As filed with the Securities and Exchange Commission on May 4, 1999
CIK: 0001084718
Registration No. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
Information Network Radio, Inc.
(Name of small business issuer in its charter)
California 94-3323226
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4832
(Primary Standard Industrial
Classification Code Number)
114 Sansome Street, Suite 1410
San Francisco, California 94104
415.434.1220
(Address and telephone number of principal executive offices
and principal place of business)
N. John Douglas, Chairman/Chief Executive Officer
Information Network Radio, Inc.
114 Sansome Street, Suite 1410
San Francisco, California 94104
415.434.1220
(Name, address and telephone of agent for service)
----------------
Copies to:
Drew Field
534 Pacific Avenue
San Francisco, CA 94133
415.296.9795
----------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
================================================================================================================================
Title of each Dollar Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate offering Amount of
to be registered registered per share price registration fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without par value $8,000,000 $100.00 $8,000,000 $2,224
================================================================================================================================
</TABLE>
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following: _X_
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2
<PAGE>
<TABLE>
INFORMATION NETWORK RADIO, INC.
Cross-reference Sheet Showing Location in Prospectus of:
PART I -- INFORMATION REQUIRED IN PROSPECTUS
<CAPTION>
Form SB-2 Item Number and Caption Caption in Prospectus
--------------------------------- ---------------------
<S> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus......... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus....................... Inside Front Cover Page of Prospectus
3. Summary Information and Risk Factors ....... Prospectus Summary; Risk Factors
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Plan of Distribution -- Determination of Offering Price
6. Dilution.................................... Dilution
7. Selling Security Holders.................... Not applicable
8. Plan of Distribution........................ Plan of Distribution
9. Legal Proceedings........................... Business -- Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Persons....................... Management
11. Security Ownership of Certain Beneficial
Owners and Management..................... Principal Shareholders
12. Description of Securities................... Description of Common Stock
13. Interest of Named Experts and Counsel....... Not applicable
14. Disclosure of Commission Position on Management -- Indemnification of
Indemnification for Securities Act ....... Officers and Directors
15. Organization Within Last Five Years......... Organization of the Company
16. Description of Business..................... Prospectus Summary; Risk Factors;
Business; Certain Transactions
17. Management's Discussion and Analysis
or Plan of Operation ..................... Management's Plan of Operations
18. Description of Property..................... Business - Properties/Facilities
19. Certain Relationships and Related
Transactions.............................. Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters Risk Factors; Shares Eligible
for Future Resale
21. Executive Compensation...................... Management: Executive Compensation
22. Financial Statements........................ Index to Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure...................... None
</TABLE>
3
<PAGE>
80,000 SHARES
[logo, consisting of block letters "IN," with a globe on top of the I,
with "RADIO" on one side of the block letters and "Information Network
Radio" on the other side]
IN Radio
COMMON STOCK
-----------------
Information Network Radio, Inc. is offering these 80,000 shares of
common stock directly to investors. There has been no public trading market for
the shares and we do not expect there to be one after this offering. See "Risk
Factors: There will be no trading market for the shares." The Company has
determined this initial public offering price. See "Plan of Distribution." The
terms "In Radio," "we" or "our" all mean the corporation, Information Network
Radio, Inc, its subsidiaries and its predecessor, Information Network Radio,
LLC.
This offering will end when all the shares have been purchased or an
earlier date, if we decide to close the offering. The minimum purchase for each
investor is 250 shares. The Company reserves the right to reject any share order
form in full or in part. See "Plan of Distribution."
-----------------
This offering involves a high degree of risk.
See "Risk Factors" beginning on page 4.
-----------------
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the shares or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
================================================================================
Public Underwriting
Offering Discounts and Proceeds to
Price Commissions (1) IN Radio (2)
- --------------------------------------------------------------------------------
Per Share $100.00 None $100.00
- --------------------------------------------------------------------------------
Total $8,000,000 None $8,000,000
================================================================================
(1) The shares are being sold directly by the Company through designated
executive officers who will register as sales representatives, where
required, and will not receive any commission. See "Plan of Distribution."
(2) Before deducting estimated expenses of $150,000 payable by the Company,
including registration fees, legal and accounting fees, costs of printing,
copying and postage and other offering costs.
-----------------
The date of this Prospectus is ___________, 1999
4
<PAGE>
We have not authorized anyone to give you any information or make any
representation that is not in this prospectus. The information in this
prospectus is current and correct only as of the date of this prospectus,
regardless of the time of its delivery or of any sale of the shares. We are
offering to sell, and seeking offers to buy the shares only in jurisdictions
where offers and sales are permitted.
ADDITIONAL INFORMATION IS AVAILABLE
This prospectus is part of a registration statement on Form SB-2 filed
under the Securities Act of 1933, as amended (which is referred to later as the
"Securities Act"). This prospectus does not contain all of the information in
the Registration Statement and its exhibits. Statements in this prospectus about
any contract or other document are just summaries. You may be able to read the
complete document as an exhibit to the Registration Statement.
IN Radio will have to file reports under the Securities Exchange Act of
1934, as amended (which is referred to later as the "Exchange Act.") You may
read and copy the Registration Statement and our reports at the Commission's
public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven
World Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. (You may telephone the
Commission's Public Reference Branch at 800-SEC-0330.) Our Registration
Statement and reports are also available on the Commission's Internet site at
http://www.sec.gov.
We intend to furnish our shareowners with annual reports containing
financial statements audited by an independent public accounting firm after the
end of each fiscal year.
-----------------------
ORGANIZATION OF THE COMPANY
IN Radio was formed September 18, 1998 as Information Network Radio,
LLC, a Delaware limited liability company. Information Network Radio, Inc. was
incorporated under California law on March 9, 1999 and is the successor to
Information Network Radio, LLC. IN Radio has two wholly-owned subsidiaries,
Personal Achievement Live, LLC, formed as a Delaware limited liability company
March 4, 1998 and AsiaOne Network, LLC, formed as a Delaware limited liability
company August 10, 1998. Our corporate office is at 114 Sansome Street, Suite
1410, San Francisco, California 94104. Our telephone number is 415.434.1220, the
fax number is 415.434.1280 and our email address is
[email protected].
---------------------------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
Prospectus Summary................................... 3 Certain Transactions.......................... 19
Risk Factors......................................... 4 Principal Shareowners......................... 19
Use of Proceeds...................................... 7 Description of Capital Stock.................. 20
Dilution............................................. 7 Shares Eligible for Future Resale............. 20
Management's Plan of Operation....................... 8 Plan of Distribution.......................... 21
Business............................................. 9 Experts....................................... 21
Management........................................... 16 Index to Financial Statements................. F-1
</TABLE>
-----------------------
5
<PAGE>
PROSPECTUS SUMMARY
This is a brief summary of the information in this Prospectus.
We encourage you to read the entire prospectus before you decide
whether and how much to invest in our shares.
IN Radio's business
IN Radio was founded by N. John Douglas, who has 37 years of
broadcasting, financial and technology experience. Our business is developing
and producing unique talk-formatted audio programming for a new service
providing digital satellite transmission directly to vehicles and homes. We are
preparing to begin radio broadcast operations October 1, 2000, when the
satellites are to have been launched and broadcasting is projected to begin. The
seven channels that we have agreements on will make IN Radio America's largest
independent supplier of audio programming to the satellite radio industry.
Satellite radio
Two companies plan to launch satellite radio transmission late next
year, under their 1997 licenses from the Federal Communications Commission.
Satellite radio will provide a new generation of radio service, offering a wide
variety of music and talk formats, nearly seamless signal coverage throughout
the United States and compact disc quality programming. Each company will have
up to 100 channels, of which 50 channels will be commercial-free music
programming and up to 50 will be advertiser-supported channels of non-music
programming, including news, sports, and talk. CD Radio subscribers will pay a
projected $9.95 monthly fee for the service.
Our satellite radio channels
We have contracts with each of the satellite radio companies to provide
talk-formatted programming 24 hours a day, seven days a week. Five channels are
with CD Radio (a service primarily for motorists) and two are with XM Satellite
Radio (principally for homes.) Our revenues will come primarily from selling up
to 12 minutes an hour of commercial advertising messages and company-sponsored
programs. We pay the satellite radio companies a share of that time or revenues.
See "Business: Essential Contracts" and Note 2 of Notes to Financial Statements.
Our programming formats
Our agreements with the satellite radio companies are exclusive for our
formats. They are:
o BEST (business, entertainment, sports and travel)
o Cruisin' (And Having Fun) [for aging "baby boomers"]
o China Wave [for Chinese Americans]
o Especially Women
o Taj Radio Network [for Asian Indians]
o Information First! (Success Tools for African Americans)
o Personal Achievement Live
We have an exclusive agreement for programming content with Nightingale-Conant,
the leading publisher of personal achievement audio recordings.
Our development plan
The proceeds of this offering will be used to build and equip our San
Francisco studio and to pay for marketing and operations until we achieve
positive cash flow from operations, which we project we'll do in 2003. We have
put together a board of directors and management team with extensive experience
in areas important to our development and operation. We are ready now to create
programming, hire and train our employee team and then begin marketing and
operations.
Becoming a Shareowner
We are offering shares of our common stock directly to selected
investors, for a minimum investment of 250 shares at $100 per share, or $25,000.
You may become a shareowner by filling out the share order form and returning it
with your check for the amount of your investment. When your order has been
accepted, we will return a signed copy to you, with an acknowledgment letter.
Within a few weeks, you will receive a certificate for your shares. You are
invited to call or write John Douglas with any questions.
6
<PAGE>
RISK FACTORS
An investment in the shares offered involves a high degree of risk.
Carefully consider the following risks and the rest of this prospectus before
deciding whether and how much to invest. There may also be important additional
risks and uncertainties. If these or other risks occur, you may lose all or part
of your investment.
This prospectus contains forward-looking statements, based on our
current expectations. Our actual results could differ materially from those
anticipated in these forward-looking statements, as a result of various factors,
including the risks described in this prospectus.
We expect to have losses and negative cash flow for at least the next four
years.
Our business is in an early development stage. Since IN Radio was formed in
1998, we have concentrated on raising capital, obtaining satellite radio channel
agreements, strategic planning, and market research. We have not yet had any
revenues and our start-up expenditures have been funded by the founder, N. John
Douglas. We expect to begin generating revenues from operations in late 2000, at
the earliest. We expect that positive cash flow from operations will not occur
before late 2003. Our ability to generate revenues and achieve profitability
will depend upon each one of many factors. This prospectus mentions the factors
we have considered and there may well be others. The satellite radio companies
may never commence operations. Even if they do, we may never achieve or sustain
profitability. See "Management's Plan of Operation" and "Business."
We need the funds from this offering to start the business on time and operate
until we reach breakeven.
There is no minimum amount required to be sold in this offering. It could close
with less than all $8 million having been sold. We estimate that $4.2 million
will be needed to commence commercial operation by the end of 2000 and total
funding of $10.2 million to reach the point when we would be generating positive
cash flow from operations. See "Use of Proceeds" and "Management's Plan of
Operation." We believe the studio buildout and equipment costs of about $2.2
million could be funded through debt or lease financing. Cost overruns or
failure to sell sufficient shares in this offering, or to secure other equity or
debt financing on a timely basis could result in serious operational delays and
defaults of certain agreements. See "Business: Essential Contracts." The
issuance of additional equity securities could cause substantial dilution of the
ownership interest of purchasers of the shares offered by this prospectus.
Payments of interest and principal on any additional debt or lease financing
could delay the time when we are generating positive cash flow.
IN Radio's business depends upon CD Radio and XM Satellite Radio and our
agreements with them.
Our business is preparing programming for radio satellite broadcast. Only two
companies have FCC satellite radio licenses and no one else has the FCC
authority to operate a similar service. IN Radio's success is dependent upon the
financial strength and ability of CD Radio and XM Satellite Radio to commence
and maintain satellite radio service. See "Business: The Satellite Radio
Opportunity." We have a seven-year term agreement with CD Radio and a five-year
agreement with XM Satellite Radio. Each agreement has options to extend but
extension is not totally within our control and may not be granted. This
compares to two-year terms that are common in the television network affiliation
business and in cable network programming agreements. Our business could be
destroyed or severely harmed by termination of or significant change in these
agreements. There is a description of the agreements, including what could cause
early termination, in the prospectus section, "Business: Essential Contracts:
Broadcast Contracts."
Delay in the start of satellite radio operations could have serious consequences
for us.
We currently expect to begin transmitting satellite radio programming in late
2000. A significant delay in the commencement of operations by CD Radio or XM
Satellite Radio would have a material adverse effect on IN Radio. CD Radio
announced in February 1999 that its projected start of operations was postponed
from April 2000 to the fourth quarter of 2000 because of a shortage in launch
vehicles for the satellites, as well as delays and cost increases for the
integrated circuits used in its customers' receivers. Further delays could
result from any one or more of many causes, such as unanticipated delays
associated with obtaining additional FCC authorizations, coordinating use of
radio spectrum with Canada and Mexico, inability of the satellite radio
companies to obtain necessary financing in a timely manner, delays in or
modifications to the design, development, construction or testing of radio
satellites, the national broadcast studios or other aspects of the satellite
radio system, changes of technical specifications, delay in commercial
availability of radio cards, S-band radios or miniature satellite dish antennas,
failure of the satellite radio's vendors to perform as anticipated or a delayed
or unsuccessful satellite launch or deployment. During any period of delay, IN
Radio would continue to have significant cash requirements, including capital
expenditures, administrative and overhead costs, contractual obligations and
7
<PAGE>
possible leasing and debt service requirements that could materially increase
the aggregate amount of funding required to permit us to commence operating.
Additional financing may not be available on favorable terms or at all during
periods of delay. Delay also could cause us to be placed at a competitive
disadvantage in relation to any competitor in any electronic media that succeeds
in beginning operations earlier than we do.
Satellite radio relies on unproven applications of technology.
Satellite radio is designed to be broadcast from two or three satellites in
geosynchronous or elliptical orbits that transmit identical signals to radio
cards or S-band radios through miniature satellite dish antennas. This design
involves new applications of existing technology and the satellite radio system
may not work as planned. The necessary radio cards, S-band radios and miniature
satellite dish antennas are not currently available in production quantities.
Signals from both satellites will be blocked and satellite radio reception will
diminish in areas with high concentrations of tall buildings and other
obstructions, such as in large urban areas, or in tunnels. In urban areas, the
satellite radio companies plan to install terrestrial repeating transmitters to
rebroadcast the satellite radio signal. Certain areas with impediments to
satellite line-of-sight may still experience "dead zones." The technology
developed by the satellite radio companies may not allow their systems to
operate as planned. However, parts of the technologies to be employed by these
companies have been successfully utilized in direct satellite television
broadcasting and cable radio.
Satellites may fail in orbit or have short lives.
A number of factors will affect the useful lives of the satellites, including
the quality of construction, the expected gradual environmental degradation of
solar panels, the amount of fuel on board and the durability of component parts.
Random failure of satellite components could result in damage to or loss of a
satellite. In rare cases, satellites could also be damaged or destroyed by
electrostatic storms or collisions with other objects in space. If the satellite
radio company is required to launch a spare satellite, due to failure of the
launch or in-orbit failure of one of the operational satellites, its operational
timetable would be delayed for approximately six months or more. The launch or
in-orbit failure of two satellites would require the satellite radio company to
arrange for additional satellites to be built and could delay the commencement
or continuation of the satellite radio's operations for three years or more. The
satellites are expected to have useful lives of approximately 15 years, after
which their performance is expected to deteriorate. We can not be sure of the
life of any particular satellite. Our operating results could be harmed if the
useful life of the initial satellites is significantly shorter than 15 years and
the satellite radio companies have not launched replacement satellites.
Radio cards, S-band radios or miniature satellite dish antennas may not be
available.
The satellite radio companies' business strategies require that subscribers to
the service purchase radio cards or S-band radios as well as the associated
miniature satellite dish antennas in order to receive the signal. Major consumer
electronics manufacturers have contracted to manufacture radio cards, S-band
radios and/or miniature satellite dish antennas for retail sale in the United
States. These products are not now available in production quantities. Our
revenues could be delayed by a failure to have those products available in
sufficient quantities, a timely manner and at an affordable price. The FCC
satellite radio licenses are conditioned upon receivers being available which
will operate on both of the significantly different transmission technologies
planned by the two companies.
Changing technology could put us out of business.
Electronic communications are in a time of rapid technological advances and
innovations. One or more of the technologies to be used by satellite radio
companies may become obsolete or their services may not be in demand at the time
they are offered. Satellite radio companies will be dependent upon technologies
developed by third parties to implement key aspects of their proposed systems.
More advanced satellite radio technologies, or broadcast technologies other than
satellite radio may be used by media competitors.
There may not be enough demand for satellite radio to make us profitable.
There is currently no satellite radio service in commercial operation for
consumers in the United States. As a result, the extent of the potential demand
for such a service and the degree to which proposed service will meet the demand
is difficult to estimate. The demand may not be sufficient for IN Radio to
achieve significant revenues or positive cash flow or profitable operations.
Factors beyond our control will affect the success of satellite radio in gaining
market acceptance, including the willingness of consumers to pay subscription
fees to obtain satellite radio broadcast; the cost, availability and consumer
acceptance of radio cards, S-band radios and miniature satellite dish antennas;
the marketing and pricing strategies of audio media competitors; the development
of alternative technologies or services and general economic conditions.
8
<PAGE>
We need to hire people and develop systems to manage the business.
We need to hire a broad range of employees to program our broadcast service,
manage operations and engineering, handle sales and promotions, marketing
efforts and perform finance, administrative and accounting functions. We expect
significant and rapid growth in the scope and complexity of the business as we
proceed with the satellite radio system and the commencement of broadcasting. We
currently have no employees, but we have identified experienced people in
several of the needed areas. Our business could be severely harmed by any
failure to develop and implement effective systems or to hire and train people
sufficiently for all of the necessary functions.
Development and operation of the business are highly dependent on the services
of N. John Douglas.
N. John Douglas, Chairman and Chief Executive Officer, is responsible for the
Company's overall direction and strategic planning. The loss of the services of
Mr. Douglas would have a material adverse effect upon the business and prospects
of the Company. Mr. Douglas does not have an employment agreement with IN Radio
and we have no insurance on his life. He is the majority shareowner.
Satellite radio will be subject to continuing oversight by the FCC.
The satellite radio companies were required to obtain a license from the FCC to
launch and operate their satellites. If they have any serious regulatory
difficulties with the FCC, it would probably hurt our business. The term of the
FCC License with respect to each satellite is eight years, commencing from the
date each satellite is declared operational after having been inserted into
orbit. Upon the expiration of the term with respect to each satellite, the
satellite radio companies will be required to apply for a license renewal. The
satellite radio companies believe that the FCC will grant renewals absent
significant misconduct on their part. Our business will also be affected by the
results of other FCC actions. FCC authorization is necessary for the satellite
radio companies to install terrestrial repeating transmitters to rebroadcast the
signal in certain urban and other areas where signals from the satellites will
be blocked and reception will be adversely affected. The satellite radio
companies also need to obtain the rights to use the roofs of certain structures
and other strategically positioned towers where the repeating transmitters will
be installed. The FCC has also required that the satellite radio companies
complete frequency coordination with Canada and Mexico before starting service.
The FCC has indicated that it may in the future impose public service
obligations on satellite radio licensees, such as channel set-asides for
educational programming. Changes in law, FCC regulations or international
agreements relating to communications policy generally or to matters relating
specifically to the services to be offered by satellite radio could affect their
ability to retain the FCC Licenses or the manner in which satellite radio would
be offered or regulated.
Satellite radio could be subject to signal theft.
The satellite radio signal, like all broadcasts, is subject to piracy. The
satellite radio companies plan to use state-of-the-art encryption technology to
mitigate signal theft. They do not believe that this technology is infallible.
Signal theft, if widespread, could be commercially harmful to the satellite
radio companies and IN Radio.
We will compete with existing and potential new radio services.
IN Radio will be seeking market acceptance of its proposed service in a new,
untested market and will compete with established conventional radio stations,
which do not charge subscription fees or require the purchase of radio cards or
S-band radios and associated miniature satellite dish antennas to receive their
services. Many radio stations also carry information programming of a local
nature such as local news or traffic reports which we will not be able to offer.
We expect that, prior to the commercial launch of satellite radio, some
traditional FM and/or AM radio broadcasting stations could begin to transmit
digital, compact disc quality signals. In addition, the FCC could grant new
licenses which would enable further competition to broadcast satellite radio.
New media such as Internet broadcasts could cut into our market. There are many
portions of the electromagnetic spectrum that are currently licensed for other
uses and certain other portions for which licenses have been granted by the FCC
without restriction as to use. These portions of the spectrum could be used for
satellite radio broadcasting in the future. The number of competitors in the
satellite radio industry could increase in the future and someone may design a
satellite radio broadcast system that is superior to the current systems.
There will be no public trading market for shares until after any future
offering or other event.
We have no plans to apply for exchange listing or interdealer market making
immediately after this offering. The number of shareowners after this offering
will probably be too limited to attract any securities dealers into creating a
trading market. We now plan to have a second public offering after we commence
operations. We expect there would be a trading market after that, but any
further offering and trading market may be delayed or may not happen. See
"Management's Plan of Operation." Acquisitions of or by IN Radio, or some other
event, could also result in cash payment to shareowners or in a trading market.
Investors in this offering should be prepared for there being
9
<PAGE>
no liquid trading market or other mechanics for converting their shares back
into cash.
We presently intend to retain any earnings and pay no dividends.
Our board of directors does not currently anticipate paying any dividends. Any
debt or preferred stock financing we may use would probably restrict dividend
payments.
The founding shareowners will control the corporation.
The founding executive officers and directors of IN Radio will own 106,700
shares, or approximately 52.5% of its outstanding common stock, after sale of
all the shares in this offering. They will be able to control election of a
majority of the board of directors and other corporate action. Such a
concentration of ownership may have the effect of delaying or preventing a
change of control.
You will experience an immediate and substantial dilution in the book value of
your shares.
The public offering price per share is substantially higher than the net
tangible book value per share of our common stock. Purchasers of shares in this
offering will experience immediate and substantial dilution of $61.50 in the pro
forma net tangible book value per share. See "Dilution."
USE OF PROCEEDS
The net proceeds to IN Radio from this offering are estimated to be
approximately $7.85 million after deducting estimated expenses. The estimated
$1.50 million of pre-operational development expenses will be paid from the
proceeds of this offering. Approximately $500,000 will be needed for working
capital. The remaining $5.85 million of net offering proceeds will be used to
cover expected net cash outflow through our projected 2003 breakeven point and
self-supporting positive cash flow. See "Management's Plan of Operation."
DILUTION
On March 31, 1999 the Company had a net tangible book value of
($23,749) or ($.19) per share. The net tangible book value per share is equal to
the Company's total tangible assets, less its total liabilities and divided by
its total number of shares of common stock outstanding. We have computed a pro
forma net tangible book value on the same date, by giving effect to the sale of
all the shares in this offering and the application of the estimated net
offering proceeds. That pro forma net tangible book value would have been
$7,827,983, or $38.41 per share. This represents an immediate increase in net
tangible book value of $38.60 per share to existing shareowners and an immediate
dilution of $61.59 per share to new shareowners in this offering. The following
table illustrates this dilution to new shareowners:
Public offering price per share...................... $100.00
Net tangible book value per share $ (0.19)
Increase in net tangible book value per share
attributed to new investors................... 38.60
-------
Pro forma net tangible book value per share
after this offering............................. 38.41
Net tangible book value dilution per share
to new investors................................ $ 61.59
=======
<TABLE>
The following table shows, on a pro forma basis as of March 31, 1999,
the difference between existing shareowners and new shareowners in this
offering, with respect to the number of shares purchased, the total
consideration paid and the average price paid per share:
<CAPTION>
Shares Purchased Total Consideration
---------------------------- --------------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareowners .................... 123,785 60.74 $ 10,000 0.12% $ 0.08
New Shareowners ......................... 80,000 39.26 8,000,000 99.88 100.00
------- ------ ---------- ------ ----------
Total .............................. 203,785 100.00% $8,010,000 100.00%
======= ====== ========== ======
</TABLE>
10
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MANAGEMENT'S PLAN OF OPERATION
Our plan of operation is linked to the schedules of the satellite radio
companies. We are planning to be ready for transmitting a test signal to them by
June 2000 and programming by October 2000, when CD Radio has projected its
service will begin. XM Satellite Radio is forecasted to commence no later than
six months after CD Radio's initial satellite broadcast service.
We expect the amount of this offering to be sufficient to pay the costs
during our pre-operational period and to fund the business until we are
receiving more cash from operations than we are paying. Our plan projects
reaching this positive cash flow in 2003. Ours is a new business, in a new
media. Both the market for satellite radio and the technology are untested. We
may need to change our plan of operation in major ways, to accommodate new
information or unexpected events. If that happens, we may need to raise
additional funds. We currently plan a second public offering of common stock
after operations commence. One purpose for that offering would be to provide a
liquid trading market for our shareowners, subject to meeting the requirements
for listing on a registered national securities exchange or Nasdaq Stock Market.
A second public offering would also allow us to have funds available for working
capital requirements, acquisition of additional satellite radio channels,
Internet site development, programming for other radio broadcast technologies or
expansion into international markets. We might decide to offer preferred stock
or debt instruments, with or without rights to acquire common stock. That could
be instead of, or in addition to a public offering of common stock. Any public
or private offering would be subject to our results of operations and financial
condition, as well as a favorable market for securities like ours.
Our development from now through late 2000 will focus on locating,
designing and constructing the studio facility, hiring and training about 164
employees, designing the programming schedules, creating and acquiring
programming content, contracting with numerous suppliers and testing all parts
of the proposed operation. We need to go from no employees or facilities to a
full complement for operating seven channels of radio broadcasting 24 hours a
day, seven days a week.
The following table describes our estimated uses of funds through 2003,
when we project reaching positive cash flow from operations. This projection is
forward-looking and could vary, perhaps substantially, from actual results, due
to events outside our control, including unexpected costs and unforeseen delays.
The "Risk Factors" section of this prospectus describes several of those
possible events. There may well be others.
Uses of Funds (in millions)
From this Total uses
Offering of funds
-------- --------
Leasehold capital improvements and equipment $ 2.20(a)
Estimated costs of this offering $ 0.15 0.15
Working capital 0.50 0.50
Operating expenses until operations commence 1.50 1.50
Losses until there is positive cash flow from
operations 5.85(b) 5.85(b)
------- -------
Total uses $ 8.00 $ 10.20
======= =======
(a) We expect to finance these through debt and/or lease financing.
(b) This includes our estimate of funds needed to cover negative cash flow
until the projected breakeven in 2003.
BUSINESS
IN Radio is a satellite radio network programming company. We will
provide talk-formatted programming to a new multi-channel radio service that
broadcasts directly from satellites to vehicles and homes.
In October 1997, two companies were granted licenses from the Federal
Communication Commission after an auction process to build, launch and operate
national satellite radio broadcast systems. The FCC licenses cost CD Radio $83
million and XM Satellite Radio $89 million. Each company plans to have up to 100
channels of which 50 channels will be commercial-free, compact disc quality
music programming and up to 50 will be advertiser-supported channels of
non-music programming including news, sports, and talk.
11
<PAGE>
<TABLE>
We have agreements to broadcast five channels on CD Radio and two
channels on XM Satellite Radio. (The agreement for two channels with CD Radio
was initially with our subsidiary, Personal Achievement Live, LLC and the
agreement with XM Satellite Radio was initially with our subsidiary, AsiaOne,
LLC. These subsidiaries have had no activity and the agreements have been
assigned to the parent company, with required consents.) We plan to develop and
offer the following wide range of informational talk programming on a 24-hour,
7-day/week basis:
<CAPTION>
- ----------------------------------------------- -------------------------------- ------------------------------
Programming Format Target Demographics Satellite Operator
- ----------------------------------------------- -------------------------------- ------------------------------
<S> <C> <C>
BEST (business, entertainment, sports and 25 - 54 CD Radio
travel)
- ----------------------------------------------- -------------------------------- ------------------------------
Cruisin'(And Having Fun) 45+ CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
China Wave Chinese Americans XM Satellite Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Especially Women... Women, 25 - 54 CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Information First!
(Success Tools For African Americans) African Americans CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Personal Achievement Live 25 - 54 CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Taj Radio Network
(Home Away From Home) Asian Indians XM Satellite Radio
- ----------------------------------------------- -------------------------------- ------------------------------
</TABLE>
IN Radio will have multiple state-of-the-art radio production studios in our San
Francisco national broadcast facility. We will be able to create, edit, store,
and transmit high-quality, digital programming to either the CD Radio (New York
City) or XM Satellite Radio (Washington, D.C.) national studios. We will also
have eight regional "micro" studios in New York, Washington D.C., Atlanta,
Chicago, Dallas, Detroit, Los Angeles, and Denver for regional/national sales
departments, local/regional news bureaus and talk interview studios.
The Satellite Radio Opportunity
The last major advance in radio technology was the introduction of FM
broadcasts and FM multiplexed sound in the 1940's and 1950's. Television
technology has meanwhile advanced steadily, from black and white to color, from
broadcast to cable, and from ordinary to high-definition television. Satellite
radio could provide a new generation of radio service, offering a wide variety
of music formats available on demand, nearly seamless signal coverage throughout
the United States and commercial-free, compact disc quality music programming.
In addition, this service will provide a wide variety of targeted talk formats
that may not be economically viable in local markets, yet could have a strong
national following. The satellite radio industry's planned multiplicity of
formats is currently not available in any market within the United States.
XM Satellite Radio is based in Washington, D.C. and was founded in 1992
as American Mobile Radio corporation. XM Satellite Radio is owned by American
Mobile Satellite Corp. (publicly traded on the NASDAQ National Market System
under the symbol SKYC) and by WorldSpace, Inc.
CD Radio was incorporated in 1990 as Satellite CD Radio, Inc. and
changed to its current name in 1992. It is publicly traded on the NASDAQ
National Market System under the symbol CDRD. Its 1998 annual report on Form
10-K reports that it needs to raise $250 million to fund its operations through
the fourth quarter of 2000 and an additional $100 million of funding for its
first year of commercial operations.
CD Radio's service is primarily for motorists and XM Satellite Radio's
service is primarily for radios in homes or other buildings. The Yankee Group, a
market research organization, estimates that there will be approximately 200
million registered private motor vehicles in the United States by the end of
2000, when CD Radio expects to commence broadcasting. At present, approximately
89% of all private vehicles have a radio that could easily receive satellite
radio type broadcasts. CD Radio, in its November 20, 1997 common stock
prospectus, targeted a number of demographic groups among the drivers of these
vehicles. The group included 110 million commuters, 34 million of whom spend
between one and two hours commuting daily, three million truck drivers and three
million owners of recreational vehicles. Almost all vehicles contain either a
cassette or a compact disc player, but 87% of automobile commuters still
listened to the radio an average of 50 minutes a day while
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<PAGE>
commuting. Between 95% and 98% of all Americans age 12 and up listen to radio
every week, and 75% listen on a daily basis, according to The Arbitron Company,
a broadcast industry ratings organization. A typical listener spends three hours
and 20 minutes each day listening to the radio, which is more than 22 hours a
week and more than 1,200 hours a year. There are about 104 million listeners
outside of radio's top 50 markets. That includes markets like Dayton, Ohio (#54
with 28 stations), Richmond, Virginia (#56 with 26 stations) and Tucson, Arizona
(#61 with 28 stations) according to BIA Research and Arbitron.
We expect that the satellite radio industry's wide choice of
programming will appeal to a large number of currently underserved listeners.
The economics of the existing advertiser-supported local radio industry dictate
that radio stations generally program for the greatest potential audience in
their limited geographic range. Even in the largest metropolitan areas, station
formats are limited. Nearly half of all commercial radio stations in the United
States offer one of only three formats: country, adult contemporary and
news/talk, and the next three most prevalent formats account for another 30% of
all stations. Approximately 27% of sales of recorded music in 1996 were in niche
music categories such as classical, jazz, rap, gospel, oldies, soundtracks, new
age and children's. Those formats are generally unavailable on existing radio
stations. Over half of the 30 most popular music formats are not even available
in New York City, the largest radio market in the United States.
Due to the limited coverage area of conventional radio broadcasting,
listeners often travel beyond the range of any single station. Conventional FM
stations have an average range of only approximately 30 miles before reception
fades. Satellite radio's signal is designed to cover the entire continental
United States, enabling listeners almost always to remain within its broadcast
range. CD Radio's delivery systems are designed to permit satellite radio to be
received by motorists in all outdoor locations where a vehicle has an
unobstructed line-of-sight with one of the two satellites or are within range of
one of the terrestrial repeating transmitters located in major markets.
The satellite radio industry will also be able to serve underserved
geographic radio markets. There are more than 45 million people in the United
States aged 12 and over living in areas with such limited radio station coverage
that the areas are not monitored by Arbitron. CD Radio believes that
approximately 22 million people receive five or fewer FM stations, 1.6 million
receive only one FM station and at least one million people receive no FM
stations. This segment of the population also has a limited choice of radio
music formats and is one of satellite radio industry's primary target markets.
The Satellite Radio Service
The satellite radio industry will offer consumers: (i) a wide range of
finely focused music and talk programs in digital form; (ii) nearly seamless
signal coverage throughout the continental United States; (iii) commercial-free
or very low commercial inventory music programming; and (iv) plug and play
convenience and/or replacement radios.
Wide Choice of Programming. Both CD Radio and XM Satellite Radio will have 50
music channels, each with distinctive formats, such as opera, reggae, classic
jazz, and children's entertainment, intended to cater to specific subscriber
tastes. The talk channels will also have a wide range of programming. In most
markets, radio broadcasters target their programming to broad audience segments.
Even in the largest metropolitan markets the variety of station formats
generally is limited, and many of the satellite radio industry's planned formats
are not available.
"Seamless" Signal Coverage. The satellite radio service will be available
throughout the continental United States, enabling listeners almost always to be
within its broadcast range. We expect that its nearly seamless signal will
appeal to motorists who frequently travel long distances, including truck
drivers and recreational vehicle owners, as well as commuters and others who
outdrive the range of their FM signals. Satellite radio broadcasts are expected
to appeal to the 45 million consumers who live in areas that currently receive
only a small number of FM stations. Even in dense, urban cores with skyscraper
buildings, satellite radio, with digital signals and terrestrial repeaters, will
probably outperform local stations which often suffer from "ghosting" and
"shadowing" effects.
Commercial-Free Music Programming. CD Radio and probably XM Satellite Radio will
provide commercial-free music programming. A principal complaint of radio
listeners concerning conventional broadcast radio is the frequency of
commercials. Satellite radios, unlike most commercial AM and FM stations, will
probably be on a subscription of about $9.95/month and not an
advertiser-supported service. Music channels will most likely not
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<PAGE>
contain commercials. Talk channels will include commercials. The success models
for this concept are the premium services on satellite television and cable that
are commercial free, but subscriber based.
Plug and Play Convenience. Consumers will be able to receive CD Radio broadcasts
by acquiring an adapter (a "radio card") and an easily attachable, silver
dollar-sized dish antenna. Listeners will not be required to replace their
existing car radios and will be able to use the radio card by plugging it into
their radio's cassette or compact disc slot. CD Radio listeners using a radio
card will be able to push a button to switch between AM, FM and CD Radio. Radio
cards will have a visual display that will indicate the channel and format
selected, as well as the title, recording artist and album title of the song
being played. Radio cards will also be portable and will be able to be moved
from car to car. Radio card activation will be accomplished directly via
satellite by calling CD Radio's customer service center at 888-CD-RADIO. XM
Satellite Radio will have car radio units as well as home/office radios that
incorporate the satellite band.
The Satellite Radio Delivery System
XM Satellite Radio and CD Radio have designed delivery systems to
transmit an identical signal from two satellites placed in geosynchronous and
low attitude, elliptical orbits, respectively. In the case of CD Radio, a third
satellite will also be in a low altitude, elliptical orbit, but only two of the
three satellites will have a "footprint" of the continental United States at any
one time. The two-satellite systems will permit both operators to provide
"seamless" signal coverage throughout the continental United States. This means
that listeners will almost always be within the broadcast range of satellite
radio, unlike current FM and AM radio broadcasts, which have a limited range.
The systems are designed to provide clear reception in most areas despite
variations in terrain, buildings and other obstructions. The systems are
designed to enable motorists to receive satellite radio in all outdoor locations
where the vehicle has an unobstructed line-of-sight with one of the satellites
or is within range of one of the terrestrial repeating transmitters. These
broadcast repeaters will supplement the satellites with a terrestrial network
that will fill in gaps in satellite coverage caused by tall buildings and other
obstructions in urban areas.
The portion of the S-band located between 2320 MHz and 2345 MHz has
been allocated by the FCC exclusively for national satellite radio broadcasts.
This portion of the spectrum was selected because there are virtually no other
users of this frequency band in the United States, thus minimizing potential
signal interference. In addition, this frequency band is relatively immune to
weather-related attenuation, which is not the case with higher frequencies. XM
Satellite Radio's three satellites (two for launch and one spare) will be built
by Hughes Space & Communications and Alcatel Espace, while CD Radio's four
satellites (three for launch and one spare) will be built by Loral Space &
Communications.
CD Radio has contracted with Lucent Technologies to design and build
the microchips for its satellite radio system, while XM Satellite Radio will be
using STMicroelectronics. XM Satellite Radio has announced that Sharp Corp.,
Pioneer Electronics Corp., and Alpine Electronics, Inc. will build the receiver
units for its service. CD Radio has Delphic Delco Electronics Systems and
Recoton Corp. as suppliers of their receiver units.
The Satellite Radio Programming Service
CD Radio and XM Satellite Radio will each have 50 music channels. Each channel
will be operated as a "separate radio station" with a distinct format. Certain
music channels will offer continuous music while others will have program hosts,
depending on the type of music programming. CD Radio will offer a wide range of
music categories, such as:
50 MUSIC CHANNELS
o Symphonic o Tropical
o Chamber Music o Latin Contemporary
o Opera/Classical Voices o Merengue
o Top of the Charts o Boleros
o 50's Hits o Mexicana
o 60'S Hits o Rock en Espanol
o 70's Hits o Tex Mex
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<PAGE>
o 80's Hits o Cumbia
o 90's Hits o Latin Jazz
o Soft Rock o Today's Country
o Love Songs o Country Gold
o Singers & Songs o Traditional Country
o Beautiful Instrumentals o Folk Rock
o Broadway's Best o Alternative Rock I
o Big Band/Swing o Alternative Rock II
o Classic Jazz o Classic Rock I
o Contemporary Jazz o Classic Rock II
o NAC Jazz o Album Rock
o New Age o Hard Rock/Metal
o Soul Ballads o Blues
o Classic Soul Hits o Reggae
o R&B Oldies o World Beat
o Urban Contemporary o Gospel
o Rap/Hip Hop o Contemporary Christian
o Dance o Children
Information Network Radio's Programming Channels
There will be 50 non-music formats on CD Radio and 20 to 50 on XM Satellite
Radio. We will have five of those channels on CD Radio and two on XM Satellite
Radio. This is a description of our planned programming formats for these
satellite radio channels:
Especially Women...
This format is aimed at women (25-54), who constitute as a whole
approximately 52% of the total population. According to the Small Business
Administration, the number of women-owned businesses increased 89% between 1987
and 1997. They increased revenues by 209% and increased their total number of
employees by 262%.
The programming will be directed at women in a similar manner as cable
TV's Lifetime Channel. Subjects of particular interest to women will be
programmed through a talk format. IN Radio anticipates creating alliances with a
cross section of the nation's most successful magazine publishers and women's
Internet sites, such as women.com.
Personal Achievement Live (PAL)
PAL is primarily targeted at adults aged 25 to 54. The format will be
talk with subject matter aimed at positive thinking, self-help, motivation,
improving success and business skills, and healthy lifestyles. Speakers on the
air will be well-known, national motivational speakers in different segments,
ranging from health to wealth. In addition, PAL has the exclusive satellite
radio rights to Nightingale-Conant's library of audio tape material, as
described under "Programming Content Agreements." Nightingale-Conant has been
the leader in the development and syndication of personal development audio
tapes for decades.
Information First! (Success Tools for African Americans)
This format is aimed at upwardly mobile African Americans.
Approximately 12% of the U.S. population is African American. Approximately 41%
of African Americans have an annual income over $35,000. The programming format
of Information First! will be talk. The content is anticipated to include topics
ranging from relationships, business, money management, careers, investment
strategies, politics, education, history, entertainment and the arts. The format
will program an array of features aimed at African Americans. IN Radio plans to
form a strategic relationship with NetNoir Online, the leading African American
web site, which is
15
<PAGE>
partially owned by America Online, and with Black Enterprise Magazine.
Cruisin' (And Having Fun)
Cruisin' is primarily aimed at the 45 plus age group and particularly
the baby boomers who started to turn fifty in 1996. "Seniors," usually defined
as over 50, is a growing demographic group that will control more spending power
than any other group in the near future. There are currently 93 million seniors
in the U.S. and 76 million baby boomers will join this group between 1996 -
2002. Approximately 77% of all assets in the U.S. belong to people over the age
of 55.
The programming on Cruisin' will include a wide variety of formats:
talk, lectures, debates, call-ins, entertainment, sports, etc. The content is
expected to include politics, estate planning, travel, health, and books.
However, throughout the programming the focus will be on the viewpoint of the
targeted age group. IN Radio plans to form strategic alliances with key
organizations, magazines, and Internet providers.
BEST
"BEST." This channel will be formatted with sponsored programming only.
The long-form programs will range from special events to live broadcast of
annual meetings of publicly traded companies. New product and event launches and
reviews of vacation locations are other possibilities for programming.
Taj Radio Network (Home Away From Home)
This channel will be programmed in English and Hindi targeting listeners in the
United States with ties to India. They are highly educated, with 52% of Asian
Indians having college degrees, and their leading professions are medicine,
research, technology, and academia. There are over one million Asian Indians in
the U.S. and this population figure grew by 126% between 1980 and 1990. This
demographic group has a median household income more than 22% above the general
population with strong values on education and entrepreneurship. IN Radio will
have Cyrus Bharucha, former President of TV Asia, to head the channel and plan
the programming content.
China Wave
China Wave will program a wide variety of talk and music subjects programmed
primarily in Mandarin. The format will be specially tailored to the interest and
needs of the Chinese population of the U.S. The largest segment of the Asian
American population is of Chinese descent. The only larger ethnic groups are
Hispanic and African American. In 1990, according to the U.S. Census, the
population numbered more than 1.6 million, an increase of 104% from 1980. The
current level is estimated to be greater than 3 million. In 91% of Chinese
American households, a language other than English was spoken at home. IN Radio
has targeted Jay "Stone" Shih, a leading producer and syndicator of Chinese
American programming to China, to head this channel.
Other Talk Format Programmers
CD Radio and XM Satellite Radio have signed lease agreements with other
companies to program other non-music channels. A selection of these programming
agreements are:
o USA TODAY, the nation's largest-selling daily newspaper, will provide,
exclusively for XM Satellite Radio, its expertise for a news and
information channel.
o Salem Communications, the nation's premier Christian broadcaster, will
create three distinctive, high-quality channels exclusively for XM
Satellite Radio, including contemporary general interest Christian talk
focusing on current events and traditional Christian themes.
o Bloomberg L.P. entered into agreements in which both CD Radio and XM
Satellite Radio will carry Bloomberg's 24-hour news and information service
on one of its broadcast channels and Bloomberg will custom-design a second
channel for CD Radio.
o CD Radio also signed an agreement with C-SPAN in which CD Radio will carry
C-SPAN 24-hours on one of its channels. C-SPAN currently provides
video-programming services related to national, literary, cultural and
international affairs.
o Classic Radio, recently acquired by Audio Books, also entered into an
agreement with CD Radio. Classic Radio will provide 24-hour programming of
exclusively old time radio programs such as "The Shadow",
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<PAGE>
"Dragnet", "Gunsmoke", and many others.
o CD Radio entered an agreement with Sports Byline USA. Sports Byline USA
will program national sports programming, including live talk shows,
interviews and features 24 hours a day.
o Hispanic Radio Network will program on two of CD Radio's channels. La Red
Hispana and the Hispanic Radio Network will also be carried 24 hours a day.
<TABLE>
This is a description of the talk and some music formats that will be programmed
by third party sources:
<CAPTION>
# of
Channels Programmer Format Satellite Radio
-------- ---------- ------ ---------------
<S> <C> <C> <C>
5 IN Radio Various Talk CD Radio
2 IN Radio (Asia One Network) Asian XM Satellite Radio
1 USA Today News XM Satellite Radio
2 Fox/Liberty Networks; Cox Communications; Speedvision/Outdoor Life CD Radio
Comcast and MediaOne
5 Heftel Broadcasting Spanish Music XM Satellite Radio
2 Bloomberg News Radio Business News CD Radio
1 Bloomberg News Radio Business News XM Satellite Radio
3 Salem Communications Religion (includes 2 XM Satellite Radio
music channels)
1 C-SPAN Radio Public Affairs XM Satellite Radio
2 C-SPAN Radio Public Affairs CD Radio
2 World Radio Network World News World News CD Radio
4 BET/Radio One African American Talk XM Satellite Radio
(includes 3 music
channels)
1 One-on-One Sports Sports XM Satellite Radio
3 Time Warner CNN (Sports Illustrated) XM Satellite Radio
CNN fn (Financial)
CNN en Espanol
# of
Channels Programmer Format Satellite Radio
-------- ---------- ------ ---------------
2 Hispanic Radio Network Spanish CD Radio
1 Sports Byline U.S.A. Sports CD Radio
1 Audio Books Classical Radio CD Radio
Total - 38
</TABLE>
Essential Contracts
Our business is developing and producing audio programming for digital
satellite transmission. We have signed contracts with each of the two companies
licensed by the FCC for satellite radio transmission. We also have signed
contracts with certain suppliers of program content.
Broadcast Contracts. CD Radio has licensed programming from us for five of its
50 channels of news, sports and talk channels. (CD Radio's other 50 channels are
commercial-free music formats, which CD Radio will produce itself.) XM Satellite
Radio and IN Radio have a "Programming Partner Agreement" for two of their
channels (they may transmit as many as 100 channels, including 50 music
channels.)
<TABLE>
This is a brief description of the contracts we have with both CD Radio
and XM Satellite Radio:
<CAPTION>
Subject CD Radio XM Satellite Radio
- ------- -------- ------------------
<S> <C> <C>
Length Seven years from when service Five years from when service begins,
of begins, with two four-year with two one-year renewals, if XM's
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contract* extensions, if we both agree revenue share meets agreed levels
Cost CD Radio gets time for com- XM gets a percentage of net adver-
to mercials, increasing to 50% tising revenues, increasing to 50%
IN Radio of all commercial inventory in the third, fourth and fifth years
in year 5
<FN>
*All these contracts may be terminated earlier by a failure to perform, such as
our changing the programming format without their consent. The agreements may
also be terminated if the necessary regulatory approvals are not available for
operating the satellite radio service.
</FN>
</TABLE>
CD Radio. Our agreements with CD Radio have us providing formatting for five
channels of satellite radio broadcasting, 24 hours a day, seven days a week. The
initial term had been five years, but was extended to seven years, in
consideration of issuing to CD Radio 3,960 shares of our common stock. We may
further extend the term, if CD Radio agrees, from seven to eleven years and from
eleven to fifteen years. Upon agreement to each extension, CD Radio is to
receive a warrant to purchase 924 shares for each channel extended, up to a
total of 9,240 shares if all five channels are extended for both additional
terms. The purchase price would be at the last public offering price for a
registered public offering of our shares. We pay CD Radio in broadcasting time
allocated for commercials. They can either sell that commercial time or use it
internally for promotional purposes. The amount of commercial time graduates
from one minute per hour in the first and second years of operations, to three
in the third, four in the fourth, five in the fifth and to half of all
commercial time after the fifth year.
XM Satellite Radio. We have one agreement with XM Satellite Radio to broadcast
two formats, China Wave and Taj Radio Network (Asian Indian). The contract has a
five-year term commencing the day XM Satellite Radio starts broadcasting. We
have all rights to advertising and sponsorship and may have a maximum twelve
minutes per hour of advertising.
Programming Content Agreements. Most of the programming for the seven satellite
radio channels will be created by our own staff. In addition, we expect to have
agreements from time to time with the owners of audio and other media content
that fits within our formats.
Our first programming content agreement is with Nightingale-Conant, the
leading publisher of sound recordings on personal achievement subjects such as
success, health, inner self, wealth and business. The agreement's initial term
is for seven years, provided we begin broadcasting by June 30, 2001. They will
make available to us, for satellite radio broadcasting, at least 3,800 audio
segments of their program archive. They will also provide other programs for
which they have broadcast rights. We also have rights and obligations to sell
Nightingale-Conant recordings, handling purchases through an 800 number call-in.
In return for providing this content, Nightingale-Conant was issued 12,500
shares of our common stock.
Management Services Agreement. We have contracted with MDW Marketing Group for
assistance in developing, recording, editing and delivering our programming to
the satellite radio companies. We will pay them consulting fees and commissions
on certain promotion sales. They have been paid 625 shares of our common stock.
Employees
We have no employees now, other than John Douglas, the Chairman and
Chief Executive Officer. Upon closing this offering, we intend to employ the
other executives shown under "Management." We plan to have 164 employees
immediately after we commence digital satellite broadcasting operations.
Properties/Facilities
We are currently located in a temporary facility that has a lease
expiring December 31, 1999 (with options to extend.) Our plan is to secure a
20,000 to 25,000 square foot location in San Francisco.
Legal Proceedings
The Company is not currently involved in any material litigation or
legal proceedings and is not aware of any material litigation or proceeding
pending or threatened against it.
Government Regulation
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<PAGE>
We do not require any FCC license or other regulatory authority to
operate our business as planned. The satellite radio companies are licensed and
regulated by the FCC. We could be very much affected by any suspension of
operations, formatting standards, or other material regulatory action concerning
either of them. This risk is mentioned in the "Risk Factors" section of this
prospectus, under the heading, "Satellite radio will be subject to continuing
oversight by the FCC."
MANAGEMENT
Directors and Executive Officers
Our executive officers and directors and their ages and positions with
the Company are:
Name Age Position
- ---- --- --------
Divakar R. Kamath............................... 51 Board of Directors
J. Peter Thompson............................... 56 Board of Directors
Edgar W. Hirst.................................. 56 Board of Directors
Suzanne M. Lopez................................ 49 Board of Directors
N. John Douglas................................. 60 Board of Directors,
Chairman and Chief
Executive Officer
Gregory J. Douglas.............................. 28 Board of Directors,
President and Chief
Operating Officer
C. Andrew Whatley............................... 46 Executive Vice President
- Sales and Marketing
Name Age Position
- ---- --- --------
Walter E. Thill................................. 62 Vice President Finance
and Chief Financial and
Administrative Officer
William E. Green................................ 62 Vice President, General
Counsel and Secretary
Background of Directors and Executive Officers
Divakar Kamath is a Co-founder and Managing Director of Pacesetter Growth Fund
and of two specialized investment companies under Mesbic Ventures Holding
Company ("MVHC"), which have combined assets under management of $56 million. He
has 18 years of venture capital experience, and serves as Executive Vice
President of MVHC. Prior to joining MVHC, Mr. Kamath held various leadership
positions with Equico Capital Corporation and Fulcrum Venture Capital
Corporation. Mr. Kamath is a former Chairman of the Board of Directors of the
National Association of Investment Companies. He received a B. Tech. In
Metallurgical Engineering from the Indian Institute of Technology in Bombay,
India in 1970, an M.S. in Materials Science from Stanford University in 1971,
and an M.B.A. in Finance and General Management from the Graduate School of
Management at UCLA in 1973.
Peter Thompson is a Venture Capitalist with over 25 years of experience in
providing investment financing to various start-up and later-stage companies. He
began as Vice President of Opportunity Capital Corporation at its
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inception in 1971 and became President in 1979. He served as a member of the
Board of Directors of several OCP portfolio companies, the National Association
of Investment Companies, the Bay Area's Small Business Development Corporation
and as a member of the Board of Trustees of the Entrepreneurial Growth and
Investment Institute. He has an undergraduate degree from Hampton University and
an MBA from Wharton School of Business.
Edgar Hirst is the Vice President - Production of Illusion, Inc., which develops
and markets interactive extreme sports and other customized attractions for the
entertainment industry. Previously, he was with ABC Television for over twenty
years as a senior-level executive in television program production, operations,
and administration. He was Vice President - Production for ABC Daytime and
Entertainment responsible for the management of such programs as Good Morning
America, General Hospital, The Academy Awards, America's Funniest Home Videos,
Primetime Emmy Awards, American Music Awards, Comedy Awards, and American
Bandstand. Previously, he was Executive-In-Charge of Production for Paramount
Domestic Television. In addition, he was the Director, Olympic Operations and
Production Control for the 1994 Summer Olympics on ABC Sports and Unit Manager
of Broadcast Operations & Engineering in the ABC News Bureau. Mr. Hirst has a
B.A. degree from Dartmouth College and a M.S. degree in Business from Columbia
University and is a graduate of the Executive Entrepreneur Institute Program.
Suzanne Lopez is a talk show host, guest, columnist, author, lecturer and
professor involved in such subjects as relationships, work, family, personal
growth, children, and women's issues. She has appeared as a guest expert in a
wide range of national shows, such as NBC-TV, Lifetime, ABC-TV, Hard Copy,
Leeza, Ricki Lake, Montel Williams, Jenny Jones, Geraldo, Donahue, Sally Jesse
Raphael and Gordon Elliot shows. In addition, she is the author of a recently
released book by Putnam Books. Ms. Lopez is the Director of the Institute for
Unlimited Human Potential and has been in private practice for almost 20 years.
She has a B.F.A. degree from the University of California at Santa Cruz and a
M.S. degree in Psychology from California State University at Los Angeles.
John Douglas is the Founder and Chairman/CEO of Information Network Radio, Inc.
He is the Chairman/CEO of OIA, LLC, which includes KBZS-AM (Palo Alto). He was
President/CEO of Douglas Broadcasting/PAR Holding, Inc., the 24th largest radio
broadcast group in the U.S. in 1997 with 19 stations primarily in major markets.
This group included the production and broadcast of the Personal Achievement
Radio programming syndicated nationally by ABC Radio Network. He also created
AsiaOne Network, the largest group of radio stations broadcasting in Asian
languages outside of Asia. Mr. Douglas was also the Founder and Chairman of
National Group Television licensee of KSTS-TV (San Francisco TV market). He was
the Creator and News Director of "Business Today", the Nation's first nationally
syndicated morning business news TV show and the Executive Producer of "Front
Page", a daily, 2-minute news highlight broadcast by the Black Entertainment
Television, a major cable programming company. He has 37 years of experience in
broadcasting, finance, communications, strategic planning, and technology. Mr.
Douglas has served as a member on several boards, including California
Broadcasters Association and Z-Spanish Media. He is currently a board member for
Radio Advertising Bureau, Comerica Bank - California, and Broadcast Music
Industries ("BMI"). He is also a Trustee of Bates College. Mr. Douglas has a
B.S. degree and M.S. degree in Physics from Bates College and Howard University
respectively, and is a graduate of the Executive Program of Darden Graduate
School of Business Administration, University of Virginia.
Gregory Douglas is the President/COO of Information Network Radio Inc. He is
also a Partner of Q2 Broadcast, syndicator of Personal Achievement Radio, and
President/COO of OIA, LLC. Previously, he was the Director of Network Operations
for Personal Achievement Radio in Los Angeles responsible for the production,
operation and distribution of the PAR format. He was the General Manager of the
two-station Seattle operations of Douglas Broadcasting, Inc. ("DBI") and Station
Manager at WBPS - AM in Boston. He was also the Management Information System
Manager for DBI, responsible for the traffic/business computer functions as well
as the computer networking of DBI/PAR radio outlets. Mr. Douglas has been
involved in almost all areas of broadcasting, including traffic, talk-format
programming, network automation systems, business, engineering, promotion,
production, syndication, marketing, and sales. He has sixteen years of
experience in radio, television and computer- related areas. He has a B.A.
degree from the University of California at Berkeley, California. He is the son
of John Douglas.
Andy Whatley is the Executive Vice President - Marketing and Sales of
Information Network Radio, Inc. He is also Partner of Q2 Broadcast and Vice
President of OIA, LLC. Previously, he was the General Manager of KYPA-AM in Los
Angeles. He has more than 25 years of media experience including radio,
television, print and media brokerage, including 19 years of broadcast
management experience, and 15 years of radio ownership. He established a joint
venture media group (Great Electric Media Group) which included four radio
stations, a weekly
20
<PAGE>
television program and a visitor market publication. He attended the University
of Texas at El Paso majoring in Mass Communications/Radio and Television and
holds a Bachelor of Arts Degree.
Walter Thill is the Vice President - Finance and Administration and CFO of
Information Network Radio, Inc. He was the Vice President of Operations and
Finance and also General Manager of Healthcare for the California College of
Podiatric Medicine. He also acted as the interim General Manager at Serrano
Irrigation District. In addition, he was an Independent Management Consultant to
companies in the mergers and acquisitions, distressed situations, and leveraged
buyouts areas. During that time, he also served as interim CFO for six other
companies. Mr. Thill was Director of Strategic Planning at Castle & Cooke, Inc.
(now Dole Foods), a NYSE company, responsible for the review of the food
industry for acquisitions and strategic planning for the company's food and
other businesses. He was also the former President of the Corporate Planners
Association. Mr. Thill has an AB from Cornell University and a MBA from the
University of Michigan and he earned his CPA while in Michigan.
William Green is the Vice President, General Counsel and Secretary for
Information Network Radio, Inc. He was the Corporate Secretary and Legal Counsel
for Douglas Broadcasting, Inc. and Personal Achievement Radio. He also has a
private practice, William Green & Associates, located in Palo Alto, California.
Formerly, he was the Assistant General Counsel for Boise Cascade Corp. He was
also Associate Counsel and Associate Patent Counsel of Sybron Corp., a Fortune
500 Company, representing the Corporation in its general legal affairs, mergers
and acquisitions activity and patent and trademark matters. He was also employed
as a patent coordinator at the Applied Research Laboratories of United States
Steel Corp. He is a former member on the Executive and Audit Committees of the
National Board of Governors of the American Red Cross and Mr. Green was also on
the Executive Committee of the Board of Governors of United Way of America. He
is a graduate of the University of Pittsburgh with a B.S. degree in Chemistry.
He has a L.L.B. degree from Duquesne University School of Law and was Managing
Editor of the Law Review. Mr. Green passed the Bar in California, Pennsylvania
and New York. He is a member of the Charles Houston, State of California,
American, and National Patent Law Bar Associations. He is a Director of the
Williams Companies, A NYSE and Fortune 500 Company.
Indemnification of Directors and Officers
Our Articles of Incorporation provide that the liability of the
directors for monetary damages shall be eliminated to the fullest extent
permissible under California law. We have been advised that, in the opinion of
the Securities and Exchange Commission, permitting indemnification to directors,
officers and controlling persons for liabilities arising under the federal
securities laws is against public policy and unenforceable.
Board Committees
An audit committee of nonemployee directors meets with our independent
public accountants and reviews our internal accounting procedures. Divakar R.
Kamath and J. Peter Thompson currently constitute the audit committee.
Director Compensation
We do not currently compensate directors for their services, except to
reimburse them for their travel expenses in attending board and committee
meetings. After we begin satellite radio service, each director who is not a
full-time employee of IN Radio will receive options to purchase shares under the
stock incentive compensation plan to be adopted, as well as quarterly payments.
Executive Compensation
No compensation has yet been paid to any of our executives. We expect
to pay a $100,000 salary to John Douglas in 1999. We intend to hire the other
executive officers upon closing of this offering, each one at a salary not to
exceed $100,000 a year. We have planned no other forms of compensation, such as
bonuses or stock options, to be paid to executives in 1999.
Stock Option Plan
The Board of Directors has reserved shares equal to 10% of our
outstanding common stock for issuance to employees, officers, directors and
consultants pursuant to a stock incentive option plan they expect to adopt.
CERTAIN TRANSACTIONS
106,700 of the shares outstanding before this offering were issued in
exchange for ownership in the predeccessor
21
<PAGE>
limited liability company and in Personal Achievement Live, LLC and AsiaOne
Network, LLC, which are both now completely owned by IN Radio. Each of the
persons to whom the shares were issued are officers and are listed in the
"Principal Shareholders" table in this prospectus.
It is the Company's policy that all material related party transactions
will be on terms that are no less favorable to the Company than those that can
be obtained from unaffiliated third parties and must be approved by a majority
of the Company's independent, disinterested directors.
PRINCIPAL SHAREHOLDERS
The following table shows the beneficial ownership of the Company's
common stock immediately prior to this offering, and as adjusted to reflect the
sale of the shares being offered, for shares owned by (i) each director and
executive officer of the Company, (ii) each shareowner known by the Company to
own beneficially 5% or more of the outstanding shares of its common stock and
(iii) all directors and officers as a group. The Company believes that the
beneficial owners of the common stock listed below, based on information they
furnished, have sole investment and voting power over their shares, subject to
community property laws where applicable.
Number of Percentage of Total Common Stock
Shares Beneficially Owned
Beneficially Before After Fully
Name and Address of Owner Owned Offering Offering Diluted*
N. John Douglas 89,500 72.6% 44.0% 42.0%
114 Sansome Street, Suite 1410
San Francisco, CA 94104
Gregory J. Douglas 7,700 3.8 6.3 3.6
114 Sansome Street, Suite 1410
San Francisco, CA 94104
22
<PAGE>
Number of Percentage of Total Common Stock
Shares Beneficially Owned
Beneficially Before After Fully
Name and Address of Owner Owned Offering Offering Diluted*
C. Andrew Whatley 7,700 6.3 3.8 3.6
114 Sansome Street, Suite 1410
San Francisco, CA 94104
Walter E. Thill 1,500 1.2 0.7 0.7
114 Sansome Street, Suite 1410
San Francisco, CA 94104
William E. Green 300 0.2 0.2 0.1
550 Hamilton Avenue
Palo Alto, CA 94301
Nightingale-Conant 12,500 10.1 6.1 5.9
7300 Lehigh Avenue
Niles, IL 60714
CD Radio, Inc. 3,960 3.2 1.9* 6.2*
1221 Avenue of the Americas
New York, NY 10020
All directors and executive 106,700 86.6 52.5 50.1
officers as a group (5 Persons)
* Assumes issuance of shares upon exercise by CD Radio of warrants given to
extend the satellite radio license agreement from seven years to eleven years
and then to fifteen years. See "Business: Essential Contracts." Does not include
any additional dilution from shares issued in additional financings or upon
exercise of any options issued under the proposed stock incentive option plan.
DESCRIPTION OF COMMON STOCK
IN Radio has authorized 10,000,000 shares of common stock, without par
value. There were 123,785 shares of common stock outstanding immediately prior
to this offering, which were held of record by eight shareowners. Owners of
common stock are entitled to one vote for each share held of record on all
matters to be voted on by shareowners, except that, upon giving the legally
required notice, shareowners may cumulate their votes in the election of
directors. The shareowners are entitled to receive dividends when, as and if
declared by the board of directors out of funds legally available. In the event
of liquidation, dissolution or winding up of the corporation, the shareowners
are entitled to share ratably in all assets remaining which are available for
distribution to them after payment of liabilities. Shareowners, as such, have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to the common stock. All of the outstanding shares of
common stock, and the shares issued in this offering, will be fully paid and
nonassessable. The transfer agent and registrar for our common stock is American
Securities Transfer & Trust, Inc.
SHARES ELIGIBLE FOR FUTURE RESALE
Legal ability to sell. The shares sold in this offering will be freely
tradable without restriction or registration under federal securities laws.
Sales of shares to residents of certain states or jurisdictions may require
registration or an applicable exemption from registration provisions of the
shares in those states or jurisdictions. The 123,785 shares of common stock
previously issued are "restricted securities" and may not be sold in a public
distribution except in compliance with those securities laws. After those shares
have been held for more than a year, they could, under applicable securities
laws, be offered for sale through any trading market, if reporting and other
requirements were met. They could also be sold in a transaction negotiated
directly with a buyer. This ability to sell could have the effect of keeping any
investor demand from increasing the price at which shares may be sold after
23
<PAGE>
this offering is over. All of the executive officers have agreed not to sell any
of their 106,700 shares for a year after completion of this offering. In return,
IN Radio has agreed to include, in any registered public offering we make, any
of their shares they ask to be included, and to pay the costs of registration
and sale (except any commissions or underwriting fees.)
Absence of any trading market. Our shares are not listed or quoted on
any organized exchange or other trading market, nor will we apply for any
listing or quotation in connection with this offering. We plan a second public
offering after the launch of broadcasting on satellite radio, and we expect a
trading market would exist after that. Shareholders would have to arrange their
own private sale of shares, until a trading market existed or there was another
way to convert their shares back into cash.
Tax effects of selling "Small Business Stock." Individuals buying
shares in this offering, and holding them for at least five years, would pay a
maximum 14% effective tax rate on any gain from their sale, under existing tax
laws. Or, no tax at all would be payable on the sales proceeds "rolled over"
into the purchase of other "small business stock," within 60 days of the sale.
This favorable tax treatment could be changed. Various conditions and
limitations apply. Shareholders will want to consult their own tax advisor if
this tax effect is important in their investment decision.
PLAN OF DISTRIBUTION
General
Announcements of this offering will be communicated to persons selected
by our officers and directors. A copy of this prospectus will be delivered to
those who request it, together with the share purchase order. All shares will be
sold at the public offering price of $100.00 per share and a minimum purchase of
250 shares is required. The Company reserves the right to reject any share
purchase order in full or in part.
The Company will only effect offers and sales of shares through N. John
Douglas, its Chairman and Chief Executive Officer, or Walter E. Thill, its Vice
President Finance and Chief Financial and Administrative Officer. Only Messrs.
Douglas or Thill will sign share purchase orders on our behalf and they will be
the only individuals who will conduct activities that involve making oral
solicitations or approval of written communications. They will not receive,
directly or indirectly, any commissions or other remuneration based either
directly or indirectly on transactions in securities. Their activities are
intended to be within Rule 3a4-1 of the federal Securities Exchange Act of 1934
and the securities regulations of certain states. Some states may require Mr.
Douglas or Mr. Thill to be registered or licensed as an issuer representative or
sales agent.
Determination of Offering Price
Prior to this offering there has been no market for our shares of
common stock. Our Board of Directors has determined the public offering price.
Among factors considered in determining the public offering price were the
Company's future prospects, the state of the markets for its services, the
experience of management and the economics of the industry in general.
EXPERTS
The Financial Statements of the Company as of and for the period ended
March 31, 1999, audited by Hollander, Lumer & Co. LLP, independent auditors,
have been included in this Prospectus in reliance upon their report, which is
also included in this Prospectus.
24
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Deficiency F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Information Network Radio, Inc.
San Francisco, California
We have audited the accompanying balance sheet of Information Network Radio,
Inc. (A Development Stage Company), a successor to Information Network Radio,
LLC, as of March 31, 1999, and the related statements of operations,
stockholders' deficiency, and cash flows for the period from September 18, 1998
(inception) through March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Information Network Radio, Inc.
as of March 31, 1999, and the results of its operations and its cash flows for
the initial period then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is a development stage
company that has incurred a net loss for the initial period ended March 31,
1999. The Company has significant capital requirements to continue with its
development plan. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
HOLLANDER, LUMER & CO. LLP
Los Angeles, California
April 6, 1999
F-1
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1999
ASSETS
CURRENT ASSETS
Cash $ 3,651
Deferred offering costs 12,000
--------
TOTAL CURRENT ASSETS 15,651
--------
TOTAL ASSETS $ 15,651
========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 1,400
Loans payable 26,000
--------
TOTAL CURRENT LIABILITIES 27,400
STOCKHOLDERS' DEFICIENCY
Common stock, no par value; authorized 10,000,000 shares;
issued and outstanding - 106,700 shares 10,000
Deficit accumulated during the development stage (21,749)
--------
TOTAL STOCKHOLDERS' DEFICIENCY (11,749)
--------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 15,651
========
F-2
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 18, 1998 (INCEPTION) TO MARCH 31, 1999
REVENUES $ --
OPERATING EXPENSES 21,749
---------
NET LOSS $ (21,749)
=========
LOSS PER SHARE $ (0.18)
=========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 123,785
=========
F-3
<PAGE>
<TABLE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 18, 1998 (INCEPTION) TO MARCH 31, 1999
<CAPTION>
Deficit
Accumulated
Common Stock During The
--------------------------- Development
Shares Amount Stage Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Common stock issued 106,700 $ 10,000 $ -- $ 10,000
Net loss incurred during the period -- -- (21,749) (21,749)
-------- -------- -------- --------
Balance, March 31, 1999 106,700 $ 10,000 $(21,749) $(11,749)
======== ======== ======== ========
F-4
</TABLE>
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 18, 1998 (INCEPTION) TO MARCH 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(21,749)
Adjustments to reconcile net loss to net
cash used in operating activities:
Increase in accounts payable 1,400
--------
NET CASH USED IN OPERATING ACTIVITIES (20,349)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred offering costs (12,000)
Proceeds from loans payable 26,000
Capital contributions 10,000
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,000
--------
CASH AT END OF PERIOD $ 3,651
========
F-5
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Information Network Radio, Inc. (the "Company") was incorporated in
California on March 9, 1999. On March 10, 1999, the Company issued
106,700 shares of common stock to the members of Information Network
Radio, LLC, its predecessor, pursuant to an Agreement of Merger.
Information Network Radio, LLC was a Delaware Limited Liability Company
formed on September 18, 1998. The accompanying financial statements
include the results of operations of the Company's predecessor for the
period from inception to March 9, 1999.
The Company is involved in developing and producing unique
talk-formatted audio programming for a new service providing digital
satellite transmission directly to vehicles and homes. Revenues are
projected to begin on October 1, 2000 when the satellites are to have
been launched. Revenues will come primarily from selling up to 12
minutes an hour of commercial advertising messages and
company-sponsored programs.
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. As shown
in the financial statements, from inception through March 31, 1999, the
Company incurred net loss of $21,749, which was funded by the initial
capital contributions and advances from the principal stockholder.
Management is currently preparing for a direct public offering of the
Company's common stock to obtain additional funds so that the Company
can meet its obligations and sustain its development activities. If the
Company is unable to successfully complete an offering or obtain
funding from other sources, the Company will not be able to continue as
a going concern. The financial statements do not include any
adjustments relating to the recoverability of the recorded assets or
the classification of the liabilities that might be necessary should
the Company be unable to continue as a going concern.
Deferred Offering Costs
The Company records incremental costs directly attributable to the
proposed offering of securities as deferred offering costs. These costs
will be charged against the gross proceeds of the offering, upon its
completion. If the offering is not completed, these costs will be
expensed.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could differ from
those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate.
Considerable judgment is required to develop estimates of fair values;
therefore, the estimates are not necessarily indicative of the amounts
that could be realized or would be paid in a current market exchange.
The effect of using different market assumptions and/or estimation
methodologies may be material to the estimated fair value amounts. The
Company estimates that the fair value of its financial instruments
approximates their carrying value.
Broadcast Rights
The Company owns the right to utilize a satellite network over an
agreed-upon license period. The Company capitalizes certain costs to
acquire these rights. The Company's policy is to amortize the cost of
these rights on a straight-line basis over the term of the contract.
F-6
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
Income Taxes
The Company elected to be taxed as a partnership for federal income tax
purposes for the period from inception through March 9, 1999.
Accordingly, the members, in their individual tax returns, report any
tax on income of the Company.
Effective March 10, 1999, the Company is subject to corporate tax
rates. The Company utilizes the asset and liability method for income
taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes
the enactment date.
Earnings (Loss) Per Share
Effective March 31, 1999, the Company adopted Statement of Financial
Accounting Standards No.128 ("SFAS No. 128"), Earnings Per Share
("EPS") which established simplified standards for computing and
presenting earnings per share information. Basic earnings (loss) per
common share is based upon the net earnings (loss) applicable to common
shares after preferred dividend requirements and upon the weighted
average number of common shares outstanding during the period. Diluted
earnings per common share adjusts for the effect of convertible
securities, stock options and warrants only in the periods presented in
which such effect would have been dilutive.
Staff Accounting Bulletin No. 98 ("SAB 98") describes the Securities
and Exchange Commission ("SEC") staff's interpretations and practices
on EPS computations in an initial public offering. In applying the
requirements of SFAS No. 128, the staff believes that nominal issuances
are recapitalizations in substance. In computing basic EPS for the
periods covered by income statements included in the registration
statement and in subsequent filings with the SEC, nominal issuances of
common stock should be reflected in a manner similar to a stock split
or stock dividend for which retroactive treatment is required by
paragraph 54 of SFAS No. 128. In computing diluted EPS for such
periods, nominal issuances of common stock and potential common stock
should be reflected in a manner similar to a stock split or stock
dividend.
Pursuant to SAB 98, the Company accounted for the subsequent issuance
of 17,085 shares of common stock as outstanding for the historical
period presented.
NOTE 2 - COMMITMENTS
On January 28, 1999, the Company entered into an agreement for legal
and related services for its direct public offering of common stock.
The agreement requires sixteen semi-monthly payments of $3,000 each
followed by one payment of $2,000. Consulting fees paid during the
period ended March 31, 1999 totaled $12,000. Upon completion of the
contemplated public offering, for at least any minimum amount offered,
the agreement also requires a payment of $25,000, of which half would
be in the Company's shares of common stock, at the public offering
price.
F-7
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
During the period ended March 31, 1999, the Company entered into
contracts with providers of satellite radio transmission granting them
a license to transmit the Company's programming. The contracts expire
five years after service begins and have provisions for renewals. The
contracts allow the licensees the right to use, or to dispose of the
right to use, commercial time beginning with one minute per hour in the
first year of the contract and increasing to 50% of the net commercial
time available (however no less than five minutes) per each hour.
Modifications to these agreements are currently being negotiated.
NOTE 3 - RELATED PARTY TRANSACTIONS
The majority stockholder made advances to the Company, bearing interest
at 6.00% and payable on demand. At March 31, 1999, aggregate advances
were $26,000.
The Company's principal stockholder and companies owned and/or
controlled by him have provided corporate services at no cost to the
Company.
NOTE 4 - SUBSEQUENT EVENTS
The Company issued 17,085 shares to certain companies for management
consulting services, programming content and for extension of satellite
radio transmission contracts. These additional shares were valued at
$1,708,500 based on the public offering price of $100 per share.
<TABLE>
Pro forma unaudited financial information of the Company is as follows:
<CAPTION>
Pro Forma
---------------------------------------------
Balance Sheet: Historical Adjustments Pro Forma
-------------- ---------- ----------- ----------
<S> <C> <C> <C>
Total Current Assets $ 15,651 $ 15,651
Intangible Assets $ 1,646,000 (1) $ 1,646,000
Total Assets $ 15,651 $ 1,646,000 (1) $ 1,661,651
Total Liabilities $ 27,400 $ 27,400
Stockholders' Equity (Deficiency) $ (11,749) $ 1,646,000 (1) $ 1,634,251
Statement of Operations:
Net loss $ (21,749) $ (62,500)(2) $ (84,249)
Loss per share $ (0.18) $ (.50) $ (0.68)
Weighted average number of common shares
outstanding 123,785 123,785
</TABLE>
Pro forma adjustments are as follows:
1. Issuance of 16,460 shares of common stock for programming and
satellite broadcast rights.
2. Issuance of 625 shares of common stock for marketing services.
F-8
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation, Article V, and Bylaws,
Article VI, provide that the Registrant shall indemnify any officer, director or
former officer or director, to the fullest extent permitted by California law.
We have been advised that, in the opinion of the Securities and
Exchange Commission, permitting indemnification to directors, officers and
controlling persons for liabilities arising under the federal securities laws is
against public policy and unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
Expenses of the Registrant in connection with the issuance and
distribution of the securities being registered are estimated as follows,
assuming the Maximum offering amount is sold:
Securities and Exchange Commission filing fee...... $ 2,224
Blue sky fees and expenses......................... 3,000
Accountant's fees and expenses..................... 12,000
Special Counsel's fees and expenses................ 75,000
General Counsel's fees and expenses................ 15,000
Printing and Edgar filer .......................... 5,000
Postage and other delivery media................... 1,000
Marketing expenses, including travel............... 10,000
Miscellaneous...................................... 26,776
-------------
Total......................................... $ 150,000
==============
(The Registrant will bear all these expenses.)
Item 26. Recent Sales of Unregistered Securities.
(a) The following information is given for all securities that the Registrant
sold within the past three years without registering the securities under the
Securities Act.
Date Title Amount
---- ----- ------
(1) March 22, 1999 common stock 106,700 shares
(2) May __, 1999 common stock 12,500 shares
(3) May __, 1999 common stock 625 shares
(4) May __, 1999 common stock 3,960 shares
(5) May __, 1999 common stock
purchase warrants 9,240 shares upon
exercise
(b) No underwriters were used in connection with any of the issuances of shares.
The classes of persons to whom the Registrant issued shares were:
(1) The five founding officers of the Registrant
(2) Nightingale Conant, a major contractor of content for Registrant's
programming.
(3) MDW Marketing Group, management, marketing, sales and product
fulfillment consultants.
(4) CD Radio, Inc., a major contractor for satellite broadcasting of
the Registrant's programming.
(5) CD Radio, Inc.
(c) There were no underwriting discounts or commissions. The transactions and
the types and amounts of consideration received by the Registrant were:
(1) Transfer of contractual rights and development, as owners of
Information Network Radio, LLC.
(2) Agreement to provide programming content for Registrant's PAL
satellite radio channels.
(3) Agreement to manage Registrant's marketing, sales and product
fulfillment.
(4) Agreement to extend Radio License Agreements with the Registrant
from five to seven years.
(5) Agreements concerning possible extensions of the Radio License
Agreements to 11 and 15 years.
30
<PAGE>
(d) The sections of the Securities Act under which the Registrant claims
exemption from registration and the facts relied upon to make the
exemption available are:
(1) Section 4(2). This was a transaction between the Registrant and its
founding officers, who continue to own all the shares.
(2) Section 4(2). The transaction was between the Registrant and its
major provider to date of content for the Registrant's digital
satellite radio programming.
(3) Section 4(2). The transaction was between the Registrant and its
management consulting firm.
(4) and (5) Section 4(2). The transaction was between the Registrant
and one of the two companies licensed by the FCC for digital
satellite radio programming.
Item 27. Exhibits
The exhibits listed below are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-B.
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation of the Registrant, dated March 9,
1999
3.2 By-laws of the Registrant
4.1 Article II, pages 2-15, of the By-laws (Reference is made to
Exhibit 3.2)
4.2 Form of common stock certificate
5 Opinion and consent of counsel with respect to the legality of
the shares being registered
10.1 Radio License Agreement with CD Radio Inc.*
10.2 Programming Partner Agreement with XM Satellite*
10.3 Programming Services and Equity Agreement with
Nightingale-Conant Corporation*
21 List of Registrant's subsidiaries, states of organization and
names under which they do business.
23.1 Consent of Hollander, Lumer & Co. LLP.
23.2 Consent of counsel (Reference is made to Exhibit 5.)
#24 Power of Attorney
27 Financial Data Schedule
99.1 Share Purchase Order
- ---------------------
* To be filed by amendment
# As filed in Part II of this Registration Statement
Item 28. Undertakings.
(a) The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(e) The registrant has been advised that, in the opinion of the Securities and
Exchange Commission, indemnification to directors, officers and controlling
persons of the registrant for liabilities arising under the Securities Act
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
31
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, in San Francisco,
California, on April 30, 1999.
INFORMATION NETWORK RADIO, INC. (Issuer)
By S/N. John Douglas
----------------------------------------
N. John Douglas, Chief Executive Officer
Each person whose signature appears below appoints N. John Douglas his
or her attorney-in-fact, with full power of substitution and resubstitution, to
sign any and all amendments (including post-effective amendments) to this
registration statement on Form SB-2 of Information Network Radio, Inc., and to
file them, with all their exhibits and other related documents, with the
Securities and Exchange Commission, ratifying and confirming all that their
attorney-in-fact and agent or his or her substitute or substitutes may lawfully
do or cause to be done by virtue of this appointment.
<TABLE>
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
S/N. John Douglas Chief Executive Officer and April 30, 1999
- --------------------------- Chairman of the Board of Directors
N. John Douglas
S/Gregory D. Douglas President, Chief Operating Officer April 30, 1999
- --------------------------- and Director
Gregory D. Douglas
S/Walter E. Thill Vice President Finance and Chief April 30, 1999
- --------------------------- Financial and Administrative Officer
Walter E. Thill (Principal financial and accounting officer)
S/Divakar R. Kamath Director April 30, 1999
- ---------------------------
Divakar R. Kamath
S/J. Peter Thompson Director April 30, 1999
- ---------------------------
J. Peter Thompson
S/Edgar W. Hirst Director April 30, 1999
- ---------------------------
Edgar W. Hirst
S/Suzanne M. Lopez Director April 30, 1999
- ---------------------------
Suzanne M. Lopez
</TABLE>
32
ARTICLES OF INCORPORATION
OF
INFORMATION NETWORK RADIO, INC.
I.
The name of the corporation is
INFORMATION NETWORK RADIO, INC.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
Corporation Code.
III.
The name and address in the State of California of this corporation's
initial agent for service of process is William E. Green, William Green &
Associates, 550 Hamilton Avenue, Suite 320, Palo Alto, California 94301.
IV.
This Corporation is authorized to issue only one class of shares of
stock which shall be designated "common shares;" and the total number of shares
which this Corporation is authorized to issue is 10,000,000.
V.
(a) The corporation may indemnify the directors and officers of the
corporation to the fullest extent permissible under California Law.
(b) The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code through
bylaw provisions, agreements with agents, vote of shareholders or
disinterested directors, or otherwise, to the fullest extent
permissible under California law as provided in Sections 317 and 204 of
the California Corporations Code.
(c) Any amendment, repeal or modification of any provision of this Article
V shall not adversely affect an agent (as defined in Section 317 of the
California Corporations Code) of this corporation existing at the time
of such amendment, repeal or modification.
IN WITNESS WHEREOF, the undersigned, being the sole Incorporator of
this Corporation has executed these Articles of Incorporation on March 3, 1999.
WILLIAM E.GREEN
EXHIBIT 3.1
BYLAWS
OF
INFORMATION NETWORK RADIO INC.
ARTICLE I
CORPORATE NAME AND OFFICES
Section 1. Corporate Name: INFORMATION NETWORK RADIO INC. is a corporation duly
organized under the laws of the State of California.
Section 2. Principal Office: The principal office for the transaction of the
business of the corporation (called "the principal office") is fixed and located
at 114 Sansome Street, Suite 1140, San Francisco, California 94104. The Board of
Directors is hereby granted full power and authority to change said principal
office from one location to another in said county. Any change of this location
shall be noted on these bylaws adjacent to this section, as this Section may be
amended to state the new location.
Section 3. Other Offices: Branch or subordinate offices may at any time be
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETING OF SHAREHOLDERS
Section 1. Place of Meetings: Meetings of shareholders shall be held at any
place within or outside the state of California designated by the Board of
Directors. In the absence of any such designation, shareholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. Annual Meeting: The Annual Meeting of shareholders shall be held each
year at a time set by the Board of Directors. Written notice shall be given to
the shareholders entitled to vote in accordance with the provisions of Sections
4 and 5 of this Article II not less than 10 nor more than 60 days before the
date of the meeting. At this meeting, directors shall be elected, and any other
proper business may be transacted.
Section 3. Special Meeting: Special meetings of the shareholders may be called
at any time by the Board of Directors, or by the chairman of the board, or by
the president or by one or more shareholders holding shares in the aggregate
entitled to cast not less than 10% of the votes at that meeting.
(a) If a Special Meeting is called by the Board of Directors, written
notice shall be given to the shareholders entitled to vote in
accordance with the provisions of Section 4 and 5 of this Article II
not less than 10 nor more than 60 days before the date of the meeting.
EXHIBIT 3.2
<PAGE>
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board, the president, and
vice president, or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 4 and 5 of this Article II,
that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than 35 nor more than 60 days after the receipt of
the request. If the notice is not given 20 days after receipt of the request,
the person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this section 3 shall be construed as limiting,
fixing or affecting the time when a meeting of shareholders called by action of
the Board of Directors may be held.
Section 4. Notice of Shareholders' Meetings: All notice of meetings of
shareholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than 10 nor more than 60 days before the date of the
meeting or if called pursuant to a request under Section 3 (b) of this Article
II not less than 35 more than 60 days before the date of such meeting. The
notice shall specify the place, date and hour of the meeting and (i) in the case
of a special meeting, the general nature of the business to be transacted, or
(ii) in the case of the annual meeting, those matters which the Board of
Directors, at the time of the giving the notice, intends to present for action
by the shareholders. The notice of any meeting at which directors are to be
elected shall include the name of any nominee or nominees whom, at the time of
the notice, management intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California, (ii)
an amendment of the Articles of Incorporation, pursuant to Section 902 of that
Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of
that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section
1900 of that Code, or (v) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, pursuant to Section 2007 of
that Code, the notice shall also state the general nature of that proposal.
Section 5. Manner of Giving Notice; Affidavit of Notice: Notice of any meeting
of shareholders shall be given either personally or by first-class mail or
telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is
<PAGE>
given, notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the
corporation's principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by telegram or other means of written
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the shareholder on
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of giving the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary,
or any transfer agent of the corporation giving the notice, and shall be filed
and maintained in the minute book of the corporation.
Section 6. Adjourned Meeting: Notice: Any shareholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to time
by the vote of the majority of the shares represented at that meeting, either in
person or by proxy, but in the absence of a quorum, no other business may be
transacted at the meeting, except as provided in Section 8 of this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, or unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more that 45 days from the date set for
the original meeting, in which case the board of directors shall set a new
record date. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 4 and 5 of this Article II. At any adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting.
Section 7. Voting: The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section 11
of this Article II, subject to the provisions of Sections 702 to 704, inclusive,
of the California General Corporation Law (relating to voting shares held by a
fiduciary, in the name of a corporation, or in joint ownership). The
shareholders' vote may be by voice vote or by ballot; provided, however,
<PAGE>
that any election for directors must be by ballot if demanded by any shareholder
before the voting has begun. On any matter other than elections of directors,
any shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal, but, if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholders'
approving vote is with respect to all shares that the shareholder is entitled to
vote. If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on any matter (other than the
election of directors) shall be the act of the shareholders, unless the vote of
a greater number or voting by classes is required by California General
Corporation Law or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or more
candidates a number of votes greater than the number of the shareholder's
shares) unless the candidates' names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such a notice, then every shareholder entitled to vote
may cumulate votes for candidates in nomination and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which that shareholder's shares are entitled, or distribute the
shareholder's votes on the same principle among any or all of the candidates, as
the shareholder thinks fit. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected.
Section 8. Quorum: The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of shareholders shall
constitute a quorum for the transaction of business. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
Section 9. Waiver Of Notice Or Consent By Absent Shareholders: The transactions
of any meeting of shareholders, either annual or special, however called and
noticed, and wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present either in person or
by proxy, and if, either before or after the meeting, each person entitled to
vote, who was not present in person or by proxy, signs a written waiver of
notice or a consent to a holding of the meeting, or an approval of the minutes.
The waiver of notice or consent need not specify either the business to be
transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters
<PAGE>
specified in the second paragraph of Section 4 of this Article II, the waiver of
notice or consent shall state the general nature of the proposal. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Attendance by a person at a meeting, shall also constitute a waiver of notice of
that meeting, except when the person objects, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened, and except that attendance at a meeting is not a waiver of any right
to object to the consideration of matters not included in the notice of the
meeting if that objection is expressly made at the meeting.
Section 10. Shareholder Action By Written Consent Without A Meeting: Any action
which may be taken at any annual or special meeting of shareholders may be taken
without a meeting and without prior notice, if a consent in writing, setting
forth the action so taken, is signed by the shareholders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares entitled to vote
on that action were present and voted. In the case of election of directors,
such a consent shall be effective only if signed by the holders of all
outstanding shares entitled to vote for the election of directors; provided,
however, that a director may be elected at any time to fill a vacancy on the
board of directors that has not been filled by the directors, by the written
consent of the holders of a majority of the outstanding shares entitled to vote
for the election of directors. All such consents shall be filed with the
secretary of the corporation and shall be maintained in the corporate records.
Any shareholder giving a written consent, or the shareholder's proxy holders, or
a transferee of the shares or a personal representative of the shareholder or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting.
This notice shall be given in the manner specified in Section 5 of this Article
II. In the case of approval of (i) contracts or transactions in which a director
has a direct or indirect financial interest, pursuant to Section 310 of the
Corporations Code of California, (ii) indemnification of agents of the
corporation, pursuant to Section 317 of that Code, (iii) a reorganization of the
corporation, pursuant to Section 1201 of that Code, and (iv) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of that Code, the notice shall be given at
<PAGE>
least 10 days before the consummation of any action authorized by that approval.
Section 11. Record Date For Shareholder Notice, Voting, And Giving Consents: For
purposes of determining the shareholders entitled to notice of any meeting or to
vote or entitled to give consent to corporate action without a meeting, the
board of directors may fix, in advance, a record date, which shall not be more
than 60 days nor less than 10 days before the date of any such meeting nor more
than 60 days before any such action without a meeting, and in this event only
shareholders of record on the date so fixed are entitled to notice and to vote
or to give consents, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date, except as
otherwise provided in the California General Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the 60th day before the date of such other action,
whichever is later.
Section 12. Proxies: Every person entitled to vote for directors or on any other
matter shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy (whether by manual signature, typewriting,
telegraphic transmission, or otherwise) shall be executed by the shareholder or
the shareholder's attorney in fact. A validly executed proxy which does not
state that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the corporation stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of 11 months from the date of the proxy, unless
otherwise provided in the proxy. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Sections
705(e) and 705(f)
<PAGE>
of the California General Corporation Law.
Section 13. Inspectors Of Election: Before any meeting of shareholders, the
board of directors may appoint any persons other than nominees for office to act
as inspectors of election at the meeting or its adjournment. If no inspectors of
election are so appointed, the chairman of the meeting may, and on the request
of any shareholder or a shareholder's proxy shall, appoint inspectors of
election at the meeting. The number of inspectors shall be either one (1) or
three (3). If inspectors are appointed at a meeting on the request of one or
more shareholders or proxies, the holders of a majority of shares or their
proxies in the meeting shall determine whether one (1) or three (3) inspectors
are to be appointed. If any person appointed as inspector fails to appear or
fails or refuses to act, the chairman of the meeting may, and upon the request
of any shareholder or a shareholder's proxy shall appoint a person to fill that
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
Section 1. Powers: Subject to the provisions of the California General
Corporation Law and any limitations in the articles of incorporation and these
bylaws relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
Without prejudice to these general powers, and subject to the same
limitations, the directors shall have the power to:
(a) Select and remove all officers, agents, and employees of the
corporation; prescribe any powers
<PAGE>
and duties for them that are consistent with law, with the articles of
incorporation, and with these bylaws; fix their compensation; and require from
them security for faithful service.
(b) Change the principal office of the corporation in the state of
California from one location to another; cause the corporation to be qualified
to do business in any other state, territory, dependency, or country and conduct
business within or without the State of California; and designate any place
within or without the State of California for the holding of any shareholders'
meeting, or meetings, including annual meetings.
(c) Adopt, make, and use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificates.
(d) Authorize the issuance of shares of stock of the corporation on any
lawful terms, in consideration of money paid, labor done, services actually
rendered, debts or securities canceled, or tangible or intangible property
actually received.
(e) Borrow money and incur indebtedness on behalf of the corporation,
and cause to be executed and delivered for the corporation's purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecation and other evidences of debt and securities.
Section 2. Number And Qualification of Directors. The authorized number of
directors shall be not less than four (4) and not more than seven (7) until
changed by a duly adopted amendment to the Articles of Incorporation or by an
amendment to this Bylaw adopted by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote. The exact number of
directors within the range set forth above shall be fixed and may from time to
time be changed by a resolution adopted by the board of directors.
Section 3. Election And Term Of Office of Directors.
Directors shall be elected at each annual meeting of the shareholders
to hold office until the next annual meeting. Each director, including
a director elected to fill a vacancy, shall hold office until the
expiration of the term for which elected and until a successor has been
elected and qualified.
Section 4. Vacancies: Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director, except that a vacancy created by the
removal of a director by the vote or written consent of the
shareholders or by court order may be filled only by the vote of a
majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present, or by the written consent of
holders of a majority of the outstanding shares entitled to vote. Each
director so elected shall hold office until the next annual
<PAGE>
meeting of the shareholders and until a successor has been elected and
qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist in the
event of the death, resignation, or removal of any director, or if the board of
directors by resolution declares vacant the office of a director who has been
declared of unsound mind by an order of court or convicted of a felony, or if
the authorized number of directors is increased, or if the shareholders fail, at
any meeting of shareholders at which any director or directors are elected, to
elect the number of directors to be voted for at that meeting. The shareholders
may elect a director or directors at any time to fill any vacancy or vacancies
not filled by the directors, but any such election by written consent shall
require the consent of a majority of the outstanding shares entitled to vote.
Any director may resign effective on giving written notice to the chairman of
the board, the president, the secretary, or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective. No
reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
Section 5. Place Of Meetings And Meetings By Telephone:
Regular meetings of the board of directors may be held at any place within or
outside the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board shall be held at any place within or outside the State of
California that has been designated in the notice of the meeting or if not
stated in the notice or there is no meeting, at the principal executive office
of the corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another, and all such directors shall
be deemed to be present in person at the meeting.
Section 6. Regular Meeting: Immediately after the Annual Meeting of Shareholders
the board of directors shall hold a regular meeting for the purpose of
organization, any desired election of officers, and the transaction of other
business. Notice of this meeting shall not be required.
Section 7. Other Regular Meeting: Other regular meetings of the board of
directors shall be held without call at such time as shall from time to time be
fixed by the board of directors. Such regular meetings may be held without
<PAGE>
notice.
Section 8. Special Meetings: Special meetings of the board of directors for any
purpose or purposes may be called at any time by the chairman of the board, or
the president or any vice president or secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. In case the notice is mailed,
it shall be deposited in the United States mail at least 5 days before the time
of the holding of the meeting. In case the notice is delivered personally, or by
telephone or telegram, or facsimile transmission, it shall be delivered
personally or by telephone or by facsimile transmission or to the telegraph
company at least 48 hours before the time of the holding of the meeting. An oral
notice given personally or by telephone or by facsimile transmission may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose of the meeting nor
the place if the meeting is to be held at the principal executive office of the
corporation.
Section 9. Quorum: A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 11 of this Article III. Every act or decision done or made
by a majority of the directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the board of directors, subject to
the provisions of Section 310 of the Corporations Code of California (as to
approval of contracts or transactions in which a director has direct or indirect
material financial interest), Section 311 of that Code (as to appointment of
committees), Section 317 (e) of that Code (as to indemnification of directors).
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by least a majority of the required quorum for that meeting.
Section 10. Waiver of Notice: Notice of a meeting, if otherwise required, need
not be given to any director who either before or after the meeting signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes, or attends the meeting without protesting the lack of notice before or
at the beginning of the meeting. The waiver of notice or consent need not
specify the purpose of the meeting. All such waivers, consents, and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Notice of a meeting shall also be deemed given to any director who
attends the meeting without protesting before
<PAGE>
or at its commencement, the lack of notice to that director.
Section 11. Adjournment: A majority of the directors present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
Section 12. Notice of Adjournment: Notice of the time and place of holding an
adjourned meeting need not be given, unless the meeting is adjourned for more
than twenty-four hours, in which case notice of the time and place shall be
given before the time of the adjourned meeting, in the manner specified in
Section 8 of this Article III, to the directors who were not present at the time
of the adjournment.
Section 13. Action Without Meeting: Any action required or permitted to be taken
by the board of directors may be taken without a meeting, if all members of the
board shall individually or collectively consent in writing to that action. Such
action by written consent shall have the same force and effect as a unanimous
vote of the board of directors. Such written consent or consents shall be filed
with the minutes of the proceedings of the board.
Section 14. Fees And Compensation Of Directors: Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement of expenses, as may be fixed or determined by resolution of the
board of directors. This Section 14 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for those services.
As a condition to serving on the Board each director shall agree that
in the event that any portion of the compensation paid by the corporation to him
is disallowed as an income tax deduction on an income tax return of the
corporation, the director will repay to the corporation the full amount of such
portion.
ARTICLE IV
COMMITTEES
Section 1. Committees of Directors: The Board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate one or
more committees, each consisting of two or more directors, to serve at the
pleasure of the board. The board may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. Any committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, except with
respect to:
(a) The approval of any action which, under the General Corporation Law
of California, also requires shareholders' approval or approval of the
outstanding shares,
<PAGE>
(b) The filling of vacancies on the board of directors or in any
committee;
(c) The fixing of compensation of the directors for serving on the
board or any committee;
(d) The amendment or repeal of any resolution of the board of directors
which by its express terms is not so amendable or repealable;
(e) The amendment or repeal of any resolution of the board of directors
which by its express terms is not so amendable or repealable;
(f) A distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the board of
directors; or
(g) The appointment of any other committees of the board of directors
or the members of these committees.
Section 2. Meetings And Action of Committees: Meetings and action of committees
shall be governed by, and held and taken in accordance with, the provisions of
Article III of these bylaws, Section 5 (place of meeting), 7 (regular meetings),
8 (special meetings and notice), 9 (quorum), 10 (waiver of notice), 11
(adjournment), 12 (notice of adjournment), and 13 (action without meeting), with
such changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members, except
that the time of regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the committee; special
meetings of committees may also be called by resolution of the board of
directors and notice of special meetings of committees shall also be given to
all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
Section 1. Officers: The Officers of the corporation shall be a president and a
chief executive officer, a secretary and a treasurer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article V. Any number of offices may be
held by the same person.
Section 2. Election Of Officers: The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the board of directors, and each
shall serve at the pleasure of the board, subject to the rights, if any, of an
officer under any contract of
<PAGE>
employment.
Section 3. Subordinate Officers: The board of directors may appoint, and may
empower the president to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the bylaws or as the
board of directors may from time to time determine.
Section 4. Removal And Resignation Of Officers: Subject to the rights, if any,
of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the board of directors, at any regular or
special meeting of the board of directors, by any officer upon whom such power
of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice, and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any of the corporation under any contract to which the officer is a
party.
Section 5. Vacancies In Offices: A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these bylaws for regular appointments to that office.
Section 6. Chairman Of The Board: The chairman of the board, if such an officer
be elected, shall, if present, preside at meetings of the board of directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the board of directors and exercise and perform such other
powers and duties as may be from time to time assigned to him by the board of
directors or prescribed by the bylaws. If there is no president, the chairman of
the board shall in addition be the chief executive officer of the corporation
and shall have the powers and duties prescribed in Section 7 of this Article V.
Section 7. President: Subject to such supervisory powers, if any, as may be
given by the board of directors to the chairman of the board, if there be such
an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence of the chairman of the board, or if there be none, at all meetings
of the board of directors. He shall have the general powers and duties of
management usually vested in the office of president of a corporation and shall
have such other powers and duties as may be prescribed by the board of directors
or the bylaws.
<PAGE>
Section 8. Vice Presidents: In the absence or disability of the president, the
vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors or the bylaws, and the president, or the chairman of the
board.
Section 9. Secretary: The secretary shall keep or cause to be kept, at the
principal executive office or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice given, the names
of those present at directors' meetings or committee meetings, the number of
shares present or represented at shareholders' meetings, and the proceedings.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required by the bylaws or by
law to be given, and he shall keep the seal of the corporation if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by the bylaws.
Section 10. Chief Financial Officer: The chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gain,
losses, capital, retained earnings, and shares. The books of account shall at
all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and the to the credit of the corporation with such
depositaries as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of
<PAGE>
directors or the bylaws.
As a condition of employment, any officer retained by the board of
directors shall agree that in the event that any portion of the compensation
paid by the corporation to him is disallowed as an income tax deduction on an
income tax return of the corporation, the officer will repay immediately tot he
corporation the full amount of such portion.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
The corporation shall, to the maximum extent permitted by the
California General Corporation Law, indemnify each of its agents against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact any such person is or was an agent of the corporation. For purposes of this
Section, an "agent" of the corporation includes any person who is or was a
director, officer, employee, or other agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, or was a director, officer, employee, or agent of a corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
ARTICLE VII
RECORDS AND REPORTS
Section 1. Maintenance And Inspection Of Share Register:
The corporation shall keep at its principal executive office, or at the office
of its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its shareholders, giving the
names and addresses of all shareholders and the number and class of shares held
by each shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five days prior
written demand on the corporation, and (ii) obtain from the transfer agent of
the corporation, on written demand and on the tender of such transfer agent's
usual charges for such list, a list of the shareholders' name and addresses, who
are entitled to vote for the election of directors, and their shareholdings, as
of the most recent record date for which that list has been compiled or as of a
date specified by the shareholder after the date of demand. This list shall be
made available to any such
<PAGE>
shareholder by the transfer agent on or before the later of 5 days after the
demand is received or the date as of which the list is to be compiled. The
record of shareholders shall also be open to inspection on the written demand of
any shareholder or holder of a voting trust certificate, at any time during
usual business hours, for a purpose reasonably related to the holder's interests
as a shareholder or as the holder of a voting trust certificate. Any inspection
and copying under this Section may be made in person or by an agent or attorney
of the shareholder or holder of a voting trust certificate making the demand.
Section 2. Maintenance And Inspection Of Bylaws: The corporation shall keep at
its principal executive office, or if its principal executive office is not in
the State of California, at its principal business office in this State, the
original or a copy of the bylaws as amended to date, which shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is outside the State of
California and the corporation has no principal business office in this State,
the Secretary shall, upon the written request of any shareholder, furnish to
that shareholder a copy of the bylaws as amended to date.
Section 3. Maintenance And Inspection Of Other Corporate Records: The accounting
books and records and minutes of proceedings of the shareholders and the board
of directors and any committee or committees of the board of directors shall be
kept at such place or places designated by the board of directors, or, in the
absence of such designation, at the principal executive office of the
corporation. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any other form capable of
being converted into written form. The minutes and accounting books and records
shall be open to inspection upon the written demand of any shareholder or holder
of a voting trust certificate, at any reasonable time during usual business
hours, for a purpose reasonably related to the holder's interests as a
shareholder or as the holder of a voting trust certificate. The inspection may
be made in person or by an agent or attorney and the right of inspection
includes the right to copy and make extracts of documents.
Section 5. Annual Report To Shareholders: The annual report to shareholders
referred to in Section 1501 of the California General Corporation Law is
expressly dispensed with, but nothing herein shall be interpreted as prohibiting
the board of directors from issuing annual or other periodic reports to the
shareholders of the corporation as they consider appropriate.
Section 6. Financial Statements: A copy of any annual financial statement and
any income statement of the corporation for each quarterly period of each fiscal
year, and any accompanying balance sheet of the corporation as of the end of
each such period, that has been prepared by the corporation shall be kept on
file in the principal
<PAGE>
executive office of the corporation for 12 months and each such statement shall
be exhibited at all reasonable times to any shareholder demanding an examination
of any such statement or a copy shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three month, six-month or nine-month period of the then current fiscal year
ended more than 30 days before the date of the request, and a balance sheet of
the corporation as of the end of that period, the chief financial officer shall
cause that statement to be prepared, if not already prepared, and shall deliver
personally or mail that statement or statements to the person making the request
within 30 days after the receipt of the request. If the corporation has not sent
to the shareholders its annual report for the last fiscal year, this report
shall likewise be delivered or mailed to the shareholder or shareholders within
30 days after the request.
The corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual, or quarterly
income statement which it has prepared, and a balance sheet as of the end of the
period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountant engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
Section 7. Annual Statement of General Information: The corporation shall,
timely file in each year with the Secretary of State of the State of California,
on the prescribed form, a statement setting forth the authorized number of
directors, the names and complete business or residence addresses of all
incumbent directors, the names and complete business or residence addresses of
the chief executive officer, secretary, and chief financial officer, the street
address of its principal executive office or principal business office in this
state, and the general type of business constituting the principal business
activity of the corporation, together with a designation of the agent of the
corporation for the purpose of service of process, all in compliance with
Section 1502 of the Corporations Code of California.
<PAGE>
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. Record Date For Purpose Other Than Notice And Voting: For purposes of
determining the shareholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any rights
in respect of any other lawful action (other than action by shareholders by
written consent without a meeting), the board of directors may fix, in advance,
a record date, which shall not be more than sixty (60) days before any such
action, and in that case only shareholders of record on the date so fixed are
entitled to receive the dividend, distribution, or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed except as
otherwise provided in the California General Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
60th day before the date of that action, whichever is later.
Section 2. Checks, Drafts, Evidences Of Indebtedness: All checks, drafts, or
other orders for payment of money, notes, or other evidences of indebtedness,
issued in the name of or payable to the corporation, shall be signed or endorsed
by such person or persons and in such manner as, from time to time, shall be
determined by resolution of the board of directors.
Section 3. Corporate Contracts And Instruments; How Executed: The board of
directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, agent or agents to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and this authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent, or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
Section 4. Certificates For Shares: A certificate or certificates for shares of
the capital stock of the corporation shall be issued to each shareholder when
any of these shares are fully paid, and the board of directors may authorize the
issuance of certificates or shares as partly paid provided that these
certificates shall state the amount of the consideration to be paid for them and
the amount paid. All certificates shall be signed in the name of the corporation
by the chairman of the board or vice chairman of the board or the president or
vice president and by the chief financial officer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has
<PAGE>
been placed on a certificate shall have ceased to be that officer, transfer
agent, or registrar before that certificate is issued, it may be issued by the
corporation with the same effect as if that person were an officer, transfer
agent, or registrar at the date of issue.
Section 5. Lost Certificates: Except as provided in this Section 5, no new
certificates for shares shall be issued to replace an old certificate unless the
latter is surrendered to the corporation and canceled at the same time. The
board of directors may, in case any share certificate or certificate for any
other security is lost, stolen, or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the board may require,
including provision for indemnification of the corporation secured by a bond or
other adequate security sufficient to protect the corporation against any claim
that may be made against it, including any expense or liability, on account of
the alleged loss, theft, or destruction of the certificate or the issuance of
the replacement certificate.
Section 6. Representation of Shares of Other Corporations: The chairman of the
board, the president, or any vice president, or any other person authorized by
resolution of the board of directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the corporation any and all shares
of any other corporation or corporations, foreign or domestic, standing in the
name of the corporation. The authority granted to these officers to vote or
represent on behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by a proxy duly
executed by these officers.
Section 7. Construction And Definitions: Unless the context requires otherwise,
the general provisions, rules of construction, and definitions in the California
General Corporation Law shall govern the construction of these bylaws. Without
limiting the generality of this provision, the singular number includes the
plural, the plural number includes the singular, and the term "person" includes
both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
Section 1. Amendment By Shareholders: New bylaws may be adopted or these bylaws
may be amended or repealed by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote; provided, however, that if
the articles of incorporation of the corporation set forth the number of
authorized directors of the corporation, the authorized number of directors may
be changed only by an amendment of the articles of incorporation.
<PAGE>
Section 2. Amendment By Directors: Subject to the rights of the shareholders as
provided in Section 1 of this Article IX, bylaws, other than a bylaw or an
amendment of a bylaw changing the authorized number of directors, may be
adopted, amended, or repealed by the board of directors.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the present duly elected and acting Secretary of INFORMATION
NETWORK RADIO INC., a California corporation; and
(2) That the foregoing bylaws, comprising forty (40) pages, constitute the
bylaws of said corporation as duly adopted at the meeting of the Board of
Directors thereof duly held on the 10th day of March, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
said corporation, this 10th day of March, 1999.
S/WILLIAM E. GREEN
--------------------
William E.Green, Secretary
Text and description of graphic and image material appearing
on the form of certificate for shares of the common stock of
Information Network Radio, Inc.
Exhibit 4.2 to Registration Statement on Form SB-2
The borders around the edge of the certificate and around the space for
certificate number and number of shares are standard printer's forms, with no
text. The Company's corporate seal is reproduced at the bottom center of the
front. The Company's logo (consisting of block letters "IN," with a globe on top
of the I, with "RADIO" on one side of the block letters and "Information Network
Radio" on the other side) appear centered near the top. Facsimile signatures of
the chairman and secretary of the Company are at the bottom left and right, and
the name and space for authorized signature of the transfer agent are on the
lower right side of the certificate face.
On the reverse side of the certificate, before the language and spaces for use
in effecting a transfer of the shares represented by the certificate, are these
words:
A statement of the rights, preferences, privileges and restrictions
granted to or imposed upon the respective classes or series of shares of stock
of the Corporation, and upon the holders thereof as established by the Articles
of Incorporation or by any certificate of determination of preferences, and the
number of shares constituting each series or class and the designations thereof,
may be obtained by any shareholder of the Corporation upon request and without
charge from the Secretary of the Corporation at the principal office of the
Corporation.
EXHIBIT 4.2
LAW OFFICES
OF
WILLIAM E. GREEN WILLIAM GREEN & ASSOCIATES
MARGARET A. MORROW
LEE T. MISCAVAGE 550 HAMILTON AVENUE FACSIMILE (650) 325-4025
PALO ALTO, CALIFORNIA 94301
(650) 321-9992
(408) 279-3293
April 26, 1999
Board of Directors
IN Radio
114 Sansome Street, Suite 1410
San Francisco, Ca 94104
Dear Directors:
You have requested my opinion as to the legality of the securities
being registered by IN Radio ("the Company") under the Securities Act of 1933,
as amended ("the Act"), by filing a registration statement on Form SB-2,
relating to the offering of shares of its common stock ("the Shares") as
described in the registration statement.
In connection with your request for my opinion, I have reviewed the
Company's Articles of Incorporation, Bylaws, resolutions of the Board of
Directors of the Company concerning the offering, the registration statement and
such other corporate documents as I have considered necessary or appropriate for
the purposes of this opinion.
Upon the basis of this examination, it is my opinion that, when the
registration statement shall have become effective under the Act, and when the
Shares shall have been duly issued and delivered to the purchasers against
payment of the consideration for them, the Shares will, when sold, be legally
issued, fully paid and non-assessable.
I consent to the filing of this opinion as an exhibit to the
registration statement.
Very truly yours,
S/William E. Green
EXHIBIT 5
INFORMATION NETWORK RADIO, INC.
Form SB-2 Registration Statement
List of all Subsidiaries of the Registrant
Each of these subsidiaries of the Registrant is wholly-owned by the Registrant.
Each of them does business under its name as organized:
AsiaOne Network, LLC, organized as a limited liability company in Delaware.
Personal Achievement Live, LLC, organized as a limited liability company in
Delaware.
EXHIBIT 21
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the heading "Experts" and
to the use of our report dated April 6, 1999 with reference to our audit of the
financial statements of Information Network Radio, Inc. as of March 31, 1999 and
for the initial period then ended, in the Registration Statement on Form SB-2
and related Prospectus dated May 4, 1999.
/s/ HOLLANDER, LUMER & CO. LLP
Los Angeles, California
May 4, 1999
EXHIBIT 23.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the initial period ended March 31, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> SEP-18-1998
<PERIOD-END> MAR-31-1999
<CASH> 3,651
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,651
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,651
<CURRENT-LIABILITIES> 27,400
<BONDS> 0
0
0
<COMMON> 10,000
<OTHER-SE> (21,749)
<TOTAL-LIABILITY-AND-EQUITY> 15,651
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 21,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (21,749)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,749)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,749)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> 0.00
</TABLE>
SHARE PURCHASE ORDER - for individual investor
To Information Network Radio, 114 Sansome Street, Suite 1410, San Francisco,
California 94104:
I have received and had an opportunity to read the Prospectus by which the
shares are offered. I represent that I am purchasing as an investment and not
with a view to or for sale in connection with any distribution of the shares.
Is at least one of the following statements true? Yes ___ No ___
My individual net worth, or joint net worth with my spouse, currently
exceeds $1,000,000.
My individual income (or joint income with my spouse) was in excess of
$200,000 in 1997 and in 1998 and I (we) have a reasonable expectation
of reaching the same income level in 1999.
Signature: ____________________________________________ Date: _________________
Enclosed is payment for _____ shares (minimum 250 shares), at $100.00 per share,
totaling $_____________. (Please make the check payable to: Information Network
Radio, Inc.)
Register the shares in the following name(s) and amount(s):
Name(s) ___________________________________ Number of shares _________
As (Check one.):
Individual _____ Joint Tenants _____ Trust _____
Tenants in Common _____ Corporation _____ UGMA ___
For the person(s) who will be registered shareowner(s):
Mailing Address: ______________________________________________________
City, State & Zip Code: _______________________________________________
Telephone Number: Business: (___) ___________ Home: (___) __________
Social Security or Taxpayer ID Number: ________________________________
(Please attach any special mailing instructions other than shown above)
THIS SHARE PURCHASE ORDER IS NOT EFFECTIVE UNTIL ACCEPTANCE
(You will be mailed a signed copy of this accepted order for your records.)
Share purchase accepted by Information Network Radio, Inc.:
_____________________________________________________ __________________
N. John Douglas, Chief Executive Officer Date
EXHIBIT 99.1
