UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g)
of the Securities Exchange Act of 1934
ENTERTECH MEDIA GROUP, INC.
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(Name of Small Business Issuer in its Charter)
Nevada 88-036858
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(State of other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
50 West Liberty Street, Suite 880
Reno, Nevada 89501
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone number: (775)324-6655
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001 Per Share
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(Title of Class)
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS
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(a) Business Development
EnterTech Media Group, Inc. (the "Company" or the "Registrant" ) is a
Nevada corporation which was originally incorporated on November 17, 1986 under
the name of Stones Stores, Inc. The Company was originally incorporated with one
class of stock. The Company had 50,000,000 shares of capital stock with a par
value of $0.001 per share authorized. The Company was incorporated to engage in
the business of the retail and wholesale sales of men's and women's furnishings
and related products.
In February of 1987, the Company made a public offering of its
securities pursuant to the provisions of Rule 504 adopted under the Securities
Act of 1933, as amended. The Company sold 500,000 shares at $0.10 per share for
a total of $50,000. The organizers of the Company purchased 100,000 shares at
$5,000. Thus, at the conclusion of the offering there were issued and
outstanding 600,000 shares of common stock with a par value $0.001 per share.
On March 30, 1987, the shareholders approved the acquisition of all of
the issued and outstanding shares of stock of PFI, Inc., a Washington
corporation engaged in the business of financial planning. As a result of the
corporate reorganization, on May 1, 1987, the Company changed its name to Stone
International, Inc. and effected a five (5) to one (1) forward split of the
stock. The Company's 600,000 shares of outstanding stock were reissued with the
result that the Company then had 3,000,000 shares outstanding with a par value
of $0.005. The Company then issued 12, 789,474 shares of it common stock for of
all of the issued and outstanding stock of PFI, Inc. The Company then had
15,789,474 shares of its common stock issued and outstanding.
On May 1, 1990, the Company underwent another corporate reorganization.
The Company's named was change to Armas Intl. Mfg. Co., Inc. and a reverse split
of the issued and outstanding shares at the rate of twenty (2) to one (1) was
effected. From September 4, 1990 through March 9, 1993, the Company acquired
assets in exchange for stock. It issued 1,852,749 shares to acquire property,
cash and services.
The Company became inactive in 1989 and remained inaction until current
management took over operations. Current management become involved with the
Company in the fall of 1998.
In October of 1998, current management reorganized the Company once
again. On October 23, 1998, the Company's name was changed to Inter-Link
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Communications Group, Inc. and the Company's issued and outstanding shares
underwent a six (6) for one (1) reverse split. The Company's articles also were
amended to authorize the Company to issue 100,000,000 shares of common stock
with a par value of $0.001 per share.
In late 1998, Management entered into acquisition agreements with two
entities for the acquisition of assets. The parties contracting with the Company
breached those agreements and as a result no assets were acquired pursuant to
those agreements. The circumstances surrounded those agreement are the subject
of litigation commenced by the Company in the State of Nevada and in Great
Britain. This litigation in detailed in Item 2 of Part II below.
During April of 1999, management entered into an Exchange Agreement
with a Nevada corporation named EnterTech Limited. Under the terms of that
Exchange Agreement, the Company is obligated to issue a minimum of 11,500,000
shares and a maximum of 15,000,000 shares of it common stock in exchange for all
the issued and outstanding shares of EnterTech Limited. At the time of the
Exchange Agreement, EnterTech Limited had 10,000,000 shares of common stock
issued and outstanding. EnterTech Limited also was, and is, in the process of
offering a minimum of 1,500,000 shares and a maximum of 5,000,000 shares of its
common stock pursuant to a private placement memorandum. Because the Company is
obligated to to issue a minimum of 11,500,000 pursuant to the Exchange
Agreement, it has issued 11,500,000 shares of its common stock to an exchange
agent who is charged under the terms of the Exchange Agreement with assuring
that the appropriate number of the Company's shares are issued to the
shareholders of EnterTech Limited once EnterTech Limited's private placement is
complete. 10,000,000 of these initial 11,500,000 shares were issued for the
10,000,000 shares of EnterTech Limited issued and outstanding apart from the
private placement offering, and the remain 1,500,000 shares were issued for the
exchange of the minimum number of shares EnterTech Limited is offering pursuant
to its private placement memorandum. In this regard, the Company will issue
additional shares if EnterTech Limited sells more the minimum number of shares
it is offering. Such additional shares will be issued on a one-for-one basis
consistent with the number of shares EnterTech Limited sells above its minimum.
Such shares will not exceed the 5,000,000 share maximum of the EnterTech private
placement.
EnterTech Limited owns 100% of the issued and outstanding shares of two
subsidiaries, EnterTech Picture Corporation and EnterTech Releasing Corporation,
also Nevada corporations.
On April 22, 1999, as part of its transaction with EnterTech Limited,
the Company's board of director approved the changed of the Company's name to
EnterTech Media Group, Inc. Now operating as EnterTech Media Group, Inc., the
business shall be the business EnterTech Limited, as described below.
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As of May 31, 1999, 900,000 shares of the Company's 100,000,000
authorized shares of common stock were issued and outstanding. In June of 1999,
the Company will issue an additional 11,500,000 shares pursuant to the Exchange
Agreement with EnterTech Limited described above. Once those shares are issued,
there will be 12,400,000 shares issued and outstanding.
To management's knowledge, the Company has not been subject to
bankruptcy, receivership or any similar proceedings.
(b) Business of the Issuer
(1) Principal Products and Services and Their Markets
The business of EnterTech Limited is now being operated as the business
of EnterTech Media Group, Inc. Accordingly, hereafter the business of EnterTech
Media Group, Inc. and that of EnterTech Limited shall be described as the
business of "EnterTech."
EnterTech has been formed to combine Entertainment with the most
progressive Technology available and is determined to approach film making in a
different way to that of the last 70 years.
EnterTech intends to establish itself as an innovative and exciting,
fully integrated production and distribution company. It intends to utilize the
latest technology, in particular High Definition Digital Video ("HDDV") to
reduce the exorbitant cost of film making that currently exists and to make,
produce distribute its films in all formats and also acquire other independent
films that will provide the Company with a growing library to build its future
on.
EnterTech has been observing the current trends in the industry whereby
feature films are being made at huge costs often in excess of sixty million
dollars with an additional sum for marketing that makes each major film's total
cost an average of around one hundred million dollars plus. The Company believes
that this is excessive and in most cases unprofitable and therefore has decided
to focus its time and energy on creating films that have been recorded on a new
format, High Definition Digital Video ("HDDV"). The intention is to then
transfer each film onto 35 mm and release them theatrically. Subsequently the
Company will distribute them in all other formats i.e. Video, DVD, Cable and
Television. There have been several recent and notable HDDV and video projects
transferred to 35 mm for theatrical release including two shot on HDDV "20
Dates" and a Wim Wenders film, "The Buena Vista Social Club" and "Celebration"
which was initially filmed on Hi8.
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Production
The Company has formed a subsidiary called EnterTech Picture
Corporation ("EPC") to make a minimum of six feature films per annum with
budgets of under one million dollars per film. Each film will use the HDDV
format that has now been developed and is being promoted by Sony. The company is
excited about the HDDV process of producing feature length films using this
technology and giving the company the opportunity to position itself as a market
leader in the production of films using this exciting and economical new
process.
The cost of filming on HDDV is attractive for a variety of economical
reasons and is so cost efficient that the Company is confident of being able to
make a substantial profit on many of the films that it produces. The savings
derive from many different areas including a much shorter production schedule
which therefore requires talent for a period shorter than the norm, set-up
times, small crews, lighting, editing, digital effects and the cost of film
itself and the associated processing and delivery costs.
In order to help rapidly develop this business EPC has agreed a joint
venture arrangement with two renowned producers, Jeff Apple ("In the Line of
Fire") and Jake Hooker who is also a composer ("I Love Rock and Roll"), who will
work alongside John Daly ("Platoon" and "Last Emperor", both Oscar winning
films, "Hoosiers", "Terminator" and many more successful and highly respected
films) all who have a record of success in movies and soundtrack production. EPC
is also working with Kimia Zabihyan, who has been successful in the producing of
important ethnic documentaries and is now launching her feature film career with
EnterTech. Kimia is bringing three films to the Company's program for 1999/2000.
The first film is "Hip-Hop Millennium" which will have a soundtrack that the
Company expects to be successful in its own right and which will feature many of
the leading groups of today. The soundtrack will be prominently released along
with the film. These experts will produce films for us utilizing HDDV
technology. The company will shortly start to film Hip-Hop Millennium as the
first of six productions planned for 1999 / 2000. It is the Company's intention
to exploit each film in all the current media plus build a library for future
distribution via Video on Demand and eventually through the Internet.
Three further productions are planned in a new Joint Venture with
Parallel Pictures, plc, a UK public company. Under the terms of this agreement
Parallel Pictures will provide 50% of each budget and will be involved in the
production of the films. In relation to this the company has the benefit of
offices in central London, which are overseen by John Smallcombe who has a
successful history in the film business and who will supervise the company's
activities in Europe where elements of these three productions are based. The
Company intends to bring its HDDV technology to Europe with a view to entering
into similar Joint Ventures with others.
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The Company's overall philosophy will be to produce programming with a
heavy emphasis being placed on the youth market with music playing a key role in
the finished films. The market is there to be addressed and the Company's
challenge is to provide it with carefully targeted productions and soundtracks.
The EnterTech Media Group Retail Store
The Company will strive to make the EnterTech Media Group store
informative and authoritative, allowing customers to easily learn about,
discover and purchase Videos, CDs and other music-related products. The store
will be designed to be intuitive and easy to use and to enable the ordering
process to be completed with a minimum of customer effort. Customers enter the
EnterTech Media Group store through its Web site, and in addition to ordering
video and music products, can conduct targeted searches, browse among top
sellers and other featured titles, read reviews, watch video clips, listen to
music samples, register for personalized communications, participate in
promotions and check order status. New users will be able to access a page
specifically designed to provide a quick understanding of the site and its many
features.
Searching. Through the Company's search engine, customers will be able to
quickly and easily navigate the store to find Videos and CDs or other products
of interest. Customers will be able to search for products based on actor, film
name, director, artist, album title, song title, record label, genre or release
date for new releases. A visitor will be able to browse among EnterTech Media
Group's database of reviews, cover art, video and sound samples and album notes.
Customers will also be able to browse alphabetical lists based on actors, film
names, directors, artists, types of products, record labels and album cover art.
Content and Music Discovery. The Company believes that effective use of content
encourages purchases by customers who may be browsing the site without a
specific item in mind. The Company's Web site will contain video and sound
samples, extensive information with regard to films, titles, reviews, ratings,
articles on related topics and other information. To help customers browse and
discover films and CDs, EnterTech Media Group will launch video and music spaces
organized by genre: Hip-Hop, Rock/Pop, Jazz/Blues, Urban/Electronic,
Country/Folk, World/New Age and Classical. The main page of each space features
links to genre-specific lists, articles and reviews. Within each space,
customers can browse sale items, new releases, advance orders and charts, read
exclusive EnterTech Media Group reviews, listen to sound samples and purchase
items recommended by the Company.
Purchasing. Once an item has been selected, customers will be able to click to
add products (including, advance orders of yet-to-be released products) to their
virtual shopping carts. Customers will be able to add and remove products from
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their shopping carts as they browse, prior to making a final purchase. The
shopping cart page will display each item that has been placed in the cart,
including title, price and any applicable discount. To execute orders, customers
will click on a button and be prompted to select shipping and payment methods
online or by e-mail, facsimile or telephone. Customers will also be able to add
products which they may wish to purchase on future visits to a special section
of the shopping cart where items may be stored over multiple visits.
Payment. In paying for orders, customers will be able to use credit cards,
personal checks or money orders. For convenience, the Company will enable
customers to store credit card information on the Company's secure server,
thereby avoiding the need to re-enter this information when making future
purchases. Customers will be offered a variety of shipping options, including
overnight delivery. The Company will automatically confirm each order by e-mail
within minutes after the order is placed and subsequently confirm shipment of
each order by e-mail. The Company will offer money back returns policy.
Distribution and Fulfillment. The Company's will establish an external, third
party fulfillment operation and possibly also link with retailers of its
products who will fulfil orders passed through to them on commercial terms. The
breadth of the inventory maintained by outside vendors will provide EnterTech
Media Group with the ability to maintain high order fill rates. EnterTech Media
Group will update its site daily with inventory information received from its
vendors, which will enable customers to check the availability of products
before ordering. The Company will electronically transmit orders to its outside
fulfillment operation and vendors, as appropriate, at least once daily. Orders
will be shipped by these vendors using an EnterTech Media Group label and
invoice, in most cases within a day after an order is placed with the Company. A
customer's credit card is charged once an order is shipped.
Multilingual Capabilities. The Company believes that international markets may
represent a significant portion of the Company's sales since many products
offered by EnterTech Media Group will not otherwise be available in these
markets. For example International music sales in 1996 were estimated to be
approximately twice that of the U.S. The Company may introduce Spanish, French,
Portuguese, Japanese and Korean language versions of its Web site that contain
translation of account registration and ordering instructions, and possibly even
support its international sales efforts with customer service representatives
fluent in these languages.
Web Advertising
The Company's type of content may offer it the ability to sell advertising
packages targeted to specific audiences and demographics. Additionally, unlike
Web sites that offer only text-based banner advertisements, the Company will be
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able to offer multimedia packages incorporating custom audio and video
applications such as gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads. Should this prove to be
a worthwhile course of action for the Company to adopt it will probably be
developed along the following lines:
Gateway Ads with Guaranteed Click-Thrus. EnterTech Media Group could provide
advertisers the opportunity to incorporate gateway ads into their Internet
advertising packages. Gateway ads are audio or video clips that are inserted at
the lead of selected programming, lasting from 15 to 30 seconds, that play prior
to the audio or video content that has been selected by the user. A guaranteed
click-thru is a pop-down browser window that automatically launches at the
beginning of the gateway ad displaying an advertiser's Web site or other
targeted information. Gateway ads are also available without guaranteed
click-thrus. The Company will sell these advertisements at a higher CPM than
traditional banner ads because of their unique nature.
Channel and Event Sponsorships. The Company could also offer advertisers the
ability to sponsor one or more of its sections or special events, enabling
advertisers to brand entire sections of the Company's Web sites. A section or
event sponsorship would involve the rotating and permanent placement of buttons,
logos and Web site links, integrated gateway ads, multimedia banner ads and
mention on EnterTech Media Group's web site home page, channel home page and
e-mail newsletter. The Company would typically sell these packages on a
channel-by-channel or event-by-event basis.
Multimedia and Traditional Banner Ads. The Company could offer advertisers the
ability to integrate audio and video into their text and graphics banner ads.
The multimedia portion of the banner plays when the user clicks on the banner.
Because audio and video can increase the impact of a banner ad, these packages
would be sold at a higher CPM than traditional banner ads.
Target Customers
International Data Corporation estimates that the number of Web users
grew to approximately 28 million by the end of 1996 and will grow to
approximately 175 million by 2001. Furthermore, Jupiter Communications estimates
that the number of online households (households using e-mail, the Internet or a
consumer online service) making purchases will grow from an estimated 15.2
million households in 1996 to 57.0 million households, representing over 50% of
U.S. households, by the year 2002.
According to the Recording Industry Association of America, domestic
purchases of recorded music by persons age 30 and over have increased from
approximately 34% of total U.S. sales in 1986 to approximately 47% of sales, or
approximately $5.9 billion, in 1996. The Company believes that the Internet
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represents a particularly attractive medium for retailing both video and audio
to customers in this age group as they are typically less "hits-driven" than
younger age groups and are more likely to purchase a wide variety of titles.
These customers generally can afford to buy more titles at one time, have access
to computers and use the Internet, and have credit cards with which to make
electronic payments. They are also more likely to be early adopters of the soon
to be released set top boxes that are designed to accept downloads of large
amounts of audio and visual content or television programming and the company
believes that these will be integrated into the Internet in due course to allow
consumers the option of downloading content directly from the Internet as well
as from their local cable or satellite provider.
The Company believes that all individuals that have Internet access
also watch feature films and listen to some form of music and therefore are
potential customers. Since almost all new computers sold today have full video
and music capabilities such as CD players, sound cards and speakers, the Company
believes that an increasing number of people will listen to music while working,
playing or browsing the Internet.
Technology
EnterTech will implement systems to support distributed, reliable and
scalable online retailing in a secure and easy-to-use format. Using a
combination of proprietary solutions and commercially available, licensed
technologies, the Company will deploy systems for online content dissemination,
online transaction processing, customer service, market analysis and electronic
data delivery and interchange.
Multimedia and User Database. EnterTech will develop a database management
system to index, retrieve and manipulate product information, content, product
catalog, orders and transactions, and customer information. This system will
allow for rapid searching, sorting, viewing and distribution of a large volume
of content including video clips, audio samples, music reviews, track lists,
cover art and photos. The Company intends to use Oracle as the technology for
database management.
Store Architecture. The Company's hardware and software systems will be based
upon a distributed transaction-processing model that allows applications to be
distributed among multiple parallel servers. Many of the software components,
and the pages of the Web site, will be developed using a new technology that
extends HTML with product, transaction, retail, and advanced programming
constructs. This technology results in the separation of the page look and feel
from the individual data elements and their associated database lookups thus
reducing software updates for Web site changes and minimizing the engineering
required to maintain a growing amount of items and content. EnterTech's
technology will enable Web sites with different formats to integrate EnterTech
store elements.
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Interfaces. EnterTech Media Group will develop or license technologies and tools
for managing interfaces with Internet service and content providers. A linking
interface will be made available to businesses with which the Company has
developed strategic alliances and to Credit sites. These allow the linking of
external Web sites, banners, and promotions to items and functions contained in
the EnterTech Media Group store. Proprietary or licensed tools will be used by
the Company's Customer Relations department to manage strategic alliances and
Credit relationships in an efficient and scalable manner. Similar systems and
tools will be licensed or developed by EnterTech Media Group, for its Customer
Service department. The ability to manage customer accounts and orders will
enable EnterTech Media Group's Customer Service department to scale effectively
and communicate efficiently, thereby responding to most inquiries within 24
hours. These systems will automate many routine communications and allow
customers to better manage their accounts and orders.
Fault Tolerance and Scalability. EnterTech Media Group's hardware servers,
storage systems, Internet connections and networks will allow its online systems
to operate continuously and enable it to maintain a 24-hour-a-day,
seven-day-a-week retail store. The Company intends to runs its Oracle databases
and Web Servers on a series of Sun Enterprise 3000 and 4000 servers with fault
tolerant characteristics including "hot- swappable" components. The Company will
maintain dedicated DS-3 connections to the Internet lines provided by multiple
Internet service providers. This technology, combined with the architecture of
the systems, will allow the Company to scale by adding new components or servers
while maintaining performance and cost effectiveness. Both proprietary and
commercially available tools are used to monitor and manage these systems with
minimal operator participation.
Security. The Company will employ firewalls integrated into the architecture of
its system to keep its Internet connections secure. The Company intends to use
the Netscape SSL Commerce Server for secure electronic transactions over the
Internet and uses proprietary EDI interfaces and private networks to ensure the
security of customer order information and credit card transactions shared with
its vendors and credit card processor.
Advanced Technologies. The Company will continually evaluate emerging
technologies and new developments in many areas including electronic commerce,
database management, and networking.
(2) Distribution Methods
The Board of EnterTech has formed a domestic distribution company
called EnterTech Releasing Corporation, and has secured the services of Peter
Marai to oversee its growth. It is anticipated that the company will be fully
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capable of distributing at least 8 to 10 pictures per annum. Films will be
produced and or acquired for release in all formats. Initially theatrically and
then on Video, DVD, Cable and Television and eventually the Internet, thus
utilizing the digital nature of their production to the ultimate degree. At
present over five hundred independent films per annum are produced and with only
a handful of independent film distributors in North America, EnterTech Releasing
Corporation, believes that it has an excellent opportunity to select and acquire
prominent films that will add residual profits to the company. It is the
company's intention to actively seek ethnic, award winning films from the finest
of foreign language films as well as quality, English language films produced in
North America.
The Company also intends to form a unique and specialized DVD label
which will develop an associated brand name for DVD releasing. This business may
seek to establish a "DVD of the week or month Club" style of operation in order
to interface closely with the Internet operations planned for the Company and to
develop customer loyalty and the associated benefits that this would bring.
Other Formats and Television
The Company will also take every opportunity to produce programming for
all other media forms. Television is experiencing a radical shift in its
programming choices and is having to become more bold and daring in its
selection of films and reality shows, etc., as it has to compete with other
forms of entertainment. We expect this trend to continue into the new millenium
as it competes against other formats that are beginning to emerge such as
Satellite, DVD and Video on Demand.
Other Target Acquisitions
In following its strategy to become a broad based company in the field
of Entertainment and Technology EnterTech Media Group also has plans to acquire
other companies that will be synergistic and profitable to the growth of the
company, especially in music recording and publishing. The Company believes that
this area of business in particular is going to be highly exciting as the
established routines of retail distribution of recordings is expanded by other
technologies, such as the Internet, that can deliver music on demand.
In addition to launching its own domestic distribution company the
Company fully intends to expand into foreign distribution of feature films and
television Movies of the Week and is in active discussion with a modern,
profitable company, that specializes in this field, that is based in Los Angeles
and has a library of some 100 feature films and a multi-million dollar annual
turnover.
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With regard to the development of a DVD branded product within its line
up (discussed in Distribution, above) the Company is also in discussion with a
manufacturer of blank DVDs and CDs that has a wide range of abilities and
services including the necessary facilities for mastering and replication. The
company offers a complete one-stop service including manufacture, mastering,
replication and silk screening of the discs, as well as graphic design, printing
of booklets and tray card inserts and the final packaging of the software media.
It is the only American independent company manufacturing DVDs and would be a
wonderfully synergistic addition to the business of EnterTech Media Group. The
company is profitable and extremely well run and constantly expanding its
capacity and facilities in order to meet the demand that it has generated for
its products and services. The quality and additional features that are
associated with DVDs really make the concept of your own personal cinema at home
one step closer to becoming a reality.
Traditionally prints of feature films are run off and delivered to
theatres around the World for screening on their existing projection equipment.
It is the belief of the Company that early in the new millenium this will change
and that digital projectors will become commonplace with films being downloaded
directly to the theatres. In effect "Feature Films on Demand" much like "Video
on Demand" will become more commonplace in the home. The Company is therefore
closely scrutinizing the industry for a possible acquisition that will allow it
to profit from these advances.
Production, Prints and Advertising (P and A)
The Company's policy with regard to the necessary funding of
productions and associated promotion, releasing and distribution costs will be
to make use of any off balance sheet financing that is available for investment
into these areas and as appropriate to use its own internal funds and resources
but without resorting to any more general lines of credit that may be available
to the Company nor to ever have invested more than 10% of its net asset value
into productions at any time. In short EnterTech will not borrow funds on a
corporate basis to produce its films and will therefore not jeopardize the
security of the Company in the event of a film failing to perform as hoped or
expected.
Film Industry Overview
The Company seeks to capitalize on the market opportunities created by
the worldwide popularity of feature films. Viewing films is among the leading
pastimes of Americans as demonstrated by the popularity of Cinema, Video, Cable,
Television and more recently DVDs. Indeed the World markets have all been
showing that film entertainment is big business.
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According to the Hollywood Reporter, an industry magazine, U.S. box
office receipts for 1998 were estimated to be $6.97 billion, up by some 9%, from
$6.37 billion in 1997 and $5.91 billion in 1996. Ticket sales increases were up
nearly 7% to 1.49 billion proving that film going is rising in popularity and
that it is not simply price increases giving rise to the increased receipts.
Music Industry Overview
The Company also seeks to capitalize on the market opportunities
created by the worldwide popularity of music and the fact that although
worldwide sales are increasing the number of labels is decreasing through
consolidation. We therefore believe that a small, efficient "label" can be
highly profitable using the various on-line opportunities that are emerging to
challenge the traditional methods of promotion and distribution. The fastest
growing and most successful area of music is soundtracks and the Company intends
to exploit this popularity fully by ensuring that the soundtracks it creates are
at the center of the production process and are considered at all stages as
being an integral part of the profit potential of the production. Music is among
the leading pastimes of Americans as demonstrated by the popularity of music
media and by the time and money consumers spend on music events, products and
services.
According to the Recording Industry Association of America, an industry
trade group, U.S. record companies generated $12.2 billion of domestic sales in
1997, while worldwide sales of record music exceeded $30 billion. During the
year, $10 billion of recorded music sales occurred in traditional retail
outlets, while sales over the Internet, a rapidly emerging phenomenon, accounted
for only $40 million of the market.
Industry analysts are forecasting significant growth for the music
industry:
Forrester Research Inc. has projected that U.S. music sales will
rise to $14.3 billion in the year 2002 with some $4 billion being
generated over the Internet.
Jupiter Communications has projected that total Internet music
revenues, including pre-recorded music sales, music related
merchandise, advertising, and concert ticketing, may rise from an
estimated $71 million in 1997 to some $2.8 billion by the year
2002.
A number of characteristics of online music retailing make the sale of
pre-recorded music via the Internet particularly attractive relative to
traditional retail stores. The Internet offers many data management and
multimedia features which enable consumers to listen to sound samples, search
for music by genre, title or artist and access a wealth of information and
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events, including reviews, related articles, music history, news and
recommendations. Internet retailers can more easily obtain extensive demographic
and behavioral data about their customers, providing them with greater direct
marketing opportunities and the ability to offer a more personalized shopping
experience. In addition, Internet retailers can also offer consumers
significantly broader product selection, the convenience of home shopping and
24-hour-a-day, seven-day-a-week operations, available to any location, foreign
or domestic, that has access to the Internet.
While physical store-based music retailers must make significant
investments in inventory, real estate and personnel for each store location,
online retailers incur a fraction of these costs, generally use centralized
distribution, and have virtually unlimited merchandising space. Traditional
retailers are compelled to limit the amount of inventory they carry at each
store and focus on a smaller selection of faster-selling hit releases.
According to Jupiter, approximately 80% of unit sales at traditional
retail stores come from approximately 20% of the available titles. Online
retailers can offer consumers a broader range of titles and information and can
also offer products from a wider range of music labels, including smaller
independent labels which account for an increasing percentage of new titles.
According to Soundscan, independent labels accounted for 21% of the total music
market in 1996 versus 12% in 1992. While independent labels released 66% of new
titles in 1996, traditional music stores often lack the capacity to stock or
promote the vast majority of these titles.
The Company also believes that online retailers will benefit from the
changing demographic profile of music consumers. According to the Recording
Industry Association of America, domestic purchases of recorded music by persons
age 30 and over have increased from approximately 34% of total U.S. sales in
1986 to approximately 47% of sales, or approximately $5.9 billion, in 1996. The
Company believes that the Internet represents a particularly attractive medium
for retailing to customers in this age group as they are typically less
"hits-driven" than younger age groups and are more likely to purchase a wide
variety of titles. These customers generally can afford to buy more titles at
one time, have access to computers and use the Internet, and have credit cards
with which to make electronic payments.
One of the Company's objectives is to become a leading Internet-based
media company and to create a global brand. The Company will seek to expand its
customer base through multiple marketing channels. The Company believes that
this strategy enables it to reduce reliance on any one source of customers,
maximize brand awareness and lower average customer acquisition cost. The
Company will focus on promoting its brand and extending its leadership position
through the following key strategies:
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Focus on Content. EnterTech is dedicated to providing online audio and visual
content. By focusing on its core competency, the Company expects to be able to
offer a high quality, customer-oriented online music and visual experience and
build a clearly delineated brand, which the Company believes will make EnterTech
the site of choice for certain genre films and recorded music. The Company
believes that this focus enables it to better direct its sales and marketing
campaigns, and form effective relationships with other Internet content and
service providers.
Exclusive Content Offerings. EnterTech seeks to provide an interesting and
extensive music and visual experience on the Internet. To this end, the
Company's objective is to develop and acquire exclusive Internet rights to
content. In addition, it will also license appropriate content when available.
Capture and Develop Emerging Revenue Opportunities. EnterTech intends to capture
strategic revenue growth opportunities as user demand increases and
technological developments become more widely adopted. Such opportunities are
expected to include pay-per-listen/view applications, fee-based sharing of the
Company's exclusive content on other Web sites and additional electronic
commerce opportunities.
Provide Innovative and Easy-to-Use Retail Concept. The Company will strive to
make its customer experience informative, efficient and intuitive by constantly
updating and improving its store format and features. The EnterTech web site
store will incorporate "point and click" options; support by technical
enhancements including easy-to-use search capabilities (by actor, film name,
director, artist, album title, song title or record label), personalized music
suggestions, order tracking and confirmation. The EnterTech web site store will
promote film and music learning and discovery by enabling visitors to access
information on titles, reviews, ratings, articles on music topics and visual and
sound samples. These features are designed to make shopping at the store
entertaining and informative and encourage purchases and repeat visits
Deploy Leading-Edge Technologies. The Company will stress the deployment and
rapid adoption of new market-leading technologies that will maximize
efficiencies and offer the best possible products and services to the customer.
Online and Traditional Advertising. The Company will promote its brand through
an aggressive marketing campaign using a combination of online and traditional
marketing. The Company intends to advertise on the sites of major Internet
content and service providers, including Infoseek, Lycos and CNN Interactive. As
part of these arrangements, the Company may purchase the right to display its
banners and hyperlinks, often in conjunction with specified search keywords such
as "music magazine." The Company's traditional advertising effort may also will
include radio advertising and print advertising in media-related publications.
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Strategic Alliances with Major Content and Service Providers. The Company
believes it can enhance its new customer acquisition efforts, increase purchases
by current customers and expand brand recognition through strategic alliances
with major Internet content and service providers. The Company expects to enter
into alliances with content and service providers to be a premier online film
and recorded music retailer on certain of their sites with the exclusive right
to place music banner advertisements and integrated links to the EnterTech web
site store on certain media-related or other specified pages. These pages will
prominently feature the EnterTech Media Group, branded link that allows users to
click through to the EnterTech web site.
Credit Program. Through its Credit program, EnterTech will strive to develop
arrangements with small Web sites, typically fan sites devoted to particular
film talent and musical artists. The Company will provide these sites with
embedded hyperlinks through which potential customers can immediately be
connected to the EnterTech web site. The Company believes that a highly-focused
sites, while having less traffic than major content providers, are likely to
have a high percentage of users that will be attracted to the EnterTech web site
and store.
Direct Marketing Techniques. The Company will use direct marketing techniques to
target new and existing customers with communications and promotions. The
Company will send a personalized e-mail newsletter to its customers that
includes purchase recommendations based on demonstrated customer preferences and
prior purchases, as well as more general information concerning new releases and
Company promotions. The Internet allows rapid and effective experimentation and
analysis, instant user feedback and efficient personalization of the store for
each customer, all of which EnterTech seeks to incorporate in its merchandising.
Acquire Customers Efficiently. The Company will seek to target its marketing
expenditures towards sources that most efficiently attract new customers. The
Company will utilize a database of customers to better evaluate and predict the
effectiveness of potential advertising opportunities and strategic
relationships. To enhance the possibility that its banners and other links will
be effective, the Company will work closely with Internet content and service
providers with respect to the placement of banners and other links as well as
the surrounding content. As a result, the Company believes that it can acquire
new customers and retain existing customers on a more cost-effective basis.
Maximize Customer Retention. The Company will seek to maximize customer
retention through its emphasis on customer service and personalized
communications. The Company will strive to accommodate its customers by
providing 24-hour-a-day, seven- day-a-week operations and rapid order
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fulfillment. Products will typically be shipped within two business days after
an order is placed and confirmation will be provided within minutes via e-mail.
Customers will be able to make separate inquiries through e-mail or telephone
access during extended business hours. The Company will strive to ensure prompt
response to customer inquiries, which will be generally answered within 24 hours
of receipt. The Company will also maintain ongoing customer contact through a
customized e-mail newsletter.
Pursue Strategic Relationships. The Company may enter into various licensing,
royalty and consulting agreements with content providers, vendors, and
organizations, which agreements may provide for consideration in various forms,
including issuance of warrants to purchase Common Stock and payment of
royalties, bounties and certain other guaranteed amounts on a per member and/or
a minimum dollar amount basis over terms ranging from one to ten years.
Additionally, some of these agreements may provide for a specified percentage of
advertising and merchandising revenue to be paid to the artist or organization
from whose Web site the revenue is derived.
Pursue Acquisitions and Investments. The Company will regularly review
opportunities to expand its operations and service offerings, by way of
acquisitions and investments. The Company believes that this is an important
means of building its customer base and achieving economies of scale.
EnterTech's marketing and promotion strategy will be designed to
broaden awareness of the EnterTech brand, increase customer traffic to the
Company's Web site and encourage new and repeat purchases. The Company will
utilize multiple channels to market and promote its brand, including online and
traditional advertising, strategic alliances, its credit program and direct
marketing. The Company believes that the use of multiple marketing channels
reduces reliance on any one source of customers, maximizes brand awareness and
lowers average customer acquisition cost.
Online and Traditional Advertising. The Company will promote its brand and Web
site through an aggressive marketing campaign using a combination of online and
traditional advertising. The Company intends to advertise on the sites of major
Internet content and service providers. As part of these arrangements, the
Company may purchase banner advertisements, often in conjunction with specified
search keywords or on contextually appropriate pages that allow consumers to
immediately click through to the EnterTech site. The significant flexibility of
online advertising allows the Company to quickly adjust its advertising plans in
response to seasonal and promotional activities.
EnterTech believes that traditional advertising is a key ingredient in
building brand recognition and promoting the benefits of online retail shopping.
Traditional advertising can be an effective means of promoting widespread brand
awareness and attracting traditional retail consumers to the Company's Web site,
including consumers with little or no history of online purchases. The Company's
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traditional advertising effort may include radio, advertising and print
advertising in music-related publications. The Company will conduct an active
public relations campaign and will regularly participate in trade shows and
conferences relating to film and music.
Strategic Alliances. The Company believes that the Web sites of major Internet
service and content providers can be a source of a significant number of new
customers. These sites have a high volume of user traffic, and the Company
believes that the utilization of carefully targeted links and other advertising
on the sites can be very effective in attracting potential customers.
Credit Program. Through its credit program, EnterTech will enter into
arrangements with small Web sites, typically fan sites devoted to particular
film talent and music artists. The Company will provide these sites with
embedded hyperlinks through which potential customers can immediately be
connected to the EnterTech site. The Company will pay Credit participants
commissions in store credit or cash based upon the dollar amount of purchases
made by persons using the link. The Company believes that highly focused, film
and music-oriented sites, while having less traffic than major content
providers, are likely to have a high percentage of users that will be attracted
to EnterTech's web site. Credit participants will be able to sign up online at a
special Web page, and will be listed inside the EnterTech store to assist the
Company's customers in finding these sites.
Direct Marketing. The Company will use direct marketing techniques to target new
and existing customers with communications and promotions. The Company will send
a personalized e-mail newsletter to its customers that include purchase
recommendations based on demonstrated customer preferences and prior purchases.
The newsletter will also include more general information concerning new
releases and Company promotions. The Internet allows rapid and effective
experimentation and analysis, instant user feedback and efficient
personalization of the store for each customer, all of which EnterTech seeks to
incorporate in its marketing and merchandising activities.
Publicity. The Company expects to generate significant publicity using its
existing relationships with the editors and reporters in magazines, newspapers,
radio and television. These opportunities represent low-cost methods of reaching
large audiences.
Customer Service
The Company believes that a high level of customer service and support
is critical to retaining and expanding its user base. EnterTech's customer
service representatives will be available throughout the week to provide
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assistance via e-mail, phone or fax. Inquiries will generally be answered within
24 hours. Customer service representatives will handle questions about orders,
assist customers in finding films, CDs and other entertainment-related products,
and register customer's credit card information over the telephone. Customer
service representatives should be a valuable source of feedback regarding user
satisfaction. The EnterTech store will also contain a customer service page that
outlines store policies and provides answers to frequently asked questions.
The Sales Proposition
EnterTech's Web site sales proposition will be based upon the following points:
Cutting Edge Content. The Company intends to offer the customer a breadth and
depth of content that is more interesting and current than is offered by its
competitors.
Exclusive Content. The Company intends to offer exclusive products that will be
selected and developed by EnterTech staff.
Unique Content. The Company intends to offer interactive interviews and events
direct from Hollywood.
Ease of Use. The Company intends to offer the customer an easy to use Internet
web site and more functionality than is offered by its competitors.
Quality of Service. EnterTech intends to offer the customer a personal approach
and high quality of service.
(3) Status of Publicly Announced New Products or Services
To date, the Company has not publicly announced the availability of its
services or products.
(4) Competitive Business Conditions
The online commerce market is new, rapidly evolving and intensely
competitive, and the Company expects that competition will further intensify in
the future. Barriers to entry are minimal, and current and new competitors can
launch new sites at a relatively low cost. In addition, the broader retail music
industry is intensely competitive. The Company will compete with a variety of
companies, including (i) online vendors of videos, music, music videos and other
related products, (ii) online vendors of videos, books and other related
products, (iii) online service providers which offer video or music products
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directly or in cooperation with other retailers, (iv) traditional retailers of
video or music products, including specialty video and music retailers, (v)
other retailers that offer video or music products, including mass
merchandisers, superstores and consumer electronic stores; and (vi) non-store
retailers such as music clubs. Many of these traditional retailers also support
dedicated Web sites that compete directly with the Company. The Company believes
that the principal competitive factors in its online market are brand
recognition, selection, ease of use, site content, quality of service and
technical expertise.
Many of the Company's current and potential competitors have longer
operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than the Company.
The Company is aware that certain of its competitors have and may continue to
adopt aggressive pricing or inventory availability policies and devote
substantially more resources to Web site and systems development than the
Company. Increased competition may result in reduced operating margins, loss of
market share and a diminished brand franchise. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors. New technologies and the expansion of existing technologies may
increase the competitive pressures of the Company in this area of its
operations. For example, applications that select specific titles from a variety
of Web sites based on factors such as price may channel customers to online
retailers that compete with the Company. In addition, many companies that allow
access to transactions through network access or Web browsers promote the
Company's competitors and could charge the Company a substantial fee for
inclusion.
(5) Dependence on Major Customers
As indiated throughout this Item I, the Company is a reorganizational
stage and is in the process of developing its new entertainment products and
services. At this point in time, the Company has no major customers. Of course,
the Company intends to develop a broad base of customers so its success is not
dependent upon a few sources of revenue.
(6) Intellectual Property
The Company regards its trade secrets and similar intellectual property
as valuable to its business, and will rely on trademark and copyright law, trade
secret protection and confidentiality and/or license agreements with its
employees, partners and others to protect its proprietary rights. There can be
no assurance that the steps taken by the Company will be adequate to prevent
misappropriation or infringement of its intellectual property. The Company
expects that it may license in the future, certain of its proprietary rights,
such as trademarks or copyrighted material, to third parties. While the Company
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attempts to ensure that the quality of its brand is maintained by such
licensees, there can be no assurance that such licensees will not take actions
that might materially adversely affect the value of the Company's proprietary
rights or reputation, which could have a material adverse effect on the Company.
(7) Governmental Approval
At this point in time, there is no need for governmental approval of
the Company's intended principal products or services. However, recent high
profile events have focused attention on the content of products and services
offered by the entertainment industry. Specifically, some governmental review of
a link, if any, between the violent content of some movies and crimes committed
by members of the society viewing those movies has emerged. While the Company
believes that it is unlikely that such scrutiny will result in governmental
restrictions placed on the content of products in the entertainment industry,
including those the Company intends to produce, such governmental restrictions
have rarely been given such consideration and it is possible that restrictions
on entertainment content could be imposed. At the time of the filing of this
Form 10-SB, however, it is unclear what form any such restrictions would take or
how they would be enforced. Nonetheless, the Company is mindful of the fact that
such matters are being reviewed on a national level.
(8) Governmental Approval, Regulation and Environmental Compliance
The Company will be subject, both directly and indirectly, to various
laws and regulations relating to its business, although there are few laws or
regulations directly applicable to access to the Internet. However, due to the
increasing popularity and use of the Internet, it is possible that a number of
laws and regulations may be adopted with respect to the Internet. Such laws and
regulations may cover issues such as user privacy, pricing, content, copyrights,
distribution and characteristics and quality of products and services.
Furthermore, the growth and development of the market for online commerce may
prompt calls for more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online.
The enactment of any additional laws or regulations may impede the
growth of the Internet which could, in turn, decrease the demand for the
Company's products and services and increase the Company's cost of doing
business, or otherwise have an adverse effect on the Company. The applicability
to the Internet of existing laws in various jurisdictions governing issues such
as property ownership, sales and other taxes, contests and sweepstakes, libel,
personal privacy, rights of publicity, language requirements and content
restrictions, is uncertain and could expose the Company to substantial
liability.
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The laws of certain foreign countries provide the owner of copyrighted
products with the exclusive right to expose, through sound and video samples,
copyrighted items for sale to the public and the right to distribute such
products. Any new legislation or regulation, or the application of existing laws
and regulations to the Internet could have a material adverse effect on the
Company. For example, major U.S.-based online services (and personnel) have been
challenged by German authorities for making certain content accessible in
Germany.
In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission (the "FCC") in the same manner as other telecommunications services.
For example, America's Carriers Telecommunications Association has filed a
petition with the FCC for this purpose. In addition, because the growing
popularity and use of the Internet has burdened the existing telecommunications
infrastructure and many areas with high Internet use have begun to experience
interruptions in phone service, local telephone carriers, such as Pacific Bell,
have petitioned the FCC to regulate Internet service providers and online
service providers in a manner similar to long distance telephone carriers and to
impose access fees on such providers. If either of these petitions are granted,
or the relief sought therein is otherwise granted, the costs of communicating on
the Internet could increase substantially, potentially slowing the growth in use
of the Internet.
Any such new legislation or regulation or application or interpretation
of existing laws could have an adverse effect on the Company's business, results
of operations and financial condition. U.S. and foreign laws regulate certain
uses of customer information and development and sale of mailing lists. The
Company believes that it is in material compliance with such laws, but new
restrictions may arise in this area that could have an adverse affect on the
Company.
The Company anticipates that it will have no material costs associated
with compliance with either federal, state or local environmental law.
(9) Research and Development
The Company intends to establish a small Research and Development team,
composed of both core and rotating engineering and marketing personnel, who will
develop and adopt new products, services, equipment, software and tools. The
Company believes that the results of this work will allow the Company to enhance
its services as well as its ability to provide those services effectively.
During the last two years, EnterTech has not incurred costs in connection with
research and development.
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(10) Employees and Facilities
As of March 31, 1999, EnterTech had 3 full-time and 3 part time
employees. The Company also employs independent contractors and other temporary
employees. None of the Company's employees is represented by a labor union, and
the Company considers its employee relations to be good. The Company expects the
number of employees to grow significantly over the next twelve months.
Competition for qualified personnel in certain areas of the Company's industry
is intense, particularly among software development and other technical staff.
The Company believes that its future success will depend in part on its
continued ability to attract, hire and retain qualified personnel.
While the Company maintains a business office in Reno, Nevada the
Company's executive offices are located in, and substantially all of its
operating activities are conducted from office space located in Los Angeles,
California. The Company also has a branch office in London, England. The Company
believes that additional space will be required as its business expands and
believes that it will be able to obtain suitable space as needed. The Company
does not own any real estate.
(c) Reports to Security Holders
Prior to filing this Form 10-SB, the Company has not been required to
deliver annual reports. To the extent that the Company is required to deliver
annual reports to security holders through its status as a reporting company,
the Company shall deliver annual reports. Also, to the extent the Company is
required to deliver annual reports by the rules or regulations of any exchange
upon which the Company's shares are traded, the Company shall deliver annual
reports. If the Company is not required to deliver annual reports, the Company
will not go the expense of producing and delivering such reports. If the Company
is required to deliver annual reports, they will contain audited financial
statements as required.
Prior to the filing of this Form 10-SB, the Company has not filed
reports with the Securities and Exchange Commission. Once the Company becomes a
reporting company, management anticipates that Forms 3, 4, 5, 10K-SB, 10Q-SB,
8-K and Schedules 13D along with appropriate proxy materials will have to be
filed as they come due. If the Company issues additional shares, the Company may
file additional registration statements for those shares.
The public may read and copy any materials the Company files with the
Securities and Exchange Commission at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by call the Commission
at 1-800-SEC-0330. The Commission maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission. The Internet address of
the Commission's site is (http://www.sec.gov).
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(d) Year 2000 Disclosure
The Company does not anticipate any problem in dealing with computer
entries in the year 2000 or thereafter, with any computers currently used at any
of their facilities. All of the Company's computer systems are new and have been
year 2000 compliant from their acquisition. The Company keeps current with all
updates and revisions with all software the Company currently use. It is
anticipated that the software updates reflect required revisions to accommodate
transactions in the year 2000 and thereafter. Though it is not anticipated that
the Company will have a problem at the turn of the century, the Company intends
to coordinate the resolution of any year 2000 problems with the vendors of the
software the Company utilizes. Nonetheless, the Company recognizes the problems
which may arise in connection with the Year 2000 issue.
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. The Company does not believe that it has material exposure
to the Year 2000 issue with respect to its own information systems since its
existing systems correctly define the year 2000. The Company intends to conduct
an analysis in 1999 to determine the extent to which its major suppliers'
systems (insofar as they relate to the Company's business) are subject to the
Year 2000 issue. The Company is currently unable to predict the extent to which
the Year 2000 issue will affect its suppliers, or the extent to which it would
be vulnerable to the suppliers' failure to remediate any Year 2000 issues on a
timely basis. The failure of a major supplier subject to the Year 2000 to
convert its systems on a timely basis or a conversion that is incompatible with
the Company's systems could have an adverse effect on the Company. In addition,
most of the purchases from the Company's store are expected to be made with
credit cards, and the Company's operations may be adversely affected to the
extent its customers are unable to use their credit cards due to any Year 2000
issues that are not rectified by their credit card vendors.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
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Plan of Operation
During the twelve-month period following the filing of this Form 10-SB,
the Company intends to develop its operations from funding it receives from the
private placement of EnterTech Limited shares identified in Item 1 above.
EnterTech Limited has created and is distributing a private placement memorandum
under the terms of which it is offering a minimum of 1,500,000 shares and a
maximum of 5,000,000 shares of its common stock to accredited investors in
units of 25,000 shares at a purchase price of $25,000 per unit. Pursuant to the
Exchange Agreement between EnterTech Limited and the Company, EnterTech Limited
shares sold pursuant to EnterTech Limited's Private Placement Memorandum will
become shares in EnterTech Media Group, Inc.
If subscriptions for the Minimum Amount are received and accepted, the
net proceeds to be received by EnterTech in its Offering are estimated to be
$1,350,000, after deducting the Agent's Fee, if any, of $100,000 (but before
giving effect to certain other expenses of the Offering, estimated at $10,000).
If subscriptions for the Maximum Amount are received and accepted, the net
proceeds to be received by EnterTech in the Offering are expected to be
$4,500,000, after deducting the Agent's Fee, if any, of $500,000 (but before
giving effect to certain other expenses of the Offering, estimated at $10,000).
The Company intends to use the net proceeds from the Minimum Amount of
the offering as follows: approximately $850,000 for acquiring feature films, on
productions and co-productions of feature films and music production and
licensing, $175,000 on technology development and infrastructure including
creating the Company's Web site, $100,000 on sales and marketing, $100,000 for
general and administration and $125,000 for working capital and other general
corporate purposes. Additional funds will be needed for broader sales and
marketing efforts required in connection with the Company's plan.
The Company intends to use the net proceeds from the Maximum Amount of
the offering as follows: approximately $2,750,000 for acquiring feature films,
on productions and co-productions of feature films and music production and
licensing, $375,000 on technology development and infrastructure including
creating the Company's Web site, $225,000 on sales and marketing, $50,000 for
customer service, $225,000 for general and administration and $875,000 for
working capital and other general corporate purposes. Additional funds will be
needed for broader sales and marketing efforts required in connection with the
Company's plan.
The Company intends to employ approximately 12 people in the first six
months, of which 5 will be directly related to film and soundtrack production, 3
to film distribution, 1 will be directly related to the design and development
of the EnterTech Media Group's web site Internet web site, 1 will be directly
related to technology support and development and 2 will be directly related to
general and administrative.
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From time to time the Company may evaluate potential acquisitions
involving complementary businesses, content, products or technologies. The
Company has no present agreements or understanding with respect to any such
acquisition. The Company's future capital requirements and the allocation of the
net proceeds of this offering, will depend on many factors, including the
entrance into strategic alliances, increases in advertising and promotions,
growth of the Company's customer base, economic conditions and other factors
including the results of future operations. Accordingly, the actual amount of
proceeds devoted to each purpose may vary substantially from the amount set
forth above.
Pending utilization of the net proceeds of this offering, the Company
intends to invest the funds in short-term, interest-bearing, investment-grade
obligations. Proceeds from this offering that are not expended for the purposes
outlined above may be allocated to working capital of the Company and be
available for any valid corporate purpose. Working capital may be utilized for
acquisition or development of other products, business assets, for payment of
general and administrative expenses, including marketing, advertising and
compensation of officers and employees of the Company.
The Company believes that the net proceeds from the sale of the Minimum
Amount of Units offered in the EnterTech Limited private plavcement, together
with the existing capital and anticipated aggregate cash flow from operations
will be sufficient to permit the Company to conduct its operations for at least
twelve (12) months. In the unlikely event that the sale of a minimum amount of
units is not achieved, then the Company will continue to operate in a low
cost-effective manner while developing its business and alternative strategies
to provide the necessary funding to achieve rapid growth. Such funding likely
would come the sale of the Company's equity securities or the sale of debt
securities. Management contemplates no such sales within the next twelve months
other than sales pursuant to the EnterTech Limited private placement.
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ITEM 3. DESCRIPTION OF PROPERTY
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While the Company maintains a business office in Reno, Nevada the
Company's executive offices are located in, and substantially all of its
operating activities are conducted from office space located in Los Angeles,
California. The Company also has a branch office in London, England. The Company
believes that additional space will be required as its business expands and
believes that it will be able to obtain suitable space as needed. The Company
does not own any real estate, nor is the Company engaged in the business of
investing in real estate or real estate mortgages.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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(a) 5% Shareholders:
The following information sets forth certain information as of June 1,
1999 about each person who is known to the Company to be the beneficial owner of
more than five percent (5%) of the Company's Common Stock:
(2)
(1) Name and Address (3) (4)
Title of Beneficial Amount and Nature of Percent of
of Class Owner Beneficial Ownership Class
- -------- ---------------------------------- -------------------- ----------
Common John Daly, Exchange Agent 11,500,000(1) 96%(2)
for Shareholders of
EnterTech Limited
9100 Wilshire, Suite 437 West Tower
Beverly Hills, CA 90212
(b) Security Ownership of Management:
(2)
(1) Name and Address (3) (4)
Title of Beneficial Amount and Nature of Percent of
of Class Owner Beneficial Ownership Class
- -------- ---------------------------------- -------------------- ----------
Common Mark Tolner 1,500,000(3) 12%
4929 Wilshire Blvd., #830
Los Angeles, CA 90010
Alexander H. Walker, Jr. 528,181(4) 4%
1700 Coronet Drive
Reno, Nevada
All Directors and 2,028,181(5) 16%
Officers as a Group
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1 These shares shall be issued in June 1999 pursuant to the terms of
the Exchange Agreement by and between the Company and EnterTech Limited.
2 All percentages are calculated based upon the 12,400,000 number of
shares of the Company's common stock which will be issued and outstanding when
the minimum number of shares required by the Exchange Agreement with EnterTech
Limited are issued.
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3 These shares current are registered in the name of John Daly as the
exchange agent for the shareholder of EnterTech Limited pursuant to the terms of
the Exchange agreement by and between the Company and EnterTech Limited.
4 Of this amount 106,750 shares are owned by a Nevada corporation named
Hidden Splendor Resources, Inc., of which Mr. Walker is an officer and director
and 21,431 shares are owned by a Nevada corporation named Nevada Agency & Trust
Company, of which Mr. Walker also is an officer and director. The remaining
400,000 shares are owned by Mr. Walker in his own name.
(c) Changes in Control:
There is no arrangement which may result in a change in control.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
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(a) Directors and Executive Officers
As of April 30, 1998, the directors and executive officers of the
Company, their ages, positions in the Company, the dates of their initial
election or appointment as director or executive officer, and the expiration of
the terms as directors are as follows:
Period Served As
Name Age Position Director
- ------------------------ --- ------------- ---------------------
Mark Tolner 43 President and March 1999 to present
Director
Alexander H. Walker, Jr. 73 Secretary and March 1999 to present
Director
- --------------------------------------------
3 These shares current are registered in the name of John Daly as the
exchange agent for the shareholder of EnterTech Limited pursuant to the terms of
the Exchange agreement by and between the Company and EnterTech Limited.
4 Of this amount 106,750 shares are owned by a Nevada corporation named
Hidden Splendor Resources, Inc., of which Mr. Walker is an officer and director
and 21,431 shares are owned by a Nevada corporation named Nevada Agency & Trust
Company, of which Mr. Walker also is an officer and director. The remaining
400,000 shares are owned by Mr. Walker in his own name
5 It also should be noted that the Company anticipates that John Daly
will appointed as an officer and director of the Company once his duties as
Exchange Agent are complete. At that time, Mr. Daly will beneficially own or
control 4,000,000 of the Company's stock. Management will then beneficially own
6,028,181 shares and its percentage ownership with then increase to 47%.
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<PAGE>
*The Company's directors are elected at the annual meeting of stockholders and
hold office until their successors are elected and qualified. The Company's
officers are appointed annually by the Board of Directors and serve at the
pleasure of the Board.
(b) Business Experience:
Mark Tolner, age 43, is the President and a Director of EnterTech Media
Group, Inc. Mr. Tolner is an International entrepreneur and senior-level
executive with demonstrated ability to adapt very rapidly to new concepts and
technologies with an extensive background in business, financial and investment
management. Mr Tolner has a proven track record of success in top level
corporate leadership both internationally and in the US in start-up and
turnaround situations as well as in joint ventures and acquisitions. During the
last eight years his achievements include conceptualizing, negotiating, funding
and managing the joint venture vehicle used in the expansion of the well-known,
largest chain of specialist sandwich retailers in London, England, Pret a Manger
and subsequently orchestrating a $250 million, fully funded, cash bid for the
business by US interests backed by Apax Ventures of London. Negotiating and
funding the acquisition from a Danish Venture Capital company of a controlling
interest in an innovative company with joint ventures in television data
broadcasting with CNN and Reuters and performing a substantial debt
restructuring for the Brazilian State owned shipping line Lloyd Brasiliero cn.
Alexander H. Walker, Jr., age 73, received his B.A. from Wayneburg
College in 1950 and his J.D. from the University of Pittsburgh School of Law in
1952. Since 1956, Mr. Walker has been a practicing attorney, with his practice
including trial and transactional work, with an emphasis on corporate securities
matters. From 1955 to 1956, he served as the Attorney in Charge of the Salt Lake
City, Utah Branch of the United States Securities and Exchange Commission, first
serving as the Attornery Advisor for that Branch from 1954 to 1955. From 1956
through the present, Mr. Walker has maintained a private practice. He maintains
licenses in both Utah and Pennsylvania.
The Company anticipates appointing two other individuals as officers or
directors within the next three months. The Company deems these two individuals
are crucial to the success of the Company's business. These individuals are John
Daly and John Smallcombe.
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<PAGE>
John Daly, age 62, has dedicated his life to entertainment and
promotion and with a partner formed Hemdale which became one of the leading
packagers, financiers and producers of motion pictures. The company won many
Oscar nominations and other prestigious awards from around the World. Mr Daly
has been responsible for over 100 productions including Oscar-winning Best
Pictures, "Platoon" and "Last Emperor", the award winning "Hoosiers" and "At
Close Range". Other films in which he and Hemdale participated include "The
Terminator", the Cannes award winner "Images" as well as "The Triple Echo", "The
Falcon and the Snowman" and "Hidden Agenda".
John Smallcombe, age 44, is a graduate of Clapham College in London,
England. He has worked in the film industry since 1971 when he worked as a
trainee production assistant for a small independent film company. From 1973
through 1975, he worked as a freelace assistant director and worked on over 20
British feature films. From 1981 through 1989, he resided in South Africa and
worked as a freelance producer, working on over 30 films. From 1989 though 1997,
Mr. Smallcombe was the Director of Sales and Acquisitions for Hemdale Holdings,
Inc. in London, England were he worked acquiring and promoting films. And from
1997 to the present, he worked as the Director of Sales and Acquisitions for
Trans Global Media, Ltd. where he has continued his work acquiring and promoting
films and has worked on the release of films of video media and the sale of
films to television networks.
(c) Directors of Other Reporting Companies:
Mr. Walker also is a director of Talk Visual Corp. whose shares are
traded under the symbol TVCP on the OTC Bulletin Board market.
(d) Employees:
The officers and directors who are identified above are the current
significant employees of the Company.
(e) Family Relationships:
There are no family relationships between the directors, executive
officers or any other person who may be selected as a director or executive
officer of the Company.
(f) Involvement in Certain Legal Proceedings:
None of the officers, directors, promoters or control persons of the
Company have been involved in the past five (5) years in any of the following:
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(1) Any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at
the time of the bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceedings or being subject to a
pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, or any Court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
(4) Being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities laws or
commodities law, and the judgment has not been reversed,
suspended, or vacated.
- --------------------------------------------------------------------------------
ITEM 6. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The Company has not compensated its management in the last three years
due to the fact that the Company has not been engaged in business since 1993.
However, the following table sets forth information about compensation paid or
accrued during the years ended December 31, 1998, 1997 and 1996 to the Company's
officers and directors. None of the Company's Executive Officers earned more
than $100,000 during the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(e) (g)
Other (f) Securities
(i)
(a) Annual Restricted Under- (h) Other
Name and (c) (d) Compen- Stock Lying LTIP Compen-
Principal (b) Salary Bonus sation Awards Options/ Payouts sation
Position Year $ ($) ($) ($) SARs(#) ($) ($)
- -------- ---- ----- ------ ------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark Tolner
President 1998 $None $ None $ None $ None None None None
and Director 1997 $None $ None $ None $ None None None None
1996 $None $ None $ None $ None None None None
Alexander H
Walker,Jr
Secretary 1998 $None $ None $ None $ None None None None
and Director 1997 $None $ None $ None $ none None None None
1996 $None $ None $ None $ None None None None
</TABLE>
-30-
<PAGE>
- --------------------------------------------------------------------------------
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
During the past two (2) years, the Company has not entered into a
transaction with a value in excess of $60,000 with a director, officer or
beneficial owner of 5% or more of the Company's common stock, except as
disclosed in the following paragraphs.
During April of 1999, management entered into an Exchange Agreement
with a Nevada corporation named EnterTech Limited. Under the terms of that
Exchange Agreement, the Company is obligated to issue a minimum of 11,500,000
shares and a maximum of 15,000,000 shares of it common stock in exchange for all
the issued and outstanding shares of EnterTech Limited. At the time of the
Exchange Agreement, EnterTech Limited had 10,000,000 shares of common stock
issued and outstanding. EnterTech Limited also was, and is, in the process of
offering a minimum of 1,500,000 shares and a maximum of 5,000,000 shares of its
common stock pursuant to a private placement memorandum. Because the Company is
obligated to to issue a minimum of 11,500,000 pursuant to the Exchange
Agreement, it issued 11,500,000 shares of its common stock to an exchange agent
who is charged under the terms of the Exchange Agreement with assuring that the
appropriate number of the Company's shares are issued to the shareholders of
EnterTech Limited once EnterTech Limited's private placement is complete.
10,000,000 of these initial 11,500,000 shares were issued for the 10,000,000
shares of EnterTech Limited issued and outstanding apart from the private
placement offering, and the remain 1,500,000 shares were issued for the exchange
of the minimum number of shares EnterTech Limited is offering pursuant to tits
private placement memoreandu. In this regard, the Company will issue additional
shares if EnterTech Limited sells more the minimum number of shares it is
offering. Such additional shares will be issued on a one-for-one basis
consistent with the number of shares EnterTech Limited sells above its minimum.
Such shares will not exceed the 5,000,000 share maximum of the EnterTech private
placement.
EnterTech Limited owns 100% of the issued and outstanding shares of two
subsidiaries, EnterTech Picture Corporation and EnterTech Releasing Corporation,
also Nevada corporations.
Also, the Company has intends to enter into 2-year employment
agreements individuals the Company deems vital the Company's operations. These
indivduals are Mark Tolner, an offficer and dirrector, John Daly and John
Smallcombe . Pursuant to these employment agreements, Mark Tolner will be
compensated for his services at the rate of $120,000 per year, John Daly will be
compensated for his services at the rate of $120,000 per year, and John
Smallcombe will be compensated for his services at the rate of $80,000 per year.
The Company's board of directors may increase the base salary of these
indivduals, as it deems appropriate.
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<PAGE>
The employment agreements will that if Messrs. Tolner, Daly and
Smallcombe are terminated by the Company without Just Cause (as defined in the
employment agreements), each will be entitled to receive the lesser of (i) his
base salary for one year from the termination plus the value of any benefits, or
(ii) the aggregate amount of his base salary plus the value of any benefits
during the balance of the agreements.
The employment agreements also will provide that Messrs. Tolner, Daly
and Smallcombe will not, during the term of the Agreements or thereafter,
disclose any confidential information of the Company without prior approval of
the Company. The agreements also will provide that Messrs. Tolner, Daly and
Smallcombe will not, during the term of the Agreements and for a period of one
year thereafter, participate in any business that competes with the Company or
solicit any of the Company's employees or customers or otherwise interfere with
the relations of the Company.
On or about May 21, 1999, the Company issued 400,000 shares to
Alexander H. Walker, Jr., an officer and director, in exchange for his agreement
to cause 200,000 shares Mr. Walker beneficially owned to be transferred to
Morgounova Corporation. The shares issued to Mr. Walker were issued in reliance
on the exemption from registration contained in Section 4(2) of the Securities
Act of 1933, as amended, and the certificate representing such shares bears a
restrictive legend reflecting the limitations on future transfer of those
shares.
- --------------------------------------------------------------------------------
ITEM 8. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
- --------------------------------------------------------------------------------
The Company is registering all of its issued and outstanding shares of
its capital stock with a par value of One Mill ($0.001) per share. On June 1,
1999, there were 12,400,000 shares of stock issued and outstanding.
Capital Stock
Each of the holders of record of stock is entitled to one (1) vote per
share thereof at all shareholder meetings for all purposes, including the
election of the Company's directors and all other matters submitted to such
holders for a vote of stockholders; to share ratably in all dividends, when, as,
and if declared by the Company's Board of Directors from funds legally available
therefor; and to share ratably in all assets available for distribution to
holders of record of capital stock upon liquidation or dissolution after the
payment of all debts and other liabilities. Shares of common stock are not
redeemable and the holders have no conversion rights, pre-emptive or other
rights to subscribe to or purchase additional shares in the event of a
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<PAGE>
subsequent offering. The common stock does not carry cumulative voting rights.
All issued and outstanding shares of common stock are fully-paid and
non-assessable.
There are no limitations or restrictions upon the rights of the Board
of Directors to declare dividends out of any funds legally available therefor.
The Company has not paid dividends to date and it is not anticipated that any
dividends will be paid in the foreseeable future. The Board of Directors
initially may follow a policy of retaining earnings, if any, to finance the
future growth of the Company. Accordingly, future dividends, if any, will depend
upon, among other considerations, the Company's need for working capital and its
financial condition at the time.
The Company may, if approved at the general meeting of shareholders,
resolve to authorize the Board of Directors to declare and pay dividends to the
Company's shareholders in the form of bonus shares. The shareholders would
receive bonus shares in lieu of cash dividends, if any, declared and paid by the
Company.
"Anti-Takeover" Provisions. Although the Board of Directors is not
presently aware of any takeover attempts, the Company's Certificate of
Incorporation and By-laws contain certain provisions which may be deemed to be
"anti-takeover" in nature in that such provisions may deter, discourage, or make
more difficult the assumption of control of the Company by another corporation
or person through a tender offer, merger, proxy contest or similar transaction
or series of transactions. These provisions were adopted unanimously by the
Board of Directors and approved by the stockholders of the Company.
Authorized but Unissued Shares. The Company has authorized 100,000,000
shares of common stock, par value $0.001 per share. These shares were authorized
for the purpose of providing the Board of Directors of the Company with as much
flexibility as possible to issue additional shares for proper corporate purposes
including equity financing, acquisitions, mergers, stock dividends, stock
splits, stock options and other purposes. The Company has no agreements,
commitments or plans at this time for the sale or use of its shares of common
stock except as described herein. Through April 30, 1999, the Company had issued
10,250,000 shares of stock.
No Cumulative Voting. The Company's Certificate of Incorporation and
Bylaws do not contain any provisions for cumulative voting. Cumulative voting
entitles stockholders to as many votes as equal the number of shares owned by
such holder multiplied by the number of directors to be elected. A stockholder
may cast all these votes for one candidate or distribute them among any two or
more candidates. Thus, cumulative voting for the election of directors allows a
stockholder or group of stockholders who hold less than fifty percent (50%) of
the outstanding shares voting to elect one or more members of a Board of
Directors. Without cumulative voting for the election of directors, the vote of
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<PAGE>
holders of a plurality of the shares voting is required to elect any member of a
Board of Directors and would be sufficient to elect all the members of the Board
of Directors being elected.
General Effect of Anti-Takeover Provisions. The overall effect of these
provisions may be to deter a future tender offer or other takeover attempt that
some stockholders might view to be in their best interest as the offer might
include a premium over the market price of the Company's capital stock at that
time. In addition, these provisions may have the effect of assisting the
Company's current management in retaining its position and place it in a better
position to resist changes which some stockholders may want to make if
dissatisfied with the conduct of the Company's business.
Voting Rights. Except as set forth below, every holder of shares
present in person or by proxy or by representative, attorney or proxy appointed
under the Company's By-laws at a meeting of shareholders has one vote on a vote
taken by a show of hands, and on a poll every holder of shares who is present in
person or by proxy or representative has one vote for every fully paid share
held by him, registered in each shareholder's name on the Company's stockholder
list. Unless a poll is demanded, every question submitted to a meeting of
holders of shares shall be decided by a show of hands of the shareholders
present and entitled to vote. In the case of an equality of votes, in either a
poll or a show of hands, the chairman shall have a second or casting vote.
Notwithstanding the above, restrictions are imposed on voting rights in the
following circumstances: (a) if two or more persons are registered as the holder
of the share, the only one of the holders entitled to vote is the senior who
tenders a vote, seniority being determined by the order of names in the
company's list of stockholders; (b) if the terms upon which the shares was
issued restrict the voting rights attaching to that share, the holder is
entitled to vote only in accordance with the terms upon which that share was
issued (neither any shares currently outstanding nor the common shares have
restricted voting rights).
Article II Section 5 of the Company's By-laws allows that the holders
of a majority of the issued and outstanding shares of the common stock of the
Company entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum for the transaction of business at all meetings of the
stockholders. All resolutions (e.g. resolutions for the election of directors,
the approval of increase in authorized capital, approval of financial
statements, amending the Articles of Incorporation and By-laws; authorizing
liquidation or a going private transaction) require the affirmative vote of the
holders of a majority of the issued and outstanding shares of the common stock
of the Company entitled to vote.
Not less than ten days' notice of any general shareholders meeting,
specifying the place, day and hour of the meeting, specifying the general nature
of the business, shall be given to the shareholders.
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<PAGE>
Article III Section 4 of the Company's By-laws allows that any director
or the entire Board of Directors may be removed, at any time, with or without
cause, by the holders of a majority of the shares then entitled to vote with or
without a stockholders meeting.
Certain Voting Requirements. The affirmative vote of the holders of a
majority of the shares present at a shareholders meeting and entitled to vote
generally constitutes shareholder approval or authorization of matters for which
such approval or authorization is required. A sale or transfer of substantially
all of the Company's assets, liquidation, merger, consolidation, reorganization
or similar extraordinary corporate action generally requires the affirmative
vote of a majority of the shares outstanding and entitled to vote thereon.
Restricted Shares. Restricted shares may not be sold unless they are
registered or are sold pursuant to an applicable exemption from registration,
including pursuant to Rule 144.
Reports to Shareholders. The Company intends to furnish its
shareholders with annual reports containing financial statements for each fiscal
year containing unaudited summary financial information and such other periodic
reports as it may deem appropriate or as required by law.
PART II
- --------------------------------------------------------------------------------
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
- --------------------------------------------------------------------------------
Market Information:
The common stock of the Company currently is not trading on any
exchange. Management anticipates that the Company's shares will be qualified on
the system of the National Association of Securities Dealers, Inc. ("NASD")
known as the Bulletin Board.
There has been no market for the Company's stock in the last two years.
Accordingly, the Company has no range of high and low bid prices for the
Company's common stock to report.
-35-
<PAGE>
There is no public market for the shares of the Company and there can
be no assurance that an active public market for the shares will develop or be
sustained. IN addition, the shares of the Company are subject to various
governmental and regulatory body rules which affect the liquidity of the shares.
Holders:
There were approximately 103 holders of record of the Company's common
stock as of June 1, 1999.
Dividends:
The Company has never paid cash dividends on its stock and does not
intend to do so in the foreseeable future. The Company currently intends to
retain its earnings for the operation and expansion of its business. The
Company's continued need to retain earnings for operations and expansion are
likely to limit the Company's ability to pay dividends in the future.
- --------------------------------------------------------------------------------
ITEM 2. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The Company is not party to, and none of the Company's property is
subject to, any pending or threatened legal, governmental, administrative or
judicial proceedings, except as noted below:
1. Interlink Communications Group, Inc. v. Unisat, Inc., Sam Lupton,
Richard Elliot- Square and Does 1 through 50. On or about April 1, 1999, the
Company filed a complaint in the District Court, Washoe County, State of Nevada
naming itself as the plaintiff and Unisat, Inc., Sam Lupton and Richard
Elliot-Square as defendants. The allegations in the complaint involve an
agreement the Company had with an entity named Telforce Communcations, Ltd. and
an individual named Christopher James Clark to acquire all of the issued and
outstanding shares of Telforce. The Company alleges that the individual
defendants, one of whom was a director of the Company at the time of the
Company's agreement with Telforce, caused Telforce to breach it agreement with
the Company and enter into a different agreement with Unisat for the acquisition
of Telforce. The Company alleges that defendants intentionally interfered with
the Company's contractual rights, breach their fiduciary duties to the Company,
engaged in unfair business practices, and were unjustly enriched by their
actions, among other things. The Company seeks an accounting of defendants'
-36-
<PAGE>
profits in the Unisat agreement for the acquisition of Telforce and seeks
damages against the defendants.
2. Interlink Communications Group, Inc. v. Christopher James Clark. On or
about April 22, 1999, the Company commenced an action in the High Court of
Justice, Queen's Bench Division, in Great Britain naming itself as plaintiff and
Christopher James Clark as the defendant. In that action, the Company alleges
that Clark breached his agreement to sell the Company all of the issued and
outstanding shares of Telforce Communications, Ltd., a Nevada corporation. The
Company seeks an order of specific performance requiring Clark to honor his
agreement to sell or, in the alternative, an award of damages against Clark for
his failure to honor his agreement.
- --------------------------------------------------------------------------------
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- --------------------------------------------------------------------------------
There have been no disagreements with the Company's independent
accountants over any item involving the Company's financial statements. The
Company's independent accountant is W. Dale McGhie, Town & Country Plaza, 1539
Vasser Street, Reno, Nevada 89502.
- --------------------------------------------------------------------------------
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
- --------------------------------------------------------------------------------
On July 31, 1998, prior to the six for one reserve split of the
Company's shares, the Company issued a total or 700,000 to the following
individuals in consideration of the payment of the Company's debt to Nevada
Agency and Trust Company, the Company's transfer agent:
Amanda Cardinalli 96,000 pre-split shares
Alexander H. Walker III 96,000 pre-split shares
Timotha Kent 96,000 pre-split shares
Hidden Splendor Resources 288,000 pre-split shares
Nevada Agency 124,000 pre-split shares
and Trust Company
This stock was issued in accordance with the exemption from registration
contained in Section 4(2) of the Securities Act of 1933, as amended.
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<PAGE>
On or about May 21, 1999, the Company issued 400,000 shares to
Alexander H. Walker, Jr., an officer and director, in exchange for his agreement
to cause 200,000 shares Mr. Walker beneficially owned to be transferred to
Morgounova Corporation. The shares issued to Mr. Walker were issued in reliance
on the exemption from registration contained in Section 4(2) of the Securities
Act of 1933, as amended, and the certificate representing such shares bears a
restrictive legend reflecting the limitations on future transfer of those
shares.
In April of 1999, the Company authorized the issuance of 11,500,000 to
John Daly as the Exchange Agent for the shareholders of EnterTech Limited in
connection with the Exchanges Agreement between EnterTech Media Group, Inc. and
EnterTech Limited. Under the terms of that Exchange Agreement, the Company is
obligated to issue a minimum of 11,500,000 shares and a maximum of 15,000,000
shares of it common stock in exchange for all the issued and outstanding shares
of EnterTech Limited. At the time of the Exchange Agreement, EnterTech Limited
had 10,000,000 shares of common stock issued and outstanding. EnterTech Limited
also was, and is, in the process of offering a minimun of 1,500,000 shares and a
maximum of 5,000,000 shares of its common stock pursuant to a private placement
memorandum. Because the Company is obligated to to issue a minimum of 11,500,000
pursuant to the Exchange Agreement, it has issued 11,500,000 shares of its
common stock to John Daly, the exchange agent who is charged under the terms of
the Exchange Agreement with assuring that the appropriate number of the
Company's shares are issued to the shareholders of EnterTech Limited once
EnterTech Limited's private placement is complete. 10,000,000 of these initial
11,500,000 shares were issued for the 10,000,000 shares of EnterTech Limited
issued and outstanding apart from the private placement offering, and the remain
1,500,000 shares were issued for the exchange of the minimum number of shares
EnterTech Limited is offering pursuant to tits private placement memorandum. In
this regard, the Company will issue additional shares if EnterTech Limited sells
more the minimum number of shares it is offering. Such additional shares will be
issued on a one-for-one basis consistent with the number of shares EnterTech
Limited sells above its minimum. Such shares will not exceed the 5,000,000 share
maximum of the EnterTech private placement. The 10,000,000 shares of EnterTech
Limited for which 10,000,000 of the initial issuance of 11,500,000 shares of
EnterTech Media Group, Inc. was made are owned as follows:
John Daly 4,000,000
Mark Tolner 1,500,000
Whyteburg Limited 3,500,000
Cullen Trading Limited 1,000,000
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<PAGE>
- --------------------------------------------------------------------------------
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
Section 78.751 of the Nevada General Corporation Law allows the Company
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that such person is or
was a director, officer, employee or 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, against expenses including attorneys fees, judgments, fines and
amounts paid in settlement actually and reasonable incurred by such person in
connection with the action, suit or proceeding if such person acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendre or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the corporation, and that, with respect to any criminal action or proceeding,
such person had reasonable cause to believe that his conduct was unlawful.
Section 78.751 of the Nevada General Corporation Law also allows the
Company to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in the corporation=s favor by
reason of the fact that such person is or was a director, officer, employee or
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 against expenses including amount paid
in settlement and attorneys fees actually and reasonable incurred by such person
in connection with the defense or settlement of the action or suit if such
person acted in good faith and in a manner which such person reasonably believed
to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction determining,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amount paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
-39-
<PAGE>
Section 78.751 of the Nevada General Corporation Law also provides that
to the extent that a director, officer, employee or agent of the corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs above, or in defense of any claim, issue or
matter therein, the corporation shall indemnify him against expenses, including
attorneys fees, actually and reasonably incurred by such person in connection
with the defense.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
PART F/S
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
-40-
<PAGE>
ENTERTECH MEDIA GROUP, INC
AND SUBSIDIARIES
(FORMERLY ARMAS INTL. MFG. CO., INC.)
FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998 AND 1997
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
(FORMERLY ARMAS INTL. MFG. CO., INC.)
TABLE OF CONTENTS
Page No.
ACCOUNTANT'S AUDIT REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Stockholder's Equity 4
Statements of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6 - 7
<PAGE>
W. DALE Mcghie Town & Country Plaza
CERTIFIED PUBLIC ACCOUNTANT 1539 Vassar St. Reno, Nevada 89502
Tel: 775-332-7744
Fax: 775-332-7747
To the Board of Directors
Entertech Media Group, Inc., and Subsidiaries.
(Formerly Armas International Corporation, Inc.)
Reno, Nevada
ACCOUNTANT'S AUDIT REPORT
I have audited the accompanying balance sheets of Entertech Media Group, Inc.,
and Subsidiaries (formerly Armas Intl. Mfg. Co., Inc.) as of April 30, 1999,
December 31, 1998 and 1997, and the related statements of operations, changes in
stockholders' equity and cash flows for the 4 months and years then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly in all
material respects the financial position of Entertech Media Group, Inc., and
Subsidiaries (formerly Armas Intl. Mfg. Co., Inc.), as of April 30, 1999,
December 31, 1998 and 1997, and the results of their operations, changes in
stockholders' equity and their cash flows for the 4 months and years then ended
in conformity with generally accepted accounting principals.
Reno, Nevada
June 7, 1999
1
<PAGE>
<TABLE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
(FORMERLY ARMAS INTL. MFG. CO., INC.)
BALANCE SHEETS
April 30, 1999, December 31, 1998 and 1997
<CAPTION>
ASSETS
APRIL
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 217,820 $ - $ -
----------------- ----------------- -----------------
EQUIPMENT
Equipment 1,966 - -
Vehicles 57,000 - -
----------------- ----------------- -----------------
58,966
Less accumulated depreciation - Note 1 - - -
----------------- ----------------- -----------------
58,966 - -
----------------- ----------------- -----------------
OTHER ASSETS
Investments - Securities 440 - -
----------------- ----------------- -----------------
Total Assets $ 277,226 $ - $ -
================= ================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 6,211 $ - $ -
----------------- ----------------- -----------------
STOCKHOLDERS' EQUITY- Note 1
Common Stock $0.001 par
value; 100,000,000 Shares
Authorized; Issued and outstanding
12,400,000, on April 30, 1999,
500,000 on December 31, 1998
and 383,333 on December 31, 1997, 12,400 500 383
Additional Paid in Capital, 325,707 55,641 55,758
Retained Earnings (deficit) (67,092) (56,141) (56,141)
----------------- ----------------- -----------------
Total Stockholder's Equity 271,015 - -
----------------- ----------------- -----------------
Total Liabilities and
Stockholder's Equity $ 277,226 $ - $ -
================= ================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE>
<TABLE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
(FORMERLY ARMAS INTL. MFG. CO., INC.)
STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDING APRIL 30, 1999
AND FOR THE YEARS ENDING DECEMBER 31, 1998 AND 1997
<CAPTION>
APRIL
1999 1998 1997
---- ---- ----
REVENUE $ - $ - $ -
----------------- ----------------- -----------------
<S> <C>
EXPENSE
Advertising and Promotion 2,500
Auto Expenses 952
Legal & Accounting 2,254
Outside Services 3,000
Telephone 1,069
Dues & Subscription 140
Meals & Entertainment 577
Bank Charges 459 - -
----------------- ----------------- -----------------
Total Expense 10,951
----------------- ----------------- -----------------
Net Income (Loss) $ (10,951) $ - $ -
================= ================= =================
Net Income Per Share $ (0.008) $ N/A $ N/A
================= ================= =================
</TABLE>
The accompany notes are an integral part of these financial statements
3
<PAGE>
<TABLE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
(FORMERLY ARMAS INTL. MFG. CO., INC.)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE FOUR MONTHS ENDING APRIL 30, 1999
AND FOR THE YEARS ENDING DECEMBER 1998 AND 1997
<CAPTION>
Retained
Common Additional Earnings Total Shock-
Stock paid in Capitol (Deficit) holders' Equity
----- --------------- --------- ---------------
<S> <C> <C> <C> <C>
Balance, January 1, 1995
2,063,749 Shares $ 10,319 $ 45,822 $ (56,141) $ -
Retroactive restatement of par value
in common stock (8,255) 8,255 - -
Retroactive restatement of 6 for 1
reverse stock split (1,720) 1,720 - -
Issue of 39,375 shares of common
stock for services on May 22, 1995
recorded at no value 39 (39) - -
----------------- ----------------- ----------------- -----------------
Balance, December 31, 1995 383 55,758 (56,141) -
Net income for the year ending
December 31, 1996, 1997 and 1998 - - - -
Issue of 116,667 shares of common
stock for services on July 31, 1998
recorded at no value 117 (117) - -
Net income for the year ending
December 31, 1998 - - - -
----------------- ----------------- ----------------- -----------------
Balance December 31, 1998
2,063,749 Shares 500 55,641 (56,141) -
Issue of 400,000 shares of common
stock for services on April 21, 1999
recorded at no value 400 (400)
Accusition at Entertech Media Group
Inc., April 22, 1999 (note 3) 11,500 270,466 - 281,966
Net (loss) for the four months
ending April 30, 1999 - - (10,951) (10,951)
----------------- ----------------- ----------------- -----------------
Balance April 30, 1999 $ 12,400 $ 325,707 $ (67,092) $ 271,015
================= ================= ================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
<TABLE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
(FORMERLY ARMAS INTL. MFG. CO., INC.)
STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDING APRIL 30, 1999
AND YEARS ENDING DECEMBER 31, 1998 AND 1997
<CAPTION>
APRIL
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (10,951) $ - $ -
Changes in Operating Assets and
liabilities:
Increase in Accounts Payable 6,211 - -
----------------- ----------------- -----------------
Net Cash used by Operating Activities (4,740) - -
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment and Vehicle (58,966) - -
Purchase of Securities (440) - -
----------------- ----------------- -----------------
Net Cash used by Investing Activities (59,406) - -
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 281,966 - -
----------------- ----------------- -----------------
Net Increase (Decrease) in Cash 217,820 - -
Cash at Beginning of Period - - -
----------------- ----------------- -----------------
Cash at End of Period $ 217,820 $ - $ -
================= ================= =================
The accompanying notes are an integral part of these financial statements
</TABLE>
5
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
(FORMERLY ARMAS INTL. MFG. CO., INC.)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION:
EnterTech Media Group, Inc., and Subsidiaries (formerly Armas Intl. Mfg. Co.,
Inc., dba Inter-Link Communications Group, Inc.) (a Nevada Corporation) was
incorporated November 17, 1986, under the name Stones Stores, Inc. The Company
changed its name in 1987 to Stone International, Inc., and again in 1990 to
Armas Intl.. Mfg. Co., Inc. The Company became inactive in 1989 and remained
inactive until 1999. On April 22, 1999 the Company charged it's name to
EnterTech Media Group, Inc., and authorized capital stock of 100,000,000 shares
with a par value of $.001 per share (following a 6 to 1 reverse split in October
1998). The Company plans to reactivate its business operations in the last half
of 1999.
These financial statements reflect the changes made in the Company's name and
the par value of common stocks retroactively.
Prior to 1995 all books and records were destroyed. Federal income tax returns
have been prepared for the years ending December 31, 1998 and 1997 based on
these financial statements.
GENERAL:
The Company was inactive during the prior years, operations have yet to
commence, therefore, accounting policies have yet to be determined. There was no
depreciation recorded on assets acquired in April of 1999. Depreciation will be
computed using a 5 year life on a straight line basis.
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
Entertech Media Group, Inc., and its wholly-owned subsidiary, Entertech Limited
(along with Entertech Limited's subsidiaries, Entertech Picture Corporation and
Entertech Releasing Corporation). See also notes 2 and 3. All significant
intercompany balances and transactions have been eliminated.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect certain reported accounts and disclosures. Accordingly, actual results
could differ from these estimates.
EARNINGS PER SHARE:
The earnings per share calculation is based on the weighted average number of
shares outstanding during the period -- 1,379,167 shares in April 1999.
DIVIDEND POLICY:
The company has not paid dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and other
relevant factors.
6
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
(FORMERLY ARMAS INTL. MFG. CO., INC.)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 1999, DECEMBER 31, 1998 AND 1997
INCOME TAXES:
A deficit of $56,141 reflected on the financial statements from prior losses
will not be available as a net operating loss carry forward because of change in
ownership and business purpose. The current period loss of $10,951 will be
available to offset future taxable income for 15 years.
NOTE 2 - ACQUISITION:
On April 22, 1999, the Company acquired EnterTech Limited, a Nevada corporation,
in a business combination accounted for as a pooling of interests. EnterTech
Limited had previously done business as EnterTech Media Group, but relinquished
its name prior to the business combination. EnterTech Limited, which plans to
engage in film production and distribution, became a wholly-owned subsidiary of
the Company through the exchange of a minimum of 11,500,000 shares of the
Company's common stock for all of the outstanding stock of EnterTech Limited.
See also Note 3. The accompanying financial statements are based on the
assumption that the companies were combined for the period presented and
financial statements of prior years have been restated to give effect to the
combination.
NOTE 3 - PRIVATE PLACEMENT:
On March 31, 1999, EnterTech Limited (then known as EnterTech Media Group as
discussed in Note 2) offered a minimum of 1,500,000 shares and a maximum of
5,000,000 chares of its common stock in units of 25,000 at a price of $1.00 per
share pursuant to a Private Placement Memorandum. The private placement of
shares is governed by the Exchange Agreement between the Company and EnterTech
Limited, signed on April 22, 1999. Thus, new shareholders will receive shares in
the Company rather than shares in EnterTech Limited.
7
<PAGE>
PART III
- --------------------------------------------------------------------------------
ITEM 1. Index to Exhibits
- ----------------------------------------------------------------------------
The following exhibits are filed with this Form 10-SB:
Assigned Number Description
- --------------- ------------------------------------------------
(2) Plan of acquisition, reorganization,
arrangement, liquid, or succession: Exchange
Agreement by and Between EnterTech Media Group,
Inc. and EnterTech Limited.
(3)(ii) By-laws of the Company: Included
(4) Instruments defining the rights of holders
including indentures: None
(9) Voting Trust Agreement: None
(10) Material Contracts: The Exchange Agreement by
and Between EnterTech Media Group, Inc. and
EnterTech Limited listed above is incorporated
herein by this reference.
(11) Statement regarding computation of per share
earnings: Computations can be determined from
the financial statements.
(16) Letter on change in certifying accountant: None
(21) Subsidiaries of the registrant: Included
(24) Power of Attorney: None
(27) Financial Data Schedule: Included
(99) Additional Exhibits: None
-41-
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 11, 1999.
ENTERTECH MEDIA GROUP, INC.
By:/s/ Mark R. Tolner
-------------------------------------
Mark R. Tolner
President
-42-
EXCHANGE AGREEMENT
------------------
THIS EXCHANGE AGREEMENT effective the 22nd day of April, 1999, by and
between ENTERTECH MEDIA GROUP, INC., formerly known as Inter-Link Communications
Group, Inc., a Nevada corporation, (hereinafter "Parent") and ENTERTECH LIMITED,
a Nevada corporation, (hereinafter "Subsidiary").
WITNESSETH:
WHEREAS, Parent and Subsidiary agree that it would be to their mutual
benefit for Parent to acquire all of the outstanding stock of Subsidiary in
exchange for shares of Parent stock.;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. [REPRESENTATIONS OF ENTER-TECH] Subsidiary hereby represents to
Parent that to the best of its knowledge:
(a) Subsidiary as of March 31, 1999 owns, and on the Closing Date
hereinafter provided will own, free and clear of all liens, charges and
encumbrances, all of the assets set forth on the Financial Statements attached
to Subsidiary's Private Placement Memorandum dated March 31, 1999 (the"PPM").
(b) Subsidiary has heretofore furnished to Parent copies of the
balance sheet of Subsidiary . Said balance sheet accurately sets forth the
financial condition of Subsidiary as of said date, prepared in conformity with
generally accepted accounting principles consistently applied.
(c) Subsidiary has good and marketable title to all of its property
and assets (except property and assets disposed of since such date in the usual
1
<PAGE>
and ordinary course of business), subject to no mortgage, pledge, lien or other
encumbrance except as disclosed in such financial statements.
(d) Subsidiary has no obligations, liabilities or commitments,
contingent or otherwise, of a material nature, except as set forth in the PPM.
(e) Subsidiary is not a party to any employment contract, or to any
lease, agreement or other commitment not in the usual and ordinary course of
business, nor to any pension, insurance, profit-sharing or bonus plan, except as
disclosed in the PPM.
(f) Subsidiary is not a defendant, nor a plaintiff against whom a
counterclaim has been asserted, in any litigation, pending or threatened, nor
has any material claim been made or asserted against Subsidiary, nor are there
any proceedings threatened or pending before any federal, state or municipal
government, or any department, board, body or agency thereof, involving
Subsidiary except as disclosed in the PPM.
(g) Subsidiary is not in default under any agreement to which it is
a party nor in the payment of any of its obligations.
(h) Between the date of the Financial Statements referred to in
subparagraph "a" hereof and the Closing, Subsidiary will not have (i) mortgaged
or pledged or subjected to any lien, charge or other encumbrance any of their
assets, tangible or intangible, except in the usual and ordinary course of
business, or (ii) sold, leased, or transferred or contracted to sell, lease or
transfer any assets, tangible or intangible, or entered into any other
transactions, except in the usual and ordinary course of business, or (iii) made
any material change in any existing employment agreement or increased the
compensation payable or made any arrangement for the payment of any bonus to any
officer, director, employee or agent, except as set forth in the PPM.
2
<PAGE>
(i) This Exchange Agreement has been duly executed by Subsidiary
and the execution and performance of this Exchange Agreement will not violate,
or result in a breach of, or constitute a default in any agreement, instrument,
judgment, order or decree to which Subsidiary is a party or to which Subsidiary
is subject nor will such execution and performance constitute a violation of or
conflict with any fiduciary duty to which Subsidiary is subject, to the best of
Subsidiary's knowledge.
(j) Subsidiary has timely filed or obtained the necessary
extensions with the appropriate governmental authorities, all tax and other
returns required to be filed by it. Such returns are true and complete and all
taxes shown thereon to be due have been paid. All material, federal, state,
local, county, franchise, sales, use, excise and other taxes assessed or due
have been duly paid or reserves for unpaid taxes have been set up as required on
the basis of the facts and in accordance with generally accepted accounting
principles.
(k) Except as may be disclosed in the PPM, Subsidiary is not in
default with respect to any order, writ, injunction , or decree of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, and there are no actions, suits, claims,
proceedings or investigations pending or, to the knowledge of Subsidiary
threatened against or affecting Subsidiary, at law or in equity, or before or by
any federal, state, municipal or other governmental court, department
commission, board, bureau, agency or instrumentality, domestic or foreign.
Subsidiary has complied in all material respects with all laws, regulations and
orders applicable to its business.
3
<PAGE>
(l) No representation in this section, nor statement in any
document, certificate or schedule furnished or to be furnished pursuant to this
Exchange Agreement by Subsidiary, or in connection with the transactions
contemplated hereby, contains or contained any untrue statement of material
fact, nor does or will omit to state a material fact necessary to make any
statement of fact contained herein or therein not misleading.
(m) As of March 31, 1999, there were 10,000,000 shares of
Subsidiary's common stock issued and outstanding. In addition, Subsidiary is
offering a minimum of 1,500,000 shares and a maximum of 5,000,000 shares of its
common stock in units of 25,000 shares at a price of $1.00 per share pursuant to
the PPM dated March 31, 1999. This private placement of Subsidiary's shares
shall be completed after the effective date of this Exchange Agreement and the
shares sold pursuant to the PPM will be additional issued and outstanding shares
which the parties agree will be subject to this Exchange Agreement.
2. [REPRESENTATIONS OF PARENT] Parent represents to Subsidiary that:
(a) Parent is a corporation duly organized and validly existing and
in good standing under the laws of the State of Nevada; is qualified to transact
business in Nevada and no other state. Parent has an authorized capitalization
of 100,000,000 shares of common stock with a par value of $0.001 per share, of
which there are issued and outstanding 900,000 shares, and 10,000,000 shares of
preferred stock of which none are outstanding.
(b) Parent has delivered to Subsidiary its balance sheet, financial
statements for the period ended December 31, 1998. These financial statements
accurately set forth the financial condition of Parent as of the dates
specified, prepared in conformity with generally accepted accounting principles
consistently applied.
4
<PAGE>
(c) Parent has good and marketable title to all of its property and
assets (except property and assets disposed of since such date in the usual and
ordinary course of business), subject to no mortgage, pledge, lien or other
encumbrance except as disclosed in such balance sheet.
(d) Parent has no obligations, liabilities or commitments,
contingent or otherwise, of a material nature which were not provided for,
except as set forth in such balance sheet.
(e) There has been no change in the nature of the business of
Parent, nor in its financial condition or property, other than changes in the
usual and ordinary course of business, none of which has been materially
adverse, and Parent has incurred no obligations or liabilities or made any
commitments other than in the usual and ordinary course of business except as
disclosed in its financial statements.
(f) Parent is not a party to any employment contract with any
officer, director, or stockholder, or to any lease, agreement or other
commitment not in the usual and ordinary course of business, nor to any pension,
insurance, profit-sharing or bonus plan, except as disclosed in its financial
statements.
(g) Parent is not defendant, nor a plaintiff against whom a
counterclaim has been asserted, in any litigation, pending or threatened, nor
has any material claim been made or asserted against Parent, nor are there any
proceedings threatened or pending before any federal, state or municipal
government, or any department, board, body or agency thereof, involving Parent,
except as disclosed in Exhibit "A".
(h) Parent is not in default under any agreement to which it is a
party nor in the payment of any of its obligations.
5
<PAGE>
(i) Between the date of the balance sheet referred to in
subparagraph "a" hereof and the Closing, Parent will not have (i) paid or
declared any dividends on or made any disbursements in respect of, or issued,
purchased or redeemed, any of the outstanding shares of its capital stock, or
(ii) made or authorized any changes in its Articles of Incorporation or in any
amendment thereto or in its By-Laws, or (iii) made any commitments or
disbursements or incurred any obligations or liabilities of a substantial nature
or which are not in the usual and ordinary course of business, or (iv) mortgaged
or pledged or subjected to any lien, charge or other encumbrance any of their
assets, tangible or intangible, except in the usual and ordinary course of its
business, or (v) sold, leased, or transferred or contracted to sell, lease or
transfer any assets, tangible or intangible, or entered into any other
transactions, except in the usual and ordinary course of business, or (vi) made
any loan or advance to any stockholder of Parent, or to any other person, firm,
or corporation except in the usual and ordinary course of business, or (vii)
made any material change in any existing employment agreement or increased the
compensation payable or made any arrangement for the payment of any bonus to any
officer, director, employee or agent, except as set forth in Parent's financial
statements.
(j) This Exchange Agreement has been duly executed by Parent and
the execution and performance of this Exchange Agreement will not violate, or
result in a breach of, or constitute a default in any agreement, instrument,
judgment, order or decree to which it is a party or to which it is subject nor
will such execution and performance constitute a violation of or conflict with
any fiduciary duty to which it is subject.
(k) Parent has filed with the appropriate governmental authorities,
all tax and other returns required to be filed. Such returns are true and
complete and all taxes shown thereon to be due have been paid. All material,
6
<PAGE>
federal, state, local, county, franchise, sales, use, excise and other taxes
assessed or due have been duly paid and no reserves for unpaid taxes have been
set up or are required on the basis of the facts and in accordance with
generally accepted accounting principles.
(l) Parent is not in default with respect to any order, writ,
injunction, or decree of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
and there are no actions, suits, claims, proceedings or investigations pending
or, to the knowledge of Parent threatened against or affecting Parent, at law or
in equity, or before or by any federal, state, municipal, or other governmental
court, department, commission, board, bureau, agency or instrumentality,
domestic or foreign, except as disclosed in Exhibit "B." Parent has complied in
all material respects with all laws, regulations and orders applicable to its
business.
(m) No representation in this section, nor statement in any
document, certificate or schedule furnished or to be furnished pursuant to this
Exchange Agreement by Parent, or in connection with the transactions
contemplated hereby, contains or contained any untrue statement of a material
fact, nor does or will omit to state a material fact necessary to make any
statement of fact contained herein or therein not misleading.
3. [DATE AND TIME OF CLOSING] The closing shall be held on April 22,
1999, at 10:00 am, local time, at 50 West Liberty Street, Suite 880, Reno,
Nevada, or at such other time and place as may be mutually agreed upon between
the parties in writing (hereinafter "the Closing").
4. [EXCHANGE OF SHARES OF STOCK AND OTHER ACTIONS] The mode of
carrying into effect the exchange provided for in this Agreement shall be as
follows:
7
<PAGE>
(a) Subsidiary shall call a special meeting its board of directors
to be held on April 22, 1999, at 10:30 a.m., local time, at 50 West Liberty
Street, Suite 880, Reno, Nevada, for the following purposes:
(1) Ratifying, approving and carrying out the terms of this
Exchange Agreement; and
(2) Designating an John Daly as the Exchange Agent for purposes
of completing this Exchange Agreement.
(b) Parent shall call a special meeting its board of directors to
be held on April 22, 1999, at 10:30 a.m., local time, at 50 West Liberty Street,
Suite 880, Reno, Nevada, for the following purposes:
(1) Ratifying, approving and carrying out the terms of this
Exchange Agreement;
(2) Issuing shares to the Exchange Agent designated by
Subsidiary in amounts sufficient to carry out the terms of this Exchange
Agreement. Such shares shall be in the minimum amount of 11,500,000 shares
and a maximum amount of 15,000,00 shares, as the issuance of Subsidiary's
shares through the PPM may require.
(c) The Exchange Agent shall take all actions necessary to cause
the shares of Parent issued to the Exchange Agent to be exchange for all the
issued and outstanding shares of Subsidiary after Subsidiary's PPM is completed.
All Subsidiary shares shall thereafter be surrendered to Parent.
8
<PAGE>
5. [NOTICES] Any notice under this Agreement shall be deemed to have
been sufficiently given if sent by Federal Express or other similar overnight
delivery service, or registered or certified mail, postage prepaid, addressed as
follows:
If to Subsidiary:
Mark Tolner
4929 Wilshire Blvd., Suite 830
Los Angeles, CA 90010
If to Parent, to:
Mark Tolner
4929 Wilshire Blvd., Suite 830
Los Angeles, CA 90010
or to any other address which may hereafter be designated by either party by
notice given in such manner. All notices shall be deemed to have been given as
of the date of receipt.
6. [COUNTERPARTS] This Exchange Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be an
original, but all such counterparts shall constitute one and the same
instrument.
7. [MERGER CLAUSE] This Exchange Agreement supersedes all prior
agreements and understandings between the parties and may not be changed or
terminated orally, and no attempted change, termination or waiver of any of the
provisions hereof shall be binding unless in writing and signed by the parties
hereto.
8. [GOVERNING LAW] This Agreement shall be governed by and construed
according to the laws of the State of Nevada.
IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be executed the day and year first above written.
9
<PAGE>
ENTER-TECH MEDIA GROUP, INC.
A Nevada Corporation
By /s/Mark Tolnew
----------------------------------------
Mark Tolner
Its: President
(Hereunto duly authorized)
ENTERTECH LIMITED
A Nevada Corporation
By /s/Mark Tolner
----------------------------------------
Mark Tolner
Its: President
(Hereunto duly authorized)
10
BY-LAWS FOR THE REGULATION
EXCEPT AS OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION OF
ENTERTECH MEDIA GROUP, INC.
A NEVADA CORPORATION
* * * * *
ARTICLE I.
Offices
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of the business of the corporation is hereby fixed and located at
Suite 880, Bank of America Plaza, 50 West Liberty Street, Reno, Nevada 89501,
being the offices of THE NEVADA AGENCY AND TRUST COMPANY. The board of directors
is hereby granted full power and authority to change said principal office from
one location to another in the State of Nevada.
Section 2. 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.
1
<PAGE>
ARTICLE II.
Meetings of Shareholders
Section 1. MEETING PLACE. All annual meetings of shareholders
and all other meetings of shareholders shall be held either at the principal
office or at any other place within or without the State of Nevada which may be
designated either by the board of directors, pursuant to authority hereinafter
granted to said board, or by the written consent of all shareholders entitled to
vote thereat, given either before or after the meeting and filed with the
Secretary of the corporation.
Section 2. ANNUAL MEETINGS. The annual meetings of
shareholders shall be held on the 1st day of July each year, at the hour of
10:00 o'clock a.m. of said day commencing with the year 1999, provided, however,
that should said day fall upon a legal holiday then any such annual meeting of
shareholders shall be held at the same time and place on the next day thereafter
ensuing which is not a legal holiday. The board of directors of the corporation
shall have the power to change the date of the annual meeting as it deems
appropriate.
Written notice of each annual meeting signed by the president
or a vice president, or the secretary, or an assistant secretary, or by such
other person or persons as the directors shall designate, shall be given to each
shareholder entitled to vote thereat, either personally or by mail or other
2
<PAGE>
means of written communication, charges prepaid, addressed to such shareholder
at his address appearing on the books of the corporation or given by him to the
corporation for the purpose of notice. If a shareholder gives no address, notice
shall be deemed to have been given to him, if sent by mail or other means of
written communication addressed to the place where the principal office of the
corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each shareholder entitled thereto not less than ten
(10) nor more than sixty (60) days before each annual meeting, and shall specify
the place, the day and the hour of such meeting, and shall also state the
purpose or purposes for which the meeting is called.
Section 3. SPECIAL MEETINGS. Special meetings of the
shareholders, for any purpose or purposes whatsoever, may be called at any time
by the president or by the board of directors, or by one or more shareholders
holding not less than 10% of the voting power of the corporation. Except in
special cases where other express provision is made by statute, notice of such
special meetings shall be given in the same manner as for annual meetings of
shareholders. Notices of any special meeting shall specify in addition to the
place, day and hour of such meeting, the purpose or purposes for which the
meeting is called.
3
<PAGE>
Section 4. ADJOURNED MEETINGS AND NOTICE THEREOF. Any
shareholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of a majority of the shares, the
holders of which are either present in person or represented by proxy thereat,
but in the absence of a quorum, no other business may be transacted at any such
meeting.
When any shareholders' meeting, either annual or special, is
adjourned for thirty (30) days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting, other than by announcement at the meeting at
which such adjournment is taken.
Section 5. ENTRY OF NOTICE. Whenever any shareholder
entitled to vote has been absent from any meeting of shareholders, whether
annual or special, an entry in the minutes to the effect that notice has been
duly given shall be conclusive and incontrovertible evidence that due notice of
such meeting was given to such shareholders, as required by law and the By-Laws
of the corporation.
4
<PAGE>
Section 6. VOTING. At all annual and special meetings of
stockholders entitled to vote thereat, every holder of stock issued to a bona
fide purchaser of the same, represented by the holders thereof, either in person
or by proxy in writing, shall have one vote for each share of stock so held and
represented at such meetings, unless the Articles of Incorporation of the
company shall otherwise provide, in which event the voting rights, powers and
privileges prescribed in the said Articles of Incorporation shall prevail.
Voting for directors and, upon demand of any stockholder, upon any question at
any meeting shall be by ballot. Any director may be removed from office by the
vote of stockholders representing not less than two-thirds of the voting power
of the issued and outstanding stock entitled to voting power.
Section 7. The presence in person or by proxy of the holders
of a majority of the shares entitled to vote at any meeting 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.
5
<PAGE>
Section 8. CONSENT OF ABSENTEES. The transactions of any
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though 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 of the shareholders entitled to vote, not
present in person or by proxy, sign a written Waiver of Notice, or a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of this meeting.
Section 9. PROXIES. Every person entitled to vote or execute
consents shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the secretary of the corporation; provided that no such
proxy shall be valid after the expiration of eleven (11) months from the date of
its execution, unless the shareholder executing it specifies therein the length
of time for which such proxy is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution.
6
<PAGE>
ARTICLE III
Section 1. POWERS. Subject to the limitations of the Articles
of Incorporation or the By-Laws, and the provisions of the Nevada Revised
Statutes as to action to be authorized or approved by the shareholders, and
subject to the duties of directors as prescribed by the By-Laws, all corporate
powers shall be exercised by or under the authority of, and the business and
affairs of the corporation shall be controlled by the board of directors.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the directors shall have the following
powers, to wit:
First - To select and remove all the other officers, agents
and employees of the corporation, prescribe such powers and duties for them as
may not be inconsistent with law, with the Articles of Incorporation or the
By-Laws, fix their compensation, and require from them security for faithful
service.
Second - To conduct, manage and control the affairs and
business of the corporation, and to make such rules and regulations therefor not
inconsistent with law, with the Articles of incorporation or the By-Laws, as
they may deem best.
Third - To change the principal office for the transaction of
the business of the corporation from one location to another within the same
county as provided in Article I, Section 1, hereof; to fix and locate from time
to time one or more subsidiary offices of the corporation within or without the
7
<PAGE>
State of Nevada, as provided in Article I, Section 2, hereof; to designate any
place within or without the State of Nevada for the holding of any shareholders'
meeting or meetings; and to adopt, make and use a corporate seal, and to
prescribe the forms of certificates of stock, and to alter the form of such seal
and of such certificates from time to time, as in their judgment they may deem
best, provided such seal and such certificates shall at all times comply with
the provisions of law.
Forth - To authorize the issue of shares of stock of the
corporation from time to time, upon such terms as may be lawful, in
consideration of money paid, labor done or services actually rendered, debts or
securities canceled, or tangible or intangible property actually received, or in
the case of shares issued as a dividend, against amounts transferred from
surplus to stated capital.
Fifth - To borrow money and incur indebtedness for the
purposes of the corporation, and to cause to be executed and delivered therefor,
in the corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and securities
therefore.
8
<PAGE>
Sixth - To appoint an executive committee and other committees
and to delegate to the executive committee any of the powers and authority of
the board in management of the business and affairs of the corporation, except
the power to declare dividends and to adopt, amend or repeal By-Laws. The
executive committee shall be composed of one or more directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors of thecorporation shall be not less than one (1)
and no more than fifteen (15).
Section 3. ELECTION AND TERM OF OFFICE. The directors shall
be elected at each annual meeting of shareholders, but if any such annual
meeting is not held, or the directors are not elected thereat, the directors may
be elected at any special meeting of shareholders. All directors shall hold
office until their respective successors are elected.
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, and each director so elected shall hold office
until his successor is elected at an annual or a special meeting of the
shareholders.
9
<PAGE>
A vacancy or vacancies in the board of directors shall be
deemed to exist in case of the death, resignation or removal of any director, or
if the authorized number of directors be increased, or if the shareholders fail
at any annual or special meeting of shareholders at which any director or
directors are elected to elect the full authorized 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. If the board of
directors accept the resignation of a director tendered to take effect at a
future time, the board or the shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of his term of
office.
Section 5. PLACE OF MEETING. Regular meetings of the board of
directors shall be held at any place within or without the State which has been
designated from time to time by resolution of the board or by written consent of
10
<PAGE>
all members of the board. In the absence of such designation, a regular meeting
shall be held at the principal office of the corporation. Special meetings of
the board may be held either at a place so designated, or at the principal
office.
Section 6. ORGANIZATION MEETING. Immediately following each
annual meeting of shareholders, the board of directors shall hold a regular
meeting for the purpose of organization, election of officers, and the
transaction of other business. Notice of such meeting is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of
the board of directors shall be held without call and the day of each month and
at an hour deemed appropriate and set by the board of directors; provided,
however, should such set day fall upon a legal holiday, then said meeting shall
be held at the same time on the next day thereafter ensuing which is not a legal
holiday. Notice of all such regular meetings of the board of directors is hereby
dispensed with.
Section 8. SPECIAL MEETINGS. Special meetings of the board of
directors for any purpose or purposes shall be called at any time by the
president, or, if he is absent or unable or refuses to act, by any vice
president or by any two (2) directors.
11
<PAGE>
Written notice of the time and place of special meetings shall
be delivered personally to the directors or sent to each director by mail or
other form of written communication, charges prepaid, addressed to him at his
address as it is shown upon the records of the corporation, or if it is not
shown on such records or is not readily ascertainable, at the place in which the
meetings of the directors are regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States mail or delivered to the
telegraph company in the place in which the principal office of the corporation
is located at least forty-eight (48) hours prior to the time of the holding of
the meeting. In case such notice is delivered as above provided, it shall be so
delivered at least twenty-four (24) hours prior to the time of the holding of
the meeting. Such mailing, telegraphing or delivery as above provided shall be
due, legal and personal notice to such director.
Section 9. NOTICE OF ADJOURNMENT.Notice of the time and place
of holding an adjourned meeting need not be given to absent directors, if the
time and place be fixed at the meeting adjourned.
12
<PAGE>
Section 10. ENTRY OF NOTICE. Whenever any director has been
absent from any special meeting of the board of directors, an entry in the
minutes to the effect that notice has been duly given shall be conclusive and
incontrovertible evidence that due notice of such special meeting was give to
such director, as required by law and the By-Laws of the corporation.
Section 11. WAIVER OF NOTICE. The transactions of any meeting
of the board of directors, however called and noticed or wherever held, shall be
as valid as though had a meeting duly held after regular call and notice, if a
quorum be present, and if, either before or after the meeting, each of the
directors not present sign a written waiver of notice or a consent to the
holding of such meeting or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 12. QUORUM. A majority of the authorized number of
directors shall be necessary to constitute a quorum for the transaction of
business, except to adjourn as hereinafter provided. 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,
unless a greater number be required by law or by the Articles of Incorporation.
13
<PAGE>
Section 13. ADJOURNMENT. A quorum of the directors may adjourn
any directors' meeting to meet again at a stated day and hour; provided,
however, that in the absence of a quorum, a majority of the directors present at
any directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the board.
Section 14. FEES AND COMPENSATION. Directors shall not receive
any stated salary for their services as directors, but by resolution of the
board, a fixed fee, with or without expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent, employee, or otherwise, and receiving compensation therefor.
ARTICLE IV.
Officers
Section 1. OFFICERS. The officers of the corporation shall be
a president, a vice president and a secretary/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
14
<PAGE>
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article. Officers other than president
and chairman of the board need not be directors. Any person may hold two or more
offices.
Section 2. ELECTION. 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, shall be chosen annually by the board of
directors, and each shall hold his office until he shall resign or shall be
removed or otherwise disqualified to serve, or his successor shall be elected
and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The board of directors
may 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 By-Laws or as the board of directors may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be
removed, either with or without cause, by a majority of the directors at the
time in office, at any regular or special meeting of the board.
15
<PAGE>
Any officer may resign at any time by giving written notice to
the board of directors or to the president, or to the secretary of the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 5. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board,
if there shall be such an officer, shall, if present, preside at all 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 or prescribed
by the By-Laws.
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 officers of
16
<PAGE>
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 be ex-officio a member of all the standing
committees, including the executive committee, if any, and 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 By-Laws.
Section 8. VICE PRESIDENT.In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the board of
directors, or if not ranked, the 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 By-Laws.
Section 9. SECRETARY.The secretary shall keep, or cause to be
kept, a book of minutes at the principal office or such other place as the board
of directors may order, of all meetings of directors and shareholders, with the
time and place of holding, whether regular or special, and if special, how
17
<PAGE>
authorized, the notice thereof given, the names of those present at directors'
meetings, the number of shares present or represented at shareholders' meetings
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the
principal office, a share register, or a duplicate share register, showing the
names of the 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
the meetings of the shareholders and of the board of directors required by the
By-Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or the By-Laws.
Section 10. TREASURER. The treasurer shall keep and maintain,
or cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursement, gains, losses, capital, surplus
18
<PAGE>
and shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all times
be open to inspection by any director.
The treasurer shall deposit all moneys and other valuables in
the name and 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 treasurer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or the By-Laws.
ARTICLE V.
INDEMNIFICATION OF OFFICERS, DIRECTORS
AND KEY PERSONEL
Section 1. The corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by reason
19
<PAGE>
of the fact that such person is or was a director, officer, employee or 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, against expenses including attorneys fees,
judgments, fines and amounts paid in settlement actually and reasonable incurred
by such person in connection with the action, suit or proceeding if such person
acted in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendre or its
equivalent, does not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interest of the corporation, and that, with respect to any
criminal action or proceeding, such person had reasonable cause to believe that
his conduct was unlawful.
Section 2. The corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
20
<PAGE>
judgment in the corporation's favor by reason of the fact that such person is or
was a director, officer, employee or 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 against expenses including amount paid in settlement and attorneys
fees actually and reasonable incurred by such person in connection with the
defense or settlement of the action or suit if such person acted in good faith
and in a manner which such person reasonably believed to be in or not opposed to
the best interests of the corporation. Indemnification may not be made for any
claim, issue or matter as to which such a person has been adjudged by a court of
competent jurisdiction determining, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amount paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
Section 3. To the extent that a director, officer, employee
or agent of a corporation had been successful on the merits or otherwise in
21
<PAGE>
defense of any action, suit or proceeding referred to in Sections 1 and 2 of
this Article V, or in defense of any claim, issue or matter therein, the
corporation shall indemnify him against expenses, including attorneys fees,
actually and reasonably incurred by such person in connection with the defense.
Section 4. The procedure for authorizing the indemnifications listed in Section
1, 2 and 3 of this Article V, and the limitations on such indemnification and
advancement of expenses, shall be that set forth in Section 78.751 of the Nevada
Revised Statutes, and shall be amended from time to time as such statute is
amended.
ARTICLE VI.
Miscellaneous
Section 1. RECORD DATE AND CLOSING STOCK BOOKS. The board of
directors may fix a time, in the future, not exceeding fifteen (15) days
preceding the date of any meeting of shareholders, and not exceeding thirty (30)
days preceding the date fixed for the payment of any dividend or distribution,
or for the allotment of rights, or when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of the
22
<PAGE>
shareholders entitled to notice of and to vote at any such meeting, or entitled
to receive any such dividend or distribution, or any such allotment of rights,
or to exercise the rights in respect to any such change, conversion or exchange
of shares, and in such case only shareholders of record on the date so fixed
shall be entitled to notice of and to vote at such meetings, or to receive such
dividend, distribution or allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
corporation after any record date fixed as aforesaid. The board of directors may
close the books of the corporation against transfers of shares during the whole,
or any part of any such period.
Section 2. INSPECTION OF CORPORATE RECORDS.The share register
or duplicate share register, the books of account, and minutes of proceedings of
the shareholders and directors shall be open to inspection upon the written
demand of a shareholder or the holder of a voting trust certificate, as limited
herein, at any reasonable time, and for a purpose reasonably related to his
interests as a shareholder, or as the holder of a voting trust certificate. Such
inspection rights shall be governed by the applicable provisions of the Nevada
Revised Statutes shall be no more permissive that such statutes as to percentage
23
<PAGE>
of ownership required for inspection and scope of the permitted inspection.
Demand of inspection other than at a shareholders' meeting shall be made in
writing upon the president, secretary or assistant secretary of the corporation.
Section 3. CHECKS, DRAFTS, ETC. 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 4. ANNUAL REPORT. The board of directors of the
corporation shall cause to be sent to the shareholders not later than one
hundred twenty (120) days after the close of the fiscal or calendar year an
annual report.
Section 5. CONTRACT, ETC., HOW EXECUTED. The board of
directors, except as in the By-Laws otherwise provided, may authorize any
officer or officers, agent or agents, to enter into any contract, deed or lease
or execute any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances; and unless so
authorized by the board of directors, no officer, agent or employee shall have
24
<PAGE>
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit to render it liable for any purpose or to any amount.
Section 6. CERTIFICATES OF STOCK. A certificate or
certificates for shares of the capital stock of the corporation shall be issued
to each shareholder when any such shares are fully paid up. All such
certificates shall be signed by the president or a vice president and the
secretary or an assistant secretary, or be authenticated by facsimiles of the
signature of the president and secretary or by a facsimile of the signature of
the president and the written signature of the secretary or an assistant
secretary. Every certificate authenticated by a facsimile of a signature must be
countersigned by a transfer agent or transfer clerk.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the board of directors or the By-Laws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state the amount remaining unpaid and the terms of payment
thereof.
Section 7. REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS.
The president or any vice president and the secretary or assistant secretary of
this corporation are authorized to vote, represent and exercise on behalf of
25
<PAGE>
this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on behalf of this
corporation or corporations may be exercised either by such officers in person
or by any person authorized so to do by proxy or power of attorney duly executed
by said officers.
Section 8. INSPECTION OF BY-LAWS. The corporation shall keep
in its principal office for the transaction of business the original or a copy
of the By-Laws as amended, or otherwise altered to date, certified by the
secretary, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
ARTICLE VI.
Amendments
Section 1. POWER OF SHAREHOLDERS. New By-Laws may be adopted
or these By-Laws may be amended or repealed by the vote of shareholders entitled
to exercise a majority of the voting power of the corporation or by the written
assent of such shareholders.
Section 2. POWER OF DIRECTORS. Subject to the right of
shareholders as provided in Section 1 of this Article VI to adopt, amend or
26
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repeal By-Laws, By-Laws other than a By-Law or amendment thereof changing the
authorized number of directors may be adopted, amended or repealed by the board
of directors.
Section 3. ACTION BY DIRECTORS THROUGH CONSENT IN LIEU OF
MEETING. Any action required or permitted to be taken at any meeting of the
board of directors or of any committee thereof, may be taken without a meeting,
if a written consent thereto is signed by all the members of the board or of
such committee. Such written consent shall be filed with the minutes of
proceedings of the board or committee.
/s/ Mark Tolner
---------------
Mark Tolner
President
27
EXHIBIT (21)
SUBSIDIARIES OF THE ISSUER
1. Subsidiaries of EnterTech Media Group, Inc.:
EnterTech Limited, a Nevada Corporation.
2. Subsidiaries of EnteTech Limited
A. EnterTech Picture Corporation, a Nevada corporation.
B. EnterTech Releasing Corporation, a Nevada corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ENTERTECH
MEDIA GROUP INC. AND SUBSIDIARIES (FORMERLY ARMAS INTL. MFG.CO., INC.) FINANCIAL
STATEMENTS, APRIL 30, 1999, DECEMBER 31, 1998 AND 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> APR-30-1999
<CASH> 217820
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 217820
<PP&E> 58966
<DEPRECIATION> 0
<TOTAL-ASSETS> 227226
<CURRENT-LIABILITIES> 6211
<BONDS> 0
0
0
<COMMON> 12400
<OTHER-SE> 258615
<TOTAL-LIABILITY-AND-EQUITY> 277226
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10951
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10951)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10951)
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<NET-INCOME> (10951)
<EPS-BASIC> (.008)
<EPS-DILUTED> (.008)
</TABLE>
