U.S. 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
INDEPENDENT MUSIC GROUP, INC.
(Name of Small Business Issuer in its charter)
DELAWARE 22-281-1783
(State of incorporation) (I.R.S. Employer Identification No.)
71 Great Pasture Road, Redding, Connecticut 06896
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number (203) 938-0737
Securities to be registered pursuant to 12(b) of the Act: None
Securities to be registered pursuant to 12(g) of the Act:
Common Stock $.00005 Par Value
(Title of Class)
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
ITEM 1. DESCRIPTION OF BUSINESS
-----------------------
Company Background
Independent Music Group, Inc. ("IMG") was formed under the laws of the
State of Delaware under the name AVTR Systems, Inc. in May 1988, and in April
1999, changed its corporate name to Independent Music Group, Inc. In April 1999,
IMG acquired all the issued and outstanding capital stock of Independent Music
Network, Inc.(TM) ("IMN"), a Delaware corporation. Through IMN, and IMN's wholly
owned subsidiary Independent Music Channel ("IMC"), and Emerald City Records,
Inc., another wholly owned subsidiary of IMG ("Emerald City Records"), IMG
intends to pursue the concept of broadcasting amateur and professional music
television videos on national cable television. IMG's principal executive
offices are located at 71 Great Pasture Road, Redding, Connecticut. IMN's
offices are located at 200 West 85th Street, Suite 2B, New York, NY 10024. IMG's
telephone number is 203-938-0737. IMG's website address is
www.independentmusicnetwork.com or www.independentmusicchannel.com.
IMG's common stock trades on the OTC Bulletin Board under the symbol "JNET."
IMG, IMN and IMC will sometimes be referred to as the Company.
Specifically, management of IMG anticipates that IMN will conduct and
coordinate all advertising, band recruiting and video editing, IMC will
facilitate the broadcast of the music videos and Emerald City Records will
produce and mass market the music of bands signed by the Company.
Corporate Strategy
Under the Company's business concept; IMN(TM) will endeavor to:
o Broadcast programming over national cable television that
consists primarily of music videos of amateur and professional
bands;
o Minimize the risk of the Company's capital by charging bands
an advance fee of $350 per three-minute video that, subject to
content approval, guarantees the video will be broadcast
nationally;
o Build franchise value and eliminate sponsorship driven
programming decisions by promoting IMN(TM) during broadcasts
and funding airtime with the advanced fees rather than with
sponsorship advertising; and
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o Design an innovative and informative corporate website that
promotes IMN(TM), enhances and builds franchise value and
generates substantial advertising and related revenue. Through
extensive cross-advertising with its anticipated cable
television programming, the Company intends to develop its
website into a web portal.
The Company's business concept was developed based on management of the
Company's assessment that no medium currently exists which gives amateur
musicians the opportunity to present themselves on national television. Channels
like MTV(TM) and VH1(TM) primarily program only those artists that are listed on
the Billboard 100(TM) or similar charts. The Company's believes its concept will
be attractive to amateur musicians and give amateur musicians the opportunity to
promote their talent on the Pay For Play(TM) basis developed by the Company and
for a nominal advanced fee of $350. The Company also believes its proposed
services will be well received by major and independent record labels and talent
agencies because IMN will provide a cost-effective medium to showcase new talent
on a non-preferential basis.
The Company will initially attempt to develop interest in its concept
among amateur musicians by undertaking an advertising campaign which will
promote the Company and provide amateur musicians with information on how to
submit their music videos and $350 fee. After being screened by the Company for
acceptable content, professionally packaged and edited, the Company will
broadcast the video on a national cable television channel. In addition to the
national television broadcast, each artist or band that submits an acceptable
video will also be listed on IMN(TM)'s corporate website and portal where
streaming audio clips of their performance may be heard and other information on
the bands and the music industry will be displayed.
As part of its programming strategy, each month the Company will choose
the Top 10 artists or bands broadcast on IMN(TM) during that period. The
selected artists/bands will each be featured that month with a 1/2 hour
exclusive, national television showcase of their videos at no additional cost.
The top band of the month will be signed to a recording contract with Emerald
City Records. In addition to screening videos for content, IMN(TM) will form an
advisory panel to evaluate the commercial viability of selected bands. If deemed
to be commercially viable, the Company will be in a position to offer these
bands management contracts or refer them to Emerald City Records(TM) or an
outside record label.
IMN(TM) intends to promote its own network during its broadcasts to
generate brand recognition and enhance franchise value. This process also
reduces the burden on IMN(TM)'s working capital, as a large sales force will not
be required. In addition to IMN(TM)'s self-promotion, its advertising will also
include commercials that promote its Web Portal and direct interested viewers to
IMN(TM)'s corporate website. Company sponsored advertising provides IMN(TM) with
sole discretion to format its broadcasts as it chooses while affording it the
ability to promote its own network. In direct contrast to the MTV(TM) or VH1(TM)
"type" channels, IMN(TM)'s financial success will not be contingent upon
ascertaining sponsorships or soliciting large advertisers. This financial and
programming freedom is the direct result of the Company's advanced fee video
delivery process.
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The Company anticipates launching its domestic website, web portal and
traditional campaign between the last quarter of 1999 or the first quarter of
2000. The Company expects to commence broadcasting by the end of 1999 or the
early part of 2000.
Music, Music Video and Recording Industry
The development of the Company's business concept resulted in part from
the popularity of the music and music video industry in general. Management of
the Company beleives that the broadcast television market for music videos and
music programming has grown significantly since the introduction of MTV(TM) in
1981. Music enthusiasts are now able to view everything from country to rock to
rap to salsa on cable television, with major channels generating significant
revenues from growing cable subscriptions and increasing advertiser support.
Management's research indicates that the amateur music industry has
exerperienced a corresponding significant growth phase. According to the Gallup
Organization of Princeton, New Jersey, in 1996 the United States had
approximately 62 million amateur musicians aged five and older comprising
approximately 6 million bands. In the United States alone, nearly $6 billion was
spent on musical instruments and accessories in 1996, an increase of
approximately 12% from 1994.
According to a 1997 study by the Recording Industry Association of
America ("RIAA") demographic profile of consumers of recorded music has aged
along with the population. Consumers age 29 and under accounted for 52.9% of
music purchases in 1996 versus 56.7% in 1992. Similarly, consumers over the age
of 45 comprised 15.2% of the market in 1996 compared with 12.2% in 1992. In
addition, based on RIAA data, there have been significant gains in the Popular
music listenership among the 35 and over category. While the spending by
young Americans remains predictably strong due to their passion for music, the
Babyboomers (particularly in the age 40-44 category) have shown the most notable
increase, jumping from a meager 4.8% market share in 1987 to 9.2% in 1996.
Marketing Strategy
In an effort to obtain the maximum number of music videos in a timely
fashion, the Company will initially target the United States marketplace, and
thereafter, the Company plans to expand its network worldwide to encompass the
estimated 50 million amateur artists/bands globally. The Company approached, and
anticipates that it will engage the New York City based firm of Frankfurt
Balkind Partners to create its advertising campaign. Frankfurt Balkind Partners
is the largest independent communications consulting firm based in the United
States. The Company anticipates its domestic advertising campaign will include
radio and print ads as well as the Internet to target the approximately 6
million amateur artists and band members.
Television Broadcasting Strategy
IMN(TM) proposes to either contract for national air time in 10 hour
per day, five day per week blocks, using a national satellite fed network or, if
the demand for the Company's concept warrants, the
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Company will attempt to air its own seven day a week, 24 hour national cable
channel. It is anticipated that the Company's programming will consist of
approximately 15 music videos per hour narrated by a video deejay personality
("VJ") situated in front of a custom designed stage set and interspersed with
Company sponsored advertising. The Company's research included an investigation
of media costs associated with buying one hour of broadcast time using a range
of vehicles, including spot network television, syndicated television, national
and regional cable television, UHF channels and leased public access. The focus
was geared to the amateur band market, where the 6 PM to 3 AM time slot offers a
combination of prime demographic viewer ship and reduced cost exposure. As a
result, the Company believes it can purchase prime time airtime that reaches
approximately 25 million cable households nationwide at an average cost of
$1,400 per hour.
Specifically, the Company has determined it can purchase airtime
through networks such as Access Television Network, Inc., a national satellite
fed network. Access Television Network, Inc. maintains contracts for air time
directly with the major cable systems operators, such as Tele-Communications,
Inc., Time-Warner, Inc. and Continental Cablevision, Inc., for a variety of
channels at the local cable system level and then Access Television Network,
Inc. feeds its signal through two digitally compressed satellite channels.
Depending upon the market demand for the Company's concept, management
of the Company may pursue the option of starting its own, seven day a week, 24
hour national cable channel that will be distinctively different from current
music channels. The Company will promote its programming and create brand
recognition through Independent Music Channel(TM), Inc.
IMN(TM)'s Website
In addition to the increasing popularity of music television, an
increasing number of people are turning to the Internet as a source for music
and music related entertainment. Whether it is fan sites, webcasting,
interactive jukeboxes, re-transmission of radio or downloading, the Internet is
providing consumers with access to more music quicker than ever before.
Management believes the Internet is changing the manner in which music is
listened to and marketed. The sale of music, for example, is no longer limited
to physical carriers such as commercial music stores. Experts agree that the
potential growth in the online sector is great, especially with companies such
as CDNow, Inc. and Amazon.com, Inc. generating greater public awareness through
costly mass media advertising.
IMN(TM) and its website are being designed to be substantially
different from most Internet companies and websites. The primary difference is
that those companies typically spend a significant portion of their operating
cash flow to advertise on television and the Internet. IMN(TM)'s strategy will
attempt to eliminate a strain on the Company's cash flow by advertising during
the Company's cable television video broadcasts and establishing website
affiliations. IMN(TM) also anticipates that it will be able to charge fees by
generating links to several Internet band websites.
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<PAGE>
IMN(TM)'s Web Portal
After the Company's wesite is firmly established, the Company will
endeavor to develop its website into a Web Portal that will focus on
entertainment and information and thereafter expand into a variety of other
content and services.
A Web Portal is where individuals typically begin when they log onto
the Internet, receiving news, topics of interest, weather, online events and
various other informational content. The portal has essentially become the
entryway to all things on the Web. Most Web Portals feature the same mix of
content and services. Differentiation amongst Web Portals is primarily in how
well the sites integrate all of their offerings; the quality of the technology
providers selected to deliver Web-based e-mail, audio and video clips, chat and
Web page communities, and; the ease with which a consumer can use and customize
the service to their individual needs.
The Company is not currently aware of any existing competitor in the
television music video industry that has or could create and promote a Web
Portal in the fashion that IMG(TM) can. The reason is rather simple; since
advertising revenue drives their profitability, companies such as MTV(TM) cannot
effectively cross promote/advertise their Web Portals and/or websites. Another
advantage for IMG(TM)'s Web Portal is the Company's targeted market. IMG(TM) has
a large core demographic base from which it expects to draw interest in its Web
Portal. The target market for IMC(TM)'s product is the six million amateur
artists/bands in the U.S. and the estimated 50 million amateur artists/bands
worldwide. The combination of 50 million amateur artists/bands globally and the
promotional advantage described above enables IMG(TM) to launch its Web Portal
with a tremendous amount of leverage.
Unlike services such as America On-Line, the "pure" Web Portals are
free from the burdens of providing access and software for users. Through
innovation and a singular focus on serving the needs of the online consumer,
IMN(TM) plans to integrate the highest quality music and entertainment content
(initially) and services to create a powerful and unique online experience.
IMN(TM) anticipates that it will establish strategic alliances, affiliations and
partnerships with a variety of companies. The potential of such alliances,
combined with the core demographics of the consumers the Company initially
intends to target, could quickly vault IMG(TM) into the upper Web Portal
echelon.
IMN(TM)'s Web Portal will initially be used for a number of functional
and IMN(TM)'s Web Portal will initially be used for a number of functional and
promotional purposes, some of which include:
<TABLE>
<CAPTION>
<S> <C>
o IMN(TM)& IMC(TM)Corporate Information o Featured Band Information
o Video Submission Guidelines & Forms o Contest Polling
o Pricing Schedules o CD Sales & Audio Samples
o Band Listings & Programming Schedules o Visitors' Log
o Frequently Asked Questions Section o VJ Biographies & Stories
o Sale of IMN(TM)/IMC(TM)Merchandise o IMN(TM)'s Interactive Jukebox
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<PAGE>
o Links to Band Websites o Music Industry News
o CD Release Information & Reviews o Links to Band Fan Club Sites
o Chat Rooms o Local Band News
</TABLE>
Upon completion, the Company's portal will include links to other
Internet sites for things such as CD and Musical Instrument Sales, National &
Local Entertainment Information, Independent Band Information & Performance
Schedules, Music Magazines & Videos, etc. As mentioned above, the Company also
expects to establish strategic alliances and partnerships with certain of
companies that provide the services linked to our website for a percentage of
sales per hit. The current industry standard is 15%.
ITEM 2. DESCRIPTION OF PROPERTY
-----------------------
IMG maintains its executive offices at 71 Great Pasture Road, Redding,
Connecticut 06896, on a rent free basis from James Fallacaro, an executive
officer and director of IMG. IMN maintains its executive offices at 200 West
85th Street, Suite 2B, New York, NY 10024, on a rent free basis from Anthony
Escamilla, an executive officer and director of IMG.
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND SIGNIFICANT
--------------------------------------------------------
EMPLOYEES
---------
The following table sets forth the names, positions with the Company
and ages of the executive officers and directors of the Company. Directors will
be elected at the Company's annual meeting of shareholders and serve for one
year or until their successors are elected and qualify. Officers are elected by
the Board and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board.
Name Age Positions Held
---- --- --------------
James Fallacaro 52 Director, Chairman, and President
Corinne Fallacaro 42 Director Secretary and Treasurer
Anthony Escamilla 32 Director and Vice President
James Fallacaro has been Director, Chairman and President of the Company since
its formation in 1986. Mr. Fallacaro has been a Director and officer of both IMC
and IMN since 1997. Mr. Fallacaro has served as the sole director of Emerald
City Records, Inc. since its formation in April 1999. Since 1991 Mr. Fallacaro
has served as President of CJS Holdings, Inc., a technology licensing company he
founded in 1991. From 1986 to 1987, Mr. Fallacaro served as President, and from
1985 to 1986 as a Vice President, of Real Estate Financial Investment Corp.,
which is in the business of acquiring, syndicating and
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operating real property. From 1983 to 1985, Mr. Fallacaro was Vice President of
Diversified Resources Group, a firm engaged in the business of acquiring,
syndicating and managing real estate. From 1979 to 1983, Mr. Fallacaro was
President of Valkyerie Technology Group, a firm engaged in licensing of foreign
and domestic technology.
Corinne Fallacaro has been a Director, Secretary and Treasurer of IMG since its
inception in 1986. Ms. Fallacaro has also served as a director and executive
officer of both IMN and IMC since 1997. Ms. Fallacaro has also served as
Vice-President of CJS Holdings, Inc., a private technology licensing company
since 1991. Ms. Fallacaro, is married to James Fallacaro.
Anthony Escamilla has served as Vice President and Director of IMG since April
1999. Mr. Escamilla is Secretary and Treasurer of StockSiren.com, LLC, a
company founded by Mr. Escamilla in March 1999. Mr. Escamilla is principally
self employed as a financial consultant and has acted as the Chief Financial
Officer of Motorsports USA, Inc. and its parent company Mobile Multimedia
Productions, Inc. since November 1997 and May 1998, respectively. From January
1993 through October 1997, he worked for The Long-Term Credit Bank of Japan,
Ltd. in their Corporate Finance and Cross Border M&A Departments. Between July
1990 and September 1996, Mr. Escamilla worked for Deloitte & Touche in their
Audit Department specializing in Corporate Finance and M&A transactions. He
earned MBA and B.S. degrees from the University of Texas at Austin and the
University of Connecticut, respectively. Mr. Escamilla is a Certified Public
Accountant.
ITEM 4. EXECUTIVE COMPENSATION
----------------------
The officers and directors of IMG do not have employment agreement with
IMG or its subsidiaries nor have the foregoing individuals had employment
agreements with any of the foregoing since 1989. The officers and directors have
not received compensation (including common stock or options to purchase common
stock) from IMG or its subsidiaries and do not expect to receive compensation
for their services to IMG for an indefinite period of time.
ITEM 5. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------
The following table sets forth information as of June 18, 1999, with
respect to the beneficial ownership of shares of IMG's common stock ("Common
Stock") by (i) each person or entity known by the Company to be the owner of
more than 5% of the outstanding shares of Common Stock, or to be under common
control, (ii) each officer and director, and (iii) all officers and directors as
a group.
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<TABLE>
<CAPTION>
Approximate
Percentage of
No. of Outstanding Shares
Name Shares(1) Beneficially Owned
- ---- --------- ------------------
<S> <C> <C> <C>
James Fallacaro(2) 8,555,000 88.7%
Corinne Fallacaro(3) 76,658 *
Anthony Escamilla(4) 0 0%
All Officers and Directors 8,631,658 89.6%
as a Group (3 persons)
*Denotes less than 1%.
</TABLE>
(1) There were 9,636,475 shares of IMG's Common Stock and outstanding as of
June 18, 1999.
(2) James Fallacaro is Director, Chairman and President of IMG. Does not
include 76,658 shares of IMG's Common Stock owned by Corinne Fallacaro,
James Fallacaro's wife.
(3) Corinne Fallacaro is Director, Secretary and Treasurer of IMG. Does not
include 8,550,000 shares of IMG's Common Stock owned by James
Fallacaro, Corinne Fallacaro's husband.
(4) Mr. Escamilla is Director and Vice President of IMG.
ITEM 6. INTEREST OF MANAGEMENT AND OTHER CERTAIN TRANSACTIONS
-----------------------------------------------------
In March 1999, IMG acquired all of the issued and outstanding shares of
common stock of IMN from James Fallacaro, and officer and director of IMG, in
exchange for 100,000 shares of Common Stock of IMG and $50,000.
In March 1999, IMG issued James Fallacaro 8,500,000 shares of Common
Stock at a price of $20,000.
ITEM 7. DESCRIPTION OF SECURITIES
-------------------------
IMG is authorized to issue 10,000,000 shares of Common Stock, par value
$.00005 per Share. IMG is not authorized to issue preferred stock. As of June
18, 1999, there were 9,636,475 shares of Common Stock issued and outstanding.
The holders of IMG's Common Stock: [i] have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by
IMG's Board of Directors; [ii] are entitled to share ratably in all of IMG's
assets for distribution to holders of IMG's Common Stock upon liquidation,
dissolution or winding up of the affairs of IMG; [iii] do not have preemptive
subscription or conversion rights and there are no redemption or sinking fund
provisions applicable thereto; and [iv] are entitled to one vote per share on
all matters on which stockholders may vote at all meetings of stockholders. All
shares of Common Stock now outstanding are fully paid and non-assessable. The
holders of shares of IMG's Common Stock do not have cumulative voting rights,
which means that the holders of more than 51% of such outstanding
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<PAGE>
shares, voting for the election of Directors, can elect all of the Directors to
be elected, if the so choose and in such event, the holders of the remaining
shares will not be able to elect any of IMG's Directors.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
-------------------------------------------------
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
-------------------------------------------
As of June 18, 1999, there were approximately 41 stockholders of record
of IMG's Common Stock. IMG's Common Stock is trades on the NASD OTC Bulletin
Board under the symbol "JNET". The following table sets forth, for the period
since June 1, 1997, the high and low bid prices for IMG's Common Stock as
reported by the OTC Bulletin Board. The following high and low bid prices
reflect inter-dealer prices without detail markup, markdown or commission and
may not represent actual transactions.
<TABLE>
<CAPTION>
Common Stock
------------
High Low
---- ---
<S> <C> <C>
June 1997 - May 31, 1999
June 1, 1997 - August 31, 1997 $.3 $.001
September 1, 1997 - November 30, 1997 $.3 $.001
December 1, 1997 - February 28, 1998 $.3 $.001
March 1, 1998 - May 31, 1998 $.3 $.001
June 1, 1998 - August 31, 1998 $.3 $.001
September 1, 1998 - November 30, 1998 $.3 $.001
December 1, 1998 - February 28, 1999 $.3 $.001
March 1, 1999 - May 31, 1999* $16 $1.25
</TABLE>
*Gives effect to a 1 for 40 reverse stock split of IMG's issued and outstanding
Common Stock effective March 1999.
The transfer agent for IMG's Common Stock is Florida Atlantic Stock
Transfer,701 North Pine Island Road, Suite 310B, Tamarac, Florida 33321.
IMG has never paid cash dividends on its Common Stock. IMG presently
intends to retain future earnings, if any, to finance the expansion of its
business and does not anticipate that any cash dividends will be paid in the
foreseeable future. The future dividend policy will depend on IMG's earnings,
capital requirements, expansion plans, financial condition and other relevant
factors.
ITEM 2. LEGAL PROCEEDINGS
-----------------
There are no material legal proceedings filed, or to IMG's knowledge,
threatened against IMG.
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<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------
In March 1999, IMG issued an aggregate of 900,000 shares of Common
Stock to two accredited investors and received aggregate proceeds of $55,000.
The offering was conducted pursuant to the exemption from registration provided
by Rule 504 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Act").
In March 1999, IMG issued 8,500,000 shares of Common Stock to an
officer and director of the IMG for a purchase price of $20,000 pursuant to the
exemption from the registration requirements of the Act pursuant to Section 4(2)
of the Act.
In April 1999, IMG issued 100,000 shares of its Common Stock to an
officer and director of IMG as part of the acquisition by IMG of IMN. The
issuance was exempt from the registration requirements of the Act pursuant to
Section 4(2) of the Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
Section 145 of the General Corporation Law of Delaware (the "GCL")
allows a corporation to indemnify any person who was or is, or is threatened to
be made a party to any threatened, pending or completed suit or proceeding. This
applies whether the matter is civil, criminal, administrative or investigative
because he or she is or was a director, officer, employee or agent of the
corporation.
A corporation may indemnify against expenses (including attorney's
fees) and, except for an action by or in the name of the corporation, against
judgments, fines and amounts paid in settlement as part of such suit or
proceeding. This applies only if the person indemnified acted in good faith and
in a manner he or she reasonably believed to be in the best interest of the
corporation. In addition, with respect to any criminal action or proceeding, the
person had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the name of the corporation, no
indemnification of expenses may be made for any claim, as to which the person
has been found to be liable to the corporation. The exception is if the court in
which such action was brought determines that the person is reasonably entitled
to indemnity for expenses.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, is permitted as to directors, officers and controlling
persons of IMG, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy and is, therefore, unenforceable. In
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the event that a claim for indemnification against such liabilities (other than
the payment by IMG in the successful defense of any action, suit or proceeding)
is asserted, IMG will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy. IMG
will be governed by the final adjudication of such issue.
PART F/S
The financial statements and supplementary data are included herein.
FINANCIAL STATEMENTS AND EXHIBITS
- ---------------------------------
The following financial statements include the audited consolidated
balance sheet of IMG at May 31, 1999, and IMG's related audited consolidated
statements of operations, deficiency in assets and cash flows for the year ended
May 31, 1999 and the period from November 6, 1997 (inception) through May 31,
1998.
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- --------------------------------------------------------------------------------
INDEPENDENT MUSIC GROUP, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
<PAGE>
C O N T E N T S
Page
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-2
Statements of Operations F-3
Statements of Deficiency in Assets F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - 8
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders
Independent Music Group, Inc. and Subsidiaries
Redding, Connecticut
We have audited the accompanying consolidated balance sheet of Independent Music
Group, Inc. and Subsidiaries (a development stage company) as of May 31, 1999,
and the related consolidated statements of operations, deficiency in assets and
cash flows for the year ended May 31, 1999 and for the period from inception
(November 6, 1997) to May 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Independent Music
Group, Inc. and Subsidiaries as of May 31, 1999, and the results of its
operations and its cash flows for the year ended May 31, 1999, and for the
period from inception (November 6, 1997) to May 31, 1998, in conformity with
generally accepted accounting principles.
KAUFMAN, ROSSIN & CO.
Miami, Florida
June 7, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
INDEPENDENT MUSIC GROUP, INC. & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
MAY 31, 1999
===================================================================================================================================
<S> <C>
ASSETS
===================================================================================================================================
CASH AND CASH EQUIVALENTS $ 262,215
OTHER ASSETS 900
- -----------------------------------------------------------------------------------------------------------------------------------
$
===================================================================================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
===================================================================================================================================
CURRENT LIABILITIES
Note payable - stockholder $ 246,472
Accrued expenses (Note 2) 62,923
Distribution payable 50,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
DEFICIENCY IN ASSETS (NOTE 4)
Common stock, $.00005 par value; authorized 10,000,000
shares; issued and outstanding 9,636,475 shares 482
Additional paid-in capital 5,243
Deficit accumulated during the development stage ( 102,005)
- -----------------------------------------------------------------------------------------------------------------------------------
Total deficiency in assets ( 96,280)
- -----------------------------------------------------------------------------------------------------------------------------------
$ 263,115
===================================================================================================================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
INDEPENDENT MUSIC GROUP, INC. & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1999 AND FOR THE PERIOD
FROM INCEPTION (NOVEMBER 6, 1997) TO MAY 31, 1998
===================================================================================================================================
1999 1998
===================================================================================================================================
<S> <C> <C>
REVENUES:
Dividend income $ 10,046 $ 12,197
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
General and administrative 42,091 24,734
Interest 30,574 26,849
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses
- ------------------------------------------------------------------------------------------------------------------------------------
NET LOSS $ 62,619 $ 39,386
===================================================================================================================================
NET LOSS PER SHARE $ .006 $ .004
===================================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,636,475 9,636,475
===================================================================================================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
INDEPENDENT MUSIC GROUP, INC. & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF DEFICIENCY IN ASSETS
FOR THE YEAR ENDED MAY 31, 1999 AND FOR THE PERIOD FROM INCEPTION (NOVEMBER 6,
1997) TO MAY 31, 1998
====================================================================================================================================
Deficit
Common stock, $.00005 par value; Accumulated
10,000,000 shares authorized Additional During the
------------------------------ Paid-in Development
Transaction Date Shares Par Value Capital Stage Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of stock for cash ($.01 per share) 11/6/97 100,000 $ 5 $ 995 $ - $ 1,000
Net loss from inception (November 6, 1997) to May
31, 1998 - - - - ( 39,386) ( 39,386)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance May 31, 1998 - 100,000 5 995 ( 39,386) ( 38,386)
Acquisition of assets of Independent Music Group,
Inc. ($.006 per share) 4/26/99 9,536,475 477 54,248 - 54,725
Special distribution to shareholder 4/26/99 - - ( 50,000) - ( 50,000)
Net loss for the year ended May 31, 1999 - - - - ( 62,619) ( 62,619)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 9,636,475 $ 482 $ 5,243 ($ 102,005) ( $96,280)
====================================================================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
INDEPENDENT MUSIC GROUP, INC. & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MAY 31, 1999 AND FOR THE PERIOD
FROM INCEPTION (NOVEMBER 6, 1997) TO MAY 31, 1998
====================================================================================================================================
1999 1998
====================================================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ( $ 62,619) ( $ 39,386)
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Other assets 4,700 ( 5,600)
Accrued expenses 36,074 26,849
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjustments 40,774 21,249
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities ( 21,845) ( 18,137)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash balances of company acquired 54,725 -
Loans from (repayments to) stockholder, net ( 243,528) 490,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities ( 188,803) 490,000
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock - 1,000
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECEASE) IN CASH AND CASH EQUIVALENTS ( 210,648) 472,863
CASH AND CASH EQUIVALENTS - BEGINNING 472,863 -
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - ENDING $ 262,215 $ 472,863
====================================================================================================================================
Supplemental Disclosures:
- ------------------------------------------------------------------------------------------------------------------------------------
Interest paid $ - $ -
====================================================================================================================================
Income taxes paid $ - $ -
====================================================================================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
INDEPENDENT MUSIC GROUP, INC. & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Basis of Consolidation
The consolidated financial statements include the accounts of
Independent Music Group, Inc. (IMG) and its subsidiaries,
Independent Music Network, Inc. (IMN), Independent Music
Channel, Inc. (IMC) and Emerald City Records, Inc.
(collectively, "the Company"). All significant intercompany
balances and transactions have been eliminated in
consolidation.
Organization and Business Activity
IMN was incorporated in November 1997, under the laws of the
State of Delaware, to pursue the concept of broadcasting
amateur and professional music television videos on national
cable television. IMC, a Delaware Corporation, is intended to
be used to broadcast the videos, promote its programming and
create corporate brand recognition. Emerald City Records is
the company's proprietary record label.
On April 26, 1999, all of the outstanding stock of IMN was
acquired by IMG (formerly known as AVTR Systems, Inc.), a
non-operating public shell company. For accounting purposes,
the acquisition has been treated as an acquisition of the
assets of IMG by IMN and as a recapitalization of IMN. The
historical financial statements prior to April 26, 1999 are
those of IMN.
The business activity of the Company to date has primarily
consisted of development of a business plan and research
related to the broadcast and music industries.
The Company is considered to be in the development stage, and
the accompanying financial statements represent those of a
development stage company.
Cash and Cash Equivalents
Cash and cash equivalents consists of cash and all highly
liquid investments readily convertible to cash.
The Company, from time to time, maintains cash balances in
excess of federally insured limits.
Income Taxes
The Company accounts for income taxes according to Statement
of Financial Accounting Standards No. 109, which requires a
liability approach to calculating deferred income taxes.
F-6
<PAGE>
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Use of Estimates
The accounting and reporting policies of the Company are in
conformity with generally accepted accounting principles. The
presentation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the balance sheet date
and the reported amounts of revenues and expenses for the
period presented. Actual results could differ from those
estimates.
The Company has recorded a deferred tax asset of approximately
$312,000 at May 31, 1999 which is completely offset by a
valuation allowance. Realization of the deferred tax asset is
dependent on generating sufficient taxable income in the
future. The amount of deferred tax asset considered realizable
could change in the near term if estimates of future taxable
income are increased.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments"
requires that the Company disclose estimated fair values for
its financial instruments. The carrying value of Notes payable
- stockholder approximates fair value as the interest rate is
not significantly different from market rates available to the
Company.
Impact of the "Year 2000" Computer Issue
Because computers frequently use only two digits to recognize
years, on January 1, 2000, many computer systems, as well as
equipment that uses embedded computer chips, may be unable to
distinguish between the years 1900 and 2000. If not
remediated, this problem could create system errors and
failures resulting in the disruption of normal business
operations. In the event the Company fails to identify or
correct a material Year 2000 problem, there could be
disruptions in normal business operations, which could have a
material adverse effect on the Company's results of
operations, liquidity or financial condition. Further, there
may be some third parties, such as governmental agencies,
utilities, telecommunication companies, vendors, suppliers and
customers who may not be able to continue business with the
Company due to their own Year 2000 problems. Also, risks
associated with some foreign third parties may be greater
since there is general concern that some entities operating
outside the United States are not addressing Year 2000 issues
on a timely basis. There can be no assurance that any efforts
made will fully mitigate the effect of Year 2000 issues.
Net Loss per Share
Net loss per share is computed based on the weighted average
number of shares outstanding, restated to give effect to the
recapitalization.
F-7
<PAGE>
- --------------------------------------------------------------------------------
NOTE 2. NOTE PAYABLE - STOCKHOLDER
- --------------------------------------------------------------------------------
Note payable - stockholder at May 31, 1999, consisted of
amounts due to the majority stockholder and officer of the
Company. The note bears interest at 10%, is unsecured and due
on demand. Interest expense on the note amounted to $30,574
for the year ended May 31, 1999 and $26,849 for the period
from inception (November 6, 1997) to May 31, 1998. Unpaid
interest on the notes as of May 31, 1999 amounted to $57,423
and is included in accrued expenses on the accompanying
balance sheet.
The Company is dependent upon its majority shareholder for
continued financing.
- --------------------------------------------------------------------------------
NOTE 3. INCOME TAXES
- --------------------------------------------------------------------------------
The Company has net operating loss carryforwards of
approximately $830,000 for income tax purposes. Approximately
$728,000 was generated by IMG prior to the acquisition of IMN
and expire from 2001 through 2006. The remaining net operating
losses begin to expire in 2018.
Deferred income tax assets of approximately $312,000,
comprised of net operating loss carryforwards, are completely
offset by a valuation allowance.
The difference between the tax provisions and the amounts
computed by applying the federal statutory tax rates to the
losses before income taxes are due to increases in the
deferred tax asset valuation allowances.
- --------------------------------------------------------------------------------
NOTE 4. COMMON STOCK
- --------------------------------------------------------------------------------
As of June 7, 1999, the Company had not issued stock
certificates issuable in connection with the acquisition of
the stock of IMN, however, as the Company is obligated to
issue the shares, they are deemed to be issued and outstanding
for financial statement purposes.
F-8
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the Registrant caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
INDEPENDENT MUSIC GROUP, INC.
Date: June 18, 1999 By: /s/ James Fallacaro
--- --------------------------------------------
James Fallacaro, President
Date: June 18, 1999 By: /s/ Corinne Fallacaro
--- --------------------------------------------
Corinne Fallacaro, Secretary and Treasurer
Date: June 18, 1999 By: /s/ Anthony Escamilla
---- --------------------------------------------
Anthony Escamilla, Vice President
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibits Description of Document
- -------- -----------------------
3.1 Certificate of Incorporation of AVTR Systems, Inc.
3.2 Certificate of Amendment to the Certificate of Incorporation of
AVTR Systems, Inc.
3.3 Certificate of Amendment to the Certificate of Incorporation of
AVTR Systems, Inc.
3.4 Certificate of Amendment to the Certificate of Incorporation of
AVTR Systems, Inc.
3.5 Bylaws of AVTR Systems, Inc.
10.1 Stock Purchase Agreement between Independent Music Group, Inc.
and James Fallacaro dated April 26, 1999.
23 Subsidiaries.
27 Financial Data Schedule.
CERTIFICATE OF INCORPORATION
OF
AVTR SYSTEMS, INC.
1. Name. The name of the Corporation is
AVTR SYSTEMS, INC.
2. Principal Office and Registered Agent. The location of the
principal office of the Corporation in the State of Delaware is at 410 South
State Street, City of Dover, County of Kent. The registered agent at this
address is Corporate Filing Service, Inc.
3. Purposes. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
4. Capital Stock. The Corporation shall have authority to issue a
total of 200 shares Of capital stock, without par value, all of which shares
shall be one class and shall be designated as common stock.
5. Incorporator. The name and mailing address of the incorporator
is as follows:
Herbert L. Cohen, Esq.
104 East 40th Street
Suite 602
New York, New York 10016
1
<PAGE>
6. Number and Classes of Directors. The number of directors of the
Corporation shall be fixed from time to time by its by-laws and may be increased
or decreased as therein provided.
7. Duration. The Corporation is to have perpetual existence.
8. Powers of Board of Directors. In furtherance and not in
limitation of the powers conferred by statute, the board of directors is
expressly authorized:
To make, alter, or repeal the by-laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created.
By a majority of the whole board, to designate one or more
committees, such committees to consist of one or more of the directors of the
Corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. The by-laws may provide that in the absence or
disqualification of a member of a
2
<PAGE>
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
or in the by-laws of the Corporation, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
by-laws of the Corporation; and, unless the resolution or by-laws expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified
3
<PAGE>
by the vote of the holders of a majority of the, stock of the Corporation which
is represented in person or by proxy at such meeting and entitled to vote
thereat (provided that a lawful quorum of stockholders be there represented in
person or by proxy) shall be valid and as binding upon tire Corporation and upon
all the stockholders as though it had been approved or ratified by every
stockholder of the Corporation. whether or not the contract or act would
otherwise be open to legal attack because of directors' interest, or for any
other reason.
When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all of the property and
assets of the Corporation including its good will and its corporate franchises,
upon such terms and conditions and for such consideration, which may consist in
whole or in part of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as its board of directors
shall deem expedient and for the best interests of the Corporation.
In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation; subject, nevertheless, to the provisions of the
statutes of Delaware, of this certificate, and to any by-laws from time to time
made by the stockholders; provided, however,
4
<PAGE>
that no by-laws so made shall invalidate any prior act of the directors which
would have been valid if such by-law had not been made.
9. Place of Meetings. Meetings of the stockholders may be held
within or without the State of Delaware as the by-laws may provide. The books of
the Corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the board of directors or in the by-laws of the Corporation.
Elections of directors need not be by written ballot unless the by-laws of the
Corporation shall so provide.
10. Right to Amend. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
11. Indemnification of Officers, Directors, Employees and Agents.
The Corporation shall, to the full extent permitted by Section 145 of the
General Corporation Law of the State of Delaware as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
12. Compromise or Arrangement. Whenever a compromise
5
<PAGE>
or arrangement is proposed between this Corporation and its creditors or any
class of them and/or between this Corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of Delaware, may,
on application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for this Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or a class of stockholders of
this Corporation, as the case may be, to be summoned in such manner as the said
court directs. If the majority in number representing three-fourths in value of
the creditors or class of creditors, and/or of the stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said reorganization shall, if sanctioned by the court to which
the said application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
THE UNDERSIGNED, being the sole incorporator hereinbefore named,
for the purpose of forming a corporation pursuant
6
<PAGE>
to the General Corporation Law of the State of Delaware, does make this
certificate, hereby declaring and certifying that this is his act and deed and
the facts herein stated are true and accordingly has caused this certificate to
be executed on its behalf this 21st day of February, 1986.
/s/ Herbert L. Cohen
---------------------------
SOLE INCORPORATOR
7
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF AVTR SYSTEMS, INC.
AVTR SYSTEMS, INC., a corporation organized under the General
Corporation Law of the State of Delaware, does hereby Certify:
1. The name of the Corporation is AVTR Systems, Inc.
2. The Articles of Incorporation of the Corporation was filed by the Secretary
of State of Delaware on March 10, 1986, and recorded in the office of the
Recorder of Deeds of Dover County on March 12, 1986.
3. Article Fourth of the Corporation's Certificate of Incorporation is hereby
amended to provide as follows:
"The aggregate number of shares which the Corporation shall
have the authority to issue is 10,000,000 shares of Common
Stock of the par value of $.00005 per share."
4. the foregoing amendment was approved by the respective unanimous consent of
the shareholders and the directors of the Corporation.
1
<PAGE>
IN WITNESS WHEREOF, said AVTR SYSTEMS, INC. has its
corporate seal to be hereunto affixed and this Certificate to be
signed by James Fallacaro, and its Secretary, Herbert L. Cohen this
17th day of June, 1986.
By: /s/ JAMES FALLACARO,
----------------------
JAMES FALLACARO,
President
Attest:
By: /s/ HERBERT L. COHEN
------------------------
HERBERT L. COHEN,
Secretary
2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
AVTR SYSTEMS, INC.
AVTR Systems, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: By the unanimous consent of the directors of the Corporation a
resolution was duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and seeking the consent of the majority of
the shareholders of said corporation to adopt such amendment to the
Certificate of Incorporation, pursuant to Sections 228 and 242 of the
Delaware General Corporation Law. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that ARTICLE IV of the Certificate of Incorporation be
amended to include the following provision:
Effective upon the Corporation filing an Amendment to the Certificate
of Incorporation ("Effective Date") in the office of the Secretary of
State of Delaware, each forty (40) shares of Common Stock, $.00005 par
value per share, outstanding on the Effective Date will be changed into
one (1) fully paid and nonassessable share of Common Stock, $.00005 par
value per share; and that after the Effective Date, each holder of
record of one or more certificates representing shares of the old
Common Stock shall be entitled to receive one or more certificates
representing the proportionate number of shares of new Common Stock on
surrender of a stockholder's old certificates for cancellation. If a
stockholder shall be entitled to a number of new shares of Common Stock
which is not a whole number, then the number of new shares of Common
Stock issued to the Stockholder shall be rounded up to the nearest
whole number in lieu of such fractional share.
"The aggregate number of shares which the Corporation shall have the
authority to issue is 10,000,000 shares of Common Stock, par value
$.00005 per share."
1
<PAGE>
SECOND: that a majority of the Stockholders have given their written
consent to the above amendments in lieu of a meeting in accordance with
the provisions of Section 228 of the Delaware General Corporation Law;
THIRD: that the aforesaid amendment shall be duly adopted in
accordance with the applicable Section 242 and 228 of the Delaware
General Corporation Law.
FOURTH: that the capital of the Corporation shall not be reduced under
or by reason of said amendment.
FIFTH: that this amendment shall become effective upon its filing in
the office of the Secretary of State of Delaware, and the record date
being March 19, 1999 for the one (1) for forty (40) (1:40) reverse
stock split of the Company's issued and outstanding shares of Common
Stock.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by its President and
Secretary, this 12 day of March, 1999.
AVTR SYSTEMS, INC.
Attest: /s/ Corinne Salzman BY: /s/ James Fallacaro
--------------------------- -------------------------
Corinne Salzman, Secretary James Fallacaro, President
2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
AVTR SYSTEMS, INC.
AVTR Systems, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: By the unanimous consent of the directors of the Corporation a
resolution was duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and seeking the consent of the majority of
the stockholders of said corporation to adopt such amendment to the
Certificate of Incorporation, pursuant to Sections 228 and 242 of the
Delaware General Corporation Law. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that ARTICLE I of the Certificate of Incorporation be amended
as follows:
The name of the Corporation is Independent Music Group, Inc.
SECOND: that a majority of the Stockholders have given their written
consent to the above amendments in lieu of a meeting in accordance with
the provisions of Section 228 of the Delaware General Corporation Law;
THIRD: that the aforesaid amendment shall be duly adopted in
accordance with the applicable Section 242 and 228 of the Delaware
General Corporation Law.
FOURTH: that this amendment shall become effective upon its filing in
the office of the Secretary of State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by its President and
Secretary, this 9th day of April, 1999.
AVTR SYSTEMS, INC.
Attest: /s/ Corinne Salzman BY: /s/ James Fallacaro
--------------------------- -------------------------
Corinne Salzman, Secretary James Fallacaro, President
BY-LAWS OF
AVTR SYSTEMS, INC.
(A Delaware corporation)
-----------
ARTICLE I
Meetings of Stockholders
Section 1. Annual Meeting. The annual meeting of the stock-holders of AVTR
Systems, Inc. (hereinafter called the "Corporation") for the election of
directors and for the transaction of such other business as may come before the
meeting shall be held in the fifth month following the close of the
Corporation's fiscal year, at such date and time as shall be designated by the
Board or Chairman of the Board or the President, or at such other date and time
as the Board shall designate.
Section 2. Special Meetings. Special meetings of the stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board or the
Chairman of the Board or the President. The Board of Directors shall call a
special meeting of the stockholders when requested in writing by stockholders
holding not less than 50% of the outstanding stock of the corporation; such
written request shall state the object of the meeting proposed to be held.
1
<PAGE>
Section 3. Notice of Meetings. Notice of the place, date and time of the holding
of each annual and special meeting of the stockholders and, in the case of a
special meeting, the purpose or purposes thereof, shall be given personally or
by mail in a postage prepaid envelope to each stockholder entitled to vote at
such meeting, not less than ten nor more than sixty lays before the date of such
meeting, and, if mailed, it shall be directed to such stockholder at his address
as it appears on the records of the Corporation, unless he shall have filed with
the Secretary of the Corporation, a written request that notices to him be
mailed to some other address, in which case it shall be directed to him at such
other address. If mailed such notice shall be deemed to be delivered when
deposited in United States mail so addressed with postage thereon prepaid.
notice of any meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy and shall not,
at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy. Unless the Board shall fix after the adjournment a new record date for an
adjourned meeting, notice of such adjourned meeting need not be given if the
time and place to which the meeting shall be adjourned were announced at the
meeting at which the adjournment is
-2-
<PAGE>
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 4. Place of Meetings. Meetings of the stockholders may be held at such
place, within or without the state of incorporation, as the Board or other
officer calling the same shall specify in the notice of such meeting, or in a
duly executed waiver of notice thereof.
Section 5. Quorum. At all meetings of the stockholders the holders of a majority
of the votes of the shares of stock of the Corporation issued and outstanding
and entitled to vote shall be present in person or by proxy to constitute a
quorum for the transaction of any business, except when stockholders are
required to vote be class, in which event a majority of the issued and
outstanding shares of the appropriate class shall be present in person or by
proxy, or except as otherwise provided by statute or in the Certificate of
Incorporation. In the absence of a quorum, the holders of a majority of the
votes of the shares of stock present in person or by proxy and entitled to vote,
or if no stockholder entitled to vote is present, then any officer of the
Corporation may adjourn
-3-
<PAGE>
the meeting from time to time. At any such adjourned meeting at which a quorum
may be present any business may be transacted which might have been transacted
at the meeting as originally called.
Section 6. Organization. At each meeting of the stockholders the Chairman of the
Board, or in his absence or inability to, act, the President, or in the absence
or inability to act of the Chairman of the Board and the President, a
Vice-President, or in the absence of all the foregoing, any person chosen by a
majority of those stockholders present, shall act as chairman of the meeting.
The Secretary, or, in his absence or inability to act, the Assistant Secretary
or any person appointed by the chairman of the meeting, shall act as secretary
of the meeting and keep the minutes thereof.
Section 7. order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute, the Certificate of
Incorporation, or any certificate duly filed in the office of the Department of
State of the state of incorporation, each holder of record of shares of stock of
the Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in his name on
the record of stockholders of the Corporation on the date fixed by the Board as
the
-4-
<PAGE>
record date for the determination of the stockholders who shall be entitled to
notice of and to vote at such meeting; or if such record date shall not have
been so fixed, then at the close of business on the day next preceding the day
on. which the meeting is 'held; or each stockholder entitled to vote at any
meeting of stockholders may authorize another person or persons to act for him
by a proxy signed by such stockholder or his attorney-in-fact. Any such proxy
shall be delivered to the secretary of such meeting at or prior to the time
designated in the order of business for so delivering such proxies. No proxy
shall be valid after the expiration of three years from the date thereof, unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the stockholder executing it, except in those cases where an irrevocable
proxy is permitted by law. Except as otherwise provided by statute, these
By-Laws, or the Certificate of Incorporation, any corporate action to be taken
by vote of the stockholders shall be authorized by a majority of the total
votes, or when stockholders are required to vote by class by a majority of the
votes of the appropriate class, cast at a meeting of stockholders by the holders
of shares present in person or represented by proxy and entitled to vote on such
action. Unless required by statute, or determined by the chairman of the meeting
"to be advisable, the vote on any question need not be by written ballot. On a
vote by
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written ballot, each ballot shall be signed by the stockholder voting, or by his
proxy, if there by such proxy, and shall state the number of shares voted.
Section 9. List of Stockholders. The officer who has charge of the stock ledger
of the Corporation, or the transfer agent of the Corporation's stock, if there
be one then acting, shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, at the place where the meeting is to be held, or at the
office of the transfer agent. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to a act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and
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on the request of any stockholder entitled to vote thereat shall appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. To the -extent permitted
by law, any action required to be taken at a meeting of stockholders may be
taken without prior notice and without a vote, if a consent in writing to such
action shall be signed by holders of outstanding stock having not
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less than the minimum number of votes that would be necessary to authorize such
action at a meeting at which all shares entitled to vote were present and voted,
provided that if such action is taken by less than unanimous consent written
notice of the action is given to all stockholders who have not consented in
writing.
ARTICLE II
Board of Directors
Section 1. General Powers. The business and affairs of the Corporation shall be
managed by the Board. The Board may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by statute or
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 2. Number, Qualifications, Election and Term of office. The number of
directors of the Corporation shall be fixed from time to time by the vote of a
majority of the entire Board then in office and the number thereof may
thereafter by like vote be increased or decrease to such greater or lesser
number (not less than three) as may be so provided, subject to the provisions of
Section 11 of this Article II. All of the directors shall be of full age and
need not be stockholders. Except as otherwise provided by statute or these
By-Laws, the directors shall be elected at
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the annual meeting of the stockholders for the election of directors at which a
quorum is present, and the persons receiving a plurality of the votes cast at
such meeting shall be elected. Each director shall hold office until the next
annual meeting of the stockholders and until his successor shall have been duly
elected and qualified, or until his death, or until he shall have resigned, or
have been removed, as hereinafter provided in these By-Laws, or as otherwise
provided by statute or the Articles of Incorporation.
Section 3. Place of Meetings. Meetings of the Board may be held at such place,
within or without the state of incorporation, as the Board may from time to time
determine or as shall be specified in the notice of waiver of notice of such
meeting.
Section 4. Annual Meeting. The Board shall meet for the purpose of organization,
the election of officers and the transaction of other business, as soon as
practicable after each annual meeting of the stockholders, on the same day and
at the same place where such annual meeting shall be held. Notice of such
meeting need not be given. Such meeting may be held at any other time or place
(within or without the state of incorporation) which shall be specified in a
notice thereof given as hereinafter provided in Section 7 of this Article II.
Section 5. Regular Meetings. Regular meetings of the Board shall be held at such
time and place as the Board may from time to time determine. If any day fixed
for a regular
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meeting shall be a legal holiday at the place where the meeting is to be held,
then the meeting which would otherwise be held on that day shall be held at the
same 'hour on the next succeeding business day. Notice of regular meetings of
the Board need not be given except as otherwise required by statute or these
By-Laws.
Section 6. Special Meetings. Special meetings of the Board may be called by two
or more directors of the Corporation or by the Chairman of the Board or the
President.
Section 7. Notice of Meetings. Notice of each special meeting of the Board (and
of each regular meeting for which notice shall be required) shall be given by
the Secretary as hereinafter provided in this Section 7, in which notice shall
be stated at the time and place (within or without the state of incorporation)
of the meeting. Notice of each such meeting shall be delivered to each director
either personally or by telephone, telegraph, cable or wireless, at least
twenty-four hours before the time at which such meeting is to be held or by
first-class mail, postage prepaid addressed to him at his residence, or usual
place of business, at least three days before the day on which such meeting is
to be held if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail. Notice of any such meeting need not be
given to any director who shall, either before or after the meeting, submit a
siqned waiver of notice
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or who shall attend such meeting without protesting, prior to or at its
commencement, the lack of notice to him. Except as otherwise specifically
required by these By-Laws, a notice of .waiver of notice of any regular or
special meeting need not state the purposes of such meeting.
Section 8. Quorum and Manner of Acting. A majority of the entire Board shall be
present in person at any meeting of the Board in order to constitute a quorum
for the transaction of business at such meeting, and, except as otherwise
expressly required by statute or the Certificate of Incorporation, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board. Any one or more members of the Board or any
committee thereof may participate in a meeting of the Board or such committee by
means of a conference telephone or similar communications equipment allowing all
participants in the meeting to hear each other at the same time and
participation by such means shall constitute presence in person at a meeting. In
the absence of a quorum at any meeting of the Board, a majority of the directors
present thereat, or if no director be present, the Secretary, may adjourn such
meeting to another time and place, or such meeting, unless it be the annual
meeting of the Board, need not be held. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally
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called. Except as provide in Article III of these By-Laws, the directors shall
act only as a Board and the individual directors shall have no power as such.
Section 9. organization. At each meeting of the Board, the Chairman of the Board
(or, in his absence or inability to act, the President, or, in his absence or
inability to act, another director chosen by a majority of the directors
present) shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the chairman)
shall act as secretary of the meeting and keep the minutes thereof.
Section 10. Resignations. Any director of the Corporation may resign at any time
by giving written notice of 'his resignation to the Board or Chairman of the
Board or the President or the Secretary. Any such resignation shall take effect
at the time specified therein or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 11. Vacancies. Vacancies, including newly created directorships, may be
filled by a majority of the directors then in office, though less than a quorum,
or by a sole remaining director, and the directors so chosen shall hold office
until their successors are duly elected and shall
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qualify. If there are no directors in office then an election of directors may
be held in the manner provided by statute.
Section 12. Removal of Directors. Except as otherwise provided in the
Certificate of Incorporation or in these By-Laws, any director may be removed,
either with or without cause, at any time, by the affirmative vote of a majority
of the votes of the issued and outstanding shares of stock entitled to vote for
the election of the stockholders called and held for that purpose, or by a
majority vote of the Board of Directors at a meeting called for such purpose,
and the vacancy in the Board caused by any such removal may be filled by such
stockholders or directors, as the case may be, at such meeting, and if the
stockholders shall fail to fill such vacancy, such vacancy shall be filled in
the manner as provided by these By-Laws.
Section 13. Compensation. The Board shall have authority to fix the
compensation, including fees and reimbursement of expenses, of directors for
services to the Corporation in any capacity, provided no such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 14. Action by the Board. To the extent permitted under the laws of the
state of incorporation, any action required or permitted to be taken at any
meeting of the Board or of any committee thereof may be taken without a meeting
if
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all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
ARTICLE III
Executive and Other Committees
Section 1. Executive and other Committees. The Board may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
Committee. Any such committee, to the extent provided in the resolution, shall
have and may exercise the powers of the Board in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; provided, however, that in the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not be or they constitute a quorum, may unanimously appoint
another member of the Board to act the meeting in the place of any such absent
or disqualified member. Each committee shall keep minutes of its proceedings and
shall report such minutes to the Board
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when required. All such proceedings shall be subject to revision or alteration
by the Board, provided, however, that third parties shall not be prejudiced by
such revision or alteration.
Section 2. General. A majority of any committee may determine its action and fix
the time and place of its meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the committee in the
manner provided for in Article III, Section 7. The Board shall have the power at
any time to fill vacancies in, to change the membership of, or to dissolve any
such committee. Any such committee, to the extent provided in the action of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger, consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution or amending the By-Laws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
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ARTICLE IV
officers
Section 1. Number and Qualifications. The officers of the Corporation shall
include the Chairman of the Board, the President, one or more Vice Presidents
(one or more of whom may be designated Executive Vice President or Senior Vice
President), the Treasurer, Controller, and the Secretary. Any two or more
offices may be held by the same person. Such officers shall be elected from time
to time by the Board, each to hold office until the meeting of the Board
following the next annual meeting of the stockholders, or until his successor
shall have been duly elected and shall have qualified, or until his death, or
until he shall have resigned, or have been removed, as hereinafter provided in
these By-Laws. The Board may from time to time elect a Vice Chairman of the
Board, and the Board may from time to time elect, or the Chairman of the Board,
or the President may appoint, such other officers (including one or more
Assistant Vice Presidents, Assistant Secretaries, and Assistant Treasurers), and
such agents, as may be necessary or desirable for the business of the
Corporation. Such other officers and agents shall have such duties and shall
hold their offices for such terms as may be prescribed by the Board or by the
appointing authority.
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Section 2. Resignation. Any officer of the Corporation may resign at any time by
giving written notice of his resignation to the Board, the Chairman of the
Board, the President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, immediately upon its receipt; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3. Removal. Any officer or agent of the Corporation may be removed,
either with or without cause, at any time, by the vote of the majority of the
entire Board at any meeting of the Board or, except in the case of an officer or
agent elected or appointed by the Board, by the Chairman of the Board or the
President. Such removal shall be without prejudice to the contractual rights, if
any, of the person so removed.
Section 4. Vacancies. A vacancy in any office, whether. arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office which shall be vacant, in the manner prescribed in
these ByLaws for the regular election or appointment to such office.
Section 5. a. The Chairman of the Board. The Chairman of the Board, if one be
elected shall be the chief executive officer of the Corporation and shall have
the general active
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Section 2. Resignation. Any officer of the Corporation may resign at any time by
giving written notice of his resignation to the Board, the Chairman of the
Board, the President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, immediately upon its receipt; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3. Removal. Any officer or agent of the Corporation may be removed,
either with or without cause, at any time, by the vote of the majority of the
entire Board at any meeting of the Board or, except in the case of an officer or
agent elected or appointed by the Board, by the Chairman of the Board or the
President. Such removal shall be without prejudice to the contractual rights, if
any, of the person so removed.
Section 4. Vacancies. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office which shall be vacant, in the manner prescribed in
these ByLaws for the regular election or appointment to such office.
Section 5. a. The Chairman of the Board. The Chairman of the Board, if one be
elected, shall be the chief executive officer of the Corporation and shall have
the general active
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management of the business of the Corporation and general and active supervision
and direction over the other officers, agents and employees and shall see that
their duties are properly performed; subject, however, to the regulation of the
Board of Directors. He shall, if present, preside at each meeting of the
stockholders and of the Board and shall be an ex officio member of all
committees of the Board. He shall perform all duties incident to the office of
Chairman of the Board and chief executive officer and such other duties as may
from time to time be assigned to him by the Board.
b. The Vice Chairman of the Board. The Vice Chairman of the Board, if
one be elected, shall have such powers and perform all such duties as from time
to time may be assigned to him by the Board or the Chairman of the Board and,
unless otherwise provided by the Board, shall in the case of the absence or
inability to act of the Chairman of the Board, perform the duties of the
Chairman of the Board and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chairman of the Board.
Section 6. The President. The President shall be the chief operating officer of
the Corporation and shall have (general and active supervision and direction
over the business and affairs of the Corporation and over its several officers,
subject, however, to the direction of the Chairman of the Board and the control
of the Board. If no Chairman of the
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Board is elected, or at the request of the Chairman of the Board, or in the case
of his absence or inability to act, unless there be a Vice Chairman of the
Board so designated to act, the President shall perform the duties of the
Chairman of the Board and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chairman of the Board. He shall
perform all duties incident to the office of President and such other duties as
from time to time may be assigned to him by the Board or the Chairman of the
Board.
Section 7. Vice Presidents. Each Executive Vice President, each Senior Vice
President and each Vice President shall have such powers and perform all such
duties as from time to time may be assigned to him by the Board, the Chairman of
the Board, or the President. They shall, in the order of their seniority, have
the power and may perform the duties of the Chairman of the Board and the
President.
Section 8. The Treasurer. The Treasurer shall be the chief financial officer of
the Corporation and shall exercise general supervision over the receipt, custody
and disbursement of Corporate funds. He shall have such further powers and
duties as may be conferred upon him from time to time by the President or the
Board of Directors. He shall perform the duties of controller if no one is
elected to that office.
Section 9. The Controller. The Controller shall be the chief accounting officer
of the Corporation and shall maintain adequate records of all assets,
liabilities and transactions
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of the Corporation; 'he shall establish and maintain internal accounting control
and, in cooperation with the independent public accountants selected by the
Board, shall supervise internal auditing. He shall have such further powers and
duties as may be conferred upon him from time to time by the President or the
Board of Directors.
Section 10. The Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of
the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation
(unless the seal be a facsimile, as hereinafter provided) and affix
and attest the seal to all other documents to be executed on behalf of
the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be 'kept and filed are
properly kept and filed; and
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(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned
to him by the Board, the Chairman of the Board, or the President.
Section 11. Officer's Bonds or Other Security. if required by the Board, any
officer of the Corporation shall give a bond or other security for the faithful
performance of his duties, in such amount and with such surety or sureties as
the Board may require.
Section 12. Compensation. The compensation of the officers of the Corporation
for their services as such officers shall be fixed from time to time by the
Board; provided, however, that the Board may delegate to the Chairman of the
Board or the President the power to fix the compensation of officers and agents
appointed by the Chairman of the Board or the President, as the case may be. An
officer of the Corporation shall not be prevented from receiving compensation by
reason of the fact that he is also a director of the Corporation, but any such
officer who shall also be a director shall not have any vote in the
determination of the amount of compensation paid to him.
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ARTICLE V
Indemnification; Insurance
Section 1. Indemnification. The Corporation shall, to the fullest extent
permitted by the laws of the state of incorporation, indemnify any and all
persons whom it shall have power to indemnify against any and all of the costs,
expenses, liabilities or other matters incurred by them by reason of having been
officers or directors of the Corporation, any subsidiary of the Corporation or
of any other corporation for which he acted as officer or director at the
request of the Corporation.
Section 2. Insurance. The Board of Directors of the Corporation may, in its
discretion, authorize the Corporation to purchase and maintain insurance on
behalf of any person who 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 any liability asserted against him or
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
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ARTICLE VI
Contracts, Checks, Drafts, Bank Account, Etc.
Section 1. Execution of Contracts. Except as otherwise required by statute, the
Articles of Incorporation or these By-Laws, any contracts or other instruments
may be executed and delivered in the name and on behalf of the Corporation by
such officers or officers (including any assistant officer) of the Corporation
as the Board may from time to time direct. Such authority may be general or
confined to specific instances as the Board may determine. Unless authorized by
the Board or expressly permitted by these By-Laws, an officer or agent or
employee shall not have any power or authority to bind the Corporation by any
contract or engagement or to pledge its credit or to render it peculiarly
liable for any purpose or to any amount.
Section 2. Loans. Unless the Board shall otherwise determine, either (a) the
Chairman of the Board, the Vice Chairman of the Board or the President, singly,
or (b) a vice President, together with the Treasurer, may effect loans and
advances at any time for the Corporation or guarantee any loans and advances to
any subsidiary of the Corporation, from any bank, trust company or other
institution, or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
certificates or evidences of indebtedness of the
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Corporation, or guarantee of indebtedness of subsidiaries of the Corporation,
but no officer or officers shall mortgage, pledge, hypothecate or transfer any
securities or other property of the Corporation, except when authorized by---the
Board.
Section 3. Check, Drafts, etc. All checks, drafts, bills of exchange or other
orders for the payment of money out of the funds of the Corporation, and all
notes or other evidences of indebtedness of the Corporation, shall be signed in
the name and on behalf of the Corporation by such persons and in such manner as
shall from time to time be authorized by the Board.
Section 4. Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board may from time to time
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be delegated by the
Board. For the purpose of deposit and for the purpose of collection for the
account of the Corporation, checks, drafts and other orders for the payment of
money which are payable to the order of the Corporation may be endorsed,
assigned and delivered by any officer or agent of the Corporation, or in such
manner as the Board may determine by resolution.
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Section 5. General and Special Bank Accounts. The Board may from time to time
authorize the opening and keeping of general and special bank accounts with such
banks, trust companies or other depositories as the Board may designate or as
may be designated by any officer or officers of the Corporation to whom such
power of designation may from time to time be delegated by the Board. The Board
may make such special rules and regulations with respect to such bank accounts,
not inconsistent with the provisions of these By-Laws, as it may deem expedient.
Section 6. Proxies in Respect of Securities of other Corporations. Unless
otherwise provided by resolution adopted by the Board of Directors, the Chairman
of the Board, the President, or a Vice President may from time to time appoint
an attorney or attorneys or agent or agents, of the Corporation, in the name and
on behalf of the Corporation to cast the votes which the Corporation may be
entitled to cast as the holder of stock or other securities in any other
securities of such other corporation, or to consent in writing, in the name of
the Corporation as such holder, to any action by such other corporation, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed in the
name and on behalf of the Corporation oration and under its corporate seal, or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
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ARTICLE VII
Shares, Etc.
Section 1. Stock Certificates. Each holder of shares of stock of the Corporation
shall be entitled to have a certificate, in such form as shall be approved by
the Board, certifying the number of shares of the Corporation owned by him. The
certificates representing shares of stock shall be signed in the name of the
Corporation by the Chairman of the Board of the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and sealed with the seal of the Corporation (which seal may be
facsimile, engraved or printed), provided, however, that where any such
certificate is countersigned by a transfer agent other than the Corporation or
its employee, or is registered by a registrar other than the Corporation or one
of its employees, the signature of the officers of the Corporation upon such
certificates may be facsimiles, engraved or printed. In case any officer who
shall have signed or whose facsimile signature has been placed upon such
certificates shall have ceased to be such officer before such certificates shall
be issued, they may nevertheless be issued by the Corporation with the same
effect as if such officer were still in office at the date of their issue.
Section 2. Books of Account and Record of Stockholders.
The books and records of the Corporation may be kept at such
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places within or without the state of incorporation as the Board of Directors
may from time to time determine. The stock record books and the blank stock
certificate books shall be kept by the Secretary or by any other officer or
agent designated by the Board of Directors.
Section 3. Transfer of Shares. Transfers of shares of stock of the Corporation
shall be made on the stock records of the Corporation only upon authorization by
the registered holder thereof, or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates for such
shares properly endorsed or accompanied by a duly executed stock transfer power
and the payment of all taxes thereon. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person in
whose name any share or shares stand on the record of stockholders as the owner
of such share or shares for all purposes, including, without limitation, the
rights to receive dividends or other distributions, and to vote as such owner,
and the Corporation may hold any such stockholder of record liable for calls and
assessments and the Corporation shall not be bound to recognize any equitable or
legal claim to or interest in any such share or shares on the part of any other
person whether or not it shall have express or other notice thereof. Whenever
any
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transfers of shares shall be made for collateral security and not absolutely,
and both the transferor and the transferee request the Corporation to do so,
such fact shall be stated in the entry of the transfer.
Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost, stolen, or destroyed or which shall have been
mutilated, and the Board may, in its descretion, require such owner or his legal
representative to give the Corporation a bond in such sum, limited or unlimited,
and in such form and with such surety or sureties as the Board
in its absolute discretion shall determine, to indemnify the
-29-
<PAGE>
Corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate, or the issuance of
a new certificate. Anything herein to the contrary notwithstanding, the Board,
in its absolute discretion, may refuse to issue any such new certificate, except
pursuant to legal proceedings under the laws of the state of incorporation.
Section 6. Fixing of Record Date. In order that the Corporation may determine
the stockholders entitled to notice of, or to vote at, any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of, or to vote at, a
meeting of stockholders shall apply to any adjournment of the meeting. provided,
however, that the Board may fix a new record date for the adjourned meeting.
-30-
<PAGE>
ARTICLE VIII
offices
Section 1. Principal or Registered office. The principal registered office of
the Corporation shall be at such place as may be specified in the Certificate of
Incorporation of the Corporation or other certificate filed pursuant to law, or
if none by so specified, at such place as may from time to time be fixed by the
Board.
Section 2. other offices. The Corporation also may have an office or offices
other than said principal or registered office, at such place or places either
within or without the state of incorporation.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be determined by the Board.
ARTICLE X
Seal
The Board shall provide a corporate seal which shall contain the name
of the CorporAtion, the words "Corporate Seal" and the year and state of
incorporation.
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<PAGE>
ARTICLE XI
Dividends, Reserves
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provision of the Certificate of Incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Reserves. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE XII
Amendments
Section 1. Stockholders. These By-Laws may be amended or repealed, or new
By-Laws may be adopted, at any annual or special meeting of the stockholders, by
a majority of the
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<PAGE>
total votes of the stockholders or when stockholders are required to vote by
class by a majority of the appropriate class, in person or represented by proxy
and entitled to vote on such action; provided, however, that the notice of such
meeting shall have been given as provided in these By-Laws, which notice shall
mention that amendment or repeal of these By-Laws, or the adoption of new
By-Laws, is one of the purposes of such meeting.
Section 2. Board of Directors. These By-Laws may also be amended or repealed or
new By-Laws may be adopted, by the Board at any meeting thereof; provided,
however, that notice of such meeting shall have been given as provided in these
By-Laws, which notice shall mention that amendment or repeal of the By-Laws, or
the adoption of new By-Laws, is one of the purposes of such meetings. By-Laws
adopted by the Board may be amended or repealed by the stockholders as provided
in Section I of this Article XII.
ARTICLE XIII
Miscellaneous
Section 1. Interested Directors. No contract or other transaction between the
Corporation and any other corporation shall be affected and invalidated by the
fact that any one or more of the Directors of the Corporation is or are
interested in or is a Director or officer or are Directors or officers
-33-
<PAGE>
of such other corporation, and any Director or Directors, individually or
jointly, may be a party or parties to or may be interested in any contract or
transaction of the Corporation or in which the Corporation is interested; and no
contract, act or transaction of the Corporation with any person or persons, firm
or corporation shall be affected or invalidated by the fact that any Director or
Directors of the Corporation is a party or are parties to or interested in such
contract, act or transaction, or in any way connected with such person or
persons, firms or associations, and each and every person who may become a
Director of the Corporation is hereby relieved from any liability that might
otherwise exist from contracting with the corporation for the benefit of
himself, any firm, association or corporation in which he may be in anyway
interested.
Section 2. Ratification. Any transaction questioned in any stockholders'
derivative suit on the ground of lack of authority, defective or irregular
execution, adverse interest of director, officer or stockholder, nondisclosure,
miscomputation, or the application of improper principles or practices of
accounting may be ratified before or after judgment, by the Board of Directors
or by the stockholders in case less than a quorum of Directors are qualified,
and, @if so ratified, shall have the same force and effect as if the questioned
transaction had been originally duly authorized,
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<PAGE>
and said ratification shall be binding upon the Corporation and its
stockholders, and shall constitute a bar to any claim or execution of any
judgment in respect of such questioned transaction.
Master III
-35-
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made this 26 day of
April 1999 (the "Closing Date") between James Fallacaro (the "Seller"), and
Independent Music Group, Inc.(the "Purchaser").
W I T N E S S E T H :
WHEREAS, Independent Music Channel, Inc. (the "Company") has 1,000
shares of common stock, par value $.00001 per share (the "Common Stock")
authorized; and
WHEREAS, Seller owns either directly or beneficially 1,000 shares of
the Company's Common Stock which constitutes all of the Company's issued and
outstanding stock (the "Shares"), and
WHEREAS, the Purchaser desires to purchase the Shares from Seller on
the terms and conditions set forth in this Agreement; and
WHEREAS, the Seller desires to sell the Shares to the Purchaser on the
terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the Company and the Purchaser hereby agree as
follows:
1. Incorporation by reference. The above recitals are herein
incorporated by reference.
2. Purchase and Sale. The Purchaser shall purchase from Seller, and the
Seller shall sell to the Purchaser, the Shares on the terms and conditions of
this Agreement.
3. Consideration/Purchase Price. In consideration of the transfer by
Seller of the Shares to the Purchaser, the Purchaser shall transfer to Seller
(i) 100,000 shares of restricted common stock of Purchaser and (ii) $50,000 cash
("Purchase Price") on the Closing Date.
4. Obligations of Seller.
(a) At the closing of this transaction (the "Closing"), Seller
shall deliver the Shares to the Purchaser registered in the name of the
Purchaser or if the Shares are registered in the name of Seller, duly endorsed
to the Purchaser.
1
<PAGE>
(b) A receipt for the Purchase Price delivered to Seller by
the Purchaser pursuant to Section 3 hereof.
5. Obligations of the Purchaser. At the Closing, the Purchaser shall
deliver to Seller the Purchase Price pursuant to the terms of Section 3 of this
Agreement.
6. Closing and Condition to Closing.
6.1 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of counsel for
Purchaser or at such other place mutually agreed upon between Purchaser and
Seller, to be effective as of the Closing Date.
6.2 Condition to Closing. The Closing shall be subject to
satisfaction of the condition that (i) the representations and warranties of the
Seller contained in Section 7 hereof, and the Purchaser contained in Section 8
hereof, are true and correct and shall be true and correct as of the Closing
Date; (ii) the Seller shall have delivered to the Purchaser the items required
by Section 4 hereof; (iii) the Purchaser shall have delivered to Seller the
items required by Section 5 hereof; and (iv) the Purchaser and Seller shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed and complied with by such party prior to or as of the
Closing Date.
7. Representations and Warranties of the Seller. Seller hereby
represents and warrants to the Purchaser as follows:
7.1 Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is entitled to own or lease its property and to
carry on its business as and in the places where such properties are now owned,
leased or operated. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company, and
will not by themselves result in a breach or default under, or result in the
creation of any lien, security interest, charge or encumbrance upon the Shares,
or any of the properties or assets of the Company as a result of the terms,
conditions or provisions of any contract, note, mortgage or any other agreement,
instrument or obligation to which the Company is a party or by which the Company
or any of its properties or assets may be bound.
7.2 Capitalization. The authorized capital stock of the
Company consists of ___________ (__________) shares of Common Stock, all of
which are presently issued and outstanding. There are currently no outstanding
warrants, options, subscription rights or other commitments of any character
granted by the Company relating to the issued or unissued shares of capital
stock of the Company.
2
<PAGE>
7.3 Authority of Seller, Consents; Execution of Agreements.
Seller has all requisite power, authority, and capacity to enter into this
Agreement and to perform the transactions and obligations to be performed by it
hereunder. No consent, authorization, approval, license, permit or order of, or
filing with, any person or governmental authority is required in connection with
the execution or the transactions and obligations to be performed by it
hereunder. This Agreement has been duly executed and delivered by Seller and
constitutes a valid and legally binding obligation of Seller, enforceable in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws.
7.4 The Shares. The Shares are free and clear of all liens,
pledges, hypothecation, option, contract and other encumbrance, except for such
restrictions provided in this Agreement and pursuant to applicable law.
8. Representations and Warranties of the Purchaser. Purchaser hereby
represents and warrants to the Seller as follows:
8.1 Authority of the Purchaser; Execution of Agreement. The
Purchaser has all requisite power, authority, and capacity to enter into this
Agreement and to perform the transactions and obligations to be performed by it
hereunder. No consent, authorization, approval, license, permit or order of, or
filing with, any person or governmental authority is required in connection with
the execution of the transactions and obligations to be performed by it
hereunder. This Agreement has been duly executed and delivered by the Purchaser
and constitutes a valid and legally binding obligation of the Purchaser,
enforceable in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws.
8.2 Investment. The Purchaser warrants and acknowledges
that:
8.2.1 the Shares have not been registered under the
Securities Act of 1933, as amended ("Act"), or under applicable state blue sky
laws;
8.2.2 the Purchaser is acquiring the Shares for its
own account;
8.2.3 the Purchaser is aware that the Shares may not
be sold unless such securities are registered pursuant to the Act or qualify for
an exemption from such registration.
9. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
physically delivered; delivered by overnight delivery, confirmed telecopy,
telegram or courier; or three days after having been deposited in the United
States Mail, as certified mail with return receipt requested and with postage
prepaid, addressed to the recipient at the address listed at the
3
<PAGE>
top of the first page of this Agreement. Any of the foregoing addresses may be
changed by giving notice of such change in the foregoing manner, except that
notices for changes of address will be effective only upon receipt.
10. Miscellaneous.
(a) Assignment. This Agreement and the rights granted
hereunder may not be assigned in whole or in part by any of the parties without
the prior written consent of the other parties.
(b) Further Assurances. All parties hereto shall execute and
deliver such other instruments and do such other acts as may be necessary to
carry out the intent and purposes of this Agreement.
(c) Gender. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms
and the singular form of nouns and pronouns shall include the plural and vice
versa.
(d) Captions. The captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit, extend or
prescribe the scope of this Agreement or the intent of any of the provisions
hereof.
(e) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
It supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
(f) Amendment. This Agreement may not be amended, supplemented
or modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
(g) Choice of Law. This Agreement will be interpreted,
construed and enforced in accordance with the laws of the State of Delaware.
(h) Effect of Waiver. The failure of any party at any time or
times to require performance of any provision of this Agreement will in no
manner affect the right to enforce the same. The waiver by any party of any
breach of any provision of this Agreement will not be construed to be a waiver
by any such party of any succeeding breach of that provision or a waiver by such
party of any breach of any other provision.
(i) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
4
<PAGE>
affect any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(j) Enforcement. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
the successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs. Venue for any such action, in addition to
any other venue permitted by statute, will be Broward County, Florida.
(k) Binding Nature. This Agreement will be binding upon and
will inure to the benefit of any successor or successors of the parties to this
Agreement.
(l) Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
(m) Construction. This Agreement shall be construed within the
fair meaning of each of its terms and not against the party drafting the
document.
The parties, as evidenced by their signatures below, acknowledge that
this Agreement has been presented to their attorneys and that their attorneys
have had the opportunity to review and explain to them the terms and provisions
of the Agreement, and that they fully understand those terms and provisions.
IN WITNESS WHEREOF, the parties have respectively caused this Agreement
to be executed on the date first above written.
SELLER:
------------------------------------
James Fallacaro
PURCHASER:
By:_________________________________
James Fallacaro, President,
Independent Music Network, Inc.
5
As of June 18, 1999, the registrant's only subsidiary is Dynamic
Imaging Group, Inc., a Colorado company.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> May-31-1999
<PERIOD-END> May-31-1999
<CASH> 262,215
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
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<TOTAL-ASSETS> 263,115
<CURRENT-LIABILITIES> 359,395
<BONDS> 0
0
0
<COMMON> 482
<OTHER-SE> (96,762)
<TOTAL-LIABILITY-AND-EQUITY> 263,115
<SALES> 0
<TOTAL-REVENUES> 10,046
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 42,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,574
<INCOME-PRETAX> (62,619)
<INCOME-TAX> 0
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</TABLE>
