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As filed with the Securities and Exchange Commission on December 6, 1999
Registration No. 000-27363
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTIONS 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
INTERNETSTUDIOS.COM, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 13-4009696
(State or other jurisdiction of (IRS Employer Identification)
incorporation or organization)
1351 4/th/ Street, Suite 227 90401
(Address of principal offices) (Zip Code)
(310) 394-4025
(Registrant's telephone number, including area code)
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common stock, par value $0.0001 per share
(Title of class)
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InternetStudios.com, Inc.
Table of Contents
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<S> <C>
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 13
ITEM 3. PROPERTIES 17
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 18
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 19
ITEM 6. EXECUTIVE COMPENSATION 20
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 27
ITEM 8. LEGAL PROCEEDINGS 27
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER 27
STOCKHOLDER MATTERS
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES 28
ITEM 11. DESCRIPTION OF SECURITIES 29
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS 29
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 30
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL 30
DISCLOSURE
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS 31
</TABLE>
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ITEM 1. DESCRIPTION OF BUSINESS
InternetStudios.com, Inc. effected a 1 for 3 forward stock split on April
15, 1999 and a 1 for 3 reverse stock split on September 23, 1999 of its common
stock. All references in the Form 10 take these stock splits into effect when
referring to the number of share of common stock or per share data.
Overview
InternetStudios.com, Inc. ("InternetStudios") was incorporated in the State
of Nevada on April 14, 1998 as The Enterprise, Inc. For a period of time prior
to December 14, 1998, InternetStudios was engaged in the word processing
business. On December 14, 1998, InternetStudios withdrew from the word
processing business in anticipation of acquiring a license to software
technology for the health industry. This acquisition was not completed. On
September 18, 1999, the stockholders of InternetStudios approved a name change
to InternetStudios.com, Inc. in anticipation of acquiring and developing an
Internet business. The name change was effective September 21, 1999. Pursuant
to an Acquisition Agreement dated September 17, 1999 among eHealth.com, Inc.
("eHealth"), Mark Rutledge and Rob Maclean (together the "Principals") and
Online Films LLC, a Delaware limited liability company ("Online Films"), the
Principals agreed to transfer on their behalves, and on behalf of other
beneficial owners, 91.847% of the membership interest in Online Films so that
Online Films became a subsidiary of eHealth. In consideration of the transfer
of the Principals' membership interests, the Principals and other beneficial
owners of Online Films received an aggregate of 5,632,800 shares of
InternetStudios common stock. As a result of the reverse acquisition eHealth
acquired a 91.847% ownership interest in Online Films. The acquisition of
91.847% of the membership interest of Online Films is referred to herein as the
"Online Films Acquisition." As a result of the Online Films Acquisition, the
prior owners of Online Films now control 44.5% percent of eHealth, which was
renamed InternetStudios, effective September 18, 1997. (Hereinafter, reference
to InternetStudios shall include its subsidiary Online Films unless the context
otherwise requires.)
As a result of the Online Films Acquisition, InternetStudios is in the
business of compiling an online database of filmed entertainment and
facilitating a digital market targeted at the entertainment industry.
onlinefilmsales.com
InternetStudios is a development stage company with no operations, no
revenues, an expectation of further significant losses and no commercially
acceptable products and services. InternetStudios' proposed operations are
subject to all of the risks inherent in a growing business enterprise, including
the potential of operating losses. The likelihood of InternetStudios' success
must be considered in light of the expenses, difficulties and delays frequently
encountered in connection with a new business.
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InternetStudios' business plan is to compile an online database of filmed
entertainment and facilitate a digital market targeted at the entertainment
industry. InternetStudios envisions that the online filmed entertainment
database will be available 24 hours a day, 7 days a week for the holders of
rights to filmed entertainment and buyers of filmed entertainment productions to
trade such rights in an open and efficient centralized forum. InternetStudios
believes that by creating an online database of filmed entertainment and digital
market, both producers and holders of rights to film entertainment and buyers of
filmed entertainment will benefit. The online database of filmed entertainment
will provide a convenient, centralized venue for producers and rights holders to
market their inventories. The online database will provide access for the
buyers of filmed entertainment to a central forum with information necessary to
making an informed purchasing decision.
InternetStudios is building the website to list filmed entertainment rights
at www.onlinefilmsales.com. InternetStudios anticipates that listing
-----------------------
capabilities for filmed entertainment rights on the onlinefilmsales.com website
will be launched for beta testing in time for the American Film Market in
February 2000. The onlinefilmsales.com website will allow holders of rights to
list on the website, filmed entertainment productions for sale. Buyers will be
able to bid on and purchase these rights and all registered users will be able
to browse through the productions from any place in the world at any time. The
onlinefilmsales.com website will offer buyers information on a large selection
of filmed entertainment productions that was traditionally time consuming and
costly to acquire. The online listing and sales market will also enable the
holders of rights to reach a larger number of potential buyers and to exploit
such productions more effectively than traditional industry markets.
InternetStudios intends for transactions to take place as follows. Once a
filmed entertainment rights holder pays a listing fee to list their rights on
the onlinefilmsales.com website, buyers of filmed entertainment rights will be
able to access information provided by the rights holders on the website, such
as available rights and territories and view trailers of the filmed
entertainment using technology that transmits video over the Internet. Buyers
will be able to target their search for products to particular rights and
particular territories. InternetStudios will facilitate the bidding process by
enabling buyers to e-mail a bid to the rights holder. The rights holder will
either accept the bid via e-mail or reject the bid and e-mail a counteroffer to
the proposed buyer. Once an agreement is reached between the parties,
InternetStudios will charge a transaction fee for matching the buyer and seller.
InternetStudios plans to continually enhance the onlinefilmsales.com website to
meet the needs of buyers and sellers, and will strive to improve the user
experience by incorporating user feedback and advances in technology.
InternetStudios intends to generate revenues from listing fees, transaction
fees, financing and profit participations, subscription fees and advertising
fees, all as more particularly described below.
A listing fee of between $5,000 and $100,000 per year, depending on the
number of filmed entertainment products and their respective budgets, will be
assessed by InternetStudios on sales companies and larger producers for the
listing of the entertainment product on the onlinefilmsales.com website.
Initially, independent producers of filmed entertainment product will not be
assessed a listing fee. However, InternetStudios may decide to impose a listing
fee on independent producers as the business develops.
In the event, buyer and seller complete a sale through the use of the
onlinefilmsales.com website, InternetStudios will receive a fee for enabling the
transaction. The transaction fee will vary between 2% and 10% of the negotiated
sales price depending on the number of filmed
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entertainment rights listed by the seller on the onlinefilmsales.com website or
the amount of the negotiated sales price.
InternetStudios' long term business plan contemplates facilitating the
financing of filmed entertainment via the onlinefilmsales.com website in 2001.
InternetStudios intends to provide a forum for producers to pre-sell a portion
of filmed entertainment rights and use the proceeds of the sale to cover the
cost of producing and marketing filmed entertainment rights in the development
stage. InternetStudios will earn a financing fee from facilitating the
financing of the filmed entertainment. In addition, InternetStudios may also
receive profit participations upon the release and financial success of such
filmed entertainment. InternetStudios is currently exploring the feasibility of
providing such services.
After an initial introductory period, InternetStudios plans to charge
asubscription fee for reportertv and studiobuzz services (as discussed below).
InternetStudios anticipates that, commencing the second quarter of the year
2000, it will charge a subscription fee of approximately $30 per month for
independent subscribers to access reportertv and will provide discounts for
multiple users in the same organization.
InternetStudios plans to generate advertising revenues from advertisement
on its websites. Currently InternetStudios does not have any advertisers on its
websites but plans to attract advertisers by marketing to potential advertisers.
InternetStudios expects its material operating expenses to be comprised of
two main expenses. The largest percentage of operating expenses is expected to
be from marketing expenses including, but not limited to, salaries for its sales
staff, fees to attend film festivals and entertainment industry forums and
expenses incurred for online and offline advertising. In addition,
InternetStudios expects to incur material expenses in maintaining its online
database including but not limited to, salaries for data entry and customer
service staff and costs for compiling and researching information to be
incorporated onto the onlinefilmsales.com website.
InternetStudios has not performed any market studies or analyses to
determine the demand for or likely market acceptance of its onlinefilmsales.com
website or any other of its business concepts.
Sales and Marketing
Since the Online Acquisition, InternetStudios' management team has focused
on marketing and public relations efforts to attract vendors to list their
filmed entertainment rights on the onlinefilmsales.com web site.
InternetStudios believes that much of the awareness of the onlinefilmsales.com
website will be generated by attendance at film festivals, entertainment
industry forums and other events. InternetStudios has used a combination of
online and offline advertising to generate awareness of InternetStudios and the
onlinefilmsales.com website.
Once the onlinefilmsales.com website is launched for beta testing,
InternetStudios intends to generate additional brand awareness from specific
promotional activities such as:
. setting up promotional booths and kiosks at major and minor film
festivals; and
. enter into relationships with other websites to place links on their
sites to the onlinefilmsales.com website.
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InternetStudios expects to hire sales personnel as demand increases.
Relationship with MediaChase Ltd.
InternetStudios has agreed, subject to a definitive contract, to enter into
two joint ventures with MediaChase Ltd. ("MediaChase"), a Los Angeles based
software development company that has developed e-commerce systems and websites
for telecommunications companies and specializes in database integration and
website enablement of corporate processes. There is no affiliation between
InternetStudios and MediaChase or any of MediaChase's principals. The
discussions with MediaChase regarding the joint venture are ongoing. The
parties have signed a preliminary deal memo pursuant to which each party agrees
to negotiate in good faith, through January 31, 2000, the terms and conditions
of any long form documents necessary to accomplish the contemplated transaction.
One joint venture, reportertv.com, will focus on providing a twice daily
business entertainment news magazine broadcast over the Internet in television
broadcast news format and the other joint venture, studiobuzz.com, will focus on
creating a comprehensive database of information relating to the entertainment
industry. MediaChase is also engaged by InternetStudios to design and develop
the onlinefilmsales.com website and its website at www.internetstudios.com,
-----------------------
which currently offers limited functionality. InternetStudios considered four
candidates in its search for a technology partner including MediaChase, Scient
Corporation, Razorfish, Inc. and Sychronicity Software. Based on discussions
with management of MediaChase, MediaChase was selected because it was the most
compatible partner with the relevant technological expertise and innovative
ideas including the concept for a business entertainment news magazine broadcast
over the Internet. InternetStudios believes that MediaChase shares its vision
and would be the most suitable candidate to develop its technological
requirements in accordance with its business plan.
reportertv.com
InternetStudios and MediaChase have agreed to jointly create and produce an
interactive entertainment news magazine in a television format broadcast via the
Internet (the "reporterTV concept"). The broadcast is dedicated to delivering
content and information similar to entertainment industry trade magazines twice
a day and is targeted at producers, studio executives and other entertainment
industry related businesses worldwide. The first Internet broadcast was
launched on November 3, 1999. The broadcast is accessible via the Internet at
www.reportertv.com.
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As of November 18, 1999, InternetStudios had advanced $1,040,000 to
MediaChase in the form of a loan as evidenced by the Secured Promissory Note
dated November 12, 1999 and the Allonge to the Secured Promissory Note dated
November 18, 1999, to fund the development of the reporterTV concept. Upon the
execution of the definitive agreements for the joint venture, this loan will be
contributed by InternetStudios to the joint venture. InternetStudios is
required to contribute a total of $1,500,000 cash (which includes the $1,040,000
loan to be contributed) to the joint venture over time as required by the
management committee of the joint venture to fund the development of the
reporterTV concept. InternetStudios will use the proceeds of the sale of
1,000,000 shares of InternetStudios' common stock of $8 per share to investors
in offshore transactions pursuant to Regulation S to fund any other capital
contributions to reportertv.com. There can be no assurances that the business
model for the joint venture will be successful, or that the venture will
generate revenues for InternetStudios.
studiobuzz.com
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InternetStudios and MediaChase have agreed to jointly create an online
database with the capability to store and provide access to information relating
to development, financing, production, talent, marketing and distribution of
filmed entertainment rights (the "studiobuzz concept"). The database will be
accessible on the web at www.studiobuzz.com.
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As of October 31, 1999, the studiobuzz concept is still in the planning
stages. The companies anticipate that the studiobuzz concept will not be
developed until the latter half of 2000. There can be no assurances that the
business model for the joint venture will be successful, or that the venture
will generate revenues for InternetStudios.
Competition
As adoption of the Web as a medium for commerce continues to grow, other
companies may enter the market to provide a forum for auctioning filmed
entertainment rights. InternetStudios has identified FilmAxis.com,
FilmBazaar.com, ShowBizData.com, Reelplay.com and InHollywood.com as its
principal competitors.
InternetStudios' ability to compete successfully in the rapidly evolving
Internet filmed entertainment rights market will depend upon certain factors,
many of which are beyond its control. There can be no assurance that
InternetStudios will be able to compete successfully. However, InternetStudios
believes that it can be differentiated from its competitors in several areas,
including relationships of its management in the entertainment industry, the
proprietary technology being developed for its websites and its secured equity
funding source.
Technology
The onlinefilmsales.com website is currently being designed and developed,
on InternetStudios behalf, by MediaChase. InternetStudios' system is being
designed around industry standard architectures. InternetStudios is unable to
predict at this time whether its infrastructure is adequate to accommodate the
volume of traffic and the number of filmed entertainment rights transactions
that will actually be conducted by users on its website. The failure of
InternetStudios' systems to accommodate the volume of traffic or the number of
transactions could cause the website to become unstable and possibly cease to
operate for periods of time. InternetStudios anticipates that it will continue
to devote significant resources to develop its technology infrastructure.
InternetStudios' future success will depend on its ability to adapt to rapidly
changing technologies, to adapt its services to evolving industry standards and
to continually improve the performance, features and reliability of its service
in response to competitive service and product offerings and evolving demands of
the marketplace. The failure of the InternetStudios to adapt to such changes
would harm its business.
Our Intellectual Property
InternetStudios regards the protection of its copyrights, service marks,
trademarks, trade dress and trade secrets as critical to its success.
InternetStudios relies on a combination of patent, copyright, trademark, service
mark and trade secret laws and contractual restrictions to protect its
proprietary rights in products and services. InternetStudios plans to enter
into confidentiality and invention assignment agreements with its employees and
contractors, and nondisclosure agreements with parties with which it conducts
business to limit access to and disclosure of its proprietary information. Any
contractual arrangements and the other steps taken by InternetStudios to protect
its intellectual property may not prevent misappropriation of its technology or
deter independent third-party development of similar technologies.
InternetStudios
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has a current pending application for the servicemark of
"InternetStudios.com" with the United States Patent and Trademark Office.
Our Employees
As of October 31, 1999, InternetStudios had ten full time employees.
InternetStudios plans to expand significantly and will actively seek, among
others, a Chief Financial Officer, accounting personnel and administrative
staff.
Industry Background
The Filmed Entertainment Rights Market
Historically, filmed entertainment rights have been bought and sold
primarily through major and minor film festivals and trade shows. Independent
producers create over 6,000 films and hundreds of thousand of hours of
television programs each year. Each project requires marketing of the
distribution rights for different media, such as theatrical release, video sales
and rental, video on demand, pay television, free television and the Internet,
in every geographic market. This results in six or more licenses for each
production in as many as 200 territories. The rise of independent feature film
and television productions over the last 15 years has created a demand for a
more efficient marketplace for distribution of the rights for these filmed
entertainment.
The market for filmed entertainment rights is fragmented. There is no
central service available for entertainment industry executives to access
information with respect to the availability and nature of filmed entertainment
rights. Currently, the entertainment industry utilizes a combination of
subscription database services, trade magazines and relies heavily on the
networking of staff and attendance at the film markets and festivals to locate
and purchase project exploitation and distribution rights or list and license
their available inventories. The market is inefficient, labor intensive and the
cost of concluding a licensing arrangement can be prohibitively high.
InternetStudios believes that there are significant market opportunities for an
easily accessible, centralized forum where entertainment industry executives and
producers can buy and sell filmed entertainment rights. An online database and
digital market will enable holders to list and sell any unsold filmed
entertainment rights. InternetStudios also believes that the Internet provides
such a forum for the transaction of filmed entertainment rights.
The Internet
The Internet has emerged as a global platform that allow millions of people
to share information, communicate and conduct business electronically.
International Data Corporation ("IDC") estimates that the number of web users
will grow from approximately 150 million worldwide in 1998 to approximately 500
million worldwide by the end of 2003. The growing adoption of the web
represents an enormous opportunity for buyers and vendors of filmed
entertainment rights to conduct commerce over the Internet. IDC estimates that
commerce over the Internet will increase from approximately $40 billion
worldwide in 1998 to approximately $900 billion worldwide in 2003.
Filmed entertainment rights have been historically bought and sold
primarily through major and minor film festivals and trade shows. These markets
are highly inefficient for the following reasons:
. their fragmented, regional nature makes it difficult and expensive for
buyers and vendors to meet, exchange information and complete
transactions;
. they offer a limited breadth of filmed entertainment rights;
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. they often have high transaction costs from intermediaries; and
. they are information inefficient, as buyers and vendors lack a
reliable and convenient means of setting prices for sales or
purchases.
The Internet offers for the first time the opportunity to create a
compelling global marketplace that overcomes the inefficiencies associated with
traditional trading of filmed entertainment rights by offering the benefits of
Internet-based commerce. An Internet-based centralized trading place offers the
following benefits:
. facilitates buyers and vendors meeting, listing filmed entertainment
rights for sale, exchanging information, interacting with each other
and, ultimately, consummating transactions;
. allows buyers and vendors to trade directly, bypassing traditional
intermediaries and lowering costs for both parties;
. is global in reach, offering buyers a significantly broader selection
of filmed entertainment rights to purchase and providing vendors the
opportunity to sell their filmed entertainment rights efficiently to a
broader base of buyers; and
. offers significant convenience, allowing trading at all hours and
providing continually updated information.
As a result, there exists a significant market opportunity for an Internet-
based centralized marketplace that applies the unique attributes of the Internet
to facilitate the trading of filmed entertainment rights directly from vendors
to buyers.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview:
InternetStudios.com, Inc. ("InternetStudios") was incorporated in the State
of Nevada on April 14, 1998 as The Enterprise, Inc. For a period of time prior
to December 14, 1998, InternetStudios was engaged in the word processing
business. On December 14, 1998, InternetStudios withdrew from the word
processing business in anticipation of acquiring a license to software
technology for the health industry. This acquisition was not completed. On
September 18, 1999, the stockholders of InternetStudios approved a name change
to InternetStudios.com, Inc. in anticipation of acquiring and developing an
Internet business. The name change was effective September 21, 1999. Pursuant
to an Acquisition Agreement dated September 17, 1999 among eHealth.com, Inc.
("eHealth"), Mark Rutledge and Rob Maclean (together the "Principals") and
Online Films LLC, a Delaware limited liability company ("Online Films"), the
Principals agreed to transfer on their behalfs, and on behalf of other
beneficial owners, 91.847% of the membership interest in Online Films so that
Online Films became a subsidiary of eHealth. In consideration of the transfer
of the Principals' membership interests, the Principals and other beneficial
owners of Online Films received an aggregate of 5,632,800 shares of
InternetStudios common stock. As a result of the reverse acquisition eHealth
acquired a 91.847% ownership interest in Online Films. The acquisition of
91.847% of the membership interest of Online Films is referred to herein as the
"Online Films Acquisition." As a result of the Online Films Acquisition, the
prior owners of Online Films now control 44.5% percent of eHealth, which was
renamed InternetStudios, effective September 18, 1997. (Hereinafter, reference
to InternetStudios shall include its subsidiary Online Films unless the context
otherwise requires.)
As a result of the Online Films Acquisition, InternetStudios is in the
business of compiling an online database of filmed entertainment and
facilitating a digital market targeted at the entertainment industry.
As a result of the Online Films Acquisition, InternetStudios is in the
business of compiling an online database of filmed entertainment and
facilitating a digital market targeted at the entertainment industry.
In September, 1999, InternetStudios entered into an agreement to raise
$8,000,000 to finance the development of a comprehensive group of services for
the filmed entertainment community delivered via the Internet.
To date, InternetStudios has not recognized any revenue and does not expect
to recognize any revenues until it has fully launched its web-based services.
Once the web-based service is launched, InternetStudios expects to derive
revenues from a number of revenue streams, including, but not limited to,
listing fees, transactions fees on sales of filmed entertainment rights over the
websites, financing fees and profit participations subscription fees and
advertising fees from the web site.
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A listing fee of between $5,000 and $100,000 per year, depending on the
number of filmed entertainment products and their respective budgets, will be
assessed by InternetStudios on sales companies and larger producers for the
listing of the entertainment product on the onlinefilmsales.com website.
Initially, independent producers of filmed entertainment product will not be
assessed a listing fee. However, InternetStudios may decide to impose a listing
fee on independent producers as the business develops.
In the event, buyer and seller complete a sale through the use of the
onlinefilmsales.com website, InternetStudios will receive a fee for enabling the
transaction. The transaction fee will vary between 2% and 10% of the negotiated
sales price depending on the number of filmed entertainment rights listed by the
seller on the onlinefilmsales.com website or the amount of the negotiated sales
price.
InternetStudios long term business plan includes the financing of filmed
entertainment via the onlinefilmsales.com website in 2001. InternetStudios
intends to provide a forum for producers to pre-sell a portion of filmed
entertainment rights and use the proceeds of the sale to cover the cost of
producing and marketing filmed rights in the development stage. InternetStudios
will earn a financing fee from facilitating the financing of the film. In
addition, InternetStudios may also receive profit participations upon the
release and financial success of such filmed entertainment. InternetStudios is
currently exploring the feasibility of providing such services.
After an initial introductory period, InternetStudios plans to charge a
subscription fee for reportertv and studiobuzz services. InternetStudios
anticipates that, commencing the second quarter of the year 2000, it will charge
a subscription fee of approximately $30 per month for independent subscribers to
access reportertv and will provide discounts for multiple users in the same
organization.
InternetStudios plans to generate advertising revenues from advertisement
on its websites. Currently InternetStudios does not have any advertisers on its
websites but plans to attract advertisers by marketing to potential advertisers.
InternetStudios' financial statements have been prepared assuming that
InternetStudios will continue as a going concern. InternetStudios has not
generated revenues since its inception and has experienced operating losses
which raise substantial doubts about InternetStudios' ability to continue as a
going concern.
Selected Financial Data
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This schedule contains summary financial information extracted from the
Registrant's registration statement on Form 10 and is qualified in its entirety
to such registration statement on Form 10.
<TABLE>
<CAPTION>
Nine months April 14, 1998
ended (inception) to
September 30, December 31,
1999 1998
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$ $
<S> <C> <C>
Operating revenues -- --
General and administrative expenses 43,883 16,137
Loss from continuing operations (43,883) (16,137)
</TABLE>
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<TABLE>
<S> <C> <C>
Loss per share (0.006) (0.011)
Total assets 1,541,717 31,025
</TABLE>
The consolidated financial statements dated September 30, 1999 include the
acquisition of Online Films, LLC effective on September 3, 1999. Accordingly,
the assets of Online Films, LLC are included in the total assets at September
30, 1999, however, the loss from continuing operations does not include the
losses of Online Films, LLC. These losses totalled $228,091 for the initial
period August 27, 1999 to September 30, 1999.
Results of Operations
Revenues. InternetStudios has not recognized revenues to date and does not
expect to recognize revenues until after the Internet services are fully
launched. The website will offer various services after launch to provide
access to the site. InternetStudios plans to charge a variety of fees,
including subscription and advertising fees, for such services.
Cost of Revenues. InternetStudios currently has no cost of revenues
because it has not recognized any revenues to date. Once InternetStudios begins
to charge fees and subscriptions, as well as advertising charges, cost of
revenues will primarily consist of costs associated with marketing, customer
service activities, and server and network operations, and to a lesser extent,
bank and escrow processing charges on fees earned on transactions, Internet
connection charges, depreciation of server and network equipment and allocation
of overhead.
Sales and Marketing Expenses. Costs related to InternetStudios' sales and
marketing efforts, which to date have not been significant, are currently
classified as general and administrative expenses until it commences charging
transaction fees and subscriptions. InternetStudios' sales and marketing
expenses will consist mainly of advertising expenses, creative development and
promotional costs and commissions, and compensation for sales and marketing
personnel. The majority of these costs will be directed to programs designed to
build brand name recognition, attract filmed entertainment companies and
individuals to InternetStudios' websites, and to attract motion pictures and
television programming for listing on the onlinefilmsales.com web site.
Research and Development Expenses. InternetStudios' research and
development costs to date have not been significant. However, InternetStudios
expects to incur significant research and development expenses in the future.
The research and development expenses will consist of compensation for personnel
involved in the development of InternetStudios' web sites and systems, and
expenditures for consulting services, third-party software and other costs
related to development.
General and Administrative Expenses. InternetStudios' general and
administrative expenses consist primarily of salaries and related costs for
general and corporate functions, including finance, accounting, facilities and
fees for legal and other professional services. InternetStudios' general and
administrative expenses for the period from inception and ended September 30,
1999 were $60,020
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Liquidity and Capital Resources
From inception to September 17, 1999, InternetStudios had financed its
operations entirely from private placements. On September 17, 1999,
InternetStudios acquired 91.847% of the membership interest of Online Films. On
September 30, 1999 InternetStudios had $1,011,659 in cash and cash equivalents.
InternetStudios has had negative cash flows from operating activities in each
fiscal and quarterly period to date.
In October, 1999 InternetStudios entered into a facility lease agreement
for InternetStudios' corporate headquarters with minimum lease payments of
$96,000 through November, 2004.
Net cash used in operating activities was $39,400 for the period from
inception of InternetStudios to September 30, 1999.
Pursuant to the Financing Agreement, dated September 17, 1999, among
InternetStudios, Online Films and Pacific Capital Markets, Inc. ("Pacific
Capital"), Pacific Capital will arrange for the sale of 1,000,000 shares of
InternetStudios' common stock at $8 per share to investors in offshore
transactions (the "Financing"). As of October 31, 1999, a total of 437,500
shares of common stock were issued to 4 unrelated third party, non U.S.
investors for a total offering price of $3,500,000. This offering was done
pursuant to Regulation S.
InternetStudios believes that its current cash balances together with the
net proceeds of the Financing will allow InternetStudios to fund its operations
for at least the next 12 months. However, InternetStudios may require
substantial working capital to fund its business and it may need to raise
additional capital. InternetStudios cannot be certain that additional funds
will be available on satisfactory terms when needed, if at all.
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Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivatives and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. As InternetStudios does not currently
engage in derivative or hedging activities there will be no impact to
InternetStudios' results of operations, financial position or cash flow upon the
adoption of this standard.
In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise," which establishes standards for
certain activities of mortgage banking enterprises. SFAS No. 134 is effective
for fiscal years beginning after December 15, 1998. The adoption of SFAS No.
134 will not have an impact on InternetStudios' results of operations, financial
position or cash flow.
Year 2000 Issues
The "year 2000 problem" refers to the possible failure of many
computer systems that may arise as a result of existing computer programs using
only the last two digits to refer to a year. InternetStudios has undertaken an
initial review of the potential effects of the year 2000 problem. These
potential problems are being addressed on a system-by-system basis.
InternetStudios has assessed its information technology hardware and
software, including personal computers, application and network software for
year 2000 compliance readiness. InternetStudios believes it is year 2000
compliant and does not foresee the need for any additional purchases in relation
to the year 2000 problem. All equipment and software purchased were financed by
cash flows from operating activities. InternetStudios expects that any expenses
incurred for InternetStudios to be year 2000 compliant will be immaterial.
The most significant outside control risk is possible problems
experienced by InternetStudios' financing institutions that maintain its
depository accounts and outstanding debt. InternetStudios is in the process of
confirming the state of year 2000 readiness with these parties. It is
anticipated that this process will be completed prior to January 1, 2000.
InternetStudios' task force is in the process of developing a
contingency plan to address other potential year 2000 problems and solutions.
The plan will be completed prior to January 1, 2000.
ITEM 3. PROPERTIES
InternetStudios maintains its offices in Santa Monica, California and
Vancouver, British Columbia. Pursuant to a three year lease commencing on
November 1, 1999,
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InternetStudios leases offices for its corporate headquarters at 1351 4th
Street, Suite 271, Los Angeles, California. The initial rent is $8,000 per
month. InternetStudios also sublets 800 square feet of office space in
Vancouver, British Columbia, at a current rent of Cdn$3,000 per month ($2,035)
on a month to month basis. InternetStudios does not own any real estate.
InternetStudios believes that it currently has sufficient space to carry on its
operations for the foreseeable future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 31,
1999 with respect to the beneficial ownership of the common stock of (1) each of
our directors, each of our executive officers and all of our executive officers
and directors as a group, and (2) each stockholder known by InternetStudios to
be the beneficial owner of 5% or more of the common stock, and the percentage of
common stock so owned.
As used in this table, the term "beneficial ownership" with respect to
a security is defined by Rule 13d-3 under the Exchange Act of 1934, as amended,
as consisting of sole or shared voting power (including the power to vote or
direct the vote) and/or sole or shared investment power (including the power to
dispose of or direct the disposition of) with respect to the security through
any contract, arrangement, understanding, relationship or otherwise, subject to
community property laws where applicable. Each person has sole voting and
investment power with respect to the shares of common stock, except as otherwise
indicated. Beneficial ownership consists of a direct interest in the shares of
common stock, except as otherwise indicated. The address of those individuals
for which an address is not otherwise indicated is: 1040 Hamilton Street, Suite
207, Vancouver, BC, V6B 2R9, Canada.
Beneficial Ownership of Management
<TABLE>
<CAPTION>
Name and Address Number of Shares of Percentage of Outstanding
of Beneficial Owner Common Stock Common Stock
Beneficially Owned Beneficially Owned
<S> <C> <C>
Robert Maclean 1,124,500 8.59%
Mark Rutledge 1,110,000 8.48%
Michael Edwards 100,000 .76%
Heidi Lester -- --%
1351 4th Street
Suite 227
Santa Monica, California
Directors and Officers as a Group 2,334,500 17.83%
</TABLE>
18
<PAGE>
Beneficial Owner of more than 5%
<TABLE>
<CAPTION>
Number of Shares of Percentage of Outstanding
Name and Address Common Stock Common Stock
of Beneficial Owner Beneficially Owned Beneficially Owned
<S> <C> <C>
Jayvee & Co. 900,000 6.87%
c/o CIBC Mellon Global Services
320 Bay Street, P.O. Box 1
Toronto, ONT, Canada MSH 4A6
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
The following table and text sets forth the names and ages of all of
InternetStudios' directors and executive officers as of October 31, 1999. All
of the directors will serve until the next annual meeting of stockholders and
until their successors are elected and qualified, or until their earlier death,
retirement, resignation or removal. Executive officers serve at the discretion
of the board of directors, and are appointed to serve until the first board of
directors meeting following the annual meeting of stockholders.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Robert Maclean 44 President and Director
Mark Rutledge 40 Secretary, Treasurer, Vice President of Business
Affairs and Director
Michael Edwards 31 Chief Operating Officer and Director
Heidi Lester 38 Chief Executive Officer
</TABLE>
Robert Maclean has been President and a director and officer of
InternetStudios since September, 1999. For the past five years, Mr. Maclean has
been an independent producer of filmed entertainment projects. He has produced
over a dozen independent motion pictures and television movies including such
films as Criminal Law, Bright Angel and Man with a Gun. Mr. Maclean also served
as head of production at RKO Pictures in Los Angeles and has developed and
produced a number of miniseries and movies of the week for ABC, CBS, and HBO.
Mr. Maclean began his film career as a documentary filmmaker based in Paris,
France where he produced several documentary series including, The Last Sailors
and The Gold Lust. Mr. Maclean obtained a Bachelor's of Art degree from
University of Oregon and a Certificate of Advanced Motion Picture Productions
from Banff School of Fine Arts.
Mark Rutledge has been Secretary, Treasurer, Vice President of
Business Affairs and a director of InternetStudios since September, 1999. He
has a Bachelor of Arts (Honours) and a Bachelor of Laws from University of
British Columbia. He was the Vice President of Business Affairs for Northwood
Entertainment Corp. from 1997 to August 1999, and was the Vice President of
Business Affairs for Movie Vista Productions from 1994 to 1997. As vice
president of these two
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companies, Mr. Rutledge was responsible for negotiating and preparing contracts
for film and television distribution and financing of film and television
productions. Prior to these positions, Mr. Rutledge practiced law for six years,
specializing in the areas of corporate finance, public offerings and
entertainment law. In addition, Mr. Rutledge produced a number of award winning
medical documentaries.
Michael Edwards has been Chief Operating Officer and a director of
InternetStudios since September, 1999. From 1991 to 1997, Mr. Edwards was the
controller of Alik Enterprises Ltd., a small BC, Canada based business. From
1997 to 1999, Mr. Edwards was the president of Soul Rider Sports, Inc., a small
consumer goods manufacturing and distribution company. Mr. Edwards serves on
the board of Fedora Industries Ltd., a web-based retailer of consumer goods.
This company has been at the forefront of developing alternative distribution
networks using the Internet.
Heidi Lester has been Chief Executive Officer of InternetStudios since
September, 1999. Ms. Lester has over 15 years of experience in the film
acquisition and distribution industry. From 1994 to 1999, she held the position
of Senior Vice President of Acquisition and Production at Summit Entertainment.
In 1994, Ms. Lester was Vice President of Acquisitions at Largo Entertainment.
From 1989 to 1994, Ms. Lester was in charge of the Los Angeles Liason office for
the JVC Visual Software Division. She is currently the Co-Chairman of Industry
Relations Committee for the American Film Market Association ("AFMA") and is a
member of the Internet Committee for AFMA. Ms. Lester has previously served as
a member of the Board of Directors of AFMA.
ITEM 6. EXECUTIVE COMPENSATION
No compensation was paid to any of InternetStudios' officers or
directors for the period ended December 31, 1998.
Employment Agreements
InternetStudios intends to enter into a Management Agreement with
Robert Maclean pursuant to which Mr. Maclean will serve as InternetStudios'
President for a term of three years, renewable by mutual written agreement of
the parties for two additional one year periods. Mr. Maclean's compensation
will includes a base salary of $180,000 per year, subject to an increase at the
conclusion of each year of the term, and a bonus, each granted by the Board of
Directors in its sole discretion. In addition, InternetStudios will grant to
Mr. Maclean, subject to the approval of its Board of Directors and its
stockholders, a stock option to purchase 175,000 shares of InternetStudios'
common stock at an exercise price of $5.00 per share, subject to vesting
requirements. Mr. Maclean will also receive customary employee benefits and
reimbursement of reasonable expenses incurred in connection with the performance
of his duties. In the event InternetStudios terminates Mr. Maclean for any
reason other than death, disability, or for cause, or in the event Mr. Maclean
terminates his services for cause, Mr. Maclean will be entitled on the eighth
day after his execution of a Confidential Severance Agreement and a letter
confirming that he did not revoke and will take no action to revoke such
Confidential Severance Agreement to: (i) a lump sum severance payment equal to
one and one-half times his base salary; (ii) any accrued and
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unpaid vacation or other benefits; (iii) any accrued and unpaid bonus; and (iv)
accelerated vesting of his stock options. Mr. Maclean will also be subject to
noncompetition, nondisclosure and nonsolicitation covenants.
InternetStudios intends to enter into a Management Agreement with Mark
Rutledge pursuant to which Mr. Rutledge will serve as InternetStudios'
Secretary, Treasurer and Vice President of Business Affairs for a term of three
years, renewable by mutual written agreement of the parties for two additional
one year periods. Mr. Rutledge's compensation will include a base salary of
$180,000 per year, subject to an increase at the conclusion of each year of the
term, and a bonus, each granted by the Board of Directors in its sole
discretion. In addition, InternetStudios will grant to Mr. Rutledge, subject to
the approval of its Board of Directors and its stockholders, a stock option to
purchase 175,000 shares of InternetStudios' common stock at an exercise price of
$5.00 per share, subject to vesting requirements. Mr. Maclean will also receive
customary employee benefits and reimbursement of reasonable expenses incurred in
connection with the performance of his duties. In the event InternetStudios
terminates Mr. Rutledge for any reason other than death, disability, or for
cause, or in the event Mr. Rutledge terminates his services for cause, Mr.
Rutledge will be entitled on the eighth day after his execution of a
Confidential Severance Agreement and a letter confirming that he did not revoke
and will take no action to revoke such Confidential Severance Agreement to:
(i) a lump sum severance payment equal to one and one-half times his base
salary; (ii) any accrued and unpaid vacation or other benefits; (iii) any
accrued and unpaid bonus; and (iv) accelerated vesting of his stock options.
Mr.Rutledge will also be subject to noncompetition, nondisclosure and
nonsolicitation covenants.
InternetStudios intends to enter into a Management Agreement with
Michael Edwards pursuant to which Mr. Maclean will serve as InternetStudios'
Chief Operating Officer for a term of three years renewable by mutual written
agreement of the parties for two additional one year periods. Mr. Edwards
compensation will include a base salary of $180,000 per year, subject to an
increase at the conclusion of each year of the term, and a bonus, each granted
by the Board of Directors in its sole discretion. In addition, InternetStudios
will grant to Mr. Edwards, subject to the approval of its Board of Directors and
its stockholders, a stock option to purchase 75,000 shares of InternetStudios'
common stock at an exercise price of $5.00 per share, subject to vesting
requirements. Mr. Edwards will also receive customary employee benefits and
reimbursement of reasonable expenses incurred in connection with the performance
of his duties. In the event InternetStudios terminates Mr. Edwards for any
reason other than death, disability, or for cause, or in the event Mr. Edwards
terminates his services for cause, Mr. Edwards will be entitled on the eighth
day after his execution of a Confidential Severance Agreement and a letter
confirming that he did not revoke and will take no action to revoke such
Confidential Severance Agreement to: (i) a lump sum severance payment equal to
one and one-half times his base salary; (ii) any accrued and unpaid vacation or
other benefits; (iii) any accrued and unpaid bonus; and (iv) accelerated
vesting of his stock options. Mr. Edwards will also be subject to
noncompetition, nondisclosure and nonsolicitation covenants.
InternetStudios intends to enter into a Management Agreement with
Heidi Lester pursuant to which Ms. Lester will serve as InternetStudios' Chief
Executive Officer for a term of three years renewable by mutual written
agreement of the parties for two additional one year periods. Ms. Lester's
compensation will include a base salary of $252,000 per year, subject to an
increase at the conclusion of each year of the term, and a bonus, each granted
by the Board of Directors in its sole discretion. In addition, InternetStudios
will grant, subject to the approval of its Board of Directors and its
stockholders, a stock option to purchase 175,000 shares of InternetStudios'
common stock at an exercise price of $5.00 per share, subject to vesting
requirements. Ms. Lester will also receive customary employee benefits and
reimbursement of reasonable expenses incurred in connection with the
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<PAGE>
performance of her duties. In the event InternetStudios terminates Ms. Lester
for any reason other than death, disability, or for cause, or in the event Ms.
Lester terminates her services for cause, she will be entitled on the eighth day
after her execution of a Confidential Severance Agreement and a letter
confirming that she did not revoke and will take no action to revoke such
Confidential Severance Agreement to: (i) a lump sum severance payment equal to
one and one-half times her base salary; (ii) any accrued and unpaid vacation or
other benefits; (iii) any accrued and unpaid bonus; and (iv) accelerated vesting
of her stock options. Ms. Lester will also be subject to noncompetition,
nondisclosure and nonsolicitation covenants.
Board of Directors
During the year ended December 31, 1998, no meetings of the Board of
Directors were held; all corporate actions were conducted by unanimous written
consent of the Board of Directors. Directors may be paid their expenses for
attending each meeting of the directors and may be paid a fixed sum for
attendance at each meeting of the directors or a stated salary as director. No
payment precludes any director from serving InternetStudios in any other
capacity and being compensated for the service. Members of special or standing
committees may be allowed like reimbursement and compensation for attending
committee meetings.
Option Grants
No stock options were granted by InternetStudios for the fiscal year ended
1998.
Stock Option Plans
Stock Incentive Plan - Non-United States Residents. The purpose of the
1999 Non-US Stock Incentive Plan is to advance the interests of InternetStudios
by encouraging "Eligible Employees" to acquire shares of common stock of
InternetStudios, thereby increasing their proprietary interest in
InternetStudios, encouraging them to remain associated with InternetStudios and
furnishing them with additional incentive to advance the interests of
InternetStudios in the conduct of their affairs. "Eligible Employees" means
employees, directors and consultants of (a) InternetStudios or (b) any of the
following entities (each, a "Related Entity"): (i) any corporation which holds a
majority of the voting shares of InternetStudios (a "Parent"), (ii) any
corporation which qualifies as a subsidiary of InternetStudios under British
Columbia corporate law (a "Subsidiary"), or (iii) any business, corporation,
partnership, limited liability company or other entity in which InternetStudios,
a Parent or a Subsidiary holds a substantial ownership interest, directly or
indirectly.
The 1999 Non-US Stock Incentive Plan will provide for the granting to
Eligible Employees of such incentive awards (each, an "Award") as the
administrator of the 1999 Non-US Stock Incentive Plan (the "Administrator") may
from time to time approve. The highlights of the 1999 Non-US Stock Incentive
Plan are as follows:
(a) the Administrator will be the Board of Directors of InternetStudios or
a committee of the Board of Directors appointed to act in such capacity;
(b) subject to applicable laws, including the rules of any applicable stock
exchange or national market system, the Administrator will be authorized to
award any type of Award to an Eligible Employee (a "Grantee") that is not
inconsistent with the provisions of the 1999 Non-US
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<PAGE>
Stock Incentive Plan, and that by its terms involves or may involve the
issuance of:
(i) shares of common stock of InternetStudios (including
"Performance Shares" which may be earned in whole or in part upon attainment of
performance criteria established by the Administrator),
(ii) a stock option (an "Option") entitling the Grantee to purchase
shares of common stock of InternetStudios,
(iii) a stock appreciation right (an "SAR") entitling the Grantee to
acquire such number of shares of common stock of InternetStudios or such cash
compensation as will be determined by reference to any appreciation in the value
of InternetStudios' common stock in accordance with terms to be established by
the Administrator,
(iv) any right similar to an SAR, with a fixed or variable price
related to the Fair Market Value (as defined in the 1999 Non-US Stock Incentive
Plan - see below) of InternetStudios' common stock and with an exercise or
conversion privilege related to the passage of time, the occurrence of one or
more events, or the satisfaction of performance criteria or other conditions,
(v) restricted stock issuable for such consideration (if any) and
subject to such restrictions on transfer, rights of first refusal, repurchase
provisions, forfeiture provisions, and other terms and conditions to be
established by the Administrator,
(vi) "Performance Units" which may be earned in whole or in part
upon attainment of performance criteria established by the Administrator and
which may be settled in cash, common stock or other securities of
InternetStudios, or a combination of cash, common stock or other securities, as
established by the Administrator,
(viii) any other security with the value derived from the value of
the InternetStudios' common stock, or
(ix) any combination of the foregoing;
(c) the maximum number of shares of common stock of InternetStudios that
will be issuable pursuant to all Awards granted under the 1999 Non-US Stock
Incentive Plan will be 500,000 shares;
(d) no insider of InternetStudios will be eligible to receive an Award
where:
(i) the insider is not a director or senior officer of
InternetStudios and the Award is an Option that would otherwise be granted to
the insider as a consultant of InternetStudios, or
(ii) any Award, together with all of InternetStudios other
previously established or proposed Awards could result at any time in: (A) the
number of shares of common stock reserved for issuance pursuant to Options
granted to insiders exceeding 10% of the outstanding issue of InternetStudios'
common stock, or (B) the issuance to insiders, within a one year period, of a
number of shares exceeding 10% of the outstanding issue of InternetStudios'
common stock; provided, however, that this restriction on the eligibility of
insiders to receive an Award will cease to apply if it is no longer required
under any applicable laws, including the rules of an applicable stock exchange
or a national market system;
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<PAGE>
(e) the maximum number of shares of common stock with respect to which
Options and SARs may be granted to any employee in any fiscal year of
InternetStudios will be 300,000 shares, subject to adjustment in certain
circumstances;
(f) each Award will be subject to a separate Award Agreement to be
executed by InternetStudios and the Grantee, which shall specify the term of the
Award;
(g) the exercise or purchase price, if any, of an Award will be determined
by the Administrator in compliance with applicable laws, including the rules of
an applicable stock exchange or national market system;
(h) the term of an Option will be no more than ten years;
(i) if the exercise price or any tax required to be withheld in respect of
an Option is satisfied by InternetStudios or the Grantee's employer withholding
shares otherwise deliverable to the Grantee, the Administrator may issue the
Grantee an additional Option, subject to terms identical to the Award Agreement
under which the Option was exercised, but at an exercise price as determined by
the Administrator in accordance with the 1999 Non-US Stock Incentive Plan;
(j) an Option may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution, and may be exercised during the lifetime of the Grantee
only by the Grantee;
(k) other Awards will be transferable to the extent provided in the
relevant Award Agreements;
(l) subject to applicable laws, including the rules of an applicable stock
exchange or national market system, an Award Agreement may permit a Grantee to
exercise an Award for a specified period following termination of the Grantee as
an Eligible Employee, in which event the Award will terminate to the extent it
is not exercised on the last day of the specified period or the last day of the
original term of the Award, whichever occurs first;
(m) the Administrator may at any time offer to buy out a previously
granted Award for a payment in cash or common stock of InternetStudios;
(n) the Administrator may issue Awards in settlement, assumption or
substitution for outstanding awards or obligations to grant future awards in
connection with InternetStudios or a Related Entity acquiring another entity, an
interest in another entity or an additional interest in a Related Entity,
whether by merger, stock purchase, asset purchase or other form of transaction;
(o) the number of shares of common stock of InternetStudios issuable under
the 1999 Non-US Stock Incentive Plan, including the number of shares issuable
under any outstanding Awards, is subject to adjustment in certain circumstances,
including certain changes in InternetStudios' share capital;
(p) subject to applicable laws, including the rules of an applicable stock
exchange or national market system, the consideration to be paid for the shares
of common stock to be issued upon exercise or purchase of an Award, including
the method of payment, will be determined by the Administrator (and, in the case
of an Option, will be determined at the time of grant); provided that, in
addition to any other types of consideration the Administrator may determine,
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<PAGE>
the Administrator will be authorized to accept as consideration for the shares
of common stock of InternetStudios:
(i) cash;
(ii) check;
(iii) surrender of shares of common stock of InternetStudios or
delivery of a properly executed form of attestation of ownership of shares of
the common stock of InternetStudios as the Administrator may require (including
withholding of shares of common stock otherwise deliverable upon exercise of the
Award) which have a fair market value on the date of surrender or attestation
equal to the aggregate exercise price of the shares of common stock of
InternetStudios as to which the Award will be exercised (but only to the extent
that such exercise of the Award would not result in an accounting compensation
charge with respect to the shares of common stock of InternetStudios used to pay
the exercise price unless otherwise determined by the Administrator); or
(iv) any combination of the foregoing methods of payment;
(q) the Board of Directors of InternetStudios may at any time amend,
suspend or terminate the 1999 Non-US Stock Incentive Plan, subject to such
stockholder approval as may be required by applicable laws, including the rules
of an applicable stock exchange or national market system, provided that:
(i) no Award may be granted during any suspension of the 1999 Non-
US Stock Incentive Plan or after termination of the 1999 Non-US Stock Incentive
Plan; and
(ii) any amendment, suspension or termination of the 1999 Non-US
Stock Incentive Plan will not affect Awards already granted, and such Awards
will remain in full force and effect as if the 1999 Non-US Stock Incentive Plan
had not been amended, suspended or terminated, unless mutually agreed otherwise
between the Grantee and the Administrator, which agreement will have to be in
writing and signed by the Grantee and InternetStudios; and
(r) "Fair Market Value" is defined to mean the value of InternetStudios
shares of common stock determined as of any date as follows:
(i) where a public market exists for InternetStudios' common stock,
the Fair Market Value shall be (A) the closing price for a share of common stock
of InternetStudios for the last market trading day prior to the time of the
determination (or, if no closing price was reported on that date, on the last
trading date on which a closing price was reported) on the stock exchange
determined by the Administrator to be the primary market for InternetStudios'
common stock or the Nasdaq National Market, whichever is applicable or (B) if
InternetStudios' common stock is not traded on any such exchange or national
market system, the average of the closing bid and asked prices of a share of
common stock of InternetStudios on the Nasdaq Small Cap Market for the day prior
to the time of the determination (or, if no such prices were reported on that
date, on the last date on which such prices were reported), in each case, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(ii) in the absence of an established market for InternetStudios's
common stock of the type described above, the Fair Market Value shall be
determined by the Administrator in good faith.
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Stock Incentive Plan - United States Residents. The purpose of the 1999 US
Stock Incentive Plan is to advance the interests of InternetStudios by
encouraging Eligible Employees who are resident in the United States and/or
subject to taxation in the United States to acquire shares of common stock of
InternetStudios, thereby increasing their proprietary interest in
InternetStudios, encouraging them to remain associated with InternetStudios and
furnishing them with additional incentive to advance the interests of
InternetStudios in the conduct of their affairs.
The 1999 US Stock Incentive Plan will provide for the granting to the
Eligible Employees of such Awards as the Administrator (being the Board of
Directors of InternetStudios or a committee of the Board of Directors appointed
to act in such capacity) may from time to time approve.
The 1999 US Stock Incentive Plan is modelled on the 1999 Non-US Stock
Incentive Plan, and the foregoing discussion of the 1999 Non-US Stock Incentive
Plan is generally applicable in respect of the 1999 US Stock Incentive Plan,
except that:
(a) the maximum number of shares of common stock of InternetStudios that
will be issuable pursuant to all awards granted under the 1999 US Stock
Incentive Plan will be 1,000,000 shares;
(b) "Parent" means a "parent corporation" as defined in section 424(e) of
the U.S. Internal Revenue Code of 1986, as amended (the "Code"), and
"Subsidiary" means a "subsidiary corporation" as defined in section 424(f) of
the Code;
(c) under the 1999 US Stock Incentive Plan, Options may be granted as
either incentive stock options under section 422 of the Code and the regulations
thereunder (the "Incentive Stock Options") or non-incentive stock options under
section 18 of the Code (the "Non-Qualified Stock Options");
(d) the specific provisions under the 1999 US Stock Incentive Plan which
apply to Incentive Stock Options include the following:
(i) if granted to a Grantee who at the time of the grant owns stock
representing more than 10% of the voting power of all classes of stock of
InternetStudios or any Parent or Subsidiary, an Incentive Stock Option will be
limited to a maximum term of five years, and will be subject to an exercise
price per share which may not be less than 110% of the Fair Market Value of
InternetStudios' common stock on the date of the grant;
(ii) an Incentive Stock Option granted to any other Grantee may be
granted for a term not exceeding ten years at an exercise price per share which
may not be less than the Fair Market Value of InternetStudios' common stock
on the date of the grant;
(iii) if the aggregate Fair Market Value of common stock of
InternetStudios subject to Incentive Stock Options which become exercisable for
the first time by a Grantee (under all plans of InternetStudios or any Parent or
Subsidiary) exceeds US$100,000 during any calendar year, the Incentive Stock
Options to which such excess value is attributable will be treated Non-Qualified
Stock Options; and
(iv) any Incentive Stock Option which is not exercised following the
Grantee's termination as an Eligible Employee within the time permitted by law
will automatically convert to a Non-Qualified Stock Option and will thereafter
be exercisable for the period specified under the
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<PAGE>
relevant Award Agreement;
(e) Non-Qualified Stock Options may be granted for a term not exceeding ten
years, and unless otherwise determined by the Administrator, the exercise price
per share may not be less than the Fair Market Value of InternetStudios' common
stock on the date of the grant; and
(f) the 1999 US Stock Incentive Plan has specific provisions which apply to
grants of Awards intended to qualify as "performance-based compensation", as
defined under section 162(m) of the Code, to any employees who are "covered
employees" for the purposes of section 162(m)(3) of the Code:
(i) the exercise or purchase price per share, if any, of such an
Award may not be less than the Fair Market Value of InternetStudios' common
stock on the date of the grant; and
(ii) grants of such Awards may only be made by a committee (or a
subcommittee of a committee) which is comprised solely of two or more directors
eligible under the Code to serve on a committee responsible for making Awards of
performance based compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From the date of the Online Films Acquisition until the effective date
of the Management Agreements, InternetStudios' four officers received an
aggregate of $63,000 in management fees for their services as officers of the
InternetStudios. Upon the effective date of the Management Agreements, these
management fees will terminate and be superceded by the compensation specified
in each such officer's Management Agreement. See Item 6.
ITEM 8. LEGAL PROCEEDINGS
InternetStudios is not a party to any pending or threatened legal
proceeding.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS
Market Information
Since September 23, 1999, InternetStudios' common stock has been
quoted on the NASD OTC Bulletin Board under the symbol "ISTS." Prior to that
date, InternetStudios' common stock traded under the symbol "EHLC." The trading
market is limited and sporadic and should not be deemed to constitute an
"established trading market." The following table sets forth the high ask and
low bid information for each fiscal quarter since InternetStudios' common stock
has been quoted on the NASD OTC Bulletin Board on September 17, 1998. The bid
information was obtained from Dow Jones & Company, Inc. and reflects inter-
dealer prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions. All prices reflect the 1-for-3 forward stock
split effective April 15, 1999 and the 1-for-3 reverse stock split effective
September 23, 1999.
27
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1998 High Low
- ----------------------------------- ---- ---
<S> <C> <C>
Quarter Ended September 30, 1998 $0.03 $0.02
Quarter Ended December 31, 1998 $1.09 $0.03
Fiscal Year Ending December 31, 1999 High Low
- ------------------------------------ ---- ---
Quarter Ended March 31, 1999 $ 6.00 $1.09
Quarter Ended June 30, 1999 $30.38 $3.13
Quarter Ended September 30, 1999 $15.38 $4.25
Period from October 1 to December 3, 1999 $ 5.88 $4.75
</TABLE>
On December 3, 1999, the closing bid price for the common stock as
reported by the NASD OTC Electronic Bulletin Board was $5.00.
As of October 31, 1999, the number of security holders of record of
the common stock was 40. As of such date, 13,093,750 shares were outstanding.
ITEM 10 RECENT SALES OF UNREGISTERED SECURITIES
The following is information for all securities that InternetStudios sold since
inception without registering the securities under the Securities Act.
1. In April, 1998, InternetStudios issued an aggregate of 1,000,000 shares of
common stock to its three directors for a total offering price of $1,000.
These shares were offered pursuant to Section 4(2) of the Securities Act of
1933, as amended.
2. In July, 1998, InternetStudios issued an aggregate of 17,200 shares of
common stock to fifteen investors for a total offering price of $17,200.
The offering was done pursuant to Rule 504 of Regulation D.
3. In December, 1998, InternetStudios issued an aggregate of 100,000 shares of
common stock to one person for a total offering price of $100. The offering
was done pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
4. In December, 1998, InternetStudios issued an aggregate of 6,000,000 shares
of common stock to ten corporate subscribers for a total offering price of
$30,000. This offering was done pursuant to Rule 504 of Regulation D.
5. From September, 1999 to October, 1999, InternetStudios issued a total of
437,500 shares of common stock to 4 investors for a total offering price of
$3,500,000. This offering was done pursuant to Regulation S.
28
<PAGE>
6. In September, 1999, 5,632,800 shares of common stock were issued to 27
beneficial owners of Online Films, LLC pursuant to the Online Acquisition.
This offering was done pursuant to Section 4(2) of the Securities Act of
1933, as amended.
ITEM 11. DESCRIPTION OF SECURITIES
InternetStudios is authorized by its Articles of Incorporation to
issue an aggregate of 100,000,000 shares of common stock, par value $.0001 per
share. As of October 31, 1999, 13,093,750 shares of common stock were issued and
outstanding and held of record by 40 stockholders.
All shares have equal voting rights. Voting rights are not
cumulative, and, therefore, the holders of more than 50% of the common stock of
InternetStudios could, if they chose to do so, elect all of the Directors.
Upon liquidation, dissolution or winding up of InternetStudios, the
assets of InternetStudios will be distributed pro rata to the holders of the
common stock. The holders of the common stock do not have preemptive rights to
subscribe for any securities of InternetStudios and have no right to require
InternetStudios to redeem or purchase their shares.
Holders of common stock are entitled to share equally in dividends
when, as and if declared by the Board of Directors of InternetStudios, out of
funds legally available therefor. InternetStudios has not paid any cash
dividends on its common stock, and it is unlikely that any such dividends will
be declared in the foreseeable future.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 78.751 of the Nevada General Corporation Law,
InternetStudios may indemnify its officers and directors against expenses
incurred by such persons in connection with any threatened, pending or completed
action, suit or proceedings, whether civil, criminal, administrative or
investigative, involving such persons in their capacities as officers and
directors, so long as such persons acted in good faith and in a manner which
they reasonably believed to be in the best interests of InternetStudios. If the
legal proceeding, however, is by or in the right of InternetStudios, the
director or officer may not be indemnified in respect of any claim, issue or
matter as to which he is adjudged to be liable for negligence or misconduct in
the performance of his duty to InternetStudios unless a court determines
otherwise.
Under Nevada law, corporations may also purchase and maintain
insurance or make other financial arrangements on behalf of any person who is or
was a director or officer (or is serving at the request of the corporation as a
director or officer of another corporation) for any liability asserted against
such person and any expenses incurred by him in his capacity as a director or
officer. These financial arrangements may include trust funds, self insurance
programs, guarantees and insurance policies.
Article 12 provides that no director or officer shall be personally
liable to InternetStudios or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of such
director or officer; provided, however, that the foregoing provision shall not
eliminate or limit the liability of a director or officer (i) for acts or
omissions which
29
<PAGE>
involve intentional misconduct, fraud or knowing violation of law or (ii) the
payment of dividends in violation of Section 78.300 of the Nevada Revised
Statutes. Article 11 of the bylaws provides that every officer or director of
InternetStudios will not be liable for damages incurred in connection with his
actions as a director or officer to the fullest extent permitted by law.
InternetStudios has been advised that it is the position of the
Securities and Exchange Commission (the "Commission") that insofar as the
provision of InternetStudios' Articles of Incorporation, as amended, and By-laws
may be invoked for liabilities arising under the Securities Act, the provision
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements on page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective in 1999, Jody M. Weber, Certified Public Accountant,
resigned as InternetStudios' independent accountant, and InternetStudios engaged
LaBonte & Co. ("LaBonte") as InternetStudios' new independent accountant. Ms.
Weber retired from her practice in New York and has limited her practice scope
in the field of accounting.
Prior to the engagement of LaBonte, neither InternetStudios nor anyone
on its behalf consulted with such firm regarding the application of accounting
principles to a specified transaction, either completed or uncompleted, or type
of audit opinion that might by rendered on InternetStudios financial statements.
Ms. Weber audited InternetStudios financial statements for the three
month period from InternetStudios inception, April 14, 1998 to July 13, 1998.
Ms. Weber's report for such period did not contain an adverse opinion or a
disclaimer of opinion, nor was the report qualified or modified as to
uncertainty, audit scope or accounting principles.
During the period from January 1, 1999 to November 9, 1999 and the
year ended December 31, 1998, there were no disagreements with Ms. Weber on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope procedure, which disagreements, if not resolved to the
satisfaction of Ms. Weber, would have caused her to make reference to the
subject matter of the disagreements in connection with its reports on
InternetStudios' financial statements. In addition, there were no such events
as described under Item 304 of Regulation S-K during the fiscal year ended
December 31, 1998 and the subsequent interim periods through November 9, 1999.
InternetStudios has provided Ms. Weber with a copy of the disclosures
contained herein, and has requested that she furnish InternetStudios with a
letter addressed to the Securities and Exchange Commission stating whether she
agrees with the statements made by InternetStudios in response to Item 304
regarding her involvement with InternetStudios as independent accountant and, if
not, stating the respects in which she does not agree. A copy of Ms. Weber's
letter is attached as an exhibit to this Form 10.
30
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(b) Exhibits
Exhibit Description
------- -----------
2.1 Acquisition Agreement*
3.1 Articles of Incorporation*
3.2 Certificate of Amendment of Articles of Incorporation*
3.3 Certificate of Amendment of Articles of Incorporation
3.4 By-laws
3.5 Amended By-Laws
10.1 Financing Agreement*
10.2 Consulting Agreement*
10.3 Letter Agreement between InternetStudios and MediaChase
10.4 Secured Promissory Note and Allonge to Secured Promissory
Note
16.1 Letter of Jody M. Weber, Certified Public Accountant*
21.1 List of Subsidiaries*
27.1 Financial data schedule*
* Previously Filed.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the registrant caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated December 6, 1999
InternetStudios.com, Inc.
a Nevada corporation
/s/ Robert K. Maclean
___________________________________
Robert K. Maclean
President
/s/ Mark Rutledge
___________________________________
Mark Rutledge
Secretary, Treasurer
32
<PAGE>
INTERNETSTUDIOS.COM, INC.
(formerly eHealth.com, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
AUDITORS' REPORT
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
<PAGE>
LABONTE & CO. 1205 - 1095 West Pender Street
CHARTERED ACCOUNTANTS Vancouver, BC Canada
V6E 2M6
Telephone (604) 682-2778
Facsimile (604) 689-2778
Email [email protected]
AUDITORS' REPORT
- -------------------------------------------------------------------------------
To the Board of Directors of InternetStudios.com, Inc.
We have audited the consolidated balance sheets of InternetStudios.com, Inc. (a
development stage company) as at September 30, 1999 and December 31, 1998 and
the consolidated statements of operations, changes in stockholders' equity and
cash flows for the periods then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 30,
1999 and December 31, 1998 and the results of its operations and the changes in
stockholders' equity and cash flows for the periods then ended in accordance
with generally accepted accounting principles in the United States.
"LaBonte & Co."
CHARTERED ACCOUNTANTS
Vancouver, B.C.
October 31, 1999
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES REPORTING
- -----------------------------------------------------------------------
DIFFERENCES
- -----------
In the United States, reporting standards for auditors' would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by a significant uncertainty such as referred
to in Note 1 regarding the Company's ability to continue as a going concern.
Our report to the directors dated October 31, 1999 is expressed in accordance
with Canadian reporting standards which do not permit a reference to such
uncertainties in the auditors' report when the uncertainties are adequately
disclosed in the financial statements.
"LaBonte & Co."
CHARTERED ACCOUNTANTS
Vancouver, B.C.
October 31, 1999
F-2
<PAGE>
INTERNETSTUDIOS.COM, INC.
(formerly eHealth.com, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and short-term investments $1,011,659 $ 10,025
Loans receivable (Note 4) 100,000 20,000
Prepaids and deposits 157,803 -
- -------------------------------------------------------------------------------------------------------------------------------
1,269,462 30,025
CAPITAL ASSET 15,000 -
GOODWILL (Note 3) 256,255 -
INCORPORATION COSTS 1,000 1,000
- -------------------------------------------------------------------------------------------------------------------------------
$1,541,717 $ 31,025
===============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 28,971 $ 8,862
Notes payable (Note 3) 1,006,302 -
- -------------------------------------------------------------------------------------------------------------------------------
1,035,273 8,862
- -------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 8)
STOCKHOLDERS' EQUITY Common stock, $.0001 par value,
100,000,000 shares authorized
7,686 7,117
Additional paid-in capital 558,778 31,183
Deficit accumulated during the development stage (60,020) (16,137)
- -------------------------------------------------------------------------------------------------------------------------------
506,444 22,163
- -------------------------------------------------------------------------------------------------------------------------------
$1,541,717 $ 31,025
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-3
<PAGE>
INTERNETSTUDIOS.COM, INC.
(formerly eHealth.com, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 14, 1998 Nine months April 14, 1998
(inception) to ended September (inception) to
September 30, 30, 1999 December 31,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
<S> <C> <C> <C>
Business investigation costs $20,000 $20,000 $ -
Management fees 3,200 - 3,200
Marketing 2,000 2,000 -
Office and general 14,399 3,425 10,974
Professional fees 13,775 13,775 -
Transfer agent and filing fees 757 757 -
Travel and accommodation 5,889 3,926 1,963
- ---------------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $60,020 $43,883 $16,137
=================================================================================================================================
BASIC NET LOSS PER SHARE $ 0.014 $ 0.006 $ 0.011
=================================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,407,036 7,138,391 1,528,145
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-4
<PAGE>
INTERNETSTUDIOS.COM, INC.
(formerly eHealth.com, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 14 1998 (INCEPTION) TO SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during the
Number of Paid In development
shares Amount Capital stage Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common stock issued for cash 1,017,200 $1,017 $ 17,183 $ - $ 18,200
Common stock issued for cash, net of deferred
offering costs 6,100,000 6,100 14,000 - 20,100
Net loss for the period - - - (16,137) (16,137)
- ----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 7,117,200 7,117 31,183 (16,137) 22,163
Share split on a 3 for 1 basis 14,234,400 - - - -
Share consolidation on a 3 for 1 basis (14,234,400) - - - -
Common stock issued for acquisition of Online
Films, LLC 5,632,800 563 27,601 - 28,164
Common stock issued for cash pursuant to
Regulation S offering 62,500 6 499,994 - 500,000
Net loss for the period - - - (43,883) (43,883)
- ----------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1999 12,812,500 $7,686 $558,778 $(60,020) $506,444
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-5
<PAGE>
INTERNETSTUDIOS.COM, INC.
(formerly eHealth.com, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
April 14, 1998 Nine months April 14, 1998
(inception) to ended September (inception) to
September 30, 30, 1999 December 31,
1999 1998
====================================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss for the period $ (60,020) $ (43,883) $(16,137)
Adjustments to reconcile net loss to net cash from operating activities:
- accounts payable 20,620 11,758 8,862
- ------------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (39,400) (32,125) (7,275)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Incorporation costs (1,000) - (1,000)
Cash acquired on acquisition of Online Films, LLC 363,759 363,759 -
- ------------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES 362,759 363,759 (1,000)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans receivable (100,000) (80,000) (20,000)
Notes payable 250,000 250,000 -
Net proceeds on sale of common stock 538,300 500,000 38,300
- ------------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 688,300 670,000 18,300
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,011,659 1,001,634 10,025
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD - 10,025 -
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,011,659 $1,011,659 $ 10,025
====================================================================================================================================
CASH AND CASH EQUIVALENTS CONSISTS OF:
Cash $ 791,102 $ 791,102 $ 10,025
Short-term investments 220,557 220,557 -
- ------------------------------------------------------------------------------------------------------------------------------------
$1,011,659 $1,011,659 $ 10,025
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-6
<PAGE>
INTERNETSTUDIOS.COM, INC.
(formerly eHealth.com, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
- -------------------------------------------------------------------------------
The Company was incorporated on April 14, 1998 in the State of Nevada.
Effective December 14, 1998 the Company changed its name to eHealth.com, Inc.,
and on September 20, 1999 changed its name to InternetStudios.com, Inc. The
Company is in the development stage and since inception has been investigating
business opportunities. Effective September 30, 1999 the Company acquired a
91.847% interest in Online Films, LLC, a private Delaware company developing a
business of compiling an online database of filmed entertainment and
facilitating a digital marketplace targeted at the entertainment industry.
Concurrently, Online Films, LLC entered into a financing agreement with Pacific
Capital Markets Inc. ("PCMI") to provide start-up capital and to raise
$8,000,000 for the development of the business. Refer to Note 3.
The consolidated financial statements have been prepared on the basis of a going
concern which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company and its subsidiary
are in the development stage, have not generated any revenues to date and
further significant losses are expected in developing its business. The ability
of the Company to continue as a going concern is dependent on raising additional
capital and on generating future profitable operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
Principles of Consolidation
The financial statements include the accounts of the Company and its wholly-
owned subsidiary Online Films, LLC which was acquired on September 30, 1999.
Accordingly, the financial statements for the period ended December 31, 1998 and
the statements of operations and cash flows for the period ended September 30,
1999 include only the accounts of the Company.
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of three
months or less when purchased, to be cash equivalents.
Goodwill
Goodwill arising on the acquisition of Online Films, LLC will be amortized
straight-line over ten years commencing October 1, 1999.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation", foreign denominated monetary assets and liabilities are translated
to their United States dollar equivalents using foreign exchange rates which
prevailed at the balance sheet date. Revenue and expenses are translated at
average rates of exchange during the year. Related translation adjustments are
reported as a separate component of stockholders' equity, whereas gains or
losses resulting from foreign currency transactions are included in results of
operations.
F-7
<PAGE>
Net Loss per Common Share
Basic earnings per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Dilutive earnings per share reflects the
potential dilution of securities that could share in the earnings of the
Company. Because the Company does not have any potentially dilutive securities,
the accompanying presentation is only of basic loss per share.
NOTE 3 - ACQUISITION OF ONLINE FILMS, LLC
- -------------------------------------------------------------------------------
By agreement dated September 17, 1999 and effective September 30, 1999 the
Company acquired a 91.847% interest in Online Films, LLC in consideration for
the issuance of 5,632,800 restricted common shares valued at $.005 per share for
a total of $28,164. This business combination has been accounted for using the
purchase method of accounting and as the fair value of liabilities exceeds the
fair value of identifiable assets no minority interest arises on the
acquisition. The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Assets acquired:
Current assets $ 521,562
Capital assets 15,000
Goodwill 256,255
---------
792,817
Liabilities assumed:
Notes payable (756,302)
Accounts payable (8,351)
---------
Purchase price 5,632,800 shares $ 28,164
=========
</TABLE>
Online Films, LLC was formed on July 23, 1999 and commenced operations August
27, 1999. Online Films, LLC is in the development stage of its internet based
business and has not generated any revenues to date. During the initial period
ended September 30, 1999, Online Films, LLC realized a loss of $228,091.
Accordingly, the pro-forma results of operations assuming the acquisition had
taken place on the inception of Online Films, LLC on August 27, 1999 would be a
net loss of $271,974 for the nine months ended September 30, 1999 and a basic
net loss per share of $0.035.
Concurrent with the acquisition of Online Films, LLC the Company entered into a
financing agreement and a consulting agreement with Pacific Capital Markets Inc.
("PCMI") whereby PCMI has agreed to raise $8,000,000 of new financing for the
development of the Company's business and to provide public relations, investor
relations and advertising services. The proposed financing is for the sale of
1,000,000 shares of common stock at a price of $8.00 per share pursuant to
Regulation S of the United States Securities Act of 1933. The consulting
agreement is for the period October 1, 1999 to September 30, 2000 with a fee
totalling $2,000,000 payable as follows:
<TABLE>
<S> <C> <C>
October 1, 1999 $ 250,000 (paid)
October 18, 1999 250,000 (paid)
November 15, 1999 500,000
January 15, 2000 500,000
March 15, 2000 500,000
----------
$2,000,000
==========
</TABLE>
At September 30, 1999 PCMI had advanced $756,302 to Online Films, LLC and
$250,000 to the Company by way of demand loans bearing interest at a rate of 10%
per year secured by promissory notes. During October an additional $500,000 was
loaned by PCMI and the entire $1,500,000 was subsequently repaid from funds
raised pursuant to the Regulation S common stock financing. Refer to Note 10 -
Subsequent Events.
F-8
<PAGE>
NOTE 4 - LOAN RECEIVABLE
- -------------------------------------------------------------------------------
Online Films, LLC entered into an agreement in principle on September 9, 1999,
subject to a definitive contract, to enter into two joint ventures with
MediaChase Ltd., a Los Angeles based software development company. MediaChase
Ltd. has developed e-commerce systems and websites and specializes in database
integration and website enablement of corporate processes. MediaChase Ltd. is
also engaged to design and develop the Company's websites.
At September 30, 1999 the Company had advanced $100,000 by way of demand loan to
fund the development of the first joint venture. During October 1999 the
Company advanced an additional $460,000 by way of demand loans. These loans
bear interest at the rate of 10% per year. Upon execution of a definitive
contract it is the intention of the parties that these loans will form part of
the Company's $1,500,000 contribution of development funds to the joint
ventures.
NOTE 5 - RELATED PARTY TRANSACTIONS
- -------------------------------------------------------------------------------
Online Films, LLC has agreed to pay management fees to four senior officers
totalling $63,000 per month.
NOTE 6 - CAPITAL STOCK
- -------------------------------------------------------------------------------
The Company's initial capitalization was 100,000,000 common shares with a par
value of $.001 per share. On December 17, 1998 the par value was decreased to
$.0001 per share. On March 15, 1999 the Company split its outstanding shares on
a three for one basis, resulting in an increase in the number of shares
outstanding from 7,117,200 to 21,351,600 common shares. On September 23, 1999
the Company consolidated its outstanding shares on a three for one basis,
resulting in a decrease in the number of shares outstanding from 21,351,600 to
7,117,200 common shares. Refer to Note 9 - Subsequent Events.
NOTE 7 - INCOME TAXES
- -------------------------------------------------------------------------------
There were no temporary differences between the Company's tax and financial
bases, except for the Company's net operating loss carryforwards amounting to
approximately $60,000, and $16,000 at September 30, 1999 and December 31, 1998,
respectively. These carryforwards will expire, if not utilized, beginning in
2013.
The Company has deferred tax assets amounting to approximately $20,000 at
September 30, 1999, related to the net operating loss carryovers. The
realization of the benefits from these deferred tax assets appears uncertain due
to recurring net losses. Accordingly, a valuation allowance has been recorded
which offsets the deferred tax assets at the end of each period.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- -------------------------------------------------------------------------------
Lease Commitments
Online Films, LLC leases office space under an operating lease which expires
October 31, 2002. Future minimum rental commitments amount to $16,000 for 1999,
$96,000 for 2000, $96,000 for 2001, and $80,000 for 2002.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107. Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies. The fair value of financial instruments classified as
current assets or liabilities including cash and cash equivalents and notes and
accounts payable approximate carrying value due to the short-term maturity of
the instruments.
F-9
<PAGE>
Concentration of Credit Risk
The Company invests its cash and certificates of deposit primarily in deposits
with major banks. Certain deposits, at times, are in excess of federally
insured limits. The Company has not incurred losses related to its cash.
Uncertainty Due to the Year 2000 Issue
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or
after January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems failure
which could impact the Company's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the Year 2000 issue
affecting the Company will be fully resolved.
Other
Refer to Notes 3, 4 and 5.
NOTE 9 - SUBSEQUENT EVENTS
- -------------------------------------------------------------------------------
The Company received subscriptions for 375,000 shares at $8.00 per share for
proceeds of $3,000,000 pursuant to its Regulation S financing anticipated to
raise a total of $8,000,000.
The Company paid $500,000 to PCMI pursuant to its consulting agreement.
The Company repaid its outstanding loan to PCMI in the amount of $1,500,000 of
which $1,000,000 was outstanding at September 30, 1999.
The Company advanced an additional $460,000 to MediaChase Ltd. by way of a
demand loan which bears interest at 10% per year.
F-10
<PAGE>
ONLINE FILMS, LLC
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
AUDITORS' REPORT
BALANCE SHEET
STATEMENT OF OPERATIONS AND DEFICIT
STATEMENT OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
<PAGE>
LABONTE & CO.
================================================================================
CHARTERED ACCOUNTANTS
- ---------------------
1205 - 1095 West Pender Street
Vancouver, BC Canada
V6E 2M6
Telephone (604) 682-2778
Facsimile (604) 689-2778 Email [email protected]
<PAGE>
AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors of Online Films, LLC
We have audited the balance sheet of Online Films, LLC (a development stage
company) as at September 30, 1999 and the statements of operations and deficit,
and cash flows for the period then ended. 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 an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at September 30, 1999 and the
results of its operations and cash flows for the period then ended in accordance
with generally accepted accounting principles in the United States.
CHARTERED ACCOUNTANTS
"LaBonte & Co."
Vancouver, B.C.
October 31, 1999
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES REPORTING
- -----------------------------------------------------------------------
DIFFERENCES
- -----------
In the United States, reporting standards for auditors' would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by a significant uncertainty such as referred
to in Note 1 regarding the Company's ability to continue as a going concern.
Our report to the directors dated October 31, 1999 is expressed in accordance
with Canadian reporting standards which do not permit a reference to such
uncertainties in the auditors' report when the uncertainties are adequately
disclosed in the financial statements.
CHARTERED ACCOUNTANTS
"LaBonte & Co."
Vancouver, B.C.
October 31, 1999
ONLINE FILMS, LLC
(A Development Stage Company)
<PAGE>
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
1999
===========================================================================================================================
ASSETS
CURRENT ASSETS
<S> <C>
Cash and short-term investments $ 263,759
Prepaids and deposits 157,803
---------------------------------------------------------------------------------------------------------------------------
421,562
CAPITAL ASSET 15,000
DUE FROM PARENT COMPANY 100,000
- ----------------------------------------------------------------------------------------------------------------------------
$ 536,562
============================================================================================================================
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 8,351
Notes payable (Note 3) 756,302
- ----------------------------------------------------------------------------------------------------------------------------
764,653
- ----------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 6)
MEMBERS' EQUITY -
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (228,091)
- ----------------------------------------------------------------------------------------------------------------------------
$ 536,562
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
ONLINE FILMS, LLC
(A Development Stage Company)
<PAGE>
STATEMENT OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
August 27, 1999
(inception) to
September 30,
1999
============================================================================================================================
GENERAL AND ADMINISTRATIVE EXPENSES
<S> <C>
Advertising $ 40,826
Bank charges and interest 6,676
Consulting 679
Management fees 126,000
Office and general 24,837
Professional fees 15,000
Travel and accommodation 14,073
- ----------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $228,091
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
ONLINE FILMS, LLC
(A Development Stage Company)
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
August 27, 1999
(inception) to
September 30, 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $(228,091)
Adjustments to reconcile net loss to net cash from operating activities:
- prepaids (157,803)
- accounts payable 8,351
- -------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (77,563)
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Domain name (15,000)
- -------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (15,000)
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable 756,302
Advances to parent company (100,000)
- -------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 656,302
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 263,759
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -
- -------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 263,759
===============================================================================================================================
CASH AND CASH EQUIVALENTS CONSISTS OF:
Cash $ 63,202
Short-term investments 200,557
- -------------------------------------------------------------------------------------------------------------------------------
$ 263,759
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
ONLINE FILMS, LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
ONLINE FILMS, LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
Online Films, LLC is a limited liability corporation incorporated on July 23,
1999 in the State of Delaware which commenced operations August 27, 1999. The
financial statements have been prepared on the basis of a going concern which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company is in the development stage of
compiling an online database of filmed entertainment and facilitating a digital
marketplace targeted at the entertainment industry. The Company has not
generated any revenues to date and further significant losses are expected in
developing its business. Furthermore, at September 30, 1999 the company had a
working capital deficiency of $343,091. The ability of the Company to continue
as a going concern is dependent on raising additional capital and on generating
future profitable operations. Effective September 30, 1999 Internetstudios.com,
Inc. acquired a 91.847% interest in the Company and agreed to finance its
business development. Refer to Note 3.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of three
months or less when purchased, to be cash equivalents.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation", foreign denominated monetary assets and liabilities are translated
to their United States dollar equivalents using foreign exchange rates which
prevailed at the balance sheet date. Revenue and expenses are translated at
average rates of exchange during the year. Related translation adjustments are
reported as a separate component of stockholders' equity, whereas gains or
losses resulting from foreign currency transactions are included in results of
operations.
NOTE 3 - ACQUISITION BY INTERNETSTUDIOS.COM, INC.
- --------------------------------------------------------------------------------
By agreement dated September 17, 1999 and effective September 30, 1999
Internetstudios.com, Inc. acquired a 91.847% interest in the Company in
consideration for the issuance of 5,632,800 restricted common shares.
Concurrent with the acquisition Internetstudios.com, Inc. entered into a
financing agreement and a consulting agreement with Pacific Capital Markets Inc.
("PCMI") whereby PCMI has agreed to raise $8,000,000 of new financing for the
development of the Company's business and to provide public relations, investor
relations and advertising services. The proposed financing is for the sale of
1,000,000 shares of common stock at a price of $8.00 per share pursuant to
Regulation S of the United States Securities Act of 1933.
At September 30, 1999 PCMI had advanced $756,302 to the Company by way of demand
loans bearing interest at a rate of 10% per year secured by promissory notes.
This loan was subsequently repaid from funds raised by Internetstudios.com, Inc.
<PAGE>
ONLINE FILMS, LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
pursuant to the Regulation S common stock financing.
NOTE 4 - LOAN RECEIVABLE
- --------------------------------------------------------------------------------
Online Films, LLC entered into an agreement in principle on September 9, 1999,
subject to a definitive contract, to enter into two joint ventures with
MediaChase Ltd., a Los Angeles based software development company. MediaChase
Ltd. has developed e-commerce systems and websites and specializes in database
integration and website enablement of corporate processes. MediaChase Ltd. is
also engaged to design and develop the Company's websites.
At September 30, 1999 Internetstudios.com, Inc. had advanced $100,000 by way of
a demand loan to fund the development of the first joint venture. During
October 1999 an additional $460,000 was advanced by way of demand loans. Upon
execution of a definitive contract it is the intention of the parties that these
loans will form part of the Company's $1,500,000 contribution of development
funds to the joint ventures.
NOTE 5 - RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
Online Films, LLC has agreed to pay management fees to four senior officers
totalling $63,000 per month.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
Lease Commitment
Online Films, LLC leases office space under an operating lease which expires
October 31, 2002. Future minimum rental commitments amount to $16,000 for 1999,
$96,000 for 2000, $96,000 for 2001, and $80,000 for 2002.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107. Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies. The fair value of financial instruments classified as
current assets or liabilities including cash and cash equivalents and notes and
accounts payable approximate carrying value due to the short-term maturity of
the instruments.
Concentration of Credit Risk
The Company invests its cash and certificates of deposit primarily in deposits
with major banks. Certain deposits, at times, are in excess of federally
insured limits. The Company has not incurred losses related to its cash.
Uncertainty Due to the Year 2000 Issue
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or
after January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems failure
which could impact the Company's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the Year 2000 issue
affecting the Company will be fully resolved.
Other
Refer to Notes 4 and 5.
<PAGE>
Exhibit 3.3
<TABLE>
<S> <C> <C>
Dean Heller STATE OF NEVADA Telephone
Secretary of State OFFICE OF SECRETARY OF STATE 702.687.5203
101 N. CARSON ST., STE. 3 Fax 702.687.3471
CARSON CITY, NEVADA 89701-4786 Web site
http//sos.state.nv.ms
Filing Fee:
</TABLE>
Certificate of Amendment to Articles of Incorporation
For Profit Nevada Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
- Remit in Duplicate -
1. Name of corporation: eHealth.com, Inc.
------------------------------------------------------
________________________________________________________________________________
2. The articles have been amended as follows (provide article numbers, if
available):
"FIRST. The name of the corporation is: INTERNETSTUDIOS.COM, INC."
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a vote
by classes or series, or as may be required by the provisions of the articles of
incorporation have voted in favor of the amendment is: 66.3% *
-----------
4. Signatures:
/s/ Allen Wilson /s/ Mark Rutledge
- ----------------------------------------- -------------------------------
President or Vice President Secretary or Asst. Secretary
(acknowledgement required) (acknowledgement not required)
City of: Vancouver
--------------------------------
Province of: British Columbia
----------------------------
This instrument was acknowledged before me on
September 20, 1999 , by
- -----------------------------------------
Allen Wilson (Name of Person)
- ------------------------
as President
--------------------------------------
as designated to sign this certificate
of eHealth.com, Inc.
--------------------------------------
(name on behalf of whom instrument was executed)
/s/ Susan Jeffs
- ------------------------------------------------
Notary Public Signature
*If any proposed amendment would alter or change any preference or any relative
or other right given to any class or series of outstanding shares, then the
amendment must be approved by the vote, in addition to the affirmative vote
otherwise required, of the holders of shares representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above information and remit the proper
fees may cause this filing to be rejected.
<PAGE>
EXHIBIT 3.4
The Enterprise, Inc.
BY-LAWS
ARTICLE I MEETINGS OF SHAREHOLDERS
1. Shareholders' Meetings shall be held in the office of the corporation, at
Carson City, NV, or at such other place or places as the Directors shall, from
time to time, determine.
2. The annual meeting of the shareholders of this corporation shall be held
at 11:00 a.m., on the 14th day of April of each year beginning in 1999, at which
time there shall be elected by the shareholders of the corporation a Board of
Directors for the ensuing year, and the shareholders shall transact such other
business as shall properly come before them. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
3. A notice signed by any Officer of the corporation or by any person
designated by the Board of Directors, which sets forth the place of the annual
meeting, shall be personally delivered to each of the shareholders of record, or
mailed postage prepaid, at the address as appears on the stock book of the
corporation, or if no such address appears in the stock book of the corporation,
to his last known address, at least ten (10) days prior to the annual meeting.
Whenever any notice whatever is required to be given under any article of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time of the meeting of the
shareholders, shall be deemed equivalent to proper notice.
4-1
<PAGE>
4. A majority of the shares issued and outstanding, either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of the shareholders.
5. If a quorum is not present at the annual meeting, the shareholders
present, in person or by proxy, may adjourn to such future time as shall be
agreed upon by them, and notice of such adjournment shall be mailed, postage
prepaid, to each shareholder of record at least ten (10) days before such date
to which the meeting was adjourned; but if a quorum is present, they may adjourn
from day to day as they see fit, and no notice of such adjournment need be
given.
6. Special meetings of the shareholders may be called at anytime by the
President; by all of the Directors provided there are no more than three, or if
more than three, by any three Directors; or by the holder of a majority share of
the capital stock of the corporation. The Secretary shall send a notice of such
called meeting to each shareholder of record at least ten (10) days before such
meeting, and such notice shall state the time and place of the meeting, and the
object thereof. No business shall be transacted at a special meeting except as
stated in the notice to the shareholders, unless by unanimous consent of all
shareholders present, either in person or by proxy.
7. Each shareholder shall be entitled to one vote for each share of stock in
his own name on the books of the corporation, whether represented in person or
by proxy.
8. At all meetings of shareholders, a shareholder may vote by proxy executed
in writing by the shareholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the Secretary of the corporation before or at the time
of the meeting.
4-2
<PAGE>
9. The following order of business shall be observed at all meetings of the
shareholders so far as is practicable:
a. Call the roll;
b. Reading, correcting, and approving of
the minutes of the previous meeting;
c. Reports of Officers;
d. Reports of Committees;
e. Election of Directors;
f. Unfinished business; and
g. New business.
10. Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action to be taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
ARTICLE II STOCK
1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary of the corporation.
2. All certificates shall be consecutively numbered; the name of the person
owning the shares represented thereby, with the number of such shares and the
date of issue shall be entered on the company's books.
3. All certificates of stock transferred by endorsement thereon shall be
surrendered by cancellation and new certificates issued to the purchaser or
assignee.
4. Upon surrender to the corporation or the transfer agent of the
corporation of a
4-3
<PAGE>
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, and
cancel the old certificate; every such transfer shall be entered on the transfer
book of the corporation.
5. The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE III DIRECTORS
1. A Board of Directors, consisting of at least one (1) person shall be
chosen annually by the shareholders at their meeting to manage the affairs of
the corporation. The Directors' term of office shall be one (1) year, and
Directors may be re-elected for successive annual terms.
2. Vacancies on the Board of Directors by reason of death, resignation or
other causes shall be filled by the remaining Director or Directors choosing a
Director or Directors to fill the unexpired term.
3. Regular meetings of the Board of Directors shall be held at 1:00 p.m., on
the 14th day of April of each year beginning in 1999 at the office of the
company at Carson City, NV, or at such other time or place as the Board of
Directors shall be resolution appoint; special meetings may be called by the
President or any Director giving ten (10) days notice to each Director. Special
meetings may also be called by execution of the appropriate waiver of notice and
called when executed by a majority of the Directors of the company. A majority
of the
4-4
<PAGE>
Directors shall constitute a quorum.
4. The Directors shall have the general management and control of the
business and affairs of the corporation and shall exercise all the powers that
may be exercised or performed by the corporation, under the statutes, the
Articles of Incorporation, and the By-Laws. Such management will be by equal
vote of each member of the Board of Directors with each Board member having an
equal vote.
5. The act of the majority of the Directors present at a meeting at which a
quorum is present shall be the act of the Directors.
6. A resolution, in writing, signed by all or a majority of the members of
the Board of Directors, shall constitute action by the Board of Directors to
effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting; and it shall be the duty
of the Secretary to record every such resolution in the Minute Book of the
corporation under its proper date.
7. Any or all of the Directors may be removed for cause by vote of the
shareholders or by action of the Board. Directors may be removed without cause
only by vote of the shareholders.
8. A Director may resign at any time by giving written notice to the Board,
the President or the Secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the Board
or such Officer, and the acceptance of the resignation shall not be necessary to
make it effective.
9. A Director of the corporation who is present at a meeting of the Directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action
4-5
<PAGE>
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
ARTICLE IV OFFICERS
1. The Officers of this company shall consist of: a President, one or more
Vice Presidents, Secretary, Treasurer, and such other officers as shall, from
time to time, be elected or appointed by the Board of Directors.
2. The PRESIDENT shall preside at all meetings of the Directors and the
shareholders and shall have general charge and control over the affairs of the
corporation subject to the Board of Directors. He shall sign or countersign all
certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors and shall perform all such other duties as are
incident to his office or are required by him by the Board of Directors.
3. The VICE PRESIDENT shall exercise the functions of the President during
the absence or disability of the President and shall have such powers and such
duties as may be signed to him, from time to time, by the Board of Directors.
4. The SECRETARY shall issue notices for all meetings as required by the By-
Laws, shall keep a record of the minutes of the proceedings of the meetings of
the shareholders and Directors, shall have charge of the corporate books, and
shall make such reports and perform such other duties as are incident to his
office, or properly required of him by the Board of Directors. He shall be
responsible that the corporation complies with Section 78.105 of the
4-6
<PAGE>
Nevada Revised Statutes and supplies to the Nevada Resident Agent or Registered
Office in Nevada, any and all amendments to the corporation's Articles of
Incorporation and any and all amendments or changes to the By-Laws of the
corporation. In compliance with Section 78.105, he will also supply to the
Nevada Resident Agent or Registered Office in Nevada, and maintain, a current
statement setting out the name of the custodian of the stock ledger or duplicate
stock ledger, and the present and complete Post Office address, including street
and number, if any, where such stock ledger or duplicate stock ledger is kept.
5. The TREASURER shall have the custody of all monies and securities of the
corporation and shall keep regular books of account. He shall disburse the funds
of the corporation in payment of the just demands against the corporation, or as
may be ordered by the Board of Directors, making proper vouchers for such
disbursements and shall render to the Board of Directors, from time to time, as
may be required of him, an account of all his transactions as Treasurer and of
the financial condition of the corporation. He shall perform all duties incident
to his office or which are properly required of him by the Board of Directors.
6. The RESIDENT AGENT shall be in charge of the corporation's registered
office in the State of Nevada, upon whom process against the corporation may be
served and shall perform all duties required of him by statute.
7. The salaries of all Officers shall be fixed by the Board of Directors and
may be changed, from time to time, by a majority vote of the Board.
8. Each of such Officers shall serve for a term of one (1) year or until
their successors are chosen and qualified. Officers may be re-elected or
appointed for successive annual terms.
4-7
<PAGE>
9. The Board of Directors may appoint such other Officers and Agents, as it
shall deem necessary or expedient, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined,
from time to time, by the Board of Directors.
10. Any Officer or Agent elected or appointed by the Directors may be removed
by the Directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
11. A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Directors for the unexpired
portion of the term.
ARTICLE V INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Corporation shall indemnify any and all of its Directors and Officers,
and its former Directors and Officers, or any person who may have served at the
corporation's request as a Director or Officer of another corporation in which
it owns shares of capital stock or of which it is a creditor, against expenses
actually and necessarily incurred by them in connection with the defense of any
action, suit or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been Director(s) or Officer(s) of the
corporation, or of such other corporation, except, in relation to matters as to
which any such Director or Officer or former Director or Officer or person shall
be adjudged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of duty. Such indemnification shall not be deemed
exclusive of any other rights to which those indemnified may be entitled, under
By-Law, agreement, vote of shareholders or otherwise.
4-8
<PAGE>
ARTICLE VI DIVIDENDS
The Directors may, from time to time, declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE VII WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be given
to any shareholder or Director of the corporation under the provisions of these
By-Laws or under the provisions of the Articles of Incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE VIII AMENDMENTS
1. Any of these By-Laws may be amended by a majority vote of the
shareholders at any annual meeting or at any special meeting called for that
purpose.
2. The Board of Directors may amend the By-Laws or adopt additional By-Laws,
but shall not alter or repeal any By-Laws adopted by the shareholders of the
company.
CERTIFIED TO BE THE BY-LAWS OF:
The Enterprise, Inc.
BY: /s/ Maureen Abato
--------------------------------
Secretary
4-9
<PAGE>
EXHIBIT 3.5
BYLAWS
of
INTERNETSTUDIOS.COM, INC.
a Nevada corporation
ARTICLE 1
Offices
Section 1. The registered office of this corporation is in the city of Carson
City, Nevada,
Section 2. The corporation may also have offices at other places both within
and without the State of Nevada as the directors may determine or the business
of the corporation may require.
ARTICLE 2
Meetings of Stockholders
Section 1. Annual meetings of the stockholders must be held at the registered
office of the corporation or at any other place within or without the State of
Nevada as the directors may decide. Special meetings of the stockholders may be
held at the time and place within or without the State of Nevada as is stated in
the notice of the meeting, or in a duly executed waiver of notice.
Section 2. Annual meetings of the stockholders must be held on the anniversary
date of incorporation each year if it is not a legal holiday and, and if it is a
legal holiday, then on the next secular day following, or at another time as the
directors may decide, at which the stockholders will elect the directors and
transact any other business that is properly before the meeting.
Section 3. The president or the secretary may, by resolution of the directors
or on the written request of the stockholders owning a majority of the issued
and outstanding shares and entitled to vote, call special meetings of the
stockholders for any purpose unless otherwise prescribed by statute or by the
articles of incorporation. A request must state the purpose of the proposed
meeting.
Section 4. Notices of meetings must be written and signed by the president or
vice-president or the secretary or an assistant secretary or by any other person
designated by the directors. The notice must state the purpose for which the
meeting is called and the time and the place, which may be within or without the
State, where it is to be held. A copy of the notice must be either delivered
personally or mailed, postage prepaid, to each stockholder of record entitled to
vote at the meeting not less than 10 and not more than 60 days before the
meeting. If it is mailed, it must be directed to a stockholder at the address
that appears upon the records of the corporation and is deemed to be delivered
to the stockholder when it is deposited into the mail. If a stockholder is a
corporation, association or partnership, the notice is deemed to have been
delivered to the stockholder if it is delivered personally to an officer of the
corporation or association, or to any member of a partnership. A transferee is
not entitled to notice of a meeting if the stock is transferred after the notice
is delivered and before the meeting is held.
Section 5. Business transactions at any special meeting of stockholders are
limited to the purpose stated in the notice.
<PAGE>
Section 6. The holders of one-third of the stock issued and outstanding and
entitled to vote and present in person or represented by proxy, constitutes a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the articles of incorporation. If
a quorum is not present or represented at any meeting of the stockholders, the
stockholders who are entitled to vote and present in person or represented by
proxy may adjourn the meeting from time to time, without notice other than
announcements at the meeting. At such adjourned meeting, the quorum shall be
equal to the number of issued and outstanding shares of the corporation present
in person or by proxy and any business may be transacted at the adjourned
meeting as originally notified. The shareholders present at a duly organized
meeting may continue to transact business until adjournment of the meeting,
notwithstanding the withdrawal of shareholders from the meeting so that less
than a quorum remains.
Section 7. When a quorum is present or represented at any meeting, the vote of
the holders of 10% of the stock having voting power present in person or
represented by proxy is sufficient to elect directors or to decide any question
brought before the meeting unless the statute or the articles of incorporation
specify that the question requires that a different percentage is required to
decide the question.
Section 8. Each stockholder of record of the corporation is entitled at each
meeting of the stockholders to one vote for each share standing in his name on
the books of the corporation. Any stockholder may demand that the vote for
directors and any question before the meeting be by ballot.
Section 9. At any meeting of the stockholders any stockholder may be
represented and vote by a proxy or proxies appointed by the stockholder in
writing. If the written proxy designates two or more persons to act as proxies,
a majority of the designated persons present at the meeting, or one if only one
is present, has the powers conferred by the written instruction. No proxy or
power of attorney to vote may be voted at a meeting of the stockholders unless
it has been filed with the secretary of the meeting when required by the
inspectors of election. All questions regarding the qualifications of voters,
the validity of proxies, and the acceptance or rejection of votes must be
decided by the inspectors of election who are appointed by the directors, or if
not appointed, then by the officer presiding at the meeting.
Section 10. Any action that may be taken by the vote of the stockholders at a
meeting may be taken without meeting if it is authorized by the written consent
of stockholders holding at least a majority of the voting power, unless the
provisions of the statute or the articles of incorporation require a greater
proportion of voting power to authorize the action, in which case the greater
proportion of written consents is required.
ARTICLE 3
Directors
Section 1. The directors must manage business of the corporation and they may
exercise all the powers of the corporation and do any lawful thing unless the
statute or the articles of incorporation or these bylaws specify that the
stockholders have the power to do the thing.
Section 2. The number of directors that constitutes the whole board may not be
less than one or more than eight. The directors at any time may increase or
decrease the number of directors to not less than one and not more than eight.
The stockholders will elect the directors at the annual meeting of the
stockholders and, except as provided in section 3 of this article, each
director's term of office will be one year or until a successor is elected and
qualified. Directors may be re-elected for successive annual terms. Directors
need not be stockholders.
Section 3. A majority of the remaining directors, even if they are less than a
quorum, or a sole remaining director may fill any vacancies in the board of
directors, including those caused by an increase in the number of directors, and
each director so elected holds office until a successor is elected at the annual
or a special meeting of the stockholders. The holders of two-thirds of the
outstanding shares of stock entitled to vote may at any time peremptorily
terminate the term of office of all or any of the directors by voting at a
meeting called for the purpose
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or by a written statement filed with the secretary or, if the secretary is
absent, with any other officer. The removal is effective immediately even if
successors are not elected simultaneously, and the resulting vacancies on the
board of directors may be filled only from the stockholders.
A vacancy on the board of directors is deemed to exist if a director dies,
resigns or is removed, or if the authorized number of directors is increased, or
if the stockholders fail to elect the number of directors to be elected at any
annual or special meeting of stockholders at which any director is to be
elected.
The stockholders may elect a director at any time to fill any vacancy not
filled by the directors. If the directors accept the resignation of a director
tendered to take effect at a future time, the board or the stockholders may
elect a successor to take office when the resignation becomes effective.
Neither the directors nor the stockholders can reduce the authorized number
of directors to cause the removal of any director before the expiration of his
term of office.
ARTICLE 4
Meeting of the Board of Directors
Section 1. Regular meetings of the board of directors must be held at any place
within or without the State that is designated by a resolution of the board or
the written consent of all members of the board. In the absence of a
designation, regular meetings must be held at the registered office.
Section 2. The first meeting of each newly elected board of directors should be
held immediately following the adjournment of the meeting of stockholders and at
the place of the meeting. A notice of the meeting is not necessary in order
legally to constitute the meeting if a quorum is present. If the meeting is not
held then, it may be held at the time and place that is specified in a notice
given as these bylaws provide for special meetings of the directors.
Section 3. Regular meetings of the board of directors may be held without call
or notice at the time and at the place that is fixed by the directors.
Section 4. Special meetings of the directors may be called by the chairman or
the president or by the vice-president or by any two directors.
Written notice of the time and place of special meetings must be delivered
personally to each director, or sent to each director by mail or by other form
of written communication, charges prepaid, addressed to the director at the
address as it is shown upon the records or, if not readily ascertainable, at the
place in which the meetings of the directors are regularly held. If the notice
is mailed or telegraphed, it will be deposited in the postal service or
delivered to the telegraph company at least 48 hours before the meeting is
scheduled to start. If the notice is delivered or faxed, it must be delivered or
faxed at least 24 hours before the meeting is scheduled to start. Delivery as
described in this article is be legal and sufficient notice to the director.
Section 5. Notice of the time and place for convening an adjourned meeting need
not be given to the absent directors if the time and place has been fixed at the
meeting adjourned.
Section 6. The transaction of business at any meeting of the directors, however
called and noticed or wherever held, is as valid as though transacted at a
meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice or a consent to meeting's being held, or written
approvals are filed with the corporate records or made a part of the minutes of
the meeting.
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Section 7. A majority of the authorized number of directors constitutes a
quorum for the transaction of business, except to adjourn as described in these
bylaws. Every decision made by a majority of the directors present at a meeting
duly held at which a quorum is present is deemed to be the decision of the board
of directors unless a greater number is required by law or by the articles of
incorporation. Any action of a majority, although not at a regularly called
meeting, and the record of it if the other directors have consented in writing,
is as valid and effective in all respects as if it were passed by the board in
regular meeting.
Section 8. A quorum of the directors may adjourn any directors' meeting to meet
again at a stated day and hour; but, in the absence of a quorum, a majority of
the directors present at any directors' meeting, either regular or special, may
adjourn the meeting to the next regular meeting of the board.
ARTICLE 5
Committees of Directors
Section 1. The directors may, by resolution adopted by a majority of them,
designate one or more committees of the directors, each to consist of two or
more of the directors. A committee may exercise the power of the whole board in
the management of the business of the corporation and may authorize the fixing
of the seal of the corporation to any document that requires it. The directors
may name the committee. The members of the committee present at any meeting and
not disqualified from voting may, whether or not they constitute a quorum,
unanimously appoint another member of the board to act at the meeting in the
place of any absent or disqualified member. The consent of a majority of the
members or alternate members at any meeting of a committee that has a quorum is
required to approve any act of the committee.
Section 2. The committee must keep regular minutes of their proceedings and
report them to the whole board.
Section 3. Any action that must or may be taken at meetings of the directors or
any committee of them may be taken without a meeting if the directors on the
board or committee consent unanimously in writing and the written consent is
filed with the minutes of the proceedings of the board or committee.
ARTICLE 6
Compensation of Directors
Section 1. The directors may be paid their expenses for attending each meeting
of the directors and may be paid a fixed sum for attendance at each meeting of
the directors or a stated salary as director. No payment precludes any director
from serving the corporation in any other capacity and being compensated for the
service. Members of special or standing committees may be allowed like
reimbursement and compensation for attending committee meetings.
ARTICLE 7
Notices
Section 1. Notices to directors and stockholders must be written and delivered
personally or mailed to the directors or stockholders at their addresses as they
appear on the books of the corporation. Notices to directors may also be given
by fax and by telegram. Notice by mail, fax or telegram is deemed to be given
when the notice is mailed, faxed or telegraphed.
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Section 2. Whenever all parties entitled to vote at any meeting, whether of
directors or stockholders, consent, either by writing on the records of the
meeting or filed with the secretary, or by their presence at the meeting or oral
consent entered on the minutes, or by taking part in the deliberations at the
meeting without objection, the doings of the meeting are as valid as if they
were done at a meeting regularly called and noticed, and at the meeting any
business may be transacted that is not excepted from the written consent if no
objection for want of notice is made at the time and, if any meeting is
irregular for want of notice or consent and a quorum was present at the meeting,
the proceedings of the meeting may be ratified and approved and rendered valid
and the irregularity or defect is waived if all parties having the right to vote
at the meeting consent in writing. The consent or approval of stockholders may
be by proxy or attorney, but all the proxies and powers of attorney must be in
writing.
Section 3. Whenever any notice is required to be given under the provisions of
the statute, the articles of incorporation or these bylaws, a written waiver
signed by the persons entitled to the notice, whether before or after the time
stated, is deemed to be equivalent.
ARTICLE 8
Officers
Section 1. The directors will choose the officers of the corporation. The
offices to be filled are president, secretary and treasurer. A person may hold
two or more offices.
Section 2. The directors at their first meeting after each annual meeting of
stockholders will choose a chairman of the board of directors from among
themselves, and will choose a president, a secretary and a treasurer, none of
whom must be directors.
Section 3. The directors may appoint a vice-chairman of the board, vice-
presidents and one or more assistant secretaries and assistant treasurers and
other officers and agents as it deems necessary to hold their offices for the
terms and exercise the powers and perform the duties determined by the
directors.
Section 4. The directors will fix the salaries and compensation of all officers
of the corporation.
Section 5. The officers of the corporation hold their offices at the pleasure
of the directors. Any officer elected or appointed by the directors may be
removed any time by the directors. The directors will fill any vacancy occurring
in any office of the corporation by the death, resignation, removal or
otherwise.
Section 6. The chairman of the board will preside at meetings of the
stockholders and of the directors and will see that the orders and resolutions
of the directors are carried into effect.
Section 7. The vice-chairman will, if the chairman is absent or disabled,
perform the duties and exercise the powers of the chairman of the board and will
perform other duties as the directors may prescribe.
Section 8. The president is the chief executive officer of the corporation and
will manage the business of the corporation. He will execute on behalf of the
corporation all instruments requiring execution unless the signing and execution
of them is expressly designated by directors to some other officer or agent of
the corporation.
Section 9. The vice-presidents will act under the direction of the president
and, if the president is absent or disabled, will perform the duties and
exercise the powers of the president. They will perform the other duties and
have the other powers prescribed by the president or directors. The directors
may designate one or more executive vice-presidents and may specify the order of
seniority of the vice-presidents. The duties and powers of the president descend
to the vice-presidents in the specified order of seniority.
5
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Section 10. The secretary will act under the direction of the president; will
attend and record the proceedings at all meetings of the directors and the
stockholders and at the standing committees when required; will give or cause to
be given notice of all meetings of the stockholders and special meetings of the
directors; and will perform other duties that are prescribed by the president or
the directors.
Section 11. The assistant secretaries will act under the direction of the
president in the order of their seniority unless the president or the directors
decide otherwise, and they will perform the duties and exercise the powers of
the secretary if the secretary is absent or disabled. They will perform other
duties and have the other powers that are prescribed by the president and the
directors.
Section 12. The treasurer will (i) act under the direction of the president
with custody of the corporate funds and securities; (ii) keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation;
(iii) deposit all money and other valuable effects in the name and to the credit
of the corporation in the depositories that are designated by the directors;
(iv) disburse the funds of the corporation as ordered by the president or the
directors, taking proper vouchers for the disbursements; and (v) render to the
president and the directors, at their regular meetings or when the directors
require, an account of all the transactions undertaken by the treasurer and of
the financial condition of the corporation.
If the directors require, the treasurer will give the corporation a bond in
the sum and with the surety that is satisfactory to the directors for the
faithful performance of the duties of his office and for the restoration to the
corporation, if he dies, resigns, retires or is removed from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the corporation.
Section 13. The assistant treasurers in order of their seniority, or as
determined by the president or the directors, will perform the duties and
exercise the powers of the treasurer if the treasurer is absent or disabled.
They will perform the other duties and have the other powers that are prescribed
by the president or the directors.
ARTICLE 9
Certificates of Stock
Section 1. Every stockholder is entitled to have a certificate signed by the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, that certifies the
number of shares owned by him in the corporation. If the corporation is
authorized to issue more than one class of stock or more that one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of the various classes of stock or series and the
qualifications, limitation or restrictions of the rights, must be described in
full or summarized on the face or back of the certificate that the corporation
issues to represent the stock.
Section 2. If a certificate is signed (a) by a transfer agent other than the
corporation or its employees or (b) by a registrar other than the corporation or
its employees, the signatures of the officers of the corporation may be
facsimiles. If any officer who has signed or whose facsimile signature has been
placed upon a certificate ceases to be the officer before the certificate is
issued, the certificate may be issued with the same effect as though the person
had not ceased to be the officer. The seal of the corporation or a facsimile of
it may, but need not be, affixed to certificates of stock.
Section 3. The directors may direct that a new certificate be issued in place
of any certificate issued by the corporation that is alleged to have been lost
or destroyed if the person claiming the loss or destruction of the certificate
makes an affidavit of that fact. When they authorize the issuance of a new
certificate, the directors may, in their discretion and as a condition precedent
to the issuance of the new certificate, require that the owner of the lost or
destroyed certificate or his legal representative advertise the loss as it
requires or give the corporation a bond in the sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
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Section 4. When a certificate for shares, duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, is
surrendered to the corporation or the transfer agent of the corporation shares,
the corporation must, if it is satisfied that it complies with the laws and
regulations applicable to the corporation regarding the transfer and ownership
of shares, issue a new certificate to the person entitled to it and will cancel
the old certificate and record the transaction upon its books.
Section 5. The directors may fix in advance a date not more than 60 days and
not less than 10 days before the date of any meeting of stockholders, or the
date of the payment of any dividend, or the date of the allotment of rights, or
the date when any change or conversion or exchange of capital stock is
effective, or a date in connection with obtaining the consent of stockholders
for any purpose, as a record date for the determination of the stockholders
entitled to notice of and to vote at any meeting or adjournment, or entitled to
be paid any dividend, or to consent to any matter for which stockholders'
consent is required, and, in any case, only the stockholders who are
stockholders of record on the date so fixed are entitled to notice of and to
vote as the meeting or any adjournment, or to be paid a dividend, or to be
allotted rights, or to exercise the rights, or to consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
the record date is fixed.
Section 6. The corporation is entitled to recognize the person registered on
its books as the owner of the share as the exclusive owner for all purposes
including voting and dividends, and the corporation is not bound to recognize
any other person's equitable or other claims to or interest in the shares,
whether it has express or other notice of a claim, except as otherwise provided
by the laws of Nevada.
ARTICLE 10
General Provisions
Section 1. The directors may declare dividends upon the capital stock of the
corporation, subject to the provisions of the articles of incorporation, if any,
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 articles of incorporation.
Section 2. Before it pays any dividend, the corporation may set aside out of
any funds of the corporation available for dividends the sum that the directors,
in their absolute discretion, think proper as a reserve to meet contingencies,
or for equalizing dividends, or for repairing and maintaining any property of
the corporation, or for another purpose that the directors determine are in the
interests of the corporation, and the directors may modify or abolish any
reserve in the manner that it was created.
Section 3. All checks or demands for money and notes of the corporation must be
signed by the officers or other persons that are designated by the directors.
Section 4. The directors will fix the fiscal year of the corporation.
Section 5. The directors may resolve to adopt a corporate seal for the
corporation. The name of the corporation must be inscribed on the seal with the
words "Corporate Seal" and "Nevada". The seal may be used by causing it or a
facsimile of it to be impressed or affixed or in any manner reproduced.
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ARTICLE 11
Indemnification
Section 1. Every person who was or is a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, because he or a person whom he
legally represents is or was a director or officer of the corporation or is or
was serving at the request of the corporation or for its benefit as a director
or officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, is indemnified and held harmless to
the fullest extent legally permissible under the General Corporation Law of the
State of Nevada from time to time against all expenses, liability and loss
(including attorney's fees, judgments, fines and amounts paid or to be paid in
settlements) reasonably incurred or suffered by him in connection with his
acting. The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation. The right of indemnification is a contract right that may be
enforced in any manner desired by the person. The right of indemnification does
not extinguish any other right that the directors, officers or representatives
may have or later acquire and, without limiting the generality of the statement,
they are entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law or otherwise, as well as their
rights under this article.
Section 2. The directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against the person and incurred in any capacity or arising out of the
status, whether or not the corporation would have the power to indemnify the
person.
Section 3. The directors may adopt other bylaws regarding indemnification and
may amend the bylaws to provide at all times the fullest indemnification
permitted by the General Corporation Law of the State of Nevada.
ARTICLE 12
Amendments
Section 1. The bylaws may be amended by the majority vote of all the record
holders of stock issued and outstanding and entitled to vote at any annual or
special meeting of the stockholders, if the notice of the meeting contains a
notice of the intention to amend.
SECTION 2. The directors by a majority vote of the whole board of directors at
any meeting may amend these bylaws, including bylaws adopted by the
stockholders, but the stockholders may specify particulars of the bylaws that
cannot be amended by the board of directors.
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Exhibit 10.3
Online Films, LLC
c/o Internetstudios.com, Inc.
1351 Fourth Street
Suite 227
Santa Monica, California 90401
November 12, 1999
Mediachase, Ltd.
8286 Santa Monica Boulevard
West Hollywood, California 90046
Ladies and Gentlemen:
Reference is hereby made to the Deal Memo, dated September 9, 1999,
between Mediachase, Ltd. ("Mediachase") and Online Films, LLC ("Online")
regarding two potential joint ventures known as ReporterTV.com and
StudioBuzz.com (the "Deal Memo"). The parties have been unable to conclude the
negotiation of the potential transaction contemplated in the Deal Memo or the
documentation of the "Definitive Agreements" (as defined in the Deal Memo) as of
the date hereof and agree that they will be unable to do so by expiration of the
negotiating period specified in the Deal Memo. Therefore, the parties agree
that the Deal Memo and any obligations thereunder shall be deemed terminated and
of no further force and effect.
However, in consideration of Online agreeing to cause
Internetstudios.com, Inc., to advance Mediachase additional funds pursuant to
that certain Secured Promissory Note, dated November 12, 1999, executed by
Mediachase and Internetstudios.com, Inc. Online and Mediachase agree to continue
to negotiate in good faith, through January 31, 2000, the terms and conditions
of any long form documents necessary to accomplish the transaction contemplated
in the attached diagrams. In the event that long form agreements are not
executed on or before January 31, 2000, either party shall have the right to
terminate negotiations.
Prior to January 31, 2000, Mediachase agrees not to enter into a
transaction with another third party to acquire the rights or interests in
ReporterTV.com or StudioBuzz.com (or negotiate for any such acquisition).
Online agrees that during such period, it will not acquire (or negotiate with
any third party to acquire) any projects competitive with such projects.
<PAGE>
If the above accurately reflects our understanding and agreement,
please so indicate by signing this letter in the space provided below.
Very truly yours,
ONLINE FILMS, LLC
By: _________________________________
Its: _________________________________
Acknowledged and Agreed:
MEDIACHASE, LTD.
By: ______________________________
Its: ______________________________
2
<PAGE>
Exhibit 10.4
SECURED PROMISSORY NOTE
-----------------------
$700,000 Los Angeles, California
November 12, 1999
FOR VALUE RECEIVED, the undersigned, MEDIACHASE LTD., a Delaware
corporation ("Borrower") promises to pay to the order of INTERNETSTUDIOS.COM,
INC., a Nevada corporation ("Lender"), at 1351 Fourth Street, Suite 227, Santa
Monica, California 90401, or at such other place as Lender may from time to time
designate, the principal sum of Seven Hundred Thousand Dollars ($700,000), or so
much thereof as shall have been advanced against this Note and shall be
outstanding, and to pay interest on the unpaid principal balance from time to
time outstanding at the rate of ten percent (10%) per annum until paid,
commencing on the date hereof. Principal and interest under this Note shall be
due and payable in full on the earlier of (i) January 31, 2000, and (ii) the
Transaction Closing Date (as hereinafter defined). As used herein, the term
"Transaction Closing Date" shall mean the date on which the transactions
contemplated by that certain Deal Memo, dated September 9, 1999, between
Borrower and Online Films, LLC, a Delaware limited liability company and an
entity in which Lender holds a 91.847% membership interest, are consummated.
Lender is hereby authorized (but not obligated, and no failure by Lender to
do so shall relieve Borrower of its obligation hereunder to repay all amounts
advanced hereagainst and interest thereon), at its option, to endorse the date
and amount of each advance made against this Note and each payment of principal
and interest thereon made with respect to this Note on Schedule "A" attached
hereto and by this reference incorporated herein. Borrower acknowledges that
Five Hundred Sixty Thousand Dollars ($560,000) has been loaned to Borrower under
that certain Loan Agreement, dated October 28, 1999 and that certain Promissory
Note, dated October 28, 1999, each between Borrower and Lender, which Loan
Agreement and Promissory Note (as well as predecessor loan agreements and notes
executed by Borrower or ReporterTV.com in favor of Lender) shall, upon the
execution of this Note, be replaced and superceded by this Note and be of no
further force or effect.
In no contingency or event whatsoever, whether by reason of advancement of
the proceeds hereof, acceleration of maturity of the unpaid principal balance,
or otherwise, shall the amount paid or agreed to be paid to Lender for the use
or forbearance of money advanced hereunder exceed the highest lawful rate
permissible under any law which a court of competent jurisdiction may deem
applicable hereto. If, from any circumstances whatsoever, the performance of
any provision of this Note would cause such limit to be exceeded, then, ipso
----
facto, the obligation to be fulfilled shall be reduced to such limit, and if
- -----
from any circumstances whatsoever Lender ever receives as interest an amount
which would exceed the highest lawful rate, the amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance due
hereunder and not to the payment of interest.
At the option of Lender exercised by written notice to Borrower, this Note
shall become immediately due and payable upon failure to pay when due any
payment of principal, interest or expenses due hereunder, which non-payment
continues for a period of 30 days thereafter; provided that in the event at the
conclusion of such 30 day period, Borrower has delivered to Lender a copy of a
bona fide commitment letter from a third party to provide financing in an amount
at least equal to all amounts due and payable hereon, such 30 day grace period
shall be extended for another 30 days, at the conclusion of which this Note
shall become due and payable in full. This Note shall automatically become due
and payable, without notice or demand and without the need for any action or
election by Lender, upon the occurrence at any time of any of the following
events of default: (i) the commencement of proceedings in bankruptcy or for the
reorganization of Borrower, or the readjustment of any of the debts of Borrower,
under the Federal Bankruptcy Code, as amended, or any party thereof, or under
any other laws, whether state or federal, for the relief of debtors, now or
hereafter existing, by Borrower, or against Borrower,
<PAGE>
which shall not be discharged within thirty (30) days of their commencement;
(ii) the appointment of a receiver, trustee or custodian for Borrower or for any
substantial part of the assets of Borrower, or the institution of proceedings
for the dissolution or the full or partial liquidation of Borrower, and such
receiver or trustee shall not be discharged within thirty (30) days of his or
its appointment, or such proceedings shall not be discharged within thirty (30)
days of their commencement, or the discontinuance of the business or the
material change in the nature of the business of Borrower; or (iii) the
liquidation or dissolution of Borrower.
As security for the full and timely payment of the amounts payable by
Borrower to Lender pursuant to this Note, Borrower hereby grants to Lender a
continuing first priority security interest in and lien upon and pledges and
assigns to Lender for security purposes, all of its right, title and interest
throughout the universe in and to the Collateral (as defined below), whether now
or hereafter acquired and wherever located. In the event that Borrower defaults
in its obligation to pay any amounts due hereunder (which default is not cured
within the grace period set forth above), Lender shall have, in addition to all
of its rights and remedies under this Note, all of the rights and remedies of a
secured party under applicable law and in equity (including, without limitation,
all of the rights and remedies of a secured party under the Uniform Commercial
Code of the State of California). The term "Collateral" shall mean all right,
title and interest in any personal property assets of Borrower used solely in
connection with the operation of the business of ReporterTV.com or
StudioBuzz.com, whether now owned or hereafter acquired and wherever located,
including, without limitation, any accounts, accounts receivable, contract
rights, general intangibles, inventory, equipment, goods, documents,
instruments, chattel paper, cash, deposit accounts, policies of insurance, work-
in-progress (including all work with respect to the website for
onlinefilmsales.com) and all products, replacements or substitutions for, and
proceeds of, and accessions and additions to any and all of the foregoing
property and interests in property, and all payments under any indemnity,
warranty or guarantee payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral, and all books and records relating
solely to any of the foregoing Collateral. At Borrower's sole cost and expense,
Borrower will duly execute and deliver to Lender such further agreements,
documents and instruments (including, without limit, Uniform Commercial Code
financing statements naming Borrower as a debtor and Lender as secured party,
and describing the Collateral) and do or cause to be done such further acts as
may be necessary or proper to evidence and/or perfect the security interests of
Lender in the Collateral or to otherwise carry out more effectively the
provisions and purposes of this Note, in each case as Lender may from time to
time request. Without limiting the generality of the foregoing, Borrower agrees
to promptly negotiate in good faith with Lender upon request to the end of
completing a security agreement confirming the grant of the security interest
granted herein, containing such terms and conditions as are customary in
transactions of this nature.
Until such time as all amounts payable by Borrower to Lender pursuant to
this Note are paid in full, Borrower agrees that it shall not directly or
indirectly, whether voluntarily, involuntarily, by operation of law or otherwise
sell, assign, transfer, exchange, lease, lend, grant any option with respect to
or dispose of any of the Collateral other than pursuant to arms-length
transactions done in the ordinary course of the business of either
ReporterTV.com or StudioBuzz.com and other than Permitted Encumbrances (as
hereafter defined) (each, a "Transfer"). As used herein, the term "Permitted
Encumbrances" shall mean (i) mechanic's, materialmen's and similar liens, (ii)
liens for taxes not yet due and payable or for taxes being contested in good
faith through appropriate proceedings, (iii) purchase money liens and liens
securing rental payments under capital lease arrangements arising pursuant to
arms-length transactions, (iv) liens and security interests granted in the
ordinary course of business in favor of any laboratory, guild, union or similar
entity securing obligations of Borrower or Lender in connection with the
business of ReporterTV.com or StudioBuzz.com, and (v) liens, security interests
and other encumbrances contemplated by a business plan for ReporterTV.com or
StudioBuzz.com approved in
2
<PAGE>
writing by Lender or any other liens, security interests or encumbrances
otherwise approved in writing by Lender.
Notwithstanding anything to the contrary set forth herein, Borrower agrees
that to the extent any of the Collateral is encumbered by any other lien or
security interest, other than a Permitted Encumbrance, of any party other than
Lender, Borrower shall promptly obtain from such other party either (i) a
release of such other party's lien or security interest in such Collateral (a
"Release"), or (ii) an agreement to subordinate such other party's lien or
security interest in such Collateral to that of the Lender (a "Subordination").
In the event Borrower is unable to obtain a Release or Subordination, or
Borrower breaches its agreement above with respect to Transfers of Collateral
(each, an "Indemnification Event"), the Borrower shall indemnify and hold Lender
harmless from and against all direct, out of pocket losses, liabilities, claims,
damages, costs and expenses incurred by Lender and arising out of or resulting
from the occurrence of such Indemnification Event; provided, however, that in no
-------- -------
event shall Borrower be responsible for any lost profits or any other
consequential, exemplary, special or incidental damages, directly or indirectly
relating thereto. Notwithstanding anything to the contrary set forth in this
Note, Lender shall have direct recourse against Borrower and its assets to the
extent necessary for the enforcement of Borrower's indemnification obligations
set forth in this paragraph.
Subject to Borrower's indemnification obligations above, Lender
acknowledges and agrees that, in the event that there is a default by Borrower
hereunder, Lender's sole recourse for repayment of any amounts due under this
Note shall be by proceeding against the Collateral and that Lender shall not
have recourse against Borrower or any assets of Borrower other than the
Collateral.
In the event that on or after the Maturity Date, Borrower pays in full all
principal, interest and any other amounts due under this Note, all of the
obligations of the parties under the Deal Memo referenced above (or otherwise in
connection with the transactions contemplated therein) shall be deemed
terminated and of no further force and effect. At such time, any interest that
Lender may have in any assets of Borrower (or in any assets used in connection
with the operation of ReporterTV.com or StudioBuzz.com) shall be deemed
irrevocably and automatically assigned to Borrower and Lender shall have no
further right, title or interest therein. In such case, Lender agrees to
execute and deliver to Borrower such further agreements, documents, instruments
and information and to do or cause to be done such further acts as may be
necessary or proper to evidence and/or perfect such assignment or to otherwise
carry out more effectively the provisions and purposes of this paragraph.
If this Note is not paid when due (after notice and opportunity to cure as
provided above), whether at maturity or by acceleration, Borrower promises to
pay all costs of collection, including without limitation, reasonable attorneys'
fees, and all expenses in connection with the protection or realization of the
Collateral securing this Note, whether or not suit is filed hereon or thereon.
The principal of this Note may not be prepaid in whole or in part at any
time.
No single or partial exercise of any power hereunder or under any security
agreement or other agreement securing this Note shall preclude other or further
exercise thereof or the exercise of any other power. Lender shall at all times
(after a default which is not timely cured) have the right to proceed against
any portion of the security held herefor in any such order and in any such
manner as Lender may deem fit, without waiving any rights with respect to any
other security. No delay or omission on the part of Lender in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note. The acceptance of any amount due and payable hereunder shall
not operate as a waiver with respect to any other amount then owing and unpaid.
3
<PAGE>
Presentment, demand, protest, notices of protest, dishonor and nonpayment
of this Note and all notices of every kind are hereby waived by Borrower, except
as otherwise provided herein. To the extent permitted by applicable law, the
defense of the statute of limitations is hereby waived by Borrower.
Principal and interest evidenced hereby are payable only in lawful money of
the United States. The receipt of a check shall not, in itself, constitute
payment hereunder unless and until paid in good funds.
Whenever any payment on this Note shall be stated to be due on a day which
is not a business day, such payment shall be made on the next succeeding
business day and such extension of time shall be included in the computation of
the payment of interest of this Note.
4
<PAGE>
This Note is to be governed by and construed in accordance with the laws of
the State of California except to the extent United States federal law permits
Lender to contract for, charge or receive a greater amount of interest. In any
action brought under or arising out of this Note, Borrower hereby consents to
the in personam jurisdiction of any state or federal court sitting in Los
Angeles, California waives any claim or defense that such forum is not
convenient or proper, and consents to service of process by any means authorized
by California law.
MEDIACHASE LTD.
By:__________________________
Name:
Title:
Acknowledged and Agreed to:
INTERNETSTUDIOS.COM, INC.
By:__________________________
Name:
Title:
ONLINE FILMS, LLC
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
5
<PAGE>
Schedule "A"
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Date Amount of Advance Amount of Principal Unpaid Principal Notation
Paid or Prepaid Balance Made By
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
ALLONGE
TO
SECURED PROMISSORY NOTE
Reference is hereby made to that certain Secured Promissory Note,
dated November 12, 1999, in the original principal amount of Seven Hundred
Thousand Dollars ($700,000), made by the undersigned to the order of
InternetStudios.com, Inc., a Nevada corporation (the "Note"), to which this
Allonge is attached. All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in the Note.
The Note is hereby amended by changing the original principal amount
thereof from Seven Hundred Thousand Dollars ($700,000) to One Million Forty
Thousand Dollars ($1,040,000), and accordingly all references therein to "Seven
Hundred Dollars ($700,000)" are hereby deleted, and "One Million Forty Thousand
Dollars ($1,040,000)" shall be inserted in lieu thereof.
The undersigned acknowledges that all amounts payable by the
undersigned to Lender under the Note, as increased by this Allonge, are secured
by a first priority security interest of Lender in the Collateral.
IN WITNESS WHEREOF, the undersigned has executed this Allonge,
effective as of November ___, 1999.
MEDIACHASE LTD., a Delaware corporation
By: _____________________________________
Name:
Title:
7
