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As filed with the Securities and Exchange Commission on November 10, 1999
Registration No. 0-
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTIONS
SECTION 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 4th Street, Suite 227 90401
Santa Monica, California (Zip code)
(Address of principal offices)
(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
<TABLE>
<S> <C> <C>
ITEM 1. DESCRIPTION OF BUSINESS.................................................................. 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION................................ 8
ITEM 3. PROPERTIES............................................................................... 10
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................... 11
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS............................. 12
ITEM 6. EXECUTIVE COMPENSATION................................................................... 13
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................... 13
ITEM 8. LEGAL PROCEEDINGS........................................................................ 13
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER STOCKHOLDER MATTERS 14
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.................................................. 14
ITEM 11. DESCRIPTION OF SECURITIES................................................................ 15
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS................................................ 15
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................. 16
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..... 16
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS........................................................ 17
</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" or "Company") 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, the Company was engaged in the word
processing business. On December 14, 1998, the Company 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 the Company 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 that certain Acquisition Agreement, dated September 17, 1999, between the
Company and Online Films, LLC, a Delaware limited liability company ("Online
Films"), Messrs. Robert Maclean and Mark Rutledge, the principal members of
Online Films, transferred on their own behalf, and have advised the Company that
they have transferred as nominees on behalf of other beneficial owners of the
membership interests of Online Films, a total of 91.847% of the membership
interests of Online Films in consideration of the issuance of an aggregate of
5,632,800 shares of the Company's common stock. The acquisition of 91.847% of
the membership interest of Online Films is referred to herein as the "Online
Films Acquisition." (Hereinafter, reference to InternetStudios or the Company
shall include its subsidiary, Online Films, unless the context otherwise
requires).
As a result of the Online Films Acquisition, the Company is in the business
of compiling an online database of filmed entertainment and facilitating a
digital market targeted at the entertainment industry.
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
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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;
. 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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onlinefilmsales.com
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
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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 plans to enhance the onlinefilmsales.com website to meet
the needs of buyers and vendors, and strive to improve the user experience.
InternetStudios plans to make use of the filmed entertainment data on the
onlinefilmsales.com website to be provided by information aggregators, other
industry sources, including banks, bond companies, and direct contacts within
the entertainment industry. Also, future planned enhancements to the
onlinefilmsales.com website include additional services such as broadband
trailer streaming video and autorespond e-mail distribution to targeted buyers
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 the company 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.
InternetStudios expects to hire sales personnel as demand increases.
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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. One joint venture will focus on
providing broadcasts over the Internet using streaming technology and the other
joint venture 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
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functionality.
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.
- - - - ------------------
As of October 31, 1999, InternetStudios had advanced $560,000 to MediaChase
in the form of a loan 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 $560,000
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. 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
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 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
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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.
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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview:
The Company 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, the
Company was engaged in the word processing business. On December 14, 1998, the
Company 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 the Company 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 that certain Acquisition Agreement, dated September 17, 1999,
between the Company and Online Films, Messrs. Robert Maclean and Mark Rutledge,
the principal members of Online Films, transferred on their own behalf, and have
advised the Company that they have transferred as nominees on behalf of other
beneficial owners of the membership interests of Online Films, a total of
91.847% of the membership interests of Online Films in consideration of the
issuance of an aggregate of 5,632,800 shares of the Company's common stock.
As a result of the Online Films Acquisition, the Company 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, the Company 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, the Company 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, the Company expects to derive revenues from a
number of revenue streams, including, but not limited to, transactions fees on
sales of filmed entertainment rights over the websites, subscription fees and
advertising fees from the web site.
Results of Operations
Revenues. The Company 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. The Company plans to charge a variety of fees, including
subscription and advertising fees, for such services.
Cost of Revenues. The Company currently has no cost of revenues because it
has not recognized any revenues to date. Once the Company 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.
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Sales and Marketing Expenses. Costs related to the Company's 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. The Company's 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 the Company's websites, and to attract motion pictures and
television programming for listing on the onlinefilmsales.com web site.
Research and Development Expenses. The Company's research and development
costs to date have not been significant. However, the Company 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 the Company's web sites and systems, and expenditures for
consulting services, third-party software and other costs related to
development.
General and Administrative Expenses. The Company's 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. The Company's general and
administrative expenses for the period from inception and ended September 30,
1999 were $60,020.
Liquidity and Capital Resources
From inception to September 17, 1999, the Company had financed its
operations entirely from private placements. On September 17, 1999, the Company
acquired 91.847% of the membership interest of Online Films. On September 30,
1999 the Company had $1,011,659 in cash and cash equivalents. The Company has
had negative cash flows from operating activities in each fiscal and quarterly
period to date.
In October, 1999 the Company entered into a facility lease agreement for
the Company's 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 and ended September 30, 1999.
Pursuant to the Financing Agreement, dated September 17, 1999, among the
Company, Online Films and Pacific Capital Markets, Inc. ("Pacific Capital"),
Pacific Capital will arrange for the sale of 1,000,000 shares of the Company's
common stock at $8 per share to investors in onshore transactions (the
"Financing"). As of October 31, 1999, a total of 437,500 shares of common stock
were issued to 4 non U.S. investors for a total offering price of $3,500,000.
This offering was done pursuant to Regulation S.
The Company believes that its current cash balances together with the net
proceeds of the Financing will allow the Company to fund its operations for at
least the next 12 months. However, the Company may require substantial working
capital to fund its business and it may need to raise additional capital. The
Company 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 the Company does not currently engage
in derivative or hedging activities there will be no impact to the Company's
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 the Company's 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. The Company 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.
The Company has assessed its information technology hardware and
software, including personal computers, application and network software for
year 2000 compliance readiness. The Company 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. The Company expects that any expenses incurred
for the Company to be year 2000 compliant will be immaterial.
The most significant outside control risk is possible problems
experienced by the Company's financing institutions that maintain its depository
accounts and outstanding debt. The Company 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.
The Company's 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
The Company maintains its offices in Santa Monica, California and
Vancouver, British Columbia. Pursuant to a three year lease commencing on
November 1, 1999, the Company leases offices for its corporate headquarters at
1351 4th Street, Suite 271, Los Angeles, California. The initial rent is $8,000
per month. The Company 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. The Company does not own any real estate. The
Company believes that it currently has sufficient space to carry on its
operations for the foreseeable future.
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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 the Company 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.
<TABLE>
<CAPTION>
Beneficial Ownership of Management
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>
<TABLE>
<CAPTION>
Beneficial Owner of more than 5%
Name and Address Number of Shares of Percentage of Outstanding
of Beneficial Owner Common Stock Common Stock
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>
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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
the Company's 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 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 the
Company 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 and a director of the
Company 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 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 the
Company 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.
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Heidi Lester has been Chief Executive Officer of the Company 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 the Company's officers or directors
for the period ended December 31, 1998.
Employment Agreements
There are currently no long-term employment or consulting agreements
between the Company and the executive officers or directors of the Company.
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 the Company 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.
Stock Option Plan
As of December 31, 1998, the Company has not adopted a stock option
plan.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Online Films has agreed to pay management fees to Robert Maclean, Mark
Rutledge, Michael Edwards and Heidi Lester, the executive officers of the
Company, totaling $63,000 per month.
ITEM 8. LEGAL PROCEEDINGS
The Company is not a party to any pending or threatened legal
proceeding.
13
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ITEM 9. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS
Market Information
Since September 23, 1999, the Company's common stock has been quoted
on the NASD OTC Bulletin Board under the symbol "ISTS." Prior to that date, the
Company's 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 the Company's 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.
<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
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ending December 31, 1999 High Low
- - - - ------------------------------------ ------ ------
<S> <C> <C>
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 November 1 to November 9, $6.63 $4.88
1999
</TABLE>
On November 9, 1999, the closing bid price for the common stock as
reported by the NASD OTC Electronic Bulletin Board was $5.31.
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 the Company sold since
inception without registering the securities under the Securities Act.
1. In April, 1998, the Company 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, the Company issued an aggregate of 17,200 shares of common
stock to fifteen
14
<PAGE>
investors for a total offering price of $17,200. The offering was done
pursuant to Rule 504 of Regulation D.
3. In December, 1998, the Company 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, the Company 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, the Company 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.
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
The Company 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
the Company could, if they chose to do so, elect all of the Directors.
Upon liquidation, dissolution or winding up of the Company, the assets
of the Company 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 the Company and have no right to require the Company 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 the Company, out of funds
legally available therefor. The Company 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,
the Company 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 the Company. If the legal proceeding, however,
is by or in the right of the Company, the director or officer may not be
indemnified in respect of any claim, issue or matter as to which he is adjudged
to be
15
<PAGE>
liable for negligence or misconduct in the performance of his duty to the
Company 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 the Company 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 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 the Company will not be liable for damages incurred in connection
with his actions as a director or officer to the fullest extent permitted by
law.
The Company has been advised that it is the position of the Securities
and Exchange Commission (the "Commission") that insofar as the provision of the
Company's 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 the Company's independent accountant, and the Company engaged
LaBonte & Co. ("LaBonte") as the Company's 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 the Company 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 the Company's financial statements.
Ms. Weber audited the Company's financial statements for the three
month period from the Company's 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 the
Company's financial statements. In addition,
16
<PAGE>
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.
The Company has provided Ms. Weber with a copy of the disclosures
contained herein, and has requested that she furnish the Company with a letter
addressed to the Securities and Exchange Commission stating whether she agrees
with the statements made by the Company in response to Item 304 regarding her
involvement with the Company 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.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(b) Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
2.1 Acquisition Agreement
3.1 Articles of Incorporation
3.2 Certificate of Amendment of Articles of Incorporation
3.3 By-laws
10.1 Financing Agreement
10.2 Consulting Agreement
16.1 Letter of Jody M. Weber, Certified Public Accountant
21.1 List of Subsidiaries
27.1 Financial data schedule
</TABLE>
17
<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 November ___, 1999
InternetStudios.com, Inc.
a Nevada corporation
/s/
- - - - ----------------------------
Robert K. Maclean
President
/s/
- - - - ----------------------------
Mark Rutledge
Secretary, Treasurer
18
<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 shareholders 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>
EXHIBIT 2.1
ACQUISITION AGREEMENT
---------------------
Re: Online Films LLC
THIS AGREEMENT dated for reference September 17, 1999, is among Ehealth.com,
Inc., a Nevada company of 1100 Melville Street, 6th Floor, Vancouver, B.C.,
V6E 4A6, and fax (604) 682-6509 (the "Company"); and Mark Rutledge and Rob
Maclean, both of 1040 Hamilton Street, Suite 207, Vancouver, B.C. V6B 2R9, and
fax (604) 689-8163 (together the "Principals"); and Online Films LLC, a Delaware
limited liability company of 1040 Hamilton Street, Suite 207, Vancouver, B.C.
V6B 2R9, and fax (604) 689-8163 ("Online").
WHEREAS the Company has agreed to raise $8 million to finance the development of
Online's business and the Principals have agreed to transfer all of their
interest in Online to the Company and become directors and officers of the
Company, FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
acknowledged, the parties agree that:
INTERPRETATION
--------------
1. The definitions in the recitals are part of this agreement.
2. In this agreement:
a. "Beneficiaries" means the persons with a beneficial interest in the
Principals' Interest.
b. "Business Plan" means Online's business plan dated September, 1999.
c. "Closing" means September 30, 1999.
d. "Consolidation" means the Company's proposed 3:1 consolidation of its
issued and outstanding common stock.
e. "Financing" means $8 million for the development of Online.
f. "Principals' Interest" means the Principals' interest in Online.
g. "$" means United States dollars.
TERMS AND CONDITIONS OF THE ACQUISITION
---------------------------------------
The Financing
- - - - -------------
3. The Company will raise the Financing by offering 1 million of its shares at
$8.00 per share under Regulation S of the United States Securities Act of
1933 and will advance the proceeds to Online. Online will use the proceeds
to develop its business as described in the Business Plan.
<PAGE>
The Share Transfer
- - - - ------------------
4. The Principals will transfer the Principals' Interest to the Company
immediately after the Closing so that Online becomes a wholly owned
subsidiary of the Company as of the Closing date.
5. As consideration for the Transfer, the Company will issue 6,132,800 post-
Consolidation shares in the Company's common stock to the Principals and
the Beneficiaries as soon as practicable after the Closing. The Principals
will advise the Company in writing of the names and addresses of the
Beneficiaries and the number of shares to which each is entitled under this
agreement. These shares will be subject to Rule 144 of the United States
Securities Act of 1933.
6. Online consents to the Principals' transferring the Principals'
Interest to the Company.
REPRESENTATIONS AND WARRANTIES
------------------------------
The Principals
- - - - --------------
7. The Principals represent and warrant that:
a. They own the Principals' Interest free of any claim or potential claim
by any person except the Beneficiaries and have Beneficiaries'
authority to transfer the Principals' Interest as described in this
agreement.
b. Neither they nor the Beneficiaries have any right to acquire
additional interests in Online.
c. Nothing in the Business Plan is proprietary to their employers or
former employers or any other person, and their providing their
expertise and services to Online is not an infringement of
intellectual property rights owned by any person or company.
d. The Business Plan truly and accurately reflects the business of Online
and the intentions of the Principals.
Online
- - - - ------
8. Online represents and warrants that:
a. It is a limited liability company formed and in good standing under
the laws of Delaware.
b. The Principals' Interest are fully paid and non-assessable and
represent all of their interest in Online.
c. It has granted no person a right to acquire any additional shares of
Online.
d. It has the legal capacity and authority to make and perform this
agreement.
2
<PAGE>
e. It has incurred no liabilities and entered into no contracts that are
not disclosed in writing to the Company.
f. It has conducted no business except the business that is described in
the Business Plan.
g. No claims against it or any of its principals are before any court or
regulatory authority or are pending or threatened, and it is not aware
of any ground for any claim that might succeed.
OTHER PROVISIONS
----------------
9. The Principals and Online acknowledge that this agreement was prepared for
the Company by Jeffs & Company Law Corporation and that it may contain
terms and conditions onerous to them. They expressly acknowledge that the
Company has given them adequate time to review this agreement and to seek
and obtain independent legal advice, and they represent to the Company that
they have in fact sought and obtained independent legal advice and are
satisfied with all the terms and conditions of this agreement.
10. Time is of the essence of this agreement.
11. This agreement is governed by the laws of British Columbia and must be
litigated in the courts of British Columbia.
12. Any notice that must be given or delivered under this agreement must be in
writing and delivered by hand or transmitted by fax to the address or fax
number given for the party on page 1 and is deemed to have been received
when it is delivered by hand or transmitted by fax unless the delivery or
transmission is made after 4:00 p.m. or on a non-business day where it is
received, in which case it is deemed to have been delivered or transmitted
on the next business day. Any payments of money must be delivered by hand
or wired as instructed in writing by the receiving party. Any delivery of a
thing other than a written notice or money must be delivered by hand to the
receiving party's address.
13. Neither the Principals nor Online may assign this agreement or any
part of it to another party.
14. Any amendment of this agreement must be in writing and signed by the
parties.
15. This agreement enures to the benefit of and binds the parties and
their respective successors, heirs and permitted assignees.
16. No failure or delay of the Company in exercising any right under this
agreement operates as a waiver of the right. The Company's rights under
this agreement are cumulative and do not preclude the Company from relying
on or enforcing any legal or equitable right or remedy.
3
<PAGE>
17. If any provision of this agreement is illegal or unenforceable under any
law, then it is severed and the remaining provisions remain legal and
enforceable.
18. This agreement may be signed in counterparts and delivered to the parties
by fax, and the counterparts together are deemed to be one original
document.
Ehealth.com, Inc. The Principals:
/s/ Allen Wilson /s/ Mark Rutledge
- - - - -------------------------- --------------------------------
Authorized signatory Mark Rutledge
September 19, 1999 September 23, 1999
Online Films LLC
/s/ Mark Rutledge /s/ Rob Maclean
- - - - -------------------------- --------------------------------
Mark Rutledge Rob Maclean
September 23, 1999 September 23, 1999
/s/ Rob Maclean
- - - - --------------------------
Rob Maclean
September 23, 1999
4
<PAGE>
EXHIBIT 3.1
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
APR 14 1998
No. C-8499-98
---------
DEAN HILLER SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
THE ENTERPRISE, INC.
FIRST. The name of the corporation is:
THE ENTERPRISE, INC.
SECOND. Its registered office in the State of Nevada is located at 2533
North Carson Street, Carson City, Nevada 89706 that this Corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said Corporation, and that this Corporation may conduct all
Corporation business of every kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada.
THIRD. The objects for which this Corporation is formed are: To engage in
any lawful activity, including, but not limited to the following:
(A) Shall have such rights, privileges, and powers as may be conferred upon
corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when not
inconsistent with the purposes and objects for which this corporation is
organized.
1
<PAGE>
(C) Shall have power to have succession by its corporate name for the period
limited in its certificate or articles of incorporation, and when no period is
limited, perpetually, or until dissolved and its affairs wound up according to
law.
(D) Shall have power to sue and be sued in any court of law or equity.
(E) Shall have power to make contracts.
(F) Shall have power to hold, purchase and convey real and personal estate and
to mortgage or lease any such real and personal estate with its franchises. The
power to hold real and personal estate shall include the power to take the same
by devise or bequest in the State of Nevada, or in any other state, territory or
country.
(G) Shall have power to appoint such officers and agents as the affairs of the
corporation shall require, and to allow them suitable compensation.
(H) Shall have power to make By-Laws not inconsistent with the constitution or
laws of the United States, or of the State of Nevada, for the management,
regulation and government of its affairs and property, the transfer of its
stock, the transaction of its business, and the calling and holding of meetings
of its stockholders.
(I) Shall have power to wind up and dissolve itself, or be wound up or
dissolved.
(J) Shall have power to adopt and use a common seal or stamp, and alter the
same at pleasure. The use of a seal or stamp by the corporation on any corporate
documents is not necessary. The corporation may use a seal or stamp, if it
desires, but such use or nonuse shall not in any way affect the legality of the
document.
(K) Shall have power to borrow money and contract debts when necessary for the
transaction of its business, or for the exercise of its corporate rights,
privileges or franchises,
2
<PAGE>
or for any other lawful purpose of its incorporation; to issue bonds, promissory
notes, bills of exchange, debentures, and other obligations and evidences of
indebtedness, payable at a specified time or times, or payable upon the
happening of a specified event or events, whether secured by mortgage, pledge or
otherwise, or unsecured, for money borrowed, or in payment for property
purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of the shares of the capital stock of, or
any bonds, securities or evidences of the indebtedness created by, any other
corporation or corporations of the State of Nevada, or any other state or
government, and while owners of such stock, bonds, securities or evidences of
indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its own
capital stock, and use therefor its capital, capital surplus, surplus, or other
property or fund.
(N) Shall have power to conduct business, have one or more offices, and hold,
purchase mortgage and convey real and personal property in the State of Nevada,
and in any of the several states, territories, possessions and dependencies of
the United States, the District of Columbia, and any foreign countries.
(O) Shall have power to do all and everything necessary and proper for the
accomplishment of the objects enumerated in its certificate or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the
3
<PAGE>
objects of the corporation, whether or not such business is similar in nature to
the objects set forth in the certificate or articles of incorporation of the
corporation, or any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or joint
ventures, in connection with any lawful activities, as may be allowed by law.
FOURTH. That the total number of common stock authorized that may be
issued by the Corporation is TWENTY FIVE MILLION (25,000,000) shares of stock
with a par value of $.001 (ONE TENTH OF ONE CENT) and no other class of stock
shall be authorized. Said shares may be issued by the corporation from time to
time for such considerations as may be fixed by the Board of Directors.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the By-Laws of this
Corporation, providing that the number of directors shall not be reduced to
fewer than one (1).
The name and post office address of the first Board of Directors shall be one
(1) in number and listed as follows:
NAME POST OFFICE ADDRESS
---- --------------------
Brent Buscay 2533 North Carson Street
Carson City, Nevada 89706
SIXTH. The capital stock, after the amount of the subscription price, or
par
4
<PAGE>
value, has been paid in, shall not be subject to assessment to pay the debts of
the corporation.
SEVENTH. The name and post office address of the Incorporator signing the
Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Brent Buscay 2533 North Carson Street
Carson City, Nevada 89706
EIGHTH. The resident agent for this corporation shall be:
LAUGHLIN ASSOCIATES, INC.
The address of said agent, and, the registered or statutory address of this
corporation in the state of Nevada, shall be:
2533 North Carson Street
Carson City, Nevada 89706
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the Stockholders, to make,
alter or amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate one
(1) or more
5
<PAGE>
committees, each committee to consist of one or more of the Directors of the
Corporation, which, to the extent provided in the resolution, or in the By-Laws
of the Corporation, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation. Such
committee, or committees, shall have such name, or names, as may be stated in
the By-Laws of the Corporation, or as may be determined from time to time by
resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote to the Stockholders holding
stock entitiling them to exercise at least a majority of the voting power given
at a Stockholders meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the Board of Directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its Board of Directors deems expedient and for the best
interests of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in its discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or ommission of any
such director or officer; provided,
6
<PAGE>
however, that the foregoing provisions shall not eliminate or limit the
liability of a director or officer (i) for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (ii) the payment
of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of the Corporation for acts or
omissions prior to such repeal or modification.
THIRTEENTH. This Corporation reserves the right to amend, alter, change or
repeal any provision contained in the Articles of Incorporation, in the manner
now or hereafter prescribed by statute, or by the Articles of Incorporation, and
all rights conferred upon Stockholders herein are granted subject to this
reservation.
7
<PAGE>
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose
of forming a Corporation pursuant to the General Corporation Law of the State of
Nevada, do make and file these Articles of Incorporation, hereby declaring and
certifiying that the facts herein stated are true, and accordingly have hereunto
set my hand this 14th day of April 1998.
/s/ Brent Buscay
---------------------
Brent Buscay
STATE OF NEVADA )
)SS:
CARSON CITY )
On this 14th day of April 1998 in Carson City, Nevada, before me, the
undersigned, a Notary Public in and for Carson City, State of Nevada, personally
appeared:
Brent Buscay
Known to me to be the person whose name is subscribed to the foregoing document
and acknowledged to me that he executed the same.
H.D. Baughman H.D. BAUGHMAN
-------------------- [seal] NOTARY PUBLIC - NEVADA
Notary Public Appt. Recorded in CARSON CITY
My Appt. Exp. Aug. 11, 2001
No. 97-3540-3
I, Laughlin Associates, Inc. hereby accept as Resident Agent for the previously
named Corporation.
April 14, 1998 /s/
- - - - -------------- --------------------
Date Vice President
8
<PAGE>
EXHIBIT 3.2
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
38499-98
DEC 17, 1998
Nc: /s/ Dean Heller
- - - - ----------------------
Dean Heller
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
THE ENTERPRISE, INC.
(After Issuance of Stock)
We the undersigned, Carl King, President and Tammy Cloutier, Secretary
of The Enterprise, Inc. do hereby certify:
That the Board of Directors of The Enterprise, Inc. by unanimous board
action, and on December 14, 1998, adopted the following resolution to amend the
original articles of incorporation as follows:
FIRST [Name] is hereby amended to read as follows:
The name of the corporation is eHealth.com, Inc.
FOURTH [Capital Stock] is hereby amended to read as follows:
The aggregate number of shares which this corporation shall have
authority to issue is 100,000,000 shares of stock, all of one class,
each with a par value of $0.0001 per share, which shall be known as
"common stock." All of the voting power of the capital stock of this
corporation will reside in the common stock. No capital stock of this
corporation will be subject to assessment and no holder of any share or
shares will have preemptive rights to subscribe to any or all issues of
shares of securities of this corporation.
The number of shares of said corporation outstanding and entitled to
vote on the amendment to the Articles of Incorporation is 1,117,200: that the
said change and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ Carl King
- - - - ------------------------ ------------------------
Carl King, President Tammy Cloutier, Secretary
<PAGE>
Articles of Amendment:I
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
THE ENTERPRISE, INC.
(After Issuance of Stock)
We the undersigned, Carl King, President and Tammy Cloutier, Secretary
of The Enterprise, Inc. do hereby certify:
That the Board of Directors of The Enterprise, Inc. by unanimous board
action, and on December 14, 1998, adopted the following resolution to amend the
original articles of incorporation as follows:
FIRST [Name] is hereby amended to read as follows:
The name of the corporation is eHealth.com, Inc.
FOURTH [Capital Stock] is hereby amended to read as follows:
The aggregate number of shares which this corporation shall have
authority to issue is 100,000,000 shares of stock, all of one class,
each with a par value of $0.0001 per share, which shall be known as
"common stock". All of the voting power of the capital stock of this
corporation will reside in the common stock. No capital stock of this
corporation will be subject to assessment and no holder of any share or
shares will have preemptive rights to subscribe to any or all issues of
shares of securities of this corporation.
The number of shares of said corporation outstanding and entitled to
vote on the amendment to the Articles of Incorporation is 1,117,200: that the
said change and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ Tammy Cloutier
- - - - ------------------------ --------------------------------
Carl King, President Tammy Cloutier, Secretary
Articles of Amendment:IA
<PAGE>
PROVINCE OF BRITISH COLUMBIA ) ss:
On this 15th day of December, 1998, personally appeared before me, a Notary
Public, Carl King, President of The Enterprise, Inc., who acknowledged that he
signed the above instrument.
/s/ Todd A. McKendrick
--------------------------
NOTARY PUBLIC in and for
the Province of British Columbia
TODD A. MCKENDRICK
BARRISTER & SOLICITOR
1550 - 400 BURRARD STREET
VANCOUVER, B.C. V6C 3A6
TELEPHONE: 689-2626
Articles of Amendment:3A
<PAGE>
STATE OF CALIFORNIA )
) ss
County of Los Angeles )
On this 15th day of December, 1998, personally appeared before me, a
Notary Public, Tammy Cloutier, Secretary of The Enterprise, Inc., who
acknowledged that she signed the above instrument.
BENNY LAKATOS /s/ Benny Lakatos
COMMISSION 1175460 ----------------------------
[LOGO] NOTARY PUBLIC CALIFORNIA NOTARY PUBLIC in and for the
LOS ANGELES COUNTY State of California, residing at:
MY COMM. EXPIRES MAR 6, 2002 Comm. Expires: 3/6/2002
Articles of Amendment:2
<PAGE>
EXHIBIT 3.3
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 10.1
FINANCING AGREEMENT
-------------------
THIS AGREEMENT dated for reference September 17, 1999, is among Pacific Capital
Markets, Inc. ("PCMI") of 6th Floor, Sun Life Plaza, 1100 Melville Street,
Vancouver, British Columbia, V6E 4A6, and fax (604) 682-6509; and Ehealth.com,
Inc. a Nevada company of 1040 Hamilton Street, Suite 207, Vancouver, B.C., V6B
2R9, and fax (604) 689-8163 (the "Company"); and Online Films LLC, a Delaware
limited liability company of 1040 Hamilton Street, Suite 207, Vancouver, B.C.,
V6B 2R9, and fax (604) 689-8163 ("Online").
WHEREAS PCMI has agreed to organize an $8-million financing of the Company, FOR
VALUABLE CONSIDERATION, the receipt and sufficiency of which are acknowledged,
and the following mutual promises, the parties agree that:
INTERPRETATION
--------------
1. The definition in the recitals are part of this agreement.
2. In this agreement:
a. "Acquisition Agreement" means the acquisition agreement between the
Company and the principals of Online attached as exhibit A.
b. "Business Plan" means the business plan of the Company and Online
dated September, 1999.
c. "Closing" means the later of the date of the Consolidation and the
date that this agreement is signed.
d. "Consolidation" means the 3:1 consolidation of the Company's issued
and outstanding common stock.
e. "Consulting Agreement" means the consulting agreement attached as
exhibit B.
f. "Financing" means $8 million for the development of the Company's
business as described in the Business Plan.
g. "Reg S Shares" means 1 million post-Consolidation shares of the
Company's common stock issued under Regulation S of the United
States Securities Act of 1933.
h. "Term" means 12 months from Closing.
i. "$" means United States dollars.
Advancing the Financing
- - - - -----------------------
3. PCMI will provide the Financing by arranging subscriptions for the Reg S
Shares at the price of $8 per share in the minimum increments set out in
table 1. The Company will
<PAGE>
issue the appropriate number of Reg S Shares as each stage of the Financing
is completed.
Table 1
Financing Schedule
<TABLE>
<CAPTION>
- - - - ------------------------------------------------------------------------------------------------------
Date of Subscription Number of
Financing Amount Reg S Shares Milestones
- - - - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
On Closing $ 500,000 62,500
30 Sept. 1999 1,000,000 125,000
18 Oct. 1999 1,250,000 156,250 Online can demonstrate its film auction
website.
31 Oct. 1999 750,000 93,750
15 Nov. 1999 1,000,000 125,000 ReporterTV is fully operational and
operating. Online can conduct a full
auction transaction on the website.
30 Nov. 1999 750,000 93,750
15 Dec. 1999 750,000 93,750
30 Dec. 1999 750,000 93,750
15 Jan. 2000 750,000 93,750
15 Feb. 2000 250,000 31,250
15 Mar. 2000 250,000 31,250
-------------------------------------
$8,000,000 1,000,000
</TABLE>
4. PCMI reserves the right to amend the schedule set out in table 1 if Online
fails to meet the milestones indicated in table 1, but PCMI remains
obligated to complete the Financing unless Online cannot demonstrate to
PCMI's satisfaction that the auction website can function as Online has
represented.
Right of first refusal on additional financing
- - - - ----------------------------------------------
5. The Company will give PCMI the right of first refusal to provide any
additional financing by giving PCMI a written notice of the terms and
conditions of its requirements and its proposed use of proceeds at least
two months before it requires the financing. PCMI must notify the Company
in writing within one month of its receipt of the Company's notice whether
it intends to exercise its right to provide the financing. This right of
first refusal ends if PCMI refuses to provide a specific financing.
Investor Relations
- - - - ------------------
6. PCMI will conduct the Company's investor and public relations under the
Consulting Agreement.
CONDITIONS PRECEDENT
--------------------
7. The following conditions must be satisfied before any of the Financing is
advanced as set out in table 1:
<PAGE>
a. The representations and warranties of the Company and Online must be
true and correct in all material respects.
b. The Company, Online and the principals of Online must sign the
Acquisition Agreement.
c. The Company must sign the Consulting Agreement.
POSITIVE COVENANTS
------------------
The Company and Online
- - - - ----------------------
8. During the Term, the Company and Online, and their successors by merger or
other corporate reorganization, will
a. maintain their corporate existence,
b. carry on their business in a proper and businesslike manner in
accordance with good business practices, prudently manage their cash
resources, and keep proper books of account in accordance with
generally accepted accounting principles,
c. at the end of each month, deliver to PCMI a written report describing
any strategic or material modifications of the Business Plan,
d. by the twentieth day of each month, deliver to PCMI their consolidated
financial statements for the preceding month consisting of a balance
sheet, statement of operations, statement of changes in shareholders'
equity, statement of cash flow, and notes to the financial statements,
all prepared in accordance with accounting principals generally
accepted in the United States, and
e. deliver to PCMI any other information that PCMI reasonably requests.
NEGATIVE COVENANTS
------------------
9. Neither Online nor the Company during the Term, without the written consent
of PCMI, will
a. authorize the issuance of or issue any of its shares or other
securities except those authorized by this agreement,
b. authorize any changes to the Company's charter documents,
c. cause any of its assets to be encumbered, or
d. grant any options to directors, officers and employees that may be
exercised during the Term.
<PAGE>
REPRESENTATIONS AND WARRANTIES
------------------------------
PCMI
- - - - ----
10. PCMI represents and warrants that it has the experience and expertise
required to negotiate and finalize the Financing and to perform the
Consulting Agreement.
The Company
- - - - -----------
11. The Company represents and warrants that
a. it will carry on its business through Online or its successor through
merger or other corporate reorganization,
b. the Business Plan truly and accurately reflects the business of
Online.
Online
- - - - ------
12. Online represents and warrants that
a. it is a limited liability company formed and in good standing under
the laws of Delaware.
b. it has the legal capacity and authority to make and perform this
agreement.
c. it has conducted no business except the business that is described in
the Business Plan.
d. no claims against it or any of its members are before any court or
regulatory authority or are pending or threatened, and it is not aware
of any ground for any claim that might succeed.
OTHER PROVISIONS
----------------
13. The Company and Online acknowledge that this agreement was prepared for
PCMI by Jeffs & Company Law Corporation and that it may contain terms and
conditions onerous to them. They expressly acknowledge that PCMI has given
them adequate time to review this agreement and to seek and obtain
independent legal advice, and they represent to PCMI that they have in fact
sought and obtained independent legal advice and are satisfied with all the
terms and conditions of this agreement.
14. The Company will pay out of the proceeds of the Financing all legal and
other costs in connection with the making and performing of this Agreement.
15. This is the entire agreement among the parties and replaces any earlier
understandings and agreements, whether written or oral.
16. Time is of the essence of this agreement.
<PAGE>
17. This agreement is governed by the laws of British Columbia and must be
litigated in the courts of British Columbia.
18. Any notice that must be given or delivered under this agreement must be in
writing and delivered by hand or transmitted by fax to the address or fax
number given for the party on page 1 and is deemed to have been received
when it is delivered by hand or transmitted by fax unless the deliver or
transmission is made after 4:00 p.m. or on a non-business day where it is
received, in which case it is deemed to have been delivered or transmitted
on the next business day. Any payments of money must be delivered by hand
or wired as instructed in writing by the receiving party. Any delivery of a
thing other than a written notice or money must be delivered by hand to the
receiving party's address.
19. Neither the Company nor Online may assign this agreement or any part of it
to another party.
20. Any amendment of this agreement must be in writing and signed by the
parties.
21. This agreement enures to the benefit of an binds the parties and their
respective successors, heirs and permitted assignees.
22. No failure or delay of PCMI in exercising any right under this agreement
operates as a waiver of the right. PCMI's rights under this agreement are
cumulative and do not preclude PCMI from relying on or enforcing any legal
or equitable right or remedy.
23. If any provision of this agreement is, illegal or unenforceable under any
law, the remaining provisions remain legal and enforceable.
24. This agreement may be signed in counterparts and delivered to the parties
by fax, and the counterparts together are deemed to be one original
document.
THE PARTIES' signatures below are evidence of their agreement.
Pacific Capital Markets Inc. by its authorized Online Films LLC by its
signatory on September 19, 1999: authorized signatories:
<TABLE>
<CAPTION>
<S> <C>
/s/ Rick Jeffs /s/ Mark Rutledge
- - - - --------------------------------- ----------------------------------
Mark Rutledge
September 23, 1999
Ehealth.com, Inc. by its authorized signatory
on September 19, 1999:
/s/ Allen Wilson /s/ Rob Maclean
- - - - --------------------------------- -----------------------------------
Rob Maclean
September 23, 1999
</TABLE>
<PAGE>
Exhibit A
[Intentionally Omitted]
<PAGE>
Exhibit B
[Intentionally Omitted]
<PAGE>
ADDENDUM TO FINANCING AGREEMENT
Dated for reference September 21, 1999
Among Pacific Capital Markets Inc.,
InternetStudios.com, Inc. (formerly Ehealth.com, Inc.)
and Online Films LLC
(the "Agreement")
1. This addendum is part of the Agreement.
2. The parties agree that:
a. The delay in getting the Agreement signed by all parties has delayed
PCMI's arrangement of the subscription for the Financing due on
September 30, 1999, as set out in Table 1 (the "Subscription").
b. PCMI will lend $750,000 (the "Loan") to the Company on September 30,
1999.
c. The Company will repay the Loan together with interest calculated and
compounded monthly at the rate of 10% per year and will sign the
attached loan agreement and promissory note.
d. PCMI will arrange for the Subscription proceeds to be paid to Jeffs &
Company in trust for the Company.
e. The Company authorizes Jeffs & Company to pay the principal amount of
the Loan to PCMI from the Subscription proceeds and to pay the
remainder of the Subscription proceeds in accordance with the terms of
the Agreement and its exhibits.
f. The Company will pay the accrued interest to PCMI when the principal
amount of the Loan is repaid.
3. This addendum may be signed in counterparts and delivered to the parties by
fax, and the counterparts, together are deemed to be one original document.
THE PARTIES' signatures below are evidence to their agreement.
Pacific Capital Markets Inc. Online Films LLC
by its authorized signatory: by its authorized signatory:
/s/Rick Jeffs /s/ Mark Rutledge
- - - - -------------------------------- -------------------------------
Mark Rutledge
Internet Studios.com, Inc.
by its authorized signatory:
/s/ Mike Edwards /s/ Rob Maclean
- - - - -------------------------------- -------------------------------
Rob Maclean
<PAGE>
Exhibit 10.2
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT dated for reference September 17, 1999, is between Pacific
Capital Markets, Inc. of 6th Floor, Sun Life Plaza, 1100 Melville Street,
Vancouver, B.C. V6E 4A6, and fax (604) 682-6509 (the "Consulting Group"); and
Ehealth.com, Inc., a Nevada company of Suite 207, 1040 Hamilton Street,
Vancouver, B.C., V6B 2R9, and fax (689) 8163 (the "Company").
WHEREAS the Consulting Group has agreed to provide financing, public relations,
advertising and investor relations services to the Company, IN CONSIDERATION of
the following mutual promises, the parties agree that:
1. Engagement. The Company engages the Consulting Group to provide the
----------
services described in paragraph 3 of this agreement and the Consulting
Group accepts the engagement.
2. Term. This agreement is effective from October 1, 1999, to September 30,
----
2000 (the "Term").
3. Service. The Consulting Group, working with the Company, will provide the
-------
following services (collectively the "Services") during the Term:
a. Financing Services. The Consulting Group will introduce the Company to
------------------
institutional investors, investment bankers, lending institutions and
high net worth individual investors and will assist in negotiating
the terms of debt, equity or convertible debt financing as required
by the Company.
b. Public Relations Services. The Consulting Group will design and
-------------------------
implement a public relations program for the Company to broaden
exposure to the Company's products and services and will introduce the
Company to potential customers and business alliances. The Consulting
Group may retain the services of qualified professional public
relations firms or persons to assist with or to provide the required
services.
c. Investor Relations Services. The Consulting Group will design and
---------------------------
implement an investor relations program to broaden the Company's
exposure to financial industry analysts, financial institutions,
brokerage firms, individual brokers and the investing public. The
Consulting Group may retain a qualified professional investor
relations firm to assist with or to provide the required services.
d. Advertising Services. The Consulting Group will develop an
--------------------
advertising strategy for the Company which may involve electronic,
print or broadcast advertising to promote the development and
marketing of the Company's products and services. The Consulting
Group may retain the services of a qualified professional advertising
firm to assist with or to provide the required services.
4. Provision of Services. The Consulting Group will provide the Services upon
---------------------
the terms and conditions contained in this agreement and will provide a
monthly written report
<PAGE>
describing its activities for each month. The Company acknowledges that the
Consulting Group maintains similar relationships with other public and
private companies. The Consulting Group will bear all of its costs incurred
in delivering the Services.
5. Covenants of the Company. The Company will, as required by the Consulting
------------------------
Group in order to deliver the Services and at its own cost,
a. provide administrative, technical and managerial support,
b. ensure that members of its executive and management teams designated
by the Consulting Group are available to meet with members of the
Consulting Group or agents of Consulting Group, and
c. provide any corporate information, documentation and material
requested by the Consulting Group.
6. Fee for the Services. The Company will pay the Consulting Group $2 million
--------------------
(the "Fee") for the Services during the Term of this agreement according to
the schedule set out in table 1.
<TABLE>
<CAPTION>
Table 1
Fee Payment Schedule
-----------------------------------------------------
Date of payment Amount
-----------------------------------------------------
<S> <C>
01 Oct. 99 $ 250,000
18 Oct. 99 250,000
15 Nov. 99 500,000
15 Jan. 00 500,000
15 Mar. 00 500,000
----------
$2,000,000
-----------------------------------------------------
</TABLE>
7. Company's Expenses. The Company will bear for its own account all of the
------------------
costs of providing the information, support and human resources described
in paragraph 5.
8. Direction. The Consulting Group will report to the C.E.O. or the C.O.O.
---------
of the Company, and reporting to either is deemed to be reporting to both.
9. Termination. Either party may terminate this agreement with ten days'
-----------
written notice. If the Company terminates this agreement, the unpaid
balance of the Fee is immediately due and payable to the Consulting Group
and Jeffs & Company is authorized to pay the balance to the Consulting
Group. If the Consulting Group terminates this agreement, it will forego
the unpaid balance of the Fee.
10. Currency. "$" means United States dollars.
--------
11. Independent Legal Advice. The Company acknowledges that this agreement
-----------
was prepared for the Consulting Group by Jeffs & Company Law Corporation
and that it may
2
<PAGE>
contain terms and conditions onerous to it. The Company expressly
acknowledges that the Consulting Group has given it adequate time to review
this agreement and to seek and obtain independent legal advice, and
represents to the Consulting Group that it has in fact sought and obtained
independent legal advice and is satisfied with the terms and conditions of
this agreement.
12. Notices. Any notice or other communication required or permitted by this
-------
agreement must be in writing and delivered by hand or transmitted by fax to
the address or fax number given for the party on page 1 unless the party
has notified the other of a different address or fax number for notice
under this agreement. Any notice is deemed to have been received on the day
that it is delivered by hand or transmitted by fax.
13. Governing Law. This agreement is governed by the laws of British Columbia
-------------
and must be litigated in the courts of British Columbia.
14. Assignment. The Consulting Group may assign its interest in this agreement
----------
to a company formed for the purpose of providing the Services.
15. Enurement. This agreement enures to the benefit of and binds the parties
---------
and their respective successors and permitted assigns.
16. Entire Agreement. This agreement constitutes the entire agreement between
----------------
the parties and supersedes all previous agreements, negotiations, and
discussions between the parties. This agreement may be amended or varied
only by a written agreement signed by all of the parties.
17. Counterparts. This agreement may be signed in counterparts and delivered
------------
to the parties by fax, and the counterparts together, whether original or
faxed, constitute one original document.
THE PARTIES' SIGNATURES below are evidence of their agreement.
Pacific Capital Markets Inc. Ehealth.com, Inc.
/s/ Rick Jeffs /s/ Mark Rutledge
- - - - -------------------- --------------------
Authorized signatory Authorized signatory
3
<PAGE>
EXHIBIT 16.1
November 10, 1999
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Dear Sir/Madam,
I have reviewed the section entitled "Changes in Registrant's Certifying
Accountant" as pertaining to Jody M. Weber and I agree with the statement
contained therein.
Sincerely yours,
/s/ Jody M. Weber
<PAGE>
Exhibit 21.1
Subsidiaries of the Registrant
Subsidiaries
- - - - ------------
1. Online Films, LLC (a Delaware limited liability company)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,011,659
<SECURITIES> 0
<RECEIVABLES> 100,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,269,462
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,541,717
<CURRENT-LIABILITIES> 1,035,273
<BONDS> 0
0
0
<COMMON> 7,686
<OTHER-SE> 506,444
<TOTAL-LIABILITY-AND-EQUITY> 1,541,717
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (43,883)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (43,883)
<INCOME-TAX> 0
<INCOME-CONTINUING> (43,883)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,883)
<EPS-BASIC> (0.006)
<EPS-DILUTED> (0.006)
</TABLE>
