UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
OPEN DOOR ONLINE, INC.
(Name of Small Business Issuer in its charter)
New Jersey 05-0507504
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 Dorrance Street,
Providence, Rhode Island 02905
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (401) 272-3267
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered each class of stock is to be registered
Common Stock, par value $.0001 per share
Securities to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
<PAGE>
TABLE OF CONTENTS
PART I Page
ITEM 1. Description of Business 3.......................................... 3
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 10
ITEM 3. Description of Properties......................................... 14
ITEM 4. Security Ownership of Certain Beneficial Owners
and Management .................................................... 15
ITEM 5. Directors, Executive Officers, Promoters and
Control Persons ................................................... 16
ITEM 6. Executive Compensation............................................. 20
ITEM 7. Certain Relationships and Related Transactions..................... 20
ITEM 8. Description of Securities.......................................... 21
PART II
ITEM 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters........................ 21
ITEM 2. Legal Proceedings.................................................. 23
ITEM 3. Changes in and Disagreements with Accountants...................... 23
ITEM 4. Recent Sales of Unregistered Securities............................ 23
ITEM 5. Indemnification of Directors and Officers ......................... 24
PART F/S ................................................................... 25
ITEM 1 Index to Exhibits.................................................. 49
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
(1) FORM AND YEAR OF ORGANIZATION
Open Door Online, Inc., formerly known as Genesis Media Group, Inc.,
was incorporated under the laws of the state of New Jersey on June 20, 1987.
Open Door Online uses the Internet in operating a music recording, distribution
and publishing business.
(2) ACQUISITION AGREEMENT
On June 17, 1999, Open Door Records, Inc., a Rhode Island corporation,
entered into a Plan of Exchange and Acquisition Agreement, which is described
later in this registration statement as the "Acquisition Agreement," with
Genesis Media Group, Inc., a New Jersey corporation.. This exchange was intended
to qualify as a tax-free reorganization pursuant to section 351 of the Internal
Revenue Code of 1986, as amended. Pursuant to the Acquisition Agreement, Genesis
Media Group declared a 1 for 30 reverse stock split of its existing shares and
issued 7,000,000 shares of common stock in exchange for a contribution to
Genesis Media Group of 1,000 shares of Open Door Records, which constituted 100%
of the issued and outstanding stock of Open Door Records. This transaction
caused Open Door Records to become a wholly owned subsidiary of Genesis Media
Group. The transaction also caused the former shareholders of Open Door Records
to become the controlling shareholders of Genesis Media Group, owning 7,000,000
shares, or 69%, of the total issued and outstanding shares of Genesis Media
Group. Genesis Media Group then changed its name to Open Door Online, Inc. The
existing officers and directors of Genesis Media Group resigned, and new
directors nominated by the former shareholders of Open Door Online were elected.
Prior to the execution of the Acquisition Agreement, Genesis Media Group had
operations in the record, movie and advertising business in southern California.
Genesis Media Group common stock was listed on the Over-The-Counter Bulletin
Board market prior to the completion of the Acquisition Agreement. The stock
continued to be so listed after the transactions in the Acquisition Agreement
were complete.
This Disclosure Statement is being filed for the purpose of allowing
Open Door Online, f/k/a Genesis Media Group, to maintain its listing on the
Over-The-Counter Bulletin Market exchange.
(3) PRIOR MERGER OF GENESIS AND HOLLYWOOD TELEVISION NETWORK, INC.
Genesis Media Group, Inc., was a New Jersey corporation created from
the combination of the assets of Hollywood Showcase Television Network, Inc. and
Genesis Group, Inc. on August 17, 1997. The business of Genesis Group was
offering production and post production services to the various media for
advertising, television, movie, music and CD-ROM consumption.
(4) DISCONTINUED BUSINESS
Genesis Media Group maintained office space and operations in the Los
Angeles, California area. The business of Genesis Media Group was contracting
for and editing of media for music, advertising and films. Prior to the
transactions provided for in the Acquisition Agreement, Genesis Media Group
planned to expand this contracting business and to increase utilization of its
office and operational facilities.
However, new management of Genesis Media Group determined that
developing and maintaining the capital expenditures and management intensity
that were necessary to maintain and expand this type of business were not in the
best interests of Genesis Media Group and its shareholders. Genesis Media Group
then terminated its business operations and disposed of its operating assets, in
preparation for the stock exchange transaction provided for in the Acquisition
Agreement.
(b) BUSINESS OF THE ISSUER
(1) PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS
Open Door Music. Open Door Online's online CD store, located on the
Internet at www.opendoormusic.com, offers over 250,000 music titles. To assist
customers in making music selections, the web site contains product notes,
reviews, related articles and sound samples and is open 24 hours a day, seven
days a week. It offers its customers convenient and timely product fulfillment,
including standard and overnight delivery options. Open Door Online's web site
provides an entertaining and informative resource enabling users to search and
sample music and artist information interactively through sound and graphics,
including online "sound stations" for each artist. Music posted on Open Door
Online's web site in digital form is available for downloading using Real
Audio(TM) "plug-ins." Visitors to the web site who are interested in the music
they sample may purchase it immediately online.
Open Door Records. Open Door Online has established its own record
label, Open Door Records, which uses Open Door Online's web sites, as well as
traditional distribution channels to promote, distribute and sell original and
licensed artists recordings. Open Door Online intends to license master
recordings from other record labels, acquire master recordings and publishing
catalogs and sign artists to the record label. Through its web sites, Open Door
Online intends to feature and promote individual artists and independent record
labels.
Open Door Records has begun the process of carefully selecting,
developing and promoting new talent. Camille M. Barbone, an industry
professional with over twenty years experience, has joined Open Door as one of
its Vice Presidents, assisting in the general management of the label and other
divisions of Open Door Music. Open Door Records recently signed The Harlem
Gospel Singers featuring Queen Ester Marrow. Other recently signed Christian and
Gospel artists include The Holy Rollers, World without End Records Inc. and
Delia and Meeks. Open Door Records also recently signed Jeru to an exclusive
recording contract.
Bowvau Records, Inc., owned by super DJ Quincy Vaughn, has joined the
Open Door Online distribution family. WMG Records, which is owned by Dick
Wagoner, has also joined the Open Door Records family. Several other major
artists are currently negotiating with Open Door Online.
Open Door Studios. As part of the Open Door Records division, Open Door
Online recently opened its own state of the art digital recording studio to be
utilized for both its own in-house recording projects and outside commercial
recording projects.
(2) DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES:
Open Door Online has designed an ordering system it believes is
easy-to-use and simple to understand. At any time during a visit to Open Door
Music, a customer can click on the "order now" button to place an item in his or
her personal shopping cart. The customer can continue to shop the website,
adding chosen items. When the customer is ready to submit an order, he or she
simply returns to the order page and chooses a shipping method. Open Door Online
offers shipping services by the U.S. Mail, 2-Day Federal Express or Federal
Express Overnight. If not previously registered with Open Door Online, a
customer is prompted to register at the time of purchase and enter his or her
name, address and password so that Open Door Online can update its database.
The customer has the option of securely submitting credit card
information on-line or calling or faxing the information to the Open Door Music
Customer Service Department. Open Door Online also offers the option of payment
by check or money order. By assigning a password to every buyer, the Open Door
Online ordering process facilitates repeat business by eliminating the need to
re-submit credit card and shipping information for subsequent orders. Open Door
Online keeps customers informed regarding the status of their orders, receipt
and shipment of each order and whether an item is back-ordered.
Open Door Online primarily uses Valley, a third-party fulfillment
operation, to ship CDs, cassettes, and Open Door Online's other products. Open
Door Online anticipates using Baker and Taylor to supply CDs, cassettes and
related items purchased at its web site if these items are unavailable through
Valley. All inventory is owned and stored by Valley and Baker and Taylor. Twice
daily, Open Door Online batches customer orders and electronically transmits
them to Valley. Open Door Online uses a secure network through which it
transmits data to Valley, thereby helping to ensure customer security as well as
data integrity. Valley picks, packs and ships customer orders in Open Door Music
boxes, and charges Open Door Online the negotiated rates for merchandise,
shipping and handling.
Customer billing is performed by Open Door Online, which utilizes a
third-party credit card processor, First USA, Inc. If a customer's selection is
not in stock, Open Door Online will notify the customer of the backlogged items.
Open Door Online believes that high levels of customer service and support are
critical to the value of its services and to retaining and expanding its
customer base. Open Door's Customer Service representatives are available from
10:00AM. to 10:00 PM EST on weekdays, and 10:00 AM to 6:00 PM on weekends.
(3) STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE
Open Door Online has no new publicly announced products or services.
(4) COMPETITIVE BUSINESS CONDITIONS
The market for Internet content providers is highly competitive and
rapidly changing. Since the Internet's commercialization in the early 1990's,
the number of web sites on the Internet competing for consumers, attention and
spending has proliferated. With little or no substantial barriers to entry,
Open Door Online expects that competition will continue to intensify. With
respect to competition for consumers' attention, in addition to intense
competition from Internet content providers, Open Door Online faces competition
from traditional media such as radio, television and print. Open Door Records
competes with major and other independent record labels in signing individual
artists and groups to its record label.
With respect to recorded music sales, Open Door Online competes with
numerous Internet retailers, including traditional music retail stores, chains
and mega-stores, mass merchandisers, consumer electronics stores and music
clubs.
Open Door Online believes that the primary competitive factors in
providing music entertainment products and services via the Internet are name
recognition, variety of value-added services, eases of use, price, quality of
service, availability of customer support, reliability, technical expertise and
experience.
Open Door Online's future success will depend heavily upon its ability
to provide high quality, entertaining content, along with cutting edge
technology and value added Internet service. Open Door Online's failure to
compete successfully in the music entertainment business would have a material
adverse effect on Open Door Online's business, results of operations and
financial condition.
Many of Open Door Online's current and potential competitors in the
Internet and the music entertainment businesses have longer operating
histories, significantly greater financial, technical and marketing resources,
greater name recognition and larger existing customer bases than Open Door
Online.
Many traditional store-based and online competitors have longer
operating histories, larger customer or user bases, greater brand recognition
and significantly greater financial, marketing and other resources than we do.
(5) PRINCIPAL SUPPLIERS
Open Door Online uses Valley, Inc. to fill all online orders of CDs,
cassettes and other related products. Open Door Online plans to use Baker and
Taylor, another supplier, to fill customer orders if and to the extent that
Valley is unable to do so. All inventory is owned and stored by Valley and Baker
and Taylor.
(6) DEPENDENCE ON MAJOR CUSTOMERS
Open Door Online is not currently dependent on a small number of major
customers. The Internet has changed the way people shop by providing convenience
and the ability to shop without leaving their home or office. Open Door Online
believes customers will log on to several sites searching for entertainment
products and services, and Open Door Online hopes that customers will look to
Open Door Online's web site due to its user-friendly environment and wide
variety of products and services.
(7) INTELLECTUAL PROPERTY
Open Door Online has developed sophisticated information service
delivery and user tracking systems by integrating third-party systems, when
available, and by developing proprietary tools. Open Door Online's integrated
systems and tools provide functionality in the areas of multimedia asset
management, website development, security, scalability and advanced
technologies. At the same time, the system and tools provide scalability to
maintain performance as the number of users of the systems and the amount of
data processed increases as well as adding new functionality as new technologies
emerge.
Multimedia Asset Management. A database management system indexes,
retrieves, and manipulates Open Door Online's multimedia content. The database
management system allows for rapid searching, sorting and distribution of, among
other things, audio samples, video clips, cover art, and photos. Open Door
Online operates its website environment through the use of a database server.
Website Development. The catalog of CDs and cassettes stored on Open
Door Online's database currently forms the core of the company's music
entertainment content collection and contains links to related content such as
audio samples, images, editorial content and charts. Each individual page of
Open Door Online's Open Door website is built dynamically from these elements
using a proprietary web page template technology. This template technology
separates page look and feel from the individual data elements, which eliminates
software updates for page layout changes and greatly reduces the programming
required to maintain a growing amount of content. Templates also enable web
sites with different formats to seamlessly integrate the Open Door Online store
elements such as "search" and "discography" pages. Open Door Online has
developed software that enables its editorial and creative staff to develop
content tightly linked into this environment. As a result, Open Door Online can
easily import content from third party sources.
Security. Open Door Online employs a combination of proprietary and
commercially available firewalls to keep its Internet connections secure. It
uses proprietary electronic data interchange, or "EDI," interfaces and private
networks to ensure the security of customer credit cards transactions and other
order information shared with Open Door Online's fulfillment partner and third
party billing company.
Scalability. In the rapidly changing Internet environment, the ability
to update the application system to stay current with new technologies is
important. The system's template technology and modular database design allow
the addition or replacement of server-based applications such as multimedia
formats and delivery systems, additional EDI-based fulfillment partners and
search and retrieval engines. This architecture also enables low cost deployment
of additional web sites that integrate with the shopping and entertainment genre
web sites.
(8) GOVERNMENTAL APPROVAL
At this point in time, there is no need for government approval of Open
Door Online's principal products or services.
(9) PROBABLE GOVERNMENTAL APPROVAL AND REGULATION
In the future, Open Door Online expects to be subject, both directly
and indirectly, to various laws and regulations relating to its business,
although there are few laws or regulations directly applicable today to access
to the Internet. Due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations will be adopted governing
commerce on the Internet. Such laws and regulations may cover issues such as
user privacy, pricing, content, copyrights, distribution, sales and other use
taxes and characteristics and quality of products and services. Further, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws that may impose additional burdens on
those companies conducting business online. The enactment of any additional laws
or regulations could impede the ability of Open Door Online to conduct its
business, and could also impede the growth of the Internet generally. Either of
both of these events could, in turn, decrease the demand for the business of
Open Door Online, or otherwise have an adverse effect on Open Door Online. The
applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes, contests and
sweepstakes, libel, personal privacy, rights or publicity, language requirements
and content restrictions, is uncertain and could expose Open Door Online to
substantial liability.
In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission (the "FCC") in the same manner as other telecommunications services.
For example, America's Carriers Telecommunications Association has recently
filed a petition with the FCC for this purpose. In addition, because the growing
popularity and use of the Internet has burdened the existing telecommunications
infrastructure, and many areas with high Internet use have begun to experience
interruptions in phone service, local telephone carriers, such as Pacific Bell,
have petitioned the FCC to regulate Internet service providers and online
service providers in a manner similar to long distance telephone carriers and to
impose access fees on such providers. If either of these petitions are granted,
or if the relief sought therein is otherwise granted, the costs of communicating
on the Internet could increase substantially, potentially slowing the growth in
use of the Internet.
Any such new legislation or regulation or application or interpretation
of existing laws could have an adverse effect on Open Door Online's business,
results of operations and financial condition. U.S. and foreign laws regulate
certain uses of customer information and development and sale of mailing lists.
Open Door Online believes that it is in material compliance with such laws, but
new restrictions may arise in this area that could have an adverse affect on
Open Door Online.
(10) RESEARCH AND DEVELOPMENT
Open Door Online intends to establish a small research and development
team composed of Open Door Online's current employees along with a network of
outside industry experts, who will develop and adopt new products.
(11) COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTA LAWS
Open Door Online anticipates that it will have no material costs
associated with compliance with either federal, state or local environmental
law.
(12) EMPLOYEES
Open Door Online currently has four (4) full time employees. Open Door
Online also has 15 part-time employees. Competition for qualified personnel in
certain areas of Open Door Online's industry is intense, particularly among
software development and other technical staff. Open Door Online believes that
its future success will depend in part on its continued ability to attract, hire
and retain qualified personnel.
(c) REPORTS TO SECURITY HOLDERS
Prior to filing this Form 10-SB, Open Door Online has not been required
to deliver annual reports. To the extent that Open Door Online is required in
the future to deliver annual reports to security holders through its status as a
reporting company, Open Door Online intends to deliver annual reports. Also, to
the extent Open Door Online is required in the future to deliver annual reports
by the rules or regulations of any exchange upon which Open Door Online's shares
are traded, Open Door Online intends to deliver annual reports. If Open Door
Online is not required to deliver annual reports in the future for any reason,
Open Door Online does not intend to go to the expense of producing and
delivering such reports. If Open Door Online is required to deliver annual
reports, they will contain audited financial statements as required.
Prior to the filing of this Form 10-SB, Open Door Online has not filed
reports with the Securities and Exchange Commission. Once Open Door Online
becomes a reporting company, management anticipates that Forms 3, 4, 5, 10-KSB,
10-QSB,8-K and Schedules 13D along with appropriate proxy materials will have to
be filed as they come due. If Open Door Online issues additional shares, Open
Door Online may file additional registration statements for those shares.
The public may read and copy materials contained in Open Door Online's
files with the Securities and Exchange Commission at the Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission. The Internet
address of the Commission's site is (http://www.sec.gov).
(d) YEAR 2000 DISCLOSURE
Open Door Online does not anticipate any problem in dealing with
computer entries in the year 2000 or thereafter, with any computers currently
used at any of its facilities. All of Open Door Online's computer systems are
new and have been Year 2000 compliant since their acquisition. Open Door Online
keeps current with all updates and revisions with all software Open Door Online
currently uses. It is anticipated that the software updates reflect required
revisions to accommodate transactions in the Year 2000 and thereafter. Though it
is not anticipated that Open Door Online will have a problem at the turn of the
century, Open Door Online intends to coordinate the resolution of any Year 2000
problems with the vendors of the software Open Door Online utilizes.
Nonetheless, Open Door Online recognizes the problems which may arise in
connection with the Year 2000 issue.
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. Open Door Online does not believe that it has material
exposure to the Year 2000 issue with respect to its own information systems
since its existing systems correctly define the year 2000. Open Door Online is
currently unable to predict the extent to which the Year 2000 issue will affect
its clients and customers and suppliers, or the extent to which any of them
would be vulnerable to a failure to remediate any Year 2000 issues on a timely
basis.
In addition, most of the purchases on Open Door Online's web site are
expected to be made with credit cards, and Open Door Online's operations may be
adversely affected to the extent its customers are unable to use their credit
cards due to any Year 2000 issues that are not rectified by their credit card
vendors. In a worst case scenario, if Open Door Online's customers' computer
systems or that of suppliers and vendors do not contain the necessary software
updates to be Year 2000 compliant, a multitude of problems could occur which may
include, among others, lost orders, merchandise not shipped or shipped to
incorrect addresses and credit card purchases incorrectly credited or debited.
As a result, Open Door Online could lose customers, clients, and credibility
which could have a material adverse effect on its business and its financial
condition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included herein should be read in conjunction with the
financial statements of Genesis Media group, Inc. for the two years ended
December 31, 1998 and the six months ended June 30, 1998 and 1999, Open Door
Records, Inc. for the year ended December 31, 1999 and the six months ended June
30, 1999 and 1998, and the financial statement of Open Door Online, Inc. for the
nine months ended September 30, 1999 and 1998, respectively, and the related
notes to each statement appearing elsewhere in this Form 10-SB. In addition to
historical information, the following discussion and other parts of this Form
10-SB contains forward-looking information that involves risks and
uncertainties. Actual results could differ materially from those anticipated by
this forward-looking information due to factors discussed in other sections of
this Form 10-SB.
Historical
The Company's historical financial data presented below has been
derived from financial statements of the Company and its predecessors, including
the notes thereto, appearing elsewhere herein.
The financial data includes the results of operations of Open Door
Online, Inc. for 1999, Open Door Records, Inc. for September 30, 1998 and the
results of operations of Genesis Media Group, Inc. and its predecessor,
Hollywood Showcase Television Network, Inc. for 1998 and 1997.
September 30, December 31,
----------------------- -----------------------
1999 1998 1998 1997
----------- ---------- ----------- ----------
Summary of Operations $191,064 $ - $521,562 $787,800
Net Revenues
Cost of Sales 118,385 81,564 31,039
Gross Profit 72,679 439,998 756,761
Operating Expenses 204,975 6,571 740,904 597,198
Net Profit (Loss) (132,296) (6,571) (300,906) 159,563
Summary Balance Sheet Data
Total Assets $22,794,237 $98,780 $42,457,368 $41,408,462
Total Liabilities 1,518,780 33,076 558,241 117,588
Shareholder's Equity 21,275,457 65,704 41,899,127 41,290,874
1997 and 1998
The operations of the Company for 1998 and 1997 are those of Genesis
Media Group, Inc., and its predecessor, Hollywood Showcase Television Network,
Inc. The business of those entities was editing and production of movie and
television media and commercial advertising. Genesis was unable to either
generate sufficient liquidity or capital to expand its base of operations and
acquire the necessary infrastructure to attract large production engagements.
The expansion of the business would have required substantial outlays of capital
for additional state of the art editing and production equipment. The production
business is highly competitive and requiring continual updating of production
techniques. Most contracts are awarded by competitive bid to companies with
demonstrated capability and personnel. Most contracts obtained by the Company
were relatively short term in duration and did not include the feature film
market which could extend beyond one year in duration. Genesis was not able to
develop its record library for use in the production of films or television
entertainment due to a lack of working capital to develop and release such
music.
Genesis did not have sufficient sources of capital or liquidity to
allow it to pursue its intended business lines with the intensity and stability
that was needed to compete in the west coast entertainment industry.
The businesses of Genesis were labor intensive in that they required
skilled technicians to operate the production and editing equipment. As a
result, the labor costs per hour of Genesis were greater than those found in
less skilled industries.
These factors were the major contributing circumstances which lead
Genesis to enter into the Exchange Agreement. In conjunction with the Exchange
Agreement, the new management of the Company abandoned those operations upon
completion of certain contracts in process and elected to pursue its own
business plan and expand the internet operations of Open Door Online, Inc.
acquired in the exchange with Open Door Records, Inc.
1999
Therefore, the Company does not believe that the historical results of
operations of Genesis and its predecessor are indicative of the future
operations of Open Door Online, Inc.
The operations of Open Door Online, Inc., subsequent to the exchange,
effective June 30, 1999, through the quarter ended September 30, 1999 consisted
primarily of three phases. The first phase was to wrap up the operations of the
predecessor, Genesis, to which the Company completed open contracts as required,
laid-off all west coast personnel, and set about the orderly liquidation of the
owned and leased equipment of the predecessor. This resulted in an operating
loss from discontinued operations for the period of approximately $ 171,000 in
addition to the establishment of a reserve for discontinued operation of
$500,000 to buy-out and terminate certain long term leases of production
equipment.
Second, the Company devoted substantial resources to completion of its
web based business sites and related programs, processing applications and
marketing plans. Portions of the internet sales structure were up and operating
by August, 1999. However, the Company intends to add and continue to add more
services and products as quickly as possible to capture significant market share
of the home entertainment and music distribution markets.
Third, the Company devoted its time and resources to the raising
liquidity, assembling a management team and developing strategic alliances with
artists, managers and promoters. During this period the Company raised
approximately $558,000 of new equity/liquidity.
Results of Operations
From inception to September 30, 1999 revenues have primarily consisted
of the sale of CD's from our division, Open Door Records, and from commercial
operations from our Open Door Studios.
Cost of Sales
Cost of Sales primarily represent website operating costs, CD and
fulfillment operations and artist promotions and royalties. Website operating
costs include internet development, design and programming, connectivity charges
and equipment. Future costs may include costs of acquisitions and development.
Cost of Sales for the nine month period ended September 30, 1999 for
Open Door Online, Inc. was approximately 62% of gross revenue. The operations of
Genesis Media Group, the predecessor, were not comparative. As sales volume
increases, the cost of sales, as a percentage of sales, should decrease since
fixed costs are spread over a greater base.
Sales and Marketing
Sales and marketing expense consists primarily of direct marketing
expenses, promotional activities, salaries and costs related to website
maintenance and development. We anticipate that overall sales and marketing
costs will increase significantly in the future; however, sales and marketing
expense as a percentage of net revenue may fluctuate depending on the timing of
new marketing programs and addition of sales and marketing personnel.
In the future, we anticipate that we will enter into arrangements with
additional leading artists and record labels to secure distribution and
marketing services and obtain rights to their music. Future expenses may include
costs related to promotional events, which will be expensed in the period the
event is held.
General and Administrative
General and administrative expense consists primarily of salaries,
legal and other administrative costs, fees for outside consultants and other
overhead. General and administrative expense was approximately 94% of Revenue
for the nine months ended September 30, 1999. It is anticipated that overall
general and administrative expense will decrease as a percentage of Revenue as
Revenue increases after this initial development stage.
Interest Expense
Net interest expense for the nine month period ended September 30, 1999
was $8,224. Interest costs may increase in future periods as the Company expands
through a combination of debt and equity offerings.
Liquidity and Capital Resources
As of September 30, 1999 the Company had approximately $78,580 of cash
available to support operations. Subsequent to September 30, 1999, the Company
collected a receivable in the amount of $518,000. The Company believes that it
will be able to raise such additional capital to meet its operating and
financial obligations in the future.
Future Plan of Operation
The post exchange Company has discontinued the production operations of
the predecessor and focused on branding itself as a virtual "open door" bridging
together artists and consumers from around the world and ultimately maintaining
a loyal and appreciative entertainment community. The Company's objective is to
build a global entertainment company offering a broad range of entertainment
commerce related products and to deliver a wealth of original content in a
highly personalized interactive context.
The Company recognizes that the nature and scope of its intended
business will require substantial additional financing. To meet this requirement
the Company plans to finance its cash requirements through a combination of
equity offerings and debt financing. This process will allow the Company to
complete the initial phases of its internet marketing products. Once in place,
the Company believes this should provide sufficient operating revenue to expand
the other intended areas of its business.
The internet marketing arena is highly competitive. The Company
believes that it is well placed to take advantage of this growing market and
looks to become more competitive in the entertainment and distribution sectors
of that market.
The Company will expand its workforce to meet its business plan and
growth objectives while providing quality services and products.
The overall plan of operation and objectives is detailed earlier in
this Form 10-SB.
The Company's business plan estimates that revenue will be
approximately $6.9 million in the first full year of operations subsequent to
the exchange resulting in a net operation loss for the period of approximately
$450,000. Subsequent periods project substantial net income. The loss for this
first period is due in large part to the Company expensing costs related to the
programming, promotion, setup and implementation of the internet presence
necessary for the Open Door Online activities.
ITEM 3. PROPERTIES
Real Property. Open Door Online's corporate headquarters are located at
10 Dorrance Street, Providence, Rhode Island. Open Door Online leases its
facilities and certain other equipment under operating and capital lease
agreements. Open Door Online's Metro Office is located at 206 Bryans Road,
Hampton, New Jersey. Open Door Online has executive branch offices at 46 Flat
River Road, Coventry, Rhode Island. Open Door Online's Recording Studio is
located at 40 Wilson Street, West Warwick, R.I.. Open Door Online's Internet
satellite office is located at 88 Weybosset Street, Providence, Rhode Island.
Equipment. Open Door Online currently owns approximately $146,000 of
equipment and leasehold improvements that are used in conjunction with its
recording and production studio.
Music Library. Open Door Online has a music library consisting of
original and digitally mastered music media from numerous artists from the
1940's through the 1990's. Open Door Online owns certain of the master
recordings in the Library, and has nonexclusive license rights to the rest of
the recordings. Open Door Online is currently in the process of purchasing those
master recordings to which it currently has only the nonexclusive license rights
to. This library can be used to produce original singles and albums by the
various artists, used to score motion picture productions, television
productions and specialty productions. Open Door Online intends to utilize this
product through traditional CD production and sales and MP3 digital sales over
the Internet. Pursuant to industry standards, Open Door Online is obligated to
pay artists royalties on units sold. Open Door Online has valued this library at
the lower of the appraised value or the present value of the estimated cash flow
from the sale and utilization of these assets over the next 7 years, after
consideration of production and distribution costs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Shares
Beneficially Percent of
Title of Class Name/Address of Owner Owned Class
- --------------- -------------------------------- --------------- ------------
Common CEDE 592,704 5.85%
P.O. Box 20
Bowling Green Station
New York, New York 10004
Common Don R. & Barrie M. Logan 545,530 5.38%
23355 Gondor Drive
Lake Forrest, California 90710
Common DJS Investors, Inc. 2,105,000 20.77%
46 Old Flat River Road
Coventry, Rhode Island
Common Thomas R. Carley 2,277,000 22.47%
46 Old Flat River Road
Coventry, Rhode Island (D)
Common David N. DeBaene 2,137,000 21.09%
46 Old Flat River Road
Coventry, Rhode Island (D)
Common All Officers and Directors over 5% 4,414,000 43.56%
per Individual
Com All Officers and Directors 4,939,000 48.74%
Notes: (1) Includes only officers and directors subsequent to the June
30, 1999 merger.
(D) Officer and Director of the Company
(i) All Percentages are calculated based upon 10,133,285 shares
outstanding as of the date of the filing of this Form 10-SB.
(ii) As of September 30, 1999 the Company had 1,641,377 free
trading shares outstanding and 8,491,908 restricted shares
outstanding for a total of 10,133,285 shares.
(b) SECURITY OWNERSHIP OF MANAGEMENT
Shares
Beneficially Percent of
Title of Class Name/Address of Owner Owned Class
- --------------- -------------------------------- --------------- ------------
Common David N. DeBaene 2,137,000 21.09%
Common Thomas R. Carley 2,277,000 22.47%
(1) All percentages are calculated based upon 8,951,618 shares
of common stock of Open Door Online issued and outstanding
as of the date of filing this Form 10-SB.
(c) CHANGES IN CONTROL
There is no arrangement which may result in a change of control.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
(a) IDENTITY OF DIRECTORS AND EXECUTIVE OFFICERS
As of October 1, 1999, the directors and executive officers of Open
Door Online, their ages, positions in Open Door Online, the dates of their
initial election or appointment as director or executive officer, and the
expiration of the terms as directors are as follows:
Name Age Position
- --------------------- ------ -------------------------------------------------
David N. DeBaene 40 President, Chief Executive Officer and Director
Thomas Carley 37 Vice President, Chief Operating Officer and
Director
Edmond L. Lonergan 53 Director
Anthony P. Santucci 36 Treasurer and Chief Financial Officer
Steve Panneton 41 Secretary
(1) BUSINESS EXPERIENCE
Mr. David DeBaene, one of the founders of Open Door Online, serves as
its president and CEO. At 31, David DeBaene founded JD American Workwear, Inc.,
a publicly traded manufacturer and distributor of safety Work wear and serves as
Chairman of the Board and Chief Executive Officer. Mr. DeBaene created four
styles of industrial safety work pants, which are secured by individual patents.
These products are distributed worldwide. Entrepreneur Magazine has recognized
Mr. DeBaene as one of its featured "outstanding entrepreneurs." Prior to JD
American Workwear, David DeBaene was involved in the nursing home and general
construction business. Mr. DeBaene is also a musician and played professionally
for 10 years. Mr. DeBaene has been a director of Open Door Online since June 17,
1999.
Mr. Thomas Carley, one of the founders of Open Door Online in 1997,
serves as its vice president and COO. Thomas Carley has actively been involved
in the music industry as a performer, producer and recording engineer. Mr.
Carley has recorded with RCA Records and throughout his career has been
critically acclaimed for his technique and style. Mr. Carley headed a large
general contracting firm, securing both union and non-union contracts. Mr.
Carley also has worked in accounting, real estate and insurance. Mr. Carley has
been a director of Open Door Online since July17, 1999.
Edmond L. Lonergan founded Corporate Architects, Inc., which is a
merger and acquisition consulting business specializing in reverse mergers of
private companies into inactive public companies. From 1968 to 1996 Mr. Lonergan
has founded and operated numerous high tech corporations one of which became a
public corporation. This company was honored by Inc. Magazine for becoming the
28th fastest growing high tech company in 1992. Previously, Mr. Lonergan has
held the positions of Board Chairman, President, CEO, Vice President of Sales
and Marketing, Vice President of Operations, Vice President of Finance, Director
of Research, Operating Manager, Manager of Software Development and Product
Development Consultant. Mr. Lonergan was also selected to be a member of the
White House Small Business Committee during the Carter Administration. Mr.
Lonergan has been a director of Open Door Online since June 17, 1999.
Mr. Anthony Santucci is the Chief Financial Officer and a Director of
JD American Workwear, Inc., a publicly traded manufacturer and distributor of
safety work wear. Mr. Santucci is also President of Bevco Plastics Company, a
privately held corporation. From 1992 to 1995, Mr. Santucci was Chief Financial
Officer of Southe Pointe Enterprises, Inc., a publicly held company engaged in
the distribution of home videos. Mr. Santucci also worked as a senior accountant
Ernst & Young, LLP and graduated with a B.S. in Business Administration from
Bryant College. He has been a director of Open Door Online since June 17, 1999.
Mr. Steev Panneton currently serves as Vice President of Manufacturing
and New Product Development for JD American Workwear, Inc. He has worked as a
commercial artist and illustrator for the past 10 years and is a graduate of the
College of Rhode Island. Mr. Panneton has developed several new products,
including a patented game called Vegas Run . He currently has several other
patents pending. He has been a director of Open Door Online since June 17, 1999.
All prior directors and executive officers of Open Door Online, Genesis
Media Group, Inc, the predecessor, tendered their resignations in conjunction
with the Acquisition Agreement dated June 17, 1999.
Open Door Online's directors are elected at the annual meeting of
stockholders and hold office until their successors are elected and qualified.
Open Door Online's officers are appointed by the Board of Directors and serve at
the pleasure of the Board and subject to employment agreements, if any, approved
and ratified by the Board.
(b) IDENTITY OF SIGNIFICANT EMPLOYEES
Name Age Position
- --------------------- ------ -------------------------------------------------
Camille M. Barbone 45 Vice President and General Manager
Timothy R. Dahler 29 Vice President Internet & Multimedia Development
& Production
Moses J. Calouro 29 Vice President Information Management Systems
Ms. Barbone has been involved in the music industry for over twenty-two
years. She has discovered, developed and managed many significant artists. She
has held executive positions in the Marketing and A&R divisions of Sony/Epic
Records, Polygram and Buddah and has owned and/or operated recording studios
such as Gotham Sound and Long View Farm. During this time her clients included
The Rolling Stones, Aerosmith, The Indigo Girls, Michael Bolton, The Monkees,
J.Giles, Edgar and Johnny Winters. Camille also produced the Gospel segment of
Woodstock `94 for a crowd of 350,000. She has lectured throughout the country at
seminars, workshops, and conventions and has been interviewed by major
newspapers, magazines and television specials such as 20/20, Entertainment
Tonight and Fox News.
Mr. Dahler was a co-founder of Concept-Link, Ltd., a leading service
bureau and Internet production corporation in Providence, RI. Mr. Dahler has
integrated his knowledge of art and design with leading edge communications
technology. Mr. Dahler has contracted with such companies as Fuji Film, USA,
United Technologies, Samsonite, and Fleet Bank. He has extensive experience and
commanding knowledge of both Microsoft and Macintosh operating systems and is a
graduate of Roger Williams University.
Mr. Calouro founded Maritime Information System and currently runs the
premiere Internet portal for the Maritime Industry, Maritime Global Net at
www.mgn.com. Mr. Calouro has over seven years experience producing and
maintaining Internet applications and database servers. He has contracted with
such companies as Motorola, Lloyd's of London, Arco, and AT&T.
(c) SIGNIFICANT CONSULTANTS
Bridgewater Management Group Inc. Bridgewater Management Group Inc. has
been instrumental in the creation and implementation of the Internet activities
of Open Door Online Inc. It is anticipated that Bridgewater Management Group
Inc. will continue to play an important role in the coordination and growth of
this division.
Pat Rogers. Ms.Rogers has been instrumental in the implementation of
Open Door Online's division, Open Door Records. Ms. Rogers brings well over
twenty years of experience in music publishing and licensing. It is anticipated
that Ms. Rogers will play an important role in the future publishing activities
of Open Door Online Inc.
John Paul Gauthier. Mr. Gauthier has provided significant assistance
for Open Door Online's division Open Door Records. Mr. Gauthier has assisted the
Company in production and engineering, as well as artist development and studio
design. It is anticipated that Mr. Gauthier will continue to play an important
role in these areas.
Ralph Petrarca. Mr. Petrarca has also provided significant production
and studio engineering assistance for Open Door Online's division, Open Door
Records. Mr. Petraca brings over 10 years experience in the engineering and
studio management field.
(d) FAMILY RELATIONSHIPS
There are no family relationships between the directors, executive
officers or any other person who may be selected as a director or executive
officer of Open Door Online.
(e) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of the officers, directors, promoters or control persons of Open
Door Online have been involved in the past five (5) years in any of the
following:
(1) Any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at
the time of the bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceedings or being subject to a
pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, or any Court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
(4) Being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities laws or
commodities law, and the judgment has not been reversed,
suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION
No compensation or directors fees have been paid to any executive
officer or directors of Open Door Online from the date of the exchange on June
17, 1999, to the date hereof. Open Door Online is in the process of formalizing
agreements with the executive officers and other key personnel that would
provide for compensation packages for five years with scheduled increases each
year designed to compensate such employees for allowing Open Door Online to
retain its working capital in the early years. It is expected that the annual
compensation for the CEO and COO will initially be $95,000 per year with annual
increases of $25,000 for each year of the five year term. It is also expected
that other executives' compensation will be scaled downward from these levels.
No stock appreciation plans or stock compensation plans are currently in
existence for Open Door Online.
No compensation or fees were paid to executive officers or directors of
the predecessor Company, Genesis Media Group, Inc., during 1997, 1998 or 1999.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998 and 1999, Mr. DeBaene has been a lender or guarantor of
funds to Open Door Online. As of December 31, 1998 and September 30, 1999, the
outstanding balances due him to lenders for which he has guaranteed amounts are
$113,643 and $498,622, including interest expense of $3,643 and $8,224,
respectively. Interest rates range from 12% to 20% per annum. Mr. DeBaene has
the option to convert amounts lent to him by third parties into shares of Open
Door Online upon their approval.
During 1998, Genesis Media Group, Inc. distributed to shareholders
shares of TranStar Communications, Inc. The Genesis Media Group shareholders
held 576,535 Rule 144 restricted shares of common stock of TranStar
Communications, Inc. after the distribution. These shares were subsequently sold
in 1999 for $.50 per share.
During 1998 and 1999, Mr. Logan, the former Chairman of the Board,
President and COO of Genesis Media Group, Inc. received shares of Genesis Media
Group in lieu of compensation. In 1998 and 1999, and 7,052,084 and 8,999,910
shares of Genesis Media Group, respectively, were issued to Mr. Logan under this
arrangement. These shares are equal to 235,084 and 299,997 shares of Open Door
Online, Inc. after the reverse 1 for 30 split.
ITEM 8. DESCRIPTION OF SECURITIES
Open Door Online's Articles of Incorporation authorize the issuance of
50,000,000 shares of Common Stock, $0.0001 par value per share. There is no
preferred stock authorized. The shares are fully paid, non-assessable, without
pre-emptive or other subscription rights and without cumulative voting. Holders
of Common Stock are entitled to one vote for each share on all matters to be
voted on by the stockholders. Holders of shares of Common Stock are entitled to
share ratably in dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available therefor. In
the event of a liquidation, dissolution or winding up of Open Door Online, the
holders of shares of Common Stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities.
PART II.
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION
Open Door Online's Common Stock currently trades on the
Over-The-Counter Bulletin Board (OTC:BB) under the trading symbol "NTER." The
following tables set forth the highest and lowest bid prices for the Common
Stock for each calendar month for Open Door Online and its predecessors, as
reported by the National Quotation Bureau:
Predecessor: Hollywood Television Network, Inc.
Bid Prices Ask Prices
---------------------- ----------------------
1997 High Low High Low
---------- ---------- ---------- ----------
January 1 - January 31 1 3/16 1-1/8 3/4
February 1 - February 28 1-3/16 5/8 13/16 5/8
March 1 - March 31 1-1/2 3/8 2 3/8
April 1 - April 30 2-1/4 1 2-3/8 1-9/16
May 1 - May 31 1-1/2 1 1-7/8 1
June 1 - June 30 1-1/2 7/8 1-7/8 7/8
July 1 - July 31 1-1/8 13/16 1-3/8 13/16
August 1 - August 31 3-1/16 1/2 3-15/16 11/16
September 1 - September 30 1-3/8 1 1-3/4 15/16
October 1 - October 31 1-1/8 3/4 1-1/8 3/4
November 1 - November 30 1 5/8 1 5/8
December 1 - December 31 3/4 3/8 7/8 7/16
Predecessor: Hollywood Television Network, Inc.
1998
January 1 - January 31 11/16 1/4 9/16 1/8
February 1 - February 28 1/4 1/8 1/4 3/16
March 1 - March 31 - - - -
Predecessor: Genesis Media Group, Inc.
1998
April 1 - April 30 - - - -
May 1 - May 31 1-5/8 1-5/16 1-15/16 1-5/8
June 1 - June 30 1-3/8 1-1/16 1-11/16 1-1/4
July 1 - July 31 1-3/8 5/8 1-7/16 13/16
August 1 - August 31 11/16` 3/8 11/16 7/16
September 1 - September 30 11/16 3/8 11/16 7/16
October 1 - October 31 3/8 1/4 7/16 1/4
November 1 - November 30 5/16 .15 3/8 .18
December 1 - December 31 .15 .07 3/8 .11
Predecessor: Genesis Media Group, Inc.
1999
January 1 - January 31 .15 .09 .26 .12
February 1 - February 28 .22 1/8 .30 1/8
March 1 - March 31 .20 1/8 .26 1/8
April 1 - April 30 .23 .08 .37 .13
May 1 - May 31 .21 .16 .30 .17
June 1 - June 30 .17 .10 .18 .11
July 1 - July 31 .13 .08 3/16 .12
Open Door Online, Inc.
1999 1 for 30 reverse split
August 1 - August 31 3.60 1-9/16 3.90 2.00
September 1 - September 30 4-1/8 1-9/16 4-3/4 1-7/8
The above quotations are inter-dealer quotations, and the actual retail
transactions may involve dealer retail markups, markdowns, or commissions for
market makers of Open Door Online's stock. The prices quoted are based on the
then stock outstanding and has not been adjusted for mergers, exchanges, splits
or reverse splits. There can be no assurance that an active public market for
the Common Stock will be sustained. In addition, the shares of Common Stock are
subject to various governmental or regulatory body rules which affect the
liquidity of the shares.
As of October 1, 1999, except for 1,217,210 free trading shares, all
shares issued by Open Door Online are "restricted securities" with in the
meaning of Rule 144 under the Securities Act of 1933. Ordinarily, under Rule
144, a person holding restricted securities for a period of one year may, every
three months, sell in ordinary brokerage transactions or in transactions
directly with a market maker an amount equal to the greater of one percent of
Open Door Online's then-outstanding Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. Future sales of such
shares could have an adverse effect on the market price of the Common Stock.
(b) HOLDERS
As of October 1, 1999 , there were approximately 233 registered holders
of free-trading shares and 93 holders of Open Door Online's restricted Common
Stock, as reported by Open Door Online's transfer agent. Some holders own both
free-trading and restricted shares and would be included in both classifications
above.
(c) DIVIDENDS
Open Door Online has not paid any dividends on its Common Stock. Open
Door Online currently intends to retain any earnings for use in its operations
and to finance the development and the expansion of its business. Therefore,
Open Door Online does not anticipate paying cash dividends in the foreseeable
future. The payment of dividends is within the discretion of the Board of
Directors. Any future decision with respect to dividends will depend on future
earnings, future capital needs and the registrant's operating and financial
condition, among other factors.
ITEM 2. LEGAL PROCEEDINGS
Open Door Online is not a party to, and none of Open Door Online's
property is subject to any pending or threatened legal, governmental,
administrative or judicial proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no disagreements with Open Door Online's independent
auditor. The Independent Certified Public Accountant for Open Door Records,
Inc., the predecessor to Open Door Online, Inc., also became the accountant for
Genesis Media Group, Inc., a predecessor. [Describe Jim Marshall and his
qualifications to practice before SEC.] [check for past SEC problems]
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In early 1998, Genesis Media Group, Inc, the predecessor, completed an
offering under Regulation D, Rule 504. As of May 18, 1998, there were 717,654
(i) shares of Open Door Online's common stock outstanding. Of these shares,
181,762 (i) were freely trading, while 535,892 (i) were subject to trading
restrictions.
During 1997, 1998 and 1999 Open Door Online issued 68,334 (i), 235,084
(i) and 299,997 (i) shares, respectively, of its common stock to Don R. Logan,
the former Chief Executive Office and Director of Open Door Online, in lieu of
compensation.
In conjunction with the Acquisition Agreement described above, on June
30, 1999 Open Door Online issued 7,000,000 (i) shares of its common stock to the
previous stockholders of Open Door Records, Inc.
Between July 1, 1999 and September 30, 1999 Open Door Online issued
673,994 post- exchange shares pursuant to an offering under Regulation D, Rule
504. [Describe to whom issued and for what purpose.]
Note (i) The number of shares are based on the post exchange number of shares of
Open Door Online, Inc. after the 1 for 30 reverse split on June 30, 1999.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors and officers of Open Door Online and its affiliates may not
be liable for errors in judgment or other acts, or omissions not amounting to
intentional misconduct, fraud or a knowing violation of law, since provisions to
limit such liability have been made in the Articles of Incorporation and
By-laws. These provisions allow for indemnification of the officers and
directors of Open Door Online for any liability suffered by them, or arising
from their activities as officers and directors of Open Door Online if they were
not engaged in intentional misconduct, fraud or a knowing violation of law.
Therefore, purchasers of stock of Open Door Online will have a more limited
right of action than they would have except for this limitation in the Articles
of Incorporation and By-laws.
The officers and directors of Open Door Online are accountable to Open
Door Online as fiduciaries, which means such officers and directors are required
to exercise good faith and integrity in handling Open Door Online's affairs. A
shareholder may be able to institute legal action on behalf of himself and all
other similarly stated shareholders to recover damages where Open Door Online
has failed or refused to observe the law. Shareholders may, subject to
applicable rules of civil procedure, be able to bring a class action or
derivative suit to enforce their rights, including rights under certain federal
and state securities laws and regulations. Shareholders who have suffered losses
in connection with the purchase or sale of their interest in Open Door Online in
connection with such sale or purchase, including misapplication by any such
officer or director of the proceeds from the sale of these securities, may be
able to recover such losses from Open Door Online.
PART F/S FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
GENESIS MEDIA GROUP, INC.: Page
----
Report of Independent Accountants.................................. 27
Balance Sheet - December 31, 1998 and 1997 and
June 30, 1999 and 1998 (Unaudited)................................. 28
Statements of Operations for the two years
ended December 31, 1998 and the six months
ended June 30, 1999 and 1998 (Unaudited).............................29
Statements of Cash Flows for the two years
ended December 31, 1998 and the six months
ended June 30, 1999 and 1998 (Unaudited)............................ 30
Notes to Financial Statements for the two years
ended December 31, 1998 and the six months
ended June 30, 1999 and 1998 (Unaudited)..........................31-34
OPEN DOOR RECORDS, INC.:
Report of Independent Accountants................................... 35
Balance Sheet - December 31, 1998 and
June 30, 1999 and 1998 (Unaudited).................................. 36
Statements of Operations for the year ended
December 31, 1998 and the six months ended June
30, 1999 and 1998 (Unaudited ....................................... 37
Statements of Cash Flows for the year ended
December 31, 1998 and the six months ended June
30, 1999 and 1998 (Unaudited)....................................... 38
Notes to Financial Statements for the year
ended December 31, 1998 and the six months
ended June 30, 1999 and 1998 (Unaudited)......................... 39-40
OPEN DOOR ONLINE, INC.:
Proforma Combined Balance Sheet, June 30, 1999
(Unaudited)......................................................... 41
Proforma Statement of Operations for the six
months ended June 30, 1999 (Unaudited).............................. 42
Proforma Statement of Cash Flows for the six
months ended June 30, 1999 (Unaudited).............................. 43
Note to Proforma Financial Statements for the
six months ended June 30, 1999 (Unaudited).......................... 44
OPEN DOOR ONLINE, INC.:
Combined Balance Sheet, September 30, 1999
(Unaudited)......................................................... 45
Statement of Operations for the nine months
ended September 30, 1999 (Unaudited)................................ 46
Statement of Cash Flows for the nine months
ended September 30, 1999 (Unaudited)................................ 47
Note to Financial Statements for the nine
months ended September 30, 1999 (Unaudited)......................... 48
<PAGE>
Report of Independent Accountants
To the Board of Directors
Genesis Media Group, Inc.
Los Angeles, California
We have audited the accompanying balance sheets of Genesis Media Group, Inc. as
of December 31, 1998 and 1997, and the related statements of operations and
retained earnings (deficit) and cash flows for the two years then ended. These
financial statements are the responsibility of Open Door Online's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Genesis Media Group, Inc. as of
December 31, 1998 and 1997, and the results of operations and its cash flows for
the two years then ended in conformity with generally accepted accounting
principles.
James C. Marshall, CPA, PC
Scottsdale, Arizona
July 14, 1999
<TABLE>
<CAPTION>
Genesis Media Group, Inc.
Balance Sheet
December 31, 1998 and 1997 and
June 30, 1999 and 1998 (Unaudited)
ASSETS
December 31, June 30,
-------------------------------------- ---------------------------------------
1998 1997 1999 1998
---------------- ----------------- ----------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 400 $ 10,025 $ 2,077 $ 155,952
Accounts receivable - trade 186,437 13,814 176,436 198,913
Loan receivable - trade 50,000 50,000 50,000
Prepaid expenses 111,030 51,416 600,289 130,944
Marketable securities (Note 8) 235,168 243,168
---------------- ----------------- ---------------- -----------------
583,035 75,255 819,902 778,977
Property and equipment,net of accumulated
depreciation of $37,333 and $15,733
for 1998 and 1997, respectively.
(Note 4) 661,666 162,034 638,038 161,581
Master music library (Note 5) 41,068,329 41,012,500 41,068,331 41,037,814
Other assets 144,338 158,673 143,647 131,092
---------------- ----------------- ---------------- -----------------
$ 42,457,368 $ 41,408,462 $ 42,678,818 $ 42,109,464
================ ================= ================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 17,286 $ 100,000 $ $
Payroll taxes and accrued expenses 46,735 17,588 113,895 4,649
Current portion of long term debt
(Note 6) 114,096
---------------- ----------------- ---------------- -----------------
178,117 117,588 113,895 4,649
Long term debt - capitalized leases
(Note 6) 380,124 703,464 7,776
---------------- ----------------- ---------------- -----------------
Total liabilities 558,241 117,588 817,359 12,425
Stockholders' Equity
Common Stock - par value $0.0001,
authorized 50,000,000 shares, issued and
outstanding 28,130,607 and 6,869,500,
1998 and 1997, respectively. (Notes 1,
10 and 12) 2,813 687 3,833 1,225
Additional paid in capital 42,202,434 41,295,401 42,335,153 41,966,499
Retained earnings (deficit) (306,120) (5,214) (477,527) 129,315
---------------- ----------------- ---------------- -----------------
41,899,127 41,290,874 41,861,459 42,097,039
---------------- ----------------- ---------------- -----------------
$ 42,457,368 $ 41,408,462 $ 42,678,818 $ 42,109,464
================ ================= ================ =================
The accompanying notes are an integral part of these financial statements
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Genesis Media Group, Inc.
Statement of Operations
For the year ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
For the year ended For the six months ended
1998 1997 1999 1998
----------------- ------------------ ----------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue
Sales $ 375,480 $ 83,334 $ $ 315,040
Other income 146,082 704,466 53,100 146,081
---------------- ----------------- ---------------- -----------------
521,562 787,800 53,100 461,121
Cost of sales 81,564 31,039 5,500 53,271
---------------- ----------------- ---------------- ----------------
Gross profit 439,998 756,761 47,600 407,850
Operating Expenses
Administrative expenses 145,128 83,737 15,930 53,851
Amortization and depreciation 29,746 15,733 26,153 10,556
Interest expense 28,062 10,278
Office expense 11,624 31,200 5,228 29,724
Professional and outside services 137,014 206,176 10,500 83,498
Rent 106,327 51,605 18,902 54,074
Salaries and payroll taxes 283,003 208,747 132,016 41,619
---------------- ----------------- ---------------- ----------------
Total Operation Expense 740,904 597,198 219,007 273,322
---------------- ----------------- ---------------- ----------------
Net Income (Loss) (300,906) 159,563 (171,407) 134,528
Retained (deficit) beginning of the
period (5,214) (164,777) (306,120) (5,214)
---------------- ----------------- ---------------- ----------------
Retained (deficit) end of the period $ (306,120) $ (5,214) $ (477,527) $ (129,314)
================ ================= ================ ================
Net loss per common share (Note 11) $ (0.02) $ 0.02 $ 0.00 $ 0.01
================ ================= ================ ================
The accompanying notes are an integral part of these financial statements
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Genesis Media Group, Inc.
Statement of Cash Flows
For the two years ended December 31, 1998 and
The six months ended June 30, 1999 and 1998(Unaudited)
For the year ended For the six months ended
1998 1997 1999 1998
------------------ ------------------ ------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operations
Net Income (Loss) $ (300,906) $ 159,563 $ (171,407) $ 134,528
Adjustments to reconcile net income to net
cash
Provided by operating activities:
Amortization and depreciation 21,600 15,733 26,153 10,556
----------------- ----------------- ----------------- -----------------
Cash Flow provided (used) by operations (279,306) 175,296 (145,254) 145,084
Adjustments to reconcile net loss to Net
Cash
Used by Operating Activities:
Changes in Assets and Liabilities:
(Increase) decrease in accounts (172,623) (13,814) 10,001 (185,099)
receivable
(Increase) in notes receivable (50,000) (50,000)
(Increase) in prepaid expenses (59,614) (51,416) (489,259) (79,528)
(Increase) in marketable securities (134,170) 235,168 (243,168)
(Increase) in property, plant &
equipment (521,232) (172,034) (2,525) (10,102)
(Increase) in master music library (55,829) (41,012,500) (2) (25,314)
(Increase) decrease in other assets 14,335 (158,673) 691 27,581
Decrease (increase) in accounts payable (82,714) 100,000 (17,286) (100,000)
Increase in accrued expenses 29,147 17,588 67,160 (12,939)
Increase in current portion of long
term debt 114,096 98,734
----------------- ----------------- ----------------- -----------------
(918,607) (41,290,849) (97,318) (478,569)
Net cash flow used by operating (1,197,908) 41,115,553 (242,572) (533,485)
activities
Cash Flows from Investments
Increase in Common Stock 2,126 1,020 538
Increase in paid in capital 806,033 41,125,578 132,719 671,098
----------------- ----------------- ----------------- -----------------
808,159 41,125,578 133,739 671,636
Financing activities
Increase in long term debt 380,124 110,510 7,776
----------------- ----------------- ----------------- -----------------
Net increase (decrease) in cash (9,625) 10,025 1,677 145,927
Cash at January 1, 10,025 0 400 10,025
----------------- ----------------- ----------------- -----------------
Cash at end of period $ 400 $ 10,025 $ 2,077 $ 155,952
================= ================= ================= =================
The accompanying notes are an integral part of these financial statements
</TABLE>
30
<PAGE>
Genesis Media Group, Inc.
Notes to Financial Statements
For the two years ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
Note 1 - Organization
The predecessor of the Genesis Media Group, Inc. (the "Company") was
incorporated in the state of New Jersey on July 27, 1987. In August 1997, Open
Door Online, Hollywood Showcase Television Network, Inc. acquired in a reverse
acquisition all of the assets of Genesis Group, Inc. and changed its name to
Genesis Media Group, Inc.
Note 2 - Summary of Significant Accounting Policies
The summary of significant accounting policies of Genesis Media Group, Inc. is
presented to assist in understanding Open Door Online's financial statements.
The financial statements and notes are representations of Open Door Online's
management. Management is responsible for their integrity. The accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Line of Business
Open Door Online is primarily engaged in media and advertising.
Accounts Receivable
Open Door Online provides allowances against accounts receivable to maintain
sufficient reserves to cover anticipated losses.
Master Music Library
The master music library is stated at the appraised value as of the date of
acquisition by Open Door Online.
Equipment and Depreciation
Depreciation has been provided on the same basis for tax and financial
accounting purposes using the straight-line, accelerated and declining balance
methods. The estimated useful lives of the assets are as follows:
Production equipment 5-7 Years
Office equipment, furniture and fixtures 5-10 Years
Leasehold improvements 3-10 Years
<PAGE>
Genesis Media Group, Inc.
Notes to Financial Statements
For the two years ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
Note 2 - Summary of Significant Accounting Policies (continued)
Copyrights and Amortization
Copyrights were purchased and are subject to the 15 year amortization rules. For
purpose of these financial statements, copyrights are amortized on the straight
line basis over 15 years.
Note 3 - Prepaid Expenses
Included in prepaid expenses is a note for $20,000 from an officer of Open Door
Online. The officer has pledged his shares of Open Door Online's common stock as
collateral for said note.
Note 4 - Property and Equipment
Property and equipment consists of the following at cost:
1998 1997
---------------- ----------------
Computer equipment $ 34,114 $ 32,057
Office furniture 24,356 24,356
Office Equipment 46,172 46,172
Production Equipment 55,371 55,371
Leased production equipment 515,810
Signs 335
Software 230
Leasehold improvements 19,661 19,611
---------------- ----------------
698,999 177,767
Less accumulated depreciation (37,333) (15,733)
---------------- ----------------
$ 661,666 $ 162,034
================ ================
Depreciation expense for the years ended December 31, 1998 and 1997 and the six
months ended June 30, 1999 and 1998 was $29,746, $15,733, $26153 and $10,556.
respectively.
Leased production equipment represents capitalized leases whereby Open Door
Online has the right to exercise a nominal purchase option at the end of the
lease. The portion of the lease included in the equipment account are the
estimated costs of the equipment at the time the leases were first executed plus
the purchase option costs.
<PAGE>
Genesis Media Group, Inc.
Notes to Financial Statements
For the two years ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
Note 5 - Master Music Library
The master music library was acquired from Genesis Group, Inc. in August, 1997
and consists of movie films, music tapes and CD ROM interactive tapes. With the
masters comes the rights to market, reconfigure, compile, manufacture,
distribute, license, sell and lease originals or copies therefrom. Open Door
Online has an independent appraisal that identifies each item and evaluates it.
The master music library is carried at appraised value. Also included in
inventory are the costs incurred to date in developing the production of the
"Diary of James Dean."
Library consist of the following:
Music and videos $ 41,005,414
Products 8,830
Productions in process - James Dean Production 54,085
================
$ 41,068,329
================
Note 6 - Long Term Debt
Long term debt consists of the following:
December 31, June 30,
1998 1999
--------------- ----------------
Remaining capitalized lease Payments $ 494,220 $ 703,464
Less current portion (114,096) (212,830)
--------------- ----------------
380,124 $ 490,634
=============== ================
Note 7 - Commitments and Contingencies
Open Door Online is committed under office leases dated October 1, 1997 and
expiring September 30, 1999, and October 31, 2000 for a minimum annual rental
(exclusive of real estate taxes, maintenance, etc.) as follows:
Year ending: December 31, 1998 $ 98,465
December 31, 2000 $ 16,159
Note 8 - Investment in TranStar Communications, Inc.
During 1998, Open Door Online distributed to shareholders shares of TranStar
Communications, Inc. Open Door Online holds 576,535 rule 144 restricted shares
of common stock of TranStar Communications, Inc. after a distribution of
TranStar's stock to the shareholders of Genesis Media Group.
<PAGE>
Genesis Media Group, Inc.
Notes to Financial Statements
For the two years ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
Note 9 - Net Operating Loss Carryover
Open Door Online has a net operating loss carryover of approximately $297,000
available to offset future taxable income, if any.
Note 10 - Stockholders' Equity
Open Door Online has 50,000,000 shares of stock authorized at $0.0001 par value,
28,130,607 and 6,869,500 shares outstanding at December 31, 1998 and 1997,
respectively and 38,330,000 and 12,250,000 shares outstanding at June 30, 1999
and 1998. The assets of Open Door Online were acquired by exchange of stock of
Genesis.
Note 11 - Earnings per Common Share
Earnings per share of common stock has been computed based on the weighted
average number of shares outstanding.
Note 12 - Restatement of 1997 Results of Operations
The 1997 income has been restated to eliminate the installment sale of films
since the transaction has not been completed by Open Door Online. The result is
that sales have been reduced by $5,400,000, net income and retained earnings at
December 31, 1997 have been reduced by $3,215,892.
Note 13 - Subsequent Company Exchange Agreement
In June 1999, Open Door Online entered into a stock exchange agreement with Open
Door Music, Inc. whereby Open Door Online would acquire all of the issued and
outstanding stock of Open Door Records, Inc. in exchange for stock of Open Door
Online. In addition, the agreement provides for the resignation of management
and directors and the appointment of directors and executives selected by Open
Door. This agreement was completed as of June 30, 1999, whereupon Open Door
Online changed its name to Open Door Online, Inc.
<PAGE>
Report of Independent Accountants
To the Board of Directors
Open Door Records, Inc.
Providence, Rhode Island
We have audited the accompanying balance sheet of Open Door Records, Inc. as of
December 31, 1998, and the related statements of operations and retained
earnings (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of Open Door Online's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Open Door Records, Inc. as of
December 31, 1998, and the results of operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
James C. Marshall, CPA, PC
September 30, 1999
Scottsdale, Arizona
<PAGE>
<TABLE>
<CAPTION>
Open Door Records, Inc.
Balance Sheet
December 31, 1998 and
June 30, 1999 and 1998 (Unaudited)
ASSETS
December 31, June 30
------------------ ---------------------------------------
1998 1999 1998
------------------ ----------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 33 $ 61,797 $ 3,122
Accounts receivable - trade 37,185 51,935
Prepaid expenses 1,477 1,477
------------------ ----------------- -----------------
38,695 115,209 3,122
Property and equipment 144,936 192,766 73,677
Other assets 2,737 3,737 2,737
------------------ ----------------- ------------------
$ 186,368 $ 311,712 $ 79,536
================== == ============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 6,720 $ 18,475 $ 3,077
Short term notes payable 110,000 297,400 5,000
------------------ ----------------- -----------------
Total liabilities 116,720 315,875 8,077
Stockholders' Equity
Common Stock - no par value, authorized
2,000 shares, issued and outstanding
1,000 at December 31, 1998, (Notes 1, 5 and 7) 1,000 1,000 1,000
Additional paid in capital 71,275 90,275 71,275
Retained earnings (deficit) (2,627) (95,437) (816)
------------------ ----------------- -----------------
69,648 (4,162) 71,459
------------------ ----------------- -----------------
$ 186,368 $ 311,712 $ 79,536
================== ================= =================
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Open Door Records, Inc.
Statement of Operations
For the year ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
For the year ended For the six months ended
1998 1999 1998
------------------ ----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenue
Sales $ 37,185 $ 3,962 $
------------------ ----------------- -----------------
37,185 3,962
Cost of sales 10,485 1,205
------------------ ----------------- -----------------
Gross profit 26,700 2,757
Operating Expenses
Administrative expenses 23,530 34,954 816
Interest expense 3,888 8,224
Office expense 1,144 2,420
Professional and outside services 765 46,470
Rent 3,500
Total Operation Expense 29,327 95,568 816
------------------ ----------------- -----------------
Net Income (Loss) (2,627) (92,811) (816)
Retained (deficit) beginning of the period (2,627)
------------------ ----------------- -----------------
Retained (deficit) end of the period $ (2,627) $ (95,438) $ (816)
================== ================= =================
Net loss per common share (Note 6) $ (2.63) $ (92.81) $ (0.82)
================== ================= =================
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Open Door Records, Inc.
Statement of Cash Flows
For the year ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
For the year ended For the six months ended
1998 1999 1998
------------------ ----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash Flows from Operations
Net Income (Loss) $ (2,627) $ (92,811) $ (816)
------------------ ----------------- -----------------
Cash Flow provided (used) by operations (2,627) (92,811) (816)
Adjustments to reconcile net loss to Net Cash
Used by Operating Activities
Changes in Assets and Liabilities
(Increase) decrease in accounts receivable (37,185) (14,750)
(Increase) in property, plant & equipment (144,936) (47,830) (73,677)
(Increase) decrease in other assets (2,737) (1,000) (2,737)
Increase (decrease) in accounts payable 6,720 11,755 3,077
Increase in short term debt 110,000 187,400 5,000
------------------ ----------------- -----------------
69,615 135,575 (68,377)
Net cash flow provided (used) by operating activities (72,242) 42,764 (69,153)
Cash Flows from Investments
Increase in Common Stock 1,000 1,000
72,275 19,000 72,275
Net increase (decrease) in cash 33 61,764 3,122
Cash at January 1, 33
------------------ ----------------- -----------------
Cash at end of period $ 33 $ 61,797 $ 3,122
================== ================= =================
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
Open Door Records, Inc.
Notes to Financial Statements
For the year ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
Note 1 - Organization
Open Door Records, Inc. (the "Company") was incorporated in the state of Rhode
Island in November 20, 1997. Open
Door Online had no operations during 1997.
Note 2 - Summary of Significant Accounting Policies
The summary of significant accounting policies of Genesis Media Group, Inc. is
presented to assist in understanding Open Door Online's financial statements.
The financial statements and notes are representations of Open Door Online's
management. Management is responsible for their integrity. The accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Line of Business
- ----------------
Open Door Online is primarily engaged in sales and marketing through the
Internet and other media of entertainment and products.
Accounts Receivable
- -------------------
Open Door Online provides allowances against accounts receivable to maintain
sufficient reserves to cover anticipated losses.
Equipment and Depreciation
- --------------------------
Depreciation has been provided on the same basis for tax and financial
accounting purposes using the straight-line, accelerated and declining balance
methods. The estimated useful lives of the assets are as follows:
Production equipment 5-7 Years
Office equipment, furniture and fixtures 5-10 Years
Leasehold improvements 3-10 Years
Note 3 - Property and Equipment
No depreciation has been taken to date since Open Door Online has not
extensively utilized the assets.
Note 4 - Short Term Debt
Short term debt is due to individuals affiliated with Open Door Online.
<PAGE>
Open Door Records, Inc.
Notes to Financial Statements
For the year ended December 31, 1998 and
The six months ended June 30, 1999 and 1998 (Unaudited)
Note 5 - Stockholders' Equity
Open Door Online has 2,000 shares of no par stock authorized and 1,000 shares
outstanding at December 31, 1998, June 30, 1999 and 1998.
Note 6 - Earnings per Common Share
Earnings per share of common stock has been computed based on the weighted
average number of shares outstanding.
Note 7 - Subsequent Company Exchange Agreement
In June 1999, Open Door Online entered into a stock exchange agreement with
Genesis Media Group, Inc. whereby all of Open Door Online's outstanding stock
would be acquired by in exchange for stock of the Genesis. In addition, the
agreement provides for the resignation of management and directors of Genesis
and the appointment of directors and executives selected by Open Door. This
agreement was completed as of June 30, 1999, whereupon the resulting entity
changed its name to Open Door Online, Inc.
<PAGE>
<TABLE>
<CAPTION>
Open Door Online, Inc.
Proforma Combined Balance Sheet
June 30, 1999 (Unaudited)
ASSETS
Open Door Genesis Open Door
Records, Media Group Online
Inc. Inc. Adjustments Inc.
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 61,797 $ 2,077 $ (2,077) $ 61,797
Accounts receivable - trade 51,935 176,436 (176,436) 51,935
Loan receivable - trade 50,000 (50,000)
Prepaid expenses 1,477 600,289 (600,289) 1,477
----------------- ----------------- ----------------- -----------------
115,209 828,802 (828,802) 115,209
Property and equipment 192,766 638,038 (638,038) 192,766
Master music library 41,068,331 (19,368,331) 21,700,000
Other assets 3,737 143,647 (143,647) 3,737
----------------- ----------------- ----------------- -----------------
$ 311,712 $ 42,678,818 $ (20,978,818) $ 22,011,712
================= ================= ================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 18,475 $ $ 100,000 $ 118,475
Payroll taxes and accrued expenses 113,895 113,895
Reserve for discontinued operations 500,000 500,000
Current portion of long term debt 297,400 210,096 (135,096) 372,400
----------------- ----------------- ----------------- -----------------
Long term debt 493,368 (343,368) 150,000
----------------- ----------------- ----------------- -----------------
Total liabilities 315,875 817,359 121,536 1,254,770
Stockholders' Equity
Common Stock 1,000 3,833 (3,887) 946
Additional paid in capital 90,275 42,335,153 (21,573,994) 20,851,434
Retained earnings (deficit) (95,438) (477,527) 477,527 (95,438)
----------------- ----------------- ----------------- -----------------
(4,163) 41,861,459 (21,100,354) 20,756,942
----------------- ----------------- ----------------- -----------------
$ 311,712 $ 42,678,818 $ (20,978,818) $ 22,011,712
================= ================= ================= =================
The accompanying notes are an integral part of these financial statements
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Open Door Online, Inc.
Proforma Statement of Operations
For the six months ended June 30, 1999 (Unaudited)
Open Door Genesis Open Door
Records, Media Group Online
Inc. Inc. Adjustments Inc.
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenue
Sales $ 3,962 $ $ $ 3,962
Other income 53,100 (53,100)
----------------- ----------------- ----------------- -----------------
3,962 53,100 (53,100) 3,962
Cost of sales 1,205 5,500 (5,500) 1,205
----------------- ----------------- ----------------- -----------------
Gross profit 2,757 47,600 (47,600) 2,757
Operating Expenses
Administrative expenses 34,954 15,930 (15,930) 34,954
Amortization and depreciation 26,153 (26,153)
Interest expense 8,224 10,278 (10,278) 8,224
Office expense 2,420 5,228 (5,228) 2,420
Professional and outside services 46,470 10,500 (10,500) 46,470
Rent 3,500 18,902 (18,902) 3,500
Salaries 132,016 (132,016)
----------------- ----------------- ----------------- -----------------
Total Operation Expense 95,568 219,077 (219,007) 95,568
----------------- ----------------- ----------------- -----------------
Loss before discontinued operations (92,811) (171,407) (171,407) (92,811)
Loss from discontinued operations (171,407)
----------------- ----------------- ----------------- -----------------
Net Income (Loss) (92,811) (171,407) (171,407) (92,811)
Retained (deficit) beginning of the (2,627) (306,120) (306,120) (2,627)
period
----------------- ----------------- ----------------- -----------------
Retained (deficit) end of the period $ (95,438) $ (477,527) $ (477,527) $ (95,438)
================= ================= ================= =================
Net loss per common share $ (0.01) $ (.02) $ (.02) $ (0.01)
================= ================= ================= =================
The accompanying notes are an integral part of these financial statements
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Open Door Online, Inc.
Proforma Statement of Cash Flows
For the six months ended June 30, 1999 (Unaudited)
Open Door Genesis Open Door
Records, Media Group Online
Inc. Inc. Adjustments Inc.
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Cash Flows from Operations
Net Income (Loss) $ (92,811) $ (171,407) $ 171,407 $ (92,811)
Adjustments to reconcile net income to net
cash
Provided by operating activities:
Amortization and depreciation 26,153 (26,153)
---------------- ---------------- ---------------- ----------------
Cash Flow provided (used) by operations (92,811) (145,254) 145,254 (92,811)
Adjustments to reconcile net loss to Net
Cash
Used by Operating Activities:
Changes in Assets and Liabilities:
(Increase) decrease in accounts (14,750) 10,001 (10,001) (14,750)
receivable
(Increase) in prepaid expenses (489,259) 489,259
(Increase) in marketable securities 235,168 (235,168)
(Increase) in property, plant & (47,830) (2,525) 2,525 (47,830)
equipment
(Increases) in master music library (2) (21,699,998) (21,700,000)
(Increase) decrease in other assets (1,000) 691 (691) (1,000)
Decrease (increase) in accounts payable 11,755 (17,286) 117,286 111,755
Increase in accrued expenses 67,160 46,735 113,895
Increase in reserve for discontinued 500,000 500,000
operations
Increase in current portion of long 187,400 9 6,000 (21,000) 262,400
term debt
---------------- ---------------- ---------------- ----------------
Net cash flow used by operating 42,764 (245,306) (20,665,799) (20,868,341)
activities
Cash Flows from Investments
Increase in Common Stock 1,020 (1,073) (53)
Increase in paid in capital 19,000 132,719 20,628,439 20,780,158
---------------- ---------------- ---------------- ----------------
19,000 133,739 20,627,366 20,780,105
Financing activities
Increase in long term debt 113,244 36,756 150,000
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in cash 61,764 1,677 (1,677) 61,764
Cash at January 1, 33 400 (400) 33
---------------- ---------------- ---------------- ----------------
Cash at end of period $ 61,797 $ 2,077 $ (2,077) $ 61,797
================ ================ ================ ===============
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
Open Door Online, Inc.
Notes to Proforma Financial Statements
For the six months ended June 30, 1999 (Unaudited)
Note 1 - Method of Combination
Open Door Online has accounted for the combination of Open Door Records, Inc.
with Genesis Media Group, Inc. as a tax free exchange under the purchase method
of accounting.
Note 2 - Discontinued Operations
Open Door Online has elected to discontinue certain operations of Genesis in
conjunction with the merger. Genesis had a number of capitalized leases and
other obligations as of June 30, 1999 which Open Door Online is in the process
of eliminating. The estimated cost of terminating these leases and disposing of
the related property is estimated at $500,000, which has been provided for at
June 30, 1999.
Note 3 - Income Taxes
The tax free exchange with Genesis creates a difference in the basis of the
assets between tax basis and accounting basis. The tax basis of the assets is
approximately $20,950,000 greater than the accounting basis. In the future, as
assets are disposed of or liabilities paid, the deduction for tax purposes will
be greater than the book basis, resulting in reduced tax expense or greater net
operating loss carryover for tax purposes than would otherwise be expected.
There is no certainty as to the timing of such recognition nor that Open Door
Online will be able to fully utilized these differences.
<PAGE>
Open Door Online, Inc.
Balance Sheet
September 30, 1999 (Unaudited)
ASSETS
September 30,
-----------------------------------
1999 1998
--------------- ---------------
Current Assets
Cash and cash equivalents $ 78,580 $ 5,791
Accounts receivable - trade 261,582 72,352
Loan receivable - trade 12,500
Loans receivable - investors (Note 4) 518,000
Prepaid expenses 15,621
--------------- ---------------
886,283 78,143
Property and equipment 204,217 17,900
Master music library 21,700,000
Other assets 3,737 2,737
--------------- ---------------
$ 22,794,237 $ 98,780
=============== ===============
LIABILITIES AND STOCKHOLDER' EQUITY
Current Liabilities
Accounts payable $ 109,942 $ 3,076
Payroll taxes and accrued expenses 212,138
Reserve for discontinued operations 500,000
Notes payable 471,700 30,000
Current portion of long term debt 75,000
--------------- ---------------
1,368,780 33,076
Long term debt 150,000
--------------- ---------------
Total liabilities 1,518,780 33,076
Stockholders' Equity
Common Stock 1,013 1,000
Additional paid in capital 21,409,367 71,275
Retained earnings (deficit) (134,923) (6,571)
--------------- ---------------
21,275,457 65,704
--------------- ---------------
$ 22,794,237 $ 98,780
=============== ===============
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
Open Door Online, Inc.
Statement of Operations
For the nine months ended September 30, 1999 (Unaudited)
September 30,
-----------------------------------
1999 1998
--------------- ---------------
Revenue
Sales $ 190,606 $
Other Income 458
---------------
191,064
Cost of sales 118,385
--------------- ---------------
Gross profit 72,679
Operating Expenses
Administrative expenses 71,376 5,677
Interest expense 8,224
Office expense 4,346 394
Professional and outside services 86,741 500
Rent 11,788
Salaries and payroll taxes 22,500
--------------- ---------------
Total Operation Expense 204,975 6,571
--------------- ---------------
Net Income (Loss) (132,296) (6,571)
Retained (deficit) beginning of the period (2,627)
--------------- ---------------
Retained (deficit) end of the period $ (134,923) $ (6,571)
=============== ===============
Net loss per common share $ (0.01) $ (6.57)
=============== ===============
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
<TABLE>
<CAPTION>
Open Door Online, Inc.
Statement of Cash Flows
For the nine months ended September 30, 1999 (Unaudited)
September 30,
-----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Cash Flows from Operations
Net Income (Loss) $ (132,296) $ (6,571)
--------------- ---------------
Cash flow provided (used) by operations (132,296) (145,254)
Adjustments to reconcile net loss to Net Cash
Used by Operating Activities:
Changes in Assets and Liabilities
(Increase) decrease in accounts receivable (224,397) (72,352)
(Increase) decrease in loans receivable - trade (12,500)
(Increase) decrease in loans receivable - investors (518,000)
(Increase) in prepaid expenses (14,144)
(Increase) in property, plant & equipment (59,281) (17,900)
(Increase) in master music library (21,700,000)
(Increase) decrease in other assets (1,000) (2,737)
Decrease (increase) in accounts payable 103,222 3,076
Increase in accrued expenses 102,138
Increase in reserve for discontinued operations 500,000
Increase in notes payable 471,700 30,000
Increase in current portion of long term debt 75,000
--------------- ---------------
Net cash flow used by operating activities (21,409,558) (66,484)
Cash Flows from Investments
Increase in Common Stock 13 1,000
Increase in paid in capital 21,338,092 71,275
--------------- ---------------
21,338,105 72,275
Financing activities
Increase in long term debt 150,000
--------------- ---------------
Net increase (decrease) in cash 78,547 5,791
Cash at January 1, 33
--------------- ---------------
Cash at end of period $ 78,580 $ 5,791
=============== ===============
The accompanying notes are an integral part of these financial statements
</TABLE>
47
<PAGE>
Open Door Online, Inc.
Notes to Financial Statements
For the nine months ended September 30, 1999 (Unaudited)
Note 1 - Method of Combination
Open Door Online has accounted for the combination of Open Door Records, Inc.
with Genesis Media Group, Inc. as a tax free exchange under the purchase method
of accounting.
Note 2 - Discontinued Operations
Open Door Online has elected to discontinue certain operations of Genesis in
conjunction with the merger. Genesis had a number of capitalized leases and
other obligations as of June 30, 1999 which Open Door Online is in the process
of eliminating. The estimated cost of terminating these leases and disposing of
the related property is estimated at $500,000, which has been provided for at
June 30, 1999.
Note 3 - Income Taxes
The tax free exchange with Genesis creates a difference in the basis of the
assets between tax basis and accounting basis. The tax basis of the assets is
approximately $20,950,000 greater than the accounting basis. In the future, as
assets are disposed of or liabilities paid, the deduction for tax purposes will
be greater than the book basis, resulting in reduced tax expense or greater net
operating loss carryover for tax purposes than would otherwise be expected.
There is no certainty as to the timing of such recognition nor that Open Door
Online will be able to fully utilized these differences.
Note 4 - Stock Sale - Subsequent Event
During the third quarter, Open Door Online sold 673,994 shares of its common
stock pursuant to a private offering for an aggregate price of $558,000. In
October, 1999, the balance of the amount due on the sale, $518,000, was received
by Open Door Online. The stock is shown as outstanding at September 30, 1999 and
a receivable of the unpaid amount at that date.
Note 5 - Common Stock
The outstanding stock of Open Door Online was 10,133,285 shares and 1,000 shares
at September 30, 1999 and 1998, respectively. The weighted average number of
shares used to compute the earnings per share were 9,509,890 and 1,000,
respectively.
PART III. EXHIBITS
ITEM 1. INDEX TO EXHIBITS
The following exhibits are filed with this Form 10-SB:
Number Description Page No.
-------- ------------------------------------------------- ---------
3(i) *Articles of Incorporation
3(ii) By-laws
10.1 Stock Exchange Agreement between Genesis
Media Group, Inc. and Open Door Records,
Inc.
11.1 Statement regarding computation of per
share earnings
27.1 Financial Data Schedule
* To be filed by amendment.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
OPEN DOOR ONLINE, INC.
Date:
/s/
By: ________________________________________________
David N. DeBaene, Chairman
BY - LAWS
OF
GENESIS MEDIA GROUP, INC.
(a New Jersey corporation)
ARTICLE I
SHAREHOLDERS
1. CERTIFICATES REPRESENTING SHARES. Certificates representing
shares shall set forth thereon the statements prescribed by Section 14A:7-l 1,
and, where applicable, by Sections 14A:5-21 and 14A:12-5, of the New Jersey
Business Corporation Act and by any other applicable provision of law and shall
be signed by the Chairman or Vice-Chairman of the Board of Directors, if any, or
by the President or a Vice-President and may be counter-signed by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be
sealed with the corporate seal or a facsimile thereof. Any or all other
signatures upon a certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of its issue.
A card which is punched, magnetically coded, or otherwise
treated so as to facilitate machine or automatic processing, may be used as a
share certificate if it otherwise complies with the provisions of Section
14A:7-1 1 of the New Jersey Business Corporation Act.
The corporation may issue a new certificate for shares in
place of any certificate theretofore issued by it, alleged to have been lost or
destroyed, and the Board of Directors may require the owner of any lost or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such certificate
or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. Unless otherwise provided in
its certificate of incorporation, the corporation may, but shall not be obliged
to, issue fractions of a share and certificates therefore. By action of the
Board, the corporation may, in lieu of issuing fractional shares, pay cash equal
to the value of such fractional share or issue scrip in registered or bearer
form which shall entitle the holder to receive a certificate for a full share
upon the surrender of such scrip aggregating a full share. A certificate for a
fractional share shall entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any distribution of assets of the
corporation in the event of liquidation, but scrip shall not entitle the holder
to exercise such voting rights, receive dividends or participate in any such
distribution of assets unless such scrip shall so provide. All scrip shall be
issued subject to the condition that it shall become void if not exchanged for
certificates representing full shares before a specified date.
3. SHARE TRANSFERS. Upon compliance with provisions
restricting the transferability of shares, if any, transfers of shares of the
corporation shall be made only on the share record of the corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation or with a
transfer agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes due
thereon, if any.
4. RECORD DATE FOR SHAREHOLDERS. The Board of Directors may
fix, in advance, a date as the record date for determining the shareholders with
regard to any corporate action or event and, in particular, for determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof; to give a written consent to any action without a
meeting; or to receive payment of any dividend or allotment of any right. Any
such record date shall in no case be more than sixty days prior to the
shareholders' meeting or other corporate action or event to which it relates.
Any such record date for a shareholders' meeting shall not be less than ten days
before the date of the meeting. Any such record date to determine shareholders
entitled to give a written consent shall not be more than sixty days before the
date fixed for tabulation of the consents or, if no date has been fixed for
tabulation, more than sixty days before the last day on which consents received
may be counted. If no such record date is fixed, the record date for a
shareholders' meeting shall be the close of business on the day next preceding
the day on which notice is given, or, if no notice is given, the day next
preceding the day on which the meeting is held, and the record date for
determining shareholders for any other purpose shall be at the close of business
on the day on which the resolution of the Board of Directors relating thereto is
adopted. When a determination of shareholders of record for a shareholders'
meeting has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date under this section for the adjourned meeting.
5. MEANING of CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "shareholder" or
"shareholders" refers to an outstanding share or shares and to a holder or
holders of record of outstanding shares when the corporation is authorized to
issue only one class of shares, and said reference is also intended to include
any outstanding share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the Certificate of
Incorporation confers such rights where there are two or more classes or series
of shares or upon which or upon whom the New Jersey Business Corporation Act
confers such rights notwithstanding that the Certificate of Incorporation may
provide for more than one class or series of shares, one or more of which are
limited or denied such rights thereunder.
6. SHAREHOLDER MEETINGS.
-TIME. The annual meeting shall be held at the time fixed,
from time to time, by the directors, provided, that the first annual meeting
shall be held on a date within thirteen months after the organization of the
corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. If, for any
reason, the directors shall fail to fix the time for an annual meeting, such
meeting shall be held at noon on the first Tuesday in April. A special meeting
shall be held on the date fixed by the directors.
-PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of New Jersey, as the directors may,
from time to time, fix. Whenever the directors shall fail to fix such place, the
meeting shall be held at the registered office of the corporation in the State
of New Jersey.
-CALL. Annual meetings may be called by the directors or by
the President or by any officer instructed by the directors to call the meeting.
Special meetings may be caused in like manner.
-NOTICE OR ACTUAL CONSTRUCTWE WAIVER of NOTICE. Written
notice of every meeting shall be given, stating the time, place, and purpose or
purposes of the meeting. If any action is proposed to be taken which would, if
taken, entitle shareholders to dissent and to receive payment for their shares,
the notice shall include a statement of that purpose and to that effect. The
notice of every meeting shall be given, personally or by mail, and, except as
otherwise provided by the New Jersey Business Corporation Act, not less than ten
days nor more than sixty days before the date of the meeting, unless the lapse
of the prescribed period of time shall have been waived before or after the
taking of any action, to each shareholder at his record address or at such other
address which be may have furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in a post office or official depository under the
exclusive care and custody of the United States post office department. When a
meeting is adjourned to another time or place, it shall not be necessary to give
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken and at
the adjourned meeting only such business is transacted as might have been
transacted at the original meeting. However, if after the adjournment the
directors fix a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given to each shareholder on the new record date.
Notice of a meeting need not be given to any shareholder who submits a signed
waiver of notice before or after the meeting. The attendance of a shareholder at
a meeting without protesting prior to the conclusion of the meeting the lack of
notice of such meeting shall constitute a waiver of notice by him.
-VOTING LIST. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make and certify a complete
list of the shareholders entitled to vote at the shareholders' meeting or any
adjournment thereof. Any such list may consist of cards arranged alphabetically
or any equipment which permits the visual display of the information required by
the provisions of Section 14A:5-8 of the New Jersey Business Corporation Act.
Such list shall be arranged alphabetically within each class, series, if any, or
group of shareholders maintained by the corporation for convenience of
reference, with the address of, and the number of shares held by, each
shareholder, be produced (or available by means of a visual display) at the time
and place of the meeting; be subject to the inspection of any shareholder for
reasonable periods during the meeting; and be prima facie evidence as to who are
the shareholders entitled to examine such list or to vote at such meeting.
CONDUCT of MEETING. Meetings of the shareholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting - the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the Chairman of the meeting shall appoint
a secretary of the meeting.
- PROXY REPRESENTATION. Every shareholder may authorize
another person or persons to act for him by proxy in all matters in which a
shareholder is entitled to participate, whether by waiving notice of or the
lapse of the prescribed period of time before any meeting, voting or
participating at a meeting, or expressing consent without a meeting. Every proxy
must be signed by the shareholder or his agent, except that a proxy may be given
by a shareholder or his agent by telegram or cable or by any means of electronic
communication which results in a writing. No proxy shall be valid for more than
eleven months unless a longer time is expressly provided therein. Unless it is
irrevocable as provided in subsection 14A:5-19(3) of the New Jersey Business
Corporation Act a proxy shall be revocable at will. The grant of a later proxy
revokes any earlier proxy unless the earlier proxy is irrevocable. A proxy shall
not be revoked by the death or incapacity of the shareholder, but the proxy
shall continue to be in force until revoked by the personal representative or
guardian of the shareholder. The presence at any meeting of any shareholder who
has given a proxy does not revoke the proxy unless the shareholder files written
notice of the revocation with the Secretary of the meeting prior to the voting
of the proxy or votes the shares subject to the proxy by written ballot. A
person named in a proxy as the attorney or agent of a shareholder may, if the
proxy so provides, substitute another person to act in his place, including any
other person named as an attorney or agent in the same proxy. The substitution
shall not be effective until an instrument affecting it is filed with the
Secretary of the corporation.
INSPECTORS - APPOINTMENT. The directors, in advance of any
meeting, or of the tabulation of written consents of shareholders without a
meeting may, but need not, appoint one or more inspectors to act at the meeting
or any adjournment thereof or to tabulate such consents and make a written
report thereof. If an inspector or inspectors to act at any meeting of
shareholders are not so appointed by the directors or shall fail to qualify, if
appointed, the person presiding at the shareholders' meeting may, and on the
request of any shareholder entitled to vote thereat, shall, make such
appointment. In case any person appointed as inspector fails to appear or act,
the vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding at. the meeting. Each
inspector appointed, if any, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his ability. No person shall be
elected a director in an election for which he has served as an inspector. The
inspectors, if any, shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. If there are three or more inspectors, the act of a majority
shall govern. On request of the person presiding at the meeting or any
shareholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, question, or matter determined by them. Any report
made by them shall be prima facie evidence of the facts therein stated, and such
report shall be filed with the minutes of the meeting.
-QUORUM. Except for meetings ordered by the Superior Court to
be called and held pursuant to Sections 14A:5-2 and 14A:5-3 of the New Jersey
Business Corporation Act, the holders of the shares entitled to cast at least a
majority of the votes at a meeting shall constitute a quorum at the meeting of
shareholders for the transaction of business.
- The shareholders present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum. Less than a quorum may adjourn.
-VOTING. Each share shall entitle the holder thereof to one
vote. In the election of directors, a plurality of the votes cast shall elect,
and no election need be by ballot unless a shareholder demands the same before
the voting begins. Any other action shall be authorized by a majority of the
votes cast except where the New Jersey Business Corporation Act prescribes a
different proportion of votes.
7. SHAREHOLDER ACTION WITHOUT MEETINGS. Subject to any
limitations prescribed by the provisions of Sections 14A:5-6 and 14A:5-7 of the
New Jersey Business Corporation Act and upon compliance with said provisions,
any action required or permitted to be taken at a meeting of shareholders by the
provisions of said Act or by the Certificate of Incorporation or these By-Laws
may be taken without a meeting if all of the shareholders entitled to vote
thereon consent thereto in writing and (except for the annual election of
directors) may also be taken without a meeting, without prior notice, and
without a vote, by less than all of the shareholders who would have been
entitled to cast the minimum number of votes which would be necessary to
authorize any such action at a meeting at which all shareholders entitled to
vote thereon were present and voting. Whenever any action is taken pursuant to
the foregoing provisions, the written consents of the shareholders consenting
thereto or the written report of inspectors appointed to tabulate such consents
shall be med with the minutes of proceedings of shareholders.
ARTICLE II
GOVERNING BOARD
1. FUNCTIONS, DEFINITIONS AND COMPENSATION. The business and
affairs of the corporation shall be managed and conducted by or under the
direction of a governing board, which is herein referred to as the "Board of
Directors" or "directors" notwithstanding that the members thereof may otherwise
bear the titles of trustees, managers, or governors or any other designated
title, and notwithstanding that only one director legally constitutes the BoarcL
The word "director" or "directors" likewise herein refers to a member or to
members of the governing board notwithstanding the designation of a different
official title or titles. The use of the phrase "entire board" herein refers to
the total number of directors which the corporation would have if there were no
vacancies. The Board of Directors, by the affirmative vote of a majority of
directors in office and irrespective of any personal interest of any of them,
shall have authority to establish reasonable compensation of directors for
services to the corporation as directors, officers, or otherwise.
2. QUALIFICATIONS AND NUMBER. Each director shall be at least
eighteen years of age. A director need not be a shareholder, a citizen of the
United States, or a resident of the State of New Jersey. The number of directors
of the corporation shall be not less than one nor more than 9. The first Board
and subsequent Boards shall consist of 5 directors until changed as hereinafter
provided. The directors shall have power from time to time, in the interim
between annual and special meetings of the shareholders, to increase or decrease
their number within the minimum and maximum number hereinbefore prescribed.
3. ELECTION AND TERM. The first Board of Directors shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified. Thereafter, directors who are elected at an
annual meeting of shareholders, and directors who are elected in the interim to
fill vacancies and newly created directorships, shall hold office until the next
succeeding annual meeting of shareholders and until their successors have been
elected and qualified. In the interim between annual meetings of shareholders or
of special meetings of shareholders called for the election of directors, newly
created directorships and any existing vacancies in the Board of Directors,
including vacancies resulting from the removal of directors for cause or without
cause, may be filled by the affirmative vote of the remaining directors,
although less than a quorum exists or by the sole remaining director. A director
may resign by written notice to the corporation. The resignation shall be
effective upon receipt thereof by the corporation or at such subsequent time as
shall be specified in the notice of resignation. When one or more directors
shall resign from the Board of Directors effective at a future date, a majority
of the directors then in office, including those who have so resigned, shall
have power to fill such vacancy or vacancies, the vote thereon to take effect
when such resignation or resignations shall become effective.
4. REMOVAL OF DIRECTORS. One or more or all the directors of
the corporation may be removed for cause or without cause by the shareholders.
The Board of Directors shall have the power to remove directors for cause and to
suspend directors pending a final determination that cause exists for removal.
5. MEETINGS.
-TIME. Meetings shall be held at such time as the Board shall
fix, except that the first meeting of a newly elected Board shall be held as
soon after its election as the directors may conveniently assemble.
-PLACE. Meetings shall be held at such place within or without
the State of New Jersey as shall be fixed by the Board.
-CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may be called by or
at the direction of the Chairman of the Board, if any, of the President, or of a
majority of the directors in office.
-NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. The notice of any meeting need not specify the business to be
transacted at, or the purpose of, the meeting. Any requirement of furnishing a
notice shall be waived by any director who signs a waiver of notice before or
after the meeting, or who attends the meeting without protesting, prior to the
conclusion of the meeting, the lack of notice to him. Notice of an adjourned
meeting need not be given if the time and place are fixed at the meeting
adjourning, and if the period of adjournment does not exceed ten days in any one
adjournment.
-QUORUM AND ACTION. Each director shall have one vote at
meetings of the Board of Directors. The participation of directors with a
majority of the votes of the entire Board shall constitute a quorum for the
transaction of business. Any action approved by a majority of the votes of
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors unless the New Jersey Business Corporation Act requires a
greater proportion. Where appropriate communication facilities are reasonably
available, any or all directors shall have the right to participate in all or
any part of a meeting of the Board of Directors or a committee of the Board of
Directors by means of conference telephone or any means of communication by
which all persons participating in the meeting are able to hear each other.
-CHAIRMAN OF THE MEETING. The Chairman of the Board, if any
and if present, shall preside at all meetings. Otherwise, the President, if
present, or any other director chosen by the Board, shall preside.
6. COMMITTIEES. The Board of Directors, by resolution adopted
by a majority of the entire Board of Directors, may appoint from among its
members one or more directors to constitute an Executive Committee and one or
more other committees, each of which, to the extent provided in the resolution
appointing it, shall have and may exercise all of the authority of the Board of
Directors with the exception of any authority the delegation of which is
prohibited by Section 14A:6-9 of the New Jersey Business Corporation Act.
Actions taken at a meeting of any such committee shall be reported to the Board
of Directors at its next meeting following such committee meeting; except that,
when the meeting of the Board is held within two days after the committee
meeting, such report shall, if not made at the first meeting, be made to the
Board at its second meeting following such committee meeting. Each director of a
committee shall have one vote at meetings of that committee. The participation
of directors with the majority of the votes of a committee shall constitute a
quorum of that committee for the transaction of business. Any action approved by
a majority of the votes of directors of a committee present at a meeting of that
committee at which a quorum is present shall be the act of the committee unless
the New Jersey Business Corporation Act requires a greater proportion.
7. WRFITEN CONSENT. Any action required or permitted to be
taken pursuant to authorization voted at a meeting of the Board of Directors or
any committee thereof may be taken without a meeting, if, prior or subsequent to
the action, all members of the Board of Directors or of such committee, as the
case may be, consent thereto in writing and such written consents are filed with
the minutes of the proceedings of the Board of Directors or committee. Such
consent shall have the same effect as a unanimous vote of the Board of Directors
or committee for all purposes and may be stated as such in any certificate or
other document filed with the Secretary of State of the State of New Jersey.
ARTICLE III
OFFICERS
The directors shall elect a President, a Secretary, and a
Treasurer, and may elect a Chairman of the Board, a Vice-Chairman of the Board,
one or more Vice-Presidents, Assistant Vice-Presidents, Assistant Secretaries,
and Assistant Treasurers, and such other officers and agents as they shall
determine. The President may but need not be a director. Any two or more offices
may be held by the same person but no officer shall execute, acknowledge, or
verify any instrument in more than one capacity if such instrument is required
by law to be executed, acknowledged, or verified by two or more officers.
Unless otherwise provided in the resolution of election, each
officer shall hold office until the meeting of the Board of Directors following
the next annual meeting of shareholders and until his successor has been elected
and qualified.
Officers shall have the powers and duties defined in the
resolutions appointing them.
The Board of Directors may remove any officer for cause or
without cause. An officer may resign by written notice to the corporation. The
resignation shall be effective upon
receipt thereof by the corporation or at such subsequent time as shall be
specified in the notice of resignation.
ARTICLE IV
REGISTERED OFFICE, BOOKS AND RECORDS
The address of the initial registered office of the
corporation in the State of New Jersey, and the name of the initial registered
agent at said address, are set forth in the original Certificate of
Incorporation of the corporation.
The corporation shall keep books and records of account and
minutes of the proceedings of its shareholders, Board of Directors, and the
Executive Committee and other committee or committees, if any. Such books,
records and minutes may be kept within or outside the State of New Jersey. The
corporation shall keep at its principal office, or at the office of its transfer
agent, its registered office, a record or records containing the names and
addresses of all shareholders, the number, class, and series of shares held by
each and the dates when they respectively became the owners of record thereof.
Any of the foregoing books, minutes, or records may be in written form or in any
other form capable of being converted into readable form within a reasonable
time.
ARTICLE V
CORPORATE SEAL
The corporate seal shall be in such form as the Board of
Directors shall prescribe.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall
be subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BY-LAWS
On and after the date upon which the first Board of Directors
shall have adopted the initial corporate By-Laws, which shall be deemed to have
been adopted by the shareholders for the purposes of the New Jersey Business
Corporation Act, the power to make, alter, and repeal the By-Laws of the
corporation may be exercised by the directors or the shareholders; provided,
that any By-Laws made by the Board of Directors may be altered or repealed, and
new By-Laws made, by the shareholders.
I HEREBY CERTIFY that the foregoing is a full, true, and
correct copy of the By Laws of Genesis Media Group, Inc.,a New Jersey
corporation, as in effect on the date hereof.
WITNESS my hand and the seal of the corporation.
Dated: February 17, 1998
\s\ Carl Conte
--------------------------------
Secretary
(SEAL)
================================================================================
STOCK EXCHANGE AGREEMENT
entered into by and between
GENESIS MEDIA GROUP, INC.
a New Jersey corporation,
and
OPEN DOOR RECORDS, INC.
a Rhode Island corporation,
================================================================================
Effective as of June 17, 1999
Scottsdale, AZ
Copyright(C)1999 Corporate Architects Information Services, Inc.
<PAGE>
STOCK EXCHANGE AGREEMENTSTOCK PURCHASE AGREEMENT
This STOCK EXCHANGE AGREEMENT (this "Agreement") is made and entered
into on the dates set forth below, to be effective as of June 17, 1999, by and
between Genesis Media Group, Inc., a New Jersey corporation ("OTC BB:
GNNX"), and Open Door Records, Inc. ("ODR"), a Rhode Island corporation.
The persons listed in Exhibit A are all of the shareholders of ODR.
Such persons are referred to herein as the "Acquired Company's Shareholders."
ODR is sometimes referred to herein as the "Acquired Company" because the
transactions described below will result in the acquisition of ODR by GNNX.
GNNX, the Acquired Company and the Acquired Company's Shareholders are referred
to collectively herein as the "Parties" and sometimes individually as a "Party."
Recitals
A. On June 3rd, 1999, GNNX and the Acquired Company signed a letter of
intent (the "Letter of Intent").
B. The Letter of Intent provides for GNNX (and its shareholders, as
required) (a) to change the corporate name of GNNX to ODR, (b) to approve a
reverse stock split of 30 old shares for 1 new share (c) to approve and elect a
new board of directors selected by ODR, (d) to acquire all of the issued and
outstanding stock of ODR in exchange for 7,000,000 shares of newly issued and
restricted common stock (the "Acquisition Stock") of GNNX that will be issued to
the Acquired Company Shareholders, (e) to obtain and to accept the resignation
of all existing GNNX officers and directors effective June 30, 1999, (f) to
complete any and all delinquent regulatory filings for GNNX, (g) to provide due
diligence materials to ODR including a legal opinion stating that there is no
outstanding or pending litigation against, (h) if required, complete any and all
delinquent regulatory filing (10Q, 10K) and update audits, (i) approve the
issuance of a consulting agreement to Mr. Don Logan, (j) approve the issuance of
600,000 shares for IR/PR compensation, (k) approve the issuance of 500,000
shares of restricted stock to the current officers, employees of GNNX, and (l)
to approve issuance of an additional 300,000 shares of newly issued stock
(200,000 restricted, 100,000 free trading) of GNNX, to certain consultants and
finders. The Acquisition Stock will be issued in exchange for all of the issued
and outstanding stock of the Acquired Company (the "Acquired Company's Stock").
C. The Letter of Intent provides for the Acquired Company's
Shareholders to transfer to GNNX, in exchange for the Acquisition Stock, all of
the Acquired Company's Stock.
D. The Parties wish to enter into this Agreement to confirm and
definitively provide for transactions that are contemplated in the Letter of
Intent. When executed and delivered by the Parties as provided below, this
Agreement shall supersede and replace the Letter of Intent so far as the
transactions provided for in this Agreement are concerned. Other provisions of
the Letter of Intent, if any, that are not otherwise provided for in this
Agreement, shall survive execution of this Agreement by the Parties unless
superseded by any other agreements.
Agreement
THEREFORE, in consideration of the mutual covenants and conditions
herein contained, and for other good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows.
ARTICLE
1
SHARE EXCHANGES
1.1 Stock Exchanges. Exchange of Stock for Obligations. GNNX hereby
agrees to sell, convey, assign and transfer the Acquisition Stock to the
Acquired Company's Shareholders in exchange for their sale, conveyance,
assignment and transfer to GNNX of the Acquired Company's Stock. The Acquired
Company's Shareholders and the Acquired Company hereby agree to sell, convey,
assign and transfer the Acquired Company's Stock to GNNX in exchange for sale,
conveyance, assignment and transfer to the Acquired Company's Shareholders of
the Acquisition Stock. Unless the Acquired Company's Shareholders otherwise
direct, the Acquisition Stock shall be transferred to them in the same
proportions as the Acquired Company's Shareholders currently own the Acquired
Company's Stock, as shown in Exhibit A.
1.2 Closing. Consummation of the transactions described in this
Agreement (the "Closing") will occur at 5pm on or before June 30, 1999 (the
"Closing Date") at the offices of Corporate Architects, Inc., 4300 N. Miller
Road, Suite 120, Scottsdale, AZ 85251-3620, telephone (480) 421-2882, fax (480)
421-2883 or at such other location as is mutually agreeable to the Parties.
1.3 Restrictions on Transferability of the Acquisition Stock3. Title to
Stock. At the Closing, GNNX shall convey to the Acquired Company's Shareholders
good, valid and marketable title to the Acquisition Stock, free and clear of any
and all encumbrances, claims, liens, security interests, pledges or mortgages of
any kind. The Parties hereby agree that the Acquisition Stock, once acquired by
the Acquired Company's Shareholders, will be subject to the restrictions of SEC
Rule 144. Unless and until the Acquisition Stock is registered under the
Securities Act of 1933 or the Securities Exchange Act of 1934, or until the
restrictions under Rule 144 lapse, no Acquired Company's Shareholder shall be
entitled to transfer all or any share of the Acquisition Stock to any person or
party, unless the Acquired Company's Shareholder first provides GNNX with an
acceptable opinion of counsel that the proposed transfer will not violate any
applicable law, rule or regulation or any provision of this Agreement. GNNX
shall be entitled to place a restrictive legend on all certificates evidencing
ownership of the Acquisition Stock that provides notice of the provisions of
this paragraph and other applicable provisions of this Agreement.
1.4 Stock Conveyed by the Acquired Company's Shareholders3. Title to
Stock. At the Closing the Acquired Company's Shareholders shall convey to GNNX
good, valid and marketable title to the Acquired Company's Stock, free and clear
of any and all encumbrances, claims, liens, security interests, pledges or
mortgages of any kind. Following delivery to GNNX of the Acquired Company's
Stock, the Acquired Company shall deliver a new stock certificate to GNNX that
replaces the Acquired Company's Stock certificate delivered to GNNX as delivered
above. The new certificate shall be issued in the name of GNNX.
ARTICLE
2
DELIVERIES BY GNNX AT THE CLOSING
2.1 Deliveries by GNNX. In addition to all other items required to be
delivered by GNNX at the Closing under this Agreement, GNNX shall deliver all of
the following items to the Acquired Company Shareholders, unless an item
described below is to be delivered to a single Party. GNNX shall deliver:
(a) the Acquisition Stock to the Acquired Company's
Shareholders, by delivery to the Acquired Company's Shareholders of one
or more share certificates evidencing ownership of the Acquisition
Stock, issued by GNNX in the name of the Acquired Company's
Shareholders;
(b) a certified copy of GNNX's articles of incorporation,
amended as necessary to authorize issuance of the Acquisition Stock,
together with a certificate of GNNX's Secretary, confirming that the
Acquisition Stock has been duly issued as required in this Agreement;
(c) a current Certificate of Good Standing of GNNX, issued by
the Secretary of State New Jersey;
(d) corporate records of GNNX consisting of at least the
following: certified copies of GNNX's bylaws, complete minute books and
a copy of GNNX's stock transfer ledger;
(d) a balance sheet of GNNX dated as of December 30, 1998,
prepared by GNNX's controller or accountant in accordance with
generally accepted accounting principles consistently applied;
(e) certificates of the Secretary and the Vice President or
the President of GNNX verifying the accuracy and authenticity of all
corporate records, other materials, disclosures or documents of GNNX
delivered or provided by GNNX at the Closing, and confirming the
accuracy on the Closing Date of all representations and warranties of
GNNX contained herein;
(f) resignations of all officers and members of the board of
directors of GNNX, effective as of or prior to the Closing Date;
certified copies of resolutions of the board of directors of
GNNX authorizing execution and delivery of this Agreement by GNNX and
consummation by GNNX of all of the transactions that are contemplated
herein;
(g) a legal opinion of GNNX's counsel addressed to the
Acquired Company in form that is mutually agreeable to the Parties; and
(g) copies of all contracts, loan agreements, memoranda and
other documents or instruments (in an amount of $5,000 or more) to
which GNNX is a party or by which it is bound or to which it or any of
its assets is subject.
2.2 Other Documents and Instruments. GNNX shall also deliver any and
all such other documents and instruments of conveyance, assignment and transfer,
and such other items, as may be reasonably requested or necessary in order to
vest good and marketable title to the Acquisition Stock in the Acquired
Company's Shareholders, on or prior to the date of the Closing. All instruments
and other documents exchanged by the Parties shall be in form as needed to
effectuate the transactions contemplated by this Agreement or to evidence the
same, and shall include any third party consents to the transactions
contemplated herein that may be required by the provisions of any contracts,
agreements or obligations to which GNNX is a party or pursuant to which a change
in the stock ownership of GNNX is deemed to constitute an assignment or transfer
requiring such consent or approval. These additional conveyances and transfers
shall be made by GNNX with a view toward placing the Acquired Company's
Shareholders, on or prior to the date of the Closing in actual possession and
full and complete ownership of the Acquisition Stock as provided herein.
ARTICLE
3
DELIVERIES BY THE ACQUIRED COMPANY'S SHAREHOLDERS
AT THE CLOSING
3.1 Deliveries by the Acquired Company's Shareholders. In addition to
all other items required to be delivered by the Acquired Company's Shareholders
at the Closing under this Agreement, at the Closing the Acquired Company's
Shareholders shall deliver all of the following items to GNNX. The Acquired
Company's Shareholders shall deliver:
(a) the Acquired Company's Stock, by delivery to GNNX of one
or more share certificates evidencing ownership of the Acquired
Company's Stock, endorsed in blank by the Acquired Company's
Shareholders in the name of GNNX;
(b) certified copies of the Acquired Company's articles of
incorporation, together with certificates of the Acquired Company's
confirming that the Acquired Company's Stock has been duly transferred
on the books and records, and in the stock transfer ledgers of the
Acquired Company, as required in this Agreement;
(c) a current Certificate of Good Standing of the Acquired
Company, issued by the Secretary of State of Rhode Island.
(d) corporate records of the Acquired Company's Shareholders
consisting of at least the following: certified copies of the Acquired
Company Shareholders' bylaws, complete minute books and a copy of the
Acquired Company's Shareholders' stock transfer ledger;
(e) a balance sheet of the Acquired Company dated as of March
15, 1999, prepared by the controller or accountant of the Acquired
Company in accordance with generally accepted accounting principles
consistently applied;
(f) certificates of the Secretary and the Vice President or
the President of the Acquired Company verifying the accuracy and
authenticity of all corporate records, other materials, disclosures or
documents pertaining to the Acquired Company delivered or provided by
the Acquired Company's Shareholders at the Closing, and confirming the
accuracy on the Closing Date of all representations and warranties of
the Acquired Company's Shareholders and the Acquired Company as
contained herein;
(g) certified copies of resolutions of the board of directors
of the Acquired Company authorizing execution and delivery of this
Agreement by the Acquired Company and consummation by the Acquired
Company of all of the transactions that are contemplated herein;
(h) copies of all contracts of $5,000 (U.S.) or more, loan
agreements, memoranda and other documents or instruments to which the
Acquired Company is a party or by which it is bound or to which it or
any of its assets is subject.
3.2 Other Documents and Instruments. The Acquired Company shall also
deliver to GNNX any and all such other documents and instruments of conveyance,
assignment and transfer, and such other items, as may be reasonably requested or
necessary in order to vest good and marketable title to the Acquired Company's
Stock in GNNX on or prior to the date of the Closing. All instruments and other
documents or instruments exchanged by the Parties shall be in form as needed to
effectuate the transactions contemplated by this Agreement or to evidence the
same, and shall include any third party consents to the transactions
contemplated herein that may be required by the provisions of any contracts,
agreements or obligations to which the Acquired Company is a party or pursuant
to which a change in the stock ownership of the Acquired Company is deemed to
constitute an assignment or transfer requiring such consent or approval. These
additional conveyances and transfers shall be made by the Acquired Company with
a view toward placing GNNX on, or prior to, the date of the Closing in actual
possession and ownership of all of the Acquired Company's Stock as provided
herein.
ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF GNNX
GNNX hereby represents and warrants to, and covenants with, the
Acquired Company Shareholders that the representations and warranties provided
below are true, correct, accurate and complete in any and all respects as of the
effective date of this Agreement, and that the same will be true, correct,
accurate and complete on and as of the date of the Closing (as though made then
and as though the Closing were substituted for the date of this Agreement
throughout the following), except as may be set forth in the Disclosure Schedule
attached hereto (the "GNNX Disclosure Schedule"). The GNNX Disclosure Schedule
will be arranged in paragraphs and subparagraphs that correspond to the
designation of subparagraphs below.
4.1 Organization of GNNX. GNNX is a corporation that is duly organized,
validly existing, and in good standing in all material respects under the laws
of the State of New Jersey.
4.2 Authorization of Transaction. GNNX has full actual and legal
corporate power and corporate authority to execute and deliver this Agreement
and to perform its obligations hereunder.
4.3 Enforceable Obligation. This Agreement constitutes the valid and
legally binding obligation of GNNX, enforceable against GNNX in accordance with
this Agreement's terms.
4.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby by GNNX
will (i) to GNNX's knowledge, violate any statute, law, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or state or federal court to which GNNX
or the Acquisition Stock are subject or any provision of the articles of
incorporation or bylaws or similar governing rules or documents of GNNX, (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any governmental rule, law or regulation
of any state or federal court or under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage or instrument of
indebtedness or under any other arrangement to which GNNX is a party or by which
it or the Acquisition Stock are bound or to which it or any of the Acquisition
Stock is subject, (iii) nor result in the imposition of any lien, encumbrance,
claim or security interest in, to or affecting any of the Acquisition Stock. To
its knowledge, GNNX does not need to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any state or federal
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except those that will be obtained
or made prior to Closing or those which would fail to have a material adverse
effect on the ability of GNNX to consummate the transactions contemplated by
this Agreement.
4.5 The Acquisition Stock. As of the date of Closing, the Acquisition
Stock will constitute, in the aggregate, 72.3 percent of all of the issued and
outstanding common stock of GNNX, with the rights, privileges and preferences
that are described in GNNX's articles of incorporation. As of the date of
Closing the Acquisition Stock will have been duly and validly issued and is and
will be nonassessable. The Acquisition Stock will be restricted stock,
consistent with Section 1.3 of this Agreement. Title to the Acquisition Stock
will be in the name of the Acquired Company's Shareholders in the official
records of GNNX and in the records of GNNX's stock transfer agent, if any.
4.6 Litigation. To GNNX's knowledge, GNNX is not subject to any
unsatisfied judgment, order, decree, stipulation, injunction, or charge nor is
it a party or threatened to be made a party to any charge, complaint, action,
suit, proceeding, hearing, or investigation of or in any court or quasi-judicial
or administrative agency of any federal, state or local jurisdiction or before
any arbitrator that relates in any way, directly or indirectly, to the
transactions contemplated in this Agreement. GNNX has no actual reason to
believe that any charge, complaint, action, suit, proceeding, hearing, or
investigation will or may be brought or threatened against GNNX in connection
with the transactions contemplated in this Agreement.
4.7 Material Information. As of the Closing, no representation or
warranty by GNNX, nor any statement or certificate furnished or to be furnished
to the Acquired Company's Shareholders pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact necessary
to make the representation, warranty, statement or certificate not misleading.
At or prior to the Closing GNNX will deliver to the Acquired Company's
Shareholders a Disclosure Document (the "GNNX Disclosure Document") that
provides the Acquired Company's Shareholders with all material information
concerning GNNX and the Acquisition Stock, as required by Rule 10b-5 of the
Securities and Exchange Commission, and GNNX and the Acquired Company's
Shareholders will take all actions and steps that are necessary to cause the
Acquired Company's Shareholders' acquisition of the Acquisition Stock to be
qualified under Regulation D of the Securities and Exchange Commission as a
private placement of securities and to be similarly qualified under applicable
provisions of state laws. The Parties will cooperate with each other in signing
documents and forms to be filed with federal and state regulatory agencies to
accomplish the results contemplated in this paragraph.
4.8 Documentation. Prior to the Closing GNNX will deliver to the
Acquired Company's Shareholders, materially correct, accurate and complete
copies of all of the contracts in an amount of $5,000 or more, and agreements
and documents that comprise or relate to GNNX or the Acquisition Stock in any
way. As to each such contract, agreement, or document (collectively, each
"Contract"):
(a) the Contract is the legal, valid, binding, and enforceable
obligation of the parties thereto as of the Closing Date, and is in
full force and effect as of the Closing Date;
(b) to the extent permitted by applicable law, after the
Closing, to the best of GNNX's knowledge, each Contract will continue
to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the Closing;
(c) to the knowledge of GNNX, no party to the Contract is in
breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration of the Contract;
(d) to the knowledge of GNNX, no party to the Contract has
repudiated, breached or anticipatorily breached any provision thereof,
nor is there any reason to think that any such is likely to occur or
may occur in the future;
(e) to the knowledge of GNNX, there are no disputes, oral
agreements, or forbearance programs in effect as to the Contract; and
(f) to the knowledge of GNNX, GNNX has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the Contract.
4.9 Legal Compliance.
(a) To its knowledge, GNNX has complied in all material
respects with all laws (including rules and regulations thereunder) of
federal, state and local governments (and all agencies thereof), and no
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, demand, or notice has been filed or commenced against any of
GNNX alleging any failure to comply with any such law or regulation.
(a) GNNX has complied in all material respects with all
applicable laws (including rules and regulations thereunder) relating
to the employment of labor, employee civil rights, and equal employment
opportunities.
4.10 Receipt of Disclosure Document. Prior to Closing, GNNX received
and reviewed a copy of the Acquired Company's Disclosure Schedule described in
Section 5.10 below, had discussions with representatives of the Acquired Company
and the Acquired Company's Shareholders, and received from such representatives
all such additional documents and information as GNNX requested.
4.11 Restricted Stock. GNNX understands that the Acquired Company's
Stock will not be registered with the Securities and Exchange Commission, and
that transferability of the Acquired Company's Stock will be subject to the
provisions and restrictions of state and federal securities laws.
4.12 Registration GNNX is the sole party in interest agreeing to
purchase the Acquired Company's Stock by entering into this Agreement. GNNX is
acquiring the Acquired Company's Stock for investment purposes only and not with
a view to the resale or other distribution thereof, in whole or in part. As
stated in the previous paragraph, GNNX is aware that as of the date of Closing
the Acquired Company's Stock has not been and will not be registered under the
1933 Act.
4.13 Third Party Consents. All third parties whose consent to the
transactions contemplated in this Agreement are listed in the Disclosure
Schedule. The Disclosure Schedule also indicates the contract, agreement, permit
or other relationship to the third party that gives rise to the need for the
third party's consent.
4.14 Due Diligence Period. During the time period from the effective
date of this Agreement until the Closing date (the "Due Diligence Period"), GNNX
shall be entitled to investigate the Acquired Company, review its files, visit
the Acquired Company's business premises and to talk with officers and employees
of the Acquired Company and to meet with any and all other third parties, public
and private, and to perform such other due diligence reviews and investigations
pertaining to the transactions contemplated in this Agreement as GNNX determines
is necessary or proper.
ARTICLE
5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE ACQUIRED COMPANY'S SHAREHOLDERS
The Acquired Company's Shareholders represent and warrant to, and
covenant with, GNNX that the representations and warranties provided below are
true, correct, accurate and complete in all respects as of the effective date of
this Agreement, and that the same will be true, correct, accurate and complete
on and as of the date of the Closing (as though made then and as though the
Closing were substituted for the date of this Agreement throughout the
following), except as may be set forth in the Disclosure Schedule attached
hereto (the "Acquired Company's Shareholders' Disclosure Schedule"). The
Acquired Company's Shareholders' Disclosure Schedule will be arranged in
paragraphs and subparagraphs that correspond to the designation of subparagraphs
below.
5.1 Organization of Creditor. The Acquired Company is a corporation
that is duly organized, validly existing, and in good standing in all material
respects under the laws of the State of Rhode Island. The description of the
Acquired Company's Stock that is contained in Exhibit A attached is a true,
correct, complete and accurate description. The Acquired Company's Shareholders
own 100% of all of the issued and outstanding stock of the Acquired Company's
Stock. There are no warrants, options, convertible securities or other interests
or rights to acquire the Acquired Company's Stock.
5.2 Authorization of Transaction. The Acquired Company has full actual
and legal corporate power and corporate authority to execute and deliver this
Agreement and to perform its obligations hereunder.
5.3 Enforceable Obligation. This Agreement constitutes the valid and
legally binding obligation of the Acquired Company and the Acquired Company's
Shareholders, enforceable against each of them in accordance with this
Agreement's terms.
5.4 Noncontravention. Neither the execution and delivery of this
Agreement by the Acquired Company and the Acquired Company's Shareholders, nor
the consummation by any of them of the transactions contemplated hereby, will
(i) violate any statute, law, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which the Acquired Company or the Acquired
Company's Shareholders or the Acquired Company's Stock are subject, or any
provision of the articles of incorporation or bylaws or similar governing rules
or documents of the Acquired Company, (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any governmental rule, law or regulation or under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage or instrument of indebtedness or under any other arrangement to which
the Acquired Company or the Acquired Company's Shareholders is a party or by
which any of them is bound or to which any of them is subject, (iii) nor result
in the imposition of any lien, encumbrance, claim or security interest in, to or
affecting any assets of the Acquired Company or the Acquired Company's Stock. No
Acquired Company or Acquired Company Shareholder needs to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
5.5 Documentation. Prior to the Closing, the Acquired Company and/or
the Acquired Company's Shareholders will deliver to GNNX true, correct, accurate
and complete copies of all of the contracts, agreements and documents that
comprise or relate to the Acquired Company or the Acquired Company's Stock in
any way. As to each such contract, agreement, or document (collectively, each
"Contract"):
(a) the Contract is the legal, valid, binding, and enforceable
obligation of the parties thereto as of the Closing Date, and is in
full force and effect as of the Closing Date;
(b) to the extent permitted by applicable law, after the
Closing, each Contract will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following
the Closing;
(c) no party to the Contract is in breach or default, and no
event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration of the Contract;
(d) no party to the Contract has repudiated, breached or
anticipatorily breached any provision thereof, nor is there any reason
to think that any such is likely to occur or may occur in the future;
(e) there are no disputes, oral agreements, or forbearance
programs in effect as to the Contract; and
(f) no Acquired Company nor Acquired Company's Shareholders
have assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the Contract.
5.6 Litigation. Neither the Acquired Company nor any of the Acquired
Company's Shareholders is subject to any unsatisfied judgment, order, decree,
stipulation, injunction, or charge nor is it a party or threatened to be made a
party to any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state or local jurisdiction or before any arbitrator that relates
in any way, directly or indirectly, to the transactions contemplated in this
Agreement. No Acquired Company or Acquired Company's Shareholder has any reason
to believe that any charge, complaint, action, suit, proceeding, hearing, or
investigation will or may be brought or threatened against any Acquired Company
in connection with the transactions contemplated in this Agreement.
5.7 Legal Compliance.
(a) The Acquired Company has complied with all laws (including
rules and regulations thereunder) of federal, state and local
governments (and all agencies thereof), and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against the Acquired Company
alleging any failure to comply with any such law or regulation.
(b) The Acquired Company has complied in all material respects
with all applicable laws (including rules and regulations thereunder)
relating to the employment of labor, employee civil rights, and equal
employment opportunities.
5.8 Material Information. As of the Closing, no representation or
warranty by the Acquired Company or the Acquired Company's Shareholders, nor any
statement or certificate furnished or to be furnished to any person or Party
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the representation,
warranty, statement or certificate not misleading. At or prior to the Closing
the Acquired Company's Shareholders will deliver to GNNX a Disclosure Document
(the "Acquired Company's Disclosure Document") that provides GNNX with all
material information concerning the Acquired Company, as required by Rule 10b-5
of the Securities and Exchange Commission, and the Acquired Company's
Shareholders and GNNX will take all actions and steps that are necessary to
cause the Acquired Company's Shareholders' acquisition of the Acquisition Stock
to be qualified under Regulation D of the Securities and Exchange Commission as
a private placement of securities and to be similarly qualified under applicable
provisions of state laws. The Parties will cooperate with each other in signing
documents and forms to be filed with federal and state regulatory agencies to
accomplish the results contemplated in this paragraph.
5.9 Receipt of Disclosure Document. Prior to making the decision to
acquire the Acquisition Stock as provided herein, the Acquired Company and the
Acquired Company's Shareholders received and reviewed a copy of the Disclosure
Schedule described in Section 4.10, had discussions with representatives of GNNX
and received from such representatives such additional documents and information
as the Acquired Company's Shareholder requested. Each of the Acquired Company's
Shareholders acknowledges that he or she is sophisticated and experienced in
matters relating to GNNX and its planned business activities as described in the
Disclosure Schedule.
5.10 Restricted Stock. Each of the Acquired Company's Shareholders
understands that the Acquisition Stock will be restricted stock, not registered
with the Securities and Exchange Commission. Unless and until the Acquisition
Stock is registered under the Securities Exchange Act of 1934, no Acquired
Company's Shareholder shall be entitled to transfer all or any share of the
Acquisition Stock unless the Acquired Company's Shareholder first provides GNNX
with an acceptable opinion of counsel that the proposed transfer will not
violate any applicable law, rule or regulation or any provision of this
Agreement. GNNX shall be entitled to place a restrictive legend on all
certificates evidencing ownership of the Acquisition Stock that provides notice
of the provisions of this paragraph and other applicable provisions of this
Agreement. Unless otherwise provided in this Agreement, each of the Acquired
Company's Shareholders shall be prohibited from trading the Acquisition Stock
for a period of one year after the date of the Closing.
5.11 Registration Representations. Each of the Acquired Company
Shareholders is the sole party in interest agreeing to purchase the Acquisition
Stock by entering into this Agreement. The Acquired Company's Shareholders are
acquiring the Acquisition Stock for the Acquired Company's Shareholders' own
account, for investment purposes only and not with a view to the resale or other
distribution thereof, in whole or in part. As stated above, the Acquired
Company's Shareholders are aware that as of the date of Closing the Acquisition
Stock has not been and will not be registered under the 1933 Act and that GNNX
provides no assurance that the Acquisition Stock will ever be registered under
such act. Each of the Acquired Company's Shareholders is willing and able and
agrees to bear the economic risk of investment in the Acquisition Stock for an
indefinite period of time, and each is capable of bearing that risk. Each of the
Acquired Company's Shareholders is knowledgeable with respect to the financial,
tax and business aspects of ownership of the Acquisition Stock and of the
business operations conducted by GNNX, or the Acquired Company has been
represented by a person with such knowledge and expertise in connection with
acquisition of the Acquisition Stock.
5.12 Third Party Consents. All third parties, if any, whose consent to
the transactions contemplated in this Agreement are listed in the Disclosure
Schedule. The Disclosure Schedule also indicates the contract, agreement, permit
or other relationship to the third party that gives rise to the need for the
third party's consent.
5.13 Due Diligence Period. During the time period from the effective
date of this Agreement until the Closing date (the "Due Diligence Period"), the
Acquired Company's Shareholders shall be entitled to investigate GNNX, review
its files, to visit GNNX's business premises and to talk with officers and
employees of GNNX and to meet with any and all other third parties, public and
private, and to perform such other due diligence reviews and investigations
pertaining to the transactions contemplated in this Agreement as any Acquired
Company's Shareholder determines is necessary or proper. The Acquired Company's
Shareholders have received the financial statements of GNNX dated through March
31, 1999, and deems them sufficient for purposes of entering into this
transaction.
5.14 Financial Statements. Attached to this Agreement as Exhibit B are
balance sheets (the "Financial Statements") of the Acquired Company. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied, and are true and accurate. Since the
date of the Financial Statements, there has been no change in the financial
condition of the Acquired Company. The Acquired Company have no liabilities,
commitments or obligations, contingent or otherwise, not shown on the Financial
Statements. The most recent balance of the Acquired Company shows it to own
unencumbered assets with a value of at least $251,000.
ARTICLE
6
CONDITIONS PRECEDENT
6.1 Conditions Precedent to the Obligations of GNNX. The following are
conditions precedent to the obligation of GNNX to sell and convey the
Acquisition Stock to the Acquired Company's Shareholders and to receive an
assignment of the Acquired Company's Stock at the Closing. Any condition listed
below may be waived by GNNX at or prior to the Closing Date.
(a) Delivery to GNNX of all information and materials required
to be delivered under any provision of this Agreement;
(b) Receipt of all necessary third party consents;
(c) Performance by each Acquired Company Shareholder of all of
his or her or its obligations under this Agreement that are required to
be performed prior to Closing;
(d) True and correct representations and warranties by the
Acquired Company and the Acquired Company's Shareholders in connection
with this Agreement; and
(e) Discovery of no materially adverse information at or prior
to the Closing concerning the Acquired Company.
6.2 Conditions Precedent to the Obligations of the Acquired Company's
Shareholders. The following are conditions precedent to the obligations of
Acquired Company's Shareholders to sell and transfer the Acquired Company Stock
to GNNX, and to acquire the Acquisition Stock from GNNX, at the Closing. Any
condition listed below may be waived by the Acquired Company's Shareholders at
or prior to the Closing.
(a) Delivery to the Acquired Company's Shareholders of all
information and materials required to be delivered by GNNX under any
provision of this Agreement;
(b) Receipt of all necessary third party consents;
(c) Performance by GNNX of all of its obligations under this
Agreement that are required to be performed prior to Closing;
(d) Discovery of no materially adverse information at or prior
to the Closing concerning GNNX.
6.3 Survival of Representations and Warranties. The representations and
warranties of the Parties contained in this Agreement shall survive the Closing
and shall continue to be the obligations of the Parties for a period of two
years after the date of the Closing.
ARTICLE
7
GENERAL PROVISIONS
7.1 Costs and Fees. If any Party breaches any term of this Agreement,
the breaching Party agrees to pay the non-breaching Party all reasonable
attorneys' fees, expert witness fees, investigation costs, costs of tests and
analysis, travel and accommodation expenses, deposition and trial transcript
costs, court costs and other costs and expenses incurred by the non-breaching
Party in enforcing this Agreement or preparing for legal or other proceedings,
at the trial or appellate level, whether or not such proceedings are instituted.
If any legal or other proceedings are instituted, the Party prevailing in any
such proceeding shall be paid all of the aforementioned costs, expenses and fees
by the other Party, and if any judgment is secured by such prevailing Party, all
such costs, expenses, and fees shall be included in such judgment, attorneys'
fees to be set by the court and not by the jury. References in this paragraph to
"legal proceedings" refer to litigation as well as arbitration proceedings and
any other similar or related proceedings.
7.2 Waiver. No delay by a Party in exercising any right or remedy shall
constitute a waiver of a Party's rights under this Agreement, and no waiver by
any Party of the breach of any covenant of this Agreement by the other shall be
construed as a waiver of any preceding or succeeding breach of the same or any
other covenant or condition of this Agreement.
7.3 Indemnification. Each Party (the "Indemnifying Party") shall
protect, indemnify and hold harmless the other Party and its directors,
officers, employees, agents, affiliates and representatives (each an
"Indemnified Party") against any and all costs, expenses, damages (whether such
damages are general, special, consequential, limited, direct or indirect or
incidental), liabilities or losses, including attorneys' fees, caused by, for or
on account of the Indemnifying Party's negligence, gross negligence or willful
misconduct or failure to perform its obligations under this Agreement or the
negligence, gross negligence or willful misconduct of the Indemnifying Party's
directors, officers, employees, agents affiliates or representatives.
(a) If an Indemnified Party intends to seek indemnification
under this paragraph from any Indemnifying Party with respect to any
action or claim, the Indemnified Party shall give the Indemnifying
Party notice of such claim or action upon the receipt of actual
knowledge or information by the Indemnified Party of any possible claim
or of the commencement of such claim or action, which period shall in
no event be later than the earlier of (i) fifteen business days prior
to the last day of responding to such claim or action or (ii) one half
of the period allowed for responding to such claim or action or, if no
time period for responding exists, as soon as reasonably possible. The
Indemnifying Party shall have no liability under this paragraph for any
claim or action for which such notice is not provided, unless the
failure to give such notice does not prejudice the Indemnifying Party.
(b) The Indemnifying Party shall have the right to assume the
defense of any such claim or action, at its sole cost and expense, with
counsel designated by the Indemnifying Party and reasonably
satisfactory to the Indemnified Party: provided, however, that if the
defendants in any such action include both the Indemnified Party and
the Indemnifying Party, and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it which are
different from or additional to those available to the Indemnifying
party, the Indemnified Party shall have the right to select separate
counsel, at the Indemnifying Party's expense, to assert such legal
defenses and to otherwise participate in the defense of such action on
behalf of such Indemnified Party.
(c) Should any Indemnified Party be entitled to
indemnification under this Section as a result of a claim by a third
party, and should the Indemnifying Party fail to assume the defense of
such claim or action, the Indemnified Party may, at the expense of the
Indemnifying Party, contest or, (with the prior consent of the
Indemnifying Party, which consent shall not be unreasonably withheld)
settle such claim or action. Except to the extent expressly provided
herein, no Indemnified Party shall settle any claim or action with
respect to which it has sought or intends to seek indemnification
pursuant to this Section without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed.
(d) If an Indemnifying Party is obligated to indemnify and
hold any Indemnified Party harmless under this Agreement, the amount
owing to the Indemnified Party shall be the amount of such Indemnified
Party's actual out-of-pocket loss, net of any insurance or other
recovery.
(e) The duty to indemnify under this Agreement will continue
in full force and effect for a period of two years with respect to any
loss, liability, damage or other expense based on facts or conditions
which occurred prior to such termination.
7.4 Notices. No notice, consent, approval or other communication
provided for herein or given in connection herewith shall be validly given,
made, delivered or served unless it is in writing and delivered personally, sent
by overnight courier, or sent by registered or certified United States mail,
postage prepaid, with return receipt requested, to the addresses for each Party
set forth below. Any Party hereto may from time to time change its address by
notice to the other Parties given in the manner provided herein. Notices,
consents, approvals, and communications by mail shall be deemed delivered upon
the earlier of forty-eight (48) hours after deposit in the United States mail in
the manner provided above or upon delivery to the respective addresses set forth
above if delivered personally or sent by overnight courier. Addresses of the
Parties are the following:
To Genesis Media Group, Inc.:
5757 W. Century Blvd., Suite 340
Los Angeles, CA 90045
To the Acquired Company:
Open Door Records, Inc.
46 Old Flat River Road
Coventry, Rhode Island 02816
7.5 Interpretation and Time. The captions of the paragraphs of this
Agreement are for convenience only and shall not govern or influence the
interpretation hereof. This Agreement is the result of negotiations between the
Parties and, accordingly, shall not be construed for or against any Party
regardless of which Party drafted this Agreement or any portion thereof. Time is
of the essence under this Agreement.
7.6 Successors and Assigns. All of the provisions hereof shall inure to
the benefit of and be binding upon the successors and assigns of the Parties.
7.7. No Partnership. This Agreement is not intended to, and nothing
contained in this Agreement shall, create any partnership, joint venture or
other similar arrangement between the Parties.
7.8 Further Documents. Each of the Parties shall execute and deliver
all such other and additional documents and perform all such acts, in addition
to execution and delivery of this Agreement and performance of the Party's
obligations hereunder, as are reasonably required from time to time in order to
carry out the purposes, matters and transactions that are contemplated in this
Agreement.
7.9 Incorporation of Exhibits. All exhibits attached to this Agreement
are by this reference incorporated herein.
7.10 Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey, without giving effect to the conflict of law provisions or
principles of the State of Rhode Island.
7.11 Date of Performance. If the date of performance of any obligation
or the last day of any time period provided for herein should fall on a
Saturday, Sunday or legal holiday, then said obligation shall be due and owing,
and said time period shall expire, on the first day thereafter which is not a
Saturday, Sunday or legal holiday. Except as may otherwise be set forth herein,
any performance provided for herein shall be timely made if completed no later
than 5:00 p.m. Nevada time, on the day of performance.
7.12 Counterparts. Counterparts. This Agreement may be executed in any
number of counterparts. This Agreement may be signed by original signatures or
by fax signatures. Any set of counterparts of this Agreement, whether faxed or
originals or both, showing signatures by all Parties, taken together, shall
constitute a single copy of this Agreement.
7.13 Resolution of Disputes. In the event of any dispute between the
Parties as to their rights and obligations under this Agreement, including, but
not limited to, any question as to whether or not a Party has performed its
obligations fully or remedied an alleged breach, and any and all other disputes
arising under this Agreement, shall be resolved as follows.
(a) The Parties shall submit their dispute to at least four
(4) hours of mediation in accordance with the mediation procedures of
American Arbitration Association ("AAA").
(b) In the event the dispute does not then settle within 15
calendar days after the first mediation session, the Parties agree to
submit the dispute to binding arbitration in accordance with the
arbitration procedures of the AAA except as modified in this Agreement.
The arbitration hearing shall be conducted no later than 45 calendar
days after the first mediation session.
(c) The arbitrator or arbitrators conducting the arbitration
hearing shall render the arbitration decision in writing, which writing
shall explain the reasoning and bases for the decision.
(d) The Parties agree to share equally the costs of mediation.
However, if the dispute is settled through arbitration, the prevailing
Party shall be entitled to recover all costs incurred, including
reasonable attorneys' fees, to enforce its rights hereunder, in
addition to any damages recovered, as provided in "Costs and Fees"
above.
7.14 Severability. If any term or provision of this Agreement shall, to
any extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement shall not be affected thereby,
and each term and provision of this Agreement shall be valid and be enforceable
to the fullest extent permitted by law.
7.15 Assignment. No Party shall assign this Agreement, nor any interest
arising herein, without the written consent of the other Parties.
7.16 Recitals. The recitals set forth above are a part of this
Agreement.
7.17 Jurisdiction and Venue. Venue for and jurisdiction over any legal
proceedings available to the Parties hereunder shall lie in the appropriate
courts of the State of Nevada.
IN WITNESS WHEREOF, the Parties hereto have hereunder affixed
their signatures on the dates set forth below to be effective as of the date
first set forth above.
Genesis Media Group, Inc.
a New Jersey corporation,
Date: 6-17-99 By: /s/
--------------------- --------------------------------------
Name: Don R. Logan
Its: President
Open Door Records, Inc.
a Rhode Island corporation,
Date: 6-17-99 By: /s/
--------------------- --------------------------------------
Name: David N. DeBaene
Its: President
<PAGE>
EXHIBIT A
List of Acquired Company's Shareholders, Addresses and Stock Ownership
<PAGE>
EXHIBIT B
Financial Statements
<TABLE>
<CAPTION>
EXHIBIT 11.1
GENESIS MEDIA GROUP, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
For the year ended For the six months ended
December 31 June 30,
1998 1997 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income (Loss) as reported $(300,906) $159,563 $(171,407) $134,528
Income tax expense - - - -
------------- ------------- ------------- -------------
Net income (loss) $(300,906) $159,563 $(7171,407) $134,528
============= ============= ============= =============
Basic earnings per share $ (0.02) $ 0.02 $0.00 $ 0.01
============= ============= ============= =============
Diluted earnings per share $ (0.02) $ 0.02 $0.00 $0.01
============= ============= ============= =============
Weighted average shares outstanding 20,233,624 6,869,500 32,680,574 6,869,500
============= ============= ============= =============
Fully diluted average shares outstanding 20,233,624 6,869,500 32,680,574 6,869,500
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
OPEN DOOR RECORDS, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
For the year ended
December 31, For the six months ended
June 30,
1998 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Income (Loss) as reported $(2,627) $(92,811) $(816)
Income tax expense - - -
------------- ------------- -------------
Net income (loss) $(2,627) $(92,811) $(816)
============= ============= =============
Basic earnings per share $(2.63) ($92.81) $(0.82)
============= ============= =============
Diluted earnings per share $(2.63) ($92.81) $(0.82)
============= ============= =============
Weighted average shares outstanding 1,000 1,000 1,000
============= ============= =============
Fully diluted average shares outstanding: 1,000 1,000 1,000
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
OPEN DOOR ONLINE, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
Proforma For the nine months ended
June 30, September 30,
1999 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Income (Loss) as reported $(92,811) $(132,296) $(6,571)
Income tax expense - - -
------------- ------------- -------------
Net income (loss) $(92,811) $(132,296) $(6,571)
============= ============= =============
Basic earnings per share $ (0.01) $ (0.01) $ (06.57)
============= ============= =============
Diluted earnings per share $ (0.01) $ (0.01) $ (6.57)
============= ============= =============
Weighted average shares outstanding: 9,159,291 9,210,569 1,000
============= ============= =============
Fully diluted average shares outstanding: 9,159,291 9,210,569 1,000
============= ============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001098125
<NAME> OPEN DOOR ONLINE, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.000
<CASH> 78,580
<SECURITIES> 0
<RECEIVABLES> 792,082
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 886,283
<PP&E> 21,907,217
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,794,237
<CURRENT-LIABILITIES> 1,368,780
<BONDS> 0
0
0
<COMMON> 1,013
<OTHER-SE> 21,409,367
<TOTAL-LIABILITY-AND-EQUITY> 22,794,237
<SALES> 190,606
<TOTAL-REVENUES> 191,064
<CGS> 118,385
<TOTAL-COSTS> 193,187
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,788
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (132,296)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (132,296)
<EPS-BASIC> (.01)
<EPS-DILUTED> 0
</TABLE>
