UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
AMENDMENT NO. 1
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(g) 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(b) of the Act:
None
(Title of Class)
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TABLE OF CONTENTS
PART I Page
ITEM 1. Description of Business .......................................... 3
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 11
ITEM 3. Description of Properties......................................... 16
ITEM 4. Security Ownership of Certain Beneficial Owners
and Management ................................................... 16
ITEM 5. Directors, Executive Officers, Promoters and
Control Persons .................................................. 18
ITEM 6. Executive Compensation............................................ 21
ITEM 7. Certain Relationships and Related Transactions.................... 22
ITEM 8. Description of Securities......................................... 23
PART II
ITEM 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters....................... 23
ITEM 2. Legal Proceedings................................................. 25
ITEM 3. Changes in and Disagreements with Accountants..................... 25
ITEM 4. Recent Sales of Unregistered Securities........................... 25
ITEM 5. Indemnification of Directors and Officers ........................ 26
PART F/S .................................................................. 28
PART III
ITEM 1 Index to Exhibits................................................. 50
<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 re-establish its listing on the
Over-The-Counter Bulletin Market exchange.
(3) PRIOR MERGER OF GENESIS GROUP, INC. 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
originating, developing, producing and financing low budget motion pictures,
with an emphasis on the action/adventure and family-comedy film genre.
(4) DISCONTINUED BUSINESS
Genesis Media Group maintained office space and operations in the Los
Angeles, California area. The business of Genesis Media Group was originating,
developing, producing and financing low budget motion pictures, with an emphasis
on the action/adventure and family-comedy film genre. These motion picture
projects typically had a budget of $1,000,000 to $5,000,000.
Prior to the transactions provided for in the Acquisition Agreement,
Genesis Media Group planned to expand this business and to increase utilization
of its office and operational facilities. However, on June 30, 1999, 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 cancelled certain outstanding
orders for specialized production equipment. Then in conjunction with the
Acquisition Agreement closing, Genesis Media Group's business operations were
then terminated and the successor company, Open Door Online, is now disposing of
the leased facilities and certain other operating assets of the former Genesis
Media Group's business that will not be necessary for the normal intended
operations of Open Door Online.
(b) BUSINESS OF THE ISSUER
(1) PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS
Open Door Music. In February of 1999, Open Door Records, Inc. created
Open Door Music, an online music CD store. 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. On November 21, 1997, Open Door Records, Inc.
established its own record label, "Open Door Records." Subsequent to the
acquisition of Open Door Records, Inc., Open Door Online now uses its 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.
With respect to licensing master recordings from other record labels,
the Company is in the process of creating compilation recordings for release as
commercial items, corporate premiums for itself or outside clients, giveaways
and other promotional uses. To date the record label has three active projects.
Two of these projects are under consideration by outside clients and one has
been approved and is in production. The two projects under consideration are for
J.C. Penney and Hanes/Sara Lee, and projected commencement dates are tentatively
set for March 1st, 2000. The WHJY Radio project has commenced meaning that
requests for master licenses have been sent to the various record labels and
music publishers. We have commenced negotiating the license fees with WHJY
Radio, setting a budget, developing art and manufacturing the product. WHJY
Radio plans to release the project in spring 2000. In all cases, the client is
responsible for the ultimate purchase and/or sale depending upon if it is to be
used as a premium item or as a consumer product. An ongoing and active effort to
secure other clients and projects of this nature is part of our operational plan
for Open Door Records for the coming years.
In an effort to acquire master recordings and publish catalogues,
solicitation has been made to various individuals and organizations such as Zen
Archer Music, Cross Eyed Cat Songs, Warner Chappell, Motown and Spirit Music. To
date, the record label has acquired the distribution rights to WMG Record's
entire catalogue which is comprised of six artists from Spirit Music. In
addition, Open Door Records is in preliminary negotiations to acquire master
recordings by Stephen Bishop and Robert Lamm from Spirit Music. Open Door
Records actively solicits the acquisition of publishing catalogues from all
artists signed to Open Door Records. As of this date, it has secured the
exclusive and entire right to 50% plus a 7.5% administration fee of all
copyrights owned by the music group No Soap Radio. Open Door Online has such
rights to No Soap Radio copyright works for the group's next five records.
Open Door Records has begun the process of carefully selecting,
developing and promoting new talent. One of the artists is Queen Esther Marrow
and the Harlem Gospel Singers and the other artist is No Soap Radio. No Soap
Radio's project has been recorded and will be mixed with a master recording
expected to be produced in February or March of 2000. The project has an
anticipated release date of May 2000.
On October 4, 1999, Open Door Records entered into an agreement with
Intershow Records, Inc. whereby Open Door Records was granted an exclusive
license to exploit master recordings of The Harlem Gospel Singers featuring
Queen Ester Marrow for a three year term. In September 1999, Open Door Records
signed the music artist Jeru to an exclusive two year recording contract.
Finally, on July 1, 1999, Open Door Records entered into an agreement with Live
on the Net whereby Live on the Net would broadcast Open Door Records artist
performances on its website for a two year term.
Bowvau Records, Inc., owned by super DJ Quincy Vaughn, has joined the
Open Door Online distribution family. Open Door Records entered into a two-year
distribution agreement in May 1999, whereby Open Door Records is the exclusive
distributor of Bowvau's music productions. WMG Records, which is owned by Dick
Wagoner, has also joined the Open Door Records family. In May 1999, Open Door
Records entered into a two-year distribution agreement whereby Open Door Records
is the exclusive distributor of WMG Records' music productions.
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 Sound Delivery, a division of Valley
Media, Inc., as 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 Sound Delivery. All inventory is owned and
stored by Sound Delivery and Baker and Taylor. Twice daily, Open Door Online
batches customer orders and electronically transmits them to Sound Delivery.
Open Door Online uses a secure network through which it transmits data to Sound
Delivery, thereby helping to ensure customer security as well as data integrity.
Sound Delivery 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.
Open Door Records uses traditional retail music stores, as well as
online internet music stores to distribute the record label's music productions.
(3) STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE
Open Door Online has no new publicly announced products or services for
either Open Door Music or Open Door Online.
(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. Some of
the independent record labels Open Door Records competes with include TVT,
Aftermath, Cash Money, Republic, Righteous Babe, Ruff Ryder and Rounder
Records. Competition from the major recording labels includes Sony, Universal
and MCA. Success in this industry is often based on the ability of the record
label to move decisively and quickly on music trends, artist signings and
promotion. Open Door Records may not be able to compete with other record
labels that have larger advertising and promotion budgets. Therefore, there is
no guarantee that we can successfully compete in this industry.
With respect to recorded music sales, Open Door Music 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, ease 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 our 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
On August 26, 1998, Open Door Records, Inc. entered into an agreement
to use Sound Delivery, a division of Valley Media, Inc., to fill all online
orders of CDs, cassettes and other related products. This agreement has a two
year term and therefore expires on August 26, 2000. Open Door Online intends to
use Baker and Taylor, another supplier, to fill customer orders if and to the
extent that Sound Delivery is unable to do so. However, as of this date, Open
Door Online has not entered into any contracts with Baker and Taylor for the
performance of such services. All inventory is owned and stored by Sound
Delivery and Baker and Taylor.
(6) DEPENDENCE ON MAJOR CUSTOMERS
Open Door Online is not currently dependent on any major customers for
either of its divisions businesses. 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
Security. Open Door Online uses an electronic data interchange, or
"EDI", interface to ensure the security of customer credit cards transactions
and other order information shared with Open Door Online's order fulfillment
partner and third party billing company, Sound Delivery. Currently, the EDI
interface Open Door utilizes is owned by Sound Delivery. Under its distribution
agreement with Sound Delivery, Open Door Online is allowed the non-exclusive use
of the EDI for the term of the agreement, which expires in August 2000.
(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
Open Door Online is unaware of any existing governmental regulations of
its business, including the business of its divisions, as presently condu cted.
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 or
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
During 1998 and 1999, Open Door Online and its predecessors did not
engage in any research and development activities.
In the future, 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. The current budget for this area is less than one hundred thousand
dollars over the next two years.
(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. These are the employees used for either
Open Door Music or Open Door Records. All of the employees of Open Door Online
have been hired on an "at-will" basis, and thus are not under contract for any
definite term. 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 was not required to
deliver annual reports. On January 4, 2000, however, we became a reporting
company, subject to the reporting requirements set forth under the 1934
Securities Exchange Act. Open Door Online anticipates filing Forms 10-KSB,
10-QSB, 8-K and Schedules 13D along with appropriate proxy materials as they
come due. In addition, Paragraph 16(a) of the Securities Exchange Act requires
the Company's executive officers and directors, and persons who own 10% or more
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
if the Company and its equity securities meet certain requirements. As of this
date, Open Door Online has not received or reviewed any filings under Section
16(a) from such individuals, including any filing on Forms 3, 4 or 5. If Open
Door Online issues additional shares, Open Door Online may file additional
registration statements for those shares.
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, we intend to deliver annual reports. If we
are not required to deliver annual reports in the future for any reason, we do
not intend to go to the expense of producing and delivering such reports. If we
are required to deliver annual reports, they will contain audited financial
statements as required.
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).
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
Our historical financial data presented below has been derived from
financial statements of Open Door Online 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 Media Group 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 requires continual
updating of production techniques. Most contracts are awarded by competitive bid
to companies with demonstrated capability and personnel. Most contracts obtained
by Genesis Media Group were relatively short term in duration and did not
include the feature film market which could extend beyond one year in duration.
Genesis Media Group 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 Media Group 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 business of Genesis Media Group was 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 Media Group were greater than
those found in less skilled industries.
These factors were the major contributing circumstances which lead
Genesis Media Group to enter into the Acquisition Agreement. In conjunction with
the Acquisition 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.
Therefore, we do not believe that the historical results of operations
of Genesis Media Group and its predecessor are indicative of the future
operations of Open Door Online, Inc.
1999
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 Media Group, 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 operations of $500,000 to buy-out and terminate certain long term
leases of production equipment.
Second, we devoted substantial resources to completion of our 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, we intend to add and continue to add more services and products
as quickly as possible to capture a significant market share of the home
entertainment and music distribution markets.
Third, we devoted our time and resources to raising liquidity,
assembling a management team and developing strategic alliances with artists,
managers and promoters. During this period we 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 the
commercial operations of 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 we had approximately $78,580 of cash available
to support operations. Subsequent to September 30, 1999, we collected a
receivable in the amount of $518,000. We believe that we will be able to raise
such additional capital to meet our operating and financial obligations in the
future.
Future Plan of Operation
The post exchange company, Open Door Online, 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. Our 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.
We recognize that the nature and scope of our intended business will
require substantial additional financing. To meet this requirement, we plan to
finance our cash requirements through a combination of equity offerings and debt
financing. This process will allow us to complete the initial phases of our
internet marketing products. Once in place, we believe this should provide
sufficient operating revenue to expand the other intended areas of our business.
The internet marketing arena is highly competitive. We believe that we
are well placed to take advantage of this growing market and look to become more
competitive in the entertainment and distribution sectors of that market.
We will expand our workforce to meet our 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.
Open Door Online'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 expensing costs related to the programming,
promotion, setup and implementation of the internet presence necessary for the
Open Door Online activities.
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 our computer systems are new and have been
Year 2000 compliant since their acquisition. We keep current with all updates
and revisions with all software we currently use. It is anticipated that the
software updates reflect required revisions to accommodate transactions in the
Year 2000 and thereafter. Though it is not anticipated that Open Door Online
will have a problem at the turn of the century, we intend to coordinate the
resolution of any Year 2000 problems with the vendors of the software Open Door
Online utilizes. Nonetheless, we 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. We are currently
unable to predict the extent to which the Year 2000 issue will affect our
clients, 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. Such problems could occur with Sound Delivery, our supplier of music
CDs, cassettes and other related products. We have not independently verified
whether Sound Delivery is Year 2000 compliant, nor assessed the risk that this
poses to Open Door Online's business. We have not taken any steps in preparation
for a worst case scenario if our customers or suppliers are not Year 2000
Compliant. We do not have, nor do we intend to create, a contingency plan to
handle such an event.
Nevertheless, as of this date, Open Door Online has not had any
problems associated with the Year 2000 issue. However, we cannot guarantee that
such problems will not arise in the future.
ITEM 3. DESCRIPTION OF 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 seven 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
Title Beneficially Percent of
of Class Name/Address of Owner Owned Class
- - -------- ---------------------------------------- --------------- -----------
Common Don R. & Barrie M. Logan 545,530 5.38%
23355 Gondor Drive
Lake Forrest, California 90710
Common Donna Petronelli 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% per 4,414,000 43.56%
Individual
Common 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.
(iii) All common shares are entitled to 1 vote per share. There are
no other shares with voting rights.
(b) SECURITY OWNERSHIP OF MANAGEMENT
Shares
Title Beneficially Percent of
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, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(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
Norman J. Birmingham 41 Treasurer and Chief Financial Officer
Steev Panneton 41 Secretary
(1) BUSINESS EXPERIENCE
Mr. David DeBaene, one of the founders of Open Door Online, serves as
its President and CEO. In 1991, David DeBaene founded JD American Workwear,
Inc., a publicly traded manufacturer and distributor of safety work wear, and
currently 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." 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 Records, Inc.,
serves as its vice president and COO. Thomas Carley has actively been involved
in the music industry as a freelance performer, producer and recording engineer.
Prior to joining Open Door Online, Mr. Carley was the owner and operator of C &
C Contracting and Painting, a general contracting firm, securing both union and
non-union contracts. Mr. Carley has been a director of Open Door Online since
June 17, 1999.
Edmond L. Lonergan, over the last five years, has been involved in
business consulting and the insurance field. Prior to 1996, Mr. Lonergan was
President of an Insurance Company called Insurance Providers of American. Since
1996, Mr. Lonergan has owned and operated Corporate Architects, Inc., a merger
and acquisition consulting business specializing in reverse mergers of private
companies into inactive public companies. 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.
Norman J. Birmingham has served as President of Patina Corp., a holding
company for construction demolition and asbestos abatement companies, since
April of 1999. From September 1998 to January 1999, Mr. Birmingham served as
Chief Financial Officer of Mediforce, Inc., a medical products company. Mr.
Birmingham was Chief Financial Officer for General Environmental Technologies,
Inc., a holding company for three demolition companies, from January 1998 to
September 1998. From November 1995 to August 1997, he served as President and
Chief Financial Officer for Westmark Group Holdings, Inc., a holding company for
wholesale mortgage companies. Mr. Birmingham was President of Budget Services
and provided accounting, tax and financial planning services from September 1986
to July 1997. Mr. Birmingham became an officer of Open Door Online in February
2000.
Mr. Steev Panneton has served as Vice President of Manufacturing and
New Product Development for JD American Workwear, Inc. since 1991. He has also
worked as a freelance 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 Genesis Media Group, Inc,
Open Door Online's 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. Over
the last five years, Ms. Barbone has been employed with August Artist
Management, where she has managed several music artists. Her clients have
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, over the last five years, has co-founded of Concept-Link,
Ltd., a service bureau and internet production corporation in Providence, Rhode
Island. 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, over the last five years, has been operating Maritime
Information System and currently operates an 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. The services Bridgewater Management Group has provided
for Open Door Online include coordination of internet activities, research and
development of current and future internet ventures, identifying potential
acquisition candidates, and general corporate strategic guidance. For each of
the services performed, Bridgewater Management Group has acted, and will
continue to act, in the capacity of a consultant. It is anticipated that
Bridgewater Management Group Inc. will continue to play an important role in the
coordination and growth of the Open Door Music 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. The services that
Ms. Rogers has provided for Open Door Online include consultation services in
music publishing for film and television, consultation services with respect to
new emerging technologies such as MP3 and other digital download technology, and
has assisted Open Door Online in its composer/artist relations. For each of the
services performed, Ms. Rogers has acted, and will continue to act, in the
capacity of a consultant. 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
Open Door Online as a production and engineering consultant, as well as a studio
design consultant. It is anticipated that Mr. Gauthier will continue to play an
important role in these areas as a consultant to Open Door Online.
Ralph Petrarca. Mr. Petrarca has also provided significant production
and studio engineering assistance as a consultant 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 or
commodities laws, 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 or Open Door Records, Inc. from
November 1997, the date of Open Door Records' inception, 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 $25,000 for each
year of the five year term. It is also expected that other executives'
compensation will be scaled downward from these levels. This plan has not been
finalized to date. No stock appreciation plans or stock compensation plans are
currently in existence for Open Door Online.
Compensation paid to the officers and directors of Genesis Media Group
and Hollywood Showcase Television Network, Inc., the predecessors of Open Door
Online, during 1997, 1998 or 1999 were as follows:
<TABLE>
<CAPTION>
Summary Compensation Table
- - ----------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
- - ----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Restricted Underlying
Name and Annual Stock Options/ All Other
Principal Compensa- Award(s) SARs (#) LTIP Compensa-
Position Year Salary($) Bonus ($) tion ($) ($) Payouts ($) tion ($)
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEO Don R. 1997 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Logan 1998 $ 66,500 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
6 months
1999 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Secretary Barrie 1997 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Logan 1998 $ 30,826 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
6 months
1999 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Treasurer Carl Conte 1997 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
1998 $ 31,250 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
6 months
1999 $ 20,000 $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -
</TABLE>
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. At no time has Mr. DeBaene received any
consideration, directly or indirectly, for the amounts he has guaranteed.
During 1998, Genesis Media Group, Inc. distributed to its shareholders
shares of TranStar Communications, Inc., that Genesis Media Group received in
exchange for certain assets, based on the book value of those assets. 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.
In 1999, Genesis issued to Don R. Logan, the former chief executive
officer and director of Genesis, an equivalent 299,997 shares of restricted
common stock in lieu of compensation. At the time of the issue, the fair market
value of the stock based on the asked price was $2.40 per equivalent share and
discounted 20% to allow for the restricted nature of the securities issued.
Genesis recognized salary expense in the amount of $576,000 for the six months
ended June 30, 1999.
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
OTHER 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.
<TABLE>
<CAPTION>
Bid Prices Ask Prices
------------------------------- -----------------------------------
1997 High Low High Low
- - ---- ---------------- -------------- -------------------- --------------
<S> <C> <C> <C> <C>
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
</TABLE>
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.
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
shares of Open Door Online's common stock outstanding. Of these shares, 181,762
were freely trading, while 535,892 were subject to trading restrictions.
During 1997, 1998 Genesis issued an equivalent 303,418 shares of common
stock in conjunction with the merger and exchange of shares of Genesis Group,
Inc. with Hollywood Showcase Television Network, Inc. These shares were issued
pursuant to the exchange agreement between those companies.
In 1999, Genesis issued to Don R. Logan, the former chief executive
officer and director of Genesis, an equivalent 299,997 shares of restricted
common stock in lieu of compensation. At the time of the issue, the fair market
value of the stock based on the asked price was $2.40 per equivalent share and
discounted 20% to allow for the restricted nature of the securities issued.
Genesis recognized salary expense in the amount of $576,000 for the six months
ended June 30, 1999.
In conjunction with the Acquisition Agreement described above, on June
30, 1999 Open Door Online issued a stock split of the then outstanding shares
such that Open Door Records, Inc. would have 7,000,000 shares of its common
stock outstanding immediately prior to the closing of the Acquisition Agreement.
In conjunction with the Acquisition Agreement, the Company granted Mr.
DeBaene the right to convert up to 100% of the debt owed to him by the Company,
plus accrued interest to common stock of the Company. The conversion price is to
be 50% of the 21 day moving average of the bid-ask prices immediately preceding
the notice of conversion. At September 30, 1999 this would equate to
approximately 153,180 shares at a conversion price of approximately $3.08 per
share.
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.
All of the above-referenced transactions were in compliance with state
blue sky laws as well as the federal securities laws.
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.
<PAGE>
PART F/S FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
GENESIS MEDIA GROUP, INC.: Page
----
Report of Independent Accountants............................................29
Balance Sheet - December 31, 1998 and 1997 and
June 30, 1999 and 1998 (Unaudited)...........................................30
Statements of Operations for the two years ended December 31, 1998
and the six months ended June 30, 1999 and 1998 (Unaudited)..................31
Statements of Cash Flows for the two years ended December 31, 1998
and the six months ended June 30, 1999 and 1998 (Unaudited)..................32
Notes to Financial Statements for the two years ended December 31, 1998
and the six months ended June 30, 1999 and 1998 (Unaudited)................33-39
OPEN DOOR ONLINE, INC.:
Report of Independent Accountants............................................40
Balance Sheet - December 31, 1998 and
September 30, 1999 and 1998 (Unaudited)......................................41
Statements of Operations for the year ended December 31, 1998
and the nine months ended September 30, 1999 and 1998 (Unaudited)............42
Statements of Cash Flows for the year ended December 31, 1998
and the nine months ended September 30, 1999 and 1998 (Unaudited)............43
Notes to Financial Statements for the year ended December 31, 1998
and the nine months ended September 30, 1999 and 1998 (Unaudited)..........44-49
<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 the Company'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 materials 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
<PAGE>
<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)
Current Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $400 $10,025 $2,077 $155,952
Accounts receivable - trade (Note 3) 186,437 13,814 176,436 198,913
Loans receivable - trade 50,000 50,000 50,000
Prepaid expenses 111,030 51,416 399,739 130,944
Marketable securities (Note 8) 235,168 243,168
---------- ---------- ---------- ----------
583,035 75,255 614,252 778,977
Property and equipment, net of accumulated 661,666 162,034 638,038 161,581
depreciation of $37,333 and $15,733 for 1998
and 1997, respectively. (Note 4)
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 $42,473,268 $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) 114,096 163,320
---------- ---------- ---------- ----------
178,117 117,588 277,215 4,649
Long term debt - capitalized leases (Note 6) 380,124 334,594 7,776
---------- ---------- ---------- ----------
Total liabilities 558,241 117,588 601,809 12,425
Stockholders' Equity
Common Stock - par value $0.0001, authorized 2,813 1,750 3,833 1,225
50,000,000 shares, issued and outstanding
28,130,607 and 17,499,327, 1998 and 1997,
respectively. (Notes 1, 10 and 12)
Additional paid in capital 42,202,434 41,294,338 42,911,153 41,966,499
Retained earnings (deficit) (306,120) (5,214) (1,053,527) 129,315
---------- ---------- ---------- ----------
41,899,127 41,290,874 41,861,459 42,097,039
---------- ---------- ---------- ----------
$42,457,368 $41,408,462 $42,473,268 $42,109,464
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Genesis Media Group, Inc.
Statement of Operations
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)
Revenue
<S> <C> <C> <C> <C>
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
--------- ------- ----------- --------
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 283,003 208,747 708,016 41,619
--------- ------- ----------- --------
Total Operation Expense 740,904 597,198 795,007 273,322
--------- ------- ----------- --------
Net Income (Loss) (300,906) 159,563 (747,407) 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) $(1,053,527) $129,314
========= ======= =========== ========
Loss per common share (Note 10) $(0.01) $0.01 $(0.02) $0.01
========= ======= =========== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<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)
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net Income (Loss) $(300,906) $159,563 $(747,407) $134,528
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Amortization and depreciation 21,600 15,733 26,153 10,556
Non-monetary compensation 576,000
----------- ----------- ----------- -----------
Net cash flow provided by (used in) operating (279,306) 175,296 (145,254) 145,084
activities
Changes in assets and liabilities
Accounts receivable (172,623) (13,814) 10,001 (185,099)
Notes receivable (50,000) (50,000)
Prepaid expenses (59,614) (51,416) (283,709) (79,528)
Marketable securities (134,170) 235,168 (243,168)
Other assets 14,335 (158,673) 691 27,581
Accounts payable (82,712) 100,000 (17,276) (100,000)
Accrued expenses 29,147 17,588 67,160 (12,939)
----------- ----------- ----------- -----------
(455,637) (106,315) 12,035 (643,153)
Net cash flow provided/(used) by operating (734,943) 68,981 (133,219) (498,069)
activities
Cash flows from investing activities:
Purchase of property, plant & equipment (521,232) (172,034) (2,525) (10,102)
Payments on production of music library (55,829) (2) (25,314)
----------- ----------- ----------- -----------
(577,061) (172,034) (2,527) (35,416)
Cash flow from financing activities:
Principal payments on long-term debt - (60,530) (45,350) (810)
capitalized leases
Proceeds from issuance of long-term debt - 554,750 49,044 8,586
capitalized leases
Proceeds from issuance of common stock 808,159 113,078 133,729 671,636
----------- ----------- ----------- -----------
1,302,379 113,078 137,323 679,412
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>
<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. ("Genesis") was incorporated in
the state of New Jersey on July 27, 1987. In August 1997, 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.
1997 Merger
- - -----------
In August 1997 (the "Merger Date"), Genesis Group, Inc. merged into Hollywood
Showcase Television Network, Inc. ("Hollywood"). The shareholders of Hollywood
received shares of Genesis Group, Inc. for each share of Hollywood common stock.
In total, approximately 8,924,000 shares were exchanged for the outstanding
stock of Hollywood.
The Merger was accounted for as a reverse acquisition whereby Genesis Group,
Inc. was treated as the acquirer and Hollywood as the acquiree, because Genesis
Group, Inc. shareholders owned a majority of the surviving entity stock as of
the merger Date and owned a majority of the assets. Purchase accounting was
performed on Hollywood based on the fair market value of the transaction date.
The value of Hollywood was based on the fair market value of the assets, net of
liabilities acquired by Genesis Group, Inc. at the Merger Date. A summary of the
assets and liabilities acquired, at estimated fair market value was as follows:
Current Assets $ 16,456
Property, Plant & Equipment 42,757
---------
Total Assets 59,213
---------
Current Liabilities (43,378)
---------
Fair market value of Hollywood $ 15,835
========
The accompanying financial statements include the results of Genesis Group, Inc.
for all periods and the results of Hollywood beginning on the Merger Date. The
following 1997 pro forma selected financial data reflect the Merger as if it had
occurred at the beginning of 1997. The unaudited pro forma financial data does
not purport to represent what the results from continuing operations would
actually have been had the transaction in fact occurred as of an earlier date,
or project the results for any future date or period.
<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 (continued)
Pro Forma (unaudited) 1997
--------------------- ----
Revenues $ 846,132
Cost of good sold 58,882
Selling, general and administrative 640,676
----------
Operating Income 146,574
----------
Income from continuing operations $ 146,574
==========
Income (loss) per share $ 0.01
==========
Weighted average number of shares 17,499,327
==========
Note 2 - Summary of Significant Accounting Policies
The summary of significant accounting policies of Genesis Media Group, Inc. is
presented to assist in understanding Genesis's financial statements. The
financial statements and notes are representations of Genesis'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
- - ----------------
Genesis is primarily engaged in media and advertising.
Accounts Receivable
- - -------------------
Genesis provides allowances against accounts receivable to maintain sufficient
reserves to cover anticipated losses.
Master Music Library
- - --------------------
The master music library is stated the independent appraised value of the
library at the time it was contributed to Genesis Group, Inc. (the predecessor).
The library was acquired and collected by the majority shareholder of Genesis
Group, Inc. over a number of years. Genesis was in the process of upgrading the
master media before production and marketing of the various music product.
Genesis intended to amortize the carrying cost of the library over the estimated
useful net sales life of the recording in such a way that the costs would be
amortized against net revenue in accordance with SFAS 50.
<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)
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
Revenue Recognition
- - -------------------
Revenue is recognized when earned and delivered to the customer or in certain
circumstances as the work progresses on a project and is progress billed to the
customer per the contract.
Copyrights and Amortization
- - ---------------------------
Copyrights were purchased and are subject to the 15 year amortization rules. For
purposes of these financial statements, copyrights are amortized on the straight
line basis over 15 years.
Note 3 - Accounts Receivable
Accounts receivable is comprised of the following:
December 31, June 30,
------------------ ------------------
1998 1997 1999 1998
-------- -------- -------- --------
Trade receivables $206,437 $13,814 $196,436 $198,913
Less: Allowance for doubtful accounts 20,000 - 20,000 -
-------- -------- -------- --------
Total $186,473 $13,814 $176,436 $198,913
======== ======== ======== ========
Note 3 - Prepaid Expenses
Included in prepaid expenses is a note for $20,000 from an officer of Genesis.
The officer has pledged his shares of Genesis's common stock as collateral for
said note.
<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 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
Capitalized lease production equipment 515,810
Signs 335
Software 230
Leasehold improvements 19,611 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, $26,153 and $10,556,
respectively.
Property, plant and equipment include certain capitalized leases. Leased
production equipment represents capitalized leases whereby Genesis has the right
to exercise a nominal purchase option at the end of the lease period.
Note 5 - Master Music Library
The master music library 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
thereof. Genesis 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 movie
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
===========
<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 6 - Leases
Genesis leases certain real estate and equipment. Commitments for minimum
rentals under noncancellable leases, by year, of the future minimum payments
under these leases, together with the present value of the net minimum payments
under the capital leases, together with the present value of the net minimum
payments as of December 31, 1998:
Capital Operating
Leases Leases
Year ending December 31, ---------- ----------
1999 $163,320 $99,191
2000 163,320 49,595
2001 144,952
2002 127,816
2003 66,323
---------- ----------
Total minimum lease payments 665,731 $148,786
Less amount representing interest 171,511 ==========
----------
Total present value of minimum payments 494,220
Less current portion of such obligations 114,096
----------
Long-term obligations with interest rates ranging
from 11.0% to 15.0% averaging approximately 12.95% $380,124
==========
Property, plant and equipment included the following amounts for
capitalized leases:
December 31, June 30,
------------------ ------------------
1998 1997 1999 1998
-------- -------- -------- --------
Capitalized lease production equipment $515,810 $--- $515,810 $232,025
Less allowance for depreciation 14,727 --- 37,567 5,832
-------- -------- -------- --------
$501,083 $--- $478,243 $226,193
======== ======== ======== ========
Rent expense under operating leases for the years ended 1998 and 1997 and the
six months ended June 30, 1999 and 1998 amounted to approximately $106,327,
$51,095, $37,775, and $54,074, respectively.
<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 7 - Investment in TranStar Communications, Inc.
During 1998, the Company distributed to shareholders shares of TranStar
Communications, Inc. Genesis 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. The carrying basis approximates the
market value of the stock at balance sheet dates.
Note 8 - Income Taxes
The components of deferred tax assets and liabilities are as follows:
December 31 June 30
1998 1999
------------ -----------
Tax effects of carryforward benefits:
Federal; net operating loss carryforwards $ 98,800 $ 248,900
------------ -----------
Tax effects of carryforwards
Tax effects of future taxable differences and
carryforwards 98,800 248,900
------------ -----------
Less deferred tax asset valuation allowance (98,800) (248,900)
------------ -----------
Net deferred tax asset $ - $ -
============ ===========
At December 31, 1998, Genesis has net operating loss carryforwards ("NOLs") of
approximately $297,000 available at December 31, 1998 to offset its future U.S.
taxable income. This amount may not be available or available only in limited
amounts as a result of the stock exchange agreement discussed in note 12.
However, the successor may authorize other tax planning techniques to utilize a
portion of the remaining NOLs before they expire. These net operating losses
expire over the next 19 years, the majority of which expire 2018. The net
operating loss carryforwards for state purposes are not significant and,
therefore, have not been recorded as deferred tax assets. Any tax benefits
subsequently recognized will be allocated to additional paid in capital.
Note 9 - Stockholders' Equity
Genesis has 50,000,000 shares of stock authorized at $0.0001 par value,
28,130,607 and 17,499,327 shares outstanding at December 31, 1998 and 1997,
respectively and 34,430,562 and 25,189,527 shares outstanding at June 30, 1999
and 1998.
During 1999, Genesis paid its chief executive officer 9,000,000 shares of common
stock in lieu of monetary compensation. The fair market value of the payment,
based on the fair market value of the Genesis's stock trading price, was
$576,000.
<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 10 - Earnings per Common Share
Earnings per common share are computed by dividing the net income/(loss) by the
average number of common shares and common stock equivalents outstanding during
the period. The weighted average number of common shares outstanding during the
periods were approximately 25,431,471 and 13,695,584 at December 31, 1998 and
1997 and 32,680,574 and 20,233,624 at June 30, 1999 and 1998.
Common stock equivalents are the net additional shares which would be issuable
upon the exercise of the outstanding common stock options, assuming that Genesis
reinvested the proceeds to purchase additional shares at market value. Common
stock equivalents had no material effect on the computation of earnings per
share for any period.
Note 11 - Reinstatement 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 Genesis. The result is that
sales have been reduced by $5,400,000, operating income, net income and retained
earnings at December 31, 1997 have been reduced by $3,215,892.
Note 12 - Subsequent Company Exchange Agreement
In June 1999, Genesis entered into a stock exchange agreement with Open Door
Music, Inc. whereby Genesis would acquire all of the issued and outstanding
stock of Open Door Records, Inc. in exchange for stock of Genesis. 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 Genesis changed its name to Open
Door Online, Inc. The exchange referred to in this note is not reflected in
these financial statements.
<PAGE>
Report of Independent Accountants
To The Board of Directors
Open Door Online, Inc. (formerly Open Door Records, Inc.)
Providence, Rhode Island
We have audited the accompanying balance sheet of Open Door Online, Inc.
(formerly 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 the
Company'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 materials respects, the financial position of Open Door Online, Inc.
(formerly 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
January 27, 2000
Scottsdale, Arizona
<PAGE>
<TABLE>
<CAPTION>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Balance Sheets
December 31, 1998
September 30, 1999 and 1998(Unaudited)
ASSETS
December 31, September 30,
------------ ---------------------------
1998 1999 1998
------------ ------------ ------------
(Unaudited) (Unaudited)
Current Assets
<S> <C> <C> <C>
Cash and cash equivalents $33 $78,580 $1,195
Accounts receivable - trade 37,185 261,582
Loans receivable - trade 12,500
Loans receivable - investors (Note 9) 164,000
Prepaid expenses 1,477 15,621
------------ ------------ ------------
38,695 532,283 1,195
Property and equipment, net of accumulated 133,615 173,954 92,690
depreciation (Note 4)
Master music library 21,700,000
Other assets 2,737 3,737 2,737
------------ ------------ ------------
$175,047 $22,409,974 $96,622
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $6,720 $109,942 $3,076
Payroll taxes and accrued expenses 212,138
Reserve for discontinued operations (Note 2) 500,000
Notes payable 110,000 471,700 30,000
Current portion of long term debt 75,000
------------ ------------ ------------
116,720 1,368,780 33,076
Long term debt 150,000
------------ ------------ ------------
Total liabilities 116,720 1,518,780 33,076
Stockholders' Equity
Common Stock (Note 7) 1,000 1,013 1,000
Additional paid in capital 71,275 21,055,367 71,275
Retained earnings (deficit) (13,948) (165,186) (8,729)
------------ ------------ ------------
58,327 20,891,194 63,546
------------ ------------ ------------
$175,047 $22,409,974 $96,622
============ ============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Statement of Operations
for the year ended December 31, 1998 and
for the nine months ended September 30, 1999 and 1998 (Unaudited)
December 31, September 30,
--------- ------------------------
1998 1999 1998
--------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenue
Sales $37,185 $190,606 $---
Other income 458
--------- --------- ---------
37,185 191,064
Cost of sales 10,485 118,385
--------- --------- ---------
Gross profit 26,700 72,679
Operating Expenses
Administrative expenses 23,530 71,376 5,677
Amortization and depreciation 11,321 18,942 2,158
Interest expense 3,888 8,224
Office expense 1,144 4,346 394
Professional and outside services 765 86,741 500
Rent 11,788
Salaries and payroll taxes 22,500
--------- --------- ---------
Total Operation Expense 40,648 223,917 8,729
--------- --------- ---------
Net Loss (13,948) (151,238) (8,729)
Retained (deficit) beginning of the period --- (13,948) ---
--------- --------- ---------
Retained (deficit) end of the period $(13,948) $(165,186) $(8,729)
========= ========= =========
Net loss per common share (Note 8) $(0.00) $(0.02) $(0.00)
========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Statement of Cash Flows
for the year ended December 31, 1998 and
for the nine months ended September 30, 1999 and 1998 (Unaudited)
December 31, September 30,
---------- -------------------------
1998 1999 1998
---------- ---------- ----------
(Unaudited) (Unaudited)
Cash Flows from Operations
<S> <C> <C> <C>
Net loss $(13,948) $(151,238) $(8,729)
Adjustments to reconcile net loss to net cash
used by operating activities:
Amortization and depreciation 11,321 18,942 2,158
Changes in operating assets and liabilities (net
of effects from acquisition of business):
accounts receivable (37,185) (224,397)
loans receivable - trade (12,500)
prepaid expenses (1,477) (14,144)
other assets (2,737) (1,000) (2,737)
accounts payable 6,720 8,222 3,076
accrued expenses 24,243
---------- ---------- ----------
Net cash flow used by operating activities (37,306) (351,872) (6,232)
---------- ---------- ----------
Cash Flows from investing activities
Acquisition of property, plant and equipment (73,661) (59,281) (23,573)
---------- ---------- ----------
Net cash used in investing activities (73,661) (59,281) (23,573)
---------- ---------- ----------
Cash flow from financing activities
Proceeds from issuance of debt 110,000 325,700 30,000
Proceeds for issuance of Common Stock 1,000 164,000 1,000
---------- ---------- ----------
Net cash provided by financing activities 111,000 489,700 31,000
---------- ---------- ----------
Net increase in cash and cash equivalents 33 78,547 1,195
Cash at January 1, --- 33 ---
---------- ---------- ----------
Cash at end of period $33 $78,580 $1,195
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Notes to Financial Statements
For the year ended December 31, 1998 and
for the nine months ended September 30, 1999 and 1998 (Unaudited)
Note 1 - Organization
Open Door Records, Inc. ("Open Door") was incorporated in the state of Rhode
Island on November 20, 1997. The Company had no operations during 1997.
In June 1999, Open Door entered into a stock exchange agreement with Genesis
Media Group, Inc. ("Genesis") accounted for as a reverse acquisition whereby all
of Open Door's outstanding stock would be acquired in exchange for stock of
Genesis. On an aggregate basis, Genesis shareholders received 0.0666 shares of
the Company for each share of Genesis common stock. 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. (the "Company") and state of incorporation to New
Jersey. The combination of Open Door with Genesis was accounted for as a
tax-free exchange under th Internal Revenue Code.
The purchase method of accounting was performed on Genesis based on the fair
market value at the transaction date. The valuation of Genesis, including
transaction costs of $120,000 was $20,861,115. A summary of assets and
liabilities acquired, at established fair market value was as follows:
Assets $21,700,000
-----------
Music library $21,700,000
Total Assets 688,885)
-----------
Current Liabilities (150,000)
-----------
Fair market value of Genesis $20,861,115
===========
The accompanying financial statements include the results of Open Door for all
periods and the results of Genesis beginning on July 1, 1999. The unaudited pro
forma financial data does not purport to represent what the Company's results
from continuing operations would actually have been had the transaction in fact
occurred as of an earlier date, or project the results for any future date or
period.
<PAGE>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Notes to Financial Statements
For the year ended December 31, 1998 and
for the nine months ended September 30, 1999 and 1998 (Unaudited)
Note 1 - Organization (continued)
December 31 September 30,
Pro Forma (unaudited) 1998 1999
---------- -----------
Revenue $ 558,747 $ 244,164
Cost of good sold 92,049 123,885
---------- -----------
Gross profit 466,698 120,279
Expenses
Selling, general and administrative (749,602) (1,000,924)
Interest expense (31,950) (18,502)
---------- -----------
Loss from operations $(314,854) $ (899,147)
========== ===========
Loss per share $ (0.03) $ (0.10)
========== ===========
Weighted average number of shares 9,159,291 9,159,291
========== ===========
Note 2 - Discontinued Operations
In conjunction with the acquisition, the Company also acquired certain
capitalized leases and operating lease obligations that extend through 2003.
Genesis had a number of capitalized leases and other obligations as of June 30,
1999 with scheduled payments of approximately $820,000 through 2003 which the
Company is in the process of eliminating. As of June 30, 1999, the Company
elected to discontinue the acquired moving production and editing business in
California and accordingly provided a reserve of $500,000 in excess of the net
carrying value of Genesis to terminate such leases and close the operations.
Note 3 - Summary of Significant Accounting Policies
The summary of significant accounting policies of Open Door Records, Inc. is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company'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
- - ----------------
The Company is primarily engaged in sales and marketing through the internet and
production of media for entertainment and music.
<PAGE>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Notes to Financial Statements
For the year ended December 31, 1998 and
for the nine months ended September 30, 1999 and 1998 (Unaudited)
Note 3 - Summary of Significant Accounting Policies (continued)
Revenue Recognition
- - -------------------
Revenue is generally recognized upon shipment to the customer or upon completion
of the services and is fully earned. Through September 30, 1999, substantially
all of the revenue is derived from the sale of music production services to
third parties.
Accounts Receivable
- - -------------------
The Company provides allowances against accounts receivable to maintain
sufficient reserves to cover anticipated losses.
Equipment and Depreciation
- - --------------------------
Depreciation has been provided on a straight-line basis for financial accounting
purposes using the straight-line method over the shorter of the asset's
estimated life or the lease term. The estimated useful lives of the assets are
as follows:
Record and production equipment 5-7 Years
Website Development 5-7 Years
Leasehold improvements 3-10 Years
Master Music Library
- - --------------------
The master music library consists of original and digitized masters of well
known artists. The Company has the right to produce, sell, distribute or
otherwise profit from its utilization of this library subject to a royalty fee
paid to artists as copies of the product are sold or distributed. The Company
recorded the music library acquired in the acquisition of Genesis at the
discounted estimate fair market value of the library based on the intended
utilization of the library by the Company over ten years. The Company will
amortize the library on a units sold basis in accordance with SFAS 50 that
relates the capitalized costs to estimated net revenue to be realized. When
anticipated sales appear to be insufficient to fully recover the basis, a
provision against current operations will be made for anticipated losses. To
date the Company has not utilized the library nor expensed any of the carrying
value.
<PAGE>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Notes to Financial Statements
For the year ended December 31, 1998 and
for the nine months ended September 30, 1999 and 1998 (Unaudited)
Note 3 - Summary of Significant Accounting Polices (continued)
Comprehensive Net Loss
- - ----------------------
There is no difference between the Company's net loss as reported for any of the
periods reported herein and the Company's comprehensive loss, as defined by the
Statement of Financial Accounting Standards No. 130.
Note 4 - Property and Equipment
Depreciation and amortization for the year ended December 31, 1998 and the nine
months ended September 30, 1999 and 1998 is $11,321, $18,942 and $2,158,
respectively.
Property plant and equipment consist of the following:
December 31, September 30,
1998 1999
---------- ----------
Production equipment $ 105,306 $ 126,206
Office equipment, furniture and fixtures 33,985 57,855
Leasehold improvements 5,645 20,156
---------- ----------
144,936 204,217
Less accumulated depreciation and amortization (11,321) (30,263)
---------- ----------
$ 133,615 $ 173,954
========== ==========
Note 5 - Related Party Short Term Debt
Short term debt is due to the president of the Company for cash advances made to
the Company for working capital. No repayments have been made on the balances.
Advances during the year ended December 31, 1998 and the nine months ended
September 30, 1999 and 1998 were $110,000, $361,700 and $30,000, respectively.
The ending balances at December 31, 1999, September 30, 1999 and 1998 were
$110,000, $471,700 and $30,000, respectively. Interest expense for the periods
was $3,888, $8,224 and $0, respectively.
<PAGE>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Notes to Financial Statements
For the year ended December 31, 1998 and
for the nine months ended September 30, 1999 and 1998 (Unaudited)
Note 6 - Income Taxes
The tax-free exchange with Genesis creates a difference in the basis of the
assets between tax basis and accounting basis. At July 1, 1999, the tax basis of
the assets is approximately $20,950,000 greater than the accounting basis. In
the future, as assets are disposed of, depreciated, or amortized 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 the Company will be able to fully utilize
these differences.
The components of deferred tax assets and liabilities are as follows:
December 31, September 30,
1998 1999
---------- ------------
Tax effect of assets acquired in business
combination $ - $ 8,367,000
Tax effects of reserve for discontinued operations - 200,000
Tax effects of carryforward benefits:
Net operating loss carryforwards 5,600 60,000
---------- ------------
Tax effects of carryforwards
Tax effects of future taxable differences and
carryforwards 5,600 8,627,000
Less deferred tax asset valuation allowance (5,600) (8,627,000)
----------- ------------
Net deferred tax asset $ - $ -
=========== ============
Realization of the net deferred tax assets is dependent on generating sufficient
taxable income prior to their expiration. Tax effects are based on a 9.0% state
and 34.0% federal income tax rates for a net combined rate of 40%. The tax
effects of the acquired business combination have not been recognized in the
current or prior periods but will be recognized in future periods, at which time
if the current period taxable income is insufficient to offset such charges for
tax purposes, the effect will be available to the Company over the succeeding 20
years. The realized net operating losses expire over the next 19 years, the
majority of which expire in 2018. A valuation allowance has been provided for
the full deferred tax asset amount due to the lack of operating history and
operating losses in recent periods. When realization of the deferred tax asset
is more likely than not to occur, the benefit related to the differences will be
recognized as a reduction of income tax expense.
<PAGE>
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Notes to Financial Statements
For the year ended December 31, 1998 and
for the nine months ended September 30, 1999 and 1998 (Unaudited)
Note 7 - Common Stock
At December 31, 1998, the Company has 2,000 shares of no par stock authorized
and 1,000 shares outstanding at December 31, 1998. In June 1999, in conjunction
with the planned acquisition, the Company issued a stock split of 7,000 for 1 to
the original stockholders of the Company and changed the par value per share to
$0.0001. The Company issued a total of 2,969,285 shares in conjunction with the
acquisition on June 30, 1999 including shares issued to prior holders of Genesis
stock and to promoters and others involved in the facilitation of the
acquisition. The outstanding stock of the Company was 10,133,285 shares and
1,000 shares at September 30, 1999 and 1998, respectively.
Note 8 - Earnings per Common Share
Earnings per share of common stock has been computed based on the weighted
average number of shares outstanding. As of December 31, 1998 and September 30,
1998, the weighted average number of shares outstanding after giving effect to
the stock split 1999 was 7,000,000. The weighted average number of shares used
to compute the earnings per share at September 30, 1999, after giving effect to
the acquisition on June 30, 1999 was 9,509,890.
Note 9 - Stock Sale - Subsequent Event
During the third quarter, the Company sold 673,994 shares of its common stock
pursuant to a private offering for an aggregate price of $204,000. In October
1999, the Company received the amount due on the sale of $164,000. The stock is
shown as outstanding at September 30, 1999 and a receivable of the unpaid amount
at that date.
<PAGE>
PART III. EXHIBITS
ITEM 1. INDEX TO EXHIBITS
The following exhibits are filed with this Form 10-SB:
Number Description
-------- ----------------------------------------------------
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
*Previously filed.
**Previously filed and revised exhibit filed herewith.
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: February 14, 2000
By: /s/
-----------------------------
David N. DeBaene, Chairman
CERTIFICATE OF INCORPORATION
OF
E.V. BRENNAN ASSOCIATES, INC.
We, the undersigned individuals of the age of 21 years or more, acting
as incorporators of a corporation under the New Jersey Business Corporation Act,
do hereby adopt the following certificate of incorporation for such corporation:
I. NAME
The name of the corporation is E.V. BRENNAN ASSOCIATES, INC.
II DURATION
The corporation's duration shall be perpetual.
III. PURPOSE OR PURPOSES
The Corporation shall be for the purpose of any activity within the
purposes for which corporations may be organized under the New Jersey Business
Corporation Act.
IV. CAPITALIZATION
The corporation is authorized to issue only one class of stock. The
total number of shares that the corporation is authorized to issue is 1,000
shares. Each share shall be without par value. No distinction shall exist
between the shares of the corporation or between the holders thereof.
V. REGISTERED OFFICE
The address of the corporation's initial registered office is 72
Woodside Drive, Middletown, Monmouth County, State of New Jersey, and the name
of the corporation's initial registered agent at such address is Eugene Brennan.
VI. DIRECTORS
The number of directors constituting the initial board of directors is
two (2), and the names and addresses of the persons who are to serve as
directors until the annual meeting of stockholders or until their successors are
elected and qualified are:
ENGENE V. BRENNAN, III 72 Woodland Drive
Middletown, N.J. 07748
IRENE K. BRENNAN 72 Woodland Drive
Middletown, N.J. 07748
The number of Directors of the corporation set forth above shall
constitute the authorized number of Directors until changed by an amendment of a
by-law duly adopted by the vote or written consent of the holders of a majority
of the then outstanding shares of stock in the corporation.
VII. INCORPORATORS
The names and addresses of the incorporators are:
ENGENE V. BRENNAN, III 72 Woodland Drive
Middletown, N.J. 07748
IRENE K. BRENNAN 72 Woodland Drive
Middletown, N.J. 07748
IN WITNESS WHEREOF, we have hereunto set our hands and seals this 30th
day of June, 1987.
/s/ Eugene V. Brennan, III
--------------------------
EUGENE V. BRENNAN, III
/s/ Irene K. Brennan
--------------------
IRENE K. BRENNAN
<PAGE>
CERTIFICATE OF AMENDMENT
OF
E.V. BRENNAN ASSOCIATES, INC.
Pursuant to Title 14A:9-4 Corporations, General
of the New Jersey Statute
The undersigned corporation hereby certifies as follows:
FIRST: The name of the corporation is E.V. Brennan Associates, Inc.
SECOND: The amendment to the Certificate of Incorporation affected
hereby is as follow:
"First" The name of the corporation is Hollywood Showcase
Television Network, Inc."
"Fourth: The corporation shall be authorized to issue fifty
million (50,000,000) shares of common stock at one tenth of a mill
(.0001) par value and five million (5,000,000) Convertible Preferred
shares bearing no dividends at once tenth of a mill (.0001) par
value."
THIRD: This amendment was adopted by the shareholders on the 5th day
of January, 1996.
FOURTH: At the time the amendment was adopted, there were 1,000 shares
outstanding and entitled to vote thereon.
FIFTH: The number of shares voted for said adoption is unanimous.
EXECUTED on behalf of this corporation this 6th day of January, 1996.
E.V. BRENNAN ASSOCIATES, INC.
By: /s/ Eugene V. Brennan III
-------------------------
CHAIRMAN and
PRESIDENT
<PAGE>
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
OF HOLLYWOOD SHOWCASE TELEVISION NETWORK, INC.
----------------------------------------------
(FOR USE BY DOMESTIC CORPORATIONS ONLY - MUST BE FILED IN DUPLICATE)
"Federal Employer Identification No." 22-2824758
Pursuant to the provisions of Section 14A:9-2(4) and Section
14A:9-4(3), Corporations, General, of the New Jersey Statutes, the undersigned
corporation executes the following Certificate of amendment to its Certificate
of Incorporation:
1. The name of the corporation is" HOLLYWOOD SHOWCASE TELEVISION NETWORK, INC.
2. The following amendment to the Certificate of Incorporation was approved by
the directors and thereafter duly adopted by the shareholders of the
corporation on the First Day of January, 1998:
RESOLVED, that Article ONE of the Certificate of Incorporation be amended
to read as follows:
The name and the title of this Company be changed from HOLLYWOOD
SHOWCASE TELEVISION NETWORK, INC., to GENESIS MEDIA GROUP, INC., and that
the officers of the company are hereby empowered to file in the office of
the State of New Jersey, the request certificate, setting forth the change
of the name is hereby Authorized and effected.
The number of shares outstanding at the time of the adoption of the
amendment was 6,869,500. The total number of shares entitled to vote
thereon was 6,869,500.
If the shares of any class or series of shares are entitled to vote thereon
as a class, set forth below the designation and number of outstanding
shares entitled to vote thereon of each such class or series. (Omit if not
applicable).
The number of shares voting for and against such amendment is as follows:
(if the shares of any class or series are entitled to vote as a class, set
forth the number of shares of each such class and series voting for and
against the amendment, respectively.
Number of Shares Number of Shares
Voting for Amendment Voting Against Amendment
ALL -0-
If the amendment provides for an exchange, reclassification or cancellation
of issued shares, set forth a statement of the manner in which the same
shall be affected. (Omit if not applicable).
(Use the following only if an effective date, not later than 90 days
subsequent to the date of filing is desired).
Dated this 10th Day of February, 1998.
GENESIS MEDIA GROUP, INC.
--------------------------------
(Corporate Name)
By: /s/ Don R. Logan
---------------------------
(Signature)
DON R. LOGAN, CHAIRMAN
--------------------------------
(Type Name and Title)
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
-----------------------------------------------------
OF
--
GENESIS MEDIA GROUP, INC.
We, the undersigned President and Assistant Secretary of GENESIS MEDIA
GROUP, INC. do hereby certify as follows:
That the Board of Directors of said corporation at a meeting duly convened,
held on July 15th, 1999 adopted a resolution to amend the Amended Articles of
Incorporation filed on December 10th, 1981 as follows:
ARTICLE 1 is hereby amended to read as follows:
That the name of the corporation is:
OPEN DOOR ONLINE, INC.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 38,330,607, that said amendment
has been consented to and approved by a majority vote of the stockholder holding
at least a majority of each class of stock outstanding and entitled to vote
thereon pursuant to an Action by Written Consent of the Shareholder of GENESIS
MEDIA GROUP, INC.
/s/ Don R. Logan
----------------------------------
Don R. Logan
President
/s/ Barrie Logan
----------------------------------
Barrie Logan
Assistant Secretary
<PAGE>
RESOLUTION GENESIS MEDIA GROUP, INC.
The undersigned, Don R. Logan, President, hereby certifies as follows:
That the Board of Directors of the Company at a meeting held on the 15th of
July, 1999 adopted the following resolutions pursuant to the consent of
shareholders:
RESOLVED that the Articles of Incorporation be amended in the following
manner:
Article One be amended to change the corporation's name to OPEN DOOR
ONLINE, INC.
It was further RESOLVED that the common stock of the Corporation be rolled back
resulting in a reverse-split of (1) new share for each 30 old shares.
It was further RESOLVED that all the shares of OPEN DOOR RECORDS, INC. are to be
acquired for 7,000,000 post rollback shares of restricted common stock of the
Corporation in exchange for all of the issued and outstanding shares of OPEN
DOOR RECORDS, INC.
It was further RESOLVED that the following individuals are hereby elected to the
Board of Directors: David N. DeBaene, Donna Petronelli, Thomas Carley and Edmond
L. Lonergan.
The meeting was then adjourned. Dated July 15th, 1999.
/s/ Don R. Logan
- - -----------------------
Don R. Logan
President
Open Door Online, Inc.
(formerly Open Door Records, Inc.)
Computation of Net Income Per Common Share
For the nine months
For the year ended ended
December 31, September 30,
---------- ----------------------
1998 1999 1998
--------- --------- ---------
Income (Loss) as reported $(13,948) $(151,238) $(8,729)
Income tax expense --- --- ---
--------- --------- ---------
Net income (loss) $(13,948) $(151,238) $(8,729)
========= ========= =========
Basic earnings per share $(0.00) $(0.02) $(0.00)
========= ========= =========
Diluted earnings per share $(0.00) $(0.02) $(0.00)
========= ========= =========
Weighted average shares outstanding: 7,000,000 9,509,890 7,000,000
========= ========= =========
Fully diluted average shares outstanding: 7,000,000 9,509,890 7,000,000
========= ========= =========
<TABLE>
<CAPTION>
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 $(171,407) $134,528
========== ========== ========== ==========
Basic earnings per share $(0.01) $0.01 $(0.01) $0.01
========== ========== ========== ==========
Diluted earnings per share $(0.01) $0.01 $(0.01) $0.01
========== ========== ========== ==========
Weighted average shares outstanding: 25,431,471 13,695,584 32,680,574 20,233,624
========== ========== ========== ==========
Fully diluted average shares outstanding: 25,431,471 13,695,584 32,680,574 20,233,624
========== ========== ========== ==========
</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> 78580
<SECURITIES> 0
<RECEIVABLES> 438082
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15621
<PP&E> 21873954
<DEPRECIATION> 0
<TOTAL-ASSETS> 22409974
<CURRENT-LIABILITIES> 1368780
<BONDS> 0
0
0
<COMMON> 1013
<OTHER-SE> 21055367
<TOTAL-LIABILITY-AND-EQUITY> 22409974
<SALES> 190606
<TOTAL-REVENUES> 191064
<CGS> 118385
<TOTAL-COSTS> 212129
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11788
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (151238)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (151238)
<EPS-BASIC> (.02)
<EPS-DILUTED> 0
</TABLE>