SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 29, 2000
iLive, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-28549 95-4783826
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(Commission File Number) (IRS Employer Identification No.)
242 N. Canon Drive, 3rd Floor
Beverly Hills, California 90210
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(Address of principal executive offices) (Zip Code)
(310) 285-5200
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Registrant's telephone number, including area code
Society of Economic Assurance, Inc.
610 Newport Center Dr., Suite 800
Newport Beach, CA 92660
(949) 719-1977
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(Former name, address, and telephone number)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to a Stock Exchange Agreement (the "Exchange Agreement")
effective as of February 29, 2000 between the shareholders (the "Shareholders")
of Society of Economic Assurance, Inc. ("SEA"), a Nevada corporation, and
iLive, Inc., a Nevada corporation ("iLive" or the "Company"), 100,000 shares,
consisting of 100% of the outstanding shares of common stock of SEA were
exchanged for 200,000 shares of the common stock of iLive in a transaction in
which iLive became the parent corporation of SEA.
The Exchange Agreement was adopted by the unanimous consent of the Board of
Directors of iLive on February 29, 2000. No approval of the shareholders of
iLive or SEA is required under applicable state corporate law.
Prior to the merger, SEA had 100,000 shares of common stock outstanding
which will be exchanged for 200,000 shares of common stock of iLive. By virtue
of the exchange, iLive acquired 100% of the issued and outstanding common stock
of SEA.
Prior to the effectiveness of the Exchange Agreement, iLive had an
aggregate of 15,053,334 shares of common stock, par value $.001, issued and
outstanding.
Upon effectiveness of the acquisition, iLive had an aggregate of
15,253,334 shares of common stock outstanding.
The officers of iLive continue as officers of iLive subsequent to the
Exchange Agreement. See "Management" below. The officers, directors, and
by-laws of iLive will continue without change.
A copy of the Exchange Agreement is attached hereto as an exhibit. The
foregoing description is modified by such reference.
(b) The following table sets forth certain information regarding
beneficial ownership of the common stock of iLive, Inc. as of January 31, 2000
(after the issuance of 200,000 shares pursuant to the Purchase Agreements) by:
(i) each director of the Company; (ii) each person who owns beneficially more
than 5% of each class of the Company's outstanding equity securities; and (iii)
all directors and executive officers as a group. The address of each person is
246 North Canon Drive, 3rd Floor, Beverly Hills, CA 90210.
Title Common Stock Percent of
of Class Name of Beneficial Owner Outstanding Outstanding
- --------------------- ----------------------- ------------ -----------
Common Stock Marcia Allen 1,500,000 9.83%
Common Stock Anastia Cronin 0 0.00%
Common Stock Mary Moriarty 30,578 0.20%
Common Stock Street Capital, Inc.(1) 8,500,000 55.73%
All Directors and
Officers as a Group
(4 Persons in total) 1,530,578 10.03%
- --------------------- ----------------------- ------------ -----------
(1) Scott Henricks is the President and sole director of Street Capital, Inc.
Albert Aimers, the Company's Chairman of the Board, is a majority
shareholder of Street Capital, Inc.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Exchange Agreement was
negotiated between the Shareholders and iLive.
In evaluating iLive as a candidate for the proposed acquisition, the
Shareholders used criteria such as the value of the assets of iLive, its present
stock price as set forth on the over-the-counter bulletin board, its current
business operations and anticipated operations, and iLive's business name and
reputation. The Shareholders determined that the consideration for the exchange
was reasonable.
(b) iLive intends to continue its historical businesses and proposed
businesses as set forth more fully immediately below.
BUSINESS
iLive, Inc. ("iLive" or "the Company"), is a Nevada Corporation
headquartered in Beverly Hills, California. The Company is a development stage
entertainment and restaurant/private club company which seeks to combine the
fast growth and entertainment potential of the Internet with the strengths of a
traditional "brick and mortar" restaurant establishment.
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HISTORY OF THE COMPANY
The Company was originally incorporated under the laws of the State of
Nevada in April 1987 as Sandalwood Corporation. In 1988, Sandalwood sold its
existing operations and became inactive. In November 1994, Sandalwood acquired
Spaceplex One., Inc., a New York corporation and changed its name to Spaceplex
Amusement Centers International, Ltd. ("Spaceplex"). Spaceplex, through its
subsidiaries, engaged in the business of operating family amusement centers. In
April 1996, Spaceplex filed for Chapter 11 bankruptcy proceedings. As a result
of those proceedings, Spaceplex satisfied all outstanding debts and claims
utilizing all of its remaining assets and discontinued all obligations.
Spaceplex was discharged from bankruptcy in April 1996. In May 1996 the Company
changed its name to Air Energy, Inc., and in December 1997, the Company changed
its name to Powerhouse International, Inc. From May 1996 until October 1999,
the Company was inactive. On September 30, 1999, the Company acquired all of
the outstanding common stock of Asia Pacific Co, Ltd., a Nuie corporation
("Asia-Pacific") in exchange for 690,000 shares of the Company's Common Stock.
Asia-Pacific's principal asset consists of a 64% ownership interest in 246 LLC,
a California limited liability corporation d.b.a Chasen's ("Chasen's"), a
restaurant located in Beverly Hills, California. On October 21, 1999, the
Company changed its name to iLive, Inc. to better reflect its current business
plan.
BUSINESS OF THE ISSUER
iLive, Inc. ("iLive" or the "Company") is a development stage entertainment
and restaurant/private club company which seeks to combine the fast growth and
entertainment potential of the Internet with the strengths of a traditional
"brick and mortar" restaurant establishment. The Company operates a broadcast
entertainment Internet destination located at www.ilive.com. the Company plans
to broadcast musical groups and entertainers live over the Internet through its
web site. These musical groups and entertainers will then be presented before a
live audience of entertainment industry insiders and simulcast to the Company's
user base. The Company plans to have its Internet audience and insiders vote to
drive the editorial content to ensure that it is entertainment by the masses for
the masses. Successful entertainment will be supported and enhanced to be
packaged, sold and delivered to the consumer via multiple forms of media.
CHASEN'S / THE JOCKEY CLUB
The Company's "hard asset" traditional business is comprised of Chasen's /
The Jockey Club, a restaurant located in the heart of Beverly Hills. The
Company, through its wholly-owned subsidiary, Asia Pacific, a Niue company, owns
a 64% interest in 246 LLC, a California limited liability company d.b.a.
Chasen's. Chasen's has contracted with Asia-Pacific to manage and operate its
restaurant operations. The Company believes that Chasen's is one of the most
revered and established dining experiences in Southern California. Above its
restaurant, the Company has built The iLive Jockey Club - an exclusive enclave
which accepts a limited number of memberships, and which provides an intimate
and elegant setting for private parties, live shows and concerts, and special,
one-of-a-kind entertainment events. The Company intends the iLive Jockey Club
to be the first venue for iLive.com events.
In forming this relationship, iLive intends to create a
vertically-integrated entertainment company that both creates content for and
responds to the entertainment industry wishes and wants by becoming the place
where entertainment comes together.
ILIVE.COM
The Company's Web site, located at www.iLive.com, is currently under
development. The Company anticipates that its Web site will become fully
operational in the first quarter of 2000. The Company anticipates that its Web
site will encompass the following features:
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* MP3/video archive and live online events
* A comprehensive entertainment destination focusing on broadband and
e-commerce
* Original and sponsored entertainment, television style interactive
interviews, concerts, and high end products available for purchase and
auction
* Membership influenced artist development
* Character driven content
* Extensive consumer loyalty programs to attract and keep user attention
* Monthly CD-rom magazine with music and videos featuring iLive
entertainment
* E-commerce, CD Sales, artist paraphernalia, concert tickets, and auction
items
* "Vortal" (vertically integrated portal) style reporting on the
entertainment industry
* Partnerships or acquisitions of other like minded entertainment properties
There can be no assurances however, that the Company will be able to
incorporate any or all of these features. Unforeseen technical or other reasons
may prevent the Company from implementing these or other features into its
intended Web site.
The Company intends to launch in two phases. Phase I (which is currently
operational) offers a full featured record label package. The Company views
this initiative as a means to quickly build an audience which it will usher and
introduce to the iLive Network (Phase II).
Phase One: iLive Music and Online Launch
During this phase the Company has launched iLive.com as a music site. The
site is intended to be a place where independent and signed bands can
upload/self-publish (with iLive editorial approval) bios, music and fan
information. The consumer is able to download the band's music in MP3 and/or
Real Media format, vote on their favorite properties, get music and
entertainment news, see live or VOD (video-on-demand, similar to a video
jukebox) concerts and interviews from the iLive Jockey Club and become iLive
members.
Music is a well recognized Internet business strategy that the Company
intends to use to aggregate content and market share in one of the most
accessible Internet entertainment spaces, music. During this phase the Company
also plans to negotiate the acquisition of and begin production on proprietary
video entities, presented in Internet television and movie format. The intent is
to leverage this media and market foothold and move into phase two.
Phase Two: The iLive Network
Building on the efforts of phase one, the Company should be in a position
to develop iLive.com into an entertainment incubator, directing any and all
demographics into selected iLive properties. Using the television model, the
Company plans to develop/script iLive characters that produce music, movies and
television. The Company believes that as people become fans of the characters,
they will become fans of the entertainment properties that the characters are
associated with, thus creating a character driven network and an entertaining
delivery of Internet entertainment.
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To technically develop this concept, iLive plans to research and most
likely partner with and/or hire writers, and cross-media producers. The Company
believes that this approach has the ability to revolutionize the way people are
entertained via interactive media. The Company is currently developing a
complete revenue model based on the impact that a character driven Internet
entertainment network will have on the interactive industry.
Initial broadcasting is expected to be done from the Company's studios at
the iLive Jockey Club. The Company's internet servers are expected to be
located at SoftAware, an internet hosting facility. As part of their package,
SoftAware will provide full-power backup (UPS and diesel generator) and
monitored, multiple backbone connections.
iLive.com intends to deliver the majority of its music in MP3 format. MP3
is gaining popularity because it enables a global audience to easily download
music that is CD quality.
iLive.com intends to service the internet music audience by providing all
"plug-in players" necessary to stream or download audio or video. A plug-in is
simply a software module that operates on a user's computer. These plug-ins
come standard on approximately 80% of web browser packages. To ensure full
coverage, iLive.com will provide RealPlayer for Windows and Macintosh users.
MARKET DESCRIPTION
The Internet has grown rapidly in recent years, spurred by simple, low-cost
Internet access, inexpensive multimedia computers and easy-to-use web browsers.
The user experience has been enhanced by several technological innovation,
yielding multimedia capabilities such as streaming audio and video, and creative
text animations.
The development of streaming media products by Microsoft and RealNetworks
has made simultaneous transmission and playback a reality. Continuous streams
of audio and video can be delivered over widely-used 28.8 kb narrow bandwidth
modems, and will take advantage of higher bandwidth access ("broadband") to
produce audio and video as faster modems (56 kb) and cable and ISDN delivery
systems become more widely accepted.
Traditional television and radio broadcasters are limited in their ability
to identify real-time listeners. The Company, as an Internet broadcaster,
expects to be able to target a geographically dispersed audience at a relatively
low cost. In addition, Internet broadcasters can provide highly specific
information about a program's audience to content providers, advertisers, and
users of Internet business services.
The desire of many users to communicate and interact with others having
similar tastes and interests has spurred the growth of virtual Internet
communities. Communities serve an important function because they create a
virtual "town square" where users can meet and exchange ideas. Communities also
play a key role in the development of online commerce by providing advertisers
and businesses with a means to identify and target groups of users with desired
traits
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The Internet has the potential to replace certain categories of retail
stores and distribution methods by linking consumers directly to wholesale
distribution channels that provide selection, convenience and competitive
pricing. Online retailers typically offer products and services that can be
described and shipped easily and do not require the consumer's physical
presence. These products include CDs, books, videocassettes and computer
software. The Internet offers the opportunity for a retailer with a single
location or web site to inexpensively develop one-to-one relationships with
customers worldwide.
The development of streaming media, a technology that permits the
simultaneous transmission and playback of digitized audio and video, allows the
Internet to broadcast music, information, advertising and other content to
Internet users worldwide. Because audio streams are transmitted in digitized
form over telephone lines, they are unaffected by atmospheric or structural
barriers. As bandwidth increases, Internet audio quality is expected to improve
and become even better than, traditional broadcast radio. Advertisers who buy
time or space on Internet audio broadcasts can typically expect a more targeted
audience with the potential for immediate, impulse purchases.
By launching as a 24-hour live Internet entertainment site, the Company
hopes to position itself to capitalize on the audio and video capabilities of
this growing broadcast medium.
The Company is focusing its efforts and resources on music content that is
compelling to the 11-34 age bracket. According to the RIAA, approximately 40%
of all recorded music sales over the last four years were to customers who are
under 25 years of age. The Company believes that those who are most likely to
be early adopters of purchasing music through the Internet are in the 11 - 34
age bracket. For example, according to Jupiter Communications, a media research
firm, college students represent 34% of all Internet users. Strategic Marketing
Communications states that there are approximately 15.0 million college students
in the United States, 83% of who use the Internet regularly.
In addition, 90% of universities in the United States provide free
high-speed Internet access to their students and faculty community in
dormitories, study areas, computer labs, and offices; this means there is no
barrier to market entry for the remaining 17%. Management believes that the
Internet presents a significant opportunity for the rapid and cost-effective
distribution of recorded music.
Due to the emerging technologies of MP3 and SDMI (the "Secure digital Music
Initiative"), consumers are now using their computers to play music. Dataquest
estimates that in 1998, 30% of U.S. households had multimedia PCs with a sound
card, speakers and either a CD or DVD drive. Consumers can now play CDs on
their computers with the ease and fidelity formerly associated only with stereo
systems.
SDMI intends to bring together the worldwide recording industry and
technology companies to develop an open, interpretable architecture and
specification for digital music security. The hope is to answer demand for
convenient accessibility to quality digital music, enable copyright protection
for artists' work, and enable technology and music companies to build successful
businesses.
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The Company believes that new technological advances will continue to drive
growth of the market for downloadable music. Advances in compression
techniques, for example, have greatly reduced the size of digitally stored
recordings. The MP3 open standard can compress music files to one-tenth their
original size while maintaining their audio integrity at near-CD quality levels.
MP3 playback software is currently available on most operating environments
such as Microsoft Windows 95/98, Windows NT and Mac OS, most major versions of
UNIX and other operating environments. Forrester Research estimates that there
are already more than 50 million MP3-capable users today.
Consumer electronics companies and technology companies have capitalized on
the growing popularity of digital music by introducing portable music devices.
The Rio, introduced in November 1998 by Diamond Multimedia Systems, has already
sold over 300,000 units. Other manufacturers, including Creative Labs, Sensory
Sciences, RCA/Thomson, Samsung, Toshiba and LG Electronics have released or
announced plans to release portable MP3 players. In addition, other
manufacturers have produced or announced plans to produce, other devices for
playing and storing MP3 recordings. These include the Empeg Car (a removable,
automotive audio system capable of holding over 5,000 titles), Clarion's AutoPC
(an auto MP3 audio player) and Lydstrom's Songbank (a home stereo component that
stores and supports MP3 files).
As a result, the Company believes that Internet demand for downloadable
music will continue to grow and that technologies will continue to develop to
support its growth.
COMPETITION
The market for delivery of entertainment content over the Internet is new,
rapidly evolving and intensely competitive, and the Company expects competition
to intensify further in the future. Barriers to entry are relatively low, and
current and new competitors can launch new sites at a relatively low cost using
commercially available software. The Company anticipates that it will compete
with a number of other companies. The Company's direct competitors include
various online audio and video streaming sites such as the House of Blues,
through their Web site at hob.com; Yahoo through their Web site at
broadcast.com; Garage Band through their Web site at garageband.com; MP3 through
their Web site at MP3.com; Music Choice through their Website at
musicchoicelive.com; and Universal Music Group/MTV through their Web site at
farmclub.com.
The Company believes that its business model focused on the promotion and
distribution of music by putting the power back into the hands of ordinary
consumers provides the following advantages to both consumers and recording
artists and therefore, competitive advantages to the Company. The Company's
proposed operations:
* Gives new artists the opportunity to perform their music live before a
worldwide audience.
* Creates an easy and convenient way for consumers to listen to, download
and purchase music.
* Lowers the costs of artist promotion and distribution.
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* Enables artists to reach a large number of consumers.
* Enables consumers to discover new artists they might not be made aware of
through traditional music retailers.
* Facilitates direct communication between fans (consumers) and artists.
* Allows users (consumers) to listen to high quality artists pre-screened by
the Company.
* Gives both consumers and artists the ability to view and judge the
competition.
Management of the Company believes that these features will allow the
Company to effectively compete with its anticipated competitors. However, there
can be no assurances that the Company will be able to successfully complete the
development of its Web site or that it will be able to effectively compete with
its anticipated competitors. Most of the Company's current and potential
competitors have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing and other
resources. Competitive pressures created by any one of these companies, or by
the Company's competitors collectively, could have a material adverse effect on
the Company's business, results of operations and financial condition.
REGULATION
The Company is not currently subject to direct federal, state or local
regulation, and laws or regulations applicable to access to or commerce on the
Internet, other than regulations applicable to businesses generally. However,
there can be no assurances that the Company will not be subject to such
regulation in the future.
FACILITIES
iLive, Inc. currently operates at 242 N. Canon Drive, 3rd Floor, Beverly
Hills, CA, 90210. On October 1, 1999, the Company entered into an oral
month-to-month lease with the Company's majority shareholder, Street Capital,
Inc., for approximately 4,400 square feet in Beverly Hills, CA. This facility
serves as the Company's headquarters and administrative facility. Under the
terms of the oral lease, the monthly rent is currently scheduled to increase to
$14,500 on January 1, 2000 and will increase to $15,000 per month beginning on
July 1, 2000. The monthly rent will increase according to the Consumer Price
Index beginning on July 1, 2001. The lease is currently scheduled to terminate
on July 1, 2004.
EMPLOYEES
As of December 15, 1999, the Company employed 5 people on a full time
basis. Additionally, Chasen's Restaurant, of which the Company, through its
wholly-owned subsidiary Asia-Pacific, holds a 64% interests, currently employs
80 people on a full time basis.
LEGAL PROCEEDINGS
No current or pending litigation, and no claims or counter claims involving
the Company as a Plaintiff or a Defendant exist.
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MANAGEMENT
The officers and directors, and key employees of the Company are as
follows:
Name Age Positions
---- --- ---------
Marcia Allen 49 President Chief Executive Officer, and
Director
Albert Aimers 37 Chairman of Board and Director
Anastasia Cronin 39 Chief Financial Officer, Controller,
Corporate Secretary, and Treasurer
Mary Moriarty 37 Vice-President, Director
Kenny Buttice 49 Director of Musical Content
EXECUTIVE OFFICERS:
MARCIA ALLEN, is currently the Company's President and Chief Executive
Officer. Between 1991 and October 1999, Ms. Allen was the president of Allen
Gordon & Associates, Inc., a corporate finance advisory organization focused
primarily on mid-sized companies in the entertainment, hospitality and related
industries. Between 1984-1991, Ms. Allen was President of Allen Brenner, Inc.,
a money management firm. Between 1978 and 1983, Ms. Allen was a Financial
Officer and Corporate Development Officer for W.R. Grace & Co. (NYSE). Between
1976 to 1978, Ms. Allen was the CFO and Controller of Taco Bell, Inc.
ALBERT AIMERS, is currently the Company's Chairman of the Board. Between
February 1998 and December, 1999, Mr. Aimers functioned as a private venture
capitalist in Southern California. His investments were primarily focused on
small to mid size private and public companies. Prior to entering the US
investment market, Mr. Aimers was a investment professional in the Canadian
markets between 1995 and February,1998. Mr. Aimers business background began
with product sales and marketing and moved into investments and investor
relations in the early 1990's.
ANASTASIA CRONIN, is currently the Company's Chief Financial Offer,
Controller, Corporate Secretary, and Treasurer. In addition to fulfilling her
duties to the Company, Ms. Cronin is the CFO, Controller, and Manager for
Chasen's Restaurant. Ms. Cronin has served as the Chief Financial Officer,
Controller, and Manager for Chasen's Restaurant since June 1997. Prior to her
service with Chasen's, Ms. Cronin was an Office Manager and Accountant from
February 1996 to June 1997, for the Hard Rock Caf in Universal City,
California. Ms. Cronin has a Bachelor of Science degree in International
Business from the American College in Leysin, Switzerland.
MARY MORIARTY, is currently a Vice-President and Director of the Company.
Between November 1994 to the present, Mr. Moriarty has been an Executive
Vice-President for Chasen's Restaurant, of which the Company owns a 64%
interest.
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KEY EMPLOYEES:
KENNETH BUTTICE, is currently The Company's Director of Musical Content.
Between 1996 and 1999 he worked as the President of ICA's (Independent Creative
Artists) Music Division. From 1994 and 1995 he held the position of Vice
President of Maverick Records (which is headed by Madonna). Between 1992 and
1994, Mr. Buttice was Vice President of Promotion for Gasoline Alley Records.
Between 1986 and 1990 he was an independent consultant for several major record
labels including; Warner, Elektra/Asylum, Atlantic, EMI and BMG. In 1980 he was
promoted to Senior Vice President of Elektra/Asylum Records and took over
Artists and Repertoire (the identifying and signing of new artists) and
Promotional Activities. In 1972 the CEO of Elektra Records head-hunted Mr.
Buttice and moved him to Los Angeles where he was promoted to spearhead the
specialized singles' sales department. A small portion of the highly successful
artists with whom Mr. Buttice has been actively involved include: The Eagles,
The Cars, Joni Mitchell, Madonna, Queen, INXS, Motely Crue, Rod Stewart and
Fleetwood Mac.
EXECUTIVE COMPENSATION
On September 1, 1999, the Company entered into an oral, at-will, employment
agreement with Marcia Allen, the Company's President and CEO, whereby the
Company will pay Ms. Allen an annual salary of $120,000. The agreement also
requires the Company to provide health benefits to Ms. Allen and her family and
to allow Ms. Allen the opportunity to participate in the Company's retirement,
stock option and bonus plans as they may be established.
On September 1, 1999, the Company entered into an oral, at-will, employment
agreement with Anatasia Cronin, the Company's Chief Financial Officer,
Controller, Corporate Secretary, and Treasurer, whereby the Company will pay Ms.
Cronin an annual salary of $50,000. The agreement also requires the Company to
provide health benefits to Ms. Cronin and her family and to allow Ms. Cronin the
opportunity to participate in the Company's retirement, stock option and bonus
plans as they may be established.
On September 1, 1999, the Company entered into an oral, at-will, employment
agreement with Mary Moriarty, the Company's Vice-President, whereby the Company
will pay Ms. Moriarty an annual salary of $60,000. The agreement also requires
the Company to provide health benefits to Ms. Moriarty and her family and to
allow Ms. Moriarty the opportunity to participate in the Company's retirement,
stock option and bonus plans as they may be established.
CERTAIN TRANSACTIONS
On September 7, 1999, the Company issued 8,500,000 shares of its
"restricted" Common Stock to Street Capital, Inc., an "accredited" corporation,
at a price of $0.05 per share, resulting in net proceeds to the Company of
approximately $425,000. Scott Henricks is the President and sole director of
Street Capital, Inc. The issuance was an isolated transaction not involving a
public offering pursuant to Section 4(2) of the Securities Act of 1933.
On September 7, 1999, the Company issued 1,500,000 shares of its
"restricted" Common Stock to Marcia Allen, an "accredited" individual, at a
price of $0.05 per share, resulting in net proceeds of the Company of $75,000.
Ms. Allen is the Company's President and CEO. The issuance was an isolated
transaction not involving a public offering pursuant to Section 4(2) of the
Securities Act of 1933.
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On September 7, 1999, the Company raised $1,500,000 through debt financing
in the form of a $1,500,000 convertible note (the "Note"). Pursuant to the
terms of the Note, the Company is required to repay the principal amount of
$1,500,000 with 12% interest on or before March 7, 2001. The note is
convertible, at anytime given 15 days's notice at the holder's election, into a
maximum of 6,000,000 shares of the Company's Common Stock at $0.25 per share.
On September 30, 1999 the Company issued 690,000 shares of its "restricted"
Common Stock in exchange for all of the outstanding common stock of Asia
Pacific. The issuance was an isolated transaction not involving a public
offering pursuant to Section 4(2) of the Securities Act of 1933.
RISK FACTORS
FUTURE CAPITAL NEEDS. To date the Company has relied on funding from its
restaurant operations. To date, the company has generated little revenue and
the Company has extremely limited cash liquidity and capital resources.
Consequently, the Company's business plan requires additional funding. Any
equity financings would result in dilution to the Company's then-existing
stockholders. Sources of debt financing may result in higher interest expense.
Any financing, if available, may be on terms unfavorable to the Company. If
adequate funds are not obtained, the Company may be required to reduce or
curtail operations.
COMPETITION. The market for capital and financing resources for emerging
growth companies is marked by numerous small, as well as large, competitors.
Additionally, the market for delivery of entertainment content over the Internet
is new, rapidly evolving and intensely competitive, and the Company expects
competition to intensify further in the future. Most of the Company's current
and potential competitors have longer operating histories, larger customer
bases, greater brand recognition and significantly greater financial, marketing
and other resources. Competitive pressures created by any one of these
companies, or by the Company's competitors collectively, could have a material
adverse effect on the Company's business, results of operations and financial
condition. We may not be able to successfully complete the launch of its Web
site or that it will be able to effectively compete with its anticipated
competitors.
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INTERNET RELATED RISKS. The Company may be subject to federal, state, and
local laws concerning the conduct of business on the Internet. Today, there are
relatively few laws specifically directed towards online services. However, due
to the increasing popularity and use of the Internet and online services, it is
possible that laws and regulations will be adopted with respect to the Internet
or online services.
DEPENDENCE ON MANAGEMENT. The Company's success depends, to a significant
extent, upon certain key employees and directors, including Marcia Allen,
Anastasia Cronin, and Mary Moriarty. The loss of services of one or more of
these employees could have a material adverse effect on the business of the
Company.
DEPENDENCE ON ADVISORY BOARD. The Company intends to engage the services
of an advisory board consisting of individuals experienced in the music and
entertainment industry to assist it in developing and promoting its music and
entertainment offerings. Currently, the Company has contracted with Arthur
("Artie") Mogul to chair the Advisory Board and to assist in recruiting
additional members of the music and entertainment industry to join the board.
Failure to retain the services of Mr. Mogul or to recruit additional persons
experienced in the music and entertainment industry may have a material adverse
effect on the Company's results of operations..
PROTECTION OF PROPRIETARY INFORMATION. The Company has applied to the U.S.
Patent and Trademarks Office for the registration of the Company's trade name,
iLive, and its logo. The Company's application is currently undergoing review.
No assurances, however, can be given as to successfulness of the Company's
application.
The Company's restaurant operations consists of Chasen's, a restaurant
located in Beverly Hills, California. The Company, through its wholly-owned
subsidiary, Asia Pacific, a Niue company, owns a 64% interest in 246 LLC, a
California limited liability company d.b.a. Chasen's. Pursuant to a licensing
agreement by and between 246 LLC and Chasen Food Specialties, Inc., a California
corporation ("Licensor") dated February 1, 1997, 246 LLC has been granted an
exclusive ten year license to use and market the name "Chasen's" with respect to
the operation of a restaurant, within a 100 mile radius of the city of Beverly
Hills, California.
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In addition, the agreement grants 246 LLC a non-exclusive license to use
the Chasen's name during the term of the agreement to market a variety of
licensed products; an exclusive license to market licensed products consisting
of cigars and other tobacco-related paraphernalia; and a non-exclusive license
to prepare and sell Chasen's famous chili. The agreement may be extended for
two successive five year periods and for up to 99 successive one year term
subject to payment of required royalties. In exchange 246 LLC is obligated to
pay a royalty equal to one and one-half percent of the restaurant's gross
proceeds for the first 18 months of the agreement increasing to 2% thereafter.
In addition, 246 LLC is obligated to pay a royalty equal to eight percent of any
licensed products sold for $75.00 or less and a royalty of 6% of any licensed
products sold for more than $75.00. Licensed products consists of any
merchandise bearing the Chasen's mark. In any event, 246 LLC is obligated to
pay a minimum royalty of $18,000 commencing 18 months from the signing of the
agreement. The minimum royalty is adjusted according to the consumer price
index each year thereafter and shall be paid in four equal installments on the
last day of each calendar quarter. Pursuant to the terms of the agreement, 246
LLC may terminate the agreement at any time given 120 days written notice.
Although the Company's relationship with Chasen's Food Specialties, Inc. is
good, are should remain so with continued contract compliance, failure to
maintain the Licensing agreement by the Company could have a material adverse
effect on the Company's restaurant and Internet business' results of operations.
DEPENDENCE ON MAJOR SUPPLIERS. The Company does not intend to host its
intended Web site through its own facilities but is dependent on a third-party
Internet Service Provider. On November 5, 1999, the Company entered into a
month-to-month Internet Colocation Service Contract with SoftAware, Inc.,
whereby SoftAware has agreed to host the Company's anticipated Web site. Under
the terms of the Agreement, the Company has agreed to pay SoftAware a $995.00
installation fee and a $3,000 per month Internet Service fee for each computer
server installed. The Company has options to purchase space for additional
computer servers at $2,000 per month for each server. Although the Company
believes that its relations with SoftAware are strong and should remain so with
continued contract compliance, the termination of the Company's contract with
SoftAware, the loss of Internet services provided by SoftAware, or a reduction
in the quality of service the Company receives from SoftAware could have a
material adverse effect on the Company's results of operations. In the event
that SoftAware were to discontinue its service to the Company, the Company
believes that it would be able to locate alternative suppliers to host its
intended Web site at comparable rates. However, there can be no assurances that
the Company will be successful in locating alternative suppliers.
DIFFICULTY OF PLANNED EXPANSION; MANAGEMENT OF GROWTH. The Company plans to
expand its level of operations. The Company's operating results will be
adversely affected if net sales do not increase sufficiently to compensate for
the increase in operating expenses caused by this expansion. In addition, the
Company's planned expansion of operations may cause significant strain on the
Company's management, technical, financial and other resources. To manage its
growth effectively, the Company must continue to improve and expand its existing
resources and management information systems and must attract, train and
motivate qualified managers and employees. There can be no assurance, however,
that the Company will successfully be able to achieve these goals. If the
Company is unable to manage growth effectively, its operating results will be
adversely affected.
12
<PAGE>
YEAR 2000 ISSUES. The Company has completed a review of its computer systems
and non-information technology ("non-IT") systems to identify all systems that
could be affected by the inability of many existing computer and microcomputer
systems to process time-sensitive data accurately beyond the year 1999, referred
to as the Year 2000 or Y2K issue. The Company is dependent on third-party
computer systems and applications. The Company also relies on its own computer
and non-IT systems (which consist of personal computers, internal telephone
systems, internal network server, Internet server and associated software and
operating systems). In conducting the Company's review of its internal systems,
the Company performed operational tests of its systems which revealed no Y2K
problems. As a result of its review, the Company has discovered no problems
with its systems relating to the Y2K issue and believes that such systems are
Y2K compliant. The Company has obtained written assurances from SoftAware, its
major supplier, as to its Y2K readiness. However, the Company has not obtained
written assurances from any other supplier regarding the status of those
suppliers with respect to the Y2K issue, and the Company does not currently have
any plans to obtain such assurances. Costs associated with the Company's review
were not material to its results of operations and are not anticipated to be
material in the future.
The Company did not experience any adverse effect related to the Year 2000 issue
subsequent to December 31, 1999 up to the date of this report. However, because
of the complexity of the Year 2000 issue and the interdependence of
organizations using computer systems, there can be no assurances that the
Company's efforts, or those of third parties with whom the Company interacts,
have fully resolved all possible Year 2000 issues. Failure to satisfactorily
address the Y2K issue could have a material adverse effect on the Company. The
most likely worst case Y2K scenario which management has identified to date is
that, due to unanticipated Y2K compliance problems, the Company's Web site or
computer software may not function as intended or that the Company may not be
able to bill its customers on a timely basis. Should this occur, it would
result in a material loss of some or all gross revenue for an indeterminable
amount of time, which could cause the Company to cease operations. In the event
of failure of one or more of its suppliers due to Y2K issues, the Company's only
recourse for any damages suffered would be through litigation. The Company has
not yet developed a contingency plan to address this worst case Y2K scenario,
and does not intend to develop such a plan in the future.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Upon execution of the Exchange Agreement and delivery of the iLive shares
to the shareholders of SEA, pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, iLive became the
successor issuer to SEA for reporting purposes under the Securities Exchange Act
of 1934 and elected to report under the Act effective March 1, 2000.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS
Included in this report are the following financial statements as required
by Item 301 of Regulation S-B: 1) Interim financial statements of iLive, Inc.
for the nine-months ended September 30, 1999; 2) Interim financial statements
of Asia Pacific Ltd., for the nine-months ended September 30, 1999; 3) Audited
financial statements of iLive, Inc. for the years ended December 31, 1998, 1997,
1996, 1995, and 1994; and 4) Audited financial statements of Asia Pacific Ltd.,
for the years ended December 31, 1998 and December 31, 1997. Audited financial
statements of iLive, Inc. for the fiscal year ended December 31, 1999 will be
included in the Company's amended Form 8K-12G3 within the prescribed period.
1) Interim financial statements of iLive, Inc. for the nine-months ended
September 30, 1999:
ILIVE, INC.
Consolidated Financial Statements
September 30, 1999
(Unaudited)
13
<PAGE>
iLive, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS SEPTEMBER 30, 1999
-----------------
CURRENT ASSETS:
Cash $ 575,180
Inventories 77,717
Other 21,899
-----------------
TOTAL CURRENT ASSETS 674,796
PROPERTY AND EQUIPMENT, NET 1,843,379
OTHER ASSETS 66,384
-----------------
$ 2,584,559
=================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 1,109,845
Accounts payable 533,663
Accrued interest 106,209
Sales taxes 57,031
Other accrued expenses 184,422
-----------------
TOTAL CURRENT LIABILITIES 1,991,170
-----------------
MINORITY INTERESTS 18,780
-----------------
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 100,000,000 shares authorized,
15,053,148 shares issued and outstanding 15,053
Additional paid-in capital 1,705,657
Accumulated deficit (1,146,101)
-----------------
TOTAL SHAREHOLDERS' EQUITY 574,609
-----------------
$ 2,584,559
=================
</TABLE>
See notes to the financial statements.
14
<PAGE>
iLive, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
<S> <C> <C>
1999 1998
---------- ----------
REVENUES $ - $ -
---------- ----------
EXPENSES:
General and administrative - -
---------- ----------
- -
---------- ----------
LOSS FROM OPERATIONS - -
INTEREST EXPENSE - -
---------- ----------
NET LOSS $ - $ -
========== ==========
BASIC AND DILUTED NET LOSS PER SHARE $ - $ -
========== ==========
BASIC AND DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING 5,297,408 4,363,148
========== ==========
</TABLE>
See notes to the financial statements.
15
<PAGE>
iLive, Inc.
Consolidated Statements of Shareholders' Equity
For the Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
------------------- ADDITIONAL TOTAL
NUMBER AMOUNT PAID-IN ACCUMULATED SHAREHOLDERS'
OF SHARES PER SHARE PAR VALUE CAPITAL DEFICIT EQUITY
------------ ----------- ---------- ------------- -------------- ------------
BALANCE, DECEMBER 31, 1998 4,363,148 $ 4,363 $1,141,738 $ (1,146,101) $ -
Common stock
issued for cash 10,000,000 $ 0.050 10,000 490,000 - 500,000
Common stock issued
for purchase of Asia
Pacific Co., LTD 690,000 $ 0.108 690 73,919 0 74,609
------------ ---------- ------------- -------------- ------------
BALANCE, SEPTEMBER 30, 1999 15,053,148 $ 15,053 $1,705,657 $ (1,146,101) $ 574,609
============ =========== ========== ============== ============
</TABLE>
See notes to the financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
iLive, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<S> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash acquired in purchase of Asia Pacific Co., LTD $ 75,180 $ -
Net cash provided by investing activities 75,180 -
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 500,000 -
------------ -----------
Net cash provided by financing activities 500,000 -
------------ -----------
Net increase in cash 575,180 -
CASH, BEGINNING OF PERIOD - -
------------ -----------
CASH, END OF PERIOD $ 575,180 $ -
============ ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchase of all the common stock of Asia Pacific Co., LTD
in cxchange for 690,000 shares of common stock valued
at $74,609
Fair value of assets acquired, including $75,180 in cash $ 2,084,559 $ -
Fair value of liabilities assumed $ (1,934,770)
Common stock issued (74,609) -
------------ -----------
$ 75,180 $ -
============ ===========
</TABLE>
See notes to the financial statements.
17
<PAGE>
iLive, Inc.
Notes to Financial Statements
September 30, 1999
(Unaudited)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------------
Nature of Business
- --------------------
iLive, Inc. (formerly Powerhouse International Corporation) was incorporated in
1987 in the state of Nevada, has been inactive since 1996, and had no assets or
liabilities at August 31, 1999. On September 7, 1999 iLive issued 10,000,000
shares of common stock for $500,000 and on September 30, 1999, it acquired Asia
Pacific Co., LTD ("Asia Pacific") by issuing 690,000 of its common shares in
exchange for all of the outstanding common shares of Asia Pacific. This
acquisition was accounted for as a purchase.
Asia Pacific was incorporated in October 1995 in Niue (a foreign country). In
1996 Asia Pacific acquired a controlling interest in 246 LLC, a limited
liability company organized in March 1996, to construct and operate a
full-service restaurant, bar and membership club in Beverly Hills, California.
The restaurant, known as Chasen's, commenced operations in April 1997.
Prior to the acquisition, Asia Pacific had $2,084,559 in assets and $2,009,950
in liabilities, which approximate their fair value. The 690,000 shares issued
were valued at $74,609, which equals the net assets acquired and therefore, no
goodwill was recorded.
The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NINE MONTHS ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- ------------------- -------------------
REVENUE $ 2,434,580 $ 3,611,508 $ 2,713,162
==================== =================== ===================
NET LOSS $ (821,917) $ (317,272) $ (1,159,731)
==================== =================== ===================
NET LOSS PER SHARE $ (0.14) $ (0.06) $ (0.23)
==================== =================== ===================
</TABLE>
The accompanying consolidated financial statements include the accounts of
iLive, Inc. ("iLive") and its wholly owned subsidiary, Asia Pacific Co., LTD
("Asia Pacific") and Asia Pacific's majority owned subsidiary, 246 LLC (dba
Chasen's), (collectively, the "Company"). All material intercompany
transactions and accounts have been eliminated in consolidation.
18
<PAGE>
iLive, Inc.
Notes to Financial Statements
(Unaudited)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Cash and equivalents
- ----------------------
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents.
Inventories
- -----------
Inventories, consisting of food, liquor, wine and cigars and cigarettes, are
stated at the lower of cost (first-in, first-out) or market.
Property and equipment
- ------------------------
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is provided over the assets' estimated useful lives of 5-7 years
using accelerated methods. Amortization of leasehold improvements is provided
over the lease term using the straight line method.
Long-lived assets are reviewed annually for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Impairment is necessary when the undiscounted cash flows
estimated to be generated by the asset are less than the carrying amount of the
asset.
Income taxes
- -------------
The Company accounts for income taxes under Statement of Financial Accounting
Standards (SFAS) 109. Under the asset and liability method of SFAS 109,
deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to future years to
the difference between the financial statement carrying amounts and the tax
bases of existing assets and liabilities.
Minority interests
- -------------------
Minority interests represent the minorities' 37.25% equity in 246 LLC.
Basic and diluted net loss per share
- ------------------------------------------
Net loss per share is calculated in accordance with Statement of Financial
Accounting Standards 128, Earnings Per Share ("SFAS 128"). Basic net loss per
share is based upon the weighted average number of common shares outstanding.
Diluted net loss per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the period (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the period.
19
<PAGE>
iLive, Inc.
Notes to Financial Statements
(Unaudited)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Use of estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Fair value of financial instruments
- ---------------------------------------
The fair value of financial instruments, consisting primarily of notes payable
and long-term debt, is based on interest rates available to the Company and
comparison to quoted prices. The fair value of these financial instruments
approximates carrying values.
Concentration of credit risk
- -------------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash maintained at two high credit quality financial
institutions located in Los Angeles, California. There were no uninsured
balances at December 31, 1998.
2. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
ESTIMATED
<S> <C> <C>
USEFUL LIVES AMOUNT
-------------- ----------
Leasehold improvements Life of lease $1,906,207
Kitchen equipment 5 years 279,157
Furnishings and fixtures 7 years 704,545
China and silverware 5 years 96,420
Sound system equipment 5 years 69,501
Office and computer equipment 5 years 42,060
----------
3,097,890
Accumulated depreciation (1,254,511)
--------------
$1,843,379
==========
</TABLE>
20
<PAGE>
iLive, Inc.
Notes to Financial Statements
(Unaudited)
<TABLE>
<CAPTION>
3. NOTES PAYABLE
<S> <C>
Various unsecured demand notes payable to minority interests,
with interest rates at 10% and 19.99% $ 336,439
Unsecured 10% and 12% demand note payable to affiliates 199,397
Secured 10% demand note payable to affiliate 455,000
Other 119,009
----------
$1,109,845
==========
</TABLE>
4. CONVERTIBLE NOTE
The Company has a convertible note in the amount of $1,500,000 with an annual
interest rate of 12%. Pursuant to the terms of the note, the Company is
required to repay the principal and interest on or before March 7, 2001. The
note is convertible at any time, given 15 days notice, at the holder's election
into a maximum of 6,000,000 shares of the Company's common stock at $0.25 per
share. The Company received proceeds from the note subsequent to September 30,
1999.
5. REVERSE COMMON STOCK SPLIT
On September 13, 1999 the Company effected a 5-for-1 reverse split of its common
stock. Accordingly, all references to number of common shares, except shares
authorized, and to per share information in the consolidated financial
statements have been adjusted to reflect the reverse stock split on a
retroactive basis.
6. INCOME TAXES
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting and tax bases of its assets and
liabilities. Deferred tax assets are reduced by a valuation allowance when
deemed appropriate.
Under Section 382 of the Internal Revenue Code, the utilization of net operating
loss carryforwards is limited after an ownership change, as defined, to an
annual amount equal to the market value of the loss corporation's outstanding
stock immediately before the date of the ownership change multiplied by the
highest Federal long-term tax exempt rate in effect for any month in the 3
calendar month period ending with the calendar month in which the ownership
change occurred. Due to the ownership change as a result of the issuance of
10,000,000 shares of common stock, the Company's utilization of net operating
losses may be limited. The determination of whether a change in control has
occurred can be a very complex and time consuming process. The Company is not
currently in a position to determine specifically whether or not a change in
control has occurred.
21
<PAGE>
iLive, Inc.
Notes to Financial Statements
(Unaudited)
6. COMMITMENTS AND CONTINGENCIES
Lease obligations
- ------------------
The Company leases office space at a monthly rental rate of $13,500 per month on
a month to month basis. The monthly rental amount is scheduled to increase to
$14,500 on January 1, 2000, to $15,000 per month beginning July 1, 2000, and
adjusted annually according to the Consumer Price Index beginning on July 1,
2001.
The Company's restaurant and office facilities operating lease expires February
28, 2006, with two 5-year renewal options. The lease calls for payment of the
Company's share of the common area expenses in addition to minimum monthly lease
payments. The minimum monthly lease payment of $23,400 through March 1999 is
adjusted annually thereafter based on the Consumer Price Index.
In addition the Company is obligated to pay percentage rent equal to 7.5% of
monthly gross sales in excess of $250,000 and $10,000 annually, in the form of
unrestricted credit, towards any purchases of food, beverage, or other
restaurant services.
The Company leases point-of-sale computer equipment and related software for
$1,940 per month under an operating lease expiring February 2000.
Future minimum annual lease payments under all non-cancelable operating leases
are:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 304,080
2000 284,680
2001 280,800
2002 280,800
2003 280,800
Thereafter 608,400
--------
$2,039,560
===========
</TABLE>
License agreement
- ------------------
The Company has entered into an agreement to the use the name "Chasen's" through
February 1, 2007 with an option to renew for two successive 5-year periods,
followed by successive periods of 1 year each up to 99 years. The agreement
grants the Company exclusive license of the name for the operation of a
restaurant in the city of Beverly Hills and other exclusive and non-exclusive
licenses relating to the sale of certain products at the restaurant bearing the
"Chasen's" name. The Company has agreed to pay a royalty of 1-1/2% of the
restaurant gross receipts for the first 18 months and 2% for each year
thereafter, an 8% royalty on the sale of licensed products sold for $75 or less
and 6% on licensed products sold for more than $75. The royalty payments are
subject to an $80,000 annual minimum after the first 18 months of the agreement.
The Company has the right to terminate the agreement for any reason upon not
less than 120 days written notice to licensor. The licensor can only terminate
the agreement for cause as described in the agreement.
22
<PAGE>
2) Interim financial statements of Asia Pacific Ltd., for the nine-months
ended September 30, 1999:
ASIA PACIFIC CO., LTD
Consolidated Financial Statements
September 30, 1999
(Unaudited)
23
<PAGE>
ASIA PACIFIC CO., LTD
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
SEPTEMBER 30, 1999
--------------------
ASSETS
CURRENT ASSETS:
Cash $ 75,180
Inventories 77,717
Other 21,899
--------------------
TOTAL CURRENT ASSETS 174,796
PROPERTY AND EQUIPMENT, NET 1,843,379
OTHER ASSETS 66,384
--------------------
$ 2,084,559
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 1,109,845
Accounts payable 533,663
Accrued interest 106,209
Sales taxes 57,031
Other accrued expenses 184,422
--------------------
TOTAL CURRENT LIABILITIES 1,991,170
MINORITY INTERESTS 18,780
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000 shares authorized,
6,866,089 shares issued and outstanding 6,866
Additional paid-in capital 3,383,041
Accumulated deficit (3,315,298)
--------------------
TOTAL SHAREHOLDERS' EQUITY 74,609
--------------------
$ 2,084,559
====================
</TABLE>
See note A to the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
ASIA PACIFIC CO., LTD
Consolidated Statements of Operations
(Unaudited)
<S> <C> <C>
NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------- --------------------
REVENUES $ 2,434,580 $ 2,548,175
-------------------- --------------------
EXPENSES:
Cost of food and beverage 755,110 790,599
Labor 1,209,187 1,033,502
Rent 449,100 247,776
Licensing fee 71,115 34,530
Other restaurant operating 278,757 292,361
General and administrative 389,045 241,412
Depreciation and amortization 559,324 281,047
-------------------- --------------------
3,711,638 2,921,227
-------------------- --------------------
LOSS FROM OPERATIONS (1,277,058) (373,052)
INTEREST EXPENSE 43,674 40,679
-------------------- --------------------
LOSS BEFORE MINORITY INTERESTS (1,320,732) (413,731)
MINORITY INTERESTS 498,815 199,448
-------------------- --------------------
NET LOSS $ (821,917) $ (214,283)
==================== ====================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.12) $ (0.03)
==================== ====================
BASIC AND DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING 6,866,089 6,769,089
==================== ====================
</TABLE>
See note A to the financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
ASIA PACIFIC CO., LTD
Statements of Cash Flows
(Unaudited)
<S> <C> <C>
NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (821,917) $ (214,283)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 559,324 281,047
Minority interest (498,815) (59,448)
Changes in assets and liabilities:
Inventories 45,879 7,802
Other current assets (11,183) (11,362)
Deposits and other assets 202,105 3,175
Accounts payable 6,771 (15,020)
Accrued interest 37,799 34,060
Advances from affiliates (91,573) 116,841
Sales taxes (22,536) 60,604
Other accrued expenses 103,591 (296,782)
-------------------- --------------------
Net cash used by operating activities (490,555) (93,366)
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (10,274) (75,647)
Net cash used by investing activities (10,274) (75,647)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 556,464 169,047
Net cash provided by financing activities 556,464 169,047
-------------------- --------------------
Net increase in cash 55,635 34
CASH, BEGINNING OF PERIOD 19,545 18,872
-------------------- --------------------
CASH, END OF PERIOD $ 75,180 $ 18,906
==================== ====================
</TABLE>
See note A to the financial statements.
26
<PAGE>
ASIA PACIFIC CO., LTD.
NOTE A TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
A. SALE OF THE COMPANY
On September 30, 1999, iLive, Inc. (formerly known as Powerhouse International
Corporation) acquired the Company by issuing 690,000 of its common shares in
exchange for all the outstanding common shares of the Company.
27
<PAGE>
3) Audited financial statements of iLive, Inc. for the years ended December
31, 1998, 1997, 1996, 1995, and 1994.
POWERHOUSE INTERNATIONAL CORPORATION
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
28
<PAGE>
DAVID M. RASKIN
Certified Public Accountant
530 South Federal Highway, Suite 160
Deerfield Reach, Florida 33441
(954) 421-5055 Fax (954) 426-4611
Independent Auditor's Report
To the Board of Directors
Powerhouse International Corporation
Boca Raton, Florida
I have audited the accompanying consolidated balance sheets of Powerhouse
International Corporation as of December 31, 1998, 1997, 1996, 1995 and 1994 and
the related consolidated statements of operations and retained earnings
(accumulated deficit), consolidated statements of stockholders' equity
(deficit), and consolidated statements of cash flows for the years then ended.
Thcsc financial statements are the responsibility of the Companys management.
My responsibility is to express and opinion on these financial statements bored
on my audits.
I conducted any audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain treasonable
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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of Powerhouse International
Corporation as of December 31, 1998,1997, 1996, 1995 and 1994, the results of
opcrations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
David M. Raskin
Certified Public Accountant
July 16, 1999
29
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
----- ----- ----- ---------- --------
Current assets:
Cash $ - $ - $ - $ 33,973 $(1,318)
Accounts receivable -trade - - - - -
Inventory - - - - -
Loans receivable - officers - - - 6,600 6,600
Notes receivable - shareholders - - - - -
Prepaid expenses - - - 68,983 72,228
Deferred charges - - - - -
------ ----- ----- --------- -------
Total current assets - - - 109,556 77,510
------ ----- ----- --------- -------
Property, plant, and equipment:
Office equipment - - - 55,008 2,850
Machinery and equipment - - - 401,686 -
Vehicles - - - 6,330 2,500
Leashold improvements - - - 573,000 -
------ ----- ----- --------- -------
Sub-totals - - - 1,036,024 5,350
Less: Accumulated depreciation - - - 1,008,035 -
------ ----- ----- --------- -------
Net property, plant, and equipment - - - 27,989 5,350
------ ----- ----- --------- -------
Other assets:
Organizational costs - - - - -
Goodwill, net of amortization - - - 98,750 -
Covenant, net of amortization - - - 33,265 -
Deposits - - - 43,454 7,900
------ ----- ----- --------- ------
Total other assets - - - 175,469 7,900
------ ----- ----- --------- ------
Total assets $ - $ - $ - $ 313,014 $90,760
------ ----- ----- ---------- -------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
POWERHOUSE INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable end
accrued expenses $ - $ - $ - $ 598,731 $ 33,880
Loans payable - shareholders - - - 1,065 7,336
Notes payable - - - 457,621 6,206
----------- ----------- ----------- ----------- ---------
Total current liabilities - - - 1,057,417 47,442
----------- ----------- ----------- ---------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock -10,000,000 shares author-
ized, none issued and outstanding - - - - -
Common stock - $.001 par value
100,000,000 shares authorized, issued,
And outstanding at December 31:
1998 - 21,815,737 shares 21,816 - - - -
1997 - 21,815,737 shares - 21,816 - - -
1996 - 21,815,737 shares - - 21,816 - -
1995 - 7,613,034 shares - - - 7,613 -
1994 - 234,030 shares - - - - 234
Paid-in capital in excess of par value
On common stock 1,124,285 1,124,285 1,124,285 1,118,286 71,671
Notes receivable from officers - - - - -
Retained earnings (accumulated deficit) (1,146,101) (1,146,101) (1,146,101) (1,870,302) (28,567)
---------- ----------- ----------- ----------- --------
Total stockholders' equity (deficit) - - - (744,403) 43,338
---------- ----------- ----------- ----------- -------
Total liabilities and stockholders'
Equity (deficit) $ - $ - $ - $ 313,014 $ 90,760
----------- ----------- ----------- ----------- --------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
POWERHOUSE INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (ACCUMULATED DEFICIT) .
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996,1995 AND 1994
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
----- ----- ---------- ------------ ---------
Gross revenues $ - $ - $ 391,001 $ 810,154 $ -
Less: Sales returns and allowances - - - - -
----- ----- --------- ----------- --------
Net revenues - - 391,101 810,154 -
Cost of goods sold - - 165,267 289,344 -
----- ----- -------- ---------- -------
Gross profit on sales - - 225,734 520,810 -
General and administrative expenses:
Professional fees - - 350 272,401 2,240
Rent and real estate taxes - - 143,184 156,158 3,900
Depreciation and amortization - - - 48,933 -
Interest - - - 14,098 743
Other - - 363,730 681,378 6,479
----- ----- -------- ---------- ------
Total general and administrative - - 507,264 1,172,968 13,362
----- ----- -------- ---------- -------
Income (loss) before other income
and expenses - - (281,530) (652,158) (13,362)
Other income and expenses
Gain (loss) on abandonment
sale of equipment - - 5,975 - -
Asset Impairment - - (3,221) (1,210,585) -
Interest income - - - - -
Other income - - - 21,575 -
----- ----- -------- ---------- ------
Total other income and expenses - - 2,754 (1,189,010) -
----- ----- -------- ----------- ------
Income (loss) from continueing operations
Before provision for income taxes - - (278,776) (1,841,168) (13,362)
</TABLE>
32
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (ACCUMULATED DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
----------- ----------- ------------ ------------ --------
Provision for income taxes - - - 567 -
----------- ---------- ------------ ----------- -------
Income (loss) from continuing operations - - (278,776) (1841,735) (13,362)
Discontinued operations (Read Note 3)
Loss from discontinued operations (Less
applicable income taxes $-0-) - - (2,115,836) - -
---------- --------- ----------- --------- ------
Net income (loss) before
extraordinary item - - (2,394,612) (1,841,735) (13,362)
---------- --------- ------------ ---------- --------
Extraordinary item
Gain on early extinguishment of debt
(less applicable income taxes $-0-) - - 3,118,813 - -
---------- --------- ----------- --------- --------
Net income (loss) - - 724,201 (1,841,735) (13,362)
Retained earnings (accumulated
deficit) - beginnning of year - - (1,870,301) (18,567) (15,205)
--------- --------- ----------- ---------- ---------
Retained earnings (accumulated
deficit) - end of year $ - $ - $( 1,146,101) $(1,870,302) $(28,567)
----------- ----------- ------------- ------------ ---------
Weighted average number of
Common shares outstanding 21,815,737 21,815,737 16,353,159 3,702,356 93,004
----------- ----------- ------------ ------------ ---------
Earnings (loss) per common share: $ - $ - $ 0.044 $ (0.497) $ (0.144)
----------- ----------- ------------- ------------ ---------
Income (loss) from continuing operations $ - $ - $ (0.017) $ (0.497) $ (0.144)
Loss from discounted operations $ - $ - (0.129) - -
Extraordinary items - - 0.190 - -
Net income (loss) per share $ - $ - 0.044 (0.497) $ (0.144)
----------- ------------ ------------- ------------ ---------
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
POWERHOUSE INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,1998, 1997, 1996, 1995 AND 1994
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---- ---- ------------ ------------ ---------
Cash flows from operating activities:
Net income (loss) - - $ 724,201 $(1,841,735) $(13,362)
---- ----- ----------- ------------ ---------
Adjustments to reconcile net income (loss)
To net cash provided by (used in) oper-
Ating activities:
Depreceiation and amortization - - - 63,174 -
Loss on impairment of assets - - 3,221 1,210,585 -
(Gain) loss on sale and abandon-
ment of equipment - - (5,975) 5,875 -
(Gain) on early extinguishment of debt - - (3,118,813) - -
Loss from discontinued operations - - 2,115,836 - -
Changes in assets and liabilities
Accounts receivable - trade - - - - -
Inventory - - - - -
Loans receivable - officers - - (6,600) - (6,600)
Notes receivable - shareholders - - - - -
Prepaid expenses - - (68,983) (27,386) (38,944)
Deferred charges - - - - -
Goodwill - - (98,750) - -
Covenant - - (33,265) - -
Deposits - - (43,454) (35,554) (7,900)
Accounts payable and
Accrued expenses - - 598,731 102,709 33,880
Loans payable - shareholders - - 1,065 (6,271) 13,541
Notes payable - - 457,621 - -
---- ---- --------- --------- -------
Total adjustments - - (199,366) 1,313,132 6,023
Net cash provided by (used in) oper-
ating activities - - 524,835 (528,603) (19,385)
---- ---- ---------- ---------- --------
</TABLE>
34
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,1998, 1997, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
----- ----- ---------- ---------- ---------
Cash flows from investing activities:
Payments to acquire property, plant,
and equipment - - - (247,457) (5,350)
Organizational costs - - (98,750) - (33,284)
Goodwill - - - - -
Covenant - - (33,265) - -
---- ----- ---------- -------- ----------
Net cash provided by (used in)
investing activities - - (132,015) (247,457) (38,634)
---- ----- ---------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock - - 20,202 197,211 56,701
Proceeds from the issuance of notes payable - - - (38,393) -
Repayment of notes payable - - (457,621) 50,000 -
Repayment of shareholders loans - - 10,626 602,533 -
---- ----- ----------- --------- --------
Net cash provided by (used in)
financing activities - - (426,793) 811,351 56,701
---- ----- ----------- --------- --------
Net increase (decrease) in cash - - (33,973) 35,291 (1,318)
Cash balance - beginning of year - - 33,973 (1,318) -
---- ----- ---------- --------- --------
Cash balance - end of year $ - $ - $ - $ 33,973 $ (1,318)
----- ----- ----------- ----------- ---------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
POWERHOUSE INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31,1998,1997, 1996,1995 AND 1994
<S> <C> <C> <C> <C> <C> <C>
Paid-in capital Retained
in excess of earnings Notes
Preferred shares Common shares par value on (Accumulated receivable
Number Amount Number Amount common stock deficit) from officers Total
------- ------- ------ ------- ------------- ------------- ------------- -------------------
Balance - $ - 67,363 $ 67 $ 15,138 $ (15,205) $ - $ -
September
8, 1994
(inception)
Issuance of - - 166,667 167 56,533 - - 56,700
common stock
Net loss
inception to
December 31,
1994 - - - - - (13,362) - (13,362)
------- ------- -------- ------- ------------ ------------ ------------ ----------------
Balance
December 31,
1994 234,030 234 71,671 (28,567) - 43,338
Proceeds of
limited offering
(Note 14) - - 330,781 331 108,827 - - 109,158
Exercise of
stock options
(Note 15) - - 3,765,831 3,766 584,624 - (446,657) 141,733
Stock exchanged
for services
(Note 11) - - 2,382,392 2,382 537,121 - - 539,503
Issuance of
common stock
(Note 16) - - 900,000 900 262,700 - - 263,600
Notes receivable
from officers - - - - (446,657) - 446,657 -
Net loss
December 31, 1995 - - - - - (1,841,735) - (1,841,735)
---- ----- -------- ------- ---------- ----------- -------- ------------
Balance
December 31, 1995 - - 7,613,034 7,613 1,118,286 (1,870,302) - (744,403)
Issuance of
common stock - - 14,202,703 14,203 5,999 - - 22,202
Net income
December 31, 1996 - - - - - 724,201 - 724,201
---- ----- ---------- ------- ------------- ------------ ----------- -----------
Balance
December 31,
1998, 1997,
and 1996 - $ - 21,815,737 $ 21,816 $ 1,124,285 $ (1,146,101) $ - $ -
----- ------ ---------- -------- ------------- ------------- ----------- -----------
</TABLE>
36
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, 1996, 1995 and 1994
1. INCORPORATION AND ORGANIZATION
Powerhouse International Corporation originally was incorporated In April, 1987,
in the State of Nevada as Sandalwood Corporation (Sandalwood). In 1988,
Sandalwood sold its existing operations and became inactive. In November, 1994,
Sandalwood acquired Spaceplex-One, Inc. (Spaceplex-One). a corporation
incorporated in the State of New York, on September 8, 1994. The acquisition was
accounted for as a recapitalization of Spaceplex-One and a purchase by
Spaceplex-One of Sandalwood. On November 21, 1994, the legal name of Sandalwood
was changed to Spaceplex Amusement Centers International. Ltd. ("Spaceplex") .
Spaceplex through its subsidiaries engaged in the business of operating family
amusement centers.
In May, 1996, the majority of Spaceplex's shares were acquired by new owners. In
May, 1996, Spaceplex changed its name to Air Energy, Inc., and in December,
1997, Air Energy, Inc. changed its name to Powerhouse International Corporation
(the "Company"). (See Note 5.)
In December, 1997, the Company was in the process of acquiring all of the issued
end outstanding shares of stock of Checking Exchange, Inc., a Florida
corporation ("Checking Exchange"). The Company, through Checking Exchange was
engaged in the business of check cashing. (See Note 6.) This transaction was
never finalized.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
- -------------
The consolidated financial statements include the accounts of Spaceplex and its
wholly-owned subsidiary and the Company. All material Iintercompany accounts
and transactions have been eliminated.
Goodwill
- --------
Goodwill represents the excess of the cost of the net assets acquired over the
fair value at the date of acquisition. The goodwill is amortized on the
straight-line method.
Basis of presentation
- -----------------------
In April, 1996, Spaceplex filed Chapter 11 bankruptcy proceedings. Accordingly.
Spaceplex reduced its assets to fair value and recognized impairment loss in the
Income statement. The impaired assets are property and equipment, goodwill,
covenant not to compete, and deferred charges. The fair value was determined
based upon estimated market values at that time. The impairment loss was valued
at $1,210,585.
37
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, 1996, 1995 and 1994
In April, 1996, Spaceplex satisfied all outstanding debts and claims utilizing
all of its remaining assets and was discharged from bankruptcy. In April, 1996,
Spaceplex discontinued all operations. (See Notes 3 and 4.)
Use of estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could different from those estimates, Significant estimates
include those related to valuation of fixed assets and intangibles. It is as
leased reasonably possible that the significant estimates used will change
within the next year.
Property and equipment
- ------------------------
Property and equipment is stated at cost. Major expenditures for property and
equipment and those which substantially increase the useful lives are
capitalized. Maintenance, repairs, and minor renewals are expensed as incurred.
When assets are retired or otherwise disposed of, their cost and related
accumulated depreciation are removed from the accounts and resulting gains or
losses are included In Income.
Depreciation will be provided by accelerated methods over the estimated useful
lives of the assets.
Covenant not to-compete
- -----------------------
In August, 1995, as part of a purchase of assets by Spaceplex, the sellers
entered into a covenant not to compete with Spaceplex, which is amortized using
the straightline method over an eight month period. Amortization expense was
$7,397 in 1995.
3. DISCONTINUED OPERATIONS
In April, 1996, Spaceplex filed Chapter 11 bankruptcy proceedings. As a result
of those proceedings, in April, 1996, Spaceplex satisfied all outstanding debts
and claims utilizing all of its remaining assets to satisfy such outstanding
debts and claims and was discharged from bankruptcy. As a result of utilizing
all of its assets to satisfy all outstanding debts and claims. Spaceplex
discontinued all operations in April, 1996.
38
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, 1996, 1995 and 1994
4. EARLY EXTINGUISHMENT OF DEBT
Due to Spaceplex's bankruptcy and the satisfaction of all of its outstanding
debts and claims utilizing all of its remaining assets to satisfy such
outstanding debts and claims, certain notes payable totaling $739,118.00 were
extinguished in April, 1996. (See Notes 3 and 12.)
5. CHANGE OF CONTROL
On May 17, 1996, the control of Spaceplex changed as a result of the exchange of
21,030,351 share of common stock, $.001 par value of American Powerhouse, Inc.
(American Powerhouse) for $52,575,877 authorized, but previously unissued shares
of the common capital stock $.001 par value, of Spaceplex. This resulted in
Spaceplex having 54,539,342 shares of common stock, $.001 par value issued and
outstanding as of that date. On May 17, 1996, the directors of Spaceplex
approved a 1-for-2.5 stock split resulting In the reduction of the issued and
outstanding shares of Spaceplex's common stock, $.001 par value, and after
giving effect to the 1-for-2.5 reverse stock split, Spaceplex had 21.815,737
shares of common stock $.001 par value issued and outstanding as of that date.
6. ACQUISITION OF CHECKING EXCBANGE
On December 5, 1997, the Company was to issue 500,000 shares of its common
stock, $.001 par value share of stock to acquire Its wholly-owned subsidiary,
Checking Exchange, which would have resulted in the Company having 22,315,737
shares of common stock $.001 par value issued and outstanding. The transaction
was never finalized and the stock was never issued.
7. NET INCOME (LOSS) PER SHARE
Net income (loss) per share Is computed based on the weighted average number of
common and common stock equivalent shares.
8. FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and payables for which carrying
amounts approximate fair value.
39
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, 1996, 1995 and 1994
9. PROPERTY, EQUIPMENT, AND. DEPRECIATION
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
----- ----- ----- ---------- ------
Office equipment $ - $ - $ - $ 55,008 $2,850
Machinery and equipment - - - 401,686 -
Vehicles - - - 6,330 2,500
Leashold improvements - - - 573,000 -
Sub-total - - - 1,036,024 5,350
Less: Accuulated depreciation
and amortization - - - 1,008,035 -
Net property and equipment $ - $ - $ - $ 27,989 $5,350
</TABLE>
The depreciation expense was $41,536 in 1995.
Spaceplex did not record any depreciation on the assets in 1994 as they had not
been placed in service.
Spaceplex discontinued all operations in. April, 1996. (See Notes 2, 3, and 4.)
10. RECAPITALIZATION
Effective November 9, 1994, Spaceplex acquired the stock of Spaceplex-One in a
reverse acquisition in which the shareholders of Spaceplex-One acquired control
of Spaceplex. The acquisition was accomplished through an exchange of stock In
which Spaceplex exchanged 5 million shares of newly Issued $.001 par value
common stock for 100% of the outstanding stock of Spaceplex-One. Upon completion
of this transaction, the shareholders of Spaceplex-One controlled approximately
71% of the voting rights of the combined company.
For financial reporting purposes, Spaceplex-one is deemed to be the acquiring
entity. The merger has been reflected as a recapitalization of Spaceplex-One
with the capital restated as of the date of inception.
On May 17,1896, the control of Spaceplex changed as a result of the exchange of
21,030,351 shares of common stock, $.001 par value of American Powerhouse, Inc.
for $52,575,877 authorized but previously unissued share of the common capital
stock $.001 par value, of Spaceplex. This resulted in Spaceplex having
40
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31. 1998, 1997, 1996, 1995 and 1994
54,539,342 shares of common stock, $.001 par value issued and outstanding as of
that date. On May 22, 1996, the directors of Spaceplex approved a 1-for-2.5
stock split resulting in the reduction of the issued and outstanding shares of
Spaceplex's common stock, $.001 par value, and after giving effect to the 1-for-
2.5 reverse stock split, Spaceplex had 21,815,737 shares of common stock $.001
par value issued and outstanding as of that date.
On December 5, 1997, the Company was to issue 500,000 shares of its common
stock, $.001 par value shares of stock to acquire its wholly-owned subsidiary,
Checking Exchange, resulting in the Company having 22,315,737 shares of common
stock $.001 par value issued and outstanding. The transaction was never
finalized and the stock was never issued.
11. NON-MONETARY TRANSACTIONS
Asset acquisition
- ------------------
On August 9, 1995, Spaceplex-One executed an asset purchase agreement, which was
valued at $1,335,200, to acquire assets of Complesports, Inc and its affiliates
(Complesports), an existing family amusement center In St. James, NY. The
purchase was inclusive of existing leases, trademarks, registrations of names,
as well as goodwill and a covenant not to compete. Spaceplex-One effectively
acquired the operations of the facility.
In connection with the acquisition, Spaceplex paid $179,000 in cash, executed
promissory notes in the amount of $300,000, assumed debt of Complesports of
$650,000, and exchanged 400,000 shares of common stock valued at $1,031,000.
Spaceplex discontinued ail operations in April, 1996. (See Notes 2, 3, and 4.)
Shareholder loans
- ------------------
In June, 1995, the Company issued common stock in exchange for promissory notes
from officers of the Company in the amount of $602,533. In May, 1996, these
shareholder loans were written off as worthless:
Stock exchanged for services
- -------------------------------
In July and August, 1995, the Company issued common stock in exchange for
services valued at $48,050.
Spaceplex discontinued all operations in April, 1996. (See Notes 2, 3, and 4.)
41
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, 1996, 1995 and 1994
12. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
------- ----- ----- -------- ------
Cash flows from investing activities
Promissory note, interest, non-
compounded at 6%, payable in full
on March 22, 1995 $ - $ - $ - $ 50,000 $ -
Promissory note, payable in three equal
installments of $100,000 due in
November, 1995 - - - 300,000 -
Notes payable, due on demand with
interest paid monthly at rates of 13% to
15% per annum - - - 60,901 6,206
Notes payable, due on demand with
interest of 11% per annum - - - 46,720 -
$ - $ - $ - $457,621 $6,206
</TABLE>
These notes were extinguished in April, 1996, in connection with Spaceplex's
bankruptcy. (See Notes 3 and 4.)
13. COMMITMENTS AND-CONTINGENCIES
In August, 1995, upon consummation of an acquisition agreement, Spaceplex
assumed the operating lease for the St. James, NY facility. The lease expires
May 31, 2000, and provides for minimum annual rentals plus Increases based on
real estate taxes. The lease was terminated In April, 1996, due to Spaceplex
discontinuing all operation in April, 1996. (See Notes 2, 3, and 4.)
14. SHAREHOLDERS' EQUITY
On November 4, 1994, the Board of Directors authorized a one-for-ten (1-for-10)
reverse stock split, thereby decreasing the number of issued and outstanding
shares of common stock to 2,020,900. Additionally, Spaceplex amended its
Articles of Incorporation, authorizing 10,000,000 shares of $.01 par value
Preferred Stock, which at the discretion of the Board of Directors may be
divided into classes at a future date.
42
<PAGE>
POWERHOUSE INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, 1996, 1995 and 1994
Effective November 4, 1994, Spaceplex issued an additional 5,000,000 shares of
common stock pursuant to the Plan of Acquisition of Spaceplex-One. This
increased the total number of shares outstanding to 7,020,900 (234,030 shares,
as restated for the February 28, 1995, reverse stock split).
On December 19, 1994, Spaceplex initiated a limited offering for 3,030,303
shares of common stock at a price of $.33 per share.
On February 28, 1995, the Board of Directors authorized a one-for-thirty
(1-for-30) reverse stock split, with fractional shares receiving a full share of
stock. The number of issued and outstanding shares was decreased to 271,014
without affecting par value. All references in the accompanying financial
statements to the number of common shares and per share amounts have been
restated to reflect the reverse stock split.
At June 30, 1995, 330,781 shares of stock related to the limited offering were
outstanding.
On May 17, 1996, the control of Spaceplex changed as a result of the exchange of
21,030,351 shares of common stock, $.001 par value of American Powerhouse, Inc.,
for 52,575,877 authorized, but previously unissued shares of the common capital
stock $.001 par value, of Spaceplex. This resulted in Spaceplex having
54,539,342 shares of common stock, $.001 par value issued and outstanding as of
that date, On May 22, 1996, the directors of Spaceplex approved a 1-for-2.5
stock split resulting in the reduction of the issued and outstanding shares of
Spaceplex's common stock, $.001 par value, and after giving effect to the
1-for-2.5 reverse stock split, Spaceplex had 21,815,737 shares of common stock
$.001 par value issued and outstanding as of that date.
Spaceplex discontinued all operations in April, 1996. (See Notes 2, 3, and 4.)
15. STOCK OPTION PLAN
On March 1, 1995, Spaceplex adopted an Incentive Stock Option Plan (the Plan)
whereby options to purchase 10 million shares of common stock may be granted
until March 1, 2005. The Plan is administered by and the terms of stock
purchases are established by the Board of Directors. Qualified options, under
the Plan, may be granted only to key employees and/or officers of the Company at
fair market value at the time the option is granted. Options may be exercised at
any time prior to the expiration date of the option.
43
<PAGE>
On March 1, 1995, Spaceplex granted stock options to the Company's Chief
Executive Officer and Chief Operating Officer entitling them each to purchase
5,000,000 shares of common stock at a purchase price of $0.16 per share. The
options expire on March 1, 2005.
On March 6, 1995, the officers exercised their options and purchased 1,600,000
shares each In exchange for promissory notes totaling $512,000. The promissory
notes are due March 5, 2001, with simple interest charged at 5% per annum.
On April 14, 1995, the officers exercised additional options for a total of
565,831 shares in exchange for promissory notes totaling $90,533. The notes are
due April 13, 2011.
Promissory notes receivable, totaling $143,500 at June 30, 1995, have
subsequently been collected and, accordingly, are included in current assets.
The remaining promissory notes receivable are shown on the balance sheets as a
reduction in equity.
At June 30, 1995, options to purchase 3,214,169 shares were outstanding.
In April, 1996, all remaining notes given for options were extinguished in
exchange for cancellation of all outstanding options.
16. RELATED PARTY TRANSACTION
On May 22, 1996, the Company sold 21,030,315 shares of common stock, $.001 par
value of American Powerhouse, Inc., to Denis C. Tseklenls in exchange for a
promissory note in the amount of $20,202.00 which has been satisfied.
44
<PAGE>
4) Audited financial statements of Asia Pacific Ltd., for the years ended
December 31, 1998 and December 31, 1997.
ASIA PACIFIC CO., LTD
Consolidated Financial Statements
December 31, 1998
45
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Asia Pacific Co., LTD
We have audited the accompanying consolidated balance sheet of Asia Pacific Co.,
LTD (the "Company") as of December 31, 1998, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
two years in the two year period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes, on a test basis, examination of
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 consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Asia Pacific Co.,
LTD as of December 31, 1998, and the results of its operations and its cash
flows for each of the two years in the two year period ended December 31, 1998
in conformity with generally accepted accounting principles.
CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
December 6, 1999
46
<PAGE>
ASIA PACIFIC CO., LTD.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1998
-------------------
ASSETS
CURRENT ASSETS:
Cash $ 19,545
Inventories 123,596
Other 10,716
-------------------
TOTAL CURRENT ASSETS 153,857
PROPERTY AND EQUIPMENT, NET 2,392,429
OTHER 268,489
-------------------
$ 2,814,775
===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 644,954
Accounts payable 526,892
Accrued interest 68,410
Sales taxes 79,567
Other accrued expenses 80,831
-------------------
TOTAL CURRENT LIABILITIES 1,400,654
MINORITY INTERESTS 517,595
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000 shares authorized,
6,866,089 shares issued and outstanding 6,866
Additional paid-in capital 3,383,041
Accumulated deficit (2,493,381)
-------------------
TOTAL SHAREHOLDERS' EQUITY 896,526
-------------------
$ 2,814,775
===================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
47
<PAGE>
ASIA PACIFIC CO., LTD.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
<S> <C> <C>
1998 1997
---------- ------------
REVENUES:
Food and beverage $ 3,249,064 $ 2,674,758
Club memberships 362,444 38,404
---------- ------------
3,611,508 2,713,162
EXPENSES:
Cost of food and beverage 1,135,604 1,013,266
Labor 1,408,995 1,401,192
Rent 337,195 310,356
Licensing fee 87,898 40,121
Other restaurant operating 398,813 525,229
General and administrative 381,909 966,546
Depreciation and amortization 428,810 266,376
----------- ------------
4,179,224 4,523,086
----------- ------------
LOSS FROM OPERATIONS (567,716) (1,809,924)
INTEREST EXPENSE 36,942 4,807
----------- ------------
LOSS BEFORE MINORITY INTERESTS (604,658) (1,814,731)
MINORITY INTERESTS 287,386 655,000
----------- ------------
NET LOSS $ (317,272) $(1,159,731)
=========== ============
BASIC AND DILUTED NET LOSS PER SHARE $ (0.05) $ (0.17)
=========== ============
BASIC AND DILUTED WEIGHTED AVERAGE SHARES 6,769,089 6,769,089
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
48
<PAGE>
ASIA PACIFIC CO., LTD.
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
NUMBER AMOUNT PAID-IN NOMINEE ACCUMULATED SHAREHOLDERS'
OF SHARES PER SHARE PAR VALUE CAPITAL INTERESTS DEFICIT EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 6,739,089 $6,739 $ 2,899,196 $ - $(2,627,163) $ 278,772
Common stock issued for cash 30,000 $ 1.00 30 29,970 - - 30,000
Cash contribution from nominee interests - - - 2,083,301 - 2,083,301
Net loss - - - (1,247,169) 87,438 (1,159,731)
--------- ---------- ----------- ----------- ------------ ------------
BALANCE, DECEMBER 31, 1997 6,769,089 6,769 2,929,166 836,132 (2,539,725) 1,232,342
Common stock issued to nominee
interests 97,000 $ 3.68 97 356,875 (356,972) - -
Net loss - - - (479,160) 161,888 (317,272)
--------- ---------- ----------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1998 6,866,089 $6,866 $ 3,286,041 $ - $(2,377,837) $ 915,070
========= ========== =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
49
<PAGE>
<TABLE>
<CAPTION>
ASIA PACIFIC CO., LTD.
Statements of Cash Flows
YEAR ENDED DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(317,272) $(1,159,731)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 428,810 266,376
Minority interest (287,386) (655,000)
Changes in assets and liabilities:
Inventories 19,078 (142,674)
Other current assets 10,492 (21,208)
Deposits and other assets 1,070 (33,159)
Accounts payable (69,497) 572,380
Accrued interest 25,550 42,860
Sales taxes 45,793 33,774
Other accrued expenses (288,587) 638,148
---------- ------------
Net cash used by operating activities (431,949) (458,234)
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (75,117) (2,189,978)
Net cash used by investing activities (75,117) (2,189,978)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 481,808 59,838
Payments on notes payable (211,069) (721,004)
Contribution from minority interests 140,000 1,060,000
Contribution from nominee interests - 2,083,301
Issuance of common stock 97,000 30,000
Net cash provided by financing activities 507,739 2,512,135
---------- ------------
Net increase (decrease) in cash 673 (136,077)
CASH, BEGINNING OF PERIOD 18,872 136,750
---------- ------------
CASH, END OF PERIOD $ 19,545 $ 673
========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 11,392 $ 14,016
Franchise taxes $ 1,600 $ 800
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Note payable incurred for purchase of equipment $ - $ 64,549
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
50
<PAGE>
ASIA PACIFIC CO., LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- -----------------------
The accompanying consolidated financial statements include the accounts of Asia
Pacific Co., LTD ("Asia Pacific") and its majority owned subsidiary, 246 LLC
(dba Chasen's), (collectively, the "Company"). All material intercompany
transactions and accounts have been eliminated in consolidation.
Nature of Business
- --------------------
Asia Pacific was incorporated in October 1995 in Niue (a foreign country). In
1996 Asia Pacific acquired a controlling interest in 246 LLC, a limited
liability company organized in March 1996, to construct and operate a
full-service restaurant, bar and membership club in Beverly Hills, California
The restaurant, known as Chasen's, commenced operations in April 1997.
Cash and equivalents
- ----------------------
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents.
Inventories
- -----------
Inventories, consisting of food, liquor, wine and cigars and cigarettes, are
stated at the lower of cost (first-in, first-out) or market.
Property and equipment
- ------------------------
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is provided over the assets' estimated useful lives of 5-7 years
using accelerated methods. Amortization of leasehold improvements is provided
over the lease term using the straight line method.
Long-lived assets are reviewed annually for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Impairment is necessary when the undiscounted cash flows
estimated to be generated by the asset are less than the carrying amount of the
asset.
51
<PAGE>
ASIA PACIFIC CO., LTD.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue recognition
- --------------------
Food and beverage revenues are recognized as the products are sold to the
customer. Proceeds from sales of club memberships are capitalized and
recognized as revenue ratably over the membership term. Deferred revenue of
$5,416 was included in "Other accrued expenses" in the accompanying consolidated
balance sheet.
Advertising and promotional costs
- ------------------------------------
Costs of advertising and promotion are expensed as incurred. Such costs were
$39,265 in 1998 and $39,860 in 1997.
Income taxes
- -------------
The Company accounts for income taxes under Statement of Financial Accounting
Standards (SFAS) 109. Under the asset and liability method of SFAS 109,
deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to future years to
the difference between the financial statement carrying amounts and the tax
bases of existing assets and liabilities.
Minority interests
- -------------------
Minority interests represent the minorities' 37.25% equity in 246 LLC.
Basic and diluted net loss per share
- ------------------------------------------
Net loss per share is calculated in accordance with Statement of Financial
Accounting Standards 128, Earnings Per Share ("SFAS 128"). Basic net loss per
share is based upon the weighted average number of common shares outstanding.
Diluted net loss per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the period (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the period.
The Company has no potentially dilutive securities, options, warrants or other
rights outstanding. Therefore, basic and diluted net loss per share are the
same.
52
<PAGE>
ASIA PACIFIC CO., LTD.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Use of estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Fair value of financial instruments
- ---------------------------------------
The fair value of financial instruments, consisting primarily of notes payable
and long-term debt, is based on interest rates available to the Company and
comparison to quoted prices. The fair value of these financial instruments
approximates carrying values.
Concentration of credit risk
- -------------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash maintained at two high credit quality financial
institutions located in Los Angeles, California. There were no uninsured balan
2. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
<S> <C> <C>
ESTIMATED
USEFUL LIVES AMOUNT
-------------- ----------
Leasehold improvements Life of lease $1,902,237
Kitchen equipment 5 years 279,157
Furnishings and fixtures 7 years 701,758
China and silverware 5 years 96,420
Sound system equipment 5 years 67,889
Office and computer equipment 5 years 38,249
----------
3,085,710
Accumulated depreciation (693,281)
----------
$2,392,429
==========
</TABLE>
53
<PAGE>
3. NOTES PAYABLE
<TABLE>
<CAPTION>
<S> <C>
Various unsecured demand notes payable to minority interests,
with interest rates at 10% and 19.99% $332,672
Unsecured 10% demand note payable to an affiliate 125,000
Unsecured 10% demand notes payable to shareholders 51,233
Non-interest bearing shareholder advances 91,573
Other 44,476
--------
$644,954
========
</TABLE>
4. NOMINEE INTERESTS
In 1997, Asia Pacific entered into agreements with several individuals to share
in the profits and losses of 246 LLC as nominee interests. In accordance with
the terms of the agreements, these individuals contributed a total of $2,083,301
and were allocated 97% of Asia Pacific's share of the losses of 246 LLC for 1997
and 1998. At December 31, 1998 the balances in the nominee interests' accounts
were converted to 97,000 shares of the Company's common stock. The conversion
was calculated at a rate of one dollar per share for each dollar in the
nominee's tax basis capital account at December 31, 1998. Asia Pacific
maintained a majority interest in the capital of 246 LLC at all times.
The Company did not obtain a legal opinion for these agreements and it in
uncertain whether the Internal Revenue Service would agree with the income tax
treatment.
5. INCOME TAXES
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting and tax bases of its assets and
liabilities. Deferred tax assets are reduced by a valuation allowance when
deemed appropriate.
As of December 6, 1999, no federal or state tax returns were filed for Asia
Pacific for the current year or any prior years. Management does not expect the
Company's tax liability for these periods to be material.
54
<PAGE>
ASIA PACIFIC CO., LTD.
NOTES TO FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES
Lease obligations
- ------------------
The Company's restaurant and office facilities operating lease expires February
28, 2006, with two 5-year renewal options. The lease calls for payment of the
Company's share of the common area expenses in addition to minimum monthly lease
payments. The minimum monthly lease payment of $23,400 through March 1999 is
adjusted annually thereafter based on the Consumer Price Index.
In addition the Company is obligated to pay percentage rent equal to 7.5% of
monthly gross sales in excess of $250,000 and $10,000 annually, in the form of
unrestricted credit, towards any purchases of food, beverage, or other
restaurant services.
The Company leases point-of-sale computer equipment and related software for
$1,940 per month under an operating lease expiring February 2000.
Future minimum annual lease payments under all non-cancelable operating leases
are:
1999 $304,080
2000 284,680
2001 280,800
2002 280,800
2003 280,800
Thereafter 608,400
-----------
$2,039,560
===========
License agreement
- ------------------
The Company has entered into an agreement to the use the name "Chasen's" through
February 1, 2007 with an option to renew for two successive 5-year periods,
followed by successive periods of 1 year each up to 99 years. The agreement
grants the Company exclusive license of the name for the operation of a
restaurant in the city of Beverly Hills and other exclusive and non-exclusive
licenses relating to the sale of certain products at the restaurant bearing the
"Chasen's" name. The Company has agreed to pay a royalty of 1-1/2% of the
restaurant gross receipts for the first 18 months and 2% for each year
thereafter, an 8% royalty on the sale of licensed products sold for $75 or less
and 6% on licensed products sold for more than $75. The royalty payments are
subject to an $80,000 annual minimum after the first 18 months of the agreement.
The Company has the right to terminate the agreement for any reason upon not
less than 120 days written notice to licensor. The licensor can only terminate
the agreement for cause as described in the agreement.
55
<PAGE>
ASIA PACIFIC CO., LTD.
NOTES TO FINANCIAL STATEMENTS
7. CONSULTING AGREEMENT WITH RELATED PARTY
The Company entered into an agreement to provide consulting services for
$100,000 a year to an affiliate for a three year period commencing April 1,
1998. The agreement was terminated effective December 31, 1998.
8. SUBSEQUENT EVENT
On September 30, 1999, iLive, Inc. (formerly known as Powerhouse International
Corporation) acquired the Company by issuing 690,000 of its common shares in
exchange for all the outstanding common shares of the Company.
56
<PAGE>
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
EXHIBITS
2.1 Stock Exchange Agreement between iLive, Inc. and the shareholders of
Society of Economic Assurance, Inc., dated as of February 29, 2000.
3.1 Restated Articles of Incorporation iLive, Inc.
3.2 Bylaws of iLive, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ILIVE, INC.
Date: 3/01/2000 By /s/ Marcia Allen
----------------------
Chief Executive Officer, President
57
<PAGE>
STOCK EXCHANGE AGREEMENT
Agreement dated as of February 29, 2000 between iLive, Inc., a Nevada
Corporation, ("iLive"), on the one hand, and M. Richard Cutler ("Cutler"), Brian
A. Lebrecht ("Lebrecht") and Vi Bui ("Bui") on the other hand. Each of Cutler,
Lebrecht, and Bui shall be referred to as a "Shareholder" and collectively as
the "Shareholders."
1. THE ACQUISITION.
1.1_ Purchase and Sale Subject to the Terms and Conditions of this
Agreement. At the Closing to be held as provided in Section 2, iLive shall sell
the iLive Shares (defined below) to the Shareholders and the Shareholders shall
purchase the iLive Shares from iLive, free and clear of all Encumbrances other
than restrictions imposed by Federal and State securities laws.
1.2 Purchase Price. iLive will exchange 200,000 shares of its
restricted common stock (the "iLive Shares") for 100,000 shares of the Common
Stock of Society of Economic Assurance, Inc. ("SEA"), representing 100% of the
outstanding common shares of SEA (the "SEA Shares"). The iLive Shares shall be
issued and delivered to the Shareholders as set forth in Exhibit "A" hereto.
2. THE CLOSING.
2.1 Place and Time. The closing of the sale and exchange of the iLive
Shares for the SEA Shares (the "Closing") shall take place at the offices of the
Cutler Law Group, 610 Newport Center Drive, Suite 800, Newport Beach, CA 92660
no later than the close of business (Orange County California time) on March
1, 2000 or at such other place, date and time as the parties may agree in
writing.
2.2 Deliveries by the Shareholders. At the Closing, the Shareholders
shall deliver the following to iLive:
1. Certificates representing the SEA Shares, duly endorsed for transfer to
iLive and accompanied by appropriate stock powers; the Shareholders shall
immediately change those certificates for, and to deliver to iLive at the
Closing, a certificate representing the SEA Shares registered in the name of
iLive (without any legend or other reference to any Encumbrance other than
appropriate federal securities law limitations).
2. The documents contemplated by Section 3.
3. All other documents, instruments and writings required by this Agreement
to be delivered by the Shareholders at the Closing and any other documents or
records relating to SEA's business reasonably requested by iLive in connection
with this Agreement.
<PAGE>
2.3 Deliveries by iLive. At the Closing, iLive shall deliver the
following to the Shareholders:
a. The iLive Shares for further delivery to the Shareholders as contemplated
by section 1.
b. The documents contemplated by Section 4.
c. All other documents, instruments and writings required by this Agreement
to be delivered by iLive at the Closing.
d. CONDITIONS TO ILIVE'S OBLIGATIONS.
The obligations of iLive to effect the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived by iLive:
3.1 No Injunction. There shall not be in effect any injunction, order
or decree of a court of competent jurisdiction that prevents the consummation of
the transactions contemplated by this Agreement, that prohibits iLive's
acquisition of the SEA Shares or the iLive Shares or that will require any
divestiture as a result of iLive's acquisition of the SEA Shares or that will
require all or any part of the business of iLive to be held separate and no
litigation or proceedings seeking the issuance of such an injunction, order or
decree or seeking to impose substantial penalties on iLive or SEA if this
Agreement is consummated shall be pending.
3.2 Representations, Warranties and Agreements. (a) The
representations and warranties of the Shareholders set forth in this Agreement
shall be true and complete in all material respects as of the Closing Date as
though made at such time, and (b) the Shareholders shall have performed and
complied in all material respects with the agreements contained in this
Agreement required to be performed and complied with by it at or prior to the
Closing.
3.3 Regulatory Approvals. All licenses, authorizations, consents,
orders and regulatory approvals of Governmental Bodies necessary for the
consummation of iLive's acquisition of the SEA Shares shall have been obtained
and shall be in full force and effect.
3.4 Resignations of Director. Effective on the Closing Date, the
Shareholders, and each of them, shall have resigned as an officer, director and
employee of SEA.
4. CONDITIONS TO THE SHAREHOLDER'S OBLIGATIONS.
The obligations of the Shareholders to effect the Closing shall be subject
to the satisfaction at or prior to the Closing of the following conditions, any
one or more of which may be waived by the Shareholders:
<PAGE>
4.1 No Injunction. There shall not be in effect any injunction, order
or decree of a court of competent jurisdiction that prevents the consummation of
the transactions contemplated by this Agreement, that prohibits iLive's
acquisition of the SEA Shares or the Shareholder's acquisition of the iLive
Shares or that will require any divestiture as a result of iLive's acquisition
of the Shares or the Shareholder's acquisition of the iLive Shares or that will
require all or any part of the business of iLive or SEA to be held separate and
no litigation or proceedings seeking the issuance of such an injunction, order
or decree or seeking to impose substantial penalties on iLive or SEA if this
Agreement is consummated shall be pending.
4.2 Representations, Warranties and Agreements. (a) The
representations and warranties of iLive set forth in this Agreement shall be
true and complete in all material respects as of the Closing Date as though made
at such time, and (b) iLive shall have performed and complied in all material
respects with the agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing.
4.3 Regulatory Approvals. All licenses, authorizations, consents,
orders and regulatory approvals of Governmental Bodies necessary for the
consummation of iLive's acquisition of the SEA Shares and the Shareholder's
acquisition of the iLive Shares shall have been obtained and shall be in full
force and effect.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
The Shareholders represent and warrant to iLive that, to the Knowledge of
the Shareholders (which limitation shall not apply to Section 5.3), and except
as set forth in an SEA Disclosure Letter:
5.1 Organization of SEA; Authorization. SEA is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Nevada. This Agreement constitutes a valid and binding obligation of the
Shareholders, enforceable against them in accordance with its terms.
5.2 Capitalization. The authorized capital stock of SEA consists of
2,000,000 authorized shares, consisting of 1,000,000 common stock, par value
$.001, and 1,000,000 preferred shares, no par $.001, of which 100,000 common
shares and no preferred shares are presently issued and outstanding. No shares
have been registered under state or federal securities laws. As of the Closing
Date, all of the issued and outstanding shares of common stock of SEA are
validly issued, fully paid and non-assessable. As of the Closing Date there
will not be outstanding any warrants, options or other agreements on the part of
SEA obligating SEA to issue any additional shares of common or preferred stock
or any of its securities of any kind. Except as otherwise set forth herein, SEA
will not issue any shares of capital stock from the date of this Agreement
through the Closing Date.
<PAGE>
5.3 No Conflict as to SEA. Neither the execution and delivery of this
Agreement nor the consummation of the sale of the SEA Shares to iLive will (a)
violate any provision of the certificate of incorporation or by-laws of SEA or
(b) violate, be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under any
agreement to which SEA is a party or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or other Governmental
Body applicable to SEA.
5.4 Ownership of SEA Shares. The delivery of certificates to iLive
provided in Section 2.2 will result in iLive's immediate acquisition of record
and beneficial ownership of the SEA Shares, free and clear of all Encumbrances
subject to applicable State and Federal securities laws. There are no
outstanding options, rights, conversion rights, agreements or commitments of any
kind relating to the issuance, sale or transfer of any Equity Securities or
other securities of SEA.
5.5 No Conflict as to SEA and Subsidiaries. Neither the execution and
delivery of this Agreement nor the consummation of the sale of the SEA Shares to
iLive will (a) violate any provision of the certificate of incorporation or
by-laws (or other governing instrument) of SEA or any of its Subsidiaries or
(b) violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
excuse performance by any Person of any of its obligations under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Encumbrance upon any property or assets of
SEA or any of its Subsidiaries under, any material agreement or commitment to
which SEA or any of its Subsidiaries is a party or by which any of their
respective property or assets is bound, or to which any of the property or
assets of SEA or any of its Subsidiaries is subject, or (c) violate any statute
or law or any judgment, decree, order, regulation or rule of any court or other
Governmental Body applicable to SEA or any of its Subsidiaries except, in the
case of violations, conflicts, defaults, terminations, accelerations or
Encumbrances described in clause (b) of this Section 5.5, for such matters which
are not likely to have a material adverse effect on the business or financial
condition of SEA and its Subsidiaries, taken as a whole.
5.6 Consents and Approvals of Governmental Authorities. Except with
respect to applicable State and Federal securities laws, no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Body is required to be made or obtained by SEA or iLive or any of its
Subsidiaries in connection with the execution, delivery and performance of this
Agreement by SEA or the consummation of the sale of the SEA Shares to iLive.
<PAGE>
5.7 Other Consents. No consent of any Person is required to be obtained
by SEA or iLive to the execution, delivery and performance of this Agreement or
the consummation of the sale of the SEA Shares to iLive, including, but not
limited to, consents from parties to leases or other agreements or commitments,
except for any consent which the failure to obtain would not be likely to have a
material adverse effect on the business and financial condition of SEA or iLive.
5.8 Financial Statements. SEA has delivered to iLive consolidated
balance sheets of SEA and its Subsidiaries as at December 31, 1999, and
statements of income and changes in financial position for the period from
inception to the period then ended, together with the report thereon of SEA's
independent accountant (the "SEA Financial Statements").
5.9 Title to Properties. Either SEA or one of its Subsidiaries owns
all the material properties and assets that they purport to own (real, personal
and mixed, tangible and intangible), including, without limitation, all the
material properties and assets reflected in the SEA Financial Statements, and
all the material properties and assets purchased or otherwise acquired by SEA
or any of its Subsidiaries since the date of the SEA Financial Statements. All
properties and assets reflected in the SEA Financial Statements are free and
clear of all material Encumbrances and are not, in the case of real property,
subject to any material rights of way, building use restrictions, exceptions,
variances, reservations or limitations of any nature whatsoever except, with
respect to all such properties and assets, (a) mortgages or security interests
shown on the SEA Financial Statements as securing specified liabilities or
obligations, with respect to which no default (or event which, with notice or
lapse of time or both, would constitute a default) exists, and all of which are
listed in the SEA Disclosure Letter, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the SEA Financial Statements (such mortgages and security interests being
limited to the property or assets so acquired), with respect to which no default
(or event which, with notice or lapse of time or both, would constitute a
default) exists, (c) as to real property, (i) imperfections of title, if any,
none of which materially detracts from the value or impairs the use of the
property subject thereto, or impairs the operations of SEA or any of its
Subsidiaries and (ii) zoning laws that do not impair the present or anticipated
use of the property subject thereto, and (d) liens for current taxes not yet
due. The properties and assets of SEA and its Subsidiaries include all rights,
properties and other assets necessary to permit SEA and its Subsidiaries to
conduct SEA's business in all material respects in the same manner as it is
conducted on the date of this Agreement.
5.10 Buildings, Plants and Equipment. The buildings, plants, structures and
material items of equipment and other personal property owned or leased by SEA
or its Subsidiaries are, in all respects material to the business or financial
condition of SEA and its Subsidiaries, taken as a whole, in good operating
condition and repair (ordinary wear and tear excepted) and are adequate in all
such respects for the purposes for which they are being used. SEA has not
received notification that it or any of its Subsidiaries is in violation of any
applicable building, zoning, anti-pollution, health, safety or other law,
ordinance or regulation in respect of its buildings, plants or structures or
their operations, which violation is likely to have a material adverse effect on
the business or financial condition of SEA and its Subsidiaries, taken as a
whole or which would require a payment by SEA or iLive or any of their
subsidiaries in excess of $2,000 in the aggregate, and which has not been
cured.
<PAGE>
5.11 No Condemnation or Expropriation. Neither the whole nor any portion of
the property or leaseholds owned or held by SEA or any of its Subsidiaries is
subject to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any Governmental Body or other Person with or
without payment of compensation therefor, which action is likely to have a
material adverse effect on the business or financial condition of iLive and its
Subsidiaries, taken as a whole.
5.12 Litigation. There is no action, suit, inquiry, proceeding or
investigation by or before any court or Governmental Body pending or threatened
in writing against or involving SEA or any of its Subsidiaries which is likely
to have a material adverse effect on the business or financial condition of
SEA, iLive and any of their Subsidiaries, taken as whole, or which would require
a payment by SEA or its subsidiaries in excess of $2,000 in the aggregate or
which questions or challenges the validity of this Agreement. Neither SEA nor
any or its Subsidiaries is subject to any judgment, order or decree that is
likely to have a material adverse effect on the business or financial condition
of SEA, iLive or any of their Subsidiaries, taken as a whole, or which would
require a payment by SEA or its subsidiaries in excess of $2,000 in the
aggregate.
5.13 Absence of Certain Changes. Since the date of the SEA Financial
Statements, neither SEA nor any of its Subsidiaries has:
a. suffered the damage or destruction of any of its properties or assets
(whether or not covered by insurance) which is materially adverse to the
business or financial condition of SEA and its Subsidiaries, taken as a whole,
or made any disposition of any of its material properties or assets other than
in the ordinary course of business;
b. made any change or amendment in its certificate of incorporation or
by-laws, or other governing instruments;
c. issued or sold any Equity Securities or other securities, acquired,
directly or indirectly, by redemption or otherwise, any such Equity Securities,
reclassified, split-up or otherwise changed any such Equity Security, or granted
or entered into any options, warrants, calls or commitments of any kind with
respect thereto;
d. organized any new Subsidiary or acquired any Equity Securities of any
Person or any equity or ownership interest in any business;
e. borrowed any funds or incurred, or assumed or become subject to, whether
directly or by way of guarantee or otherwise, any obligation or liability with
respect to any such indebtedness for borrowed money;
f. paid, discharged or satisfied any material claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than in the ordinary course
of business;
<PAGE>
g. prepaid any material obligation having a maturity of more than 90 days
from the date such obligation was issued or incurred;
h. canceled any material debts or waived any material claims or rights,
except in the ordinary course of business;
i. disposed of or permitted to lapse any rights to the use of any material
patent or registered trademark or copyright or other intellectual property owned
or used by it;
j. granted any general increase in the compensation of officers or employees
(including any such increase pursuant to any employee benefit plan);
k. purchased or entered into any contract or commitment to purchase any
material quantity of raw materials or supplies, or sold or entered into any
contract or commitment to sell any material quantity of property or assets,
except (i) normal contracts or commitments for the purchase of, and normal
purchases of, raw materials or supplies, made in the ordinary course business,
(ii) normal contracts or commitments for the sale of, and normal sales of,
inventory in the ordinary course of business, and (iii) other contracts,
commitments, purchases or sales in the ordinary course of business;
l. made any capital expenditures or additions to property, plant or
equipment or acquired any other property or assets (other than raw materials and
supplies) at a cost in excess of $100,000 in the aggregate;
m. written off or been required to write off any notes or accounts
receivable in an aggregate amount in excess of $2,000;
n. written down or been required to write down any inventory in an aggregate
amount in excess of $ 2,000;
o. entered into any collective bargaining or union contract or agreement; or
p. other than the ordinary course of business, incurred any liability
required by generally accepted accounting principles to be reflected on a
balance sheet and material to the business or financial condition of SEA and
its subsidiaries taken as a whole.
5.14 No Material Adverse Change. Since the date of the SEA Financial
Statements, there has not been any material adverse change in the business or
financial condition of SEA and its Subsidiaries taken as a whole, other than
changes resulting from economic conditions prevailing in the United States
precious coins, collectibles and metals industry.
5.15 Contracts and Commitments. Neither SEA nor any of its Subsidiaries is a
party to any:
<PAGE>
a. Contract or agreement (other than purchase or sales orders entered into
in the ordinary course of business) involving any liability on the part of SEA
or one of its Subsidiaries of more than $25,000 and not cancelable by SEA or
the relevant Subsidiary (without liability to SEA or such Subsidiary) within 60
days;
b. Except with respect to the lease on its business location, lease of
personal property involving annual rental payments in excess of $25,000 and not
cancelable by SEA or the relevant Subsidiary (without liability to SEA or such
Subsidiary) within 90 days;
c. Except with respect to the options referenced above, Employee bonus,
stock option or stock purchase, performance unit, profit-sharing, pension,
savings, retirement, health, deferred or incentive compensation, insurance or
other material employee benefit plan (as defined in Section 2(3) of ERISA) or
program for any of the employees, former employees or retired employees of SEA
or any of its Subsidiaries;
d. Commitment, contract or agreement that is currently expected by the
management of SEA to result in any material loss upon completion or performance
thereof;
e. Contract, agreement or commitment that is material to the business of
SEA and its Subsidiaries, taken as a whole, with any officer, employee, agent,
consultant, advisor, salesman, sales representative, value added reseller,
distributor or dealer; or
f. Employment agreement or other similar agreement that contains any
severance or termination pay, liabilities or obligations.
All such contracts and agreements are in full force and effect. Neither SEA nor
any or its Subsidiaries is in breach of, in violation of or in default under,
any agreement, instrument, indenture, deed of trust, commitment, contract or
other obligation of any type to which SEA or any of its Subsidiaries is a party
or is or may be bound that relates to the business of SEA or any of its
Subsidiaries or to which any of the assets or properties of SEA or any of its
Subsidiaries is subject, the effect of which breach, violation or default is
likely to materially and adversely affect the business or financial condition of
SEA and its Subsidiaries, taken as a whole. iLive has not guaranteed or assumed
and specifically does not guarantee or assume any obligations of SEA or any of
its Subsidiaries.
<PAGE>
5.16 Labor Relations. Neither SEA nor any of its Subsidiaries is a party to
any collective bargaining agreement. Except for any matter which is not likely
to have a material adverse effect on the business or financial condition of SEA
and its Subsidiaries, taken as a whole, (a) SEA and each of its Subsidiaries is
in compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice, (b) there is no unfair labor practice
complaint against SEA or any of its Subsidiaries pending before the National
Labor Relations Board, (c) there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against SEA or any of its Subsidiaries,
(d) no representation question exists respecting the employees of SEA or any of
its Subsidiaries, (e) neither SEA nor any of its Subsidiaries has experienced
any strike, work stoppage or other labor difficulty, and (f) no collective
bargaining agreement relating to employees of SEA or any of its Subsidiaries is
currently being negotiated.
5.17 Employee Benefit Plans. No material employee pension and welfare
benefit plans covering employees of SEA is (1) a multi-employer plan as defined
in Section 3(37) of ERISA, or (2) a defined benefit plan as defined in Section
3(35) of ERISA, any listed individual account pension plan is duly qualified as
tax exempt under the applicable sections of the Code, each listed benefit plan
and related funding arrangement, if any, has been maintained in all material
respects in compliance with its terms and the provisions of ERISA and the Code.
5.18 Compliance with Law. The operations of SEA and its Subsidiaries have
been conducted in accordance with all applicable laws and regulations of all
Governmental Bodies having jurisdiction over them, except for violations thereof
which are not likely to have a material adverse effect on the business or
financial condition of SEA and its Subsidiaries, taken as a whole, or which
would not require a payment by SEA or its Subsidiaries in excess of $2,000 in
the aggregate, or which have been cured. Neither SEA nor any of its Subsidiaries
has received any notification of any asserted present or past failure by it to
comply with any such applicable laws or regulations. SEA and its Subsidiaries
have all material licenses, permits, orders or approvals from the Governmental
Bodies required for the conduct of their businesses, and are not in material
violation of any such licenses, permits, orders and approvals. All such
licenses, permits, orders and approvals are in full force and effect, and no
suspension or cancellation of any thereof has been threatened.
5.19 Tax Matters.
<PAGE>
a. SEA and each of its Subsidiaries (1) has filed all nonconsolidated and
noncombined Tax Returns and all consolidated or combined Tax Returns that
include only SEA and/or its Subsidiaries and not Seller or its other Affiliates
(for the purposes of this Section 5.19, such tax Returns shall be considered
nonconsolidated and noncombined Tax Returns) required to be filed through the
date hereof and has paid any Tax due through the date hereof with respect to the
time periods covered by such nonconsolidated and noncombined Tax Returns and
shall timely pay any such Taxes required to be paid by it after the date hereof
with respect to such Tax Returns and (2) shall prepare and timely file all such
nonconsolidated and noncombined Tax Returns required to be filed after the date
hereof and through the Closing Date and pay all Taxes required to be paid by it
with respect to the periods covered by such Tax Returns; (B) all such Tax
Returns filed pursuant to clause (A) after the date hereof shall, in each case,
be prepared and filed in a manner consistent in all material respects (including
elections and accounting methods and conventions) with such Tax Return most
recently filed in the relevant jurisdiction prior to the date hereof, except as
otherwise required by law or regulation. Any such Tax Return filed or required
to be filed after the date hereof shall not reflect any new elections or the
adoption of any new accounting methods or conventions or other similar items,
except to the extent such particular reflection or adoption is required to
comply with any law or regulation.
b. All consolidated or combined Tax Returns (except those described in
subparagraph (a) above) required to be filed by any person through the date
hereof that are required or permitted to include the income, or reflect the
activities, operations and transactions, of SEA or any of its Subsidiaries for
any taxable period have been timely filed, and the income, activities,
operations and transactions of SEA and Subsidiaries have been properly included
and reflected thereon. SEA shall prepare and file, or cause to be prepared and
filed, all such consolidated or combined Tax Returns that are required or
permitted to include the income, or reflect the activities, operations and
transactions, of SEA or any Subsidiary, with respect to any taxable year or the
portion thereof ending on or prior to the Closing Date, including, without
limitation, SEA's consolidated federal income tax return for such taxable years.
SEA will timely file a consolidated federal income tax return for the taxable
year ended December 31, 1998 and such return shall include and reflect the
income, activities, operations and transactions of SEA and Subsidiaries for the
taxable period then ended, and hereby expressly covenants and agrees to file a
consolidated federal income tax return, and to include and reflect thereon the
income, activities, operations and transactions of SEA and Subsidiaries for the
taxable period through the Closing Date. All Tax Returns filed pursuant to this
subparagraph (b) after the date hereof shall, in each case, to the extent that
such Tax Returns specifically relate to SEA or any of its Subsidiaries and do
not generally relate to matters affecting other members of SEA's consolidated
group, be prepared and filed in a manner consistent in all material respects
(including elections and accounting methods and conventions) with the Tax Return
most recently filed in the relevant jurisdictions prior to the date hereof,
except as otherwise required by law or regulation. SEA has paid or will pay all
Taxes that may now or hereafter be due with respect to the taxable periods
covered by such consolidated or combined Tax Returns.
c. Neither SEA nor any of its Subsidiaries has agreed, or is required, to
make any adjustment (x) under Section 481(a) of the Code by reason of a change
in accounting method or otherwise or (y) pursuant to any provision of the Tax
Reform Act of 1986, the Revenue Act of 1987 or the Technical and Miscellaneous
Revenue Act of 1988.
d. Neither SEA nor any of its Subsidiaries or any predecessor or Affiliate
of the foregoing has, at any time, filed a consent under Section 341(f)(1) of
the Code, or agreed under Section 341(f)(3) of the Code, to have the provisions
of Section 341(f)(2) of the Code apply to any sale of its stock.
e. There is no (nor has there been any request for an) agreement, waiver or
consent providing for an extension of time with respect to the assessment of any
Taxes attributable to SEA or its Subsidiaries, or their assets or operations and
no power of attorney granted by SEA or any of its Subsidiaries with respect to
any Tax matter is currently in force.
f. There is no action, suit, proceeding, investigation, audit, claim,
demand, deficiency or additional assessment in progress, pending or threatened
against or with respect to any Tax attributable to SEA, its Subsidiaries or
their assets or operations.
g. All amounts required to be withheld as of the Closing Date for Taxes or
otherwise have been withheld and paid when due to the appropriate agency or
authority.
h. No property of SEA is "tax-exempt use property " within the meaning of
Section 168(h) of the Code nor property that SEA and/or its Subsidiaries will be
required to treat as being owned by another person pursuant to Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended and in effect immediately
prior to the enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to iLive true and complete
copies of all income Tax Returns (or with respect to consolidated or combined
returns, the portion thereof) and any other Tax Returns requested by iLive as
may be relevant to SEA, its Subsidiaries, or their assets or operations for any
and all periods ending after December 31, 1998, or for any Tax years which are
subject to audit or investigation by any taxing authority or entity.
j. There is no contract, agreement, plan or arrangement, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of SEA or its Subsidiaries that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
Section 280G or 162 of the Code.
5.20 Environmental Matters.
a. At all times prior to the date hereof, SEA and its Subsidiaries have
complied in all material respects with applicable environmental laws, orders,
regulations, rules and ordinances relating to the Properties (as hereinafter
defined), the violation of which would have a material adverse effect on the
business or financial condition of SEA and its Subsidiaries, taken as a whole,
or which would require a payment by SEA or its Subsidiaries in excess of
$2,000 in the aggregate, and which have been duly adopted, imposed or
promulgated by any legislative, executive, administrative or judicial body or
officer of any Governmental Body.
b. The environmental licenses, permits and authorizations that are material
to the operations of SEA and its Subsidiaries, taken as a whole, are in full
force and effect.
<PAGE>
c. Neither SEA nor any of its Subsidiaries has released or caused to be
released on or about the properties currently owned or leased by SEA or any of
its Subsidiaries (the "Properties") any (i) pollutants, (ii) contaminants, (iii)
"Hazardous Substances," as that term is defined in Section 101(14) of the
Comprehensive Environmental Response Act, as amended or (iv) "Regulated
Substances," as that term in defined in Section 9001 of the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended,
which would be required to be remediated by any governmental agency with
jurisdiction over the Properties under the authority of laws, regulations and
ordinances as in effect and currently interpreted on the date hereof, which
remediation would have a material adverse effect on the business or financial
condition of SEA and its Subsidiaries, taken as a whole.
5.21 Brokers or Finders. SEA and the Shareholders have not employed any
broker or finder or incurred any liability for any brokerage or finder's fees or
commissions or similar payments in connection with the sale of the SEA Shares to
iLive.
5.22 Absence of Certain Commercial Practices. Neither SEA nor any of its
Subsidiaries has, directly or indirectly, paid or delivered any fee, commission
or other sum of money or item of property, however characterized, to any finder,
agent, government official or other party, in the United States or any other
country, which is in any manner related to the business or operations of SEA or
its Subsidiaries, which SEA or one of its Subsidiaries knows or has reason to
believe to have been illegal under any federal, state or local laws of the
United States or any other country having jurisdiction; and neither SEA nor any
of its Subsidiaries has participated, directly or indirectly, in any boycotts or
other similar practices affecting any of its actual or potential customers in
violation of any applicable law or regulation.
5.23 Transactions with Directors and Officers. SEA and its Subsidiaries do
not engage in business with any Person in which any of SEA's directors or
officers has a material equity interest. No director or officer of SEA owns any
property, asset or right which is material to the business of SEA and its
Subsidiaries, taken as a whole.
5.24 Borrowing and Guarantees. SEA and its Subsidiaries (a) do not have any
indebtedness for borrowed money, (b) are not lending or committed to lend any
money (except for advances to employees in the ordinary course of business), and
(c) are not guarantors or sureties with respect to the obligations of any
Person.
6. REPRESENTATIONS AND WARRANTIES OF ILIVE.
iLive represents and warrants to the Shareholders that, to the Knowledge of
iLive (which limitation shall not apply to Section 6.3), and except as set forth
in a iLive Disclosure Letter:
<PAGE>
6.1 Organization of iLive; Authorization. iLive is a corporation duly
organized, validly existing and in good standing under the laws of Nevada with
full corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action of
iLive and this Agreement constitutes a valid and binding obligation of iLive;
enforceable against it in accordance with its terms.
6.2 Capitalization. The authorized capital stock of iLive consists of
100,000,000 shares of common stock, par value $.001 per share, and 10,000,000
shares of preferred stock, par value $.001 per share. As of January 31, 2000,
iLive had 15,053,334 shares of common stock issued and outstanding and no shares
of Preferred Stock issued and outstanding. As of the Closing Date, all of the
issued and outstanding shares of common stock of iLive are validly issued, fully
paid and non-assessable. The Common Stock of iLive is presently listed and
trading on the Nasdaq Over-the-Counter Bulletin Board under the symbol "LIVE."
6.3 Ownership of iLive Shares. The delivery of certificates to SEA
provided in Section 2.3 will result in the Shareholders immediate acquisition of
record and beneficial ownership of the iLive Shares, free and clear of all
Encumbrances other than as required by Federal and State securities laws.
6.4 No Conflict as to iLive and Subsidiaries. Neither the execution
and delivery of this Agreement nor the consummation of the sale of the iLive
Shares to the Shareholders will (a) violate any provision of the certificate of
incorporation or by-laws (or other governing instrument) of iLive or any of its
Subsidiaries or (b) violate, or be in conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or excuse performance by any Person of any of its obligations
under, or cause the acceleration of the maturity of any debt or obligation
pursuant to, or result in the creation or imposition of any Encumbrance upon any
property or assets of iLive or any of its Subsidiaries under, any material
agreement or commitment to which iLive or any of its Subsidiaries is a party or
by which any of their respective property or assets is bound, or to which any of
the property or assets of iLive or any of its Subsidiaries is subject, or (c)
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or other Governmental Body applicable to iLive or any of its
Subsidiaries except, in the case of violations, conflicts, defaults,
terminations, accelerations or Encumbrances described in clause (b) of this
Section 6.4, for such matters which are not likely to have a material adverse
effect on the business or financial condition of iLive and its Subsidiaries,
taken as a whole.
6.5 Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
Governmental Body is required to be made or obtained by iLive or SEA or any of
either of their Subsidiaries in connection with the execution, delivery and
performance of this Agreement by iLive or the consummation of the sale of the
iLive Shares to the Shareholders.
<PAGE>
6.6 Other Consents. No consent of any Person is required to be obtained
by SEA or iLive to the execution, delivery and performance of this Agreement or
the consummation of the sale of the iLive Shares to the Shareholders, including,
but not limited to, consents from parties to leases or other agreements or
commitments, except for any consent which the failure to obtain would not be
likely to have a material adverse effect on the business and financial condition
of SEA or iLive.
6.7 Financial Statements. iLive has delivered to the Shareholders
consolidated balance sheets of iLive and its Subsidiaries as at December 31,
1998 and June 30, 1999, and statements of income and changes in financial
position for each of the years in the two-year period then ended, together with
the report thereon of iLive's independent accountant (the "iLive Financial
Statements"). Such iLive Financial Statements and notes fairly present the
consolidated financial condition and results of operations of iLive and its
Subsidiaries as at the respective dates thereof and for the periods therein
referred to, all in accordance with generally accepted United States accounting
principles consistently applied throughout the periods involved, except as set
forth in the notes thereto, and shall be utilizable in any SEC filing in
compliance with Rule 310 of Regulation S-B promulgated under the Securities Act.
6.8 Brokers or Finders. Other than M. Richard Cutler, Brian A.
Lebrecht, and Vi Bui, iLive has not employed any broker or finder or incurred
any liability for any brokerage or finder's fees or commissions or similar
payments in connection with the sale of the iLive Shares to the Shareholders.
6.9 Purchase for Investment. iLive is purchasing the SEA Shares solely
for its own account for the purpose of investment and not with a view to, or for
sale in connection with, any distribution of any portion thereof in violation of
any applicable securities law.
7. Access and Reporting; Filings With Governmental Authorities; Other
Covenants.
7.1 Access Between the date of this Agreement and the Closing Date.
Each of the Shareholders and iLive shall (a) give to the other and its
authorized representatives reasonable access to all plants, offices, warehouse
and other facilities and properties of SEA or iLive, as the case may be, and to
its books and records, (b) permit the other to make inspections thereof, and (c)
cause its officers and its advisors to furnish the other with such financial and
operating data and other information with respect to the business and properties
of such party and its Subsidiaries and to discuss with such and its authorized
representatives its affairs and those of its Subsidiaries, all as the other may
from time to time reasonably request.
7.3 Exclusivity. From the date hereof until the earlier of the Closing
or the termination of this Agreement, the Shareholders shall not solicit or
negotiate or enter into any agreement with any other Person with respect to or
in furtherance of any proposal for a merger or business combination involving,
or acquisition of any interest in, or (except in the ordinary course of
business) sale of assets by, SEA, except for the exchange of the iLive Shares
for the SEA Shares from the Shareholders.
<PAGE>
7.4 Regulatory Matters. The Shareholders and iLive shall (a) file with
applicable regulatory authorities any applications and related documents
required to be filed by them in order to consummate the contemplated transaction
and (b) cooperate with each other as they may reasonably request in connection
with the foregoing.
8. CONDUCT OF SEA'S BUSINESS PRIOR TO THE CLOSING. The Shareholder shall
use their best efforts to ensure the following:
8.1 Operation in Ordinary Course. Between the date of this Agreement
and the Closing Date, SEA shall cause conduct its businesses in all material
respects in the ordinary course.
8.2 Business Organization. Between the date of this Agreement and the
Closing Date, SEA shall (a) preserve substantially intact the business
organization of SEA; and (b) preserve in all material respects the present
business relationships and good will of SEA and each of its Subsidiaries.
8.3 Corporate Organization. Between the date of this Agreement and the
Closing Date, SEA shall not cause or permit any amendment of its certificate of
incorporation or by-laws (or other governing instrument) and shall not:
a. issue, sell or otherwise dispose of any of its Equity Securities, or
create, sell or otherwise dispose of any options, rights, conversion rights or
other agreements or commitments of any kind relating to the issuance, sale or
disposition of any of its Equity Securities;
b. create or suffer to be created any Encumbrance thereon, or create, sell
or otherwise dispose of any options, rights, conversion rights or other
agreements or commitments of any kind relating to the sale or disposition of any
Equity Securities;
c. reclassify, split up or otherwise change any of its Equity Securities;
d. be party to any merger, consolidation or other business combination;\
e. sell, lease, license or otherwise dispose of any of its properties or
assets (including, but not limited to rights with respect to patents and
registered trademarks and copyrights or other proprietary rights), in an amount
which is material to the business or financial condition of SEA and its
Subsidiaries, taken as a whole, except in the ordinary course of business; or
f. organize any new Subsidiary or acquire any Equity Securities of any
Person or any equity or ownership interest in any business.
8.4 Other Restrictions. Between the date of this Agreement and the
Closing Date, SEA shall not:
a. borrow any funds or otherwise become subject to, whether directly or by
way of guarantee or otherwise, any indebtedness for borrowed money;
b. create any material Encumbrance on any of its material properties or
assets;
c increase in any manner the compensation of any director or officer or
increase in any manner the compensation of any class of employees;
d. create or materially modify any material bonus, deferred compensation,
pension, profit sharing, retirement, insurance, stock purchase, stock option, or
other fringe benefit plan, arrangement or practice or any other employee benefit
plan (as defined in section 3(3) of ERISA);
e. make any capital expenditure or acquire any property or assets;
f. enter into any agreement that materially restricts iLive, SEA or any of
their Subsidiaries from carrying on business;
g. pay, discharge or satisfy any material claim, liability or obligation,
absolute, accrued, contingent or otherwise, other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities or obligations
reflected in the SEA Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the date of the SEA Financial
Statements; or
h. cancel any material debts or waive any material claims or rights.
9. DEFINITIONS.
As used in this Agreement, the following terms have the meanings specified
or referred to in this Section 9.
9.1 "Business Day" C Any day that is not a Saturday or Sunday or a day
on which banks located in the City of New York are authorized or required to be
closed.
9.2 "Code" C The Internal Revenue Code of 1986, as amended.
9.3 "Encumbrances" C Any security interest, mortgage, lien, charge,
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership, other than a restriction on transfer arising under
Federal or state securities laws.
9.4 "Equity Securities" C See Rule 3aB11B1 under the Securities
Exchange Act of 1934.
9.5 "ERISA" C The Employee Retirement Income Security Act of 1974, as
amended.
9.6 "Governmental Body" C Any domestic or foreign national, state or
municipal or other local government or multi-national body (including, but not
limited to, the European Economic Community), any subdivision, agency,
commission or authority thereof.
9.7 "Knowledge" C Actual knowledge, after reasonable investigation.
9.8 "Person" C Any individual, corporation, partnership, joint venture,
trust, association, unincorporated organization, other entity, or Governmental
Body.
9.9 "Subsidiary" C With respect to any Person, any corporation of which
securities having the power to elect a majority of that corporation's Board of
Directors (other than securities having that power only upon the happening of a
contingency that has not occurred) are held by such Person or one or more of its
Subsidiaries.
10. TERMINATION.
10.1 Termination. This Agreement may be terminated before the Closing
occurs only as follows:
<PAGE>
a. By written agreement of the Shareholders and iLive at any time.
b. By iLive, by notice to the Shareholders at any time, if one or more of
the conditions specified in Section 4 is not satisfied at the time at which the
Closing (as it may be deferred pursuant to Section 2.1) would otherwise occur or
if satisfaction of such a condition is or becomes impossible.
c. By the Shareholders, by notice to iLive at any time, if one or more of
the conditions specified in Section 3 is not satisfied at the time at which the
Closing (as it may be deferred pursuant to Section 2.1), would otherwise occur
of if satisfaction of such a condition is or becomes impossible.
d. By either the Shareholders or iLive, by notice to the other at any time
after February 29, 2000.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, this Agreement shall terminate without any liability or further
obligation of any party to another.
13. NOTICES. All notices, consents, assignments and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given when (a) delivered by hand, (b) sent by telex or facsimile (with receipt
confirmed), provided that a copy is mailed by registered mail, return receipt
requested, or (c) received by the delivery service (receipt requested), in each
case to the appropriate addresses, telex numbers and facsimile numbers set forth
below (or to such other addresses, telex numbers and facsimile numbers as a
party may designate as to itself by notice to the other parties).
(a) If to iLive:
282 N. Canon Dr., 3rd Floor
Beverly Hills, CA 90210
Attn: Marcia Allen, President
Facsimile (310) 285-0966
(b) If to the Shareholders:
c/o Cutler Law Group
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Facsimile No.: (949) 719-1988
Attention: M. Richard Cutler, Esq.
14. MISCELLANEOUS.
14.2 Expenses. Each party shall bear its own expenses incident to the
preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder.
<PAGE>
14.3 Captions. The captions in this Agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this
agreement.
14.4 No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
14.5 Exclusive Agreement; Amendment. This Agreement supersedes all prior
agreements among the parties with respect to its subject matter with respect
thereto and cannot be changed or terminated orally.
14.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
14.7 Governing Law, Venue. This Agreement and (unless otherwise provided)
all amendments hereof and waivers and consents hereunder shall be governed by
the internal law of the State of California, without regard to the conflicts of
law principles thereof. Venue for any cause of action brought to enforce any
part of this Agreement shall be in Orange County, California.
14.8 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns,
provided that neither party may assign its rights hereunder without the consent
of the other, provided that, after the Closing, no consent of SEA shall be
needed in connection with any merger or consolidation of iLive with or into
another entity.
<PAGE>
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to
be executed by their respective offi-cers, hereunto duly authorized, and entered
into as of the date first above written.
ILIVE, INC.
a Nevada corporation
/s/ Marcia Allen /s/ M. Richard Cutler
By: Marcia Allen, President M. Richard Cutler
/s/ Anatasia Cronin /s/ Brian A. Lebrecht
Anatasia Cronin, Secretary Brian A. Lebrecht
/s/ Marcia Allen /s/ Vi Bui
By: Marcia Allen, on behalf of the Vi Bui
iLive Board of Directors
<PAGE>
EXHIBIT A
SEA SHAREHOLDERS
SHAREHOLDER NUMBER OF SHARES
----------- ----------------
MRC Legal Services LLC 130,000
Brian A. Lebrecht 40,000
Vi Bui 30,000
RESTATED ARTICLES OF INCORPORATION
OF
ILIVE, INC.
ARTICLE I
The name of the corporation is:
iLive, Inc.
ARTICLE II
Its principal office in the State of Nevada is located at 3318 China Drive,
Las Vegas, Nevada 89121. This Corporation may maintain an office, or offices, in
such other place within or without the State of Nevada as may be from time to
time designated by the Board of Directors., or by the By-Laws of said
Corporation, and that this Corporation may, conduct all Corporation business of
every kind and nature, including the holding of all meetings of Directors and
Stockholders outside the State of Nevada as well as within the State of Nevada.
ARTICLE III
The objects for which this Corporation is formed are:
To engage in any lawful activity, including, but not limited to the following:
1. Shall have such rights, privileges and powers as may be conferred
upon corporations by any existing law.
2. May at any time exercise such rights, privileges and powers, when
not inconsistent with the purposes and objectives for which this Corporation to
organized.
3. Shall have power to have succession by its corporate name for the
period limited in its certificate or Articles of Incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.
4. Shall have power to sue and be sued in any court of law or equity.
5. Shall have power to make contracts.
<PAGE>
6. Shall have power to hold, purchase and convey real and personal
estate and to mortgage or lease any such real and personal estate with its
franchises. The power to hold real and personal estate shall include the power
to take the same by devise or bequest in the State of Nevada, or in any other
state, territory or country.
7. Shall have power to appoint such officers and agents as the affairs
of the Corporation shall require, and to allow the suitable compensation
thereof.
8. Shall have power to make by-laws not inconsistent with the
Constitution and laws of the United States, or of the State of Nevada, for the
management, regulation and government of its affairs and property, the transfer
of its stock, and the transaction of its stockholders.
9. Shall have power to wind up and dissolve itself, or be wound up or
dissolved.
10. Shall have power to adopt and use a common seal or stamp, and alter
the same at pleasure. The use of a seal or stamp by the Corporation on any
corporate documents is not necessary. The Corporation may use a seal or stamp,
if it desires, but such use or nonuse shall not in Any way affect the legality
of the document.
11. Shall have power to borrow money and contract debts when necessary
for the transaction of its business, or for the exercise of its corporate
rights, privileges or franchises, or for any other lawful purpose of its
incorporation; to issue bonds, promissory notes, bills of exchange, debentures,
and other obligations and evidences of indebtedness, payable at a specified
time or times, or payable upon the happening of a specified event or events,
whether secures by mortgage, pledge, or otherwise, or unsecured, for money
borrowed, or in payment for property purchased, or acquired, or for any other
lawful object.
12. Shall have power to guarantee, purchase, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of the shares of the capital
stock of, or any bonds, securities, or evidences of the indebtedness created by,
any corporation or corporations of the State of Nevada, or any other state of
government, and, while owners of such stock, bonds, securities or evidences of
indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
13. Shall have power to purchase, hold, sell and transfer shares of its
own capital stock, and use therefor its capital, capital surplus, or other
property or fund.
14. Shall have power to conduct business, have one or more offices, and
holds purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and any foreign
countries.
15. Shall have power to do all and everything necessary and proper for
the accomplishment of the objects enumerated in its certificate or Articles of
Incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry an any
lawful business necessary or incidental to the attainment of the objects of the
Corporation whether or not such business is similar in nature to the objects set
forth in the certificate or Articles of Incorporation of the Corporation, or any
amendment thereof.
<PAGE>
16. Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
17. Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities.
ARTICLE IV
That the total number of voting common stock authorized that may be used by
Corporation is One Hundred Million (100,000,000) shares of stock with a par
value of ($.001) per share and no other class of common stock shall be
authorized. Each of said shares shall have equal voting rights, shall not have
cumulative voting rights, and said shares may be issued by the Corporation from
time to time upon such terms and conditions and for such consideration as may be
determined by the Board of Directors.
The total number of voting preferred stock authorized that may be issued by
the Corporation is Ten Million (10,000,000) shares of Preferred Stock with par
value of one cent ($.01) per share and voting rights, preferences, liquidation
rights, conversion rights, dividend rights and other privileges as may be
determined by the board of Directors from time to time, depending upon the
consideration to be received by the Corporation on each such occasion.
ARTICLE V
The governing board of this Corporation shall be known as Directors, and
the number of Directors may from time to time be increased or decreased in such
manner provided that the number of Directors shall not be reduced to less than
three (3), except that in cases where all the shares of the corporation are
unissued or owned beneficially and of record by either one or two stockholders,
the number of Directors may be less than three (3), but not less than the number
of stockholders.
ARTICLE VI
The capital stock, after the amount of the subscription price, or par
value, has been paid in, shall not be subject to assessment or pay the debts of
the Corporation.
ARTICLE VII
The Corporation is to have perpetual existence.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
<PAGE>
Subject to the By-laws, if any adopted by the Stockholders, to make, alter
or amend the Bylaws of the Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate one (1)
or more committees, each committee to consist of one or more of the Directors of
the Corporation, which, to the extent provided in the resolution, or in the
By-laws of the Corporation, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation.
Such committee, or committees, shall have such name, or names, as may be stated
in the By-laws of the Corporation or as may be determined from time to time by
resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the Stockholders holding
stock entitles them to exercise at least a majority of the voting power given at
a Stockholders meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the Board of Directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its Board of Directors deems expedient and for the best
interests of the Corporation.
ARTICLE IX
No shareholder shall be entitled as a matter of right to subscribe for or
receive additional shares of any class of stock of the Corporation, whether now
or hereafter authorized, or any bonds, debentures or securities convertible into
stock, but such additional shares of stock or other securities convertible into
stock may be issued or disposed of by the Board of Directors to such persons and
on such terms as in its discretion it shall deem advisable.
ARTICLE X
This Corporation reserves the right to amend, alter, change or repeal any
provision contained in the Articles of Incorporation, in the manner now or
hereafter prescribed by statute, or by the Articles of Incorporation, and all
rights conferred upon Stockholders herein are granted subject to this
reservation.
WE, THE UNDERSIGNED, being the President and Secretary of the Corporation, do
hereby certify that the foregoing Restated Articles of Incorporation was adopted
by the Board of Directors of the Corporation on December 22, 1999 and correctly
sets forth the text of the Articles of Incorporation of the Corporation as
amended as of the date hereof and that we have been authorized by the Board of
Directors of the Corporation to execute this Restated Articles of Incorporation.
/s/ Marcia Allen
Marcia Allen, President
/s/ Anatasia Cronin
Anatasia Cronin, Secretary
BYLAWS
OF
ILIVE, INC.
A NEVADA CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office for the transaction
of business of the Corporation is hereby fixed and located at 242 N. Canon
Drive, 3rd Floor, Beverly Hills, California. The location may be changed by the
Board of Directors in their discretion, and additional offices may be
established and maintained at such other place or places, either within or
outside of Nevada, as the Board of Directors may from time to time designate.
Section 2. Other Offices. Branch or subordinate offices may at any
time be established by the Board of Directors at any place or places where the
Corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. Powers, Standard of Care.
A. Powers: Subject to the provisions of the Nevada Corporations Code
(hereinafter the "Act"), and subject to any limitations in the Articles of
Incorporation of the Corporation relating to action required to be approved by
the Shareholders, or by the outstanding shares, the business and affairs of the
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors. The Board of Directors may
delegate the management of the day-to-day operation of the business of the
Corporation to a management company or other persons, provided that the business
and affairs of the Corporation shall be managed, and all corporate powers shall
be exercised, under the ultimate direction of the Board.
B. Standard of Care; Liability:
(i) Each Director shall exercise such powers and otherwise perform such
duties, in good faith, in the matters such Director believes to be in the best
interests of the Corporation, and with such care, including reasonable inquiry,
using ordinary prudence, as a person in a like position would use under similar
circumstances.
<PAGE>
(ii) In performing the duties of a Director, a Director shall be
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, in which case prepared or
presented by:
(a) One or more officers or employees of the Corporation whom the
Director believes to be reliable and competent in the matters presented,
(b) Counsel, independent accountants or other persons as to which the
Director believes to be within such person's professional or expert competence,
or
(c) A Committee of the Board upon which the Director does not serve, as
to matters within its designated authority, which committee the Director
believes to merit confidence, so long as in any such case the Director acts in
good faith, after reasonable inquiry when the need therefor is indicated by the
circumstances and without knowledge that would cause such reliance to be
unwarranted.
C. Exception for Close Corporation. Notwithstanding the provisions of
Section 1 of this Article, in the event that the Corporation shall elect to
become a close corporation, its Shareholders may enter into a Shareholders'
Agreement. Said Agreement may provide for the exercise of corporate powers and
the management of the business and affairs of the Corporation by the
Shareholders; provided, however, such agreement shall, to the extent and so long
as the discretion or powers of the Board of Directors in its management of
corporate affairs is controlled by such agreement, impose upon each Shareholder
who is a party hereof, liability for managerial acts performed or omitted by
such person pursuant thereto otherwise imposed upon Directors; and the Directors
shall be relieved to that extent from such liability.
Section 2. Number and Qualification of Directors. The authorized
number of Directors of the Corporation shall be at least one (1) but not more
than five (5) until changed by a duly adopted amendment to the Articles of
Incorporation or by an amendment to this Section 2 of Article II of these
Bylaws, adopted by the vote or written consent of a majority of the members of
the then existing Board of Directors or by the vote or written consent of a
majority of the Shareholders entitled to exercise majority voting power as
provided in the Act.
Section 3. Election and Term of Office of Directors. Directors shall
be elected at each annual meeting of the Shareholders to hold office until the
next annual meeting. Each Director, including a Director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 4. Vacancies.
<PAGE>
A. Vacancies on the Board of Directors may be filled by a majority of
the re-maining Directors, though less than a quorum, or by a sole remaining
Director, except that a vacancy created by the removal of a Director by the vote
or written consent of the Shareholders, or by a court order, may be filled only
by the vote of a majority of the shares entitled to vote, represented at a duly
held meeting at which a quorum is present, or by the written consent of holders
of the majority of the outstanding shares entitled to vote. Each Director so
elected shall hold office until the next annual meeting of the Shareholders and
until a successor has been elected and qualified.
B. A vacancy or vacancies on the Board of Directors shall be deemed to
exist in the event of the death, resignation or removal of any Director, or if
the Board of Directors by resolution declares vacant the office of a Director
who has been declared of unsound mind by an order of court or convicted of a
felony.
C. The Shareholders may elect a Director or Directors at any time to
fill any vacancy or vacancies not filled by the Directors, but any such election
by written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
D. Any Director may resign, effective on giving written notice to the
Chairman of the Board, the President, the Secretary, or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a Director is effective at a future time, the
Board of Directors may, prior to the effective date of a Director's resignation,
elect a successor to take office when the resignation becomes effective.
E. No reduction of the authorized number of Directors shall have the
effect of removing any Director before that Director's term of office expires.
Section 5. Removal of Directors.
A. The entire Board of Directors, or any individual Director, may be
removed from office as provided by the Act. In such case, the remaining
members, if any, of the Board of Directors may elect a successor Director to
fill such vacancy for the remaining unexpired term of the Director so removed.
B. No Director may be removed (unless the entire Board is removed) when
the votes cast against removal or not consenting in writing to such removal
would be sufficient to elect such Director if voted cumulatively at an election
at which the same total number of votes were cast (or, if such action is taken
by written consent, all shares entitled to vote, were voted) and the entire
num-ber of Directors authorized at the time of the Directors most recent
election were then being elected; and when by the provisions of the Articles of
Incorporation the holders of the shares of any class or series voting as a
class or series are entitled to elect one or more Directors, any Director so
elected may be removed only by the applicable vote of the holders of the shares
of that class or series.
<PAGE>
Section 6. Place of Meetings. Regular meetings of the Board of
Directors shall be held at any place within or outside the state that has been
designated from time to time by resolution of the Board. In the absence of such
resolution, regular meetings shall be held at the principal executive office of
the Corporation. Special meetings of the Board shall be held at any place
within or outside the state that has been designated in the notice of the
meeting, or, if not stated in the notice or there is no notice, at the principal
executive office of the Corporation. Any meeting, regular or special, may be
held by conference telephone or similar communication equipment, so long as all
Directors participating in such meeting can hear one another, and all such
Directors shall be deemed to have been present in person at such meeting.
Section 7. Annual Meetings. Immediately following each annual meeting
of Shareholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, the election of officers and the transaction of other
business. Notice of this meeting shall not be required. Minutes of any meeting
of the Board, or any committee thereof, shall be maintained as required by the
Act by the Secretary or other officer designated for that purpose.
Section 8. Other Regular Meetings.
A. Other regular meetings of the Board of Directors shall be held
without call at such time as shall from time to time be fixed by the Board of
Directors. Such regular meetings may be held without notice, provided the time
and place of such meetings has been fixed by the Board of Directors, and further
provided the notice of any change in the time of such meeting shall be given to
all the Directors. Notice of a change in the determination of the time shall be
given to each Director in the same manner as notice for such special meetings of
the Board of Directors.
B. If said day falls upon a holiday, such meetings shall be held on the
next succeeding day thereafter.
Section 9. Special Meetings/Notices.
A. Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Chairman of the Board or the President
or any Vice President or the Secretary or any two Directors.
B. Notice of the time and place for special meetings shall be delivered
personally or by telephone to each Director or sent by first class mail or
telegram, charges prepaid, addressed to each Director at his or her address as
it is shown in the records of the Corporation. In case such notice is mailed,
it shall be deposited in the United States mail at least four days prior to the
time of holding the meeting. In case such notice is delivered personally, or by
telephone or telegram, it shall be delivered personally or be telephone or to
the telegram company at least 48 hours prior to the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
to either the Director or to a person at the office of the Director who the
person giving the notice has reason to believe will promptly communicate same to
the Director. The notice need not specify the purpose of the meeting, nor the
place, if the meeting is to be held at the principal executive office of the
Corporation.
<PAGE>
Section 10. Waiver of Notice.
A. The transactions of any meeting of the Board of Directors, however
called, noticed, or wherever held, shall be as valid as though had at a meeting
duly held after the regular call and notice if a quorum be present and if,
either before or after the meeting, each of the Directors not present signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes thereof. Waivers of notice or consent need not specify the purposes of
the meeting. All such waivers, consents and approvals shall be filed with the
corporate records or made part of the minutes of the meeting.
B. Notice of a meeting shall also be deemed given to any Director who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such Director.
Section 11. Quorums. A majority of the authorized number of Directors
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 12 of this Article II. Every act or decision done or made
by a majority of the Directors present at a meeting duly held at which a quorum
was present shall be regarded as the act of the Board of Directors, subject to
the provisions of the Act. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of Directors, if
any action taken is approved by at least a majority of the required quorum for
that meeting.
Section 12. Adjournment. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time and place.
Section 13. Notice of Adjournment. Notice of the time and place of the
holding of an adjourned meeting need not be given, unless the meeting is
adjourned for more than 24 hours, in which case notice of such time and place
shall be given prior to the time of the adjourned meeting to the Directors who
were not present at the time of the adjournment.
Section 14. Board of Directors Provided by Articles or Bylaws. In the
event only one Director is required by the Bylaws or the Articles of
Incorporation, then any reference herein to notices, waivers, consents, meetings
or other actions by a majority or quorum of the Board of Directors shall be
deemed or referred as such notice, waiver, etc., by the sole Director, who shall
have all rights and duties and shall be entitled to exercise all of the powers
and shall assume all the responsibilities otherwise herein described, as given
to the Board of Directors.
Section 15. Directors Action by Unanimous Written Consent. Any action
required or permitted to be taken by the Board of Directors may be taken without
a meeting and with the same force and effect as if taken by a unanimous vote of
Directors, if authorized by a writing signed individually or collectively by all
members of the Board of Directors. Such consent shall be filed with the regular
minutes of the Board of Directors.
<PAGE>
Section 16. Compensation of Directors. By resolution of the Board of
Directors, the Directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation thereofor.
Section 17. Committees. Committees of the Board of Directors may be
appointed by resolution passed by a majority of the whole Board. Committees
shall be composed of two or more members of the Board of Directors. The Board
may designate one or more Directors as alternate members of any committee, who
may replace any absent member at any meeting of the committee. Committees shall
have such powers as those held by the Board of Directors as may be expressly
delegated to it by resolution of the Board of Directors, except those powers
expressly made non-delegable by the Act.
Section 18. Meetings and Action of Committees. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article II, Sections 6, 8, 9, 10, 11, 12, 13 and 15, with such
changes in the context of those Sections as are necessary to substitute the
committee and its members for the Board of Directors and its members, except
that the time of the regular meetings of the committees may be determined by
resolution of the Board of Directors as well as the committee, and special
meetings of committees may also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws.
Section 19. Advisory Directors. The Board of Directors from time to
time may elect one or more persons to be Advisory Directors, who shall not by
such appointment be members of the Board of Directors. Advisory Directors shall
be available from time to time to perform special assignments specified by the
President, to attend meetings of the Board of Directors upon invitation and to
furnish consultation to the Board of Directors. The period during which the
title shall be held may be prescribed by the Board of Directors. If no period
is prescribed, the title shall be held at the pleasure of the Board of
Directors.
ARTICLE III
OFFICERS
Section 1. Officers. The principal officers of the Corporation shall
be a President, a Vice President, a Secretary, and a Chief Financial Officer who
may also be called Treasurer. The Corporation may also have, at the discretion
of the Board of Directors, a Chairman of the Board, one or more Vice Presidents,
one or more Assistant Secretaries, one or more Assistant Treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
3 of this Article III. Any number of offices may be held by the same person.
Section 2. Election of Officers. The principal officers of the
Corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be chosen by the
Board of Directors, and each shall serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment.
<PAGE>
Section 3. Subordinate Officers, Etc. The Board of Directors may
appoint such other officers as the business of the Corporation may require, each
of whom shall hold office for such period, have such authority and perform such
duties as are provided in the Bylaws or as the Board of Directors may from time
to time determine.
Section 4. Removal and Resignation of Officers.
A. Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by a
majority of the Directors at that time in office, at any regular or special
meeting of the Board of Directors, or, except in the case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
B. Any officer may resign at any time by giving written notice to the
Board of Directors. Any resignation shall take effect on the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Corporation under any contract to which
the officer is a party.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for regular appointments to that office.
Section 6. Chairman of the Board.
A. The Chairman of the Board, if such an officer be elected, shall, if
present, preside at the meetings of the Board of Directors and exercise and
perform such other powers and duties as may, from time to time, be assigned by
the Board of Directors or prescribed by the Bylaws. If there is no President,
the Chairman of the Board shall, in addition, be the Chief Executive Officer of
the Corporation and shall have the powers and duties prescribed in Section 7 of
this Article III.
Section 7. President and Chief Executive Officer. Subject to such
supervisory powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, if there is such an officer, the President along with the
Chief Executive Officer of the Corporation shall, subject to the control of the
Board of Directors, have general supervision, discretion and control of the
business and officers of the Corporation. The President or the Chief Executive
Officer shall preside at all meetings of the Shareholders and, in the absence of
the Chairman of the Board, or if there be none, at all meetings of the Board of
Directors. The President and Chief Executive Officer, jointly, shall have the
general powers and duties of management usually vested in the office of
President and Chief Executive Officer of a corporation, each shall be ex officio
a member of all the standing committees, including the Executive Committee, if
any, and shall have such other powers and duties as may be prescribed by the
Board of Directors or the Bylaws.
<PAGE>
Section 8. Vice President. In the absence or disability of the
President or Chief Executive Officer, the Vice Presidents, if any, in order of
their rank as fixed by the Board of Directors, or if not ranked, the Vice
President designated by the Board of Directors, shall perform all the duties of
the President or Chief Executive Officer, as the case may be, and when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the President or the Chief Executive Officer. The Vice Presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them, respectively, by the Board of Directors or the Bylaws, the
President, the Chief Executive Officer, or the Chairman of the Board.
Section 9. Secretary.
A. The Secretary shall keep, or cause to be kept, a book of minutes of
all meetings of the Board of Directors and Shareholders at the principal office
of the Corporation or such other place as the Board of Directors may order. The
minutes shall include the time and place of holding the meeting, whether regular
or special, and if a special meeting, how authorized, the notice thereof given,
and the names of those present at Directors' and committee meetings, the number
of shares present or represented at Shareholders' meetings and the proceedings
thereof.
B. The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation or at the office of the Corporation's transfer agent,
a share register, or duplicate share register, showing the names of the
Shareholders and their addresses; the number and classes or shares held by each;
the number and date of certificates issued for the same; and the number and date
of cancellation of every certificate surrendered for cancellation.
C. The Secretary shall give, or cause to be given, notice of all the
meetings of the Shareholders and of the Board of Directors required by the
Bylaws or by law to be given. The Secretary shall keep the seal of the
Corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 10. Chief Financial Officer or Treasurer.
A. The Chief Financial Officer shall keep and maintain, or cause to be
kept and maintained, in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares issued. The books of account shall, at all reasonable times, be open to
inspection by any Director.
<PAGE>
B. The Chief Financial Officer shall deposit all monies and other
valuables in the name and to the credit of the Corporation with such
depositaries as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, shall render to the President and Directors, whenever
they request it, an account of all of the transactions of the Chief Financial
Officer and of the financial condition of the Corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the Bylaws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings. Meetings of the Shareholders shall be
held at any place within or outside the state of Nevada designated by the Board
of Directors. In the absence of any such designation, Shareholders' meetings
shall be held at the principal executive office of the Corporation.
Section 2. Annual Meeting.
A. The annual meeting of the Shareholders shall be held, each year, as
follows:
Time of Meeting: 10:00 A.M.
Date of Meeting: First Tuesday in April
B. If this day shall be a legal holiday, then the meeting shall be held
on the next succeeding business day, at the same time. At the annual meeting,
the Shareholders shall elect a Board of Directors, consider reports of the
affairs of the Corporation and transact such other business as may be properly
brought before the meeting.
C. If the above date is inconvenient, the annual meeting of
Shareholders shall be held each year on a date and at a time designated by the
Board of Directors within ninety days of the above date upon proper notice to
all Shareholders.
Section 3. Special Meetings.
A. Special meetings of the Shareholders for any purpose or purposes
whatsoever, may be called at any time by the Board of Directors, the Chairman of
the Board, the President, or by one or more Shareholders holding shares in the
aggregate entitled to cast not less than 10% of the votes at any such meeting.
Except as provided in paragraph B below of this Section 3, notice shall be given
as for the annual meeting.
<PAGE>
B. If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the Chairman of the Board, the President, any
Vice President or the Secretary of the Corporation. The officer receiving such
request shall forthwith cause notice to be given to the Shareholders entitled to
vote, in accordance with the provisions of Sections 4 and 5 of this Article,
indicating that a meeting will be held at the time requested by the person or
persons calling the meeting, not less than 35 nor more than 60 days after the
receipt of the request. If the notice is not given within 20 days after receipt
of the request, the person or persons requesting the meeting may give the notice
in the manner provided in these Bylaws. Nothing contained in this paragraph of
this Section shall be construed as limiting, fixing or affecting the time when a
meeting of Shareholders called by action of the Board of Directors may be held.
Section 4. Notice of Meetings - Reports.
A. Notice of any Shareholders meetings, annual or special, shall be
given in writing not less than 10 days nor more than 60 days before the date of
the meeting to Shareholders entitled to vote thereat by the Secretary or the
Assistant Secretary, or if there be no such officer, or in the case of said
Secretary or Assistant Secretary's neglect or refusal, by any Director or
Shareholder.
B. Such notices or any reports shall be given personally or by mail or
other means of written communication as provided in the Act and shall be sent to
the Shareholder's address appearing on the books of the Corporation, or supplied
by the Shareholder to the Corporation for the purpose of notice, and in the
absence thereof, as provided in the Act by posting notice at a place where the
principal executive office of the Corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located.
C. Notice of any meeting of Shareholders shall specify the place, the
day and the hour of meeting, and (i) in case of a special meeting, the general
nature of the business to be transacted and that no other business may be
transacted, or (ii) in the case of an annual meeting, those matters which the
Board of Directors, at the date of mailing of notice, intends to present for
action by the Shareholders. At any meetings where Directors are elected, notice
shall include the names of the nominees, if any, intended at the date of notice
to be presented for election.
D. Notice shall be deemed given at the time it is delivered personally
or deposited in the mail or sent by other means of written communication. The
officer giving such notice or report shall prepare and file in the minute book
of the Corporation an affidavit or declaration thereof.
<PAGE>
E. If action is proposed to be taken at any meeting for approval of (i)
contracts or transactions in which a Director has a direct or indirect financial
interest, (ii) an amendment to the Articles of Incorporation, (iii) a
reorganization of the Corporation, (iv) dissolution of the Corporation, or (v) a
distribution to preferred Shareholders, the notice shall also state the general
nature of such proposal.
Section 5. Quorum.
A. The holders of a majority of the shares entitled to vote at a
Shareholders' meeting, present in person, or represented by proxy, shall
constitute a quorum at all meetings of the Shareholders for the transaction of
business except as otherwise provided by the Act or by these Bylaws.
B. The Shareholders present at a duly called or held meeting at which a
quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by a majority
of the shares required to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof.
A. Any Shareholders' meeting, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at such meeting, either in person or by
proxy, but in the absence of a quorum, no other business may be transacted at
such meeting.
B. When any meeting of Shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than 45 days from the date set for
the original meeting, in which case the Board of Directors shall set a new
record date. Notice of any adjourned meeting shall be given to each Shareholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Section 4 of this Article. At any adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting.
Section 7. Waiver or Consent by Absent Shareholders.
A. The transactions of any meeting of Shareholders, either annual or
special, however called and noticed, shall be valid as though had at a meeting
duly held after regular call and notice, if a quorum be present either in person
or by proxy, and if, either before or after the meeting, each of the
Shareholders entitled to vote, not present in person or by proxy, sign a written
waiver of notice, or a consent to the holding of such meeting or an approval of
the minutes thereof.
<PAGE>
B. The waiver of notice or consent need not specify either the business
to be transacted or the purpose of any regular or special meeting of
Shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in Section E of Section 4 of this
Article, the waiver of notice or consent shall state the general nature of such
proposal. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
C. Attendance of a person at a meeting shall also constitute a waiver
of notice of such meeting, except when the person objects, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice. A Shareholder or Shareholders of the Corporation holding at least
5% in the aggregate of the outstanding voting shares of the Corporation may (i)
inspect, and copy the records of Shareholders' names and addresses and
shareholdings during usual business hours upon five days prior written demand
upon the Corporation, and/or (ii) obtain from the transfer agent by paying such
transfer agent's usual charges for such a list, a list of the Shareholders'
names and addresses who are entitled to vote for the election of Directors, and
their shareholdings, as of the most recent record date for which such list has
been compiled or as of a date specified by the Shareholders subsequent to the
day of demand. Such list shall be made available by the transfer agent on or
before the later of five days after the demand is received or the date specified
therein as the date as of which the list is to be compiled. The record of
Shareholders shall also be open to inspection upon the written demand of any
Shareholder or holder of a voting trust certificate, at any time during usual
business hours, for a purpose reasonably related to such holder's interest as a
Shareholder or as a holder of a voting trust certificate. Any inspection and
copying under this Section may be made in person or by an agent or attorney of
such Shareholder or holder of a voting trust certificate making such demand.
Section 8. Maintenance and Inspection of Bylaws. The Corporation shall
keep at its principal executive office, or if not in this state, at its
principal business office in this state, the original or a copy of the Bylaws
amended to date, which shall be open to inspection by the Shareholders at all
reasonable times during office hours. If the principal executive office of the
Corporation is outside the state and the Corporation has no principal business
office in this state, the Secretary shall, upon written request of any
Shareholder, furnish to such Shareholder a copy of the Bylaws as amended to
date.
Section 9. Annual Report to Shareholders.
A. Provided the Corporation has 100 Shareholders or less, the Annual
Report to Shareholders referred to in the Act is expressly dispensed with, but
nothing herein shall be interpreted as prohibiting the Board of Directors from
issuing annual or other period reports to Shareholders of the Corporation as
they deem appropriate.
<PAGE>
B. Should the Corporation have 100 or more Shareholders, an Annual
Report to Shareholders must be furnished not later than 120 days after the end
of each fiscal period. The Annual Report to Shareholders shall be sent at least
15 days before the annual meeting of the Shareholders to be held during the next
fiscal year and in the manner specified in Section 4 of Article V of these
Bylaws for giving notice to Shareholders of the Corporation. The Annual Report
to Shareholders shall contain a Balance Sheet as of the end of the fiscal year
and an Income Statement and Statement of Changes in Financial Position for the
fiscal year, accompanied by any report of independent accountants or, if there
is no such report, the certificate of an authorized officer of the Corporation
that the statements were prepared without audit from the books and records of
the Corporation.
Section 10. Financial Statements.
A. A copy of any annual financial statement and any Income Statement of
the Corporation for each quarterly period of each fiscal year, and any
accompanying Balance Sheet of the Corporation as of the end of each such period,
that has been prepared by the Corporation shall be kept on file at the principal
executive office of the Corporation for 12 months from the date of its
execution, and each such statement shall be exhibited at all reasonable times to
any Shareholder demanding an examination of such statement or a copy shall be
made for any such Shareholder.
B. If a Shareholder or Shareholders holding at least 5% of the
outstanding shares of any class of stock of the Corporation make a written
request to the Corporation for an Income Statement of the Corporation for the
three month, six month or nine month period of the then current fiscal year
ended more than 30 days prior to the date of the request, and a Balance Sheet of
the Corporation at the end of such period, the Chief Financial Officer shall
cause such statement to be prepared, if not already prepared, and shall deliver
personally or mail such statement or statements to the person making the request
within 30 days after the receipt of such request. If the Corporation has not
sent to the Shareholders its Annual Report for the last fiscal year, this report
shall likewise be delivered or mailed to such Shareholder or Shareholders within
30 days after such request.
C. The Corporation also shall, upon the written request of any
Shareholder, mail to the Shareholder a copy of the last annual, semi-annual or
quarterly Income Statement which it has prepared and a Balance Sheet as of the
end of such period. This quarterly Income Statement and Balance Sheet referred
to in this Section shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the Corporation or the certificate of
authorized officer of the Corporation such that financial statements were
prepared without audit from the books and records of the Corporation.
<PAGE>
Section 11. Annual Statement of General Information. The Corporation
shall, in a timely manner, in each year, file with the Secretary of State of
Nevada, on the prescribed form, the statement setting forth the authorized
number of Directors, the names and complete business or residence addresses of
all incumbent Directors, the names and complete business or residence addresses
of the Chief Executive Officer, Secretary and Chief Financial Officer, the
street address of its principal executive office or principal business office in
this state and the general type of business constituting the principal business
activity of the Corporation, together with a designation of the agent of the
Corporation for the purpose of the service of process, all in compliance with
the Act.
ARTICLE IX
AMENDMENTS TO BYLAWS
Section 1. Amendment by Shareholders. New Bylaws may be adopted or
these Bylaws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that if the Articles of Incorporation of the Corporation set forth the
number of authorized Directors of the Corporation, the authorized number of
Directors may be changed only by amendment to the Articles of Incorporation.
Section 2. Amendment by Directors. Subject to the rights of the
Shareholders to adopt, amend or repeal the Bylaws, as provided in Section 1 of
this Article IX, and the limitations of the Act, the Board of Directors may
adopt, amend or repeal any of these Bylaws other than an amendment to the Bylaws
changing the authorized number of Directors.
Section 3. Record of Amendments. Whenever an amendment or new Bylaw is
adopted, it shall be copies in the corporate book of Bylaws with the original
Bylaws, in the appropriate place. If any Bylaw is repealed, the fact of repeal
with the date of the meeting at which the repeal was enacted or written assent
was filed shall be stated in the corporate book of Bylaws.
ARTICLE X
MISCELLANEOUS
Section 1. Shareholders' Agreements. Notwithstanding anything
contained in this Article X to the contrary, in the event the Corporation elects
to become a close corporation, an agreement between two or more Shareholders
thereof, if in writing and signed by the parties thereto, may provide that in
exercising any voting rights, the shares held by them shall be voted as provided
therein or in the Act, and may otherwise modify the provisions contained in
Article IV, herein as to Shareholders' meetings and actions.
Section 2. Effect of Shareholders' Agreements. Any Shareholders'
Agreement authorized by the Act, shall only be effective to modify the terms of
these Bylaws if the Corporation elects to become a close corporation with the
appropriate filing of an amendment to its Articles of Incorporation as required
by the Act and shall terminate when the Corporation ceases to be a close
corporation. Any other provisions of the Act or these Bylaws may be altered or
waived thereby, but to the extent they are not so altered or waived, these
Bylaws shall be applicable.
Section 3. Subsidiary Corporations. Shares of the Corporation owned by
a subsidiary shall not be entitled to vote on any matter.
<PAGE>
Section 4. Accounting Year. The accounting year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 5. Form. The corporate seal shall be circular in form, and
shall have inscribed thereon the name of the Corporation, the date of its
incorporation, and the word "Nevada" to indicate the Corporation was
incorporated pursuant to the laws of the State of Nevada.
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, certify that:
1. I am the duly elected and acting secretary of iLive, Inc., a Nevada
corporation; and
2. The foregoing Bylaws, consisting of 15 pages, are the Bylaws of this
Corporation as adopted by the Board of Directors in accordance with the Nevada
Business Corporation Act and that such Bylaws have not been amended and are in
full force and effect.
IN WITNESS WHEREOF, I have subscribed my name and affixed the seal of this
Corporation on September 7, 2000.
/s/ Anastasia Cronin
Anastasia Cronin, Secretary
