Edgar Filing: DREAMLIFE INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ...... to ......

Commission file number 0-15586
-------

DREAMLIFE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE NO. 52-1373960
------------------------------------ ---------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

425 WEST 15TH ST., FLOOR 3R
---------------------------------------------------------------------------
NEW YORK, NEW YORK 10011
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 313-9400

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
common stock, $0.01 par value per share

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the closing sale price of the common stock on
April 12, 2001 as reported on the OTC Bulletin Board, was approximately
$6,310,760. Shares of common stock held by each officer and director and by
each person who owns 5% or more of the outstanding common stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive
determination for other purposes.

As of April 12, 2001, the registrant had outstanding 17,959,955 shares of
common stock.

DOCUMENTS INCORPORATED BY REFERENCE

See Exhibit Index.

DREAMLIFE, INC.

FORM 10-K

TABLE OF CONTENTS

PART I PAGE NO.

Item 1. Business............................................. 4
Item 2. Properties........................................... 12
Item 3. Legal Proceedings.................................... 12
Item 4. Submission of Matters to a Vote of Security Holders.. 12

PART II

Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters.................................. 13
Item 6 Selected Financial Data.............................. 14
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 15
Item 7A Quantitative and Qualitative Disclosure about Market
Risk................................................. 24
Item 8 Financial Statements................................. 24
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................. 24

PART III

Item 10 Directors and Executive Officers of the Registrant... 25
Item 11 Executive Compensation............................... 27
Item 12 Security Ownership of Certain Beneficial Owners and
Management........................................... 34
Item 13 Certain Relationships and Related Transactions....... 36

PART IV

Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.......................................... 38
Signatures........................................... 42

PART I

ITEM 1. BUSINESS

Certain statements in this Annual Report on Form 10-K, including certain
statements contained in "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The words or phrases "can be",
"expects", "may affect", "may depend", "believes", "estimate", "project", and
similar words and phrases are intended to identify such forward-looking
statements. Such forward-looking statements are subject to various known and
unknown risks and uncertainties and dreamlife, inc. ("Dreamlife") cautions you
that any forward-looking information provided by or on behalf of Dreamlife is
not a guarantee of future performance. Dreamlife's actual results could differ
materially from those anticipated by such forward-looking statements due to a
number of factors, some of which are beyond Dreamlife's control, including (i)
the volatile and competitive nature of the Internet industry, (ii) changes in
domestic and foreign economic and market conditions, (iii) the effect of
federal, state and foreign regulation on Dreamlife's business, (iv) the ability
of Dreamlife to attract and maintain relationships with content providers, (v)
intellectual property and other claims, (v) Dreamlife's ability to successfully
implement and execute its acquisition strategy and (vi) Dreamlife's ability to
maintain its relationships with its customers in addition to the risks described
below, as well as those discussed in Dreamlife's other public filings. All such
forward-looking statements are current only as of the date on which such
statements were made. Dreamlife does not undertake any obligation to publicly
update any forward-looking statement to reflect events or circumstances after
the date on which any such statement is made or to reflect the occurrence of
unanticipated events.

"Dreamlife", the Dreamlife logo and "Quick Coach" are service marks of
dreamlife, inc. Other marks are the property of their respective owners.

OVERVIEW

Dreamlife officially launched its web site, WWW.DREAMLIFE.COM, on February
12, 2000. Dreamlife's objective was to build an interactive network for personal
and professional improvement. Dreamlife's web site was designed to enable its
members to reach their individual goals in the most important areas of their
lives, by facilitating a member's ability to assess, define and pursue his or
her dreams through the integration of leading-edge technology, results coaching,
empowerment communities, rewarding courses, educational tools and a powerful
interface with leading experts and peer support.

Pursuant to Dreamlife's initial business model, Dreamlife intended to
harness the potential of the Internet, to engage its users to create
personalized life plans based on their responses to its exclusive "Quick Coach"
feature.

In January 2001, we decided to change our business strategy. The change
came in response to Dreamlife's inability to generate significant revenues under
its initial business model, as well as the increasingly difficult climate that
business to consumer content-oriented sites were facing in the capital markets.
Under the new strategy, we intend to focus on utilizing the Dreamlife website to
provide education, inspiration and training tools for the sales forces of direct
selling companies to be acquired by Dreamlife. In February 2001, we announced
that Dreamlife had entered into a non-binding letter of intent to acquire
Discovery Toys, Inc., a leading direct seller of educational toys, books, games
and software for children. As of the date hereof, this transaction has not been
consummated; however, Dreamlife and Discovery Toys, Inc. have continued to
negotiate a potential business combination. If the transaction is

successfully completed, this will represent the Company's first step in the
implementation of its new strategy. There can be, however, no assurance that
this transaction will be consummated.

INDUSTRY BACKGROUND

INTERNET AND ONLINE COMMERCE

The Internet has emerged as a significant global communications medium,
enabling millions of people to share information and conduct business
electronically and providing advertisers and businesses with an attractive means
of marketing and selling their products and services. International Data
Corporation estimates the number of users accessing the web will increase from
approximately 142 million at the end of 1998 to over 500 million by the end of
2003. According to International Data Corporation, the amount of commerce
conducted over the web will top $1 trillion by 2003. Forrester Research, a
research firm that analyzes the future of technological change and its impact,
estimates that the amount spent on online advertising in the United States is
expected to increase to approximately $22.2 billion by 2004. However, in the
past several months, the near-term potential of the Internet has been questioned
by the financial community, resulting in dramatically reduced valuations for the
entire industry. Whereas formerly, the markets embraced a philosophy of "growth
at any cost", they are now looking for companies to present and achieve a clear
plan to reach profitability in the short-term. This has resulted in a
significant decline in the supply of equity capital for many of these companies
and consequently, a massive shakeout and consolidation of the industry
participants.

DIRECT SELLING INDUSTRY

Direct selling is the sale of goods and services in a face-to-face manner,
away from a fixed retail location. The direct selling industry represented $24.5
billion in U.S. retail sales in 1999, according to the Direct Selling
Association, a leading industry group. The industry employed approximately 10.3
million salespeople in the U.S. in 1999, over 99% of whom worked as independent
contractors. Typically, turnover rates amongst salespeople in the industry are
high. As a result, recruiting new sales people and improving retention rates
among existing salespeople are some of the primary challenges for direct selling
companies.

BUSINESS STRATEGY

Our objective is to acquire direct selling companies and to utilize the
educational and motivational resources of the Dreamlife web site to improve the
retention rates and effectiveness of the sales forces of the acquired companies,
thereby enhancing their profitability.

We believe our success will be dependent on the following key components
of our business plan:

ACQUISITIONS

Dreamlife will need to identify suitable direct selling companies to
acquire. There can be no assurance that Dreamlife will be able to successfully
identify potential acquisition or business combination candidates or, if
identified, that Dreamlife will be able to consummate a transaction with any
acquisition or business combination candidate.

STRONG BRAND RECOGNITION

We believe that building brand recognition of Dreamlife is critical to
attracting potential acquisition and business combination candidates. We plan to
initially target strategic marketing initiatives to establish Dreamlife's brand
positioning within the direct selling industry.

ACTIVE USER BASE

Under our new strategy, we intend to shift the focus of our web site to
address issues relevant to the members of the sales forces of the direct selling
companies we acquire and seek to acquire. We believe that building an active
user base will be critical to improving sales force retention rates and sales
effectiveness. We plan to encourage active usage by the sales people of the
acquired companies through promotions, interactive services, personalization
features, community building, and co-marketing relationships with renowned
experts.

SPONSORSHIP AND ADVERTISING REVENUES

In the long-term, we plan to derive a portion of our revenues from the
sale of sponsorships and advertisements by providing selected advertisers with a
targeted audience that is highly involved with the Dreamlife site. In addition,
these advertisers will have the opportunity to combine on- and offline
promotions to more effectively reach their target audience. Our sponsorship
arrangements will differ from traditional banner advertising in that they will
be designed to achieve broad marketing objectives such as brand promotion,
awareness, product introductions and online research. Although we believe that
this is a significant long-term opportunity, we do not expect to generate
short-term revenues from sponsorship or advertising.

BUSINESS DESCRIPTION

MEMBERSHIP

We believe a large and active membership base is critical to our success.
Most features on our web site are currently restricted to members. Membership is
free and available to Dreamlife visitors who provide us with their name, e-mail
address, zip code and age and choose a member name and password to be used
throughout member-only areas. We intend to shift the focus of our web site to
address issues relevant to the members of the sales force of the direct selling
companies we acquire and seek to acquire. To encourage utilization by sales
people, we will provide the following benefits:

o Access to online courses led by renowned experts, such as
Anthony Robbins;

o Free forums on a variety of subjects, where members can ask
questions, give advice and share thoughts;

o Quick Coach - our unique self-assessment function to create a
personalized life plan;

o "My Journal" - a personalized and confidential online record
to chart progress and growth.

We recognize the importance of maintaining confidentiality of user
information and have a strict privacy policy in effect to protect such
information. Our current privacy policy is set forth on the Dreamlife web site
through our Terms of Service, which is directly linked to the new membership

registration site page. Our current policy is to never sell to any third party
any user's personal identifying information such as his or her name or address,
without the user's written consent. In these instances, our partners have agreed
to be bound by this policy. We do share aggregated user information with third
parties, such as users' zip codes or ages. We also reserve the right to offer
users products and services. We may use information revealed by users and
information built from user behavior to target advertising, content and e-mail.
For example, we may, send e-mail offers to all users from a particular region or
target advertisements to all users who frequent a specific area of the site.

OPERATING INFRASTRUCTURE

Our Internet operating infrastructure has been designed and implemented to
support the delivery of millions of page views a day. Web pages are generated
and delivered in response to end-users requests, by four web servers. Key
attributes of this infrastructure include the ability to support growth,
performance and service availability.

Our servers run on the Microsoft NT operating systems and use Microsoft
Corporation's IIS Web server software.

We maintain all of our production servers at an off-site hosting facility,
Exodus Communications. Our operations are dependent upon Exodus Communications'
ability to protect its infrastructure against damage from fire, hurricanes,
power loss, telecommunications failure, break-ins and other events. Exodus
provides comprehensive facilities management services, including human and
technical monitoring of facilities 24 hours per day, seven days per week. Exodus
Communications provides connectivity for our servers to end-users via the
Internet through multiple connections. Our servers can receive power from
multiple sources and are designed to provide power without interruption.

Our production data is backed up regularly. We keep all of our production
servers behind firewalls for security purposes and do not allow outside access,
at the operating systems level, except via special secure web sites. Strict
password management and physical security measures are followed. Computer
emergency response team alerts are reviewed, and, where appropriate, recommended
action is taken to address security risks and vulnerabilities.

COMPETITION

The market for members, visitors and Internet advertising is new and
rapidly evolving, and competition for members, visitors, advertisers and capital
has been intense and is expected to increase significantly in the future. With
no substantial barriers to entry, we expect that competition will continue to
intensify.

We also compete for advertisers and product revenues with traditional
forms of personal and professional improvement and learning products and
services such as infomercials, offline classes and seminars, books, tapes and
videos.

There has been a proliferation of Internet companies relying on web-based
advertising revenues. Further, many companies have reduced their spending on
Internet advertising, intensifying the competition we face for advertising
revenues. As a result of these unfavorable industry dynamics, the Company
decided to change its strategy as described above. We expect that we will also
face strong competition in the execution of the Company's new strategy, as many
of our current and potential competitors, including other direct selling
companies, have:

o longer operating histories;

o more experience in the direct selling industry;

o significantly greater financial, technical and marketing resources;

o more liquid stock which can be used as a currency to acquire other
companies;

o greater access to debt or equity capital;

o greater name recognition; and

o larger existing customer bases.

Accordingly, there can be no assurance that:

o we will be able to identify and negotiate favorable acquisitions;

o we will be able to effectively compete against other companies for
acquisitions; or

o we will be able to successfully integrate and grow these
acquisitions.

There can be no assurance that we will be able to compete successfully against
our current or future competitors or that competitive pressures faced by us will
not have a material adverse effect on our business, results of operations and
financial condition.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND DOMAIN NAMES

We regard our copyrights, service marks, trademarks, trade names, trade
dress, trade secrets, proprietary technology and similar intellectual property
as critical to our success, and rely on trademark and copyright law, trade
secret protection and confidentiality and/or license agreements with our
employees, customers, independent contractors, partners and others to protect
our proprietary rights. We pursue the registration of our trademarks and service
marks in the United States, and have applied for and obtained registration in
the United States for certain of our trademarks and service marks, including
"Dreamlife", the Dreamlife logo and "QuickCoach." Effective trademark, service
mark, copyright and trade secret protection may not be available in every
country in which our products and services are made available online.

We expect that we may license in the future certain of our proprietary
rights, such as trademarks or copyrighted material, to third parties. While we
will attempt to ensure that the quality of our brand is maintained by these
licensees, there can be no assurance that the licensees will not take actions
that might materially adversely affect the value of our proprietary rights or
reputation, which could have a material adverse effect on our business,
financial condition and results of operations. There can be no assurance that
the steps taken by us to protect our proprietary rights will be adequate or that
third parties will not infringe or misappropriate our copyrights, trademarks,
trade dress and similar proprietary rights. In addition, there can be no
assurance that other parties will not assert claims of infringement of
intellectual property or alter proprietary rights against us.

We have not been, but may be, subject to legal proceedings and claims from
time to time in the ordinary course of our business, including claims of alleged
infringement of patents, trademarks and other intellectual property rights of
third parties by us and our licensees. These claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources. Further, if these claims

are successful, we may be required to change our trademarks, alter our content,
alter our site format and pay financial damages. There can be no assurance that
these changes of trademarks, alteration of content or format or payment of
financial damages will not adversely affect our business, results of operations
and financial condition.

We may be required to obtain licenses from others to refine, develop,
market and deliver new services. There can be no assurance that we will be able
to obtain any license on commercially reasonable terms or at all or that rights
granted pursuant to any licenses will be valid and enforceable.

HUMAN RESOURCES

As of December 31, 2000, we employed 29 full-time employees. Subsequent to
year-end, through a combination of attrition and lay-offs, we reduced our staff
to 9 full-time employees as of March 31, 2001. None of our current employees are
represented by a labor union or is the subject of a collective bargaining
agreement. We believe that relations with our employees are satisfactory.

OUR RECENT COMPANY HISTORY

CHANGE IN BUSINESS

On April 25, 1999, we announced an Internet initiative including plans for
a network to focus on personal and professional improvement. In connection with
this initiative, on May 27, 1999, we acquired related businesses and rights to
related content and intellectual property, contracted for certain co-marketing
and co-promotion activities and raised approximately $15.1 million in net
proceeds in a private placement of equity securities.

On September 16, 1999, we ended our association with our former primary
business when we distributed to holders of our common stock, our interest in
U.S. NeuroSurgical, Inc. ("USN"), then our wholly-owned subsidiary (the
"Spin-Off"). USN owns and operates stereotactic radiosurgery centers using the
Gamma Knife technology. USN is now a separate company no longer owned or
controlled in any way by Dreamlife.

CHANGE IN STRATEGY

On January 31, 2001, our Board of Directors approved a change in the
Company's business strategy. The change was in response to our inability to
generated significant revenues under our current business model, as well as the
increasingly difficult climate that business to consumer content-oriented sites
are facing in the capital markets. Under the new strategy, Dreamlife intends to
identify and acquire direct selling companies. If we are able to acquire one or
more direct selling companies, we intend to focus on utilizing our web site to
provide education, inspiration and training tools for the sales forces of the
direct selling companies.

In February 2001, Dreamlife entered into a non-binding letter of intent to
acquire Discovery Toys, a direct seller of educational toys, books, games and
software for children. The final transaction is subject to customary conditions,
including the successful completion of due diligence, board approval, the
negotiation and execution of a definitive purchase agreement and approval of the
stockholders of Discovery Toys. If the acquisition is completed on the terms
currently contemplated it would be accounted for as a reverse acquisition.

CHANGE IN CONTROL

On May 27, 1999, in connection with our Internet initiative, we acquired
Change Your Life.com, LLC ("CYL") in a transaction accounted for as a reverse
acquisition (the "CYL Transaction"). As a result of the CYL Transaction, members
of CYL obtained voting control of Dreamlife. CYL was formed in April 1999 by
Anthony Robbins ("Robbins") to engage in the development of a web site for
personal and professional improvement. The CYL Transaction was effected pursuant
to the Contribution and Exchange Agreement (the "Exchange Agreement") dated as
of May 20, 1999, among Dreamlife, CYL, Robbins, Robbins Research International
Inc., a corporation controlled by Robbins ("RRI"), and CYL Development Holdings,
LLC ("Development Holdings").

Pursuant to the Exchange Agreement, Dreamlife issued a total of 99,059.338
shares of newly-designated Series A Convertible Preferred Stock ("Series A
Preferred Stock"), to Robbins, RRI and Development Holdings, the members of CYL,
in exchange for all of the membership interests in CYL. The shares of Series A
Preferred Stock converted into an aggregate of 30,708,396 shares of our common
stock on November 4, 1999. Prior to such conversion, the holders of the Series A
Preferred Stock voted on an as converted basis with the holders of our common
stock.

At December 31, 2000, Dreamlife had outstanding 40,368,351 shares of
common stock, of which Robbins and his affiliates owned approximately 57.1%,
Development Holdings owned approximately 19.0% and the holders of our common
stock immediately prior to the CYL Transaction owned approximately 18.1%.

SHARE CONTRIBUTIONS

On February 1, 2001, two of the Company's principal shareholders, Anthony
J. Robbins and his affiliates and CYL Development Holdings, LLC, agreed to
contribute back shares to the Company. As a result of these contributions,
Dreamlife's total number of common shares outstanding have been reduced from
40,368,351 to 17,959,955. Anthony Robbins and his affiliates have contributed
17,031,297 shares to the Company and CYL Development Holdings, LLC has
contributed 5,377,099 shares to the Company. After giving effect to the
contributions, Mr. Robbins and his affiliates own approximately 33.4% of our
outstanding common stock and Development Holdings owns approximately 12.8% of
our outstanding common stock.

AGREEMENT REGARDING THE ELECTION OF DIRECTORS AND OTHER MANAGEMENT ISSUES

In connection with and pursuant to the Exchange Agreement, we amended and
restated our by-laws (the "Restated By-Laws"). The Restated By-Laws require,
among other things, that the following persons be nominated for election as
members of our Board of Directors (the "Board"):

(i) W. Grant Gregory;

(ii) Charles D. Peebler, Jr.;

(iii) Fredric D. Rosen;

(iv) one person selected by the Board as it existed on May 27, 1999, the
date of the closing of the CYL Transaction (the "Old Board");

(v) three persons designated by Robbins (the "Robbins Directors"); and

(vi) the Chief Executive Officer of Dreamlife (the selection of which
Robbins has the right to approve as described below).

Development Holdings, Robbins and RRI (collectively, the "CYL Transaction
Group") agreed with each other and Dreamlife to vote their shares for the
election of W. Grant Gregory, Charles D. Peebler, Jr. and Fredric D. Rosen as
members of the Board in connection with the CYL Transaction. The nominee for
director selected by the Old Board was Peter A. Lund. The three nominees for the
Robbins Directors were Anthony J. Robbins, H. Peter Guber and Bruce L. Stein.

On November 8, 1999, we sent to our stockholders an Information Statement
for the election of the nominees set forth above. On November 18, 1999, the
tendered resignations of the Old Board became effective and the nominees assumed
their positions as directors resulting in an entirely new Board. On March 8,
2000, Mr. Gregory resigned from the Board. On April 16, 2001, Mr. Rosen
resigned from the Board.

Our Restated Bylaws provide that at each subsequent election of directors
and for so long as Robbins or any of his affiliates hold in the aggregate at
least 10% of the outstanding shares of our common stock or common stock
equivalents, the Board shall consist of the following persons:

(i) three persons to be designated by Robbins or his affiliates;

(ii) four persons nominated by a nominating committee consisting of the
directors of Dreamlife (other than the Robbins Directors and the
Chief Executive Officer of Dreamlife) and their respective
successors; and

(iii) the Chief Executive Officer of Dreamlife.

If any director is unable to serve or, once having commenced to serve, is
removed or withdraws from the Board, the replacement of such director on the
Board will be nominated in accordance with the procedures described above.

In addition, the Restated By-Laws provide that during the term of the
Content Provider Agreement and License (the "Content Provider Agreement")
effective as of April 23, 1999, among CYL, Robbins and RRI, Robbins will have
the right to approve the selection of the Chief Executive Officer of Dreamlife
by the Board (the "CEO Approval Right"). The CEO Approval Right will expire if
the entire interest in Dreamlife (or successor thereto) obtained by Robbins and
RRI in connection with the Exchange Agreement is transferred to any other party
on an involuntary basis, e.g., through bankruptcy proceedings or pursuant to a
court order. The Content Provider Agreement may be terminated by any party
thereto (i) after the tenth anniversary of the launch of the web site on which
Robbins content is offered (the "Launch Date") if Dreamlife does not meet
specified financial benchmarks by such time or (ii) after the eleventh
anniversary of the Launch Date if Dreamlife does not meet certain promotional
criteria with respect to the Robbins content. The Content Provider Agreement may
also be terminated if a material term of certain agreements between Dreamlife
and Robbins and RRI is breached without cure or Dreamlife becomes insolvent, is
liquidated, dissolved or the subject of certain bankruptcy proceedings.

The Restated By-Laws also provide that the Board shall be chaired by a
non-executive Chairman of the Board. The Restated By-Laws provide that the
Chairman of the Board shall be Robbins or a person nominated by Robbins from
among Dreamlife's directors provided that Robbins or his affiliates hold at
least 10% of the outstanding shares of common stock or common stock equivalents.
The Chairman of the Board is also required to serve as Chairman of Dreamlife's
Executive Committee. Robbins currently serves as Chairman of the Board and is
Chairman of Dreamlife's Executive Committee.

Robbins, RRI and Development Holdings have agreed with each other and with
Dreamlife pursuant to the Stockholders' Agreement dated May 27, 1999, among such
parties (the "Stockholders' Agreement") that until the earlier of March 31, 2014
and the termination of the Content Provider Agreement, each will vote their
respective shares of capital stock of Dreamlife (i) in the manner recommended by
the Board and (ii) in favor of the election, removal and replacement of
directors as described above. The Stockholders' Agreement also contemplated the
arrangements described above with respect to the election of a Chief Executive
Officer and a Chairman of the Board.

ITEM 2. PROPERTIES

We are headquartered in New York, New York, where we lease approximately
17,000 square feet of space at 425 West 15th Street, Suite 3R. The lease
originally expired on August 31, 2004. In January 2001, we entered into a
Surrender Agreement with the lessor for our office space providing for
termination of our lease no later than July 22, 2001.

ITEM 3. LEGAL PROCEEDINGS

We are not currently subject to any material legal proceedings. We may
from time to time become a party to various legal proceedings arising in the
ordinary course of our business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

In June 2000, a majority of the stockholders voted to approve two
amendments to dreamlife's 1999 Employee Stock Option Plan. The amendments (i)
increased the number of shares reserved for issuance under options granted under
the plan to 6,500,000, and (ii) increased to 2,400,000 the maximum number of
shares of common stock underlying options that can be granted to employees from
their date of hire through the end of the remaining fiscal year.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted on the OTC Bulletin Board under the symbol
"DLIF". The following table sets forth, for the periods indicated, the high and
low bid prices per share of the common stock as reported on the OTC Bulletin
Board. Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.

HIGH LOW
---- ---
1999
----

First Quarter...................... $6.13 $1.94
Second Quarter..................... $18.25 $7.88
Third Quarter...................... $16.88 $11.00
Fourth Quarter..................... $17.13 $11.00

2000
----

First Quarter...................... $18.13 $9.88
Second Quarter..................... $9.88 $3.50
Third Quarter...................... $4.03 $3.50
Fourth Quarter..................... $3.66 $0.94

2001
----

First Quarter...................... $2.50 $0.94

On April 12, 2001, the closing sale price of our common stock on
the OTC Bulletin Board was $0.90 per share. There were 99 holders of record as
of April 12, 2001. We have no outstanding shares of preferred stock as of April
12, 2001.

We have not declared or paid any cash dividends on our common stock and
intend to retain our future earnings, if any, to fund the development and growth
of our business. We do not anticipate paying any cash dividends in the
foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data should be read in conjunction with
"Management's Discussion of Financial Condition and Results of Operations" and
our financial statements and notes to those statements and other financial
information included elsewhere in this Annual Report. The financial statements
included herein have been prepared assuming that the Company will continue as a
going concern. As discussed in Note 2 to the financial statements, the Company
has incurred losses from development stage activities and has a working capital
and stockholders' deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to this matter are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

(in thousands, except share and per share amounts)

APRIL 21, 1999
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
2000 1999
------------ -------------

STATEMENT OF OPERATIONS DATA:
Revenues ................................... $ 61 $ --
Cost of revenues ........................... 48 --
------------ ------------
13 --

OPERATING EXPENSES:
Non-cash compensation expense .............. $ 1,891 $ 8,572
Write-down and amortization of intangible
assets ................................... 5,744 1,386
Advertising and marketing .................. 3,284 --
General and administrative ................. 9,731 5,119
------------ ------------
Total operating expenses ................ 20,650 15,077
------------ ------------
Loss from operations ....................... (20,637) (15,077)
Interest income, net ....................... 228 373
------------ ------------
Net loss ................................... (20,409) (14,704)
Beneficial conversion attributable to
preferred stock ............................ -- 13,617
------------ ------------
Net loss attributable to common stockholders $ (20,409) $ (28,321)
============ ============
Basic and diluted net loss per share .... $ (0.51) $ (1.84)
============ ============
Weighted average shares of common
stock outstanding used in computing
basis and diluted net loss per share .... 40,368,351 15,380,542
============ ============

AS OF DECEMBER AS OF DECEMBER
31, 2000 31, 1999
-------------- --------------
BALANCE SHEET DATA:

Cash and cash equivalents .................. $ 244 $ 10,459
Working capital ............................ (2,918) 9,990
Total assets ............................... 1,661 18,172
Long-term liabilities ...................... 1 73
Stockholders'(deficit) equity .............. (1,567) 16,951

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND NOTES TO THOSE STATEMENTS AND THE OTHER FINANCIAL INFORMATION
APPEARING ELSEWHERE IN THIS ANNUAL REPORT. IN ADDITION TO HISTORICAL
INFORMATION, THE FOLLOWING DISCUSSION AND OTHER PARTS OF THIS ANNUAL REPORT
CONTAIN FORWARD-LOOKING INFORMATION THAT INVOLVES RISKS AND UNCERTAINTIES. THE
FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN PREPARED ASSUMING THAT THE
COMPANY WILL CONTINUE AS A GOING CONCERN. AS DISCUSSED IN NOTE 2 TO THE
FINANCIAL STATEMENTS, THE COMPANY HAS INCURRED LOSSES FROM DEVELOPMENT STAGE
ACTIVITIES AND HAS A WORKING CAPITAL AND STOCKHOLDERS' DEFICIENCY THAT RAISE
SUBSTANTIAL DOUBT ABOUT ITS ABILITY TO CONTINUE AS A GOING CONCERN. MANAGEMENT'S
PLANS IN REGARD TO THIS MATTER ARE ALSO DESCRIBED IN NOTE 2. THE FINANCIAL
STATEMENTS DO NOT INCLUDE ANY ADJUSTMENTS THAT MIGHT RESULT FROM THE OUTCOME OF
THIS UNCERTAINTY.

OVERVIEW

We officially launched our website, WWW.DREAMLIFE.COM, in February 2000.
The site was designed to enable our members to reach personal and professional
goals by assessing, defining and pursuing their aspirations through the use of
technology, coaching, communities, courses, education tools and an interface
with experts and peer support. In January 2001, we decided to change our
business strategy. The change came in response to Dreamlife's inability to
generate significant revenues under its current business model, as well as the
increasingly difficult climate that business to consumer content-oriented sites
are facing in the capital markets. Under the new strategy, we intend to focus on
utilizing the Dreamlife website to provide education, inspiration and training
tools for the sales forces of direct selling companies which Dreamlife seeks to
acquire.

In February 2001, we announced that Dreamlife had entered into a
non-binding letter of intent to acquire Discovery Toys, Inc., a leading direct
seller of educational toys, books, games and software for children. If the
transaction is successfully completed, this will represent the Company's first
step in the implementation of its new strategy. There can be, however, no
assurance that this transaction will be consummated.

If the transaction is not completed or we are unable to secure additional
financing before the end of the second quarter of 2001, we may be forced to
cease operations.

As a result of the following, the discussion and analysis of our financial
condition and results of operations for the period from inception (April 21,
1999) through December 31, 1999 reflect the operations of Dreamlife's Internet
business from the period commencing on April 21, 1999, the date of inception of
CYL (See Notes 1, 3 and 4 to Dreamlife's financial statements):

(i) CYL was the acquiror of Dreamlife for accounting purposes in
the reverse acquisition on May 27, 1999 and, thus, the
financial statements presented are those of CYL;

(ii) Dreamlife completed the Spin-Off, which included the spin-off
of Dreamlife's subsidiary, USN, and, except for certain cash,
all its other business related assets (USN's operations were
treated as discontinued operations of Dreamlife for accounting
purposes as of May 20, 1999, the date the Board approved the
Spin-Off); and

(iii) CYL was formed on April 21, 1999 and had not conducted
significant operations prior to the reverse acquisition on May
27, 1999.

In connection with Dreamlife's acquisition of CYL's Internet business
focusing on personal and professional improvement, Dreamlife completed the
following transactions:

o On May 27, 1999, Dreamlife acquired the right and license to
use (subject to certain limitations) the Robbins name in
connection with CYL's Internet business, all goodwill attached
to the Robbins name and likeness for use in CYL's Internet
business, the existing Internet activities of RRI, the
exclusive license to use RRI trademarks, tradenames, goodwill
attached thereto, and the right to use existing programs,
recordings, videos, CD-ROMs, proprietary software packages,
and seminars owned by RRI in CYL's Internet business as well
as various URLs, an online self-help pilot program and a
business plan. See Note 3 to our financial statements.

o On May 27, 1999, Dreamlife acquired Concept Development, Inc.,
which was formed in September 1996 to provide online
general-interest continuing education courses. See Note
4 to our financial statements.

o On May 27, 1999, Dreamlife entered into a Marketing and
License Agreement with The Learning Annex, a leading provider
of continuing education courses in five cities in the United
States and Canada, for the exclusive online use of its
intellectual property and sale of certain of its merchandise
over the Internet and for certain co-marketing and
co-promotion activities. See Note 4 to our financial
statements.

o On May 27, 1999, Dreamlife obtained an option to acquire The
Learning Annex. See Note 4 to our financial statements.

o On May 27, 1999, Dreamlife completed a private placement
resulting in net proceeds to us of approximately $15.1
million. See Note 4 to our financial statements.

PLAN OF OPERATION

accounted for as a reverse acquisition. If the transaction is successfully
completed, this will represent the Company's first step in the implementation of
its new strategy. There can be, however, no assurance that this transaction will
be consummated.

If the transaction is not completed or we are unable to secure additional
financing before the end of the second quarter of 2001, we may be forced to
cease operations.

As described above, in May 1999, Dreamlife changed its business to a
network to focus on personal and professional improvement from that of USN,
which provided access to stereotactic radiosurgery centers using the Gamma Knife
technology.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 AND THE PERIOD APRIL 21, 1999 (INCEPTION) THROUGH
DECEMBER 31, 1999

REVENUES

We began to generate an immaterial amount of revenue during the year ended
December 31, 2000. Revenues for the year 2000 were $61,000 and were primarily a
result of the sale of online courses to our users. As we launched our website in
February 2000, we did not generate any revenue in 1999. Costs of revenues were
$48,000 for the twelve months ended December 31, 2000 and are comprised of
revenue share amounts due to our content providers and service fees due to our
digital commerce service provider.

INTEREST INCOME

We earned interest of approximately $243,000 on our cash balances for the
year ended December 31, 2000 compared to $373,000 for the period from April 21,
1999 (inception) through December 31, 1999. The decline is a result of a decline
in the Company's average cash balances.

EXPENSES

Operating expenses for the year ended December 31, 2000 totaled $20.7
million, of which $7.6 million related to non-cash items including $1.9 million
of compensation expense for compensatory stock options granted to our employees
and directors and $5.7 million related to the write-down and amortization of
intangible assets acquired in the Concept Development and The Learning Annex
transactions (see Note 4 to Dreamlife's financial statements). The remaining
$13.1 million of expenses primarily consisted of expenses relating to
advertising and marketing, internal salaries, development of our website, and
expenses related to the acquisition and development of content. Operating
expenses for the period from inception to December 31, 1999 totaled $15.1
million, of which $10.0 million relates to non-cash items including $8.6 million
of compensation expense for compensatory stock options granted to employees,
directors and consultants of Dreamlife and $1.4 million relates to the
amortization of intangible assets acquired in the Concept Development and The
Learning Annex transactions (see Note 4 to Dreamlife's financial statements).
The remaining $5.1 million of expenses primarily consist of expenses relating to
web site design, legal expenses relating to the CYL transactions and general
corporate matters and expenses related to prospective content acquisitions.

Operating expenses for the year 2000 increased by $5.6 million from $15.1
million for the period from April 21, 1999 (inception) through December 31,
1999. The increase was primarily driven by a full

year of results in the year 2000 versus less than nine months of expenses in
1999, the write-down of intangible assets in the Concept Development and The
Learning Annex transactions, the addition of promotional and marketing
activities and increased staffing levels, partially offset by a decline in
expenses for compensatory stock options.

BENEFICIAL CONVERSION ATTRIBUTABLE TO PREFERRED STOCK

Based on the market price of Dreamlife's common stock on the date of
issuance of our Series B Preferred Stock, the Series B Preferred Stock had a
beneficial conversion feature of $13.6 million, which was recognized as a non
cash charge in loss per share during 1999.

LIQUIDITY AND CAPITAL RESOURCES

We had $244,000 and $10.5 million in cash and cash equivalents at December
31, 2000 and 1999, respectively.

For the year ended December 31, 2000, cash used in operating activities
was $11.1 million , of which internal salaries and benefits expenses totaled
approximately $4.4 million, advertising and promotional expenses totaled $3.0
million, website and content development expenses totaled $1.7 million and other
operating expenses totaled $2.0 million.

For the year ended December 31, 2000, cash used in investing activities
was $0.5 million, which was primarily for the acquisition of property and
equipment.

Cash provided by financing activities was approximately $1.4 million,
consisting of proceeds of $1.5 million from a line of credit with The Chase
Manhattan Bank offset by $0.1 million for payments under capital lease
obligations.

We have received a report from our independent accountants containing an
explanatory paragraph stating that we incurred losses from development stage
activities and have a working capital and stockholders' deficiency that raise
substantial doubt about our ability to continue as a going concern.

We believe that we will need additional financing to meet cash
requirements for our operations, and the availability of such financing when
needed, on terms acceptable to us, or if at all, is uncertain. If we are unable
to raise additional financing or generate sufficient cash flow, we may be unable
to continue as a going concern.

Our financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should we be unable to
continue as a going concern. We believe our ability to continue as a going
concern is dependent upon our ability to generate sufficient cash flow to meet
our obligations on a timely basis, to obtain additional financing or refinancing
as may be required, and ultimately to achieve profitable operations.

We believe that we will continue to incur operating losses through at
least 2001. In October 2000, the Company obtained a $1.5 million line of credit
from The Chase Manhattan Bank. On January 15, 2001, our line of credit with The
Chase Manhattan Bank was increased to $2.0 million and the maturity date was
extended to April 30, 2001. On March 13, 2001, the line of credit was further
increased to $2.25 million. There can be no assurance that we will have
sufficient funds to repay the loan when due.

On April 12, 2001, the Company obtained a $50,000 short-term loan from
an affiliate of CYL Development Holdings, LLC, a 12.8% stockholder, which
expires on April 30, 2001. We expect that we will require additional
financing before the end of the second quarter of 2001. We cannot assure you
that we will be able to secure additional financing or that such financing,
if any, will be available on favorable terms. If we are unable to obtain
additional financing, we may be forced to cease operations.

In December 1999, we entered into a Content License Agreement with
Yahoo! Inc. whereby our content was placed within Yahoo!'s web site for
one year. As of December 31, 2000, under the terms of the Content License
Agreement and a media insertion order, we remain obligated to pay Yahoo!
an additional $229,167, which is included in accrued expenses. The
Company is currently in negotiations with Yahoo! for a settlement of this
obligation.

In April 2000, we entered into a one-year engagement letter with Wit
SoundView Corporation whereby Wit SoundView Corporation and Wit Capital
Corporation will act as our exclusive financial advisors. In connection with
this engagement letter we have agreed to pay a monthly retainer fee and to
compensate Wit SoundView in connection with specified business and financing
transactions involving Dreamlife. We also issued to Wit SoundView a five-year
warrant to purchase 400,000 shares of our common stock at $7.00 per share.

In May 2000, we entered into a Retention and Severance Agreement with Beth
Polish, Dreamlife's then President and Chief Operating Officer, whereby, in
addition to adjustments in stock option compensation, Dreamlife paid to Ms.
Polish a bonus of $50,000 and agreed to pay to Ms. Polish severance in the
amount of $300,000 in semi-monthly installments through May 2001.

In July 2000, we entered into an agreement with America Online, Inc.
whereby we will provide content aimed at small business users to AOL and
Netscape Netcenter for eighteen (18) months, in addition to receiving promotion
across several AOL properties. As of December 31, 2000, we are obligated to pay
America Online $0.5 million through December 2001. We are currently in
negotiations with America Online for a settlement of this obligation.

As of May 2000, we entered into a compensation arrangement with Peter A.
Lund, our new Chief Executive Officer. Under an agreement between Mr. Lund and
Dreamlife, Mr. Lund will receive an annual base salary of $300,000, subject to
change at the discretion of the Board of Directors. The agreement also provides
for a discretionary bonus that may be granted as determined by the Board of
Directors and a guaranteed deferred bonus of up to $3,000,000 payable in a lump
sum on May 22, 2003. The deferred bonus is subject to vesting requirements based
on continued employment and is therefore being expensed over the two-year
vesting period. Mr. Lund also received stock option grants under our 1999 Stock
Option Plan and from a principal shareholder.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities, as amended in June, 2000 by SFAS No. 138."
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. The Company is required to adopt these statements in the
first quarter of 2001. The Company believes the adoption of these statements
will not have a significant effect on its financial statements.

RISK FACTORS THAT MAY AFFECT RESULTS OF OPERATIONS AND FINANCIAL CONDITION

THE INDEPENDENT ACCOUNTANTS' REPORT ON OUR FINANCIAL STATEMENTS
CONTAINS A "GOING CONCERN" QUALIFICATION. We have incurred significant losses
from our operations since inception. As a result of our continued losses and
working capital and stockholders' deficiencies, our independent auditors have
issued their report noting that substantial doubt exists about our ability to
continue as a going concern, referring to Note 2 of our financial statements.
We cannot assure you that we will ever be able to achieve significant
revenues or that our business will ever be profitable.

WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS. We will require
additional financing before the end of the second quarter of 2001. We may not be
able to obtain the financing or obtain it on terms acceptable to us. Without
additional financing, we may be forced to cease operations. In addition, the
success of the Company's new business strategy is dependent on our ability to
complete acquisitions. These acquisitions may require additional financing.

WE MAY NOT BE SUCCESSFUL IN IMPLEMENTING THE NEW STRATEGY. The Company was
not successful in generating revenue in its prior business and no assurance can
be given that the new strategy will be successful. An investor purchasing our
common stock must therefore consider the risks and difficulties frequently
encountered by early stage companies. These risks include our ability to:

o identify and complete appropriate acquisitions;

o successfully integrate completed acquisitions;

o manage the costs of pursuing and completing acquisitions;

o manage the costs associated with our website;

o raise financing to meet the cash needs of the acquired companies;

o achieve profitability and revenue growth in the acquired companies;

o attract, retain and motivate qualified management and other
personnel.

WE LACK REVENUES AND EXPECT SIGNIFICANT CONTINUING LOSSES, WHICH COULD
DECREASE THE VALUE OF YOUR SHARES. Through March 31, 2001, we have not generated
significant revenues from our Internet business and prior to the completion of
acquisitions, we expect to continue to incur significant operating losses. As a
result, we are financing our operations through borrowings. There can be no
assurance that we will be able to repay our loan when due or to borrow
additional money as needed to support our operations.

WE DEPEND ON ANTHONY ROBBINS, OUR CHAIRMAN. We have an agreement with Mr.
Robbins, an internationally recognized leader in peak performance and results
coaching, and Robbins Research International, Inc., a company controlled by Mr.
Robbins, that provides us with content for use on our web site and allows us to
use related intellectual property on our web site.

The agreement with the Robbins group may be terminated

o if, after the tenth anniversary of the launch of the web site on
which Robbins content is offered, we do not meet financial
benchmarks specified in the agreement by such time;

o if, beginning after the eleventh anniversary of the launch date,
Dreamlife does not meet specified promotional criteria on an annual
basis;

o if a material term of specified agreements between Dreamlife and the
Robbins group is breached without cure; or

o if we become insolvent, are liquidated, dissolved, or the subject of
specified bankruptcy proceedings.

The involvement of Anthony Robbins is critical to the success of our
acquisition strategy. If our agreement with the Robbins group is terminated, our
business will be materially adversely affected.

WE WILL RELY, IN PART, ON LICENSED THIRD-PARTY CONTENT FOR USE ON OUR WEB
SITE. We plan to license self-improvement content for our web site in order to
provide a resource to achieve improvements in retention and performance of
salespeople of companies we intend to acquire. If we are unable to obtain
desirable content from our current licensors or from new licensors, it will
affect our ability to acquire high quality direct selling companies.

OUR SUCCESS DEPENDS ON OUR KEY PERSONNEL. Our success is substantially
dependent on the ability and experience of our senior management and other key
personnel, particularly Peter Lund, our Chief Executive Officer, and Anthony
Robbins, our Chairman of the Board and provider of content for use on our web
site. We do not have any employment contracts with members of our senior
management or other key personnel. If one or more members of our management team
become unable or unwilling to continue in their present positions, our business
could be materially harmed.

Our existing senior management team does not have experience in the direct
selling industry. In order to be successful in implementing our new strategy, we
will need to identify acquisition candidates with strong management teams and
motivate those managers to remain with the Company following the completion of
the acquisition. If we are unable to hire additional qualified management, our
growth could be impaired.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS. Dreamlife's success will depend upon our ability to identify and
attract high quality acquisition candidates. Many of our competitors have longer
operating histories, more extensive industry experience, greater brand
recognition and significantly greater financial, marketing and other resources
than we have. If we are unable to successfully compete, our business, operating
results and financial condition would be materially harmed.

WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS. We regard
our trademarks, trade secrets and similar intellectual property as important to
our success. We have applied for the registration of some of our trademarks and
service marks in the United States and in selected foreign jurisdictions. We
have also entered into licensing agreements. However, our efforts to establish
and protect our intellectual property rights may be inadequate to prevent
misappropriation or infringement of our intellectual property rights. If we are
unable to safeguard our intellectual property rights, it could materially harm
our business, operating results and financial condition.

WE MAY INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS. Although we
believe that our use of third-party material on our web site is permitted under
current provisions of copyright law, some aspects of Internet content and
commerce law are not clearly settled. We may therefore be the subject of alleged
infringement claims of the trademarks and other intellectual property rights of
third parties. If we become subject to these types of claims, our business could
be materially harmed, even if we successfully

defend against the claims. In addition, we may be unable to maintain rights to
information we plan to disseminate via the Internet.

WE COULD FACE LIABILITY FOR THE INTERNET CONTENT WE PUBLISH. Because
material may be downloaded from our web site and then distributed to others,
there is potential that claims will be made against Dreamlife for defamation,
negligence, copyright or trademark infringement or other theories based on the
nature and content of such material. Such claims have been brought, and
sometimes successfully pressed, against online services in the past. In
addition, we could be exposed to liability with respect to the material that may
be accessible through our branded products and web site. For example, claims
could be made against Dreamlife if we provide information or advice that results
in harm to a user. Dreamlife's insurance may not cover potential claims of this
type or may not be adequate to cover all costs incurred in defense of potential
claims or to indemnify Dreamlife for all liability that may be imposed. Any
costs or imposition of liability that is not covered by insurance or in excess
of insurance coverage could have a material adverse effect on Dreamlife's
business, operating results and financial condition.

THE PROTECTION OF OUR DOMAIN NAMES IS UNCERTAIN BECAUSE THE REGULATION OF
DOMAIN NAMES IS SUBJECT TO CHANGE. We currently hold various web domain names
relating to our brand, including dreamlife.com, dreamlife.net and dreamlife.org.
The acquisition and maintenance of domain names generally is regulated by
governmental agencies and their designees. The regulation of domain names in the
United States and in foreign countries is expected to change in the near future.
As a result, we may be unable to acquire or maintain relevant domain names in
all countries in which we may conduct business. If our ability to acquire or
maintain domain names is limited, it could materially harm our business,
operating results and financial condition.

WE ARE SUBJECT TO GOVERNMENT REGULATION AND LEGAL LIABILITIES THAT MAY BE
COSTLY AND MAY INTERFERE WITH OUR ABILITY TO CONDUCT BUSINESS ON THE INTERNET.
Laws and regulations directly applicable to online commerce or Internet
communications are becoming more prevalent. These laws and regulations could
expose us to compliance costs and substantial liability, which could materially
harm our business, operating results and financial condition. In addition, the
growth of the Internet, coupled with publicity regarding Internet fraud, may
lead to the enactment of more stringent consumer protection laws. These laws
would also be likely to impose additional burdens on our business.

ONE OF OUR STOCKHOLDERS CURRENTLY OWNS MORE THAN 33% OF OUR VOTING
SECURITIES AND HAS SPECIAL RIGHTS AFFECTING CORPORATE GOVERNANCE; HIS INTERESTS
MAY CONFLICT WITH YOURS. Anthony Robbins, our Chairman of the Board, owns more
than 33% of Dreamlife's voting securities, personally and through Robbins
Research International. Mr. Robbins and Robbins Research International have
agreed in a stockholders' agreement with a stockholder that controls over 12.5%
of the voting stock of Dreamlife, to vote their shares (i) for the
recommendation of the Board on matters submitted to a vote of the stockholders
and (ii) for the election of specified nominees to the Board.

Mr. Robbins has designated three of the six current members of the Board
out of the contemplated eight members of the Board pursuant to the stockholders'
agreement and Dreamlife's bylaws. He has also agreed with Dreamlife and the over
12.5% stockholder on the election of an additional three members. With respect
to directors elected in the future, while Mr. Robbins or any of his affiliates
hold at least 10% of the outstanding shares of common stock or common stock
equivalents of Dreamlife, the stockholders' agreement and Dreamlife's bylaws
provide that the Board shall consist of the following persons:

(i) three persons to be designated by Robbins or his affiliates;

(ii) four persons nominated by a nominating committee consisting of the
directors of Dreamlife (other than the three direct Robbins
designees and the Chief Executive Officer of Dreamlife) and their
respective successors; and

(iii) the Chief Executive Officer of Dreamlife.

In addition, Robbins has the right to approve the Board's selection of a
Chief Executive Officer of Dreamlife during the term of the Content Provider
Agreement and License effective as of April 23, 1999 among Dreamlife, the over
12.5% stockholder, Robbins and Robbins Research International.

Mr. Robbins' interests may be different than yours.

WE HAVE ANTI-TAKEOVER PROVISIONS THAT COULD PREVENT AN ACQUISITION OF OUR
BUSINESS AT A PREMIUM PRICE. Some of the provisions of our certificate of
incorporation and bylaws could discourage, delay or prevent an acquisition of
our company at a premium price or at all. For example, these provisions:

o provide, so long as Anthony Robbins or any of his affiliates hold at
least 10% of the outstanding shares of common stock or common stock
equivalents of Dreamlife, that the Board shall consist of (i) three
persons to be designated by Robbins or his affiliates; (ii) four
persons nominated by a nominating committee consisting of the
directors of Dreamlife (other than the three direct Robbins
designees and the Chief Executive Officer of Dreamlife) and their
respective successors; and (iii) the Chief Executive Officer of
Dreamlife;

o provide that at least two-thirds of the Board approve a merger or
consolidation with another entity or a sale of all or substantially
all of our assets, or acquisition by us of all or substantially all
of the stock or assets of another entity;

o authorize the issuance of preferred stock in one or more series; and

o limit the persons who may call special meetings of stockholders.

YOU MAY EXPERIENCE DILUTION OF YOUR SHARES. Initially, the Company plans
to complete acquisitions using primarily equity as an acquisition currency. If
the Company is successful in completing acquisitions in this manner, it will
require the issuance of additional shares, which will result in substantial
dilution of your holdings in Dreamlife.

OUR STOCK PRICE MAY FLUCTUATE, WHICH MAY MAKE IT DIFFICULT TO RESELL YOUR
SHARES AT ATTRACTIVE PRICES. The market price of our common stock may be highly
volatile. The market prices of securities of other technology-based companies,
particularly Internet-related companies, currently are highly volatile. Factors
that could cause volatility in our stock price include:

o fluctuations in our quarterly operating results;

o deviations in our results of operations from the estimates of
securities analysts;

o changes in the market valuations of other Internet companies and
stock market price and volume fluctuations generally;

o economic conditions specific to online commerce and the personal
improvement industry;

o announcements by us or our competitors relating to new services or
technologies, significant acquisitions, strategic relationships,
joint ventures or capital commitments;

o regulatory developments; and

o additions or departures of our key personnel.

SALES OF SHARES ELIGIBLE FOR FUTURE SALE COULD IMPAIR OUR STOCK PRICE. As
of April 12, 2001, there were 17,959,955 shares of our common stock outstanding,
of which 11,544,555 were restricted securities as that term is defined by Rule
144 under the Securities Act of 1933, 1,843,270 of which are registered in an
effective registration statement. Such shares will be eligible for public sale
only if registered under the Securities Act or sold in accordance with Rule 144.
The market price of our common stock could drop due to the sale of a large
number of shares of our common stock, such as the shares sold under the
prospectus or under Rule 144, or the perception that these sales could occur.
These factors could also make it more difficult to raise funds through future
offerings of common stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by Item 8 are included in this
Annual Report beginning on Page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On December 10, 1999, the Board voted to engage KPMG LLP, independent
certified public accountant, to act as our independent certified public
accountant effective as of December 3, 1999, thereby dismissing and replacing
Richard A. Eisner & Company, LLP, which was terminated by letter authorized by
the Board on December 10, 1999.

The former accountant's reports for our two most recent fiscal years did
not contain any adverse opinion or disclaimer of opinion, nor were any such
reports modified as to uncertainty, audit scope or accounting principles. There
have been no disagreements between our former accountant and us with regard to
any matters which would have caused such accountant to make reference to the
subject matter thereof with their report.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

MANAGEMENT

DIRECTOR AND EXECUTIVE OFFICERS

The following table sets forth the director and executive officers of
Dreamlife, their ages and the positions held by them with Dreamlife on March 31,
2001.

NAME AGE POSITION
---- --- --------

Peter A. Lund(a)........... 60 Chief Executive Officer and Director
Philicia G. Levinson....... 36 Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
H. Peter Guber(b).......... 59 Director
Charles D. Peebler, Jr.(c). 64 Director
Anthony J. Robbins(b)...... 41 Director
Bruce L. Stein(b).......... 46 Director

----------
(a) Nominated by the Old Board
(b) Nominated as a Robbins Director
(c) Nominated by the CYL Transaction Group

PETER A. LUND has served as our Chief Executive Officer since May 2000 and
has served as one of our directors since November 1999. Mr. Lund served as
President and Chief Executive Officer, CBS Inc. and President and Chief
Executive Officer, CBS Television and Cable from October 1995 to June 1997.
Prior to that, he had been President, CBS Broadcast Group. Mr. Lund first joined
CBS in 1977, as Vice President of the CBS Owned AM Radio Stations. During the
next 18 years, he held a variety of management positions at CBS. From 1987 to
1990, he was President, Multimedia Entertainment Company, which produced and
distributed television programming for syndication. Mr. Lund is currently a
member of the Board of Directors of Hughes Electronics Corp., Razorfish, Inc.
and Crown Media Holdings, Inc., all publicly held companies. He is also a member
of the Board of Trustees at his alma mater, the University of St. Thomas and in
May 1999, was awarded an honorary Doctor of Laws degree.

PHILICIA G. LEVINSON joined us in August 1999 and currently serves as
Senior Vice President, Chief Financial Officer, Secretary and Treasurer. Prior
to joining Dreamlife, Ms. Levinson was Senior Vice President, Chief Financial
Officer and Secretary of Headway Corporate Resources, Inc., a publicly-held
staffing and human resources company from March 1999 through August 1999.
Previously, Ms. Levinson served as Senior Vice President, Director of Finance of
Headway from May 1998 through March 1999, Vice President, Director of Corporate
Development of Headway from April 1995 to May 1998, and Director of Client
Service for Whitehall Associates, a division of Headway, from December 1992 to
April 1995. She also held the position of Secretary of Headway from September
1996 through August 1999. Ms. Levinson received an M.B.A from Harvard Business
School and a B.A. from the University of Virginia.

H. PETER GUBER has served as one of our directors since November 1999. Mr.
Guber has also served as Chairman and Chief Executive Officer of Mandalay
Pictures LLC, an entertainment production company, since March 1998. Mr. Guber
also holds a majority ownership position in, and is an executive

officer of, Mandalay Television, Mandalay E-Media and Mandalay Music, and has a
significant ownership interest in, and is an executive officer of, Mandalay
Sports Entertainment and Mandalay Media Arts. From 1989 to 1995, Mr. Guber was
Chairman and Chief Executive Officer of Sony Pictures Entertainment, after which
he became Chairman and Chief Executive Officer of Mandalay Entertainment through
mid-1998.

CHARLES D. PEEBLER, JR. has served as one of our directors since November
1999. Mr. Peebler recently retired as Chairman Emeritus of True North
Communications Inc., the world's ninth largest advertising agency holding
company. Previously he served as President of True North Communications Inc. and
Chairman and Chief Executive Officer of True North Diversified Companies, a
marketing services wholly-owned subsidiary of True North Communications Inc. He
also served as President and Chief Executive Officer of Bozell, Jacobs, Kenyon &
Eckhardt, Inc. from January 1986 to December 1997, when it was acquired by True
North Communications Inc. Mr. Peebler is currently a director of Valmont
Industries, Inc., the leading manufacturer of mechanized irrigation equipment
for agriculture.

ANTHONY J. ROBBINS has served as one of our directors and our Chairman of
the Board since November 1999. Mr. Robbins has served as Chairman of the Board
of Robbins Research International, Inc., also known as The Anthony Robbins
Companies, since 1983. Mr. Robbins is an internationally recognized leader in
peak performance and results coaching. He is an international best selling
author of five books on peak performance and wealth management, and his
"Personal Power" audio program is the number-one personal and professional
coaching system of all time with more than 30 million tapes being used to
transform lives worldwide. More than two million people have participated in Mr.
Robbins' live seminars; and each year, individuals from over 70 nations have
attended his Mastery University.

BRUCE L. STEIN has served as one of our directors since November 1999.
During 2000 and 2001, Mr. Stein has served as an advisor to Warner Brothers,
United Internet Technologies and Mandalay Entertainment. Since September 1999,
he has served as Chief Executive Officer and Chairman of Radical Communication
Inc. Mr. Stein served as Worldwide President and a director of Mattel Inc. from
August 1996 to March 1999, and Chief Operating Officer of Mattel Inc. from
September 1997 to March 1999. Mr. Stein also served as President and Chief
Executive Officer of SONY Interactive Entertainment from July 1995 to August
1996. Previously, he served as President of the Kenner Products division of
Hasbro, Inc. from January 1987 to July 1994.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Directors, officers and greater than ten
percent stockholders are required by Commission regulation to furnish the
Company with copies of all section 16(a) forms they file.

Based upon a review of filed forms received by the Company and
representations by persons that would be required to file such forms, the
Company believes that all required filings by current executive officers and
directors during the calendar year 2000 have been timely filed, except that
Peter A. Lund, the Company's Chief Executive Officer, reported one transaction
late on a Form 4 filed on August 19, 2000 and Philicia Levinson, the Company's
Chief Financial Officer, reported one transaction late on a Form 5 filed on
April 16, 2001.

ITEM 11. EXECUTIVE COMPENSATION

EMPLOYMENT AGREEMENTS

In connection with the Spin-off, USN assumed the obligations under
the employment agreement between Mr. Gold and Dreamlife.

In May 1999, Dreamlife entered into a three-year employment agreement
with William Zanker pursuant to which Mr. Zanker will be responsible for such
executive responsibilities as shall be assigned to him by Dreamlife's Chief
Operating Officer. Pursuant to the agreement, Mr. Zanker is entitled to
receive an annual base salary of $200,000, subject to increase at the
discretion of the Board. If Mr. Zanker's employment is terminated without
cause, he is entitled to severance compensation in an amount equal to the
employee's base salary for the remainder of the employment term. The
agreement also contains confidentiality and non-competition provisions
prohibiting the employee from competing against Dreamlife and disclosing
trade secrets and other proprietary information.

In May 2000, Dreamlife entered into a Retention and Severance Agreement
with Beth Polish, Dreamlife's then President and Chief Operating Officer (the
"Polish Severance Agreement"), pursuant to which Ms. Polish (a) agreed to
continue in her positions as President and Chief Operating Officer until May 31,
2000; (b) was deemed to have earned her bonus of $50,000, payable on or before
May 26, 2000; (c) benefited from the accelerated vesting of options to purchase
225,000 shares of Common Stock at $9.00 per share (such options and options to
purchase an additional 225,000 shares were part of a grant of options to Ms.
Polish to purchase 1,000,000 shares, of which options to purchase 550,000 will
not vest due to Ms. Polish's resignation); and (d) received a severance payment
of $300,000 to be paid in semi-monthly installments over 12 months. The Polish
Severance Agreement also provides for mutual releases and restrictions on Ms.
Polish's ability to solicit Dreamlife employees, customers and suppliers as well
as restrictions on Ms. Polish's ability to use certain confidential information
gained during her employment with Dreamlife.

In July 2000, Dreamlife entered into an offer letter with Peter A. Lund,
Dreamlife's Chief Executive Officer, that provides for annual base salary to Mr.
Lund of $300,000, subject to change at the discretion of the Board. The
agreement also provides for a discretionary bonus that may be granted as
determined by the Board and a deferred bonus of up to $3,000,000, subject to
vesting requirements, payable in a lump sum on May 22, 2003, the third
anniversary of the start of Mr. Lund's service as Chief Executive Officer. The
deferred bonus vests with respect to 33 1/3% of the full bonus amount on May 22,
2001, the first anniversary of the start of Mr. Lund's service, and an
additional 5.55% of the full bonus amount at the end of each following month
until fully vested. The vesting of the deferred bonus accelerates (a) with
respect to up to 25% of the full bonus amount if a change in control occurs with
respect to Dreamlife and (b) with respect to the remaining unvested portion if
Mr. Lund is terminated other than for cause prior to May 22, 2002. The agreement
also contains confidentiality and non-competition provisions prohibiting Mr.
Lund from competing against Dreamlife and disclosing trade secrets and other
proprietary information. In July 2000, Dreamlife also granted to Mr. Lund a
ten-year non-statutory stock option under Dreamlife's 1999 Employee Stock Option
Plan to purchase up to 2,400,000 shares of Common Stock at $5.20 per share. Such
option will vest, based on continued service

to Dreamlife, as to 800,000 shares on May 22, 2001, and as to an additional
132,000 shares at the end of each following month until such option is fully
vested in June 2002.

As an inducement to Mr. Lund, CYL Development Holdings, LLC, a 12.8%
shareholder of Dreamlife, has granted to Mr. Lund an option to purchase up to
100,000 shares of Dreamlife Common Stock held by CYL Development Holdings, LLC.
Such option is exercisable for a period of five years commencing on May 21, 2000
at an exercise price of $4.75 per share. Dreamlife has granted to Mr. Lund
piggyback registration rights with respect to the resale of the shares
underlying such options.

BOARD COMMITTEES

The compensation committee of the Board reviews and recommends to the
Board the compensation and benefits of all executive officers of Dreamlife,
administers Dreamlife's stock option plans and establishes and reviews general
policies relating to compensation and benefits of employees of Dreamlife. The
compensation committee currently consists of Peter Lund.

The executive committee of the Board consists of Anthony J.
Robbins, Charles D. Peebler, Jr. and Bruce L. Stein.
Mr. Robbins is the Chairman of the Executive Committee.

DIRECTOR COMPENSATION

All directors are entitled to receive reimbursement for traveling costs
and other out-of-pocket expenses incurred in attending Board meetings. Dreamlife
pays each non-employee director a $2,000 fee for each Board meeting attended.

CYL Development Holdings, LLC, a 12.8% shareholder of Dreamlife granted
options to two Board members, Charles D. Peebler, Jr. and Fredric D. Rosen, to
purchase 100,000 shares of Dreamlife Common Stock held by CYL Development
Holdings, LLC. Such options are exercisable for a period of five years
commencing on May 11, 2000 at an exercise price of $4.75 per share.

EXECUTIVE COMPENSATION

The following table sets forth the total compensation paid or accrued for
the years specified below for Dreamlife's Chief Executive Officer and its most
highly compensated executive officer, other than its Chief Executive Officer,
whose salary and bonus for such fiscal year were in excess of $100,000.

SUMMARY COMPENSATION TABLE

NAME AND PRINCIPAL POSITION ANNUAL SALARY ALL OTHER COMPENSATION
--------------------------- ----------------- ------------------------

Peter A. Lund (1)
Chief Executive Officer
2000 .......................................... $184,231

Beth Polish (2)
President and Chief Operating Officer
2000 .......................................... $104,167 $225,000(3)
1999 .......................................... $145,601

Philicia G. Levinson (4)
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
2000 .......................................... $175,000 $ 25,000
1999 .......................................... $ 69,271

----------
(1) Mr. Lund became our Chief Executive Officer in May 2000.
(2) Ms. Polish served as our President and Chief Operating Officer until
May 2000.
(3) Pursuant to Polish Severance Agreement as described above.
(4) Ms. Levinson joined us in August 1999.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth grants of stock options to our former
President and Chief Operating Officer, our most highly compensated executive
officer for the year ended December 31, 2000 and our current Chief Executive
Officer. The potential realizable value is calculated based on the term of the
option at its time of grant. It is calculated assuming that the fair market
value of our common stock on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the appreciated
stock price. These numbers are calculated based on the requirements of the
Securities and Exchange Commission and do not reflect our estimate of future
stock price growth.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
NUMBER OF GRANTED TO RATES OF STOCK PRICE
SECURITIES EMPLOYEES EXERCISE APPRECIATION FOR
UNDERLYING IN FISCAL PRICE PER OPTION TERM
OPTIONS YEAR SHARE EXPIRATION -----------
NAME GRANTED (#) (%)(1) ($/SH) DATE 5%($) 10%($)
---- ----------- ----------- --------- ---------- ----------- -----------

Peter A. Lund ............ 2,400,000 65.1% $ 5.20 07/10/2010 $1,202,715 $9,307,437
100,000(2) 2.7% $ 4.75 05/21/2005 $ 131,234 $ 289,992

Beth Polish .............. -- -- -- -- -- --

Philicia G. Levinson(3)... 116,292 3.2% $ 3.53 8/03/2010 $ 258,168 $ 654,248

---------
(1) Based on options to purchase an aggregate of 3,587,650 shares of common
stock granted by Dreamlife under and outside our 1999 Employee Stock Option
Plan, our 1999 Consultants Stock Option Plan and our 1999 Outside Directors
Stock Option Plan in the year ended December 31, 2000 to employees, consultants
and directors of Dreamlife and options to purchase 100,000 shares granted to
Peter Lund by CYL Development Holdings, LLC, a 12.8% stockholder of Dreamlife
(see Note 2 below).

(2) Mr. Lund received options from CYL Development Holdings, LLC, a 12.8%
stockholder of Dreamlife, to purchase 100,000 shares of Dreamlife Common Stock
held by CYL Development Holdings, LLC. Such option is exercisable for a period
of five years commencing on May 21, 2000.

(3) Board approved options granted to Ms. Levinson consist of 116,292 options at
an exercise price of $3.53 per share, 29,073 of which are currently vested,
29,073 of which vest on August 9, 2001 and 2,422 vest each month thereafter for
twenty-four consecutive months.

FISCAL YEAR END OPTION VALUES

The following table provides certain summary information concerning stock
options held as of December 31, 2000 by our Chief Executive Officer, our former
President and Chief Operating Officer and our most highly compensated executive
officer. No options were exercised during fiscal 2000 by any of the officers,
other than set forth below. The value of unexercised in-the-money options at
fiscal year-end is based on $0.94 per share, the fair market value of the
common stock at December 31, 2000, less the exercise price per share.

NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF SECURITIES EXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END
---------------------------------- ---------------------------
NAME SHARES ACQUIRED VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
ON EXERCISE (#) ($)
--------------- ---

Peter A. Lund................ --- --- 135,000 2,420,000 --- ---
Beth Polish.................. --- --- 750,000 --- --- ---
Philicia G. Levinson......... --- --- 141,573 424,719 --- ---

------------------

STOCK OPTION PLANS

1997 STOCK OPTION PLAN

Officers, directors, consultants and other key personnel of Dreamlife are
eligible for option grants under our 1997 Stock Option Plan (the "1997 Plan"),
which is administered by the Board. The administration of the 1997 Plan may be
delegated to a committee of the Board in the Board's discretion. The 1997 Plan
replaced the expired 1986 Stock Option Plans. There are no options outstanding
under the 1986 Stock Option Plan.

The 1997 Plan authorizes the granting of incentive stock options ("ISOs")
and non-qualified stock options ("NSOs") to purchase up to 750,000 shares of
common stock at a price not less than 100% (110% in the case of ISO's granted a
person who owns stock possessing more than 10% of the voting power of Dreamlife)
of the fair market value of the common stock on the date of grant and provides
that no portion of an option may be exercised beyond ten years from that date
(five years in the case of ISO's granted to a 10% stockholder). As of December
31, 2000, options to purchase an aggregate of 325,000 shares had been granted
under the 1997 Plan and 425,000 shares were available for future grant.

To the extent not otherwise provided by the Board, options granted under
the 1997 Plan to employees and consultants become exercisable in three
installments, each equal to one-third of the entire option granted and
exercisable on the first, second and third anniversaries of the grant date,
respectively. In the event of termination of an employee's service to Dreamlife,
vested options may be exercised within one year following the date of death or
following a determination of disability and within three months following
termination for any other reason; except that, if such termination is for cause,
the options will not be exercisable following such termination. In no event may
an option be exercised later than the date of expiration of the term of the
option as set forth in the agreement evidencing such option. Options will not be
transferable except upon death (in which case they may be exercised by the
decedent's executor or other legal representative). The 1997 Plan will terminate
by its terms in 2007.

1999 EMPLOYEE STOCK OPTION PLAN

Officers and other full time employees of Dreamlife and any of its
subsidiaries are eligible to participate in the 1999 Employee Stock Option Plan,
which may be administered by the Board or a committee of the Board. An aggregate
of 6,500,000 shares of common stock are reserved for issuance under the 1999
Employee Stock Option Plan. As of December 31, 2000, options to purchase an
aggregate of 3,914,964 shares had been granted, net of forfeitures, under the
1999 Employee Stock Option Plan and 2,585,036 shares were available for future
grant.

The 1999 Employee Stock Option Plan permits grants of ISOs and NSOs. An
employee who owns more than ten percent (10%) of the total combined voting power
of all classes of outstanding stock of Dreamlife or its subsidiaries will not be
eligible for the grant of an ISO, unless the requirements set

forth in Section 422(c)(5) of the Internal Revenue Code (the "Code") are
satisfied. The exercise price per share of an option is established by the
administrator of the 1999 Employee Stock Option Plan in its discretion, but, in
the case of an ISO, may not be less than the fair market value (or not less than
110% of the fair market value under the requirements of Section 422(c)(5) of the
Code) of a share of common stock as of the date of grant. NSOs granted under the
1999 Employee Stock Option Plan may have a specified exercise price that is
fixed or varies in accordance with a predetermined formula while the NSO is
outstanding. No individual is permitted to receive options to purchase common
stock during any fiscal year covering in excess of 500,000 shares of common
stock; provided, however, a newly hired individual may receive options to
purchase up to 2,400,000 shares of common stock during the portion of the fiscal
year remaining after his or her date of hire.

Options granted under the 1999 Employee Stock Option Plan may be
exercisable (subject to such restrictions and vesting provisions as the plan
administrator may determine on the date of grant in its discretion), in part
from time to time or in whole at any time after a portion becomes fully vested,
for a period not to exceed ten years from the date of grant, in the case of an
ISO (or five years under the requirements of Section 422(c)(5) of the Code). The
exercise of an option may be accelerated in the event of the optionee's death,
disability or retirement or other events and may provide for expiration prior to
the end of its term in the event of the termination of the optionee's service
with or without cause. Such period will be established by the plan administrator
in its discretion on the date of grant. Options are not transferable except upon
death (in which case they may be exercised by the decedent's executor or other
legal representative).

The 1999 Employee Stock Option Plan provides for partial acceleration of
options granted under the plan under certain circumstances involving certain
changes in control of Dreamlife. The 1999 Employee Stock Option Plan will
terminate by its terms in 2009.

1999 OUTSIDE DIRECTORS STOCK OPTION PLAN

Non-Employee directors of Dreamlife and any of its subsidiaries are
eligible for option grants under the 1999 Outside Directors Stock Option Plan,
which is administered by the Board. An aggregate of 385,000 shares of common
stock are reserved for issuance under the 1999 Outside Directors Stock Option
Plan. As of December 31, 2000, options to purchase an aggregate of 290,000
shares had been granted, net of forfeitures, under the 1999 Outside Directors
Stock Option Plan and 95,000 shares were available for future grant.

The options granted under the 1999 Outside Directors Stock Option Plan are
NSOs. The exercise price per share of an option is established by the Board in
its discretion. The exercise price per share of an option may be fixed or vary
in accordance with a predetermined formula while the option is outstanding.

Options granted under the 1999 Outside Directors Stock Option Plan are
exercisable (subject to such restrictions and vesting provisions as the Board
may determine on the date of grant in its discretion), in part from time to time
or in whole at any time after a portion becomes fully vested, for a period not
to exceed ten years from the date of grant. The exercise of an option may be
accelerated in the event of the optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the optionee's service with or without cause. Such
period will be established by the Board in its discretion on the date of grant.
Options are not transferable except upon death (in which case they may be
exercised by the decedent's executor or other legal representative). The 1999
Outside Directors Stock Option Plan will terminate by its terms in 2009.

1999 CONSULTANTS STOCK OPTION PLAN

Consultants and other bona fide service providers to Dreamlife and any
subsidiaries are eligible for option grants under the 1999 Consultants Stock
Option Plan, which may be administered by the Board or a committee of the Board.
An aggregate of 327,500 shares of common stock are reserved for issuance under
the 1999 Consultants Stock Option Plan. As of December 31, 2000, options to
purchase an aggregate of 327,500 shares had been granted under the 1999
Consultants Stock Option Plan and no shares were available for future grant.

The options granted under the 1999 Consultants Stock Option Plan are NSOs.
The exercise price per share of an option is established by the administrator of
the 1999 Consultants Stock Option Plan in its discretion. The exercise price may
be fixed or may vary in accordance with a predetermined formula while the option
is outstanding.

Options granted under the 1999 Consultants Stock Option Plan may be
exercisable (subject to such restrictions and vesting provisions as the plan
administrator may determine on the date of grant in its discretion), in part
from time to time or in whole at any time after a portion becomes fully vested,
for a period not to exceed ten years from the date of grant. The exercise of an
option may be accelerated in the event of the optionee's death, disability or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the optionee's service with or
without cause. Such period will be established by the plan administrator in its
discretion on the date of grant. Options will not be transferable except upon
death (in which case they may be exercised by the decedent's executor or other
legal representative). The 1999 Consultants Stock Option Plan will terminate by
its terms in 2009.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of April 12, 2001, certain information
concerning beneficial ownership of Dreamlife's voting securities by (i) each
person known to Dreamlife to beneficially own 5% or more of Dreamlife's
outstanding voting securities, (ii) all executive officers and directors of
Dreamlife naming them, and (iii) all executive officers and directors of
Dreamlife as a group, without naming them.

NUMBER OF
SHARES OF PERCENT OF
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER(1) OWNED(2) OWNED(3)
------------------- ------------ ------------

Anthony J. Robbins
Chairman of the Board
9191 Towne Center Drive
Suite 600
San Diego, CA 92122........... 6,000,000(4) 33.4%

CYL Development Holdings, LLC
330 South Street
P.O. Box 1975
Morristown, NJ 07962-1975..... 2,300,000(5) 12.8%

Stanley S. Shuman
711 Fifth Avenue
New York, NY 10022............ 2,788,000(6) 15.4%

Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022............ 1,927,000(7) 10.7%

Peter A. Lund
Chief Executive Officer and
Director...................... 945,000(8) 5.0%

Fredric D. Rosen
Director...................... 430,000(9) 2.3%

Philicia G. Levinson
Senior Vice President, Chief
Financial Officer, Secretary
and Treasurer................. 141,573(10) *

H. Peter Guber
Director...................... 45,000(11) *

Charles D. Peebler, Jr.
Director...................... 145,000(12) *

Bruce L. Stein
Director...................... 45,000(11) *

All Directors and Executive
Officers as a group (seven
persons)..................... 7,751,573(4)(8)(9) 39.3%
(10)(11)(12)

----------
* less than 1%

(1) Unless otherwise indicated, all shares are beneficially owned and sole
voting and investment power is held by the person named above. Each holder
has an address c/o dreamlife, inc., 425 West 15th Street, Suite 3R, New
York, NY 10011, unless otherwise noted.

(2) Generally, a person is deemed to be the beneficial owner of securities
that can be acquired within 60 days from the date set forth above through
the exercise of any option, warrant or right.

(3) Based on a total of 17,959,955 shares of common stock. Shares of common
stock subject to options, warrants or rights that are currently
exercisable or exercisable within 60 days are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
options, warrants or rights, but are not deemed outstanding for purposes
of computing the percentage ownership of any other person.

(4) Based in part on a Schedule 13D filed by Robbins and RRI. The shares of
common stock reported hereby were issued upon the conversion of shares of
Dreamlife's Series A Preferred Stock held by Robbins and RRI and received
by them in the CYL Transaction. Of the number of shares of common stock
reported in the table, RRI is the direct holder of 1,799,999 shares. In
his capacity as Chairman and sole equity owner of RRI, Robbins shares
voting and dispositive power with respect to the securities beneficially
owned by RRI and may be deemed to be the beneficial owner of such
securities. Robbins, RRI and Development Holdings have agreed with each
other and with Dreamlife pursuant to the Stockholders' Agreement that
until the earlier of March 31, 2014 and the termination of the Content
Provider Agreement, each will vote their respective shares of capital
stock of Dreamlife in the manner recommended by the Board and in favor of
the election, removal and replacement of directors as described in this
report.

(5) Based in part on a Schedule 13D filed by Development Holdings, Kurt T.
Borowsky and David J. Roy. The shares of common stock reported hereby were
issued upon the conversion of shares of Series A Preferred Stock held by
Development Holdings and received by Development Holdings in the CYL
Transaction. In their capacities as managers of Development Holdings,
Messrs. Borowsky and Roy together irrevocably possess the sole power to
vote and dispose of common stock owned by Development Holdings, and may
each, therefore, be deemed to be the beneficial owner of such securities.
Further, a charitable trust, of which Messrs. Borowsky and Roy are
trustees, owns an indirect pecuniary interest in more than 5% of the
shares of common stock held by Development Holdings. Robbins, RRI and
Development Holdings have agreed with each other and with Dreamlife
pursuant to the Stockholders' Agreement that until the earlier of March
31, 2014 and the termination of the Content Provider Agreement, each will
vote their respective shares of capital stock of Dreamlife in the manner
recommended by the Board and in favor of the election, removal and
replacement of directors as described in this report.

(6) Includes (i) 1,807,000 shares of common stock held by Allen & Company
Incorporated ("Allen & Company"), (ii) 120,000 shares of common stock
issuable upon exercise of warrants held by Allen & Company and (iii)
20,000 shares of common stock issuable upon exercise of warrants
beneficially owned by Mr. Shuman. Mr. Shuman, who is a Managing Director
of Allen & Company, disclaims beneficial ownership of the shares and
warrants referred to in clauses (i) and (ii) above, except to the extent
of his pecuniary interest therein. Allen & Company disclaims beneficial
ownership of the warrants referred to in clause (iii) above.

(7) Includes 120,000 shares of common stock issuable upon exercise of warrants
beneficially owned by Allen & Company. Does not include 80,000 shares of
common stock issuable upon exercise of warrants owned of record by Allen &
Company in which certain officers and directors of Allen & Company possess
a beneficial interest to which Allen & Company disclaims beneficial
ownership.

(8) Represents 945,000 shares of common stock issuable upon the exercise of
presenty exercisable options held by Mr. Lund.

(9) Represents 430,000 shares of common stock issuable upon the exercise of
presently exercisable options held by Mr. Rosen. Mr. Rosen resigned as
a director on April 16, 2001.

(10) Represents 141,573 shares of common stock issuable upon the exercise of
presently exercisable options held by Ms. Levinson.

(11) Represents 45,000 shares of common stock issuable upon the exercise of
presently exercisable options held by such individual.

(12) Represents 145,000 shares of common stock issuable upon the exercise of
presently exercisable options held by Mr. Peebler.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As an inducement to Mr. Lund, CYL Development Holdings, LLC, a 12.8%
shareholder of Dreamlife, granted to Mr. Lund an option to purchase up to
100,000 shares of Dreamlife Common Stock held by CYL Development Holdings, LLC.
Such option is exercisable for a period of five years commencing on May 21, 2000
at an exercise price of $4.75 per share. Dreamlife has granted to Mr. Lund
piggyback registration rights with respect to the resale of the shares
underlying such options.

Fredric D. Rosen, a former director, consulted for us from June 1999
until July 2000. Mr. Rosen was paid a monthly consulting fee of $14,000 and
was reimbursed for out of pocket expenses incurred in connection with
consulting services rendered on our behalf. Mr. Rosen was paid a total of
$98,000 during the fiscal year 2000 pursuant to this consulting relationship.
CYL Development Holdings, LLC also granted Mr. Rosen options to purchase
100,000 shares of Dreamlife Common Stock held by CYL Development Holdings,
LLC. Mr. Rosen resigned as a director on April 16, 2001. See Item 10
Directors and Executive Officers of the Registrant-Director Compensation.

Under the terms of a Grid Time Promissory Note signed on October 24, 2000
to the order of The Chase Manhattan Bank, the Company obtained a line of credit
for $1,500,000. On January 15, 2001, the principal amount of the note was
increased to $2.0 million and the maturity date was extended to April 30, 2001.
On March 13, 2001, the principal amount of the note was further increased to
$2.25 million. An affiliate of CYL Development Holdings, LLC, a 12.8%
stockholder of Dreamlife, provides credit support for the line of credit.

Under the terms of a Grid Time Promissory Note signed on April 12, 2001,
the Company obtained a loan from Van Beuren Management, Inc., an affiliate of
CYL Development Holdings, LLC, a 12.8% stockholder of Dreamlife, for $50,000
which expires on April 30, 2001.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit
Number Description and Method of Filing
--------- ----------------------------------------

2.1 Contribution and Exchange Agreement dated as of May 20,
1999 among the registrant, Change Your Life.com, LLC,
Anthony J. Robbins, Robbins Research International Inc.
and CYL Development Holdings, LLC (1)

2.2 Agreement and Plan of Reorganization dated as of May 27,
1999 among the registrant, Concept Acquisition
Corporation, Concept Development, Inc., William Zanker
and Debbie Dworkin (2)

2.3 Agreement of Merger dated as of May 27, 1999 between
Concept Acquisition Corporation and Concept Development,
Inc. (2)

3(i).1 Restated Certificate of Incorporation (3)

3(i).2 Certificate of Amendment to Certificate of Incorporation
dated June 18, 1987 (4)

3(i).3 Certificate of Amendment to Certificate of Incorporation
dated November 17, 1989 (5)

3(i).4 Certificate of Amendment to Certificate of Incorporation
filed November 3, 1999 (6)

3(i).5 Certificate of Amendment to Certificate of Incorporation
filed December 13, 1999 (7)

3(ii) Amended and Restated By-Laws (1)

10.1 Content Provider Agreement and License effective as of
April 23, 1999 between Change Your Life.com, LLC,
Anthony J. Robbins and Research International Inc. (2)
(8)

10.2 Escrow Agreement dated as of May 27, 1999 among the
registrant, Debbie Dworkin and State Street Bank and
Trust Company (2) (8)

10.3 Repurchase Agreement dated as of May 27, 1999 between
the registrant and Debbie Dworkin (2)

10.4 Employment Agreement dated as of May 27, 1999 between
the registrant and William Zanker (1)

10.5 Exclusive License and Marketing Agreement dated as of
May 27, 1999 among the registrant, Seligman Greer
Communication Resources, Inc., SGS Communications
Resources, Inc., Seligman Greer Sandberg Enterprises,
Inc., SGC Communication Resources LLC and Learning Annex
Interactive LLC (2) (8)

10.6 Option Agreement dated as of May 27, 1999 among the
registrant, Seligman Greer Communication Resources,
Inc., SGS Communication Resources, Inc., Seligman Greer
Sandberg Enterprises, Inc., SGC

Communication Resources LLC and Learning Annex
Interactive LLC and certain shareholders and members, as
applicable, of such entities other than the registrant
listed therein (2)(8)

10.7 Registration Rights Agreement dated as of May 27, 1999
among the registrant, Anthony J. Robbins, Robbins
Research International Inc. and CYL Development
Holdings, LLC (1)

10.8 Stockholders Agreement dated as of May 27, 1999 among
the registrant, Anthony J. Robbins, Robbins Research
International Inc. and CYL Development Holdings, LLC (1)

10.9 Lease for 425 West 15th Street, Floor 3R, New York, New
York dated May 21, 1999 between the registrant and
CFG/AGSB Chelsea Ninth, L.L.C. (9)

10.10 Distribution Agreement dated May 27, 1999 between the
registrant and USN (10)

10.11 Tax Matters Agreement dated May 27, 1999 between the
registrant and USN (10)

10.12 Assignment and Assumption Agreement dated May 27, 1999
between the registrant and USN (10)

10.13 1997 Stock Option Plan (11)

10.14 1999 Employee Stock Option Plan (6)

10.15 1999 Outside Directors Stock Option Plan (6)

10.16 1999 Consultants Stock Option Plan (6)

10.17 Content License Agreement dated December 6, 1999 between
Yahoo! Inc. and the registrant, as amended (7) (12)

10.18 Retention and Severance Agreement made as of May 23,
2000 by and between Beth Polish and dreamlife, inc. (13)

10.19 Offer Letter by and between Peter A. Lund and dreamlife,
inc. dated July 24, 2000. (14)

10.20 Letter agreement regarding registration rights by and
between Peter A. Lund and dreamlife, inc. dated July 24,
2000. (15)

10.21 Grid Time Promissory Note to The Chase Manhattan Bank
for $1,500,000 dated October 24, 2000. (16)

10.22 Interactive Services Agreement by and between America
Online, Inc. and dreamlife, inc. dated July 17, 2000.
(12) (17)

10.23 Grid Time Promissory Note to The Chase Manhattan Bank
for $1,500,000 dated November 27, 2000. (18)

10.24 Grid Time Promissory Note to The Chase Manhattan Bank
for $2,000,000 dated January 11, 2001. (18)

10.25 Grid Time Promissory Note to The Chase Manhattan Bank
for $2,250,000 dated March 9, 2001. (18)

10.26 Surrender Agreement by and between CFG/AGSCB 75 Ninth
Avenue, LLC and dreamlife, inc. dated January 23, 2001.
(18)

10.27 Grid Time Promissory Note to Van Beuren Management, Inc.
for $50,000 dated April 12, 2001. (18)

16 Letter, dated December 13, 1999, of Richard A. Eisner &
Company, LLP (19)

23.1 Consent of KPMG LLP (18)

----------
(1) Incorporated by reference to the registrant's Form 8-K/A dated May 27,
1999 and filed with the Securities and Exchange Commission as of June 11,
1999.

(2) Incorporated by reference to the registrant's Form 8-K/A dated May 27,
1999 and filed with the Securities and Exchange Commission on February 17,
2000.

(3) Incorporated by reference from Exhibit 3.1 to the registrant's
Registration Statement No. 33-4532-W on Form S-18.

(4) Incorporated by reference from Exhibit 3(b) to the registrant's 1987
Annual Report on Form 10-K.

(5) Incorporated by reference to Exhibit 3(c) to the registrant's 1988 Annual
Report on Form 10-K.

(6) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.

(7) Incorporate by reference to the registrant's 1999 Annual Report on Form
10-K.

(8) Confidential treatment has been granted for certain portions of this
exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.

(9) Incorporated by reference to Exhibit 10(i) to the registrant's Quarterly
Report on Form 10-Q for the period from April 21, 1999 through June 30,
1999.

(10) Incorporated by reference to exhibits to U.S. Neurosurgical, Inc.'s (a
former subsidiary of the registrant) Form 10 as filed with the Securities
and Exchange Commission on July 1, 1999.

(11) Incorporated by reference to Exhibit 10(k) to the registrant's 1997 Annual
Report on Form 10-K.

(12) Confidential treatment has been granted for certain portions of this
exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.

(13) Incorporated by reference to Exhibit 10.1 to the registrant's Form 8-K
dated May 23, 2000 and filed with the Securities and Exchange Commission
on May 26, 2000.

(14) Incorporated by reference to Exhibit 10.2 to the registrant's Form 8-K
dated July 24, 2000 and filed with the Securities and Exchange Commission
on July 25, 2000.

(15) Incorporated by reference to Exhibit 10.2 to the registrant's Form 8-K
dated July 24, 2000 and filed with the Securities and Exchange Commission
on July 25, 2000.

(16) Incorporated by reference to Exhibit 10.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000.

(17) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000.

(18) Filed herewith

(19) Incorporated by reference to Exhibit 16 to the registrant's Form 8-K/A
dated December 3, 1999 and filed with the Securities Exchange Commission
on December 15, 1999.

----------

(b) Reports on Form 8-K

On October 23, 2000 Dreamlife filed a report on Form 8-K dated October
20, 2000 under Item 5 (Other Events) and Item 7 (Financial Statements, PRO FORMA
Information and Exhibits) to report the receipt of a commitment for short-term
financing.

On October 27, 2000 Dreamlife filed a report on Form 8-K dated October
26, 2000 under Item 5 (Other Events) and Item 7 (Financial Statements, PRO FORMA
Information and Exhibits) to report the receipt of $1.5 million short-term
financing.

On November 29, 2000 Dreamlife filed a report on Form 8-K dated
November 28, 2000 under Item 5 (Other Events) and Item 7 (Financial Statements,
PRO FORMA Information and Exhibits) to report the extension of the $1.5 million
short-term financing previously received.

On January 17, 2001 Dreamlife filed a report on Form 8-K dated January
15, 2001 under Item 5 (Other Events) and Item 7 (Financial Statements, PRO FORMA
Information and Exhibits) to report the increase of the $1.5 million short-term
financing previously received to $2.0 million and the extension of the maturity
date to April 30, 2001.

On February 2, 2001 Dreamlife filed a report on Form 8-K dated February
1, 2001 under Item 5 (Other Events) and Item 7 (Financial Statements, PRO FORMA
Information and Exhibits) to report the proposed transaction among dreamlife,
inc., Discovery Toys, Inc. and certain other parties.

On March 14, 2001, Dreamlife filed a report on Form 8-K dated March 14,
2001 under Item 5 (Other Events) and Item 7 (Financial Statements, PRO FORMA
Information and Exhibits) to report the increase of the $2.0 million short-term
financing previously received to $2.25 million.

Exhibits required by Section 601 of Regulation S-K (see (a)
above).

(d) Financial Statement Schedules

None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized as of the
9th day of April, 2001.

DREAMLIFE, INC.

By: /s/ Peter A. Lund
-----------------------------
Peter A. Lund
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated.

SIGNATURE TITLE OF CAPACITIES DATE
--------- ------------------- ----

/s/ Peter A. Lund Chief Executive Officer April 9, 2001
---------------------------- and Director
Peter A. Lund

/s/ Philicia G. Levinson Senior Vice President, April 9, 2001
---------------------------- Chief Financial
Philicia G. Levinson Officer, Secretary &
Treasurer

/s/ Anthony J. Robbins Director April 16, 2001
----------------------------
Anthony J. Robbins

/s/ H. Peter Guber Director April 10, 2001
----------------------------
H. Peter Guber

/s/ Charles D. Peebler, Jr. Director April 11, 2001
----------------------------
Charles D. Peebler, Jr.

/s/ Bruce L. Stein Director April 11, 2001
----------------------------
Bruce L. Stein

INDEX TO FINANCIAL STATEMENTS

DREAMLIFE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS

PAGE

Independent auditors' report...................................... F-2

Financial Statements:

Balance sheets as of December 31, 2000 and 1999............. F-3

Statements of operations for the year ended December 31, 2000
and for the period from April 21, 1999
(date of inception) to December 31, 1999.............. F-4

Statement of stockholders' equity
for the period from April 21, 1999
(date of inception) to December 31, 2000 ............. F-5

Statements of cash flows for the year ended December 31, 2000
and for the period from April 21, 1999
(date of inception) to December 31, 1999.............. F-6

Notes to financial statements..................................... F-7

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors
dreamlife, inc.

We have audited the accompanying balance sheets of dreamlife, inc. (a
development stage enterprise) as of December 31, 2000 and 1999, and the related
statements of operations, stockholders' (deficit) equity and cash flows for the
year ended December 31, 2000 and the period from April 21, 1999 (date of
inception) to December 31, 1999. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of dreamlife, inc. (a development
stage enterprise) as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the year ended December 31, 2000 and the
period from April 21, 1999 (date of inception) to December 31, 1999, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 2 to the
financial statements, the Company has incurred losses from development stage
activities and has a working capital and stockholders' deficiency at December
31, 2000 that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

KPMG LLP

New York, New York
March 30, 2001

F-2

DREAMLIFE, INC.
(A Development Stage Enterprise)

Balance Sheets

(in thousands, except share amounts)

ASSETS

December 31,
2000 1999
-------- --------

Current assets:
Cash and cash equivalents $ 244 $ 10,459
Prepaid expenses and other current assets 65 579
Cash held in escrow -- 100
-------- --------
Total current assets 309 11,138

Property and equipment, net of accumulated depreciation of $553 and $83, respectively 975 1,013
Deferred costs 100 --
Intangible assets, net of accumulated amortization of $3,169 and $1,386, respectively -- 5,744
Security deposits 277 277
-------- --------

Total assets $ 1,661 $ 18,172
======== ========

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities:
Accounts payable $ 260 $ 745
Accrued expenses 1,386 310
Notes payable 1,500 --
Obligations under capital lease, current portion 81 93
-------- --------
Total current liabilities 3,227 1,148

Obligations under capital lease, net of current portion 1 73

Stockholders' (deficit) equity:
Common stock - $.01 par value. Authorized 100,000,000 shares;
issued and outstanding 40,368,351 shares 403 403
Additional paid-in capital 34,399 37,042
Deferred compensation (1,256) (5,790)
Deficit accumulated during the development stage (35,113) (14,704)
-------- --------

Total stockholders' (deficit) equity (1,567) 16,951
-------- --------

Total liabilities and stockholders' (deficit) equity $ 1,661 $ 18,172
======== ========

See accompanying notes to financial statements.

F-3

DREAMLIFE, INC.
(A Development Stage Enterprise)

Statements of Operations
(in thousands, except per share amount)

Period from Period from
April 21, 1999 April 21, 1999
Year Ended (date of inception) (date of inception) to
December 31, 2000 to December 31, 1999 December 31, 2000
----------------- -------------------- ----------------------

Revenues:
Interactive services revenue $ 49 $ -- $ 49
Commerce 12 -- 12
-------- -------- --------
Total revenue 61 -- 61

Cost of revenues 48 -- 48
-------- -------- --------
13 -- 13

Expenses:
Noncash compensation expense $ 1,891 $ 8,572 $ 10,463
Write-down and amortization of intangible assets 5,744 1,386 7,130
Advertising and marketing 3,284 -- 3,284
General and administrative 9,731 5,119 14,850
-------- -------- --------
Total operating expenses 20,650 15,077 35,727

Operating Loss (20,637) (15,077) (35,714)
Interest expense (15) -- (15)
Interest income 243 373 616
-------- -------- --------
Net loss (20,409) (14,704) (35,113)

Beneficial conversion attributable to preferred stock -- 13,617 13,617
-------- -------- --------

Net loss to common stockholders $(20,409) $(28,321) $(48,730)
======== ======== ========

Basic and diluted net loss per common share $ (0.51) $ (1.84) $ (1.62)
======== ======== ========

Basic and diluted outstanding common shares 40,368 15,381 30,115
======== ======== ========

See accompanying notes to financial statements.

F-4

DREAMLIFE, INC.
(A Development Stage Enterprise)

Statements of Stockholders' (Deficit) Equity

Period from April 21, 1999 (date of inception)
to December 31, 2000

(in thousands, except share amounts)

CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK
COMMON STOCK SERIES A PAR VALUE $.01 SERIES B PAR VALUE $.01
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ---------- ---------- ---------- ---------- ----------

Issuance of shares pursuant to
merger of dreamlife, inc. and
CYL (notes 1 and 3) 7,047,828 $ 70 -- $ -- -- $ --

Issuance of shares to members
of CYL pursuant to merger (note 3) -- -- 99,059 1 -- --

Issuance of shares in private
placement, net of expenses -- -- -- -- 178,582 2

Issuance of shares to acquire Concept
Development, Inc. (note 4) -- -- -- -- -- --

Issuance of shares pursuant to
exclusive license agreement (note 4) -- -- -- -- -- --

Exercise of stock options 268,857 3 -- -- -- --

Issuance of common stock options -- -- -- -- -- --

Deferred compensation expense -- -- -- -- -- --

Conversion of Convertible
Preferred Stock Series B 1,785,820 18 -- -- (178,582) (2)

Conversion of Convertible
Preferred Stock Series C 557,450 5 -- -- -- --

Distribution of discontinued
operations -- -- -- -- -- --

Conversion of Convertible
Preferred Stock Series A 30,708,396 307 (99,059) (1) -- --

Net loss for the period from
April 21, 1999 (date of
inception) to
December 31, 1999 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 1999 40,368,351 403 -- -- -- --

Cancellation of stock options -- -- -- -- -- --

Deferred compensation expense -- -- -- -- -- --

Issuance of warrants -- -- -- -- -- --

Net loss for the year
ended December 31, 2000 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 2000 40,368,351 $ 403 -- $ -- -- $ --
========== ========== ========== ========== ========== ==========

CONVERTIBLE DISTRIBUTION OF DEFICIT
PREFERRED STOCK DISCONTINUED ACCUMULATED
SERIES C PAR VALUE $.01 ADDITIONAL OPERATION TO DURING THE
----------------------- PAID-IN COMMON DEFERRED DEVELOPMENT
SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION STAGE TOTAL
---------- ---------- ---------- ------------ ------------ ------------ ---------

Issuance of shares pursuant to
merger of dreamlife, inc. and
CYL (notes 1 and 3) -- $ -- $ 4,169 $ (1,239) $ -- $ -- $ 3,000

Issuance of shares to members
of CYL pursuant to merger (note 3) -- -- (1) -- -- -- --

Issuance of shares in private
placement, net of expenses -- -- 15,064 -- -- -- 15,066

Issuance of shares to acquire Concept
Development, Inc. (note 4) 50,000 1 4,499 -- -- -- 4,500

Issuance of shares pursuant to
exclusive license agreement (note 4) 5,745 -- 517 -- -- -- 517

Exercise of stock options -- -- (3) -- -- -- --

Issuance of common stock options -- -- 14,362 -- (14,362) -- --

Deferred compensation expense -- -- -- -- 8,572 -- 8,572

Conversion of Convertible
Preferred Stock Series B -- -- (16) -- -- -- --

Conversion of Convertible
Preferred Stock Series C (55,745) (1) (4) -- -- -- --

Distribution of discontinued
operations -- -- (1,239) 1,239 -- -- --

Conversion of Convertible
Preferred Stock Series A -- -- (306) -- -- -- --

Net loss for the period from
April 21, 1999 (date of
inception) to
December 31, 1999 -- -- -- -- -- (14,704) (14,704)
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 1999 -- -- 37,042 -- (5,790) (14,704) 16,951

Cancellation of stock options -- -- (3,476) -- 3,476 -- --

Deferred compensation expense -- -- -- -- 1,891 -- 1,891

Issuance of warrants -- -- 833 -- (833) -- --

Net loss for the year
ended December 31, 2000 -- -- -- -- -- (20,409) (20,409)
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 2000 -- $ -- $ 34,399 $ -- $ (1,256) $ (35,113) $ (1,567)
========== ========== ========== ========== ========== ========== ==========

See accompanying notes to financial statements

F-5

DREAMLIFE, INC.
(A Development Stage Enterprise)

Statements of Cash Flows

(in thousands)

Period from
Period from April 21, 1999
Year April 21, 1999 (date of
Ended (date of inception) inception)
December to December to December
31, 2000 31, 1999 31, 2000
-------- -------- -------------

Cash flows from operating activities:
Net loss $(20,409) $(14,704) $(35,113)
Adjustments to reconcile net loss to net cash used in
operating activities:
Noncash compensation expense 1,891 8,572 10,463
Depreciation and amortization 2,253 1,469 3,722
Write-down of intangible assets 3,961 -- 3,961
Changes in:
Prepaid expenses and other 514 (579) (65)
Cash held in escrow 100 (100) --
Accounts payable and accrued expenses 591 1,055 1,646
-------- -------- --------

Net cash used in operating activities (11,099) (4,287) (15,386)
-------- -------- --------

Cash flows from investing activities:
Acquisition of property and equipment (415) (905) (1,320)
Payment of deferred costs (100) -- (100)
Acquisition of Concept Development, Inc. -- (2,113) (2,113)
Payment of security deposits -- (277) (277)
-------- -------- --------

Net cash used in investing activities (515) (3,295) (3,810)
-------- -------- --------

Cash flows from financing activities:
Proceeds from line of credit 1,500 -- 1,500
Net proceeds from sale of Series B Convertible Preferred Stock -- 15,066 15,066
Cash acquired pursuant to merger of dreamlife, inc. and Change Your Life.com -- 3,000 3,000
Payments under capital lease obligations (101) (25) (126)
-------- -------- --------

Net cash provided by financing activities 1,399 18,041 19,440
-------- -------- --------

Net (decrease) increase in cash and cash equivalents (10,215) 10,459 244

Cash and cash equivalents at beginning of period 10,459 -- --
-------- -------- --------

Cash and cash equivalents at end of period $ 244 $ 10,459 $ 244
======== ======== ========

Supplemental information of noncash investing and financing activities:
Common stock dividend to effect USN Spin-Off (note 3) $ -- $ 1,239 $ 1,239
======== ======== ========

Computer equipment acquired under capital lease $ 17 $ 191 $ 208
======== ======== ========

Issuance of Series C Convertible Preferred Stock in acquisition of Concept
Development, Inc. (note 4) $ -- $ 4,500 $ 4,500
======== ======== ========

Stock issued for exclusive license agreement (note 4) $ -- $ 517 $ 517
======== ======== ========

See accompanying notes to financial statements.

F-6

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) ORGANIZATION AND BASIS OF PRESENTATION

dreamlife, inc. (a development stage enterprise) (the "Company" or
"Dreamlife") commenced development stage activities in April 1999 that
included plans for an online network to focus on personal and
professional improvement. The Company launched its website
WWW.DREAMLIFE.COM on February 12, 2000. Since then, the Company has
derived insignificant revenues from fees for interactive products and
services and electronic commerce. The Company operates in one business
segment.

The accompanying financial statements present the historical financial
results of Change Your Life.com LLC ("CYL"), which was formed on April
21, 1999, since the acquisition of CYL by dreamlife on May 27, 1999 was
accounted for as a reverse acquisition (note 3). Subsequent to May 27,
1999, dreamlife spun off its discontinued stereotactic radiosurgery
center business and had no results of continuing operations from this
business.

Inherent in the Company's business are various risks and uncertainties,
including its limited operating history, historical operating losses,
dependence upon strategic alliances and the limited history of the need
for Internet access and enhanced services.

On October 27, 1999, the Board of Directors of the Company approved an
amendment to the Restated Certificate of Incorporation to change the
corporate name from GHS, Inc. to dreamlife, inc.

(b) USE OF ESTIMATES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure 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
differ from those estimates.

Revenue derived from interactive services, such as online courses, is
recognized when the service is provided.

Revenue derived from electronic commerce is recognized when the
products are delivered.

F-7

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

(d) CASH AND CASH EQUIVALENTS

The Company considers all highly liquid securities with maturities at
the time of purchase of three months or less to be cash equivalents.
Cash equivalents, consisting of money market funds, at December 31,
2000 and 1999 were approximately $117,000 and $10,356,000,
respectively.

(e) PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the
related assets, generally ranging from three to five years. Property
and equipment under capital leases are stated at the present value of
minimum lease payments and are amortized using the straight-line method
over the shorter of the lease term or the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line
method over the estimated useful lives of the assets or the term of the
lease, whichever is shorter.

(f) IMPAIRMENT OF LONG-LIVED ASSETS

Impairment losses are recorded on long-lived assets used in operations,
including goodwill, when indicators of impairment are present and the
undiscounted future cash flows estimated to be generated by those
assets are less than the assets' carrying amount. In addition, the
recoverability of goodwill is further evaluated under the provisions of
Accounting Principle Board ("APB") Opinion No. 17, "Intangible Assets,"
based upon estimated fair value. If such assets are impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of their carrying
value or fair value, less costs to sell.

(g) INTANGIBLE ASSETS

Intangible assets included the costs incurred for the acquisition of
Concept Development, Inc. and the Marketing and License and Option
Agreements with The Learning Annex. Amortization is provided using the
straight-line method over three years. On October 12, 2000, Dreamlife
officially discontinued its relationship with The Learning Annex. As a
result of this decision and the absence of benefits realized from the
relationship, the Company wrote-down the remaining balance of the
intangible assets related to The Learning Annex transaction during the
third quarter of 2000. In addition, the Company also wrote-down the
remaining balance of the intangible assets related to the Concept
Development transaction as the value to be derived from this
relationship was dependent on the Company's continued relationship with
The Learning Annex. Amortization expense was approximately $1,783,000
for the year ended December 31, 2000 and $1,386,000 for the period from
April 21, 1999 (date of inception) through December 31, 1999. The
write-downs amounted to $4.0 million.

F-8

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

(h) INCOME TAXES

Deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been included in the
financial statements or tax returns. Deferred tax assets and
liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse.

(i) LOSS PER SHARE

Basic loss per share excludes dilution and is computed by dividing the
loss available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted loss per share
reflects the potential dilution that could occur if potentially
dilutive securities such as convertible preferred stock, stock options
and warrants were exercised or converted into common stock. Basic and
diluted loss per share were the same for the year ended December 31,
2000 and the period from April 21, 1999 (date of inception) through
December 31, 1999 since the effect of all potential dilutive common
share equivalents was antidilutive. As of December 31, 2000 and 1999,
there were options and warrants exercisable into 6,057,464 and
4,503,750 shares of common stock, respectively.

(j) FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents. At December 31, 2000 and 1999, the fair value of the
Company's financial instruments approximates their carrying value based
on their terms and interest rates.

(k) STOCK-BASED COMPENSATION

Entities may recognize stock-based compensation expense over the
vesting period for the fair value of all stock-based awards on the date
of grant or continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net earnings (loss) disclosures for employee stock
option grants as if the fair-value-based method had been applied. The
Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosures.

(l) COMPREHENSIVE INCOME (LOSS)

Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," requires the Company to report in its
financial statements, in addition to its net income (loss),
comprehensive income (loss), which includes all changes in equity
during a period from nonowner sources including, as applicable, foreign
currency items, minimum pension liability adjustments and unrealized
gains and losses on certain investments in debt and equity securities.
There were no differences between the Company's comprehensive loss and
its net loss as reported.

F-9

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

(2) LIQUIDITY

The Company has incurred a net loss of $20.4 million for the year ended
December 31, 2000 and $14.7 million for the period from April 21, 1999
(date of inception) to December 31, 1999 and at December 31, 2000 has a
stockholders' and working capital deficiency. The Company's management
developed a broad operational and financing plan, which was presented to
the Company's Board of Directors in December 1999. The plan included
management's cash flow projections, website development plan and required
financing. Through March 30, 2001, the Company did not realize the cash
flows or revenues as projected in that plan. As a result, the Company has
been unable to raise the additional financing required to continue to
support its current business strategy through 2001. In response to this, on
January 31, 2001, the Board of Directors approved a change in strategy for
the Company to focus on utilizing its website to provide education,
inspiration and training tools for the sales forces of direct selling
companies to be acquired by Dreamlife. On February 1, 2001, the Company
announced that it had signed a non-binding letter of intent to acquire
Discovery Toys, Inc. (see note 15).

(3) DREAMLIFE, INC. REVERSE ACQUISITION OF CHANGE YOUR LIFE.COM, LLC (CYL)

On April 25, 1999, the Company announced an Internet initiative that
included plans for a network to focus on personal and professional
improvement. On May 27, 1999, the Company issued 99,059.338 shares of a
newly-designated Series A Convertible Preferred Stock (the "Series A
Preferred Stock") to the members of CYL in exchange for 100% of the
membership interests in CYL pursuant to a Contribution and Exchange
Agreement (the "Exchange Agreement"). The Series A Preferred Stock
automatically converted into an aggregate of 30,708,396 shares of common
stock on November 4, 1999 (the next business day following the date of
filing a certificate of an amendment to the Company's Restated Certificate
of Incorporation increasing the number of authorized shares of common stock
to a number sufficient to permit such conversion - see note 12). Prior to
conversion, the holders of the Series A Preferred Stock voted on an as
converted basis with the holders of the common stock. As a result of the
issuance of the Series A Preferred Stock pursuant to the Exchange
Agreement, the members of CYL obtained voting control of dreamlife.
Accordingly, for accounting purposes, the transaction was treated as a
reverse acquisition with CYL as the acquirer. In addition, as the only
assets of dreamlife at the time of the transaction were cash and the net
assets of the discontinued operations of U.S. NeuroSurgical, Inc. ("USN"),
a subsidiary of dreamlife at that time, the transaction was accounted for
as a recapitalization of CYL with the issuance of common stock and options
and warrants to

F-10

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

purchase common stock to the pre-transaction holders of common stock in
exchange for cash. Accordingly, the accompanying financial statements are
the historical financial statements of CYL and include the operations of
dreamlife from May 27, 1999. On the balance sheet as of May 27, 1999, the
equity of the Company equaled the cash balance acquired of $3 million, the
net assets of the discontinued operations of USN of $1,239,000 were
reflected as a contra-equity account until they were distributed to the
common stockholders in September 1999 and the common shares outstanding,
amounting to 7,047,828, were those held by dreamlife stockholders prior to
the reverse acquisition.

CYL was formed on April 21, 1999 with membership interests held by Anthony
J. Robbins ("Robbins"), Robbins Research International Inc. ("RRI") and CYL
Development Holdings, LLC ("Development Holdings"). In exchange for their
membership interests, the members contributed the right and license to use,
subject to certain limitations, the Robbins name in connection with CYL's
Internet business as set forth in a Content Provider Agreement and License
dated April 23, 1999, all goodwill attached to the Robbins name and
likeness for use in CYL's Internet business, the existing Internet
activities of RRI, the exclusive license to use RRI trademarks, trade
names, goodwill attached thereto, and the right to use existing programs,
recordings, videos, CD-ROMs, proprietary software packages and seminars
owned by RRI in CYL's Internet business. Also contributed were various
URLs, an online self-help pilot program and a business plan. The
contributed intangible assets were not ascribed a value by CYL since there
was no book value for these assets in the contributing companies' books and
records. CYL did not conduct operations prior to the acquisition on May 27,
1999. The terms of the Content Provider Agreement and License provide that
CYL will share varying percentages of revenues with Robbins and RRI from
the online sale of Robbins', RRI's or CYL's products initiated through the
Company's website. There are also additional amounts due for CYL's off-line
sales of Robbins or RRI products.

On September 16, 1999, dreamlife completed the spin-off of its wholly owned
subsidiary USN pursuant to an Agreement and Plan of Distribution
("Distribution Agreement") and an Assignment and Assumption Agreement (the
"Assignment Agreement") between dreamlife and USN. Under the Assignment
Agreement, the majority of the assets and liabilities of dreamlife and its
subsidiaries on May 27, 1999 were assigned and transferred to USN. Pursuant
to the Distribution Agreement, dreamlife distributed to holders of record
of the common stock of dreamlife on September 8, 1999 one share of USN
common stock for each share of common stock of dreamlife owned (the
"Spin-Off"). Effective at the time of the Spin-Off, USN became a separate
company no longer owned or controlled by dreamlife in any way. The results
of USN were accounted for as discontinued operations from May 20, 1999, the
date the Board of Directors of dreamlife formally approved the
discontinuance of USN through a distribution to its stockholders. The
results of operations of USN during the phase-out period (May 20, 1999
through September 16, 1999) were insignificant.

(4) ACQUISITION, LICENSE AND OTHER TRANSACTIONS

On May 27, 1999, the Company acquired all of the outstanding capital stock
of Concept Development Inc. ("Concept Development"). Concept Development
was formed in September 1996 to provide online general-interest continuing
education courses. Concept Development did not conduct operations

F-11

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

prior to its acquisition and as of May 27, 1999 had assets of $1,000. The
Company paid $2.0 million in cash and issued an aggregate of 50,000 shares
of a newly-designated Series C Convertible Preferred Stock (the "Series C
Preferred Stock") in exchange for all of the outstanding capital stock of
Concept Development. Concurrently, the Company entered into a three-year
employment agreement with an employee, who was the spouse of the sole
stockholder of Concept Development. The shares of Series C Preferred Stock
issued in the Concept Development acquisition automatically converted into
an aggregate of 500,000 shares of common stock on September 9, 1999 (the
next business day following the record date for the Spin-Off). The fair
value of the shares issued was $90 per preferred share, aggregating
$4,500,000, based on the price paid for similar preferred shares issued in
a contemporaneous private placement (described below).

The acquisition of Concept Development was accounted for as a purchase with
the purchase price allocated to the intangible assets underlying the
three-year employment agreement including certain noncompete restrictions
and to the license agreement entered into with The Learning Annex
(described below).

On May 27, 1999, the Company entered into the Exclusive Marketing and
License Agreement (the "Marketing and License Agreement") with The Learning
Annex (defined below) pursuant to which The Learning Annex granted to the
Company the exclusive right to use The Learning Annex's intellectual
property online and to sell certain of The Learning Annex's merchandise
online. The Marketing and License Agreement also provides for certain
co-marketing and co-promotion activities. In exchange, the Company issued
to The Learning Annex certain equity securities and is required to pay to
The Learning Annex an annual license fee. The fair value of the stock
issued of $517,000 was recorded as an intangible asset and is being
amortized over the initial term of the license. "The Learning Annex"
consists of Seligman Greer Communication Resources, Inc. (d/b/a The
Learning Annex of San Francisco), SGS Communication Resources, Inc. (d/b/a
The Learning Annex of Los Angeles), Seligman Greer Sandberg Enterprises,
Inc. (d/b/a The Learning Annex of San Diego), SGC Communication Resources
LLC (d/b/a The Learning Annex of New York) and Learning Annex Interactive
LLC.

On May 27, 1999, the Company sold in a private placement 178,582 shares of
a newly designated Series B Convertible Preferred Stock (the "Series B
Preferred Stock") at a purchase price of $90 per share. The private
placement resulted in net proceeds of approximately $15.1 million. The
shares of Series B Preferred Stock automatically converted into an
aggregate of 1,785,820 shares of common stock on September 9, 1999 (the
next business day following the record date for the Spin-Off). The shares
were sold pursuant to an exemption from the registration requirements of
the Securities Act of 1933. The Company agreed to file a registration
statement under the Securities Act of 1933 to register the resale of the
shares of common stock issued upon the conversion of the Series B Preferred
Stock. Based on the market price of the Company's common stock on the date
of issuance, the Series B Preferred Stock had a beneficial conversion
feature of $13,616,878, which was recognized as a noncash charge in loss
per share for the period from April 21, 1999 (date of inception) to
December 31, 1999.

F-12

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

On September 1, 2000, Dreamlife decided not to make scheduled payments
necessary to continue its relationship with The Learning Annex under the
parties' License and Marketing Agreement and Option Agreement. As
anticipated, The Learning Annex sent a notice to Dreamlife that it is in
breach of the terms of such agreements. On October 12, 2000, Dreamlife
officially discontinued its current relationship with The Learning Annex
and does not believe that the loss of such relationship will have a
material adverse effect on its business, as no revenues have been derived
from that relationship. As a result of Dreamlife's decision to discontinue
its relationship with the Learning Annex due to the absence of benefits
realized to date, the Company wrote-down the remaining balance of the
intangible assets related to The Learning Annex transaction, amounting to
$3,961,000, in the third quarter of 2000. In addition, the Company also
wrote-down the remaining value of the intangible assets related to the
Concept Development transaction, as the value to be derived from this
relationship was dependent on the Company's continued relationship with The
Learning Annex. These write-downs are included in write-down and
amortization of intangible assets in the statement of operations and
amounted to $4.0 million.

(5) PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

December 31
2000 1999
---- ----

Computer equipment and software $ 998,238 $ 590,419
Furniture, fixtures and office equipment 76,182 74,012
Leasehold improvements 246,241 241,118
Equipment acquired under capital lease 207,846 190,696
----------- -----------
1,528,207 1,096,245
Less accumulated depreciation (553,346) (83,404)
----------- -----------

Total $ 975,161 $ 1,012,841
=========== ===========

(6) LEASES

The Company leases certain computer and office equipment under capital
leases, and office space under a noncancelable operating lease expiring in
August 2004. In January 2001, the Company entered into a Surrender
Agreement with the lessor of its office space terminating its lease no
later than July 23, 2001 (see note 15). In addition, the Company leases
certain office equipment under a noncancelable operating lease expiring in
2002.

Future minimum annual lease payments under capital and noncancelable
operating leases as of December 31, 2000 are as follows:

F-13

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

CAPITAL OPERATING
YEAR ENDING DECEMBER 31 LEASES LEASES

2001 $ 83,471 215,533
2002 1,715 10,407
------- --------

Total minimum payments 85,186 $ 225,940
=========

Less amount representing interest (3,828)
---------

Present value of net minimum
lease payments 81,358

Less current portion (80,560)
---------

$ 798
=========

Rent expense for the year ended December 31, 2000 and the period from April
21, 1999 (date of inception) to December 31, 1999 was $362,458 and
$156,323, respectively.

(7) LINE OF CREDIT

Under the terms of a Grid Time Promissory Note signed on October 24, 2000
to the order of The Chase Manhattan Bank, the Company obtained a line of
credit for $1,500,000. The note bears interest at the prime rate (9.5% at
December 31, 2000) and was due on November 30, 2000. On November 28, 2000,
the maturity date of the note was extended to January 31, 2001. As of
December 31, 2000, $1,500,000 was outstanding under the line of credit. An
affiliate of CYL Development Holdings, LLC, a 19.1% stockholder of
Dreamlife, provides credit support for the line of credit.

On January 15, 2001, the principal amount of the note was increased to $2.0
million and the maturity date was extended to April 30, 2001. On March 13,
2001, the principal amount of the note was further increased to $2.25
million (see note 15).

(8) EMPLOYMENT AND SEVERANCE AGREEMENTS

As of May 2000, the Company entered into a compensation arrangement with
Peter A. Lund, Dreamlife's new Chief Executive Officer. Under the agreement
between Mr. Lund and Dreamlife, Mr. Lund will receive an annual base salary
of $300,000, subject to change at the discretion of the Board of Directors.
The agreement also provides for a discretionary bonus that may be granted
as determined by the Board of Directors and a guaranteed deferred bonus of
up to $3,000,000 payable in a lump sum on May 22, 2003. The deferred bonus
is subject to vesting requirements, based on continued employment

F-14

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

and is therefore being expensed over the two-year vesting period. Mr. Lund
also received grants of 2,400,000 stock options under the Company's 1999
Stock Option Plan and 100,000 stock options from a principal shareholder.
As of December 31, 2000, $912,000 in unpaid bonus expense is included in
accrued expenses.

In May 2000, the Company entered into a Retention and Severance Agreement
with Beth Polish, Dreamlife's then President and Chief Operating Officer,
whereby, in addition to adjustments in stock option compensation, Dreamlife
paid to Ms. Polish a bonus of $50,000 and agreed to pay to Ms. Polish
severance in the amount of $300,000 in semi-monthly installments through
April 2001. As of December 31, 2000, unpaid severance costs of $125,000 are
included in accrued expenses.

(9) STOCK OPTIONS AND WARRANTS

Officers, directors, consultants and other key personnel of the Company are
eligible for option grants under Dreamlife's 1997 Stock Option Plan (the
"1997 Plan"), which was established prior to the reverse acquisition by the
accounting acquiree in 1997. During 1999 and 2000, no options were granted
under the 1997 Plan and at December 31, 2000 and 1999, 175,000 options were
outstanding and 425,000 options were available for future grant under the
1997 Plan.

The 1997 Plan authorizes the granting of incentive stock options ("ISOs")
and nonqualified stock options ("NSOs") to purchase up to 750,000 shares of
common stock at a price not less than 100% (110% in the case of ISOs
granted to a person who owns stock possessing more than 10% of the voting
power of Dreamlife) of the fair market value of the common stock on the
date of grant and provides that no portion of an option may be exercised
beyond ten years from that date (five years in the case of ISOs granted to
a 10% stockholder). To the extent not otherwise provided by the Board of
Directors, options granted under the 1997 Plan to employees and consultants
become exercisable in three equal annual installments. In the event of
termination of an employee's service, vested options may be exercised
within three months following termination; except that, if such termination
is for cause, the options will not be exercisable following such
termination. The 1997 Plan will terminate in 2007.

Effective May 27, 1999, the Company granted to an executive officer of the
Company 300,000 options at an exercise price of $4.50 per share. Such
options vested immediately and expire in May 2009. In addition, the Company
granted to the executive officer 1,000,000 additional options which will
vest over four years from the date of grant and have exercise prices of
$9.00 per share for 225,000 options which vest at the end of year one,
$9.00 per share for 225,000 options which vest at the end of year two,
$10.00 per share for 250,000 options which vest monthly during year three
and $12.00 per share for 300,000 options which vest monthly during year
four. Pursuant to the Retention and Severance Agreement entered into in May
2000, vesting of certain of these options was accelerated and the unvested
options relating to years three and four were forfeited (see note 8).
Deferred compensation related to these options was $10,118,973, of which
$1,275,308 and $5,797,192 was recorded as compensation expense during the
year ended December 31, 2000 and the period April 21, 1999 (date of
inception) through December 31, 1999, respectively. The remaining deferred
compensation related to

F-15

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

the forfeited options was reversed against paid in capital in 2000. None of
the above options were granted under any of the Company's stock option
plans.

On November 3, 1999, the Company adopted three new stock option plans, the
1999 Employee Stock Option Plan ("1999 Employee Plan"), the 1999 Outside
Directors Stock Option Plan ("1999 Directors Plan") and the 1999
Consultants Stock Option Plan.

The 1999 Employee Plan, as amended, provides for the granting of options to
employees to purchase up to 6,500,000 shares of common stock. The 1999
Employee Plan will permit grants of incentive stock options ("ISOs") and
nonqualified stock options ("NSOs"). ISOs will be granted at a price not
less than the fair market value of the common stock on the date of grant.
NSOs may have a specified exercise price that is fixed or varies in
accordance with a predetermined formula while the NSO is outstanding.
Options granted under the 1999 Employee Plan through December 31, 2000 have
a vesting period of four years. Options may be exercised for a period not
to exceed ten years from the date of grant. Upon a change of control, as
defined, vesting will accelerate on up to 25% of the shares originally
covered by an option for employees employed by the Company at least one
year.

During the year 2000 and the period April 21, 1999 (date of inception)
through December 31, 1999, the Company granted 3,587,650 and 2,226,250
options under the 1999 Employee Plan. Certain options granted in 1999 had
exercise prices less than the fair value of the common stock on the date of
grant, which resulted in deferred compensation of $158,906. As of
December 31, 2000, 2,585,036 shares were available for future grant under
the 1999 Employee Plan.

The 1999 Directors Plan provides for the granting of up to 385,000 options
to directors who are not common-law employees of the Company. Options may
be exercised for a period not to exceed ten years from the date of grant.
On December 10, 1999, under the provisions of the 1999 Directors Plan, the
Company granted various directors of the Company 90,000 options, which
vested immediately and 240,000 options, which vest in equal semiannual
installments over the two-year period beginning on November 18, 1999 (the
date the new Board of Directors became effective). Deferred compensation
related to these option grants totaled $1,980,000. As of December 31, 2000,
95,000 shares were available for future grant under the 1999 Directors
Plan.

The 1999 Consultants Stock Option Plan provides for granting of up to
327,500 options to acquire common stock to consultants and other bona fide
service providers who are not common-law employees of the Company. The
exercise price of options under the 1999 Directors Plan and the 1999
Consultants Stock Option Plan may be fixed or vary in accordance with a
predetermined formula while the option is outstanding, provided that the
exercise price per share shall not be less than the par value of the common
stock. In the fourth quarter of 1999, the Company granted 327,500 options
under the 1999 Consultants Stock Option Plan. Such options vested
immediately and expire three to five years from the date of grant. The fair
value of the options, as determined by the Black Scholes option pricing
method, of $2,104,763 was recorded as deferred compensation expense and
expensed in 1999.

F-16

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

A summary of the activity in the plans is presented below:

WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE

Options assumed pursuant to merger of
Dreamlife and CYL 459,000 $ 0.75
Granted 4,183,750 11.45
Forfeited (55,000) 11.19
Exercised (284,000) 0.75
----------
Outstanding at December 31, 1999 4,303,750 $ 11.01

Granted 3,587,650 4.65
Forfeited (2,433,936) 10.62
Exercised -- --
----------
Outstanding at December 31, 2000 5,457,464 $ 7.00
========== ---------

Options exercisable at December 31, 1999 892,500 $ 6.35
========== =========

Options exercisable at December 31, 2000 1,798,521 $ 8.04
========== =========

Weighted average fair value of options granted
during 1999 $ 10.03
during 2000 $ 3.51

The options exercised above resulted in the net issuance of 268,857 shares
of common stock in 1999. Based on the market value of the common stock on
the date of exercise, optionholders used 15,143 shares to exercise the
options.

F-17

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

The following table summarizes information related to options outstanding
at December 31, 2000:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- ------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 2000 LIFE (YEARS) PRICE 2000 PRICE
--------------- ---- ------------ ----- ---- -----

$0.75-$1.63 175,000 6.9 $ .75 175,000 $ .75
$3.27-$4.90 876,839 5.2 3.87 376,021 4.30
$4.90-$6.54 2,400,000 9.5 5.20 -- --
$8.17-$9.80 450,000 8.4 9.00 450,000 9.00
$9.80-$11.44 1,239,375 7.9 10.49 704,375 10.13
$14.71-$16.34 316,250 4.9 16.34 93,125 16.34
--------- ------ --------- --------- -------

$0.75-$16.34 5,457,464 8.0 $ 7.00 1,798,521 $ 8.04
========= ====== ========= ========== =======

Pro forma information regarding net loss and diluted loss per share has
been determined as if Dreamlife had accounted for its employee stock
options under the fair value method. The following pro forma information
gives effect to compensation expense for the fair value for those options
granted during 2000 and 1999, which was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted
average assumptions: dividend yield of 0%, volatility of 60%, risk-free
interest rate of 6.0% and 5.0% in 2000 and 1999, respectively, and an
expected life of five years.

(in thousands, except per share data)

For the period from
April 21, 1999 (date of
Year ended inception) to
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- -----------------

Net loss to common stockholders:

As reported $ (20,409) $ (28,321)
Pro forma (25,812) (31,970)
Diluted loss per share:
As reported (0.51) (1.84)
Pro forma (0.64) (2.08)
======= =======

In April 2000, the Company issued 400,000 warrants to its financial
advisor, Wit Soundview Corporation, to acquire common stock at $7.00 per
share. These warrants expire on April 20, 2005. In addition, there are
200,000 warrants to acquire common stock at $0.75 per share that were
granted prior to the reverse acquisition of CYL by Dreamlife, which remain
outstanding at December 31, 2000. These warrants expire on November 30,
2003.

F-18

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

(10) INCOME TAXES

Income tax benefit differs from the amounts that would result from applying
the Federal statutory rate of 34% as follows:

2000 1999
---- ----

Expected tax benefit $(6,939,000) $ (4,999,000)
State income taxes, net of Federal (892,000) (775,000)
benefit
Nondeductible expenses 6,000 5,000
Change in valuation allowance 5,999,000 5,204,000
Nondeductible amortization of intangible assets 1,811,000 437,000
Other 15,000 128,000
----------- -----------

$ -- $ --
=========== ===========

Temporary differences that give rise to the components of deferred tax
assets and liabilities as of December 31, 2000 and 1999 are as follows:

Net operating loss carryforward $ 5,845,000 247,000
Noncash compensation expense 4,180,000 3,425,000
Deferred start-up costs for
tax purposes 1,166,000 1,457,000
Fixed assets depreciation 5,000 18,000
Other, net 7,000 57,000
------------ ------------
Deferred tax assets 11,203,000 5,204,000
Valuation allowance (11,203,000) (5,204,000)
------------ ------------

Net deferred tax asset $ -- --
------------ ------------

At December 31, 2000, the Company had a net operating loss carryforward for
Federal income tax purposes of approximately $14.6 million, which is
available to offset future Federal taxable income, if any, expiring in
various years through 2020. Due to the uncertainty regarding the ultimate
utilization of the net operating loss carryforward and other deferred tax
assets, no tax benefit for losses has been provided by the Company and a
valuation allowance has been recorded for the entire amount of the deferred
tax asset.

(11) RELATED PARTY TRANSACTIONS

A director of the Company was paid consulting fees during 2000 and 1999 of
$98,000 each year.

F-19

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

(12) EQUITY

On November 3, 1999, the Company filed an amendment to its Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock from 25 million to 100 million.

(13) COMMITMENTS

In December 1999, the Company entered into a Content License Agreement with
Yahoo! Inc. whereby the Company's content would be placed within Yahoo!'s
web site for one year. As of December 31, 2000, under the terms of the
Content License Agreement and a media insertion order, the Company remains
obligated to pay Yahoo! an additional $229,167, which is included in
accrued expenses. The Company is currently in negotiations with Yahoo! for
a settlement of this obligation.

In April 2000, the Company entered into a one-year engagement letter with
Wit SoundView Corporation whereby Wit SoundView Corporation and Wit Capital
Corporation will act as the Company's exclusive financial advisors. In
connection with this engagement letter, the Company has agreed to pay a
monthly retainer fee and to compensate Wit SoundView in connection with
specified business and financing transactions involving Dreamlife. As of
December 31, 2000, $100,000 of deferred costs relate to fees owed Wit
for a pending acquisition. In April 2000, the Company issued to Wit
SoundView a five-year warrant to purchase 400,000 shares of common stock
at $7.00 per share. The fair value of the warrants, amounting to $833,000,
has been recorded as a deferred charge, reflected as a reduction of
stockholders' equity in the balance sheet, pending the consummation of the
related transaction.

In July 2000, the Company entered into a content and distribution agreement
with America Online, Inc. whereby the Company will provide content aimed at
small business users to AOL and Netscape Netcenter for eighteen months, in
addition to receiving promotion across several AOL properties. As of
December 31, 2000, the Company is obligated to pay America Online $0.5
million through December 2001. The Company is currently in negotiations
with America Online for a settlement of this obligation.

(14) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results for the year ended
December 31, 2000 and the period from April 21, 1999 (date of inception)
through December 31, 1999.

2000 Quarter Ended
MARCH JUNE SEPTEMBER DECEMBER
----- ---- --------- --------
(dollars in thousands, except per share
amounts)
Revenues 15 13 12 21
Operating Loss (4,918) (4,893) (8,050) (2,776)
Net Loss (4,798) (4,811) (8,009) (2,791)
Basic and diluted loss per
common share (0.12) (0.12) (0.20) (0.07)

F-20

DREAMLIFE, INC.
(A Development Stage Enterprise)

Notes to Financial Statements

December 31, 2000 and 1999

1999 Quarter Ended
JUNE SEPTEMBER DECEMBER
---- --------- --------
(dollars in thousands, except per share amounts)

Revenues 0 0 0
Operating Loss (4,701) (3,388) (6,988)
Net Loss (4,638) (3,233) (6,833)
Basic and diluted loss per
common share (0.66) (0.41) (0.24)

(15) SUBSEQUENT EVENTS (UNAUDITED)

On January 15, 2001, the Company signed a new promissory note to the order
of The Chase Manhattan Bank increasing the principal amount of its line of
credit to $2.0 million and extending the maturity date to April 30, 2001.
On March 13, 2001, the Company signed an agreement to further increase
the note to $2.25 million with substantially the same terms and conditions
as the prior promissory notes. The line of credit has a maturity date of
April 30, 2001 and the outstanding principal amount of the line of credit
incurs interest at Chase's prime commercial lending rate. An affiliate of
CYL Development Holdings, LLC, a 19.1% stockholder of Dreamlife, provides
credit support for the line of credit.

On January 23, 2001, the Company entered into a Surrender Agreement with
the lessor of its office space, which provides for the early termination of
its lease. The lease will expire no later than July 23, 2001, subject to
acceleration at the lessor's option.

On January 31, 2001, the Board of Directors of Dreamlife approved a change
in the Company's business strategy. Under the new strategy, the Company
will be focusing on utilizing its website to provide education, inspiration
and training tools for the sales forces of direct selling companies to be
acquired by Dreamlife.

On February 1, 2001, two of the Company's principal stockholders, Anthony
Robbins and CYL Development Holdings, LLC, agreed to contribute shares
back to Dreamlife. As a result of these contributions, Dreamlife's total
number of common shares outstanding have been reduced from 40,368,351 to
17,959,955. Anthony Robbins reduced his shares from 23,031,297 to
6,000,000. CYL Development Holdings, LLC reduced its shares from
7,677,099 to 2,300,000.

In February 2001, Dreamlife entered into a non-binding letter of intent
to issue common stock to acquire Discovery Toys, a direct seller of
educational toys, books, games and software for children. The final
transaction is subject to customary conditions, including the successful
completion of due diligence, board approval, the negotiation and execution
of a definitive purchase agreement and approval of the stockholders of
Discovery Toys. If the acquisition is completed on the terms currently
contemplated it would be accounted for as a reverse acquisition.

F-21

EXHIBIT INDEX

Exhibit
Number Description and Method of Filing
--------- ----------------------------------------

2.2 Agreement and Plan of Reorganization dated as of May 27,
1999 among the registrant, Concept Acquisition
Corporation, Concept Development, Inc., William Zanker
and Debbie Dworkin (2)

2.3 Agreement of Merger dated as of May 27, 1999 between
Concept Acquisition Corporation and Concept Development,
Inc. (2)

3(i).1 Restated Certificate of Incorporation (3)

3(i).2 Certificate of Amendment to Certificate of Incorporation
dated June 18, 1987 (4)

3(i).3 Certificate of Amendment to Certificate of Incorporation
dated November 17, 1989 (5)

3(i).4 Certificate of Amendment to Certificate of Incorporation
filed November 3, 1999 (6)

3(i).5 Certificate of Amendment to Certificate of Incorporation
filed December 13, 1999 (7)

3(ii) Amended and Restated By-Laws (1)

10.1 Content Provider Agreement and License effective as of
April 23, 1999 between Change Your Life.com, LLC,
Anthony J. Robbins and Research International Inc. (2)
(8)

10.2 Escrow Agreement dated as of May 27, 1999 among the
registrant, Debbie Dworkin and State Street Bank and
Trust Company (2) (8)

10.3 Repurchase Agreement dated as of May 27, 1999 between
the registrant and Debbie Dworkin (2)

10.4 Employment Agreement dated as of May 27, 1999 between
the registrant and William Zanker (1)

10.6 Option Agreement dated as of May 27, 1999 among the
registrant, Seligman Greer Communication Resources,
Inc., SGS Communication Resources, Inc., Seligman Greer
Sandberg Enterprises, Inc., SGC Communication Resources
LLC and Learning Annex Interactive LLC and certain
shareholders and members, as applicable, of such
entities other than the registrant listed therein (2)(8)

10.7 Registration Rights Agreement dated as of May 27, 1999
among the registrant, Anthony J. Robbins, Robbins
Research International Inc. and CYL Development
Holdings, LLC (1)

10.8 Stockholders Agreement dated as of May 27, 1999 among
the registrant, Anthony J. Robbins, Robbins Research
International Inc. and CYL Development Holdings, LLC (1)

10.9 Lease for 425 West 15th Street, Floor 3R, New York, New
York dated May 21, 1999 between the registrant and
CFG/AGSB Chelsea Ninth, L.L.C. (9)

10.10 Distribution Agreement dated May 27, 1999 between the
registrant and USN (10)

10.11 Tax Matters Agreement dated May 27, 1999 between the
registrant and USN (10)

10.12 Assignment and Assumption Agreement dated May 27, 1999
between the registrant and USN (10)

10.13 1997 Stock Option Plan (11)

10.14 1999 Employee Stock Option Plan (6)

10.15 1999 Outside Directors Stock Option Plan (6)

10.16 1999 Consultants Stock Option Plan (6)

10.17 Content License Agreement dated December 6, 1999 between
Yahoo! Inc. and the registrant, as amended (7) (12)

10.18 Retention and Severance Agreement made as of May 23,
2000 by and between Beth Polish and dreamlife, inc. (13)

10.19 Offer Letter by and between Peter A. Lund and dreamlife,
inc. dated July 24, 2000. (13)