<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
NEW VISUAL ENTERTAINMENT, INC.
(Name of Small Business Issuer in its charter)
Utah 95-4543704
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5737 Pacific Center Blvd., San Diego, CA 92121
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (619) 657-9777
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered: each class is to be registered:
NONE NOT APPLICABLE
Securities to be registered under Section 12(g) of the Act:
Common Stock ($.001 par value per share)
<PAGE> 2
ITEM 1. DESCRIPTION OF BUSINESS
The Company, a developmental stage enterprise (previously known as Bellwether
Investment Inc.), was incorporated under the laws of the State of Utah on
December 5, 1985. On October 18, 1995, the Company acquired all of the
outstanding shares of Siliwood Entertainment Corporation ("Siliwood"), another
developmental stage company with no operations. The Company issued a total of
5,911,592 shares of common stock to the shareholders of Siliwood to effect the
acquisition. The acquisition was accounted for as a pooling of interests. The
Company then changed its name to Siliwood Entertainment Corporation.
On June 10, 1996, the Company acquired certain assets and assumed various
liabilities from Infinity Vision Entertainment, a Nevada corporation, ("IVE").
Immediately following the purchase, Siliwood changed its name to New Visual
Entertainment, Inc. ("NV Entertainment"). Accordingly, former IVE partners have
an interest in NV Entertainment (formerly known as Siliwood) common stock. The
acquisition of these assets and the assumption of these liabilities has been
accounted for as a purchase, with the costs being allocated to the assets based
on fair market value. There were no operations of NV Entertainment prior to the
acquisition. The Company is currently engaged in the development, design and
distribution of software techniques, videos, and theaters for stereoscopic
("3D") authorizing and visualization. The Company has generated minimal revenues
to date. Due to the nature of the business, the Company has presented an
unclassified balance sheet.
NV Entertainment has a number of exclusive licenses to use intellectual
properties relating to its business. For example, the Company has exclusive
access to a patented dual element, single lens system utilized in connection
with the production of 3D motion pictures and will acquire ownership of this
system pending the consummation of a purchase agreement. In addition, the
Company has the exclusive ownership of two of the only three "6 Perforation"
cameras that have been manufactured; the Company also has exclusive access to
the third camera. Finally, the Company has an exclusive license to use a
patented 3D signature for productions and products relating to action sports and
maintains unlimited access to signatures for all other subject matter.
MARKETING AND COMPETITION
NV Entertainment has exclusive licenses and patents for new 3D technology. The
Company's primary function is to facilitate the production and distribution of
the 3D technology, as well as the establishment of new, innovative platforms for
the presentation of 3D media. A successful entertainment organization must
deliver high-quality, cost-effective content 3D films with broad market appeal.
NV Entertainment has already produced two successful 3D films.
NV Entertainment consists of three divisions: (i) NV Entertainment, based in Los
Angeles, California, is responsible for 3D production and distribution, hardware
licensing, promotional activities, and strategic alliances; (ii) NV
Entertainment, also in Los Angeles, supplies 3D viewers (eye wear) and develops
technologies; and the NV Entertainment office in San Diego, California promotes
and distributes NV Entertainment Experience ("NVX") Theaters, a new brand of
Location-Based Entertainment ("LBE").
2
<PAGE> 3
The bulk of corporate assets consist of 3D cameras, a mobile truck unit and a
library of music and video content. NV Entertainment's business activities
consist of content production and distribution, 3D hardware manufacturing, and
directing research and development of 3D technology. The Company will market its
3D technology by providing the industry with the necessary tools that will allow
for 3D production and viewing within the current 2D infrastructure. This will be
accomplished by the following:
(i) Produce and distribute 3D content for the video, broadcast
television ("TV"), and motion picture industries;
(ii) Establish special theaters for showcasing 3D content;
(iii) Create a mass audience and mainstream distribution channel;
and
(iv) License the technology to the entertainment industry
The immediate focus of the Company is to create a library of 3D products. The
Company has already produced and marketed the world's first wide-angle 35
millimeter extreme sports film, "Edge of Reality," which has been viewed by
nearly one half million people. In addition, the Company recently filmed the
nationwide "AT&T On Tour" concert series of alternative rock and pop artists.
This production was the first ever of its kind and not only satisfied
requirements for 3D filming, but also should have a broad market appeal to the
3D target audience. Finally, NV Entertainment is finalizing an agreement to
produce a 3D video based on the popular "X-Files" television program, a
project that could potentially result in the sale of up to 20 million 3D
viewers over the next few years.
3D MARKETS
Three-dimensional entertainment markets are currently characterized by
relatively short content (one hour or less), and explosive action in color,
images, events or scenery. Prime 3D markets include music videos, action
television programming, nature documentaries, sports events, promotional
material, merchandising tie-ins, and specialized films for location-based visual
entertainment. Continued technology development may lead to the re-emergence of
full-length 3D movies.
VISUAL ENTERTAINMENT MARKET
The total potential market for NV Entertainment's 3D technology is estimated to
be $3.5 billion, and encompasses three distinct entertainment industries:
broadcast and cable television video software and motion pictures. In addition,
LBE theaters represent a profitable and rapidly growing market segment which
could potentially represent revenues exceeding $180 million.
3
<PAGE> 4
I) BROADCAST AND CABLE TELEVISION INDUSTRY
Television advertising revenue in 1994 amounted to $34.2 billion, and is
currently estimated at about $38 billion annually. Household TV penetration now
exceeds 98% of the total households in the United States, with nearly 100% being
color television sets. Currently, the TV population in the United States exceeds
217 million sets, with the average household having a TV on over seven hours
each day. NV Entertainment believes there is substantial opportunity for
enhancing the visual experience with its 3D technology.
Initial 3D penetration of visual broadcast markets will be focused on sports
events, music videos and special programming, such as the "X-Files" and "AT&T On
Tour" projects. As the mass TV audience acquires 3D viewers, NV Entertainment
expects to considerably expand the scope of 3D television programming.
Syndicated 3D programs, or even dedicated time slots or channels, may be
broadcast in 3D and will facilitate widespread video software and motion picture
opportunities.
II) VIDEO SOFTWARE INDUSTRY
Video software (dubbed video tapes) is a $15 billion retail industry divided
almost equally between sales and rentals. During 1995, video software volume
reached 490 million prerecorded tapes in addition to 375 million blank video
cassettes. Revenue generated by video (content) suppliers was just over $6.0
billion in 1995, or about $12.25/tape. Over 75 million households in the United
States have video cassette recorders ("VCR's"), or 80% of all households with
televisions. Currently, distribution of 3D content to the home entertainment
market is nearly non-existent.
Distribution of video software is primarily controlled by over 27,000 specialty
video stores such as Blockbuster Entertainment. These video specialty stores
generate over 80% of total revenue from video rentals. Video tapes are primarily
sold through mass merchants, video specialty stores, and discount stores.
Collectively, these stores generate over 75% of video tape sales. NV
Entertainment has concluded, or is currently negotiating, a number of joint
distribution agreements with major entertainment companies.
NV Entertainment will initially target the estimated $1.8 billion non-theatrical
content market which includes children's, instructional, sports, exercise and
music videos. The theatrical content video market represents another estimated
$5.4 billion in sales potential. One area that is both lucrative and accessible
to NV Entertainment is the filming and distribution of broadcast television
programming and video content. NV Entertainment is finalizing an agreement with
FOX Entertainment to film an episode of the popular X-Files television program
is an excellent example, and could potentially be worth over $80 million in
viewer and video tape revenue to NV Entertainment in 1997.
4
<PAGE> 5
III) MOTION PICTURE INDUSTRY
The motion picture industry generated box office gross revenue of almost $5.5
billion in 1995 from over 380 new movies. Although the motion picture industry
currently represents a smaller 3D market than TV or video, it may become an
important market for 3D technology licensing. Much of the content of the video
software industry originates from the motion picture industry. As content
suppliers (production companies) adopt the 3D format, the Company will attempt
to actively negotiate licensing agreements with the motion picture industry.
DEPENDENCE ON PRODUCTION OF FILM SOFTWARE
The ability of the Company to implement its business strategy depends upon
continuing to successfully create, produce and market entertainment and
educational film software for exhibition for its theater systems. The size and
quality of the Company's library of film software titles is a material factor in
competing for sales of the Company's attractions and developing the Company's
base of recurring revenue.
The Company generally intends to produce and develop specialty films and videos
for its library with production budgets in a range of approximately $100,000 to
$4 million. While the Company may enter into participation, licensing or other
financing arrangements with third parties in order to minimize its financial
involvement in production, the Company will be subject to substantial financial
risks relating to the production and development of new entertainment and
educational software. The Company expects that it will typically be required to
pay for the production of software during the production period prior to release
but will unlikely be able to recoup these costs from revenues from exhibition
licenses prior to 24 to 36 months following release.
EMPLOYMENT
As of June 30, 1996, the Company had 5 full time employees:
KEY EMPLOYEES:
PHIL KUEBER, JR. - President and Director. Mr. Kueber has financed and managed
high technology growth companies, such as Offshore Navigational Systems and
Knave Digital Systems from 1991 to 1996. Mr. Kueber has also written and
produced television and multi-media entertainment programming, and recently
completed research and development on a new product for digital video systems.
Mr. Kueber is responsible for project development, contract negotiations,
financial public relations, and general administration. As President, Mr.
Kueber is also responsible for coordinating compliance and regulatory stock
issues.
5
<PAGE> 6
FRANK DeMILLE - Director and Chief Financial Officer. Mr. DeMille has been
actively involved in entertainment and venture financing for several companies
including Software Control Systems, and feature film financing. Mr. DeMille
recently concluded a twelve year career as a stockbroker on Wall Street.
RAY WILLENBERG, JR. - Vice President and Secretary. Mr. Willenberg has over 25
years of experience in the mortgage banking industry and executive level
management, including over two and one-half (2 1/2) years of management
experience in the entertainment industry. Mr. Willenberg is responsible for
theater and internal operations of the Company, including LBE operations,
accounting and budgeting, project fund raising, purchasing and personnel
training.
ITEM 2. PLAN OF OPERATION
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements at PART F/S herein.
The current plan of New Visual Entertainment incorporates operational resources
that will make holographic 3D media ("H3D") a mainstream entertainment form. The
Company plans to reach the mass market by aligning itself with
already-established, heavily branded products and entities for the production,
promotion and distribution of H3D. New Visual management intends to aggressively
evaluate and pursue production opportunities in order to increase the Company's
content library and maintain a leadership position as the foremost provider of
H3D. In keeping with the rapid pace of technological growth in the entertainment
industry, the Company also plans to continually develop and implement new
entertainment forms for the production and exhibition of New Visual Experience
("NVX"), the Company brand of H3D. Research and development of new holographic
3D production technology is currently in progress and will steadily continue.
In order to satisfy cash requirements for the Company's production and revenue
goals, management intends to continue substantial fund raising efforts. For the
purpose of general operations and production needs, the Company anticipates the
need for funding of between $2 and $6 million in the next 12 months. Such fund
raising is planned to be achieved through public financial markets, private
offerings, and joint venture opportunities. In addition to the need for
production funds, the Company will need to raise capital for the manufacturing
and purchase of NVX shutter glasses in mass quantities. Funding required for the
purchase and sale of the glasses is dependent upon the timing and size of the
purchase orders.
As a developmental stage enterprise, the Company has no substantial operations
or revenue history to report. The Company has been able to remain in operation
due to the financial support of its Officers and its ability to acquire assets
by the issuance of stock.
Financial characteristics of the industry include a relatively low cost of goods
sold with substantial operating expenses. Operating expenses are primarily
attributable to content production and are incurred in total prior to any income
realized from the product. Once content
6
<PAGE> 7
is produced, however, it is an asset which may be leveraged and may be
distributed through multiple channels repeatedly over time. As a result of
front-end production costs, NV Entertainment anticipates a net loss for 1996,
but expects to be profitable in 1997 and 1998.
The entertainment industry is highly competitive in the production and
distribution of content. Although there can be no assurances of any capital
appreciation or sufficient revenues to produce quarterly dividends, the Company
believes that due to the expansion and diversification of programming, an
opportunity exists for the introduction of a new mainstream entertainment
format.
SEASONALITY
There are no seasonal factors affecting the Company's business.
ITEM 3. DESCRIPTION OF PROPERTY
The Company currently has its corporate offices at 5737 Pacific Center Blvd.,
San Diego, California 92121. It will be moving to its new corporate offices in
the very near future and will occupy 9,600 square feet located at 1805 Colorado
Avenue, Santa Monica, CA which it leases on a 5-year lease commencing December
1, 1996 with monthly lease payments of approximately $12,000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of October 31, 1996,
concerning shares of Common Stock of the Company beneficially owned by each
director and officer and by all directors and officers as a group. Unless
expressly indicated otherwise, each stockholder exercises sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------- ------------------ --------
<S> <C> <C>
Phil Kueber, Jr. 5,000 Common Less than 1%
5737 Pacific Center Blvd.
San Diego, CA 92121
Ray Willenberg, Jr. 155,619 Common 1.3%
5737 Pacific Center Blvd.
San Diego, CA 92121
Frank DeMille 1,000,000 Common 8.6%
434 E. 58th, Suite. 1D
New York, NY 10022
</TABLE>
7
<PAGE> 8
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, ages and current positions
with the Company held by Directors, Executive Officers and significant
employees, together with the year such positions were assumed. There is no
immediate family relationship between or among any of the Directors, Executive
Officers or significant employees, and the Company is not aware of any
arrangement or understanding between any Director or Executive Officer and any
other person pursuant to which he was elected to his current position.
<TABLE>
<CAPTION>
POSITION
NAME AGE POSITION SINCE
- ---------------- --- -------- --------
<S> <C> <C> <C>
Philip T. Kueber, Jr. 35 President and Director April 1995
Frank DeMille 50 Director December 1995
Ray Willenberg, Jr. 44 Director August 1996
</TABLE>
BUSINESS EXPERIENCE - Business experience for the last five years and
other information relating to each Director and Executive Officer is as follows:
PHILIP T. KUEBER, JR. is President and a Director of NV Entertainment and
resides in Los Angeles, California. Mr. Kueber has financed and managed high
technology growth companies, such as Offshore Navigational Systems and Knave
Digital Systems from 1991 to 1996. From 1983 to the present, Mr. Kueber has
also written and produced television and multimedia entertainment, and recently
completed research and development on a new product for digital video.
FRANK DeMILLE is a Director and Chief Financial Officer of NV Entertainment and
currently resides in New York City. Mr. DeMille has been actively involved in
entertainment and venture financing for several companies, including Software
Control Systems, and feature film financing since 1976. Mr. DeMille recently
concluded a twelve year career on Wall Street. Prior to joining the Company,
from November 1994 to November 1995, Mr. DeMille was a broker with Rickel &
Associates and from October 1991 through September 1994, Mr. DeMille was a
broker with the firm of The Stamford Company.
RAY WILLENBERG, JR. is Vice President and Corporate Secretary of New Visual
Entertainment, Inc. Ray has over 25 years of experience in the mortgage banking
industry and executive management. For the Company, he is responsible for
theater and internal operations, project fund raising and personnel development.
From 1972 to 1995, Mr. Willenberg was Chief Executive Officer of Mesa Mortgage
Company in San Diego, California.
8
<PAGE> 9
ITEM 6. EXECUTIVE COMPENSATION
For services rendered to the Company during the fiscal year ended
October 31, 1996 and for the prior two fiscal years, no executive officers
received cash compensation in excess of $100,000. The following table sets forth
information concerning all annual cash compensation paid to the chief executive
officer of the Company for services rendered to the Company during the twelve
month period ended October 31, 1996.
<TABLE>
<CAPTION>
Name of Individual Cash
or Number in Group Capacity Served Compensation
- ------------------ ------------------ ------------
<S> <C> <C>
Philip T. Kueber, Jr. President and Chief -0-
Executive Officer
</TABLE>
In addition, the Company makes available certain non-monetary benefits
to its executive officers with a view to acquiring and retaining qualified
personnel and facilitating job performance. The Company considers such benefits
to be ordinary and incidental business costs and expenses. The value of such
benefits did not exceed, in the case of any named individual, 10% of the cash
compensation of the individual.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following sets forth information regarding transactions between the
Company and the following persons: directors, officers and persons who
potentially own in excess of 5% of the Company's Common Stock:
None
ITEM 8. DESCRIPTION OF SECURITIES
The $.001 par value Common Stock of the Registrant being registered
hereunder is the Registrant's only authorized class of stock. Each share of
Common Stock is entitled to participate pro rata in dividends and distributions
upon liquidation and to one vote for all purposes. There are no preemptive
rights nor are there conversion rights, redemption provisions or sinking fund
provisions relating to the Common Stock. The shares of Common Stock have no
cumulative voting rights. All outstanding shares of such Common Stock are fully
paid and nonassessable.
In addition, the rights of the holders of the Common Stock of the
Registrant may not be modified otherwise than by a vote of a majority or more of
the shares outstanding voting as a class. There are no restrictions on the
repurchase of redemption of shares of such Common Stock by the Registrant while
there is any arrearage in the payment of dividends or sinking fund installments.
9
<PAGE> 10
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS
(a) MARKET INFORMATION
The Company's common stock is presently traded on the over-the-counter
market under the symbol "NVXE". The following table shows the high and low bid
and ask prices of the stock since it commenced trading on February 20, 1996.
COMMON STOCK
<TABLE>
<CAPTION>
BID PRICES (1) ASK PRICES
-------------- ------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
FISCAL QUARTERS-1996
(November 1995 through
October 1996)
Second Quarter 3/4 3/8 1 1/4 3/4
Third Quarter 3 3/4 7/8 4 1/2 1 1/4
Fourth Quarter 3 1 5/32 3 3/8 1 5/16
</TABLE>
(1) The bid prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
(b) HOLDERS
The number of record holders of the Company's Common Stock as of
October 31, 1996 was 284.
(c) DIVIDENDS
The Company has never paid cash dividends on its Common Stock and
intends to utilize current resources to expand its operations. Therefore, it is
not anticipated that cash dividends will be paid on the Company's common stock
in the foreseeable future.
10
<PAGE> 11
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal proceedings
other than ordinary routine litigation incidental to the business.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Since December 31, 1993, the Registrant has sold securities
unregistered under the Securities Act of 1933 (the "Act"), in the following
transactions:
NONE
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Although applicable provisions of Utah corporate law allow such
indemnification under certain circumstances, no provision of the certificate of
incorporation, bylaws, contract or other arrangement insures or indemnifies a
controlling person, director or officer of the Registrant.
PART F/S
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Index to the Consolidated Financial Statements is set forth on page
F/S hereof, which immediately follows the Exhibits listed below. The
Consolidated Financial Statements of Siliwood Entertainment Corporation, dated
as of October 31, 1995, together with the report thereon of BDO Seidman dated
December 12, 1995, are set forth on pages F-1 through F-10 hereof. The
Consolidated Unaudited Financial Statements of New Visual Entertainment and
Subsidiary, dated as of July 31, 1996 are set forth on pages F-11 through F-24
hereof.
PART III
ITEM 1. INDEX TO EXHIBITS
NOT APPLICABLE
ITEM 2. DESCRIPTION OF EXHIBITS
NOT APPLICABLE
11
<PAGE> 12
NEW VISUAL ENTERTAINMENT, INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Public Accountants F-1
Balance Sheet at October 31, 1995 F-2
Statements of Operations for the year ended October 31, 1995 and the
period December 5, 1985 (inception) through October 31, 1995 F-3
Statements of Stockholders' Equity (Deficiency) for the year ended October 31,
1995 and for the period December 5, 1985 (inception)
through October 31, 1995 F-4 - F-5
Statements of Cash Flows for the year ended October 31, 1996 and for
the period December 5, 1985 (inception) through October 31, 1995 F-6 - F-7
Summary of Accounting Policies F-8
Notes to Consolidated Financial Statements F-9 - F-10
Consolidated Unaudited Balance Sheet at July 31, 1996 F-11
Consolidated Unaudited Statements of Operations for the nine months ended July
31, 1996 and for the period December 5, 1985 (inception)
to July 31, 1996 F-12
Consolidated Unaudited Statement of Stockholders' Equity (Deficiency) for the
nine months ended July 31, 1996 and for the period December 5,
1985 (inception) to July 31, 1996 F-13 - F-15
Consolidated Unaudited Statement of Cash Flows for the nine months ended July
31, 1996 and for the period December 5, 1985 (inception) to July 31,
1996 F-16 - F-17
Unaudited Summary of Accounting Policies F-18 - F-20
Notes to Consolidated Unaudited Financial Statements F-21 - F-24
F/S
</TABLE>
<PAGE> 13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Siliwood Entertainment Corporation
(a Development Stage Enterprise)
Los Angeles, California
We have audited the accompanying balance sheet of Siliwood Entertainment
Corporation (a Development Stage Enterprise), as of October 31, 1995, and the
related statements of operations, stockholders' equity and cash flows for the
year then ended and for the period December 5, 1985 (Inception) to October 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Siliwood Entertainment
Corporation, (a Development Stage Enterprise) at October 31, 1995, and the
results of its operations and its cash flows for the year then ended and for the
period December 5, 1985 (Inception) to October 31, 1995 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6, the Company
has no historical operations and minimal capital. These matters raise
substantial doubt as to the Company's ability to continue as a going concern.
The Company's future operations are dependent upon generating funds to finance
the marketing and expansion of its operations. Management plans to generate
these funds through support from officer loans and the issuance of the Company's
stock. There is no assurance that this will generate sufficient funds to enable
the Company to continue its operations for the next twelve months. The financial
statements does not include any adjustments that might result from the outcome
of this uncertainty.
BDO SIEDMAN, LLP
December 12, 1995
F-1
<PAGE> 14
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
October 31, 1995
- -----------------------------------------------------------------------------
<S> <C>
ASSETS
Cash $ 44
Organization costs 13,677
Intangible assets 410,700
Property and equipment 5,893
- -----------------------------------------------------------------------------
$ 430,314
=============================================================================
LIABILITIES
Due to officer (Note 2) $ 19,614
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Notes 3 and 4)
Common Stock, par value - $.001, shares
authorized - 100,000,000 issued and
outstanding 7,209,259 7,209
Additional paid-in capital 859,152
Accumulated deficit during development stage (105,641)
Stock note receivable (Note 3) (350,020)
- -----------------------------------------------------------------------------
410,700
- -----------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 430,314
=============================================================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-2
<PAGE> 15
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 5,
1985
(Inception) to
Year Ended October 31,
October 31, 1995
1995 (Cumulative)
- -------------------------------------------------------------------------------
<S> <C> <C>
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES $ 14,400 $ 105,641
- -------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (14,400) (105,641)
INCOME TAX EXPENSE - -
- -------------------------------------------------------------------------------
NET LOSS $ (14,400) $ (105,641)
===============================================================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-3
<PAGE> 16
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD DECEMBER 5, 1985 (INCEPTION) TO OCTOBER 31, 1995
AND FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Stock Additional During the Stock Stockholders'
--------------------- Paid-in Development Note Equity
Shares Amount Capital Stage Receivable (Deficiency)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock
for cash ($.02 per share) -
December 1985 500,000 $ 500 $ 9,500 $ -- $ -- $ 10,000
Retirement of common
stock - September 1986 (84,600) (85) 85 -- -- --
Issuance of common stock
- via public offering,
net of issuance costs
of $6,985, ($.10 per share) -
October 1986 752,500 753 67,512 -- -- 68,265
Net loss -- -- -- (3,165) -- (3,165)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1986 1,167,900 1,168 77,097 (3,165) -- 75,100
Net loss -- -- -- (75,100) -- (75,100)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1987 1,167,900 1,168 77,097 (78,265) -- --
Net losses for years ended
October 31, 1988 and 1989 -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1989 1,167,900 1,168 77,097 (78,265) -- --
Issuance of common stock
for services, at current
market value ($.10 per share) -
June 1990 129,767 130 12,846 -- -- 12,976
Net loss -- -- -- (12,976) -- (12,976)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1990 1,297,667 1,298 89,943 (91,241) -- --
</TABLE>
F-4
<PAGE> 17
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD DECEMBER 5, 1985 (INCEPTION) TO OCTOBER 31, 1995
AND FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Stock Additional During the Stock Stockholders'
--------------------- Paid-in Development Note Equity
Shares Amount Capital Stage Receivable (Deficiency)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net losses for years ended
October 31, 1991, 1992,
1993 and 1994 -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1994 1,297,667 1,298 89,943 (91,241) -- --
Issuance of common stock
in acquisition of Siliwood
(see Note 1) - ($.12 per share)
October 1995 5,911,592 5,911 714,109 -- (350,020) 370,000
Issuance of common stock
for services from controlling
shareholders at current
value ($.12 per share) -
October 1995 -- -- 14,400 -- -- 14,400
Issuance of common stock
from controlling shareholders
to investors ($.37 per share) -
October 1995 -- -- 40,700 -- -- 40,700
Net loss -- -- -- (14,400) -- (14,400)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1995 7,209,259 $7,209 $859,152 $(105,641) $(350,020) $410,700
===========================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-5
<PAGE> 18
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE IN CASH AND CASH EQUIVALENTS December 5,
1985
(Inception) to
Year Ended October 31,
October 31, 1995
1995 (Cumulative)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (14,400) $ (105,641)
Adjustments to reconcile net loss to net cash
used in operating activities:
Consulting fees paid by issuing common stock
by controlling shareholders 14,400 14,400
Consulting fees paid by issuing common stock - 12,976
Increase (decrease) from changes in:
Organization costs (13,677) -
- ----------------------------------------------------------------------------------------------
Net cash used in operating activities (13,677) (78,265)
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (5,893) -
- ----------------------------------------------------------------------------------------------
Net cash used in investing activities (5,893) -
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock - 78,265
Proceeds from officer loans 19,614 -
- ----------------------------------------------------------------------------------------------
Net cash provided by financing activities 19,614 78,265
- ----------------------------------------------------------------------------------------------
NET INCREASE IN CASH 44 -
CASH AND CASH EQUIVALENTS, at beginning of period - -
- ----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, at end of period $ 44 $ -
==============================================================================================
</TABLE>
F-6
<PAGE> 19
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
On June 21, 1990, the Company issued 129,767 shares of common stock for
consulting fees.
On September 8, 1995, the Company issued 3,730,998 shares of common stock to
a shareholder for a non-interest-bearing, non-recourse note receivable for
$350,020. (See Note 3).
On October 18, 1995, the controlling shareholders issued 118,232 shares of
common stock for consulting fees.
On October 31, 1995, the officers of the Company issued 110,000 shares of
common stock to a vendor of the Company in exchange for the rights to
certain Stereoscopic/3-D titles. (See Note 4).
See accompanying summary of accounting policies and notes to financial
statements.
F-7
<PAGE> 20
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF ACCOUNTING POLICIES
PROPERTY AND
EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on a
straight-line method over the estimated useful lives of the assets which
generally range form five to seven years.
INCOME TAXES
Income taxes are accounted for in accordance with the Statement of Financial
Accounting Standard (SFAS) No. 109 "Accounting for Income Taxes." The Statement
employs an asset and liability method of accounting for income taxes. Under the
asset and liability method, deferred income taxes are recognized for tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable to future years to difference between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. Under
SFAS No. 109, the effect on deferred income taxes of a change in tax rates is
recognized income in the period that includes the enactment date.
INTANGIBLE ASSETS
Intangible assets consists of licenses purchased related to the stereoscopic
imaging technology and the rights to certain stereoscopic/3-D titles. These cost
will be amortized over their estimated economic life of 5 years.
F-8
<PAGE> 21
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
The Company, a development stage enterprise (previously known as Bellwether
Investment Inc.), was incorporated under the laws of the State Utah on December
5, 1985 and has not yet commenced operations. From 1985 until October of 1995
the Company was an inactive shell with minimal administrative activities. On
October 18, 1995, the Company acquired all of the outstanding shares of Siliwood
Entertainment Corporation ("Siliwood"), another development stage company with
no operations. The Company issued 5,911,592 shares of common stock to the
shareholders of Siliwood Entertainment Corporation to effect the acquisition.
The acquisition was accounted for as a pooling of interest. The Company then
changed its name to Siliwood Entertainment Corporation and is currently engaged
in the development, design and distribution of software techniques for
stereoscopic (3-D) authoring and visualization.
2. RELATED PARTY TRANSACTIONS
During 1995, an officer of the Company advanced the Company $19,614 for
payment of organization costs and purchase of equipment.
3. STOCK NOTE RECEIVABLE
At October 31, 1995, the Company has a non-interest bearing, non-recourse note
receivable due from a shareholder for $350,020 related to the purchase of the
Company's common stock.
4. COMMON STOCK
On October 18, 1995, the Company approved a 1 for 2 reverse stock split. All
common shares, and price per share information disclosed in the financial
statements and notes have been adjusted to give effect to the 1 for 2 reverse
stock split.
On October 31, 1995, the officers of the Company issued 110,000 shares of common
stock to a vendor of the Company to acquire the rights to certain
Stereoscopic/3-D titles.
5. INCOME TAXES
At October 31, 1995, the Company has unused net operating loss carryforward of
approximately $105,000 available to offset future years' federal taxable income
through 2001. At October 31, 1995 the Company has a deferred tax asset of
$35,700 and established a valuation allowance equal to the deferred tax asset.
There was no current year tax provision for the year ended October 31, 1995.
F-9
<PAGE> 22
SILIWOOD ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
6. GOING CONCERN CONSIDERATIONS
The Company has no historical operations and has minimal capital. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments relating to the recoverability or classification of reported assets
or liabilities should the Company be unable to continue as a going concern.
The Company has been able to continue based upon the financial support of its
Officers and the continued existence of the Company is dependent upon this
support and its ability to acquire assets by the issuance of stock. Management's
plans in this regard are to receive the continued support of the Officers and/or
to obtain other financing until profitable operation and positive cash flow are
achieved and maintained. There can be no guarantee that the Officers will
provide this support.
7. SUBSEQUENT EVENTS
The Company has received a letter of understanding from First Interstate Bank,
the trustee for the Harold Lloyd Trust, to enter into a licensing agreement
which assigns the Company the use of the Stereoscopic 3-D reproduction rights of
the Harold Lloyd 3-D Collection, including rights to stereo images. This
agreement requires the Company to fund all development costs. The Company will
issue 100,000 shares of common stock plus royalty payments in the future as
consideration for this agreement.
The Company has entered into a letter of understanding with Spatial Media, Inc.
("SMI") to license a proprietary Holographic Three Dimensional ("H3D") signature
to enable 3-D video and computer content that the Company produces, to be
compatible with SMI active eyewear (viewing glasses). The Company will also be a
favorable distributor of SMI active eyewear. The consideration for this
agreement will be determined upon the formalization of this agreement.
Finally, SMI is developing a 2D to 3D converter which takes standard 2D video
and converts it in real time to simulated 3D. If SMI builds a service for this
conversion, the Company will have access to this service, which terms will be
covered under a separate agreement.
These agreements will be formally entered into upon the restoration of trading
of the Company's common stock.
F-10
<PAGE> 23
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED UNAUDITED BALANCE SHEET
<TABLE>
<CAPTION>
July 31, 1996
- -----------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Cash $ 41,807
Receivables 65,527
Due from related parties (Note 2) 38,085
Theatre equipment held for sale 52,820
Music rights (Note 6) 2,100,000
Film and video library 1,626,627
Projects under development 1,215,466
Property and equipment, net (Note 3) 284,569
Deposits 245,000
Organization costs, net of accumulated amortization of $2,051 11,626
Intangible assets, net of accumulated amortization of $61,647 351,553
- -----------------------------------------------------------------------------------------------
$ 6,033,080
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 173,080
Notes payable, related parties (Note 5) 252,000
- -----------------------------------------------------------------------------------------------
Total liabilities 425,080
- -----------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 8)
- -----------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Note 6)
Convertible preferred stock, series A and B, $30 par value, 200,000,000 shares
authorized, liquidation value of $30 per share, 200,000 shares issued and
outstanding 2,100,000
Common stock, $.001 par value, 100,000,000 shares authorized,
11,642,449 issued and outstanding 11,642
Additional paid-in capital 4,332,337
Deficit accumulated during the development stage (323,209)
Stock note receivable and subscription receivable (Note 4) (512,770)
- -----------------------------------------------------------------------------------------------
Total stockholders' equity 5,608,000
- -----------------------------------------------------------------------------------------------
$ 6,033,080
===============================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-11
<PAGE> 24
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 5,
1985
Nine Months (Inception) to
Ended July 31,
July 31, 1996
1996 (Cumulative)
- --------------------------------------------------------------
<S> <C> <C>
REVENUES $ 93,373 $ 93,373
- --------------------------------------------------------------
EXPENSES:
COST OF SALES 100,604 100,604
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 210,337 315,978
- --------------------------------------------------------------
Total expenses 310,941 416,582
- --------------------------------------------------------------
LOSS BEFORE INCOME TAXES (217,568) (323,209)
INCOME TAX EXPENSE (Note 7) -- --
- --------------------------------------------------------------
NET LOSS $(217,568) $(323,209)
==============================================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-12
<PAGE> 25
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD DECEMBER 5, 1985 (INCEPTION) TO OCTOBER 31, 1995
AND FOR THE NINE MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
----------------------- ----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock for cash ($.02 per share) -
December 1985 -- $ -- 500,000 $ 500
Retirement of common stock - September 1986 -- -- (84,600) (85)
Issuance of common stock - via public offering,
net of issuance costs of $6,985, ($.10 per share) -
October 1986 -- -- 752,500 753
Net loss -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1986 -- -- 1,167,900 1,168
Net loss -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1987 -- -- 1,167,900 1,168
Net losses for years ended October 31, 1988 and 1989 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1989 -- -- 1,167,900 1,168
Issuance of common stock for services, at current
market value ($.10 per share) - June 1990 -- -- 129,767 130
Net loss -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Deficit Stock Note
Accumulated Receivable Total
Additional During the and Stockholders'
Paid-in Development Subscription Equity
Capital Stage Receivable (Deficiency)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock for cash ( $.02 per share) -
December 1985 $ 9,500 $ -- $ -- $ 10,000
Retirement of common stock - September 1986 85 -- -- --
Issuance of common stock - via public offering,
net of issuance costs of $6,985, ($.10 per share) -
October 1986 67,512 -- -- 68,265
Net loss -- (3,165) -- (3,165)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1986 77,097 (3,165) -- 75,100
Net loss -- (75,100) -- (75,100)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1987 77,097 (78,265) -- --
Net losses for years ended October 31, 1988 and 1989 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1989 77,097 (78,265) -- --
Issuance of common stock for services, at current
market value ($.10 per share) - June 1990 12,846 -- -- 12,976
Net loss -- (12,976) -- (12,976)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE> 26
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD DECEMBER 5, 1985 (INCEPTION) TO OCTOBER 31, 1995
AND FOR THE NINE MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
------------------------- ---------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, October 31, 1990 -- -- 1,297,667 1,298
Net losses for years ended October 31, 1991, 1992,
1993, and 1994 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1994 -- -- 1,297,667 1,298
Issuance of common stock in acquisition of Siliwood
($.12 per share) - October 1995 (see Note 1) -- -- 5,911,592 5,911
Issuance of common stock for services from controlling
shareholders at current value ($.12 per share) -
October 1995 -- -- -- --
Issuance of common stock from controlling shareholders
to investors ($.37 per share) - October 1995 -- -- -- --
Net loss -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1995 -- -- 7,209,259 7,209
Issuance of common stock for services (unaudited):
At $.50 per share, November 1995 -- -- 30,000 30
Issuance of common stock for acquisition of NVE (unaudited):
At $1.40 per share, June 1996 -- -- 1,089,333 1,089
At $1.75 per share, June 1996 -- -- 466,857 467
</TABLE>
<TABLE>
<CAPTION>
Deficit Note Stock
Accumulated Receivable Total
Additional During the and Stockholders'
Paid-in Development Subscription Equity
Capital Stage Receivable (Deficiency)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, October 31, 1990 89,943 (91,241) -- --
Net losses for years ended October 31, 1991, 1992,
1993, and 1994 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1994 89,943 (91,241) -- --
Issuance of common stock in acquisition of Siliwood
($.12 per share) - October 1995 (see Note 1) - 714,109 -- (350,020) 370,000
Issuance of common stock for services from controlling
shareholders at current value ($.12 per share) -
October 1995 14,400 -- -- 14,400
Issuance of common stock from controlling shareholders
to investors ($.37 per share) - October 1995 - 40,700 -- -- 40,700
Net loss -- (14,400) -- (14,400)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1995 859,152 (105,641) (350,020) 410,700
Issuance of common stock for services (unaudited):
At $.50 per share, November 1995 14,970 -- -- 15,000
Issuance of common stock for acquisition of NVE (unaudited):
At $1.40 per share, June 1996 1,523,977 -- -- 1,525,066
At $1.75 per share, June 1996 816,533 -- -- 817,000
</TABLE>
F-14
<PAGE> 27
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD DECEMBER 5, 1985 (INCEPTION) TO OCTOBER 31, 1995
AND FOR THE NINE MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
--------------------------- --------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock - July 1996 (unaudited):
Shares issued in private placement ($.50) per share -- -- 850,000 850
Cost associated with private placement -- -- -- --
Issuance of common stock for cash (unaudited):
At $.50 per share, July 1996 -- -- 1,780,000 1,780
Cost associated with private placement -- -- -- --
At $1.00 per share, July 1996 -- -- 157,000 157
Issuance of common stock for services (unaudited):
At $.50 per share, July 1996 -- -- 50,000 50
At $1.00 per share, July 1996 -- -- 10,000 10
Issuance of preferred stock for acquisition of music
rights - July 1996 (see Note 6) (unaudited) 200,000 2,100,000 -- --
Net loss (unaudited) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, July 31, 1996 200,000 $2,100,000 11,642,449 $11,642
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Deficit Stock Note
Accumulated Receivable Total
Additional During the and Stockholders'
Paid-in Development Subscription Equity
Capital Stage Receivable (Deficiency)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock - July 1996 (unaudited):
Shares issued in private placement ($.50) per share 424,150 -- -- 425,000
Cost associated with private placement (382,500) -- -- (382,500)
Issuance of common stock for cash (unaudited):
At $.50 per share, July 1996 888,220 -- (25,750) 864,250
Cost associated with private placement (3,948) -- -- (3,948)
At $1.00 per share, July 1996 156,843 -- (137,000) 20,000
Issuance of common stock for services (unaudited):
At $.50 per share, July 1996 24,950 -- -- 25,000
At $1.00 per share, July 1996 9,990 -- -- 10,000
Issuance of preferred stock for acquisition of music
rights - July 1996 (see Note 6) (unaudited) -- -- -- 2,100,000
Net loss (unaudited) -- (217,568) -- (217,568)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, July 31, 1996 $ 4,332,337 $(323,209) $(512,770) $ 5,608,000
===================================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-15
<PAGE> 28
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED UNAUDITED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE IN CASH AND CASH EQUIVALENTS December 5,
1995
Nine Months (Inception) to
Ended July 31, 1996
July 31, 1996 (Cumulative)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(217,568) $ (323,209)
Adjustments to reconcile net loss to net cash
used in operating activities:
Consulting fees paid by issuing common stock
by controlling shareholders 35,000 49,400
Professional fees paid by issuing common stock 15,000 27,976
Depreciation and amortization 90,486 90,486
Increase (decrease) from changes in:
Receivables (65,527) (65,527)
Due from related parties (57,699) (57,699)
Theatre equipment held for sale, music rights, and film
and video library (581,325) (581,325)
Deposits 5,000 5,000
Organization costs -- (13,677)
Intangible assets (2,500) (2,500)
Accounts payable and accrued expenses 26,485 26,485
- -----------------------------------------------------------------------------------------------------
Net cash used in operating activities (752,648) (844,590)
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (121,391) (127,284)
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities (121,391) (127,284)
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 922,802 1,001,067
Proceeds from officer loan -- 19,614
Repayments on notes payable (7,000) (7,000)
- -----------------------------------------------------------------------------------------------------
Net cash provided by financing activities 915,802 1,013,681
- -----------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 41,763 41,807
CASH AND CASH EQUIVALENTS, at beginning of period 44 --
- -----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, at end of period $ 41,807 $ 41,807
=====================================================================================================
</TABLE>
F-16
<PAGE> 29
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED UNAUDITED STATEMENT OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
On June 21, 1990, the Company issued 129,767 shares of common stock for
consulting fees.
On September 8, 1995, the Company issued 3,730,998 shares of common stock to
a shareholder for a non-interest-bearing, non-recourse note receivable for
$350,020. (See Note 4).
On October 18, 1995, the controlling shareholders issued 118,232 shares of
common stock for consulting fees.
On October 31, 1995, the officers of the Company issued 110,000 shares of
common stock to a vendor of the Company in exchange for the rights to certain
Stereoscopic/3-D titles. (See Note 6).
On November 1, 1995, the Company issued 30,000 shares of common stock to an
individual for consulting services.
On June 10, 1996, the Company issued 1,556,190 shares of common stock to
purchase the net assets of a partnership involved in the same type of
business as the Company (see Note 6). As a result of this purchase the
Company acquired the following net assets:
<TABLE>
<CAPTION>
Amount
- ------------------------------------------------------------------------------
<S> <C>
Prepaid expenses and other assets $ 250,000
Theatre, film, and video library 2,331,961
Property and equipment 165,700
Accounts payable and accrued expenses (146,595)
Notes payable (259,000)
- ------------------------------------------------------------------------------
$2,342,066
- ------------------------------------------------------------------------------
</TABLE>
On July 23, 1996, the Company issued 200,000 shares of series "B" convertible
preferred stock to purchase the rights of a music library (see Note 6).
See accompanying summary of accounting policies and notes to financial
statements.
F-17
<PAGE> 30
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED SUMMARY OF ACCOUNTING POLICIES
PRINCIPALS OF The consolidated financial statements include the
CONSOLIDATION accounts of New Visual Entertainment, Inc. ("NVE")
(formerly known as Siliwood) and its subsidiary, NV
Entertainment ("NV") (collectively, "the Company"). All
significant intercompany balances and transactions have
been eliminated.
PROPERTY AND Property and equipment are stated at cost. Depreciation
EQUIPMENT is computed on a straight-line method over the
estimated useful lives of the assets which generally
range from five to seven years.
INTANGIBLE ASSETS Intangible assets consists of licenses purchased
AND MUSIC RIGHTS related to music rights and the stereoscopic imaging
technology and the rights to certain stereoscopic/3-D
titles. These costs are stated at the lower of cost or
net realizable value and will be amortized over their
estimated economic life of 5 and 10 years,
respectively. For the nine months ended July 31, 1996,
amortization expense was $63,698.
FILM AND VIDEO Film and video library and projects under development
LIBRARY AND PROJECTS are stated at the lower of amortized cost or market.
UNDER DEVELOPMENT Upon completion, costs are amortized on an individual
production basis in the proportion that current gross
revenues bear to management's estimate of total gross
revenues with such estimates being reviewed at least
quarterly. For the nine months ended July 31, 1996,
amortization expense related to the film and video
library was $18,373.
INCOME TAXES Income taxes are accounted for in accordance with the
Statement of Financial Accounting Standard (SFAS) No.
109 "Accounting for Income Taxes." The Statement
employs an asset and liability method of accounting for
income taxes. Under the asset and liability method,
deferred income taxes are recognized for tax
consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years
to difference between the financial statement carrying
amounts and the tax bases of existing assets and
liabilities. Under SFAS No. 109, the effect on deferred
income taxes of a change in tax rates is recognized
income in the period that includes the enactment date.
ACCOUNTING The preparation of financial statements in conformity
ESTIMATES with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,
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.
F-18
<PAGE> 31
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED SUMMARY OF ACCOUNTING POLICIES
NEW ACCOUNTING Statement of Financial Accounting Standards No. 121,
PRONOUNCEMENTS "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of" (SFAS No. 121)
issued by the Financial Accounting Standards Board
(FASB) is effective for financial statements for fiscal
years beginning after December 15, 1995. The new
standard establishes new guidelines regarding when
impairment losses on long-lived assets, which include
plant and equipment, and certain identifiable
intangible assets, should be recognized and how
impairment losses should be measured. The Company does
not expect adoption to have a material effect on its
financial position or results of operations.
Statements of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS No.
123) issued by the Financial Accounting Standards Board
(FASB) is effective for specific transactions entered
into after December 15, 1995, while the disclosure
requirements of SFAS No. 123 are effective for
financial statements for fiscal years beginning no
later than December 15, 1995. The new standard
establishes a fair value method of accounting for
stock-based compensation plans and for transactions in
which an entity acquires goods or services from
nonemployees in exchange for equity instruments. At the
present time, the Company has not determined if it will
change its accounting policy for stock based
compensation or only provide the required financial
statement disclosures. As such, the impact on the
Company's financial position and results of operations
is currently unknown. The Company does not expect
adoption to have a material effect on its financial
position or results of operations.
FAIR VALUE Quoted market prices generally are not available for
OF FINANCIAL all of the Company's financial instruments.
INSTRUMENTS Accordingly, fair values are based on judgments
regarding current economic conditions, risk
characteristics of various financial instruments and
other factors. These estimates involve uncertainties
and matters of judgment, and therefore, cannot be
determined with precision. Changes in assumptions could
significantly affect the estimates.
F-19
<PAGE> 32
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED SUMMARY OF ACCOUNTING POLICIES
FAIR VALUE A description of the methods and assumptions used to
OF FINANCIAL estimate the fair value of each class of the Company's
INSTRUMENTS financial instruments is as follows:
(CONTINUED)
Cash, receivables, accounts payable and accrued
expenses, and notes payable have carrying amounts that
approximate fair value due to the short maturity of
these instruments.
F-20
<PAGE> 33
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BUSINESS The Company, a development stage enterprise (previously
known as Bellwether Investment Inc.), was incorporated
under the laws of the State Utah on December 5, 1985.
On October 18, 1995, the Company acquired all of the
outstanding shares of Siliwood Entertainment
Corporation ("Siliwood"), another development stage
company with no operations. The Company issued
5,911,592 shares of common stock to the shareholders of
Siliwood Entertainment Corporation to effect the
acquisition. The acquisition was accounted for as a
pooling of interest. The Company then changed its name
to Siliwood Entertainment Corporation.
On June 10, 1996, the Company acquired certain assets
and assumed various liabilities from Infinity Vision
Entertainment ("IVE"). Immediately following the
purchase, Siliwood changed its name to New Visual
Entertainment, Inc. ("NVE"). Accordingly, former IVE
partners have an interest in NVE (formerly known as
Siliwood) stock. The acquisition of these assets and
the assumption of these liabilities has been accounted
for as a purchase and the costs were allocated based on
fair market value. There were no operations of NVE
prior to acquisition. The Company is currently engaged
in the development, design and distribution of software
techniques, videos, and theatres for stereoscopic (3-D)
authoring and visualization. The Company has generated
minimal revenues to date. Due to the nature of the
business the Company has presented an unclassified
balance sheet.
2. DUE FROM During 1996, the Company repaid an amount of $19,614
RELATED PARTIES owed to a stockholder as of October 31, 1995 and has
made advances to certain employees and shareholders
with a net receivable at July 31, 1996 of $38,085.
F-21
<PAGE> 34
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
3. PROPERTY AND Property and equipment consist of the following:
EQUIPMENT, NET
<TABLE>
<CAPTION>
July 31, 1996
-------------------------------------------------------
<S> <C>
Furniture and fixtures $ 3,175
Camera equipment 276,868
Office equipment 12,941
-------------------------------------------------------
292,984
Less: accumulated depreciation 8,415
-------------------------------------------------------
Total property and equipment $284,569
-------------------------------------------------------
</TABLE>
For the nine months ended July 31, 1996, depreciation
expense was $8,415.
4. STOCK NOTE At July 31, 1996, the Company has a non-interest
RECEIVABLE AND bearing, non-recourse note receivable due from a
SUBSCRIPTION shareholder for $350,020 related to the purchase of the
RECEIVABLE Company's common stock. The Company has subscription
receivables of $162,750 related to a private placement
offering completed in July 1996 (see Note 6).
5. NOTES PAYABLE, Notes payable consists of the following:
RELATED PARTIES
<TABLE>
<CAPTION>
July 31, 1996
---------------------------------------------------------
<S> <C>
Note payable to stockholder, interest, due
monthly at 12%, due on January 6, 2000 $200,000
Note payable to stockholder, no interest, due
on demand 19,000
Note payable to former IVE shareholder, no
interest, due on demand 28,000
Note payable to former IVE shareholder,
interest at 10%, due on demand 5,000
---------------------------------------------------------
$252,000
---------------------------------------------------------
</TABLE>
F-22
<PAGE> 35
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
6. COMMON DESCRIPTION OF SECURITIES
STOCK AND
PREFERRED On October 18, 1995, the Company approved a 1 for 2
STOCK reverse stock split. All common shares, and price per
share information disclosed in the financial statements
and notes have been adjusted to give effect to the 1
for 2 reverse stock split.
On October 31, 1995, the officers of the Company issued
110,000 shares of common stock to a vendor of the
Company to acquire the rights to certain
Stereoscopic/3-D titles.
On June 10, 1996, the Company issued 1,556,190 shares
of common stock for $2,342,066 in exchange for certain
assets and liabilities of IVE (See Note 1).
On July 23, 1996, the Company issued 200,000 shares of
non-voting series "B" convertible preferred stock (3 to
1 conversion feature for common stock) with a
liquidation value of $30 per share for the acquisition
of the rights of a music library, which consist of
2,100 titles. Each music title was appraised at a value
range of $1,000 to $3,000. The value of the acquisition
was based upon the fair market value of the stock that
was issued.
In July 1996, the Company issued 850,000 shares of
common stock related to a private placement at $.05 per
share at a time when the stock was valued at $.50 a
share related to a private placement memorandum.
Accordingly, $382,500 was charged to additional paid in
capital related to the this private placement. In
addition, another 1,780,000 shares were issued at $.50
per share which had detachable stock warrants. The
stock warrants allow the holder to convert one warrant
for one share of common stock at $1.40. The Company had
costs of $3,948 associated with this private placement
(see Note 4).
During the nine months ended July 31, 1996, the Company
issued 30,000 shares of common stock at $.50 for
professional services which included stock option of
30,000 shares at $.25. The Company issued an additional
50,000 shares at $.50 for professional services.
F-23
<PAGE> 36
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
7. INCOME TAXES At July 31, 1996, the Company has unused federal and
state net operating loss carryforward of approximately
$323,000 and $161,000, respectively, available to
offset future years' taxable income through 2010 and
2002, respectively. At July 31, 1996, the Company has a
deferred tax asset of $124,000. The deferred tax asset
was not recognized due to uncertainties regarding its
realization; accordingly, a 100% valuation allowance
was provided. There was no current year tax provision
for the nine months ended July 31, 1996.
8. COMMITMENTS The Company has hired a television company to produce
AND 26 episodes of live music acts in 3-D. The fee
CONTINGENCIES agreement for this production is $1,100,000. As of July
31, 1996, the Company has paid $631,324. All 26
episodes have yet to be completed as of July 31, 1996.
The cost incurred to date is included in Projects under
development on the balance sheet.
The Company's projects under development and music
rights stipulate royalty payments which are based on
percentages of revenue.
9. GOING CONCERN The Company has no historical operations and has
CONSIDERATIONS minimal cash flow. These conditions raise substantial
doubt about the consolidated Company's ability to
continue as a going concern. The accompanying
consolidated financial statements do not include any
adjustments relating to the recoverability of reported
assets or liabilities should the Company be unable to
continue as a going concern.
The Company has been able to continue based upon the
financial support of its Officers and the continued
existence of the Company is dependent upon this support
and its ability to acquire assets by the issuance of
stock. Management's plans in this regard are to receive
the continued support of the Officers and/or to obtain
other financing until profitable operation and positive
cash flow are achieved and maintained. There can be no
guarantee that the Officers will provide this support.
F-24
<PAGE> 37
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NEW VISUAL ENTERTAINMENT, INC.
(Registrant)
Date: November 21, 1996 By: /s/ Philip T. Kueber, Jr.
------------------------------
Philip T. Kueber, President
Date: November 21, 1996 By: /s/ Ray Willenberg, Jr.
------------------------------
Ray Willenberg, Jr., Secretary
12
