<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the Fiscal Year Ended October 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD ______________ TO ______________
Commission File No. 0-21785
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.)
827 BRIGHTON COURT, SAN DIEGO, CALIFORNIA 92109
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number - (858) 488-9577
--------------
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $0.001 PAR VALUE
------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 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 [ ]; No [X].
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $129,845
As of December 31, 1999 the registrant had outstanding 68,896,194 shares of its
Common Stock, par value of $0.001, its only class of voting securities. The
aggregate market value of the shares of Common Stock of the registrant held by
non-affiliates on December 31, 1999, was approximately $28,684,191 based on the
average of the closing bid and ask prices on the OTC:BB on such date (See Item
5).
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report incorporates by reference information in the
proxy statement for the annual meeting of shareholders of the registrant to be
filed with the Securities and Exchange Commission on or before February 29,
2000.
Transitional Small Business Disclosure Format (Check one): Yes ; No X .
--- ---
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
New Visual Entertainment, Inc. (previously known as Bellwether Investment
Corporation) (the "Company"), was incorporated under the laws of the State of
Utah on December 5th, 1985. On October 18th, 1995, the Company acquired all of
the outstanding shares of Siliwood Entertainment Corporation ("Siliwood"), a
developmental stage company with no operations. The Company then changed its
name to Siliwood Entertainment Corporation.
On June 10th, 1996, the Company acquired certain assets and assumed various
liabilities from Infinity Vision Entertainment, a Nevada Corporation ("IVE").
Following the asset purchase, Siliwood changed its name to New Visual
Entertainment, Inc. ("NV Entertainment"). There were no operations of NV
Entertainment prior to the IVE acquisition. There were minimal operations of
IVE at the time of the acquisition. The Company is currently engaged in the
development, design and distribution of software techniques, videos, and
theaters for stereoscopic ("3D") entertainment.
NV Entertainment was founded with the mission to produce and distribute
high-impact 3D films for the growth oriented specialty venue markets, such as
theme parks, amusement parks, family entertainment centers and casinos. The
Company utilizes a low cost 3D production and exhibition technology to compete
in these markets. The technology allows the Company to produce and show its
brand of 3D films at costs roughly 15-25% of industry leading competitors such
as IMAX. The Company plans to make use of this cost advantage to continue to
produce high-quality, cost-effective 3D films and market them to venues which
have not been accessible to other 3D systems and software providers due to cost
prohibitiveness.
During 1998 and 1999, the Company engaged in three (3) on-location shoots
producing the following three proprietary rough-cut releases and one compilation
featurette: "Wonder in Belize" an underwater 3D film, "Big Waves" in Hawaii and
"A Day at the Beach", an off-road and surfing lifestyle adventure. The Company
also completed two (2) customer-driven productions, which resulted in modest
revenues: "Miss Hawaiian Tropic '99" for C3D, and "Game On", a paintball film
for JT USA.
NV Entertainment is currently located at 827 Brighton Court, San Diego,
California, but will be relocating to 5920 Friars Road, Suite 104, San Diego,
California 92108 on February 1, 2000.
PRODUCTS
--------
CAMERA & 3D SIGNATURE
---------------------
NV Entertainment owns certain exclusive licenses to use intellectual property
relating to its business. The Company has exclusive access to a patented dual
element, single lens system utilized in connection with the production of 3D
motion pictures. NV Entertainment owns one of six 3D video cameras in the world
capable of giving broadcast 3D quality to TV.
3
<PAGE>
MARKETING AND DISTRIBUTION
The Company's primary functions are to facilitate the production and
distribution of its 3D technology and establish new, innovative platforms for
the presentation of 3D media. NV Entertainment has already produced five
completed 3D films: "Edge of Reality", " Beyond 3D", "A Day at the Beach",
"Wonder in Belize" and "3DBW (Big Waves of Surfing). The Company also filmed the
Miss Hawaiian Tropics International Pageant for a 3D satellite television
distributor. New Visual Entertainment, Inc. licensed the rights of "Edge of
Reality" to a Taiwan theme park for one year. "Edge of Reality" was also
licensed for U.S. distribution with C3D.
The Company intends to market its 3D technology by providing the necessary tools
to allow for 3D production and viewing within the current 2D infrastructure. The
Company plans to:
(i) Produce and distribute 3D content for the video, special
venue, theatrical, internet, motion picture and
cable/satellite industries;
(ii) Establish special theaters for showcasing 3D content;
(iii) Create a mass audience and mainstream distribution channel;
and
(iv) License its technology to the entertainment industry and for
business to business internet consumption.
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. The Company believes that with continued technology development
the re-emergence of full-length 3D movies may reappear in the near future.
VISUAL ENTERTAINMENT MARKET
The total potential market for NV Entertainment's 3D technology encompasses
three distinct entertainment industries; broadcast and cable television, video
software, and motion pictures. In addition, Location Based Entertainment ("LBE")
theaters represent a profitable and rapidly growing market segment.
4
<PAGE>
I) BROADCAST AND CABLE TELEVISION INDUSTRY
Television advertising revenues approach $40 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 220 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 3D technology.
Initial 3D penetration of visual broadcast markets will be focused on sports
events, music videos and special programming. As the mass TV audience acquires
3D viewers, NV Entertainment believes the scope of 3D programming will expand.
Syndicated 3D programs, or even dedicated time slots or channels, may be
broadcast in 3D and could facilitate widespread video software and motion
picture opportunities.
(II) VIDEO SOFTWARE INDUSTRY
Video software (dubbed videotapes) is a $20 billion retail industry divided
almost equally between sales and rentals. Video software volume exceeds 500
million pre-recorded tapes in addition to approximately 400 million blank video
cassettes. Revenue generated by video (content) suppliers approaches $10
billion annually. 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. 10,000 copies of "Beyond 3D" were sold to C3D.
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 is currently negotiating joint distribution agreements with
entertainment companies.
DEPENDENCE ON PRODUCTION OF FILM SOFTWARE
The ability of the Company to generate substantial revenues depends upon its
ability to successfully create, produce, and market entertainment or educational
software for exhibition in its theater systems and home markets. 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 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
financial 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 most likely be unable to recoup these costs from revenues from
exhibition licenses within 24 to 36 months following release.
5
<PAGE>
DISTRIBUTION METHOD OF PRODUCTS
-------------------------------
The primary markets for New Visual products are: home entertainment, motion
pictures production, theatrical/LBE exhibition, and theme/amusement park
markets. Other ancillary markets include PC gaming and special event venue
markets. The Company intends to distribute its products through network and
exhibition contracts, and through distribution agreements with other video and
programming distributors. Hardware products will, in most cases, accompany the
sale of software (content) in a bundled 3D viewer kit containing a video, 3D
eyewear, and 3D emitter/decoder box.
COMPETITION
-----------
Although a considerable number of companies have 3D products, NV Entertainment
believes it is positioned to deliver 3D content to mass in-home audiences which
presently is not done by its competitors.
A low price structure is required to appeal to these markets that few
competitors are able to meet. The competitive environment in the home market
consists of limited suppliers of 3D viewers and content (CD-ROM, video tape)
kits, such as V-REX, VIDMAX, and others. Conversely, competition in the special
venue markets (theatrical) is much more developed. Currently, there are four
companies other than NV Entertainment that have carved a substantial niche in
special venue markets:
o IMAX
IMAX is the most formidable presence in both hardware and software
special format entertainment.
The fact that IMAX uses a 15 perforation 70mm system limits its
ability to market 3D content. As the leading 3D content hardware and
software provider; however, IMAX is regarded as NV Entertainment's
foremost competitor in special venue markets.
o IWERKS
IWERKS specializes in "ridefilm," an experience that combines motion
simulation with visual immersion and functions in either a fixed base
or portable capacity.
o SHOWSCAN
Showscan also specializes in motion simulation entertainment for
specialty theaters.
o CINEMA RIDE, INC.
Cinema Ride, Inc. is also a competitor in specialty theater and motion
simulated entertainment. Cinema Ride technology combines 3D films with
motion to provide unique on screen action.
6
<PAGE>
NV Entertainment believes that it is in position to begin successfully marketing
of 3D entertainment, particularly to mass in-home markets. The cost structure of
its technology positions it to be viable in the home market. Of the home 3D
technologies available, NV Entertainment believes that its technology presently
delivers the highest image quality and is the most adaptable to the home viewing
environment. Furthermore, due to NV Entertainment's low cost, single camera 3D
lens production and exhibition technologies, it is positioned to provide 3D
systems and software to the motion picture industry and special venue markets.
NV Entertainment's stereographic 3D media is differentiated from past or
traditional 3D media in that it is true stereo-imagery as it is produced and
exhibited. It is also different in that NV Entertainment 3D is produced and
exhibited through a single lens. Prior methods used to create and exhibit 3D
employed simulated 3D filming and projection techniques using 2 cameras for
production and 2 projectors for exhibition. Production of true stereo imagery
requires the emulation of depth perception known to normal human eyesight, which
results from two (right and left) converging fields of perception on an object
from slightly different perspectives. The differing perspectives occur due to
the distance between a human's eyes. 3D content can be produced in a number of
formats for Film, Video, Computer/Internet and Broadcast TV. The shutter glass
viewing system can be utilized to view all of these formats, yet is primarily
used for video, computer/Internet, broadcast TV and satellite transmission
mediums.
Once 3D content has been produced, whether by single or dual camera methods, it
can be viewed on any standard television monitor for most TV broadcast standards
(NTSC-North America, PAL-Asia, Australia) when accompanied by the shutter glass
system. When a 3D video tape or broadcast signal is displayed on the TV, the
naked eye sees two (2) separate, overlapping images; one for the right eye and
one for the left eye. The viewing system, however, isolates the right and left
eye views so as to allow the right eye to see only the right eye view, and the
left eye to see only the left eye view, but from slightly differing
perspectives. This is accomplished by the Liquid Crystal shutters within the
glasses that alternate, Lon-Roff, Ron-Loff, at a rate of 60-120 hertz, or 30-60
times per second for each eye. The timing of the shutter is synchronized with
the action on the monitor by the wireless transmitter. The transmitter
communicates with the transmission medium (video tape, broadcast signal, etc.),
interprets the synchronization code and transmits instructions to the glasses by
means of an infrared signal.
EMPLOYEES
---------
The Company has five (5) full-time employees, none of whom are
represented by a labor union. The Company considers its employee relations to be
good.
7
<PAGE>
ITEM 2. PROPERTIES
----------
The Company's current corporate offices are located in San Diego,
California at 827 Brighton Court, San Diego, California 92109. The Company's
offices will be relocating to 5920 Friars Road, Suite 104, San Diego, CA on
February 1, 2000. This property will be occupied under a lease. The term of the
lease is five years commencing on February 1, 2000. The Company believes that
this space will meet the Company's administrative needs for at least the next 12
months.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
-----------------------------------------------------
MARKET INFORMATION
- ------------------
The Company's Common Stock is currently listed on the NASDAQ Stock
Market's over-the-counter bulletin board under the symbol "NVXE".
The following chart shows the quarterly high and low bid-ask prices of
the Company's common stock for the last three fiscal years, as reported on the
NASDAQ OTC bulletin board. The prices represent quotations by dealers without
adjustments for retail mark-ups, mark-downs or commission and may not represent
actual transactions.
COMMON STOCK
------------
BID ASK
--- ---
HIGH LOW HIGH LOW
FISCAL QUARTERS
November 1996 through October 1997
- ----------------------------------
First Quarter 1 1/4 7/16 1 1/4 .55
Second Quarter 13/16 3/8 1 7/16
Third Quarter 3/8 .18 1/2 3/16
Fourth Quarter 3/16 1/16 1/4 .09
November 1997 through October 1998
- -----------------------------------
First Quarter 3/16 .10 5/16 .11
Second Quarter .14 1/16 3/16 1/16
Third Quarter .13 .06 5/16 1/16
Fourth Quarter .08 .02 .11 .04
November 1998 through October 1999
- -----------------------------------
First Quarter .07 .03 1/8 .03
Second Quarter 1/16 .03 1/16 .03
Third Quarter .22 .03 .32 .03
Fourth Quarter 1.08 3/16 1.48 .24
8
<PAGE>
HOLDERS
- -------
The approximate number of record holders of the Company's Common Stock as of
December 31, 1999 was 1,035, an undetermined number of which represent more than
one individual participant in securities positions with the Company.
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
----------------------------------------------------------
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements set forth on pages F-1 through F-18.
PLAN OF OPERATION
- -----------------
New Visual Entertainment, Inc. was founded with the mission to produce and
distribute high- impact 3D films for the growth oriented specialty venue markets
such as theme parks, amusement parks, family entertainment centers and casinos.
The Company, through its proprietary technology, utilizes a low cost 3D
production and exhibition technology to compete in these markets. The Company
plans to use this proprietary technology to continue to produce high-quality,
cost effective 3D films and market them to venues not accessible to other 3D
systems and software providers due to cost prohibitiveness.
Through the use of this proprietary technology, the Company developed three new
feature films during 1998 and 1999. They were 1) "Wonder in Belize", an
underwater 3D Film; 2) "Big Waves" in Hawaii; and 3) "A Day at the Beach", an
off-road and surfing lifestyle adventure. The Company also produced two
customer-driven productions in 1999: "Miss Hawaiian Tropic '99" for C3D, and
"Game On", a paintball film for JT USA.
With the production of the above films, the Company has strengthened its
position as a special venue content producer of 3D material. Additionally, it
has positioned itself to produce and distribute multi-media and alternative
format content for traditional and web-based consumption.
The Company's plan of operation for the 2000 fiscal year will consist of
activities aimed at:
o Investigating and, if appropriate, pursuing definitive agreements for
acquisitions believed by the Board to be consistent with the Company's
plan to develop and distribute 3D content over a variety of traditional
and new media (such as 3D films for special venues, computer software,
videotape, television and internet distribution).
o Establishing strategic partnerships for the production, marketing,
sales, licensing and other distribution of the Company's 3D content.
o Developing new 3D content and otherwise expanding the Company's library
of 3D material.
o Acquiring additional studio production and editing equipment, cameras,
lenses, and mobile theater transport equipment.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company believes, with the right strategic partnerships, it can function as
a full-scale production studio capable of financing, producing and distributing
3D and traditional content to multiple mass markets.
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED OCTOBER 31, 1999 TO OCTOBER 31, 1998
REVENUES. Revenues increased to approximately $130,000 for fiscal 1999 from
approximately $17,000 for fiscal 1998. The increase of $113,000 was primarily
due to revenue recognized from film and video library productions.
COST OF SALES. Cost of sales consists of amortization of the costs of film
and/or video productions. Costs of sales increased to approximately $81,000 for
fiscal 1999 from approximately $27,000 for fiscal 1998. The increase of $54,000
was primarily due to the matching of the amortization of the projects costs with
related revenue recognized.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses consists of non-cash charges related to stock issuances
for consultants and the compensatory elements and other cash charges for
professional and personnel costs. Selling, general and administrative expenses
increased to approximately $1,918,000 for fiscal 1999 from $1,454,000 in fiscal
1998. The increase consisted of primarily of increases to professional and
personal costs.
OTHER EXPENSES. Other expenses include writedowns of projects and valuation
allowances in long-term assets. These two category expenses decline from
$1,648,000 in fiscal 1998 to $175,000 in fiscal 1999. No further significant
writedowns in such assets were deemed necessary.
NET LOSS. The Net Loss for fiscal 1999 was approximately $2,045,000 as compared
to a net loss in fiscal 1998 of $3,112,000 due to lower writedowns in projects
offset by an increase in selling, general and administrative costs.
COMPARISON OF THE YEAR ENDED OCTOBER 31, 1998 TO OCTOBER 31, 1997
Due to the small volume of revenue activities in these years, the analysis of
these years would not be meaningful.
LIQUIDITY AND CAPITAL RESOURCES.
Over the last three years, operations have been financed through private sales
of common stock resulting in net proceeds of $863,000, $463,000 and $522,000 in
fiscal 1999, 1998 and 1997, respectively. In addition, during these years a
substantial portion of expenses were paid by the issuance of stock.
Net cash used by operating activities approximately $800,000 for fiscal 1999.
Net used for operating activities for fiscal 1999 included 330,000 for new
project production costs and the funding of cash portions of selling, general
and administrative costs. Net cash used by operating activities for fiscal 1998
approximated $469,000 and consisted of $171,000 of new project production costs
and the cash portion of selling, general and administrative costs.
PROPOSED MERGER
In September 1999, the Company entered into a merger agreement with
Astounding.com, Inc. ("Astounding"). The merger agreement provides for the
Company to issue 10,000,000 shares of its common stock for all of the
outstanding shares of Astounding. The closing of the merger is subject to
various conditions including the receipt of a debt or equity financing of at
least $1,000,000 and requisite shareholder approval.
ACQUISITION
In January 2000, the Company completed the acquisition of 100% of the common
stock of Impact Pictures, Inc., a small San Diego-based multi-media production
firm, for 50,000 shares of the Company's common stock.
10
<PAGE>
LETTER OF INTENT
In January 2000, the Company entered into a letter of intent to acquire the
intellectual rights to a certain technology in exchange for shares of the
Company's common stock based on attainment of certain operational objectives.
GOING CONCERN CONSIDERATION
The Company has continued losses in each of its years of operation, negative
cash flow and liquidity problems. 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
certain of its stockholders 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 stockholders and/or to obtain other financing until profitable operation and
positive cash flow are achieved and maintained. There can be no guarantee that
the stockholders will provide this support.
ITEM 7. FINANCIAL STATEMENTS
--------------------
The Consolidated Financial Statements of New Visual Entertainment, Inc.,
together with the report thereon, are set forth on pages F-1 through F-18
hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
NONE
11
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------------------
The information required by this item will be contained in the definitive proxy
statement for the Company's Annual Meeting of Shareholders, which the Company
will file with the Securities and Exchange Commission on or before February 29,
2000, and is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
For services rendered to the Company during the fiscal year ended October 31,
1999 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 periods
ended October 31, 1999.
<TABLE>
<CAPTION>
NAME AND FISCAL OTHER ALL
PRINCIPAL YEAR ANNUAL OTHER
POSITION END SALARY BONUS COMPENSATION COMPENSATION
-------- --- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Ray Willenberg, Jr. 1999 $62,500 -0- $112,500*(1) -0-
President 1998 $40,000 -0- $127,500*(2) -0-
1997 $29,000 -0- -0- -0-
</TABLE>
- --------------------
*1 Represents the issuance to Mr. Willenberg of 2,250,000 shares of common
stock valued @ .05/share.
*2 Represents the issuance to Mr. Willenberg of 3,187,500 shares of common
stock valued @ .04/share.
12
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
---------------------------------------------------
The following table sets forth information, as of December 31, 1999,
concerning all persons known by the Company to own beneficially more than 5% of
any class of the Company's voting securities and concerning shares of each
director and executive officer and by all directors and executive officers as a
group. Unless expressly indicated otherwise, each stockholder exercises sole
voting and investment power with respect to the shares beneficially owned.
NAME & ADDRESS NUMBER OF SHARES PERCENT
CLASS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ----- ------------------- ------------------ --------
Common Western Tel 9,000,000 13.1%
Stock 149 West 29th Street
Pueblo, CO 81008
Common Ray Willenberg, Jr. 5,593,119 8.1%
Stock 827 Brighton Court
San Diego, CA 92109
Common Herb Lightman 775,000 1.1%
Stock 5670 Sahara Drive
Carnelian Bay, CA 96140
Common Elorian Landers 1,375,000 2.0%
Stock 9307 W. Sam Houston Pkwy.
Houston, TX 77099
Common All directors and executive 7,743,119 11.2%
Stock officers as a group (3 persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
NOT APPLICABLE.
13
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1* Plan of Reorganization and Agreement of Merger among the
registrant, Astounding Acquisition Corporation and
Astounding.com, Inc., dated as of September 1999
21.1* Subsidiaries of the registrant
27.1* Financial Data Schedule
- ------------------
* Filed herewith
(b) REPORTS ON FORM 8-K. None
14
<PAGE>
SIGNATURES
----------
In accordance with 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.
New Visual Entertainment, Inc.
Date: January 21, 2000 By /s/ RAY WILLENBERG, JR.
------------------------------------
Ray Willenberg, Jr., President
In accordance with the Securities Exchange Act of 1934, this Report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated:
Signature Date
/s/ Ray Willenberg, Jr. January 21, 2000
- ------------------------------------------------
Ray Willenberg, Jr.
President & Director (principal executive officer)
/s/ Elorian Landers January 21, 2000
- ------------------------------------------------
Elorian Landers
Secretary & Director (principal financial and
accounting officer)
/s/ Herb Lightman January 21, 2000
- ------------------------------------------------
Herb Lightman
Director
15
<PAGE>
NEW VISUAL ENTERTAINMENT, INC.
AND SUBSIDIARY
------------------------------
FINANCIAL REPORT
OCTOBER 31, 1999
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Nos.
---------
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED BALANCE SHEETS
At October 31, 1999, 1998 and 1997 F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended October 31, 1999, 1998 and 1997 F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
For the Years Ended October 31, 1999, 1998 and 1997 F-5 - F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended October 31, 1999, 1998 and 1997 F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9 - F-18
F-1
<PAGE>
Board of Directors and Stockholders
New Visual Entertainment, Inc. and Subsidiary
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of New Visual
Entertainment, Inc. and Subsidiary (the "Company") as of October 31, 1999, 1998
and 1997 and the related consolidated statements of operations, stockholders'
equity (deficiency), and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes 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 provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of New Visual
Entertainment, Inc. at October 31, 1999, 1998 and 1997 and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 7, the
Company has minimal historical operations, negative cash flows, and liquidity
problems. 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. Also,
as discussed in Note 7, management plans to generate these funds through support
from stockholder 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 do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ TABB, CONIGLIARO & McGANN, P.C.
New York, New York
January 20, 2000
F-2
<PAGE>
<TABLE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
At October 31,
-------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Current Assets:
Cash $ 62,872 $ - $ 6,293
Receivable from related parties 31,422 23,072 61,638
-------------- -------------- --------------
Total Current Assets 94,294 23,072 67,931
Property and equipment - net of accumulated depreciation 102,530 163,391 228,768
Other assets 5,000 5,000 52,819
Film and video library, net 100,557 - -
Projects under development, net 32,883 60,124 1,515,563
-------------- -------------- --------------
Total Assets $ 335,264 $ 251,587 $ 1,865,081
============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Notes payable - related parties $ - $ 285,500 $ 294,500
Accounts payable and accrued expenses 420,699 325,430 252,176
-------------- -------------- --------------
Total Current Liabilities 420,699 610,930 546,676
-------------- -------------- --------------
Commitments, Contingencies and Other Matters (Notes 6, 7
and 8)
Stockholders' Equity (Deficiency):
Cumulative convertible preferred stock, Series A and B - $30
par value; 200,000,000 shares authorized; liquidation price,
$30 per share; -0- shares issued and outstanding - - -
Common stock - $0.001 par value; 100,000,000 shares
authorized; 68,896,194, 51,866,128 and 35,788,650 shares
issued and outstanding at October 31, 1999, 1998 and 1997,
respectively 68,896 51,866 35,788
Additional paid-in capital 12,145,702 9,844,309 8,426,549
Accumulated deficit (12,360,033) (10,255,518) (7,143,932)
-------------- -------------- --------------
Total Stockholders' Equity (Deficiency) (85,435) (359,343) 1,318,405
-------------- -------------- --------------
Total Liabilities and Stockholders' Equity (Deficiency) $ 335,264 $ 251,587 $ 1,865,081
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For the Years Ended October 31,
---------------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES $ 129,845 $ 16,696 $ 61,504
------------- ------------- -------------
EXPENSES:
Cost of sales 81,159 26,988 20,302
Projects written off 175,000 1,599,413 1,546,539
Valuation allowance on long-term assets - 47,820 666,006
Selling, general and administrative expenses 1,918,201 1,454,061 3,389,452
------------- ------------- -------------
TOTAL EXPENSES 2,174,360 3,128,282 5,622,299
------------- ------------- -------------
LOSS BEFORE INCOME TAXES (2,044,515) (3,111,586) (5,560,795)
INCOME TAX EXPENSE - - -
------------- ------------- -------------
NET LOSS $ (2,044,515) $ (3,111,586) $ (5,560,795)
============= ============= =============
NET LOSS PER COMMON SHARE $ (.03) $ (.07) $ (.23)
============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 60,520,000 43,827,000 24,106,000
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
<CAPTION>
Convertible Total
Preferred Stock Common Stock Additional Stockholders'
-------------- ----------------------- Paid-in Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficiency)
------ ------ ---------- ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - October 31, 1998 - $ - 51,866,128 $ 51,866 $ 9,844,309 $(10,255,518) $ (359,343)
Issuance of common stock for services:
($.04 per share at December 1998) - - 100,000 100 3,900 - 4,000
($.04 per share at July 1999) - - 2,500,000 2,500 97,500 - 100,000
($.05 - $1.00 per share at August
1999) - - 2,296,645 2,297 121,389 - 123,686
($.35 - $.50 per share at September
1999) - - 1,735,267 1,735 608,327 - 610,062
Issuance of common stock for cash
(November 1, 1998 - October 31, 1999) - - 7,398,367 7,398 855,652 - 863,050
Issuance of common stock for
compensation and directors fees and
consulting
($.25 per share at August 1999) - - 375,000 375 93,375 - 93,750
($.25 per share at September 1999) - - 500,000 500 174,500 - 175,000
Issuance of common stock in settlement
of debt
($.05 per share at December 1998) - - 1,000,000 1,000 49,000 - 50,000
($.28 - $.35 per share at August 1999) - - 729,287 730 206,520 - 207,250
($.12 - $.50 per share at September
1999) - - 395,500 395 91,230 - 91,625
Net loss - - - - - (2,044,515) (2,044,515)
------ ------ ---------- ---------- ----------- ------------- ------------
Balance - October 31, 1999 - $ - 68,896,194 $ 68,896 $12,145,702 $(12,300,033) $ (85,435)
====== ====== ========== ========== =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
<CAPTION>
Convertible Total
Preferred Stock Common Stock Additional Stockholders'
-------------- ----------------------- Paid-in Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficiency)
------ ------ ---------- ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - October 31, 1997 - $ - 35,788,650 $ 35,788 $ 8,426,549 $ (7,143,932) $ 1,318,405
Issuance of common stock for services:
($.06 per share at March 1998) - - 100,000 100 5,400 - 5,500
($.05 per share at August 1998) - - 187,000 187 10,513 - 10,700
($.05 per share at September 1998) - - 60,000 60 2,940 - 3,000
Issuance of common stock for
compensation and directors fees
(November 1, 1997 to October 31, 1998) - - 4,792,500 4,793 735,033 - 739,826
Issuance of common stock in settlement
of debt:
($.04 - $.05 per share at April 1998) - - 3,000,000 3,000 127,000 - 130,000
($.05 - $.12 per share at June 1998) - - 410,000 410 31,090 - 31,500
Issuance of common stock for an aborted
acquisition ($.05 per share at
November 1997) - - 1,000,000 1,000 49,000 - 50,000
Issuance of common stock for cash
(November 1, 1997 to October 31, 1998) - - 6,527,978 6,528 456,784 - 463,312
Net loss - - - - - (3,111,586) (3,111,586)
------ ------ ---------- ---------- ----------- ------------- ------------
Balance - October 31, 1998 - $ - 51,866,128 $ 51,866 $ 9,844,309 $(10,255,518) $ (359,343)
====== ====== ========== ========== =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
<CAPTION>
<CAPTION>
Stock Note
Convertible Receivable Total
Preferred Stock Common Stock Additional and Stockholders'
-------------- --------------------- Paid-in Accumulated Subscription Equity
Shares Amount Shares Amount Capital Deficit Receivable (Deficiency)
------ ------ ------------ -------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - October 31, 1996 200,000 $2,100,000 12,425,227 $ 12,425 $ 5,201,988 $(1,583,137) $ (512,770) $ 5,218,506
Issuance of common stock for services:
($.50 per share at December 1996) - - 1,750,000 1,750 873,250 - - 875,000
($.22 per share at March 1997) - - 220,000 220 48,180 - - 48,400
($.05 per share at September 1997) - - 100,000 100 4,900 - - 5,000
($.25 per share at October 1997) - - 100,000 100 49,650 - - 49,750
Issuance of common stock for settlement
of debt ($.28 per share at August
1997) - - 400,000 400 109,600 - - 110,000
Issuance of common stock for consulting
fees ($.04 per share at September
1997) - - 800,000 800 31,200 - - 32,000
Issuance of common stock from stock
option plan (November 1, 1996 to
October 31, 1997) - - 4,990,000 4,990 476,148 - - 481,138
Issuance of common stock for
compensation (April 1 to August 31,
1997) - - 11,500,000 11,500 1,113,500 - - 1,125,000
Issuance of common stock for cash
(November 1, 1996 to October 31, 1997) - - 3,503,423 3,503 1,038,380 - - 1,041,883
Cancellation of preferred stock for
acquisition of music rights (200,000)(2,100,000) - - - - - (2,100,000)
Reduction of stock subscription
receivable - - - - - - 512,770 512,770
Cost associated with private placement - - - - (520,247) - - (520,247)
Net loss - - - - - (5,560,795) - (5,560,795)
------ ------ ------------ -------- ----------- ------------ ------------ ------------
Balance - October 31, 1997 - $ - 35,788,650 $ 35,788 $ 8,426,549 $(7,143,932) $ - $ 1,318,405
====== ====== ============ ======== =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Years Ended October 31,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,044,515) $ (3,111,586) $ (5,560,795)
Adjustments to reconcile net loss to net cash used by operating
activities:
Consulting fees and other compensatory elements of
stock issuances 1,106,498 970,526 3,134,058
Project in progress written-off 175,000 1,599,413 1,546,539
Depreciation and amortization 142,019 87,690 81,864
Valuation allowance on long-term assets - 47,820 666,006
Increase (decrease) from changes in:
Receivables - - 5,200
Due from related parties (8,350) 38,566 30,403
Projects under development (329,475) (170,962) (420,691)
Accounts payable and accrued expenses 158,645 68,928 1,092
------------- ------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (800,178) (469,605) (516,324)
------------- ------------- -------------
CASH USED IN INVESTING ACTIVITIES
Acquisition of property and equipment - - -
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 863,050 463,312 1,041,883
Costs of private placement - - (520,247)
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 863,050 463,312 521,636
------------- ------------- -------------
INCREASE (DECREASE) IN CASH 62,872 (6,293) 5,312
CASH AND CASH EQUIVALENTS - BEGINNING - 6,293 981
------------- ------------- -------------
CASH AND CASH EQUIVALENTS - ENDING $ 62,872 $ - $ 6,293
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ - $ - $ -
============= ============= =============
Income taxes $ - $ - $ -
============= ============= =============
Notes, interest and accounts payable satisfied
by issuance of stock $ 348,875 $ - $ -
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the 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.
DESCRIPTION OF BUSINESS
The Company, (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"), a development-stage company with no
operations. The Company issued 5,911,592 shares of common
stock to the shareholders of Siliwood to effect the reverse
acquisition. The reverse acquisition was accounted for as a
recapitalization and was accounted for in a manner similar to
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 changes
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 theaters for stereoscopic (3-D) authoring and
visualization.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company
to concentrations of credit risks, are principally trade
accounts receivable. The Company maintains an allowance for
uncollectible accounts receivable and, generally, does not
require collateral. At October 31, 1999, 1998 and 1997, no
allowance for uncollectible accounts was deemed necessary by
management.
CASH AND CASH EQUIVALENTS
The Company considers all short-term highly liquid investments
with a maturity of three months or less when purchased to be
cash or cash equivalents.
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 from five to seven
years. Maintenance and repair expenses are charged to
operations as incurred.
F-9
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
INTANGIBLE ASSETS
Intangible assets consists of a 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 years. These costs are evaluated quarterly to determine
the net realizable value. During the year ended October 31,
1997, a valuation allowance of $330,893 was charged to
operations related to such assets.
FILM AND VIDEO LIBRARY AND PROJECTS UNDER DEVELOPMENT
Film and video library and projects under development are
stated at the lower of amortized cost or market. 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. In each of the
three years ended October 31, 1999, 1998 and 1997, several
projects under development were determined to have no
estimated realizable value and were accordingly written-off.
Project costs written-off during the years ended October 31,
1999, 1998 and 1997 were $175,000, $1,599,413 and $1,546,539,
respectively. For the years ended October 31, 1999, 1998 and
1997, amortization expense related to the film and video
library was $81,159, $26,988 and $20,302, respectively.
INCOME TAXES
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109). SFAS No. 109 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 ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosures of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
F-10
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Quoted market prices generally are not available for all of
the Company's financial instruments. Accordingly, fair values
are based on judgements regarding current economic conditions,
risk characteristics of various financial instruments and
other factors. These estimates involve uncertainties and
matters of judgement and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect
the estimates.
A description of the methods and assumptions used to estimate
the fair value of each class of the Company's financial
instruments is as follows:
Cash, receivables, accounts payables and accrued expenses have
carrying amounts that approximate fair value due to the short
maturity of these instruments. Management was not able to
practically estimate the fair value of notes payable due to
their related party nature.
REVENUE RECOGNITION
Substantially all revenues are derived from the production and
licensing of videos and commercial films. Revenue is
recognized over the shorter of the license term or the
expected revenue term.
ADVERTISING
Advertising costs are charged to operations when incurred.
There was no advertising expense for the years ended October
31, 1999, 1998 and 1997.
LOSS PER SHARE
Basic earnings per share ("Basic EPS") is computed by dividing
net income available to common stockholders by the weighted
average number of common shares outstanding during the period.
Diluted earnings per share ("Diluted EPS") gives effect to all
dilutive potential common shares outstanding during a period.
In computing diluted EPS, the treasury stock method is used in
determining the number of shares assumed to be purchased from
the conversion of common stock equivalents.
STOCK-BASED COMPENSATION
As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company accounts for its stock-based
compensation arrangements pursuant to APB Opinion No. 25,
"Accounting for Stock Issued to Employees". In accordance with
the provisions of SFAS No. 123, the Company discloses the
proforma effects of accounting for these arrangements using
the minimum value method to determine fair value.
F-11
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
IMPAIRMENT OF LONG-LIVED ASSETS
During 1996, the Company adopted the Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of". Under the provisions of this statement, the
Company has evaluated its long-lived assets for financial
impairment, and will continue to evaluate them as events or
changes in circumstances indicate that the carrying amount of
such assets may not be fully recoverable.
The Company evaluates the recoverability of long-lived assets
by measuring the carrying amount of the assets against the
estimated undiscounted future cash flows associated with them.
At the time such evaluations indicate that the future
undiscounted cash flows of certain long-lived assets are not
sufficient to recover the carrying value of such assets, the
assets are adjusted to their fair values.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective November 1, 1998, the Company adopted the provisions
of SFAS No. 130, "Reporting Comprehensive Income". SFAS No.
130 establishes standards for reporting comprehensive income,
defined as all changes in equity from non-owner sources.
Adoption of SFAS No. 130 did not have a material effect on the
Company's financial position or results of operations.
Effective November 1, 1998, the Company adopted the provisions
of SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information". SFAS No. 131 establishes standards
for the way public enterprises report information about
operating segments in annual financial statements and requires
those enterprises to report selected information about
operating segments in interim financial reports issued to
stockholders. Adoption of SFAS No. 131 did not have a material
effect on the Company's financial position or results of
operations.
Effective November 1, 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 132, "Employers'
Disclosures About Pensions and Postretirement Benefits", which
standardizes the disclosure requirements for pensions and
other postretirement benefits. The Statement addresses
disclosure only. It does not address liability measurement or
expense recognition. There was no effect on financial position
or net income as a result of adopting SFAS No. 132.
F-12
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - PROPERTY AND EQUIPMENT, NET
Property and equipment, at October 31, 1999, 1998 and 1997,
consists of the following:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Furniture and fixtures $ 2,376 $ 2,376 $ 10,376
Camera equipment 278,660 278,660 276,868
Office equipment 26,442 26,442 26,442
----------- ----------- -----------
307,478 307,478 313,686
Less: Accumulated depreciation 204,947 144,087 84,918
----------- ----------- -----------
Total $ 102,531 $ 163,391 $ 228,768
=========== =========== ===========
</TABLE>
For the years ended October 31, 1999, 1998 and 1997,
depreciation expense was $60,860, $60,702 and $61,562,
respectively.
NOTE 3 - NOTES PAYABLE, RELATED PARTIES
Notes payable at October 31, 1999, 1998 and 1997 consists of
the following:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Note payable to stockholder, interest, due monthly at
12%, due on January 6, 2000. $ - $ 200,000 $ 200,000
Notes payable to stockholders, no interest, due on
demand. - 25,000 34,000
Notes payable to officer, no interest, due on demand. - 31,250 31,250
Note payable to former IVE shareholder, no interest,
due on demand. - 28,000 28,000
Note payable to former IVE shareholder, interest at
10%, due on demand. - 1,250 1,250
----------- ----------- -----------
$ - $ 285,500 $ 294,500
=========== =========== ===========
</TABLE>
The Company incurred interest expense of $16,000, $24,000 and
$24,000 for the years ended October 31, 1999, 1998 and 1997,
respectively.
F-13
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PREFERRED STOCK, COMMON STOCK AND WARRANTS
DESCRIPTION OF SECURITIES
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 July 23, 1996, the Company issued 200,000 shares of
non-voting series "B" cumulative 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 September 1999,
the Company's Board of Directors elected to cancel the
preferred shares of NVE stock. The decision was made and
executed as the Company sought to take delivery of the music
library and the seller was unable to provide the content.
At October 31, 1996, the Company had 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. The Company has subscription receivables of $162,750
related to a private placement offering completed in July
1996. This full amount of $512,770 was charged to operations
as compensation expense for the year ended October 31, 1997.
During the Year Ended October 31, 1997:
--------------------------------------
For the period from November 1, 1996 to October 31, 1997, the
Company issued 3,503,423 shares of common stock at prices
ranging from $.05 to $1.50 per share totalling $1,041,883
pursuant to Rule 144.
On December 3, 1996, the Company issued 1,750,000 shares of
common stock at $.50 for professional services totalling
$875,000.
On March 31, 1997, the Company issued 220,000 shares of common
stock at $.22 for professional services totalling $48,400.
On August 8, 1997, the Company issued 400,000 shares of common
stock at $.28 in settlement of debt totalling $110,000.
During September 1997, the Company issued 100,000 shares of
common stock at $.05 for professional services totalling
$5,000.
On September 25, 1997, the Company issued 800,000 shares of
common stock at $.04 for professional services totalling
$32,000.
During October 1997, the Company issued 100,000 shares of
common stock at $.25 for professional services totalling
$49,750.
F-14
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PREFERRED STOCK, COMMON STOCK AND WARRANTS (CONTINUED)
During the Year Ended October 31, 1997: (Continued)
--------------------------------------
For the year ended October 31, 1997, the Company issued
4,990,000 shares of common stock at various amounts in
connection with the stock option plan totalling $481,138.
For the year ended October 31, 1997, the Company issued
11,500,000 shares of common stock between $.05 and $.35 for
professional services totalling $1,125,000.
For the Year ended October 31, 1998:
------------------------------------
For the period from November 1, 1997 to October 31, 1998, the
Company issued 6,527,978 shares of common stock at prices
ranging from $.04 to $1.00 per share totalling $463,312
pursuant to Rule 144.
For the period November 1, 1997 to October 31, 1998, the
Company issued 4,792,500 shares of common stock at various
amounts for officers compensation and director fees totalling
$739,826.
In November 1997, the Company issued 1,000,000 shares of
common stock at $.05 totalling $50,000 for a subsequently
aborted acquisition.
On March 25, 1998, the Company issued 100,000 shares of common
stock at $.06 for professional services totalling $5,500.
On April 13, 1998, the Company issued 3,000,000 shares of
common stock at $.05 in settlement of debt totalling $130,000.
On June 2, 1998, the Company issued 410,000 shares of common
stock between $.05 and $.12 in settlement of debt totalling
$31,500.
During August 1998, the Company issued 187,000 shares of
common stock at $.05 for professional services totalling
$10,700.
On September 8, 1998, the Company issued 60,000 shares of
common stock at $.05 for professional services totalling
$3,000.
During the Year Ended October 31, 1999:
--------------------------------------
For the period from November 1, 1998 to October 31, 1999, the
Company issued 7,398,367 shares of common stock at prices
ranging from $.02 to $.41 per share totalling $610,062
pursuant to Rule 144.
On December 15, 1998, the Company issued 100,000 shares of
common stock at $.04 for professional services totalling
$4,000.
F-15
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PREFERRED STOCK, COMMON STOCK AND WARRANTS (CONTINUED)
During the Year Ended October 31, 1999: (Continued)
--------------------------------------
On December 28, 1998, the Company issued 1,000,000 shares of
common stock at $.05 in settlement of debt totalling $50,000.
On July 23, 1999, the Company issued 2,500,000 shares of
common stock at $.04 for professional services totalling
$100,000.
During August 1999, the Company issued 2,296,645 shares of
common stock between $.05 and $1.00 for professional services
totalling $123,686.
On August 13, 1999, the Company issued 375,000 shares of
common stock at $.25 for director fees totalling $93,750.
On August 20, 1999, the Company issued 729,287 shares of
common stock between $.28 and $.35 in settlement of debt
totalling $207,250.
During September 1999, the Company issued 395,500 shares of
common stock between $.12 and $.50 in settlement of debt
totalling $91,625.
During September 1999, the Company issued 1,735,267 shares of
common stock between $.35 and $.50 for professional services
totalling $610,062.
On September 27, 1999, the Company issued 500,000 shares of
common stock at $.35 for consulting fees totalling $175,000.
STOCK OPTIONS
During 1997, the Board of Directors of the Company approved
the 1997 Stock Option Plan (the "Plan"), which provides for
the granting of up to 5,000,000 shares of common stock,
pursuant to which key employees and consultants are eligible
to receive incentive and/or nonqualified stock options.
Options granted under the Plan are exercisable for a period of
up to 5 years from the date of grant at an exercise price,
which shall be determined by the committee and may be more,
equal to, or less than, the then current market price of the
Company's common stock as the committee may deem to be
appropriate, but in no event may such price be less than par
value, provided, however, that in the event that the committee
shall determine to grant an option at less than 85% of the
current market price of the Company's common stock, such
option shall not be granted without the prior approval of the
Board of Directors. During the year ended October 31, 1997,
4,990,000 options under this plan were granted and exercised
in consideration of services valued at $481,138.
F-16
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES
At October 31, 1999, the Company has unused federal and state
net operating loss carryforwards of approximately $4,200,000
available to offset future years' taxable income from 2009
through 2017. The Tax Reform Act of 1996 contains provisions
which limit the federal net operating loss carryforwards
available that can be used in any given year in the event of
certain occurrences, which include significant ownership
changes. At October 31, 1999, the Company has established a
valuation allowance equal to the net deferred tax asset of
$1,680,000, as the Company cannot conclude that it is more
likely than not that the net deferred tax asset will be
realized. There were no current year tax provisions for the
years ended October 31, 1999, 1998 and 1997 as a result of net
operating losses incurred during those years.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company has hired a television company to produce 26
episodes of live music acts in 3-D. As of October 31, 1997,
the Company has paid $1,515,563 to the television company. All
26 episodes have yet to be completed as of October 31, 1998 in
3-D. Since no revenues were recognized, the Company wrote-off
the accumulated project cost of $1,515,563 during the year
ended October 31, 1998.
The Company's projects under development stipulate royalty
payments which are based on percentages of revenue.
The Company's headquarters are located in San Diego,
California, which has a month to month lease. Rent expense for
the years ended October 31, 1999, 1998 and 1997 were $6,000,
$8,900 and $60,619, respectively.
PROPOSED MERGER
In September 1999, the Company entered into a merger agreement
with Astounding Acquisition Corporation ("Astounding"). The
merger agreement provides for the Company to issue 10,000,000
shares of its common stock for all of the outstanding shares
of Astounding. The closing of the merger is subject to various
conditions including the receipt of a debt or equity financing
of at least $1,000,000 and requisite shareholders approval.
CONSULTING AGREEMENT
In September 1999, the Company entered into a consulting
agreement for financial advisory services. The agreement
provides for the Company to pay consulting fees of $2,500 per
month, plus out-of-pocket expenses for 10 months. In addition,
the Company shall issue to the consultant warrants to purchase
up to 350,000 shares of common stock at an exercise price of
$.60 per share. The warrants are exercisable provided certain
financial conditions are achieved and expire on September 23,
2003.
F-17
<PAGE>
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
For the years ended October 31, 1999, 1998 and 1997,
substantially all of the net revenues were derived from three
companies. At October 31, 1999, no receivables were due from
the above customers.
NOTE 7 - GOING CONCERN CONSIDERATION
The Company has continued losses in each of its years of
operation, negative cash flow and liquidity problems. 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 certain of its stockholders 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 stockholders and/or to obtain other financing
until profitable operation and positive cash flow are achieved
and maintained. There can be no guarantee that the
stockholders will provide this support.
NOTE 8 - SUBSEQUENT EVENTS
LEASE
On January 3, 2000, the Company enter into an operating lease
for office space in San Diego, California. The lease commences
on February 1, 2000 and expires on January 2005. The lease
provides for a minimum annual rental of approximately $54,000
with a 3% annual increase each year starting on February 1,
2001 and each year thereafter.
ACQUISITION
In January 2000, the Company completed the acquisition of 100%
of the common stock of Impact Pictures, Inc., a small San
Diego-based multi-media production firm, for 50,000 shares of
the Company's common shares.
LETTER OF INTENT
In January 2000, the Company entered into a letter of intent
to acquire the intellectual rights to a certain technology in
exchange for shares of the Company's common stock based on
attainment of certain operational objectives.
F-18
EXHIBIT 2.1
PLAN OF REORGANIZATION AND AGREEMENT OF MERGER
This PLAN OF REORGANIZATION AND AGREEMENT OF MERGER (hereinafter called
the "Merger Agreement") is made as of September ___, 1999, by and among New
Visual Entertainment, Inc., a Utah corporation ("Parent"), Astounding
Acquisition Corporation, a Delaware corporation (hereinafter called "Merger
Sub") and Astounding.com, Inc., a Delaware corporation (hereinafter called the
"Company" or "Surviving Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Parent, Merger Sub and the Company desire to adopt a plan of
reorganization resulting in a tax free "reorganization" within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended; and
WHEREAS, the Board of Directors of Parent, the Board of Directors and
the sole stockholder of Merger Sub and the Board of Directors and stockholders
of the Company deem it advisable and to the advantage of said persons that
Merger Sub merge with and into the Company (the "Merger") pursuant to the
provisions of this Merger Agreement;
NOW, THEREFORE, the parties do hereby adopt and make themselves
respectively parties to the plan of reorganization encompassed by this Merger
Agreement and do hereby agree that Merger Sub shall merge with and into the
Company in accordance with the following terms, conditions and other provisions:
1. MERGER. At the Effective Time (as defined herein), Merger Sub shall
be merged with and into the Company and the Company shall survive the Merger and
shall be the Surviving Company, effective at the date and time when this Merger
Agreement is made effective under the laws of the State of Delaware (the
"Effective Time").
2. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of the Company, as amended and in effect at the Effective Time,
shall continue to be the Certificate of Incorporation of the Surviving Company
without change or amendment until further amended in accordance with the
provisions thereof and applicable law. The Bylaws of the Company, as amended and
in effect at the Effective Time, shall continue to be the Bylaws of the
Surviving Company without change or amendment until further amended in
accordance with the provisions thereof and applicable law.
3. DIRECTORS AND OFFICERS. From and after the Effective Time, the Board
of Directors of the Surviving Company shall consist of those persons who,
immediately prior to the Effective Time, were the Board of Directors of the
Company, and they shall hold office until the next annual meeting of the
stockholders of the Company and until such time as their successors have been
elected and qualified, unless sooner removed, disqualified or deceased. From and
after the Effective Time, the officers of the Company immediately prior to the
Effective Time shall hold the offices in the Surviving Company which they then
held in the Company, until such time as their respective successors have been
elected or appointed and qualified, unless sooner removed, disqualified or
deceased.
-1-
<PAGE>
4. SUCCESSION. At the Effective Time, the Company shall succeed to
Merger Sub in the manner of and as more fully set forth in Sections 251 and 259
of the General Corporation Law of the State of Delaware.
5. CONVERSION OF ASTOUNDING COMMON STOCK.
(a). Upon the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, Parent, Merger Sub or the Company,
all of the issued and outstanding shares of common stock, par value $0.01 per
share, of the Company (other than shares held by Merger Sub pursuant to Section
6 hereof) (the "Astounding Common Stock"), shall be canceled and extinguished
and be converted into and become exchangeable for ten million (10,000,000) fully
paid and nonassessable shares of the common stock, $0.001 par value per share,
of Parent ("Parent Common Stock"). Shares of Astounding Common Stock immediately
prior to the Effective Time shall thereafter not evidence any interest in the
Company but, until surrendered as provided for in paragraph (b) of this Section,
subject to the provisions of paragraph (c) of this Section, shall evidence
ownership of the number of shares of Parent Common Stock into which the shares
of the Company theretofore represented thereby shall have been converted in the
Merger.
(b). After the Effective Time, each former holder of shares of
Astounding Common Stock which have been converted into shares of Parent Common
Stock in the Merger, upon surrender in proper form to the Parent for
cancellation of the certificate or certificates that prior to the Effective Time
represented such holder's shares of Astounding Common Stock, shall be entitled
to receive one or more certificates representing the shares of Parent Common
Stock into which the shares of Astounding Common Stock previously represented by
the surrendered certificate or certificates shall have been so converted.
(c). After the Effective Time, no former holder of shares of
Astounding Common Stock shall be entitled to receive any dividend or other
distribution payable to holders of shares of Parent Common Stock until such
holder surrenders to the Parent, as provided in paragraph (b) of this Section,
the certificate or certificates which prior to the Effective Time represented
such holder's shares of Astounding Common Stock; provided, however, that upon
surrender of such certificate or certificates, there shall be paid to the holder
of record of each certificate representing Parent Common Stock issued upon such
surrender the amount of dividends or other distributions (without interest)
which theretofore have become payable and have not been paid with respect to the
number of shares of Parent Common Stock represented by that certificate.
(d). Notwithstanding perfection by any former Company stockholder
who dissents from the Merger of his right to receive payment for his shares of
Astounding Common Stock pursuant to applicable law, the shares of Astounding
Common Stock held by such former Company stockholder immediately prior to the
Effective Time shall be converted in the Merger into shares of Parent Common
Stock as provided in paragraph (a) of this Section, which, from and after the
making by Company of the required payment therefor, shall be held and disposed
of by Company subject to the requirements of applicable law.
-2-
<PAGE>
6. CONVERSION OF MERGER SUB COMMON STOCK. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, Parent, Merger Sub or the Company be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Company.
7. LEGENDING OF PARENT COMMON STOCK. There shall be placed on all
certificates representing the shares of Parent Common Stock issued to the former
stockholders of the Company pursuant to this Merger Agreement all appropriate
restrictive legends referencing the restrictions imposed by applicable
securities laws. Each such stockholder hereby acknowledges and agrees that the
Parent Common Stock shall be subject to volume limitations or other restrictions
provided in Rule 144 (or any successor provision thereto) promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). Each such stockholder
agrees to comply with any applicable restrictions of Rule 144, and further
agrees that he will not offer to sell or otherwise dispose of any of the Parent
Common Stock issued to him except pursuant to an effective registration
statement or another exemption from the registration requirements of the
Securities Act, and in compliance with all applicable requirements of Rule 144.
With respect to any such sale or disposition, each such stockholder agrees to
furnish to Parent upon request such information as its counsel may deem
necessary to ensure that such sale or disposition is made in full compliance
with this Agreement, such rule and applicable federal and state securities laws.
8. AMENDMENT AND TERMINATION. This Merger Agreement may be amended by
the parties hereto, with the approval of their respective Boards of Directors,
at any time prior to the Effective Time, whether before or after approval hereof
by the stockholders of the Company or Merger Sub, but after such approval, no
amendments shall be made which materially adversely affect the rights of the
stockholders of the Company or Merger Sub without further approval of such
stockholders. This Agreement may not be amended, except by an instrument in
writing signed on behalf of each of the parties hereto. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after
approval hereof by the stockholders of the Company or Merger Sub, by mutual
consent of the Boards of Directors of the parties hereto.
9. FURTHER ASSURANCES. From time to time, as and when required by the
Surviving Company or by its successors and assigns, there shall be executed and
delivered on behalf of Merger Sub such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other action, as
shall be appropriate or necessary in order to vest or perfect in or to confirm
of record or otherwise in the Surviving Company the title to and possession of
all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Merger Sub, and otherwise to carry out the purposes
of this Merger Agreement, and the officers and directors of the Surviving
Company are fully authorized in the name and on behalf of Merger Sub or
otherwise to take any and all such action and to execute and deliver any and all
such deeds and other instruments.
-3-
<PAGE>
10. CONDITIONS TO THE MERGER. The obligations of the parties under this
Merger Agreement shall be subject to:
(a) The procurement of all other consents and approvals, and the
satisfaction of all other requirements prescribed by law, which are necessary in
connection with the Merger;
(b) Parent shall have received debt or equity financing of at least
$1,000,000;
(c) This Merger Agreement shall have been approved by unanimous
written consent of the holders of all shares of Merger Sub and the Company
entitled to vote on the matter;
(d) There shall have been no material adverse change in the
financial condition, results of operations, business or assets of either the
Company or Parent since the execution of this Merger Agreement; and
(e) There shall be no pending or threatened action, suit,
litigation, complaint, counterclaim, petition or administrative proceeding,
whether at law, in equity, in arbitration or otherwise, which could have an
adverse effect on the Parent or Company or the operation of Parent's or the
Surviving Company's business after the Effective Time or which could prevent or
impede the consummation of the Merger or the transactions contemplated hereby.
11. NEW DIRECTORS. As soon as reasonably practicable after the
Effective Time, Parent will use its best efforts to cause its Board of Directors
to consist of Ray Willenberg, Jr., Jack D. Robinson and Lilly Beter.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, except to the extent that the
laws of the United States of America are applicable.
13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, which together shall constitute a single agreement.
14. ENTIRE AGREEMENT. This Merger Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof, and this Merger Agreement contains the sole and entire agreement
between the parties with respect to the matters covered hereby. This Merger
Agreement shall not be altered or amended except by an instrument in writing
signed by or on behalf of the party entitled to the benefit of the provision
against whom enforcement is sought.
15. AVAILABILITY OF MERGER AGREEMENT. An executed Plan of
Reorganization and Agreement of Merger is on file at the principal place of
business of the Company, One Embarcadero Center, Suite 2405, San Francisco, CA
94111, and will be furnished by the Company, on written request and without
cost, to any stockholder of the Company.
-4-
<PAGE>
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by the Board of Directors of Parent, Company and Merger Sub, is hereby
executed on behalf of each of said persons by the duly authorized persons whose
signatures appear below.
ASTOUNDING.COM, INC.
A Delaware corporation
By: /s/ Jack D. Robinson
Name: Jack D. Robinson
Title: President
ASTOUNDING ACQUISITION CORPORATION
A Delaware corporation
By: /s/ Ray Willenberg, Jr.
-----------------------
Name: Ray Willenberg, Jr.
Title: President
NEW VISUAL ENTERTAINMENT, INC.
A Utah corporation
By: /s/ Ray Willenberg, Jr.
-----------------------
Name: Ray Willenberg, Jr.
Title: President
-5-
Exhibit 21.1
Subsidiaries of the Registrant
------------------------------
Astounding Acquisition Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 62,872
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 102,530
<DEPRECIATION> 0
<TOTAL-ASSETS> 335,264
<CURRENT-LIABILITIES> 420,699
<BONDS> 0
0
0
<COMMON> 68,896
<OTHER-SE> (214,331)
<TOTAL-LIABILITY-AND-EQUITY> 335,264
<SALES> 129,845
<TOTAL-REVENUES> 129,845
<CGS> 81,159
<TOTAL-COSTS> 2,174,360
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,044,515)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,044,515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,044,515)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
