SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 1999
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[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number 0-27043
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E-VIDEOTV, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 51-0389325
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(State or Other Jurisdiction of IRS Employer
Incorporation or Organization) Identification No.)
8360 East Via de Ventura, Building L-200, Scottsdale, AZ 85258
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(Address of Principal Executive Offices)
480-905-5838
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name Of Each Exchange
Title Of Each Class On Which Registered
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Securities registered under Section 12(g) of the Exchange Act:
Common stock, par value $0.0001 per share
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Check whether the issuer: (1) filed all reports required to be filed by Section
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 [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. $8,858
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State the aggregate market value of the voting and non-voting common equity
Held by non-affiliates computed by reference to the price at which the common
Equity was sold or the average bid and asked prices of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
Rule 12b-2 of the Exchange Act.)
$47,095,313 As of March 27, 2000
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ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
shares, as of the latest practicable date:
16,757,072 As of March 27, 2000
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DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the Securities Act of 1933. The listed documents should be clearly
described for identification purposes.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 4
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . 4
Item 2. Description of Property . . . . . . . . . . . . . . . . . . . . 8
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 9
PART II . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 10
Item 5. Market for Common Equity and Related Stockholder Matters.. . . . 10
Item 6. Management's Discussion and Analysis and Plan of Operation.. . . 10
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 12
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 24
PART III. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 25
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act . . . . . . . 25
Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . . . 27
Item 11. Security Ownership of Certain Beneficial Owners and Management. 28
Item 12. Certain Relationships and Related Transactions. . . . . . . . . 29
Item 13. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 31
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL DEVELOPMENT OF THE BUSINESS
The Company was incorporated in Delaware on July 25, 1997 under the name Oro
Rico Mining Corporation. On August 25, 1997, ORM, Inc., an inactive company
incorporated in Colorado on July 25, 1997, was merged into the Company. The
name of the Company was changed to Asia Pacific Enterprises, Inc. on October 16,
1997. On June 23, 1999, the Company acquired eVideo U.S.A., Inc. by issuing
6,623,016 of its common shares to eVideo International, Inc. On August 6, 1999
the Company changed its name to e-VideoTV, Inc.
Unless otherwise indicated, all references to the Company include the operations
of the Company and its wholly-owned subsidiary, eVideo U.S.A., Inc.
The planned business of the Company is to develop and operate an electronic
video delivery system in the United States. Digitally compressed video movies
will be delivered on request to "set-top boxes" connected to the televisions of
individual cable or satellite subscribers. The set-top box will permit the
movie to be viewed with full pause, rewind, fast forward and playback controls,
any number of times within a set period of time (such as within 48 hours) after
which it will be erased.The Company's system will be designed to provide all of
the advantages of video movie rentals without requiring the customer to visit a
store to pick-up or return a video cassette. The customer will be able to order
the video in any one of three ways:
- - by telephone,
- - by the cable television network, using the set-top box and television, or
- - from the Company's internet web-site.
Following receipt of a customer's order, the Company will deliver the video
electronically via high capacity cable or satellite to the customer via the
address of the customer's set-top box and the address of all other customers'
set-top boxes who have ordered the same video. The cable or satellite
television provider then broadcasts the video and addresses. The set-top boxes
whose addresses match the broadcasted addresses will record the video and then
alert the customer that the video has been received.
The Company's system will compete directly with video rental outlets but will
compliment Video-On-Demand services currently provided by satellite and
cablevision companies. The Company believes its system will be superior to
video rental outlets because its customers will not have to visit a video store
or return videos. The Company believes its system will be superior to current
Video-On-Demand services because its system will permit full VCR playback and
rewind controls, lets the viewer decide when to watch the video, and, because of
the system's fast delivery time of ten minutes for a two-hour movie, allows
cable and satellite providers to supply a greater variety of videos.
The Company's principal suppliers will be the owners of movie and video rights.
Other significant alliances will be providers of high-speed, long-distance
telephone communications and computer hardware and software distributors.
Roy B. Bennett, the Company's President, developed the business plan for the
Company's video delivery system and transferred the world-wide rights in the
business plan to eVideo International, Inc., a company which he controlled. On
March 5, 1999 eVideo International, Inc. incorporated eVideo U.S.A., Inc. in
Nevada. eVideo International, Inc. then transferred the U.S. rights to the
business plan to eVideo U.S.A., Inc. for $300,000. The funds for the payment of
the $300,000 were supplied by the Company to eVideo U.S.A., Inc. prior to and at
the closing of the acquisition of eVideo U.S.A., Inc. by the Company. On June
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23, 1999, the Company acquired eVideo U.S.A., Inc. At the same time that the
Company acquired eVideo U.S.A., Inc., creditors of eVideo International, Inc.
purchased 2,730,000 shares of already issued common stock of the Company from
other shareholders of the Company.
One of eVideo U.S.A., Inc.'s primary assets at the time of the acquisition was
an option to acquire an exclusive license from Macrovision Corporation to use
certain technology which prevents a video from being copied onto a VCR tape or
other device.
The Company paid $30,000 in option fees to December 31, 1999 to maintain the
option and, after December 31, 1999, paid an additional option fee of $15,000
and $400,000 to exercise the option and acquire the license. The Company also
issued 502,713 shares of its common stock to the licensor, which represents 3%
of the Company's outstanding common shares, and agreed to issue the licensor 3
shares for each 97 shares the Company subsequently issues to third parties.
The rights to the technology are limited to the electronic transmission and
recording of videos in the United States by means that deliver the video in
significantly less time than its normal running time, and to subsequent playback
of the video at normal speed for viewing.
The license to the Macrovision technology is an important aspect of the
Company's business plan as distributors of motion pictures, videos and similar
entertainment will not allow the Company to distribute newly released product
without the copy-protection features provided by the Macrovision technology.
The Company's license is exclusive, which prevents competitors of the Company
from offering Macrovision copy protection on videos distributed electronically
in less than real time.
The license is for a five year term ending January 31, 2005 and may be extended
until January 31, 2010. A usage royalty of 1% of the gross pay-per-view
transaction fees charged to viewers is payable to the licensor. Minimum annual
royalties of $250,000 are due each January 31 from 2001 until 2004, and, if the
license is extended, of $350,000 each January 31 from 2005 until 2009. Each
minimum royalty paid may be applied against usage royalties incurred during the
following twelve months. The $400,000 initial license fee may be applied
against usage royalties incurred by January 31, 2001.
The license will become non-exclusive if the Company does not generate a
one-month usage royalty of $1,000 by January 31, 2001, or if the Company's
e-Video transmission business does not generate in excess of $250,000,000 in
gross revenues in the United States in the fourth full year of operation
following the month it first generates a usage royalty of $1,000.
The Company has the option of extending the license to other countries, subject
to certain restrictions, upon payment of initial license fees ranging from
$25,000 to $150,000 per country.
All of the shares issued to eVideo International, Inc. for the acquisition of
eVideo U.S.A., Inc. are held in escrow. Portions of the shares will be released
to eVideo International, Inc. on the basis of the Company achieving certain
milestones, according to the following schedule.
25% of the shares will be released when all of the following are achieved:
- - a formal license to use video copyright protection technology has been
entered into, and
- - an agreement has been entered into with a motion picture studio for the
distribution of movies by means of the Company's system,
25% of the shares will be released when all of the following are achieved:
- - a recognized Chief Executive Officer has been successfully recruited by
the Company,
- - a successful file server beta testing with video files has been developed,
- - a distribution agreement with a cable company has been entered into, and
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- - a communication test between a cable company and a cable customer has been
successfully completed.
50% of the shares will be released when the Company first generates gross annual
revenues of $1,000,000.
All shares remaining in escrow, if any, will be released if one of the following
events occurs:
- - the Company declares a dividend of at least $2.00 per common share by June
23, 2001.
- - the Company successfully completes a public offering that raises more than
$10,000,000.
- - if a successful takeover for a majority of the issued and outstanding
common shares of the Company is completed.
- - if the Company's common shares have a publicly quoted market price of over
$10.00 per share for more than 20 consecutive trading days.
Any shares that have not been released from escrow by June 23, 2004 will be
cancelled.
At the present time, the Company is in the development stage, does not have any
customers, and has not earned any revenues from its proposed operations. The
Company currently has three full-time employees, its president, its chief
financial officer and a project manager. All employees are based in Scottsdale,
Arizona. The Company expects to expand its workforce to 12 persons by July 2000
and to 30 persons by December 2000 as operations expand.
RISK FACTORS
An investment in stock of the Company is highly speculative, involves a high
degree of risk, and should not be made by any person who cannot afford the loss
of the entire investment. The following factors should be considered carefully
in evaluating the Company and its business.
Lack of Prior Operations and Experience
The Company is a development stage company, has no revenues from operations and,
except for the services of its officers and directors and the cash on hand, has
no other significant tangible assets. Accordingly, there can be no assurance
that the Company will operate at a profitable level. The Company's proposed
business involves the electronic delivery of videos on a faster than real-time
basis. Future development and operating results will depend on many factors,
including the initial completion of a developed product, the demand for the
Company's product, the level of product and price competition, the Company's
success in establishing and expanding distribution channels, and the Company's
ability to develop and market new products and control costs. In addition, the
Company's future prospects must be considered in light of the risks, expenses
and difficulties frequently encountered in establishing a new business in the
video distribution industry, which is characterized by intense competition,
rapid technological change, and significant regulation.
Acceptance of Company's Technology; Creation of New Market
There can be no assurance that the Company's proposed video delivery system will
be able to function in the manner contemplated by the Company or that the
Company's video delivery system will be accepted by cable and satellite
television customers. Although the Company believes that there will be a large
market for its proposed video delivery system, there can be no assurance that
such a market will develop, or how quickly such development may occur. The
Company currently is concentrating its efforts solely on the electronic
distribution of videos and will be dependent upon the successful development of
this business to generate revenues. Accordingly, for the foreseeable future,
the Company's success will depend upon the development and marketing of its
electronic video distribution system.
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Additional Financing Required - Dilution to Present Shareholders
The Company does not have sufficient funds to complete the development of its
business operating systems, reach full commercial distribution of its products
and be competitive in the industry. The Company's capital requirements will
depend on a variety of factors, including the progress of systems development,
the acquisition of rights to distribute videos, negotiations with cable and
satellite television providers to use their distribution networks and market
acceptance of and demand for its service. The timing and amount of such capital
requirements cannot be accurately predicted. There is no assurance that
additional funds will be available from any source when needed by the Company.
If additional funds are not available, the Company may not be able to continue
in business.
In order to raise additional capital, the Company may issue additional shares of
common stock at prices which will be determined by the Company's Board of
Directors. The issuance of any such shares may result in a reduction of the net
book value per share or market price of the outstanding shares of the Company's
common stock, and will reduce proportionate ownership and voting power of all
other shareholders. Further, any such issuance may result in a change in
control of the Company.
A critical factor in the Company's ability to market its video movies will be
developing and funding the cost of producing a new digital set-top box with
e-VideoTV specifications for cable and satellite TV subscribers. A digital
set-top box capable of receiving and storing videos is estimated to cost $600.
Each subscriber will require a digital set-top box in order to receive the
Company's videos. The Company's business plan contemplates that the costs
associated with manufacturing the set-top boxes will be financed by cable and
satellite television distributors. Critical factors include acceptance by both
distributors and set-top box manufacturers to include e-VideoTV specifications
in their future operations to enable the Company to provide its services to
their customers.
Stock Options
The Company has, subject to shareholder approval, adopted a stock option plan
that sets aside 5,000,000 shares of the Company's common stock for issuance upon
the exercise of stock options. No stock options have been granted yet under the
stock option plan. The issuance of options under the stock option plan could
adversely affect the market price of the Company's common stock and could impair
the Company's ability to raise additional capital through the sale of its equity
securities or debt financing. Exercise of any such options will result in
dilution to the proportional interests of shareholders of the Company at the
time of exercise and, to the extent that the exercise price is less than the
book value of the common stock at that time, to the book value per share of the
common stock.
No Dividends
The Company never has paid and does not anticipate paying dividends on its
common stock in the foreseeable future. Retained earnings, if any, will be
utilized for the operation and expansion of the Company's business.
Limited Public Market for Common Stock
The Company's common stock is traded in the over-the-counter market. An
investment in the Company's common stock should be considered highly illiquid,
and there can be no assurance that a market for the Company's common stock will
continue.
Penny Stock Regulation
The Securities and Exchange Commission (the "SEC") has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks." Penny stocks generally are equity securities with a price of less than
$5.00 per share (other than securities registered on certain national securities
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exchanges or quoted on the NASDAQ National Market System, provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document prepared by the
SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from such rules, the broker-dealer must
make a special written determination that a penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure requirements often have the effect of reducing
the level of trading activity in any secondary market for a stock that becomes
subject to the penny stock rules. The Company's common stock is subject to the
penny stock rules, and accordingly, owners of the Company's common stock may
find it difficult or impossible to sell their shares.
Need for Experienced Management and Key Employees
The Company is dependent upon the services of a few key management and technical
personnel. The loss of any one of their services, or an inability to recruit
and retain additional qualified personnel, could have a material adverse effect
on the Company.
Substantial Competition
The electronic video distribution industry is characterized by rapidly evolving
technology and intense competition. The Company will be at a disadvantage with
other companies having larger technical staffs, established market shares and
greater financial and operational resources than the Company. There can be no
assurance that the Company will be able to compete successfully. Most of the
Company's competitors have substantially greater capital resources, name
recognition and expertise in research, development, distribution and marketing.
There can be no assurance that the Company's competitors will not succeed in
developing products, or competing technologies that are more effective or more
effectively marketed than products marketed by the Company or that render the
Company's technology obsolete.
Dependence on Third Parties
The Company will rely on third parties for the supply of the video movies that
it proposes to distribute. In addition, the Company will rely upon cable
operators to distribute its videos to cable subscribers. There can be no
assurance that the Company will be able to acquire the rights required for the
distribution of these videos. The failure to obtain the rights to distribute
sufficient quantities and qualities of such videos will have a material adverse
effect on the Company's business, financial condition and results of operations.
Control by Principal Shareholders.
The Company's officers, directors and principal shareholders own approximately
41.6% of the Company's outstanding common stock. The Company's officers and
directors will therefore be able to control the election of the Company's
directors and thereby direct the Company's policies and affairs.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not currently own any material amount of property or equipment.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is not party to any pending legal proceeding nor is any of its
property the subject of any pending legal proceeding. The Company is not aware
of any proceeding that a governmental authority is contemplating.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of the fiscal year covered by this report.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock has been quoted on the National Association of
Securities Dealers' Over-the-Counter market since May 11, 1999. There is no
other public trading market for the Company's equity securities.
The following table summarizes trading in the Company's common stock, as
provided by quotations published on the OTC Bulletin Board for the period
indicated. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
Quarter ended High Bid Low Bid
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June 30, 1999 $4-3/16 $ 1-5/8
September 30, 1999 $2-1/2 $ 5/8
December 31, 1999 $3-1/4 $1-1/16
As of March 7, 2000, there were approximately 308 holders of record of the
Company's common stock.
The Company has not paid, and, in the foreseeable future, the Company does not
intend to pay, any dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
The Company has not yet developed the systems required to operate the eVideo
business. The following are the major steps and estimated costs to develop the
Company's operating systems:
<TABLE>
<CAPTION>
Estimated Estimated
Description Time Frame Cost
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Development Expenditures
- - Design, write and test video ordering system
software March - April $30,000
- - Set-Top Box specifications engineering and
design, including embedded software
programming, and operational testing March - April 132,000
- - Purchase and install computer hardware for movie file
servers and peripherals April 700,000
- - Purchase and install computer hardware for web server March 200,000
- - Purchase, install and configure operating system and
database management software March 150,000
- - Purchase and configure software for embedding in
Set-Top boxes March 140,000
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Total capital development expenditures 1,352,000
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Development Stage Operating Expenses, January - December 2000
- - Marketing 250,000
- - Personnel 560,000
- - Professional fees 600,000
- - Licensing fees 750,000 (1)
- - Contract services 50,000
- - Travel expenses 250,000
- - Management services 120,000
- - Offices and facilities 226,000
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Total development stage operating expenses 2,806,000
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Total development stage cash requirements $4,158,000
===============
<FN>
(1) Includes initial fee for Macrovision license, fees for distribution rights to
motion pictures and other entertainment and related legal and consulting
services.
</TABLE>
At December 31, 1999 the Company had cash on hand of $105,000. From January 1,
2000 to March 17, 2000 the Company raised $1,048,600 through the sale of 666,000
shares in its common stock. The Company anticipates that it will need
approximately $1,000,000 in additional capital by April 30, 2000, and an
additional $2,200,000 by June 30, 2000 to meet the development timetable set
forth above. The Company's development schedule will be delayed unless the
additional capital required by the Company is available when needed.
A critical factor in the Company's ability to market its video movies will be
developing digital set-top box specifications for cable and satellite TV systems
and convincing manufacturers to include those specifications in their set-top
boxes. A digital set-top box capable of receiving and storing the videos to be
distributed by the Company is estimated to cost $600. Each subscriber will
require a digital set-top box in order to receive eVideoTV.
The Company's proposed capital expenditures do not include the cost of
manufacturing and distributing the set-top boxes. The Company's business plan
contemplates that the costs associated with manufacturing the set-top boxes will
be financed by cable and satellite television providers, advertisers and
customers. The inability of the Company to arrange third party funding for the
cost of the set-top boxes will have a material adverse effect on the Company's
proposed operations.
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ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included in this Annual Report on Form
10-KSB:
<TABLE>
<CAPTION>
PAGE #
<S> <C>
Report of the Independent Auditors 13
Consolidated Balance Sheet as at December 31, 1999 14
Consolidated Statement of Operations for the period from inception,
March 5, 1999 to December 31, 1999 15
Consolidated Statement of Cash Flows for the period from inception,
March 5, 1999 to December 31, 1999 16
Consolidated Statement of Shareholders' Equity from inception,
March 5, 1999, to December 31, 1999 17
Notes to the Consolidated Financial Statements 18
</TABLE>
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INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS
To the Shareholders of e-VideoTV, Inc.
We have audited the consolidated balance sheet of e-VideoTV, Inc. (formerly,
Asia Pacific Enterprises, Inc.) as at December 31, 1999 and the consolidated
statements of operations, cash flows and shareholders' equity for the period
from inception, March 5, 1999, to December 31, 1999. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of e-VideoTV, Inc. as at December 31,
1999 and the results of its operations and its cash flows for the period from
inception, March 5, 1999, to December 31, 1999 in accordance with generally
accepted accounting principles in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
the company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the company has no established source of
revenue and is dependent on its ability to raise substantial amounts of equity
funds. This raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Grant Thornton
Vancouver, Canada
March 17, 2000 Chartered Accountants
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<TABLE>
<CAPTION>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
U.S. DOLLARS
<S> <C>
$
ASSETS
CURRENT ASSETS
Cash 105,002
Prepaid expenses 2,904
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TOTAL CURRENT ASSETS 107,906
OFFICE EQUIPMENT 3,334
DISTRIBUTION RIGHTS AND SOFTWARE DEVELOPMENT (note 4) 756,478
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TOTAL ASSETS 867,718
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LIABILITIES
CURRENT LIABILITIES
Accounts payable 248,899
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SHAREHOLDERS' EQUITY
SHARE CAPITAL (notes 3 and 5)
Authorized
- - 30,000,000 shares of common stock, $0.0001 par value
- - 5,000,000 shares of preferred stock, $0.0001 par value
Issued and outstanding
- - 15,588,359 common shares 1,559
Additional paid in capital 1,095,297
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TOTAL SHARE CAPITAL 1,096,856
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (478,037)
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NET SHAREHOLDERS' EQUITY 618,819
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 867,718
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CONTINUANCE OF OPERATIONS (NOTE 1)
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
INCEPTION, MARCH 5, 1999, TO DECEMBER 31, 1999
U.S. DOLLARS
<S> <C>
$
GENERAL AND ADMINISTRATIVE EXPENSES
Corporate promotion 42,137
General corporate expenses 55,612
Management and consulting fees 156,640
Office expenses 14,279
Professional fees 165,921
Rent 23,828
Travel 28,478
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TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 486,895
INTEREST INCOME (8,858)
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NET LOSS FOR THE PERIOD 478,037
===========
Weighted Average Number of Shares Outstanding (note 5) 5,470,052
-----------
NET LOSS PER SHARE 0.09
===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
INCEPTION, MARCH 5, 1999, TO DECEMBER 31, 1999
U.S. DOLLARS
<S> <C>
$
OPERATING ACTIVITIES
Net loss for the period (478,037)
Adjustments to reconcile net loss to net cash used in operating activities:
- - depreciation 247
- - accounts receivable 2,262
- - prepaid expenses 7,438
- - accounts payable 216,669
-----------
NET CASH USED IN OPERATING ACTIVITIES (251,421)
-----------
FINANCING ACTIVITIES
Proceeds from sale of common shares 1
Loans from parent company prior to acquisition 115,000
Cash acquired on acquisition of parent company 1,001,481
-----------
TOTAL CASH FLOW FROM FINANCING ACTIVITIES 1,116,482
-----------
INVESTING ACTIVITIES
Distribution rights (300,000)
Option (30,000)
Software development (426,478)
Office equipment (3,581)
-----------
TOTAL CASH USED IN INVESTING ACTIVITIES (760,059)
-----------
INCREASE IN CASH DURING THE PERIOD AND CASH AT THE END OF THE PERIOD 105,002
===========
NON-CASH ACTIVITIES NOT INCLUDED IN CASH FLOWS
Cancellation of loans from parent company on acquisition 115,000
Ascribed value of shares issued in excess of cash acquired
on acquisition of parent company 95,374
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
INCEPTION, MARCH 5, 1999, TO DECEMBER 31, 1999
U.S. DOLLARS
ADDITIONAL TOTAL
NUMBER PAR PAID IN SHAREHOLDERS'
OF SHARES VALUE CAPITAL DEFICIT EQUITY
$ $ $ $
<S> <C> <C> <C> <C> <C>
Issuance of shares for cash on
incorporation 1 1 - - 1
Adjustment for change in share
structure resulting from acquisition
of eVideo U.S.A., Inc. 6,623,015 661 (661) - -
Shares outstanding at date of
acquisition of eVideo U.S.A., Inc.,
previously issued for cash, net of
issue costs (note 3) 8,965,343 897 1,095,958 - 1,096,855
Net loss, inception to December 31,
1999 - - - (478,037) 478,037)
----------- ------ ----------- --------------- ----------
Balance, December 31, 1999 15,588,359 1,559 1,095,297 (478,037) 618,819
=========== ====== =========== =============== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-17-
<PAGE>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
U.S. DOLLARS
1. OPERATIONS AND GOING CONCERN
The Company was incorporated in Delaware on July 25, 1997 under the name
Oro Rico Mining Corporation. On August 25, 1997, ORM, Inc., an inactive
Company incorporated in Colorado on July 25, 1997, was merged into the
Company. The name of the Company was changed to Asia Pacific Enterprises,
Inc. on October 16, 1997 and to e-VideoTV, Inc. on August 6, 1999. On June
23, 1999 the Company acquired all of the outstanding shares of eVideo
U.S.A., Inc. (note 3). This business combination has been accounted for as
an acquisition of the Company by eVideo U.S.A., Inc.
The Company has not yet commenced its planned principal operations and it
has not yet earned any revenue. The Company's current operational focus is
to ensure that its electronic video delivery system is able to be
commercially exploited. To that end, management is devoting substantially
all of the Company's resources to the development of the system. The
electronic video delivery technology and software that it is in the process
of developing will require cash significantly in excess of its current
resources. The ability of the Company to develop this technology and
software into a marketable product is dependent on the Company's ability to
obtain adequate additional financing, develop a commercially saleable
process and to achieve profitable operations.
The Company is devoting significant efforts to obtaining private financing
to fund the continued development of its technology and software.
Subsequent to December 31, 1999 the Company was successful in raising
$1,048,600 through an issue of 666,000 shares of its common stock; however,
significant additional cash will be required.
2. SIGNIFICANT ACCOUNTING POLICIES
GAAP - These consolidated financial statements are presented in U.S.
dollars in accordance with accounting principles generally accepted in the
United States.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
TRANSLATION OF FOREIGN CURRENCIES - The Company considers the U.S. dollar
its functional currency. Monetary assets and liabilities are translated at
the exchange rate in effect at the balance sheet date and non-monetary
assets and liabilities at the exchange rates in effect at the time of
acquisition or issue. Revenues and expenses are translated at the rates in
effect at the time of the transaction. Exchange gains or losses arising on
translation are included in net income or loss for the period.
FINANCIAL INSTRUMENTS - The company has various financial instruments,
including cash and payables. The carrying values of these financial
instruments approximate their fair values.
-18-
<PAGE>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
U.S. DOLLARS
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
DISTRIBUTION RIGHTS AND SOFTWARE DEVELOPMENT - The costs incurred to
acquire the Company's distribution rights and develop its software have
been capitalized and will be amortized over its estimated economic life
upon commencement of commercial operations.
The Company has adopted AICPA Statement of Position 98-1 ("SOP 98-1")
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use. SOP 98-1 requires capitalization of costs incurred to develop
internal-use computer software during the application development stage.
The Company's software development focus is currently on the design and
operational testing of its electronic video delivery system software as
well as evaluating hardware installation options and methods. As such, all
costs related to this development are capitalized in accordance with SOP
98-1. The software development costs capitalized will be amortized on the
straight-line method over a period to be determined by management when its
development is substantially complete.
The Company reviews the value assigned to distribution rights and software
development costs to determine if it has been impaired by adverse
conditions affecting the Company. Management is of the opinion that there
has been no diminution of the value assigned.
DEFERRED INCOME TAXES - Deferred income taxes are provided for significant
carryforwards and temporary differences between the tax basis of an asset
or liability and its reported amount in the financial statements that will
result in taxable or deductible amounts in future periods. Deferred tax
assets or liabilities are determined by applying the presently enacted tax
rates and laws. A valuation allowance is required when it is more likely
than not that some portion or all of the deferred tax asset will not be
realized.
3. BUSINESS COMBINATION
On June 23, 1999, the Company acquired all of the outstanding shares of
eVideo U.S.A., Inc. in exchange for the issuance of 6,623,016 shares of
common stock and a commitment to issue an additional one and one-half
shares of common stock for every share the Company issues in raising
$3,900,000 after June 23, 1999. Subsequent to December 31, 1999, the
commitment to issue the additional shares was cancelled. This business
combination has been accounted for as an acquisition of the Company by
eVideo U.S.A., Inc. Accordingly, these consolidated financial statements
combine the operations of eVideo U.S.A., Inc. since its incorporation on
March 5, 1999 and the operations of e-VideoTV, Inc. since the date of
acquisition, June 23, 1999. All intercompany transactions and balances have
been eliminated.
-19-
<PAGE>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
A DEVELOPMENT STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
U.S. DOLLARS
3. BUSINESS COMBINATION (CONTINUED)
At the date of acquisition, the net tangible assets of e-VideoTV, Inc.
acquired were:
<TABLE>
<CAPTION>
<S> <C>
Cash $1,001,481
Other current assets 12,604
Advances to eVideo U.S.A., Inc. 115,000
Current liabilities (32,230)
-----------
Value assigned to 8,965,343 shares outstanding
at date of acquisition $1,096,855
===========
4. DISTRIBUTION RIGHTS AND SOFTWARE DEVELOPMENT
Distribution rights $ 300,000
Payments under option agreement 30,000
Software development costs 426,478
-----------
Total technology and software development costs $ 756,478
===========
</TABLE>
The Company has paid $300,000 to a company controlled by the president of
the Company for the right to distribute video movies electronically in the
United States of America in accordance with a system developed by the
Company's president. At the time, that company had an option to acquire an
exclusive license from an unrelated corporation to use certain technology
which prevents a video from being copied onto a video cassette tape or
other unauthorized device. The rights to the technology are limited to the
electronic distribution of videos in the United States by means that
transmit the video in significantly less time than its normal running time
for subsequent playback and viewing at normal speed . The Company has paid
the optionor $30,000 to maintain the option and, subsequent to December 31,
1999, the Company paid an additional $15,000 option fee and $400,000 to
exercise the option and acquire the license. In addition to the cash
consideration, the Company issued 502,713 shares of its common stock to the
licensor, which represents 3% of the Company's outstanding common shares,
and agreed to issue the licensor 3 shares for each 97 shares the Company
subsequently issues to third parties.
The license is for a five year term ending January 31, 2005 and may be
extended until January 31, 2010. A usage royalty of 1% of the gross
pay-per-view transaction fees charged to viewers is payable to the
licensor. Minimum annual royalties of $250,000 are due each January 31 from
2001 until 2004, and, if the license is extended, of $350,000 each January
31 from 2005 until 2009. Each minimum royalty paid may be applied against
usage royalties incurred during the following twelve months. The $400,000
initial license fee may be applied against usage royalties incurred by
January 31, 2001.
-20-
<PAGE>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
A DEVELOPMENT STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
U.S. DOLLARS
4. DISTRIBUTION RIGHTS AND SOFTWARE DEVELOPMENT (continued)
The license will become non-exclusive if the Company does not generate a
one-month usage royalty of at least $1,000 by January 31, 2001, or if the
Company's e-Video transmission business does not generate in excess of
$250,000,000 in gross revenues in the United States in the fourth full year
of operation following the month it first generates a usage royalty of at
least $1,000.
The Company has the option of extending the license to other countries,
subject to certain restrictions, upon payment of initial license fees
ranging from $25,000 to $150,000 per country.
The Company has spent $426,478 on the design and operational testing of its
electronic video delivery system software and the evaluation of hardware
installation options and methods.
5. SHARE CAPITAL
WARRANTS
Warrants are outstanding that entitle their holder to purchase up to
307,693 shares of common stock at $3.25 per share until May 25, 2000.
ESCROWED SHARES
A director of the Company has placed 345,000 shares of common stock into
escrow. These shares will be released to the director based on equity
financings completed by the Company by May 30, 2000. The portion of the
shares to be released from escrow is calculated by dividing the amount of
equity financings completed by the Company, with certain exceptions, by
$5,000,000. To December 31, 1999, $1,186,843 in qualifying financings had
been completed. An additional $441,000 in qualifying financings was
completed subsequent to December 31, 1999. Any shares not released from
escrow by May 30, 2000 will be cancelled.
In addition, all of the 6,623,016 common shares issued for the acquisition
of eVideo U.S.A., Inc. are held in escrow. These shares will be released
from escrow on the basis of the company achieving certain milestones
according to the following schedule:
-21-
<PAGE>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
A DEVELOPMENT STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
U.S. DOLLARS
5. SHARE CAPITAL (continued)
Portion to be released Conditions for release
---------------------- ------------------------
25% when both of the following are achieved:
- a formal license to use video copyright protection
technology has been entered into, and
- an agreement has been entered into with a motion
picture studio for the distribution of movies by
means of the Company's system.
25% when all of the following are achieved:
- the Company has successfully recruited a Chief
Executiv Officer approvedy the board of directors,
- a successful file server beta testing with video
files has been developed,
- a distribution agreement with a cable company has
been entered into, and
- a communication test between a cable company and
a cable customer has been successfully completed.
50% when the Company first generates gross annual
revenues of $1,000,000.
All shares remaining if the Company successfully completes a public offering
in escrow, if any that raises more than $10,000,000.
All shares remaining if a successful takeover is completed for a majority of
in escrow, if any the issued and outstanding common shares of the
Company not held in escrow.
All shares remaining if the Company's common shares have a publicly quoted
in escrow, if any market price of over $10.00 per share for more than
20 consecutive trading days.
Any shares that have not been released from escrow by June 23, 2004 will be
cancelled.
Pursuant to amending agreements entered into subsequent to the June 23,
1999 acquisition, the Company agreed to amend the escrow restrictions
originally specified. The amended escrow restrictions are disclosed in
these financial statements.
All shares held in escrow have been excluded from the calculation of the
weighted average number of shares outstanding.
TRANSACTIONS SUBSEQUENT TO DECEMBER 31, 1999
The Company issued 666,000 shares of common stock for cash proceeds of
$1,048,600.
The Company issued 502,713 shares of common stock to acquire the exclusive
copy protection license described in note 4, and agreed to maintain the
licensor's ownership at 3% of the issued common stock.
The Company increased its authorized capital to 100,000,000 shares of
common stock, par value $0.0001 per share and 5,000,000 shares of preferred
stock, par value $0.0001 per share.
-22-
<PAGE>
E-VIDEOTV, INC.
(FORMERLY, ASIA PACIFIC ENTERPRISES, INC.)
A DEVELOPMENT STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
U.S. DOLLARS
5. SHARE CAPITAL (CONTINUED)
Subject to shareholder approval, the Company adopted an employee and
director stock option plan that sets aside 5,000,000 shares of the
Company's common stock for issuance upon the exercise of stock options.
6. INCOME TAXES
At December 31, 1999 the Company has net operating losses carried forward
of
approximately $570,000 that may be offset against future taxable income
from 2000 to 2016. The potential tax benefits of the losses carried forward
are offset by a valuation allowance of the same amount as there is
substantial uncertainty that the losses carried forward will not expire
unused.
7. RELATED PARTY TRANSACTIONS
Pursuant to a management agreement effective for two years commencing June
21, 1999, the Company has committed to pay $15,000 per month to a company
controlled by the president of the Company for the services of the
president and a project manager. $95,000 was paid for the period from
inception to December 31, 1999.
Consulting fees of $58,649 and rent of $23,828 have been paid to other
companies that employ other directors and officers of the Company.
-23-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Grant Thornton, Chartered Accountants, Vancouver, Canada, were appointed as the
auditors of the Company on May 14, 1999. They replaced Spicer, Jeffries & Co.,
Certified Public Accountants, Denver, Colorado, who resigned at the request of
the Company on May 13, 1999.
The report of Spicer Jeffries & Co. on the Company's financial statements for
the period ending August 26, 1997 did not contain any adverse opinion or
disclaimer of opinion, nor was it modified as to uncertainty, audit scope, or
accounting principles.
This change in auditors was recommended and approved by the board of directors
of the Company. The Company does not have an audit committee.
There were no disagreements with Spicer, Jeffries & Co. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the satisfaction of Spicer,
Jeffries & Co., would have caused them to make reference to the subject matter
of the disagreement in connection with their report.
-24-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors and executive officers of the Company are:
Name Age Position
---- --- --------
Roy Bennett 53 President and Director
Robert Dinning 60 Chief Financial Officer and Director
Adrian Rollke 31 Director
Peter Wilson 32 Director
Owen Granger 42 Secretary and Treasurer
Harvey Nickerson 42 Chief Technology Officer
ROY B. BENNETT has been an officer and director of the Company since June 1999.
Mr. Bennett has also been the President of Roy B. Bennett and Associates Ltd., a
private venture capital and management company specializing in new technology
start-ups, corporate structuring and private funding since 1994.
ROBERT DINNING has been a director of the Company since June 1999 and an officer
of the Company since January 2000. Mr. Dinning is a Chartered Accountant, who
has been a Business and Financial Management Consultant since 1977. He has been
President of Bentley Capital Corp. since 1996 and has provided management and
financial advice to clients (both public and private companies and individuals)
in the software technology, resource, hospitality and retail industries. In the
past five years, positions held include; Chief Financial Officer and Director of
First American Scientific Corp. from October 1995 to June 1999, Director of
Visionary Solutions Ltd. from May 1997 to November 1998, Director of Reward
Enterprises Inc. from June 1998 to the present, Chief Financial Officer of
Elgrande.com from August 1998 to October 1999. Prior to 1977, Mr. Dinning was
CFO and Secretary of a large national public broadcasting company headquartered
in Vancouver, British Columbia.
ADRIAN ROLLKE was President of the Company between August 27, 1997 and June 23,
1999. Mr. Rollke has been a director of the Company since August 1997. Mr.
Rollke is a principal of Reinhart Capital Corporation and officer of Cebu
Holdings Inc., companies providing management services to public corporations,
1997 to present. Director of PetroReal Oil Corporation, a Canadian Venture
Exchange listed oil company, 1998 to present. Secretary/Treasurer and Director
of Twin Gold Corporation a Toronto Stock Exchange listed mineral exploration
company, 1996 to 1997. Controller of Twin Gold Corporation and Quest
International Resources Corporation, a NASDAQ and Toronto Stock Exchange listed
mineral exploration company, 1992 - 1996.
PETER WILSON has been a director of the Company since June 1999. Mr. Wilson is
a principal of Sterling-Grant Capital Inc., a private company specializing in
corporate development, structured project financing and senior management
services to public corporations since 1997. Director of Investor Relations,
Samoth Capital Corporation, a Toronto Stock Exchange listed real estate
investment company, 1996 to 1999. Vice President Samoth Equity Corporation, a
subsidiary of Samoth Capital Corporation from 1995 to 1997.
OWEN GRANGER has been an officer of the Company since October 1998. Mr. Granger
is a Certified Management Accountant, employee of Cebu Holdings Inc., a
corporation providing financial services to public companies, since September
1998. Secretary/Treasurer and Director of WestBond Enterprises Corporation, a
Canadian Venture Exchange listed paper converting company, July 1988 to present.
Secretary/Treasurer of PetroReal Oil Corporation, a Canadian Venture Exchange
listed oil company, September 1998 to present. Director of PetroReal Oil
Corporation since June 1999. Chief Financial Officer and Director of Quest
International Resources Corporation (now named Standard Mining Corporation), a
-25-
<PAGE>
NASDAQ and Toronto Stock Exchange listed mineral exploration company, December
1992 to August 1998. Secretary/Treasurer and Director of Twin Gold Corporation
(formerly Atlanta Gold Corporation), a Toronto Stock Exchange listed mineral
exploration company, 1989 to 1996.
HARVEY NICKERSON has been an officer of the Company since January 2000. Mr.
Nickerson is responsible for the architecture, technical direction and
development of the Company's products. Prior to joining e-Video, Mr. Nickerson
had an 18-year career in the technology, semiconductor and cable TV industry.
After success as a design engineer, his career has grown to also include
executive management, business planning, and international product marketing.
Mr. Nickerson has two degrees in Electrical Engineering.
During the past five years, none of the Company's directors, executive officers,
promoters or control persons:
(1) have been involved in any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that
time;
(2) have been convicted in a criminal proceeding or are subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) have been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting such person's involvement in any type of business, securities or
banking activities; or
(4) have been found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 furnished to the registrant under
Rule 16a-3(e) during the year ended December 31, 1999 and Forms 5 furnished to
the registrant, or written representations from reporting persons that no Form 5
is required to be filed, with respect to the year ended December 31, 1999, the
only person who, at any time during the fiscal year, was a director, officer, or
beneficial owner of more than 10% of any class of equity securities of the
registrant who failed to file on a timely basis, was Robert Dinning, who failed
to file Form 3 by August 27, 1999 and a Form 5 by February 14, 2000 to disclose
his initial ownership of securities.
-26-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The following table discloses all compensation received by the Company's
President (the Chief Executive Officer) during the years ended December 31,
1997, 1998 and 1999. During 1997, 1998 and 1999 no executive officer received
cash or other compensation from the Company in excess of $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------ ------------------------------------
Other Securities
Name and Annual Restricted Underlying All Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards SAR's Payouts sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roy Bennett 1999 $ 76,000 (1) 0 0 0 0 0 0
President since
June 23, 1999
Adrian Rollke 1999 $ 20,538 (1) 0 0 0 0 0 0
President from 1998 0 0 0 0 0 0 0
August 27, 1997 1997 0 0 0 0 0 0 0
to June 23, 1999
</TABLE>
(1) Paid to a corporation wholly owned by the named executive officer for the
services of the named executive officer.
Roy Bennett, the President of the Company, is the only officer who works
full-time for the Company. The other officers of the Company work on an
as-needed basis.
Although the Company does not have employment agreements with any of its
officers, the Company, effective June 21, 1999, entered into a two-year
non-cancellable management agreement with Roy B. Bennett and Associates Ltd.
("RBA Ltd."), a company wholly owned by Roy B. Bennett, the Company's president.
Under the terms of the management agreement RBA Ltd. is paid $144,000 per year
for the services of Roy B. Bennett and $36,000 per year for the services of a
project manager employed by RBA Ltd. A bonus of $50,000 will be paid to RBA Ltd.
if the Company has gross revenues of at least $1,000,000 by June 21, 2001.
The Company also agreed to provide:
(a) medical insurance for the president and project manager and their immediate
families, as well as extended health and other benefits.
(b) a leased van for the president's use, and one leased compact car for the
project manager's use when the Company has secured financing in the amount
of $3,900,000;
(c) a health club membership for the president; and
(d) three weeks paid vacation for the president and project manager. The
Company also paid $10,582 for moving and relocation expenses from Vancouver,
B.C., to Scottsdale, Arizona for the president and the project manager.
-27-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table shows the ownership of the Company's common stock by the
Company's officers and directors and by those persons known by the Company to be
the beneficial owner of more than 5% of the Company's common stock. Unless
otherwise indicated all shares are owned of record.
<TABLE>
<CAPTION>
Amount Owned
and nature of Percent of
Name and Address of Beneficial Owner ownership Class
- --------------------------------------- -------------- -----------
<S> <C> <C>
Roy B. Bennett, Director and President 6,623,016 39.5%
1750 - 1177 W. Hastings St. Indirect (1)
Vancouver, BC, Canada V6E 2K3
Robert G. Dinning, Director and 0 0.0%
Chief Financial Officer
3910 Indian River Road
North Vancouver, BC, Canada V7G 2G7
Adrian Rollke, Director 345,000 2.1%
1750 - 1177 W. Hastings St. Direct (2)
Vancouver, BC, Canada V6E 2K3
Peter Wilson, Director 2,000 0.0%
1750 - 1177 W. Hastings St.
Vancouver, BC, Canada V6E 2K3
Owen Granger, Secretary/Treasurer 0 0.0%
1750 - 1177 W. Hastings St.
Vancouver, BC, Canada V6E 2K3
Directors and Executive Officers as a 6,970,016 41.6%
group (5 persons)
<FN>
(1) Shares are owned by eVideo International, Inc., a Bahamian company
controlled by Mr. Bennett. These shares are held in escrow and will be
released or cancelled in accordance with the schedule described under Item
1 of this Annual Report.
(2) These shares are held in escrow and will be released on May 30, 2000 to Mr.
Rollke based on equity financings completed by the Company. The portion of
the shares to be released from escrow is calculated by dividing the amount
of equity financings completed by the Company, with certain exceptions, by
$5,000,000. To March 27, 2000, $1,627,843 in qualifying financings had been
completed. Any shares not released from escrow by May 30, 2000 will be
cancelled.
</TABLE>
There are no arrangements known to the Company which may result in a change in
control of the Company.
-28-
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since February 1999 Cebu Holdings Inc. ("Cebu") has provided office space,
furniture, equipment and management services to the Company. Cebu is
wholly-owned by Karl Rollke, the father of Adrian Rollke, a director and former
officer of the Company. Adrian Rollke is also an officer of Cebu. Owen
Granger, the Secretary/Treasurer and a former director of the Company, is an
employee of Cebu.
Cebu did not charge the Company for any costs or expenses during 1997 or 1998.
During the year ended December 31, 1999, Cebu charged $83,504 to the Company for
rent, office supplies and services and management fees.
The Company received loans of $16,000 from Cebu during 1997 and 1998. These
loans were repaid in 1999.
See Part I, Item 1 of this Annual Report for information concerning the
acquisition of eVideo USA, Inc. from Roy Bennett, an officer and director of the
Company.
-29-
<PAGE>
<TABLE>
<CAPTION>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K PAGE
<S> <C> <C>
Exhibit 2 Articles of Incorporation, as amended,and Bylaws a
Exhibit 2.1 Articles of Incorporation, as amended on August 5, 1999 b
Exhibit 3 Instruments Defining the Rights of Security Holders a
Exhibit 3.1 Warrant Agreement a
Exhibit 6.1 Agreement dated June 8, 1999 between the Registrant, eVideo U.S.A.,
Inc., eVideo International, Inc., Roy B. Bennett & Associates Ltd. and
Roy B. Bennett with respect to the acquisition of eVideo U.S.A., Inc
by the Registrant
Exhibit 6.2 Management agreement effective June 21, 1999 between eVideo U.S.A., a
Inc. Roy B. Bennett & Associates Ltd. pursuant to which Roy B. Bennett
and Associates Ltd. agrees to provide the services of Roy Bennett and a
project manager
Exhibit 6.3 Less-Than-Real-Time Master License Agreement dated January 31, 2000 32
by and between Macrovision Corporation, eVideo U.S.A., Inc. and the
Company
Exhibit 10.1 Amendment dated September 1, 1999 to the Agreement dated June 8, b
1999 between the Company, eVideo U.S.A., Inc., eVideo International
Inc., Roy B. Bennett & Associates Ltd. and Roy B. Bennett
Exhibit 10.2 Amendment dated January 31, 2000 to the Agreement dated June 8, 52
1999 between the Company, eVideo U.S.A., Inc., eVideo International
Inc., Roy B. Bennett & Associates Ltd. and Roy B. Bennett
Exhibit 27 Financial Data Schedule 57
</TABLE>
Notes:
a. Filed with the Company's Registration Statement on Form 10-SB on August
13, 1999 and incorporated herein by this reference.
b. Filed with the Company's Quarterly Report on Form 10-QSB on November 15,
1999 and incorporated herein by this reference.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1999.
-30-
<PAGE>
In accordance with Section 13 or 15(d) of Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
E-VIDEOTV, INC.
Date:March 28, 2000 /s/ Roy B. Bennett
- ------------------- ----------------------------------------
Roy B. Bennett
President
In accordance with Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated
Date:March 28, 2000 /s/ Roy B. Bennett
- ------------------- ----------------------------------------
Roy B. Bennett
Director and President (Chief Executive
Officer)
Date:March 28, 2000 /s/ Robert G. Dinning
- ------------------- ----------------------------------------
Robert G. Dinning
Director and Chief Financial Officer
Date:March 28, 2000 /s/ Owen Granger
- ------------------- ----------------------------------------
Owen Granger Secretary/Treasurer
(Chief Accounting Officer)
Date:March 28, 2000 /s/ Adrian Rollke
- ------------------- ----------------------------------------
Adrian Rollke
Director
Date:March 28, 2000 /s/ Peter Wilson
- ------------------- ----------------------------------------
Peter Wilson
Director
-31-
<PAGE>
EXHIBIT 6.3
LESS-THAN-REAL-TIME MASTER LICENSE AGREEMENT
THIS LESS-THAN-REAL-TIME MASTER LICENSE AGREEMENT is dated for reference January
31st, 2000 (the "Effective Date") by and between MACROVISION CORPORATION, a
Delaware corporation, of 1341 Orleans Drive, Sunnyvale, California 94089, USA,
facsimile (408) 743-8610 ("Macrovision"), E-VIDEO U.S.A., INC., a Nevada
corporation, of 8360 East Via de Ventura, Building L-200, Scottsdale, Arizona
85258, USA, facsimile (480) 778-1498 ("E-Video") and E-Video's parent company,
E-Video TV, Inc., a Delaware corporation ("E-Video TV").
RECITALS
WHEREAS Macrovision is the owner of all right, title and interest in and to
certain patents and inventions pertaining to a certain video copy protection
process as more particularly described in the attached Specifications.
AND WHEREAS E-Video wishes to procure an exclusive license to use Macrovision's
analog copy protection technology in the United States of America for the
Less-Than-Real-Time programming service operated by E-Video.
AND WHEREAS the parties entered into the Letter Agreement on or about the 16th
day of September, 1998, setting out the terms of the Option providing for
E-Video to become the exclusive licensee in the USA for Macrovision's analog
copy protection technology in the Less-Than-Real-Time domain, which Letter
Agreement set out the initial terms under which the license contemplated herein
would be agreed upon.
AND WHEREAS E-Video has provided written notice to Macrovision indicating its
intent to exercise the Option, and the parties now wish to more formally
document the exercise of the Option and the terms of the license agreement
provided for in the Letter Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the covenants and premises hereinafter set
out, and other good and valuable consideration, the parties agree as follows:
1. DEFINITIONS
In this Agreement, the following terms will have the meanings set out
below.
1.1 "AGREEMENT" means this agreement and all attachments hereto;
1.2 "COMMERCIAL LAUNCH" means the first month in which Usage Royalties
payable to Macrovision exceed $1,000.00;
1.3 "DEVICE" means a custom integrated circuit which will allow
application of the Process to the playback of E-Video Recordings,
which is to be incorporated into all E-Video Recorders, and which is
purchased by the manufacturer of E-Video Recorders from a component
supplier authorized by Macrovision to supply such integrated circuits;
<PAGE>
1.4 "E-VIDEO RECORDER" means a recorder containing any magnetic hard disc
drive, solid-state memory, magnetic tape-based videocassette or
write/erase optical disk recorder proprietary to E-Video and
manufactured by or under license from E-Video which is capable of
recording E-Video Recordings, whether sold by or installed by E-Video
or other parties;
1.5 "E-VIDEO RECORDINGS" means recordings made of an E-Video Transmission;
1.6 "E-VIDEO TRANSMISSION" means the transmission in Less-Than-Real-Time
of a video signal containing pay-per-view theatrical (i.e. movie,
concert, sporting event, or pay-per-view packages) content for
reception and subsequent playback in real time;
1.7 "EXPANDED TERRITORY SUBLICENSE" means an addendum to this Agreement in
the form set out in Exhibit A, which, in prescribed circumstances,
E-Video will have the option to sign extending the Territory
sublicenses to countries outside the U.S.A. (as specified in each
individual Expanded Territory Sublicense) by payment to Macrovision of
an initial sub-license fee calculated per the Country Pricing Formula
shown in Exhibit D for each such country of $1,000 per 1,000,000
population in each such country and the execution of an Expanded
Territory Sublicense applicable to such countries, pursuant to Section
2.3;
1.8 "FIELD OF USE" means the application of the Technology to E-Video
Transmissions in the Less-Than-Real-Time domain. "Field of Use"
expressly excludes all other applications of the Technology and other
Macrovision-proprietary copy protection technologies, including
without limitation use of Macrovision's real-time and
less-than-real-time digital copy protection and watermarking
technologies, Macrovision's audio and software copy protection
technologies, HDTV, digital television, and all New Technologies.
Notwithstanding the foregoing, E-Video shall have the non-exclusive
right to utilize the Technology in the Field of Use by way of Internet
transmissions;
1.9 "IMPROVEMENT" means any improvements, modification, derivatives and/or
changes to or in the Process and/or Technology, whether patentable or
not, that are directly useful within E-Video Recorders or in E-Video
Recordings, and come within the scope of one or more of the Patents;
1.10 "INITIAL LICENSE FEE" means the initial license fee referred to in
Section 3.2 hereof;
1.11 "LESS-THAN-REAL-TIME" means any application in which video programs
are transmitted to an end user in significantly less time than the
program's normal running time, and recorded on a suitable medium, for
later viewing by the end user. To be considered a Less-Than-Real-Time
application, the time compression must exceed 3:1, e.g., a movie with
a running time of two hours would be transmitted in less than forty
minutes;
1.12 "LETTER AGREEMENT" means the letter agreement referred to in the
recitals hereto, which the parties entered into on or about September
16, 1998;
1.13 "NEW TECHNOLOGIES" means other copy protection technologies (but not
Improvements) proprietary to Macrovision for use in, without
limitation, e-commerce, web-based interactive TV, digital TV, HDTV,
automated banking, electronic business software applications, software
game applications, video and/or audio streaming, digital watermarking,
play control, disc authentication, digital-to-digital copy protection
solutions and other non-theatrical applications;
<PAGE>
1.14 "OPTION" means the option granted to E-Video under the Letter
Agreement entitling E-Video to assume the license rights contemplated
herein;
1.15 "PATENTS" means method claims 1-13 of U.S. Patent No. 4,631,603,
claims 1-7 of U.S. Patent No. 4,577,216, and claims 1-8 of U.S. Patent
No. 4,819,098, foreign counterparts thereof having a first filing date
prior to April 14, 2007;
1.16 "PATENT TERRITORIES" means those countries set forth in Exhibit B
attached hereto in which Macrovision holds existing patents or has
applications for patents for the Process. If any Improvements are
patented in any territory not listed in Exhibit B, such territory
shall be added to Exhibit B upon application for such patent;
1.17 "PAY-PER-VIEW" means the transmission of a specific delivered video
program or package of related programs, for which additional viewer
payment(s) or separate fee(s) to receive transmission of such program
or package of programs are made, but excludes pay-TV subscription
plans;
1.18 "PROCESS" means Macrovision's processes of modifying a video signal by
the addition of a plurality of bipolar pulse pairs during selected
lines of the vertical blanking interval and by the addition of pulses
in the back porches of certain horizontal synchronizing pulses in the
region of the vertical blanking interval, and of pseudorandomly phase
modulating the color burst, which processes are the subject of the
Patents, as now existing and including any Improvements;
1.19 "RENEWAL TERM" means the five-year extension to the Term of this
Agreement that may be implemented by E-Video electing to renew this
Agreement in accordance with Section 12.2 of this Agreement;
1.20 "SPECIFICATIONS" means Attachments 1A, 1B, 2 and 3;
1.21 "TECHNOLOGY" means Macrovision's proprietary analog anti-copy
technology as more specifically described in the Patents and the
Specifications, necessary for E-Video to design, develop, manufacture
and or purchase E-Video Recorders;
1.22 "TERM" means an initial period of five (5) years from the date of
execution of this Agreement;
1.23 "TERRITORY" means the United States of America, and such additional
countries as may be added to the Territory by way of one or more
Expanded Territory Sublicenses as contemplated herein; and
1.24 "USAGE ROYALTY" means the payments due to Macrovision for use of the
Technology by E-Video, in accordance with Section 3.3 hereof.
2. LICENSE GRANT
2.1 Grant of License. Subject to the terms and conditions of this
------------------
Agreement, Macrovision hereby grants to E-Video, and E-Video hereby
accepts from Macrovision, the following indivisible, exclusive,
non-transferable rights and licenses under the Patents and the
Technology, including the right to sublicense in accordance with
Exhibit C herein, solely in the Field of Use, during the Term of this
Agreement:
<PAGE>
2.1.1The right to lease, rent, sell or otherwise distribute E-Video
Recorders to E-Video Transmission service providers and
subscribers in the Territory;
2.1.2The right to acquire E-Video Devices solely from Macrovision
licensed suppliers thereof for the purpose of incorporating
Devices into E-Video Recorders in the Patent Territories, for
sale and/or distribution ; and
2.1.3The right to apply the Process in the Field of Use to E-Video
Transmissions in the Territory, subject to the limited use
license rights in Section 2.2 below.
2.2 Limited Use. E-Video acknowledges and agrees that:
-----------
2.2.1The rights of E-Video to use the Technology and apply the Process
are limited to the purposes set forth in Section 2.1 and that
nothing contained in this Agreement shall be deemed to grant
E-Video any additional rights to the Process and/or the
Technology;
2.2.2E-VIDEO SHALL NOT APPLY THE PROCESS TO ANY FORM OF NEW
TECHNOLOGY, VIDEOTAPE OR VIDEO DISK (OTHER THAN THE PLAYBACK OF
E-VIDEO RECORDINGS), REAL TIME PAY-TELEVISION, FREE BROADCAST
TELEVISION TRANSMISSIONS, OR ANY OTHER UNRESTRICTED TELEVISION
BROADCAST TRANSMISSION. E-VIDEO SHALL USE COMMERCIALLY REASONABLE
EFFORTS TO PREVENT ALL PERSONS OTHER THAN E-VIDEO AND ITS
AUTHORIZED LICENSEES FROM USING ANY E-VIDEO RECORDER TO APPLY THE
PROCESS TO E-VIDEO RECORDINGS AND TO USE COMMERCIALLY REASONABLE
EFFORTS TO PREVENT ALL PERSONS FROM USING ANY E-VIDEO RECORDER TO
APPLY THE PROCESS FOR ANY PURPOSE NOT AUTHORIZED BY SECTION 2.1
OF THIS AGREEMENT; AND
2.2.3All E-Video Recorders will contain a Device, and that each
Device and E-Video Recorder shall be designed and manufactured in
compliance with the Specifications.
2.3 Additional Countries. So long as E-Video has materially complied with
--------------------
all of the terms and conditions of this Agreement, and subject to the
restrictions set out below, E-Video shall have the option to enter
into one or more exclusive Expanded Territory Sublicenses by payment
(subject to a prior offer as contemplated in Section 2.4) to
Macrovision, upon thirty (30) days written notice to Macrovision, of
an initial license fees calculated per the Country Pricing Formula
shown in Exhibit D.
2.4 Right of First Refusal. If Macrovision receives a request from a third
----------------------
party to procure the rights described herein in any country other than
the US or a country for which E-Video has not entered into an Expanded
Territory Sublicense prior to such request, then Macrovision shall
offer such license to E-Video on similar terms and conditions to those
which Macrovision is prepared to enter into with such third party, and
shall be free to enter into such license with such third party if
E-Video does not execute an Expanded Territory Sublicense addendum to
this Agreement within thirty (30) days of Macrovision's written notice
to E-Video. In such cases, E-Video shall either accept or decline such
terms within fourteen (14) days of receiving written notice from
Macrovision. E-Video's failure to sign an Expanded Territory
Sublicense on such terms within the said fourteen (14) days for such
additional country or countries (and failure to pay for such license
within sixty (60) days of such written notice) shall be deemed to be a
decision on the part of E-Video to decline such Expanded Territory
Sublicense. Notwithstanding the foregoing,
<PAGE>
Macrovision agrees not to actively solicit any offers from any third
parties for any such unexercised territories.
2.5 Conversion to Non-exclusive License. Any and all exclusive rights
-------------------------------------
granted pursuant to Section 2.4 shall convert, at the sole option of
Macrovision, to non-exclusive rights for that Expanded Territory
Sublicense upon the happening of any of the following:
2.5.1E-Video payments to Macrovision are less than the minimum amounts
set forth in Section 3; or
2.5.2E-Video fails to execute one or more system operator license
agreements for Less-Than-Real-Time applications of the
Technology, for a Tier 1 country, within twelve (12) months, for
a Tier 2 country, within fifteen (15) months, and, for a Tier 3
country, within eighteen (18) months of the execution of the
applicable Expanded Territory Sublicense. Tier 1, Tier 2 and Tier
3 countries are defined in Exhibit D.
2.6 Sublicense Rights. E-Video is hereby granted, subject to Exhibit C,
the exclusive right to sublicense the use of the Technology in the
Field of Use to system operators in the Territory and in any Expanded
Territories.
3. LICENSE FEES AND ROYALTIES
3.1 Option Exercised. The Option is deemed to have been exercised as of
-----------------
the Effective Date.
3.2 Initial License Fee. E-Video will pay to Macrovision the Initial
---------------------
License Fee of$400,000.00 thirty (30) days from the Effective Date.
The long form agreement must be executed prior to payment of fees
outstanding. The Initial License Fee will be applied on a monthly
basis toward the first twelve months' royalties hereunder, will be
non-refundable, and will not creditable on a carry-forward basis into
the subsequent year.
3.3 Usage Royalties. In addition to the Initial License Fee, E-Video will
---------------
pay to Macrovision Usage Royalties for the application of the
Technology to E-Video Transmission programming at the rate of 1% of
the gross pay-per-view transaction charge levied by the system
operator. Royalties shall be payable within thirty (30) days of the
end of each calendar quarter in which such revenues became payable and
shall be accompanied by reports reasonably satisfactory to Macrovision
that show the number of pay-per-view transactions during that period
and support the calculation of the Usage Royalty payment. If any real
time pay-per-view system operator licenses provided by Macrovision in
any Territory require fees less than 1% of the gross pay-per-view fees
payable, then Macrovision will immediately reduce the E-Video license
to an equal percentage for such system operator in that Territory.
3.4 Minimum Royalties. Beginning on the first anniversary of the Effective
-----------------
Date, and at each of the next three anniversaries thereafter, E-Video
shall pay to Macrovision a minimum annual Usage Royalty of $250,000 as
an advance against the following year's Usage Royalties on total
revenues from the E-video Transmission service in the United States of
America. Each such $250,000 minimum annual fee shall be applicable to
Usage Royalties incurred during the 12 months following such payment
date. The minimum annual royalty for countries comprising Expanded
Territory countries are set out in Exhibit D. There shall be no
carry-over of such minimum annual Usage Royalties from one year to the
next. E-Video will exercise any such Expanded Territory right within
two (2) years of the Effective, except with respect to Europe in which
case the time for
<PAGE>
exercise of such Expanded Territory rights will be eighteen (18)
months from the Effective Date.
3.5 Minimum Gross Revenues. E-Video's exclusive rights under the license
----------------------
contemplated hereunder shall become non-exclusive if:
3.5.1The Commercial Launch in the U.S. has not occurred within twelve
(12) months of E-Video's execution of the Effective Date, or
3.5.2The E-video Transmission service does not generate in excess of
$250,000,000 in gross revenues in the U.S.A. in the fourth full
year of operation following the Commercial Launch.
3.6 Recorder Fees and Royalties. E-Video will pay, or require its
------------------------------
manufacturers to enter into agreements with Macrovision requiring them
to pay, to Macrovision, a standard set top decoder one-time license
fee ($75,000.00 as of the Effective Date) plus a per box license
royalty fee ($1.00 as of the Effective Date for each E-Video Recorder
manufactured by or for E-Video) within thirty (30) days after the
close of each calendar month in which such E-Video Recorder is
manufactured. If a set top manufacturer already has a Macrovision
license, it will not be required to take out another Macrovision
license, but it will be required to pay the $5,000 technical services
and test fee per Device.
4. E-VIDEO OBLIGATIONS
4.1 Specification of Copy Protection Technology in Receiver/Decoders.
----------------------------------
E-Video will specify that all E-Video Recorders incorporate the
Technology, and that all E-Video Recorder manufacturers sign license
agreements with Macrovision.
4.2 Usage of Technology. E-Video agrees to apply the Technology to all
--------------------
E-Video Transmissions, as contemplated in Section 2.2.2 herein.
4.3 Copy Protection Management Strategy. E-Video will design and implement
-----------------------------------
a Copy Protection Management Strategy (CPMS) in the E-video
Transmission transaction processing, conditional access, and billing
systems. E-Video acknowledges that it has or will receive a copy of
the CPMS requirements prior to commercial launch and understands that
it has the responsibility to properly implement CPMS in the E-video
Transmission systems.
4.4 Progress Reports. E-Video shall provide to Macrovision monthly status
----------------
reports related to the design, development, and deployment of the
E-video Transmission service, the contents of which will be mutually
agreeable between E-Video and Macrovision.
5. MACROVISION OBLIGATIONS
5.1 Technical Support. When requested, Macrovision will provide technical
-----------------
support and documentation reasonably necessary for E-Video to
implement the Technology within E-Video Recorders, and to utilize the
Technology in accordance with this Agreement. Macrovision technical
personnel will collaborate as reasonably required to assist E-Video
with the creation of a customized version of the CPMS software
architecture.
5.2 Improvements. Macrovision will apprise E-Video of any Improvements in
------------
the Process and the Technology and make such Improvements immediately
available
<PAGE>
to E-Video at no additional charge. Macrovision agrees to reasonably
assist E-Video with respect to technical support concerning any
Improvements.
5.3 MACROVISION AGREES TO REASONABLY ASSIST E-VIDEO WITH ANY ASSESSMENT OR
TESTING OF THE TECHNOLOGY THAT PERTAINS TO APPROVAL OR CERTIFICATION
OF THE E-VIDEO SERVICE BY REGULATORY BODIES, UP TO A MAXIMUM OF ONE
HUNDRED (100) HOURS OF TECHNICAL SUPPORT AT NO CHARGE TO E-VIDEO.
6. QUALITY CONTROL & PRODUCT NOTICE
6.1 Quality Control Standards. E-Video shall employ or cause to be
---------------------------
employed such manufacturing and quality standards as shall be required
to manufacture E-Video Recorders capable of properly applying the
Process and in accordance with the Specifications. In addition, as and
when requested by Macrovision for the sole purpose of enabling
Macrovision to test and verify that the Process is being properly
applied by E-Video Recorders, E-Video shall furnish to Macrovision
random samples of the E-Video Recorders. Macrovision at any given time
may be in possession of a maximum of five E-Video Recorders for
testing which, with the exception of one E-Video Recorder, shall be
returned to E-Video on completion of such testing. Macrovision shall
exercise reasonable care and custody of such E-Video Recorders and
will make no commercial use of the E-Video Recorders at any time other
than for evaluation and demonstration. Macrovision shall not be liable
to E-Video in the event that in the course of conducting a quality
control test and verification pursuant to this Section 6 if there is
damage to any E-Video Recorder. Macrovision shall promptly reimburse
E-Video for the replacement cost of the damage to the E-Video
Recorder. E-Video will provide Macrovision without charge at least one
subscription to its E-Video Transmission service in each country in
which such services are provided, to enable Macrovision to
periodically test for CPMS compliance.
6.2 Product Notice. E-Video will place or cause to be placed on the back
---------------
or bottom of each E-Video Recorder in a readily viewable location,
silk-screened or placed on a non- removable exterior tag, a product
notice that shall read as follows: "U.S. patent numbers 4,631,603,
4,577,216, 4,819,098 and their foreign counterparts are licensed for
non-commercial limited pay-per-view uses only". In the printed
collateral material that accompanies the E-Video Recorder, the
following notice must be printed in an appropriate place in such
materials: "This product incorporates copyright protection technology
that is protected by U.S. and foreign patents and other intellectual
property rights. Use of this copyright protection technology must be
authorized by Macrovision, and is intended for home and other limited
pay-per-view uses only unless otherwise authorized by Macrovision.
Reverse engineering or disassembly is prohibited."
7. INDEMNITIES
7.1 Indemnification of E-Video. Macrovision will indemnify, defend and
---------------------------
hold harmless E-Video against any and all third party claims of
proprietary rights infringement which may be asserted against E-Video
on the grounds that E-Video's use of the Patents and/or Technology
infringes upon such third party's rights. Macrovision shall defend
against, control the defense of, and settle any action based upon any
such claims. Macrovision will bear all costs and expenses, including
reasonable attorney's fees, incurred in connection with the defense of
any such claims or as result of any settlement made or judgment
rendered on the basis of such claims. Macrovision's obligations under
this Subsection 6.1 shall arise only if E-Video
7.1.1Promptly notifies Macrovision in writing when such claim is made,
<PAGE>
7.1.2 has complied with the material terms of this Agreement,
7.1.3furnishes such information and assistance as Macrovision may
reasonably request in connection with the defense, settlement or
compromise of such claim,
7.1.4does not enter into any settlement of any such claim without
Macrovision's prior written consent; and
7.1.5allows Macrovision to direct the defense of and/or handle such
suit, claim or proceeding.
7.2 Indemnification of Macrovision. Notwithstanding the foregoing,
---------------------------------
Macrovision shall not be liable to E-Video in any manner for any claim
described in Section 6.1 arising primarily from E-Video's modification
of the Technology and/or the Recorders or combination of same with
other technologies if such claim would have been avoided in the
absence of such combination or modification. In such instance, E-Video
shall defend, indemnify and hold harmless Macrovision from and against
any suit, claim proceeding or damages (including any court costs,
attorneys' fees, and related litigation expenses) suffered by
Macrovision arising out of or related to any circumstance described in
this Section 7.2. E-Video's obligations under this Section 7.2 shall
arise only if Macrovision:
7.2.1promptly notifies E-Video in writing of any such suit, claim or
proceeding,
7.2.2allows E-Video to direct the defense of and/or handle such suit,
claim or proceeding,
7.2.3furnishes such information and assistance as E-Video may
reasonably request in connection with the defense settlement or
compromise of such claim;
7.2.4does not enter into any settlement of the suit, claim or
proceeding without E-Video's prior written consent; and 7.2.5 has
complied with the material terms of this Agreement.
7.3 Alleged Infringement: Discontinuance of Use. If any legal action
----------------------
alleging proprietary rights infringement is commenced or any threat
thereof is made, against either party hereto or their customers or
suppliers with respect to the use of the Patents, Technology, and /or
in the manufacture and /or distribution of the E-Video Recorder by
E-Video pursuant to the terms of this Agreement, Macrovision shall
have the right, but not the obligation, to do any of the following:
7.3.1replace or modify the Technology at Macrovision's expense to
render it non-infringing, provided, however, that any replacement
and/or modification shall substantially meet the Specifications
or;
7.3.2require E-Video to discontinue its use of the Technology until
such action or threatened action is resolved to Macrovision's
satisfaction. If Macrovision requires E-Video to discontinue its
use of the Technology for any period, then during such period of
discontinued use, all payments due pursuant to Section 3.1 and
3.2 shall be deferred during such period of discontinued use. Any
deferral of fees due during this period does not apply to fees
owing prior to or after the discontinuance period; or
<PAGE>
7.3.3procure for the benefit of E-Video at Macrovision's expense the
right or license to any technology alleged to have been
infringed.
7.4 E-Video Participation. E-Video shall have the right to participate in
---------------------
the defense of such action and any settlement negotiations concerning
a claim of patent or intellectual property infringement with regard to
the use by E-Video of the Process, Patents and/or Technology.
Macrovision shall not be responsible for any expenses incurred by
E-Video in such participation unless Macrovision requires E-Video to
participate in the expense of such action, in which case Macrovision
shall be responsible for E-Video's reasonable out-of-pocket expenses.
THE FOREGOING IS MACROVISION'S EXCLUSIVE OBLIGATION WITH RESPECT TO
CLAIMS OF INFRINGEMENT OF PROPRIETARY RIGHTS OF ANY KIND.
8. WARRANTIES
8.1 Macrovision Warranties. Macrovision represents and warrants to E-Video
----------------------
that:
8.1.1Macrovision owns all right, title and interest in and to the
Patents and the Technology, and that the Patents are valid and
enforceable;
8.1.2Macrovision is duly constituted and has the authority and is duly
authorized to enter into this Agreement and perform its
obligations hereunder;
8.1.3the entering into of this Agreement by Macrovision and the
performance by Macrovision of its obligations hereunder will not
result in a breach or otherwise violate the terms of any
agreements to which Macrovision is a party or is otherwise bound;
8.1.4no further patent, trade secret, copyright or other intellectual
property right is required (other than the license rights herein
granted) to lawfully entitle E-Video to apply the Technology in
the Territory through Recorders;
8.1.5to its knowledge there are no material outstanding claims of
infringement against Macrovision or its customers relating to the
Technology; and
8.1.6the Process when properly applied to a standard NTSC or PAL video
signal will cause a substantial reduction in the image quality of
a copy of such signal recorded on a videocassette when such
videocassette is played on most combinations of videocassette
recorders and television sets available as of the date of this
Agreement. If the Process shall fail to comply with the foregoing
warranty, E-Video shall have the right to require Macrovision to
attempt to correct the Process to cause it to perform in
accordance with the Specifications. If the Process does not
comply with the foregoing warranty as a result of a defect in the
E-Video Recorder or any component thereof or the improper
application of the Process by E-Video, Macrovision shall have no
warranty obligation to E-Video and shall be entitled to
reimbursement at its then current time and materials rates for
any corrective work Macrovision provides as to the Process and/or
the defective E-Video Recorder; and
8.1.7Macrovision is duly organized and existing under the applicable
laws of Delaware.
<PAGE>
8.2 E-Video Warranties. E-Video represents and warrants to Macrovision
------------------
that:
8.2.1E-Video has the authority and is duly authorized to enter into
this Agreement and perform its obligations hereunder;
8.2.2the entering into of this Agreement by E-Video and the
performance by E-Video of its obligations hereunder will not
result in a breach or otherwise violate the terms of any
agreements to which E-Video is a party or is otherwise bound;
8.2.3E-Video is duly organized and existing under the applicable laws
of Nevada; and E-Video has the competence and expertise in the
marketplace to commercialize the Technology, in the Field of Use,
that would reasonably be expected of a company taking on the
responsibilities of E-Video under this Agreement
8.2.4No further patent, trade secret, copyright or other intellectual
property right is required (other than technologies currently
developed) to lawfully entitle E-Video to apply the Technology in
the Territory through E-Video Recorders;
9. LIMITATION OF LIABILITY
9.1 NEITHER MACROVISION NOR E-VIDEO WILL BE LIABLE TO EACH OTHER FOR ANY
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE OR KIND
WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR OTHER
ECONOMIC LOSS ARISING OUT OF THE USE OF THE PATENTS OR THE TECHNOLOGY
BY E-VIDEO OR THE MANUFACTURE AND DISTRIBUTION OF THE E-VIDEO RECORDER
BY E-VIDEO SO LONG AS SUCH USE IS IN ACCORDANCE WITH THE PROVISIONS OF
THIS AGREEMENT.
9.2 IN NO EVENT WILL MACROVISION'S LIABILITY IN CONNECTION WITH THE
PATENTS, THE TECHNOLOGY, THE PROCESS, THE DEVICE, THE E-VIDEO
RECORDERS, OR THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY DAMAGES
AND ANY COSTS FOR THE DEFENSE OF LICENSEE PURSUANT TO SUBSECTION 7.1,
EXCEED TWICE THE AMOUNT PAID BY E-VIDEO TO MACROVISION HEREUNDER.
THESE LIMITATIONS WILL APPLY TO ALL CAUSES OF ACTION IN THE AGGREGATE,
INCLUDING WITHOUT LIMITATION BREACH OF CONTRACT, BREACH OF WARRANTY,
MACROVISION'S NEGLIGENCE, STRICT LIABILITY, PROPRIETARY RIGHTS
INFRINGEMENT, MISREPRESENTATION AND OTHER TORTS, EXCEPT MACROVISION'S
INTENTIONAL MISCONDUCT OR GROSS NEGLIGENCE.
10. NEW TECHNOLOGY
New Technologies shall not be considered Technology or Improvements
hereunder. New Technologies may be made available to E-Video under a
separate agreement with terms and conditions to be negotiated by the
parties. E-Video acknowledges that Macrovision shall not be under any
obligation to license E-Video one or more New Technologies unless the
parties mutually agree upon fees, terms and conditions and execute a
separate agreement for such purpose.
11. OWNERSHIP INTEREST IN E-VIDEO
For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, E-Video TV shall, within thirty (30) days following E-Video's
execution of this Agreement, grant Macrovision a 3% equity interest in its
common issued stock as of the Effective Date. The parties shall enter into
such documents and perform such other deeds and acts as are reasonably
necessary to
<PAGE>
accomplish the intent of this provision, including industry-standard
anti-dilution terms and restrictions on corporate reorganizations. E-Video
TV shall ascertain not less than semi-annually that Macrovision's 3% equity
interest remains undiluted.
12. TERM AND TERMINATION
12.1 Term. This Agreement shall be effective as of the Effective Date and
----
will remain in effect for the Term, unless earlier terminated by
mutual consent or for material breach of this Agreement.
12.2 Renewal Option. So long as E-Video has materially complied with all of
--------------
the terms and conditions of this Agreement, E-Video shall have the
additional option, by providing Macrovision with written notice on or
before the fifty-fourth month of this Agreement (4.5 years), to renew
this Agreement, effective upon expiration of the initial Term, for the
Renewal Term on the same terms and conditions as described above,
other than with respect to fees. E-Video shall pay an additional
$350,000 to Macrovision prior to the expiration of the initial license
herein for the purpose of exercising the Renewal Term option. Such
renewed Agreement shall include all of the terms of the initial
Agreement, except that this Agreement shall be deemed to be amended
such that the requirement for the payment of minimum annual Usage
Royalties shall increase to the sum of $350,000 per year beginning on
the first anniversary of the Renewal Term and on each anniversary
thereafter.
12.3 Termination for Breach. In the event of a material breach by either
-----------------------
party in the performance of its duties, obligations or undertakings
under this Agreement, the other party will have the right to give
written notice to the breaching party advising such party of the
specific breach involved. If the breaching party will not have
remedied such breach within thirty (30) days after such notice, the
other party will have the right, in addition to any other rights and
remedies it may have, to terminate this Agreement immediately upon
written notice to the defaulting party.
13. GENERAL TERMS
13.1 Governing Law. This Agreement will be governed by and interpreted in
-------------
accordance with the laws of the State of California, as such laws are
applied to agreements between California residents entered into and to
be wholly performed within California.
13.2 Currency. All references to money in this Agreement refer to United
--------
States dollars.
13.3 Attorneys' Fees. In any dispute, litigation, or arbitration between
---------------
the parties arising out of or related to this Agreement, the
prevailing party therein shall be entitled to have its attorneys'
fees, reasonable expenses, related litigation costs and costs of suit
(if any) paid by the non-prevailing party.
13.4 Inspection of Records. Macrovision will have the right during the term
---------------------
of this Agreement and for one (1) year thereafter to have an
independent certified public accounting firm review or audit E-Video's
records for the purpose of certifying compliance with this Agreement
or any succeeding long form agreement. All audits will be at
Macrovision's expense and conducted during regular business hours, and
begun upon at least one (1) week's prior notice. Macrovision will
provide a copy of such audit to E-Video within five (5) days of
<PAGE>
its receipt of the audit. If the audit reveals that any payments due
to Macrovision have been understated by more than five percent (5%),
then E-Video will reimburse Macrovision for the cost of the audit. Any
discrepancy in the amounts paid (including any understatement or
overstatement) will be corrected within ten (10) days of the written
notice of the official results of the audit being delivered by the
auditor.
13.5 Arbitration. Any dispute between the parties arising out of, or
------------
relating to, the validity, construction, interpretation or performance
of this Agreement that cannot be resolved amicably shall be submitted
to binding arbitration, to be held in San Francisco, California, USA,
in accordance with the rules of the American Arbitration Association.
Any such arbitration proceeding shall be conducted before an
arbitration panel composed of three (3) arbitrators; each party shall
designate one (1) arbitrator, and the two (2) arbitrators so
designated shall designate the third arbitrator. The decision and
award of the arbitrators shall (i) be in writing, (ii) state the
reasons therefor, (iii) be based solely on the terms and conditions of
this Agreement, as interpreted under the laws of the State of
California, USA, and (iv) shall be final and binding upon the parties.
The decision and award of the arbitrators in any such arbitration
proceeding may be enforced in any court of competent jurisdiction.
13.6 Rights Cumulative. Each and all of the various rights, powers and
------------------
remedies of the parties will be considered to be cumulative with and
in addition to any other rights, powers and remedies which such
parties may have at law or in equity in the event of breach of any of
the terms of this Agreement. The exercise or partial exercise of any
right, power or remedy will neither constitute the exclusive election
thereof nor the waiver of any other right, power or remedy available
to such party.
13.7 Notices. All notices, consents or demands of any kind which either
-------
party to the Agreement may be required or may desire to serve on the
other party in connection with this Agreement will be in writing, will
be deemed complete upon delivery and will be delivered by facsimile
with a confirming copy sent by mail, personal service or by registered
or certified mail, return receipt requested, deposited in the United
States mail with postage thereon fully prepaid, addressed to the party
at the address or facsimile number set forth in the initial paragraph
of this Agreement. Service of any such notice, consent or demand so
made by mail will be deemed complete on the date of actual delivery as
shown by the addressee's registry or certification receipt. Each party
hereto may from time-to-time, by notice in writing served upon the
other as aforesaid, designate a different mailing address or facsimile
number or a different person to which such notices or demands are
thereafter to be addressed or delivered.
13.8 Severability. If any of the provisions of this Agreement are held to
------------
be void or unenforceable, the parties agree that such determination
will not result in the nullity or unenforceability of the remaining
portions of this Agreement. The parties further agree to replace such
void or unenforceable provisions of this Agreement with valid and
enforceable provisions which will achieve, to the extent legally
permissible, the economic, business and other purposes of the void or
unenforceable provisions.
13.9 Counterparts. This Agreement may be executed in separate counterparts,
------------
and by facsimile, each of which will be deemed an original, and when
executed, separately or together, will constitute a single original
instrument, effective in the same manner as if the parties had
executed one and the same instrument.
13.10Entire Agreement. This Agreement is intended by the parties to be the
----------------
final expression of their agreement and constitutes and embodies the
entire
<PAGE>
agreement and understanding between the parties hereto and constitutes
a complete and exclusive statement of the terms and conditions
thereof, and will supersede any and all prior correspondence,
conversations, negotiations, agreements or understandings relating to
the same subject matter. The Letter Agreement is expressly terminated
and superseded.
13.11Amendments. No change in, modification of or addition to the terms
---------
and conditions contained herein will be valid as between the parties
unless set forth in a writing which is signed by authorized
representatives of both the parties and which specifically states that
it constitutes an amendment to this Agreement.
13.12Waiver. No waiver of any term, provision, or condition of this
------
Agreement, whether by conduct or otherwise, in any one or more
instances, will be deemed to be, or be construed as, a further or
continuing waiver of that term, provision or condition or any other
term, provision or condition of this Agreement.
13.13Assignment. Neither party hereto will assign this Agreement or any
----------
rights or obligations hereunder to any party without the prior written
consent of the other party hereto, such consent not to be unreasonably
withheld. However, either party may assign this Agreement in total to
a successor in interest.
13.14Binding on Successors and Assigns. Subject to the restrictions of
-----------------------------------
Section 13.13 (Assignment), this Agreement and all of its terms,
conditions and covenants are intended to be fully effective and
binding, to the extent permitted by law, on the successors and
permitted assigns of the parties hereto.
13.15Captions. Captions are provided in this Agreement for convenience
--------
only and they form no part of this Agreement and are not to serve as a
basis for interpretation or construction of this Agreement, nor as
evidence of the intention of the parties hereto.
13.16Disclaimer of Agency. Nothing contained in this Agreement is intended
--------------------
or will be construed so as to constitute the parties to this Agreement
as partners or joint venturers or as agents of each other. Neither
party will have any express or implied right or authority to assume or
create any obligations on behalf of or in the name of the other party
or to bind the other party in any contract, agreement or undertaking
with any third party.
13.17Publicity. Macrovision and E-Video agree that from time-to-time it
---------
will be beneficial to both parties to issue press releases and other
public announcements concerning benefits arising from the manufacture
and sale of Products. Each party agrees to submit for mutual approval
any press release that involves the other party and the Technology,
such approval not to be unreasonably withheld. Macrovision may at any
time "line list" E-Video as an authorized Macrovision licensee.
Likewise, E-Video may publicly disclose that it is a
Macrovision-authorized licensee.
13.18Effectiveness. This Agreement shall be effective only when signed by
-------------
all parties.
13.19Ambiguities. Each party and its counsel have participated fully in
-----------
the review and revision of this agreement. Any rule of construction to
the effect that ambiguities are to be resolved against the drafting
party shall not apply in interpreting this agreement.
13.20Confidentiality. Any and all information of a confidential and/or
proprietary nature of either party ("Confidential Information")
as may be
<PAGE>
disclosed and exchanged between the parties during the term of
this Letter Agreement (and marked so as to indicate its
confidentiality) shall be kept strictly confidential by each of
the parties. Neither party shall disclose any Confidential
Information of the other party to any third party (except for its
accounting, legal advisors and potential investors under a
non-disclosure agreement) without the prior written consent of
the party disclosing such Confidential Information (the
"Disclosing Party"). The foregoing shall not apply to information
disclosed by a Disclosing Party which:
13.20.1 is now publicly available, or becomes publicly available,
through no fault of the other party;
13.20.2 can be shown by written evidence to have been in the
possession of the other party prior to the time of disclosure by
the Disclosing Party;
13.20.3 becomes available to the other party, other than by breach of
confidentiality owed to the Disclosing Party; or
13.20.4 is required by law or ordered by competent government or
court.
13.21Excise Taxes. In the event that any sales tax, use tax, or other
-------------
excise tax is imposed upon Macrovision by any jurisdiction, with
respect to any transaction set forth herein, E-Video shall reimburse
to Macrovision one-half the amount of any and all such taxes paid by
Macrovision to the fullest extent permitted by law.
13.22Rights Cumulative. Each and all the various rights, powers and
------------------
remedies of the parties shall be considered to be cumulative with and
in addition to any other rights, powers and remedies which such
parties may have at law or in equity in the event of breach of any of
the terms of this Agreement. The exercise or partial exercise of any
right, power or remedy shall neither constitute the exclusive election
thereof nor the waiver of any other right, power or remedy available
to such party.
13.23Export Controls. E-Video will not export directly or indirectly the
----------------
Technology or any confidential information generated or disclosed by
Macrovision to any country for which the Government of the United
States or any agency thereof requires an export license or other
governmental approval at the time of export without first obtaining
such required license or approval.
13.24Force Majeure. If either party's performance of any of its obligations
-------------
hereunder is prevented, restricted or interfered with by reason of
fire, or other casualty or accident; strikes or labor disputes; war or
other violence; any law, order, proclamation, regulation, ordinance,
demand or requirement of any government agency; or any act or
condition whatsoever beyond its reasonable control, the non-performing
party upon giving prompt notice to the other party, both parties shall
be excused from such performance to the extent of such prevention,
restriction or interference; provided the non-performing party shall
use its best efforts to avoid or remove such causes of non-performance
and shall continue performance hereunder whenever such causes are
removed.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the Effective Date.
MACROVISION CORPORATION E-VIDEO U.S.A., INC.
By: /s/ Ian Halifax By: /s/ R. Bennett
-------------------- --------------------
(Signature) (Signature)
Name: Ian Halifax Name: Roy Bennett
------------------ ------------------
(Please print) (Please print)
Title: CFO Title: President
----------------- -----------------
(Please print) (President)
Date: 14 March 2000 Date: 14 March 2000
------------------ ------------------
E-VIDEO TV, INC.
By: /s/ R. Dinning
---------------------
(Signature)
Name: Robert Dinning
-------------------
(Please print)
Title: CFO/Director
------------------
(Please print)
Date: March 14, 2000
-------------------
<PAGE>
EXHIBIT A
EXPANDED TERRITORY SUBLICENSE
This EXPANDED TERRITORY SUBLICENSE is effective the ___ day of _________, 200__
by and between MACROVISION CORPORATION, a Delaware corporation, of 1341 Orleans
Drive, Sunnyvale, California 94089, USA, facsimile (408) 743-8610
("Macrovision") and E-VIDEO U.S.A., INC., a Nevada corporation, of 8360 East Via
de Ventura, Building L-200, Scottsdale, Arizona 85258, USA, facsimile (480)
778-1498 ("E-Video").
Reference is made to that certain license agreement between Macrovision and
E-Video dated January 31st, 1999 pertaining to Macrovision's Less-Than-Real-Time
technology, as defined therein (the "Agreement").
For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. The definition of "Territory" in the Agreement is hereby expanded to
include _______.
2. [License fee and royalty table for the expanded territory to be inserted
here.]
3. All other terms of the Agreement remain unchanged and are incorporated
herein by reference. The term of this Expanded Territory Sublicense will be
co-terminous with the Agreement. This Expanded Territory Sublicense will be
considered part of the Agreement, however a breach of the terms hereof will not
be considered a breach of the Agreement, and in such event Macrovision will be
entitled to terminate only this Expanded Territory Sublicense.
IN WITNESS WHEREOF, the parties have executed this Expanded Territory Sublicense
as of the date first written above.
MACROVISION CORPORATION E-VIDEO U.S.A., INC.
By: By:
------------------------------- -----------------------------------
(Signature) (Signature)
------------------------------- -----------------------------------
Name: Name:
------------------------------- -----------------------------------
(Please print) (Please print)
------------------------------- -----------------------------------
Title: Title:
------------------------------- -----------------------------------
(Please print) (Please print)
------------------------------- -----------------------------------
Date: Date:
------------------------------- -----------------------------------
<PAGE>
EXHIBIT B
PATENT TERRITORIES
Australia
Austria
Belgium
Canada
China
France
Germany
Hong Kong
India
Ireland
Italy
Japan
Liechtenstein
Luxembourg
Mexico
Netherlands
New Zealand
Philippines
South Africa
South Korea
Spain
Sweden
Switzerland
Taiwan
Thailand
United Kingdom
United States
<PAGE>
EXHIBIT C
SUBLICENSE RIGHTS, RESTRICTIONS AND OBLIGATIONS
E-Video shall enter into one or more system operator agreements substantially in
the form set out in Exhibit E, under the terms of Section 2.6 hereof.
The rights set out in Section 2.6 of this Agreement are subject to the following
restrictions and obligations:
E-VIDEO OBLIGATIONS
1. E-Video will not represent to any party that it represents Macrovision or
acts as Macrovision's agent with respect to any New Technologies, as defined
herein.
2. With respect to existing Macrovision licensees, or prospects which
Macrovision provides to E-Video, E-Video will not charge more and Macrovision
will receive not less than the licensee fees and royalties referred to in such
agreements; and with respect to prospective customers, E-Video will not charge
less than the 1% provided for in Macrovision's standard system operator
agreement. Any alteration to the license fees and royalties of such agreements
must be authorized in writing by Macrovision prior to the execution of any such
agreements by E-Video.
3. Less-Than-Real-Time customer prospects will not be required to utilize
E-Video Recorders manufactured by E-Video so long as the recorders used comply
with E-Video Recorder specifications as they relate to analog copy protection.
4. E-Video will test and certify all uses of the Technology in the Field of
Use that any E-Video licensee may make in their customer applications. E-Video
will insure that the Specifications are properly implemented before any set top
decoders utilizing the Technology are shipped, and before any transmission
implementing the Technology is activated.
5. E-Video will provide and maintain its own technical, legal, sales and
operational personnel in support of all sales, certification and system
activation activities. If E-Video requires assistance from Macrovision in this
regard, E-Video will pay for any such assistance exceeding forty (40) hours at
Macrovision's then-current technical support rates.
6. E-Video will immediately notify Macrovision upon commencing any
discussions pertaining to the Technology in the Field of Use with any MPA
studios, cable operators or DBS operators.
7. E-Video will immediately notify Macrovision of the commencement of any
discussions or negotiations with any party, who shall promptly be identified to
Macrovision, pertaining to the possibility of such party representing E-Video
for the purpose of licensing E-Video services with the Technology embedded
therein. E-Video will instruct any such agent or sales representative which it
retains that it is obligated, as is E-Video, to utilize the Macrovision approved
standard form system operator licensee documentation as set out in Exhibit E
when it is negotiating with E-Video customers, and that neither such agent or
sales representative nor E-Video is entitled to change any terms in such
documentation without Macrovision's prior written agreement.
8. E-Video will promptly notify Macrovision in writing of any product or
service enhancement which might have any effect on the use of the Technology,
and any such event will require re-certification by Macrovision to ascertain
that the Specifications are still met.
<PAGE>
9. E-Video and Macrovision will promptly notify one another of any new
product or service offerings relating to the Technology or the E-Video service,
and any price changes pertaining to the licensing of any product or service with
the Technology embedded. For new sales, E-Video will provide to Macrovision a
copy of the E-Video sales contract or license agreement.
10. E-Video will attach a copy of the Specifications to each E-Video system
operator or manufacturing agreement pertaining to the Technology, provided that
E-Video shall ascertain beforehand that an appropriate non-disclosure agreement
has been entered into which adequately protects Macrovision's trade secret and
other proprietary rights therein.
11. E-Video will be responsible for complying with all DVB or related
standards, specifications and requirements for the licensing of the Technology
in the Field of Use into all Expanded Territories.
12. E-Video will not enter into any agreement, directly or indirectly, for
the manufacture, production, import, advertising, offering, acquisition, sale or
licensing of any products or services competitive to the Technology.
13. E-Video will make no representations or warranties as to the Technology
other than those contained in written materials made available by Macrovision,
other than as may be approved beforehand in writing by Macrovision.
MACROVISION OBLIGATIONS
1. Macrovision will attend meetings with potential E-Video customers as
reasonably requested. E-Video will provide reasonable advance notice of such
meetings as well as copies of all pertinent documentation and correspondence
with such customer.
2. Macrovision will provide up to forty (40) hours of technical support
(including one round-trip to a customer's site) per E-Video system operator
activation, as required to explain the Technology, configure operator software,
carry out system tests, and as otherwise required in Macrovision's reasonable
opinion. E-Video will pay Macrovision's then-current technical support rates
for any such support in excess thereof.
3. Macrovision will provide sales support, as reasonably requested,
including sales leads, prospective contacts and support which Macrovision
reasonably deems necessary in licensing negotiations.
4. Macrovision will provide one master copy, along with all subsequent
revisions thereof, of the Specifications for use with the license agreements
which E-Video will enter into hereunder.
5. Macrovision will immediately provide E-Video contact information
regarding any new real-time licenses and inquiries for Less Than Real Time
licenses. E-Video will not contact any such parties prior to giving Macrovision
reasonable advance notice of the intent to do so.
<PAGE>
EXHIBIT D
MINIMUM USAGE ROYALTIES
TIER 1, 2 AND 3 COUNTRIES (AS REFERENCED IN SECTION 2.5.2)
Tier 1: U.S.A., U.K., France, Spain, Germany, Italy, and Japan
Tier 2 : Hong Kong and Australia
Tier 3: Rest of the world
COUNTRY PRICING FORMULA:
The minimum annual usage royalties payable in any country comprising an Expanded
Territory country hereunder will be the greater of:
(a) $1.00 per 1,000 of population
(b) the average of projected (or actual, if available) Pay TV spending (in
US dollars) in 2000, 2001, 2002 and 2003 times one one-hundredth of
one percent (.01%)
but in no event less than $25,000 per year nor more than $150,000.
The preceding formula excludes the following Expanded Territories, which have
been priced individually as follows:
U.K. (excluding Ireland) - $150,000
Japan - $150,000
France - $100,000
Germany - $100,000
Spain - $100,000
Australia - $75,000
South Korea - $50,000
EXHIBIT 10.2
THIS SECOND AMENDING AGREEMENT made and dated for reference the 31st day of
January, 2000.
AMONG:
E-VIDEOTV, INC., a body corporate, incorporated under the laws of the
State of Delaware, having its registered office at 1313 North Market
Street, New Castle County, Wilmington, Delaware 19801-1151
(HEREINAFTER CALLED "E-VIDEOTV")
OF THE FIRST PART
AND:
EVIDEO USA, INC., a body corporate, incorporated under the laws of
Nevada, having its registered office at 502 East John Street, Carson
City, Nevada 89706
(HEREINAFTER CALLED "USA")
OF THE SECOND PART
AND:
EVIDEO INTERNATIONAL, INC., a body corporate, incorporated under the
laws of The Commonwealth of the Bahamas, having its registered office
at ABL Building, Bank Lane, Nassau, Bahamas
(HEREINAFTER CALLED "INTERNATIONAL")
OF THE THIRD PART
AND:
ROY B. BENNETT & ASSOCIATES LTD., a body corporate, incorporated under
the laws of the Province of British Columbia, having its head office
at 1750 - 1177 W. Hastings Street, Vancouver, B.C. V6E 3K2
(HEREINAFTER CALLED "BENNETT")
OF THE FOURTH PART
AND:
ROY B. BENNETT, an individual, at 1750 - 1177 W. Hastings Street,
Vancouver, B.C. V6E 3K2
(HEREINAFTER CALLED "ROY BENNETT")
OF THE FIFTH PART
WHEREAS:
A. Pursuant to an agreement among the parties hereto dated June 8, 1999
(hereinafter called the "Agreement"), E-VideoTV (formerly known as "Asia Pacific
Enterprises, Inc.") agreed to acquire all of the issued and outstanding shares
of USA from International on the terms set forth in the Agreement;
<PAGE>
B. The closing pursuant to the Agreement occurred on June 23, 1999;
C. Pursuant to an amending agreement among the parties hereto dated
September 1, 1999 (hereinafter called the "Amending Agreement"), the parties
amended certain of the provisions of the Agreement on the terms and conditions
set forth therein;
D. The parties now wish to further amend certain of the provisions of
the Agreement, as amended by the Amending Agreement, on the terms and conditions
hereinafter set forth;
NOW THEREFORE THIS SECOND AMENDING AGREEMENT WITNESSETH that in consideration of
these presents and the sum of Ten Dollars ($10.00) now paid by each of the
parties to each of the other parties hereto, the receipt and sufficiency of
which is hereby acknowledged by each of the parties, and for other good and
valuable consideration, the receipt and sufficiency of which is also hereby
acknowledged by each of the parties, the parties hereby agree as follows:
1. Paragraph 1.01 of the Agreement is deleted in its entirety, and is replaced
with the following:
"1.01Subject to the terms and conditions hereof, International hereby
agrees to sell to E-VideoTV, and E-VideoTV hereby agrees to purchase
from International, one common share in the capital stock of USA,
representing all of the issued and outstanding shares of USA, with the
consideration to consist of the issuance of 6,623,016 common shares in
the capital stock of E-VideoTV, with all of these shares to be held in
escrow by an independent escrow agent, with these shares of E-VideoTV
to be dealt with on the following basis:
(a) 25% of these shares will be released to International from escrow
when all of the following business milestones have been met:
(i) the formal Long Form Agreement contemplated in paragraph 16
of the Macrovision Agreement has been entered into; and
(ii) an agreement has been entered into with a motion picture
studio for the distribution of movies by means of USA's
system;
(b) an additional 25% of these shares will be released to
International from escrow when each of the following conditions
have been met:
(i) E-VideoTV has successfully recruited a Chief Executive
Officer and such recruitment has been approved by its board
of directors;
(ii) a successful file server beta testing with video files has
been developed;
(iii)a distribution agreement with a cable company has been
entered into; and
(iv) a communication test between a cable company and a cable
customer has been successfully completed;
<PAGE>
(c) the remaining 50% of these shares will be released to International
from escrow when E-VideoTV first generates gross annual revenues of
One Million Dollars ($1,000,000) on a consolidated basis; and
(d) any shares not released to International from escrow by June 23, 2004
will be surrendered to E-VideoTV for cancellation; PROVIDED THAT,
notwithstanding any of the provisions of this paragraph 1.01, all
shares not yet released to International from escrow pursuant to the
provisions of sub-paragraphs (a), (b) or (c) or not cancelled pursuant
to the provision of sub-paragraph (d) hereof shall be released from
escrow upon the occurrence of any of the following events:
(e) E-VideoTV successfully completing a public offering that raises in
excess of Ten Million Dollars ($10,000,000); or
(f) the completion of a successful takeover for a majority of the issued
and outstanding common shares of E-VideoTV that results in a majority
of the shares of E-VideoTV not held in escrow pursuant to the terms of
this Agreement having been tendered pursuant to the takeover bid; or
(g) E-VideoTV having a publicly quoted market price in excess of Ten
Dollars ($10.00) per common share for a period of in excess of twenty
consecutive trading days."
2. Paragraph 1.02 of the Agreement, as amended by paragraph 1 of the Amending
Agreement, is deleted in its entirety, the result being that no additional
shares of E-VideoTV will be issued to International, notwithstanding
E-VideoTV raising additional equity capital in the future.
3. Paragraph 1.03 of the Agreement, as amended by paragraph 2 of the Amending
Agreement, is deleted in its entirety and replaced with the following:
"1.03In order to secure E-VideoTV's performance in the raising of
additional equity capital, Adrian Rollke, a director of E-VideoTV, has
agreed to lodge 345,000 common shares of E-VideoTV currently owned by
him with an independent escrow agent, which shares will be released to
Mr. Rollke from escrow or cancelled on the following basis:
(a) on May 30, 2000, that portion of the total shares held in escrow
that equals the portion that the equity funds raised by E-VideoTV
from January 1, 1999 to May 30, 2000 (excluding equity funds
raised solely through the efforts of Roy B. Bennett) is of
$5,000,000; and
(b) any shares not entitled to be released from escrow as provided
for in sub-paragraph (a) of this paragraph 1.03 will be
surrendered to E-VideoTV for cancellation on May 31, 2000.
4. Paragraph 7.01 of the Agreement is deleted in its entirety, and is replaced
with the following:
<PAGE>
"7.01The following will become or remain the directors and officers of each
of E-VideoTV and USA:
(a) Roy Bennett will remain a director, the President and the Chief
Executive Officer until a new Chief Executive Officer is
appointed under subsection 1.01(b)(i) herein, at which time Roy
Bennett will remain a director and the Chairman, at his
discretion;
(b) Adrian Rollke will have the right to nominate one director, who,
if not already a director of E-VideoTV, will be appointed
director forthwith upon being nominated by Adrian Rollke. His
representation in total shall be one directorship.
5. Paragraph 7.02 of the Agreement is deleted in its entirety.
6. Paragraph 7.05 of the Agreement is deleted in its entirety, and is replaced
with the following:
"7.05 E-VideoTV and USA each acknowledge and agree that:
(a) any expenditure by either in excess of Twenty-five Thousand
Dollars ($25,000) will require the prior approval of the board of
directors of E-VideoTV; and
(b) each will be required to present to its board of directors at
least 2 weeks prior to the start of any calendar quarter an
operating budget for the next calendar quarter, detailing
proposed expenditures on a monthly basis, with the operating
budget for USA to be subject to the approval of the boards of
directors of each of USA and E-VideoTV, and with the operating
budget for E-VideoTV to be subject to the approval of its board
of directors."
7. In all other respects the terms and conditions of the Agreement, as amended
by the Amending Agreement, shall remain in full force and effect.
8. The parties hereto agree that the terms and conditions of this Second
Amending Agreement shall supercede and replace any other agreement or
arrangements, whether oral or written, heretofore existing among the
parties in respect of the subject matter of this Second Amending Agreement.
9. This Second Amending Agreement and any certificate or other writing
delivered in connection herewith may be executed in any number of
counterparts and any party hereto may execute any counterpart, each of
which when executed and delivered will be deemed to be an original and all
of which counterparts of this Second Amending Agreement or such other
writing, as the case may be, taken together, will be deemed to be one and
the same instrument. The execution of this Second Amending Agreement or any
other writing by any party hereto will not become effective until all
counterparts hereof have been executed by all the parties hereto.
10. Each of the parties hereto will be entitled to rely upon delivery by
facsimile of executed copies of this Second Amending Agreement and any
certificates or other writings delivered in connection herewith, and such
facsimile copies will be legally effective to create a valid and binding
agreement among the parties in accordance with the terms and conditions of
this Second Amending Agreement.
11. Each of the parties hereto agrees to do and/or execute all such further and
other acts, deeds, things, devices, documents and assurances as may be
required in order to carry out the true intent and meaning of this Second
Amending Agreement.
<PAGE>
12. This Second Amending Agreement shall endure to the benefit of and be
binding upon the parties hereto and each of their successors and permitted
assigns, as the case may be.
IN WITNESS WHEREOF this Second Amending Agreement has been executed as of the
day and year first above written.
SIGNED and DELIVERED by
E-VIDEOTV, INC.
in the presence of:
/s/ Robert Dinning
- --------------------------------
Authorized Signatory
SIGNED and DELIVERED by
EVIDEO USA, INC.
in the presence of:
/s/ Robert Dinning
- --------------------------------
Authorized Signatory
SIGNED and DELIVERED by
EVIDEO INTERNATIONAL, INC.
in the presence of:
/s/ Roy B. Bennett
- --------------------------------
Authorized Signatory
SIGNED and DELIVERED by
ROY B. BENNETT & ASSOCIATES LTD.
in the presence of:
/s/ Roy B. Bennett
- --------------------------------
Authorized Signatory
SIGNED AND DELIVERED BY )
ROY B. BENNETT )
IN THE PRESENCE OF: )
/S/ ROBERT DINNING ) /S/ ROY B. BENNETT
- ------------------------------------------------- ) ---------------------
SIGNATURE OF WITNESS ) ROY B. BENNETT
ROBERT DINNING )
- ------------------------------------------------- )
NAME OF WITNESS - PLEASE TYPE OR PRINT )
3910 INDIAN RIVER DR )
- ------------------------------------------------- )
ADDRESS OF WITNESS - PLEASE TYPE OR PRINT )
NORTH VANCOUVER BC )
- ------------------------------------------------- )
CHARTERED ACCOUNTANT )
- ------------------------------------------------- )
OCCUPATION OF WITNESS - PLEASE TYPE OR PRINT )
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAR-05-1999
<PERIOD-END> DEC-31-1999
<CASH> 105002
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 107906
<PP&E> 3334
<DEPRECIATION> 0
<TOTAL-ASSETS> 867718
<CURRENT-LIABILITIES> 248899
<BONDS> 0
0
0
<COMMON> 1559
<OTHER-SE> 617260
<TOTAL-LIABILITY-AND-EQUITY> 867718
<SALES> 0
<TOTAL-REVENUES> 8858
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 486895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (478037)
<INCOME-TAX> 0
<INCOME-CONTINUING> (478037)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (478037)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
