SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended September 30, 2000
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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.)
7333 East Doubletree Ranch Road, Suite 205, Scottsdale, AZ 85258
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(Address of Principal Executive Offices)
480-778-1499
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant 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
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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
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Transitional Small Business Disclosure Format (check one):
Yes No X
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Page 1 of 12
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E-VIDEOTV, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 2
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . 2
Item 2. Management's Discussion and Analysis and Plan of Operation. 9
PART II OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 10
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<TABLE>
<CAPTION>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following financial statements are included as part of this quarterly report:
<S> <C>
Unaudited Consolidated Balance Sheet at September 30, 2000 and December 31, 1999 . . . . 3
Unaudited Consolidated Statement of Operations for the period from inception, March 5,
1999, to September 30, 2000, the nine months ended September 30, 2000, the period from
inception to September 30, 1999, the quarter ended September 30, 2000 and the quarter ended
September 30, 1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Unaudited Consolidated Statement of Cash Flows for the period from inception, March 5,
1999, to September 30, 2000, the nine months ended September 30, 2000 and the period
from inception to September 30, 1999. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unaudited Consolidated Statement of Shareholders' Equity for the period from inception,
March 5, 1999, to September 30, 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Unaudited Notes to the Consolidated Financial Statements. . . . . . . . . . . . . . . . . 7
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<TABLE>
<CAPTION>
E-VIDEOTV, INC.
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEET
UNAUDITED
U.S. DOLLARS SEPTEMBER 30, DECEMBER 31,
2000 1999
<S> <C> <C>
--------------- -------------
$ $
ASSETS
CURRENT ASSETS
Cash 15,387 105,002
Accounts receivable 6,726 -
Prepaid expenses 2,800 2,904
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TOTAL CURRENT ASSETS 24,913 107,906
OFFICE EQUIPMENT 22,107 3,334
DISTRIBUTION RIGHTS AND SOFTWARE DEVELOPMENT 1,987,027 756,478
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TOTAL ASSETS 2,034,047 867,718
=============== =============
LIABILITIES
CURRENT LIABILITIES
Accounts payable 198,241 248,899
Loan payable (note 2) 92,500 -
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TOTAL LIABILITIES 290,741 248,899
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SHAREHOLDERS' EQUITY
SHARE CAPITAL (note 3)
Authorized
- 100,000,000 shares of common stock, $0.0001 par value
- 5,000,000 shares of preferred stock, $0.0001 par value
Issued and outstanding
- 16,757,072 common shares (1999 - 15,588,359) 1,676 1,559
Additional paid in capital 2,935,553 1,095,297
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TOTAL SHARE CAPITAL 2,937,229 1,096,856
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (1,193,923) (478,037)
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NET SHAREHOLDERS' EQUITY 1,743,306 618,819
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,034,047 867,718
=============== =============
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.
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
U.S. DOLLARS
INCEPTION, 9 MONTHS INCEPTION, QUARTER QUARTER
MARCH 5, 1999, ENDED MARCH 5, ENDED ENDED
TO SEPT. 30, SEPT. 30, TO SEPT. 30, SEPT. 30, SEPT. 30,
2000 2000 1999 2000 1999
----------- -------------- ----------- ----------- ----------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
GENERAL AND ADMINISTRATIVE
EXPENSES
Corporate promotion 130,656 88,519 24,535 22,809 23,490
General corporate expenses 125,378 69,766 45,200 21,644 43,901
Management and consulting fees 507,633 350,993 87,106 65,156 79,633
Office expenses 64,094 49,815 - 19,787 -
Professional fees 230,943 65,022 80,901 34,112 79,201
Rent 45,366 21,538 11,525 5,601 10,691
Travel 99,906 71,428 18,311 18,063 16,878
----------- -------------- ----------- ----------- ----------
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 1,203,976 717,081 267,578 187,172 253,794
INTEREST INCOME (10,053) (1,195) (6,859) (5) (6,171)
----------- -------------- ----------- ----------- ----------
NET LOSS FOR THE PERIOD 1,193,923 715,886 260,719 187,167 247,623
=========== ============== =========== =========== ==========
Weighted Average Number of
Shares Outstanding 9,460,622 4,083,320 9,789,056 8,620,343
-------------- ----------- ----------- ----------
NET LOSS PER SHARE 0.08 0.06 0.02 0.03
============== =========== =========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
E-VIDEOTV, INC.
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
U.S. DOLLARS INCEPTION, NINE MONTHS INCEPTION,
MARCH 5, 1999, ENDED MARCH 5, 1999,
TO SEPT. 30, SEPT. 30, TO SEPT. 30,
2000 2000 1999
---------------- ------------- ---------------
$ $ $
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss for the period (1,193,923) (715,886) (260,719)
Adjustments to reconcile net loss to net cash
used in operating activities:
- depreciation 988 741 -
- accounts receivable and prepaid expenses 3,078 (6,622) (1,399)
- accounts payable 166,011 (50,658) 72,765
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NET CASH USED IN OPERATING ACTIVITIES (1,023,846) (772,425) (189,353)
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FINANCING ACTIVITIES
Proceeds from sale of common shares 1,048,601 1,048,600 1
Loan payable 92,500 92,500 -
Loans from parent company prior to acquisition 115,000 - 115,000
Cash acquired on acquisition of parent company 1,001,481 - 1,001,481
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TOTAL CASH FLOW FROM FINANCING ACTIVITIES 2,257,582 1,141,100 1,116,482
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INVESTING ACTIVITIES
Distribution rights and software development (1,195,254) (438,776) (497,783)
Office equipment (23,095) (19,514) (5,452)
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TOTAL CASH USED IN INVESTING ACTIVITIES (1,218,349) (458,290) (503,235)
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INCREASE IN CASH DURING THE PERIOD 15,387 (89,615) 423,894
CASH AT THE BEGINNING OF THE PERIOD - 105,002 -
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CASH AT THE END OF THE PERIOD 15,387 15,387 423,894
================ ============= ===============
NON-CASH ACTIVITIES NOT INCLUDED
IN CASH FLOWS
Ascribed value of shares issued to
acquire copy protection license 791,773 791,773 -
Cancellation of loans from parent
company on acquisition 115,000 - 115,000
Ascribed value of shares issued in
excess of cash acquired on
acquisition of parent company 95,374 - 95,374
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
E-VIDEOTV, INC.
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
INCEPTION, MARCH 5, 1999, TO SEPTEMBER 30, 2000
UNAUDITED
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 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
Issuance of shares for cash 666,000 67 1,048,533 - 1,048,600
Issuance of shares to acquire
copy protection license 502,713 50 791,723 - 791,773
Net loss, nine months ended
September 30, 2000 - - - (715,886) (715,886)
----------- ------ ----------- --------------- ----------
Balance, September 30, 2000 16,757,072 1,676 2,935,553 (1,193,923) 1,743,306
=========== ====== =========== =============== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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E-VIDEOTV, INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
UNAUDITED
U.S. DOLLARS
1. BASIS OF PRESENTATION
While the information presented in these interim consolidated financial
statements is unaudited, it includes all adjustments which are, in the
opinion of management, necessary to the fair presentation of the interim
periods reported. As certain information has been condensed or omitted from
the notes to the financial statements, these financial statements should
only be read in conjunction with the audited consolidated financial
statements for the period from inception, March 5, 1999, to December 31,
1999, contained in the company's annual report on Form 10-KSB.
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. Significant additional cash
will be required.
2. LOAN PAYABLE
The loan is without specific repayment and interest terms.
3. SHARE CAPITAL
The warrants that were outstanding that entitled their holder to purchase
up to 307,693 shares of common stock at $3.25 per share until May 25, 2000
expired without being exercised.
The Company has agreed to issue 3 common shares to the licensor of the
Company's copy protection software for each 97 shares the Company issues in
future to third parties.
During the nine months ended September 30, 2000 the Company granted stock
options to purchase an aggregate of 4,625,000 at prices ranging from $0.875
to $1.25 per share, of which 25,000 were cancelled during the period. The
weighted average exercise price is $0.924 per share. At September 30, 2000
there were options outstanding on a total of 4,600,000 shares with a
weighted average exercise price of $0.921 per share that are exercisable
until 2005.
A total of 6,968,016 shares held in escrow have been excluded from the
calculation of the weighted average number of shares outstanding.
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E-VIDEOTV, INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
UNAUDITED
U.S. DOLLARS
4. RELATED PARTY TRANSACTIONS
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<CAPTION>
Inception, Nine months
March 5, 1999, ended
to Sept. 30, Sept. 30,
2000 2000
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$ $
<S> <C> <C>
Management and consulting fees paid to other companies that employ
directors and officers of the Company 383,149 229,500
Rent paid to a company that employed directors and
officers of the Company - 10,973
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
The Company continues to focus on its exclusive rights to activate Macrovision
Corporation's copy protection circuit used in all home movie devices and set-top
boxes for video received in Faster Than Real Time (FTRT) and stored for later
viewing.
Macrovision copy protection allows consumers to view, but not record, programs
that are copy protected at the direction of program copyright holders. The
technology is designed to deter unauthorized home taping of digitally delivered
programs. Macrovision holds an equity interest in the Company.
While the Company continues to position itself as a B2B content aggregator to
obtain new release Video-On-Demand (VOD) movies for transmission by its
distributors, it is also pursuing a program of licensing throughout the world.
It is currently in discussions with interested parties in different countries
regarding licensing.
The Company has initiated three specific strategies regarding VOD:
1. Licensing operators such as cable, satellite, wireless, DSL and other
broadband distributors for FTRT VOD service.
2. Licensing set-top box manufacturers and strategic partners.
3. Using its relationships in Hollywood to position the Company as a VOD
content aggregator to obtain new release movies.
The annual home movie market is estimated at $14 billion. Of this, it is
estimated that 85% is represented by new release movies. VOD content can be
started at anytime thus there is no need for recording of the program. It is
expected that Hollywood will require that new VOD new-release-content be copy
protected and Macrovision is the accepted standard.
The license rights from Macrovision Corp are for a five year period with an
option to renew for an additional five years. The Company has complied with all
requirements of its agreement with Macrovision Corp to date, and is cognizant of
its obligations both now and in the future regarding its commitment to
Macrovision.
In the next 12 months, the Company estimates it will require $2,000,000 to
assist in research and development, marketing and general overhead.
Proposed capital expenditures do not include any costs associated with
manufacturing and distribution of set top boxes. Other interested parties will
finance these costs.
The Company has financed its development stage to date by private placements of
common stock. It also recognizes that it currently does not have sufficient
funds to finance its operation over the next 12 months. The Company plans to
complete additional private placement financings to provide the necessary funds.
The inability of the Company to arrange necessary financing will have a material
adverse effect on proposed operations.
The Company further recognizes that its development schedule will be delayed
unless additional capital required is available when needed.
Inflation has not been a factor during the quarter ending September 30, 2000.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no reportable legal proceedings.
ITEM 2. CHANGES IN SECURITIES.
There are no changes in the Company's securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There have been no defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the quarter ended
September 30, 2000.
ITEM 5. OTHER INFORMATION.
The Company has no other information to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The following exhibits are filed as part of this report.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed by the undersigned, thereunto duly authorized.
E-VIDEOTV, INC.
Date November 14, 2000 By /s/ Charles Weber
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Charles Weber
President (Chief Executive Officer)
Date November 14, 2000 By /s/ Robert G. Dinning
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Robert G. Dinning
Chief Financial Officer
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