UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 2000
[_] Transition Report pursuant to 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________ to _______________
Commission File Number 0-26535
VIAVID BROADCASTING, INC.
(Exact name of Small Business Issuer as specified in its charter)
NEVADA 98-020-6168
--------------------------- -----------
(State or other jurisdiction of (IRS Employer
incorporation ) Identification No.)
3955 GRAVELEY STREET, BURNABY, BRITISH COLUMBIA V5C 3T4
----------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 604-669-0047
------------
Indicate by a check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days [X] Yes [_] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class November 10, 2000
----- -----------------
Common Stock 7,651,000 shares
1
<PAGE>
PART 1 B FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL
The Company's unaudited financial statements for the six months ending September
30, 2000 are included with this Form 10-QSB. The unaudited financial statements
for the six months ending September 30, 2000 include:
(a) Consolidated Balance Sheet as of September 30, 2000 and March
31, 2000;
(b) Consolidated Statement of Operations - Cumulative from
Incorporation to September 30, 2000, Six months ended
September 30, 2000 and September 30, 1999 and Three months
ended September 30, 2000 and September 30, 1999;
(c) Consolidated Statement of Shareholders' Equity for the period
ending September 30, 2000;
(d) Consolidated Statement of Cash Flows - Cumulative from
Incorporation to September 30, 2000, Six months ended
September 30, 2000 and September 30, 1999;
(e) Notes to Consolidated Financial Statements.
The unaudited financial statements have been prepared in accordance with the
instructions to Form 10-QSB and, therefore, do not include all information and
footnotes necessary for a complete presentation of the financial position,
results of operations, cash flows, and stockholders' equity in conformity with
generally accepted accounting principles. In the opinion of management, all
adjustments considered necessary for a fair presentation of the results of
operations and financial position have been included and all such adjustments
are of a normal recurring nature. Operating results for the six months ended
September 30, 2000 are not necessarily indicative of the results that can be
expected for the year ending March 31, 2001.
FINANCIAL STATEMENTS
2
<PAGE>
VIAVID BROADCASTING INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
(UNAUDITED)
SEPTEMBER 30, 2000
3
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
=============================================================================================================================
September 30, March 31,
2000 2000
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 183,556 $ 134,540
Accounts receivable 7,702 6,164
Prepaid expenses 7,572 13,045
------------- --------------
198,830 153,749
CAPITAL ASSETS (Note 5) 164,162 183,740
------------- --------------
$ 362,992 $ 337,489
=============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 25,464 $ 31,794
Due to related parties 37,313 17,780
------------- --------------
62,777 49,574
------------- --------------
SHAREHOLDERS' EQUITY
Capital stock (Note 6)
Authorized
25,000,000 common shares with a par value of $0.001 per share
Issued
7,367,000 common shares (6,652,000 at March 31, 2000) 7,367 6,652
Additional paid-in capital 1,823,937 1,358,077
Deficit accumulated during the development stage (1,531,089) (1,076,814)
------------- --------------
300,215 287,915
------------- --------------
$ 362,992 $ 337,489
=============================================================================================================================
</TABLE>
NATURE OF OPERATIONS (Note 1)
SUBSEQUENT EVENT (Note 13)
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
===============================================================================================================================
Cumulative
From Three Month Three Month Six Month Six Month
Incorporation Period Ended Period Ended Period Ended Period Ended
to September 30, September 30, September 30, September 30, September 30,
2000 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Broadcast and web income $ 56,838 $ 4,069 $ 9,142 $ 8,758 $ 14,445
Interest income 9,119 1,208 445 3,615 1,108
---------------- ----------------- --------------- --------------- ---------------
65,957 5,277 9,587 12,373 15,553
---------------- ----------------- --------------- --------------- ---------------
EXPENSES
Amortization 63,514 11,998 14,172 23,965 20,178
Consulting 488,321 99,907 47,664 181,893 87,158
Equipment rental 9,365 685 2,102 1,601 2,476
Foreign exchange 12,596 898 2,848 8,574 1,034
Internet, website and graphics 81,019 12,140 23,246 27,853 39,644
Office and miscellaneous 89,739 10,071 21,019 26,935 33,857
Professional fees 148,592 23,699 4,534 34,940 26,305
Rent 74,470 7,658 8,608 19,164 16,998
Salaries and benefits 193,996 44,982 11,704 91,232 20,380
Stock based compensation 372,204 17,288 - 34,575 -
Travel and entertainment 63,230 734 8,360 15,916 11,785
---------------- ----------------- --------------- --------------- ---------------
1,597,046 230,060 144,257 466,648 259,815
---------------- ----------------- --------------- --------------- ---------------
LOSS FOR THE PERIOD $ (1,531,089) $ (224,783) $ (134,670) $ (454,275) $ (244,262)
===============================================================================================================================
BASIC LOSS PER SHARE $ (0.03) $ (0.02) $ (0.07) $ (0.04)
===============================================================================================================================
WEIGHTED AVERAGE
SHARES OUTSTANDING 6,902,000 6,057,000 6,855,000 5,980,000
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
==============================================================================================================================
Cumulative
From Six Month Six Month
Incorporation Period Ended Period Ended
to September 30, September 30, September 30,
2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (1,531,089) $ (454,275) $ (244,262)
Items not affecting cash:
Amortization 63,514 23,965 12,129
Stock based compensation 372,204 34,575 -
Stock issued for consulting fees 37,500 37,500
Changes in non-cash working capital items:
Increase in accounts receivable (7,702) (1,538) (13,104)
Increase (decrease) in accounts payable 25,464 (6,330) (2,397)
(Increase) decrease in prepaid expenses (7,572) 5,473 -
-------------- --------------- ---------------
Net cash used in operating activities (1,047,681) (360,630) (247,634)
-------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (222,241) (4,387) (124,224)
Acquisition of subsidiary (335) - -
-------------- --------------- ---------------
Net cash used in investing activities (222,576) (4,387) (124,224)
-------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common shares 1,416,500 394,500 400,000
Loans from related parties 37,313 19,533 (4,541)
-------------- --------------- ---------------
Net cash provided by financing activities 1,453,813 414,033 395,459
-------------- --------------- ---------------
CHANGE IN CASH FOR THE PERIOD 183,556 49,016 23,601
CASH, BEGINNING OF PERIOD - 134,540 163,406
-------------- --------------- ---------------
CASH, END OF PERIOD $ 183,556 $ 183,556 $ 187,007
==============================================================================================================================
</TABLE>
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 12)
The accompanying notes are an integral part
of these consolidated financial statements.
6
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
==============================================================================================================================
Deficit
Common Stock Accumulated
------------------------------ Additional During the
Number Paid-in Development
of Shares Amount Capital Stage Total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issued shares for acquisition (Note 4) 5,100,000 $ 5,100 $ - $ - $ 5,100
Issued shares for cash at $0.01 per share 500,000 500 4,500 - 5,000
Issued shares for cash at $0.50 per share 100,000 100 49,900 - 50,000
Issued shares for cash at $1.00 per share 184,000 184 183,816 - 184,000
Loss for the period - - - (71,668) (71,668)
------------- -------------- ------------- -------------- --------------
Balance at March 31, 1999 5,884,000 5,884 238,216 (71,668) 172,432
Shares issued for cash 768,000 768 782,232 - 783,000
Stock-based compensation for options
issued to consultants and non-employees - - 337,629 - 337,629
Loss for the year - - - (1,005,146) (1,005,146)
------------- -------------- ------------- -------------- --------------
Balance at March 31, 2000 6,652,000 6,652 1,358,077 (1,076,814) 287,915
Stock-based compensation for options
issued to consultants and non-employees - - 34,575 34,575
Issued shares for cash at $1.00 per share 180,000 180 179,820 - 180,000
Issued shares for services at $0.50 per share 75,000 75 37,425 - 37,500
Issued shares for cash at $0.50 per share 460,000 460 229,540 - 230,000
Finders fees paid in cash - - (15,500) - (15,500)
Loss for the period - - - (454,275) (454,275)
------------- -------------- ------------- -------------- --------------
Balance at September 30, 2000 7,367,000 $ 7,367 $ 1,823,937 $ (1,531,089) $ 300,215
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
7
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
ViaVid Broadcasting Inc., a Nevada corporation, was incorporated on
January 20, 1999. On January 27, 1999, the Company completed the
acquisition of ViaVid Broadcasting Corp., a Canadian company operating
in Vancouver, British Columbia, Canada.
The Company was incorporated in order to create a global internet video
broadcasting company that offers a network of video services utilizing
streaming video technology.
2. GOING CONCERN
As at September 30, 2000, the Company has an accumulated deficit of
$1,531,089. The Company's ability to continue as a going concern is
dependent on continued financial support in the form of loans from its
shareholders and other related parties, the ability of the Company to
raise equity financing, and the attainment of profitable operations.
Management is of the opinion that sufficient working capital will be
obtained from external financing and further share issuances to meet
the Company's liabilities as they become due.
These consolidated financial statements have been prepared on a going
concern basis, which assumes the realization of assets and liquidation
of liabilities in the normal course of business. They do not include
any adjustments to the recoverability and classification of recorded
asset amounts and liabilities that might be necessary should the
Company be unable to continue as a going concern.
3. SIGNIFICANT ACCOUNTING POLICIES
In preparing these consolidated financial statements in conformity with
generally accepted accounting principles, management was required to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results in future periods could be
different from these estimates made in the current period. The
following is a summary of the significant accounting policies of the
Company:
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, ViaVid Broadcasting Corp. All
significant inter-company balances and transactions have been
eliminated.
REPORTING ON COSTS OF START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998 with initial adoption reported as the cumulative
effect of a change in accounting principle. The Company adopted SOP
98-5 during the last period.
8
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...)
CAPITAL ASSETS
Capital assets are recorded at cost and are amortized over their useful
lives on the declining balance method at the following rates:
Computer equipment 30%
Office furniture 20%
Telephone and video equipment 20%
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts
receivable, accounts payable and accrued liabilities and due to related
parties. Unless otherwise noted, it is management's opinion that the
Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments. The fair value of these
financial instruments approximate their carrying values, unless
otherwise noted.
REVENUE RECOGNITION
Revenue is recognized once the filming and editing of a project has
been completed.
FOREIGN CURRENCY TRANSLATION
The Company accounts for foreign currency transactions and translation
of foreign currency financial statements under Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS
52"). Transaction amounts denominated in foreign currencies are
translated at exchange rates prevailing at transaction dates. Carrying
values of monetary assets and liabilities are adjusted at each balance
sheet date to reflect the exchange rate at that date. Non-monetary
assets and liabilities are translated at the exchange rate on the
original transaction date. Gains and losses from restatement of foreign
currency monetary and non-monetary assets and liabilities are included
in income. Revenues and expenses are translated at the rates of
exchange prevailing on the dates such items are recognized in earnings.
SEGMENTED INFORMATION
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." SFAS No. 131 establishes standards for the manner in
which public companies report information about operating segments in
annual and interim financial statements. The statement is effective for
fiscal years beginning after December 15, 1997.
The Company conducts substantially all of its operations in Canada in
one business segment.
LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"). Under SFAS 128, basic and diluted earnings per
share are to be presented. Basic earnings per share is computed by
dividing income available to common shareholders by the weighted
average number of common shares outstanding in the year. Diluted
earnings per share takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive
common shares.
9
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...)
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred
tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss
carryforwards. Deferred tax expenses (benefit) results from the net
change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly compensation
cost for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. In June 1999, the FASB
issued SFAS 137 to defer the effective date of SFAS 133 to fiscal
quarters of fiscal years beginning after June 15, 2000. The Company
does not anticipate that the adoption of the statement will have a
significant impact on its financial statements.
COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components (revenue, expenses,
gains and losses). The purpose of reporting comprehensive income is to
present a measure of all changes in stockholders' equity that result
from recognized transactions and other economic events of the year,
other than transactions with owners in their capacity as owners. SFAS
No. 130 is effective for financial statements issued for periods
beginning after December 15, 1997. The adoption of SFAS 130 had no
impact on total stockholders' equity during the current period.
4. ACQUISITION OF VIAVID BROADCASTING CORP.
On January 27, 1999, the Company completed the acquisition of ViaVid
Broadcasting Corp. ("VBC"), a related company having common directors
and officers. VBC is a Canadian company incorporated under the laws of
British Columbia on July 26, 1994. VBC was inactive from incorporation
until October 30, 1998 when it changed its name from 477504 British
Columbia Ltd. to ViaVid Broadcasting Corp.
10
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
4. ACQUISITION OF VIAVID BROADCASTING CORP. (cont'd.....)
The Company acquired VBC pursuant to a share exchange agreement whereby
the Company agreed to issue 5,100,000 common shares to the shareholders
of VBC in exchange for their 3,000 common shares. The Company has
accounted for this transaction as a capital transaction. For accounting
purposes, the financial statements of the Company and its subsidiary
are deemed to have been combined for the prior and current accounting
periods. As of the date of acquisition, VBC held no significant assets
and liabilities and the accumulated losses to January 27, 1999 was
$335.
5. CAPITAL ASSETS
<TABLE>
<CAPTION>
=====================================================================================================================
Net Book Value
--------------------------------
Accumulated September 30, March 31,
Cost Amortization 2000 2000
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment $ 133,557 $ 40,096 $ 93,461 $ 106,508
Office furniture 11,103 2,950 8,153 8,675
Telephone and video equipment 77,582 15,034 62,548 68,557
------------- -------------- -------------- --------------
$ 222,242 $ 58,080 $ 164,162 $ 183,740
=====================================================================================================================
</TABLE>
6. CAPITAL STOCK
The Company issued shares of common stock for the period from
incorporation on January 20, 1999 to March 31, 1999 as follows:
In January 1999, in connection with the acquisition of ViaVid
Broadcasting Corp., the Company issued 5,100,000 shares of
common stock under Regulation D, subject to Rule 144 of the
Securities Act of 1933, as amended, with a value of $5,100.
In February 1999, the Company completed an offering of 500,000
shares of common stock under Regulation D, subject to Rule 504
of the Securities Act of 1933, as amended, and realized
proceeds of $5,000.
In February 1999, the Company completed an offering of 100,000
shares of common stock under Regulation D, subject to Rule 504
of the Securities Act of 1933, as amended, and realized
proceeds of $50,000.
In February 1999, the Company completed an offering of 184,000 shares
of common stock under Regulation D, subject to Rule 504 of the
Securities Act of 1933, as amended, and realized proceeds of $184,000.
11
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
6. CAPITAL STOCK (cont'd...)
The Company issued shares of common stock during the year ended March
31, 2000 as follows:
In October 1999, the Company issued 295,000 shares of common
stock under Regulation S of the Securities Act of 1933, as
amended, and realized proceeds of $295,000.
In November 1999, the Company issued 202,000 shares of common
stock under Regulation S of the Securities Act of 1933, as
amended, and realized proceeds of $202,000.
In December 1999, the Company issued 40,000 shares of common
stock under Regulation D, subject to Rule 504 of the
Securities Act of 1933, as amended, and realized proceeds of
$40,000.
In January 2000, the Company issued 225,000 shares of common
stock on the exercise of stock options and realized proceeds
of $225,000.
In March 2000, the Company issued 6,000 shares of common stock
on the exercise of stock options and realized proceeds of
$21,000.
The Company issued shares of common stock during the six month period
ended September 30, 2000 as follows:
In April 2000, the Company issued 180,000 shares of common
stock on the exercise of stock options and realized proceeds
of $180,000.
In July 2000, the Company issued 75,000 shares of common stock
in exchange for consulting services at a deemed value of $0.50
per share.
In September, the Company issued 230,000 units at $1.00 per
unit pursuant to a unit offering under Regulation S of the
Securities Act of 1933, as amended. Each unit consisted of two
common shares and one share purchase warrant to purchase an
additional common share at $0.50 per share, until September
30, 2003. The proceeds to the Company were $214,500 (net of a
finders fees of $15,500).
7. SHARE PURCHASE WARRANTS
As at September 30, 2000, the following share purchase warrants were
outstanding:
===============================================================================
Number Exercise
of Shares Price Expiry Date
-------------------------------------------------------------------------------
230,000 $0.50 September 30, 2003
===============================================================================
12
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
8. STOCK OPTIONS
As at September 30, 2000, the following stock options were outstanding:
===============================================================================
Number Exercise
of Shares Price Expiry Date
-------------------------------------------------------------------------------
20,000 $1.00 November 24, 2002
237,000 1.00 January 19, 2003
50,000 1.00 February 3, 2003
25,000 3.50 March 1, 2010
50,000 1.00 April 10, 2003
170,000 1.00 May 15, 2003
20,000 1.00 June 19, 2003
5,000 1.00 August 17, 2003
75,000 1.00 August 28, 2003
150,000 1.00 September 23, 2003
===============================================================================
9. RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with related
parties:
a) Paid or accrued consulting fees totalling $90,774 (1999 -
$47,380 to two directors) to three directors of the Company
b) Paid salary totalling $16,137 (1999 - $16,244) to an officer
of the Company.
10. INCOME TAXES
The Company's total deferred tax asset is as follows:
================================================================================
Net operating loss carry forward $ 441,170
Valuation allowance (441,170)
--------------
$ -
================================================================================
The Company has United States operating loss carryforwards of
approximately $451,000 which expires in the year 2019. The Company's
subsidiary, ViaVid Broadcasting Corp., has Canadian operating loss
carryforwards of approximately $625,000 which expire in the year 2007.
The Company provided a full valuation allowance on the deferred tax
asset because of the uncertainty regarding realizability.
13
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
11. STOCK-BASED COMPENSATION EXPENSE
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", encourages but does not require companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Accordingly, compensation
cost for stock options is measured as the excess, if any, of quoted
market price of the Company's stock at the date of grant over the
option price. No stock based compensation has resulted from the use of
this standard.
Following is a summary of the status of the plan during 2000:
<TABLE>
<CAPTION>
====================================================================================================================
Weighted
Average
Number Exercise
of Shares Price
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at March 31, 2000 642,000 $ 1.49
Granted 620,000 1.00
Forfeited (280,000) (1.89)
Exercised (180,000) (1.00)
-------------
Outstanding at September 30, 2000 802,000 1.08
====================================================================================================================
</TABLE>
On June 7, 2000, 302,000 stock options were re-priced from $3.50 per
share to $1.00 per share. The re-pricing changed the weighted average
at March 31, 2000 from $2.72 to $1.49.
The weighted average fair value of options to non-employees as at
September 30, 2000 is approximately $1.09 per share.
Following is a summary of the status of options outstanding at
September 30, 2000:
<TABLE>
<CAPTION>
=====================================================================================================================
Outstanding Options Exercisable Options
------------------------------------------- -------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Exercise Price Number Life Price Number Price
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 20,000 2.2 $ 1.00 20,000 $ 1.00
1.00 237,000 2.3 1.00 219,000 1.00
1.00 50,000 2.3 1.00 50,000 1.00
</TABLE>
- continued -
14
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
11. STOCK-BASED COMPENSATION EXPENSE (cont'd...)
<TABLE>
<CAPTION>
=====================================================================================================================
Outstanding Options Exercisable Options
------------------------------------------- -------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Exercise Price Number Life Price Number Price
---------------------------------------------------------------------------------------------------------------------
CONTINUED...
<S> <C> <C> <C> <C> <C>
3.50 25,000 9.4 3.50 25,000 3.50
1.00 50,000 2.6 1.00 50,000 1.00
1.00 170,000 2.6 1.00 170,000 1.00
1.00 20,000 2.7 1.00 20,000 1.00
1.00 5,000 2.9 1.00 5,000 1.00
1.00 75,000 2.9 1.00 75,000 1.00
1.00 150,000 3.0 1.00 150,000 1.00
=====================================================================================================================
</TABLE>
NON-VESTED STOCK OPTIONS
The Company has granted options to employees to purchase 15,000 shares
of common stock exercisable at $1.00 per share that vest and become
exercisable on October 19, 2000.
The Company has granted options to consultants to purchase 3,000 shares
of common stock exercisable at $1.00 per share that vest on October 19,
2000.
COMPENSATION
Had compensation cost for employees been recognized on the basis of
fair value pursuant to Statement of Financial Accounting Standards No.
123, net loss and loss per share would have been adjusted as follows:
================================================================================
NET LOSS
As reported $ (224,783)
===============
Pro forma $ (245,177)
===============
BASIC AND DILUTED LOSS PER SHARE
As reported $ (0.03)
===============
Pro forma $ (0.04)
================================================================================
15
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
11. STOCK-BASED COMPENSATION EXPENSE (cont'd...)
The fair value of each option granted is estimated using the Black
Scholes Model. The assumptions used in calculating fair value are as
follows:
================================================================================
Risk-free interest rate 5.554% - 6.484%%
Expected life of the options 2 years
Expected volatility 50%
Expected dividend yield -
================================================================================
The Company accounts for stock issued to non-employees in accordance
with the provisions of SFAS 123 and the emerging issues task force
consensus in issued No. 96 - 18 "Accounting for Equity Instruments that
are Issued to Other Than Employees for Acquiring or in Conjunction with
Selling, Goods or Services".
The Company granted 225,000 options to third party consultants during
the current period. The stock based compensation recognized, using the
Black Scholes Option pricing model, is Nil.
The Company granted 390,000 options to third party consultants during
the six month period ended June 30, 2000. The stock based compensation
recognized, using the Black Scholes Option pricing model, is $138,300.
This amount will be amortized to expense over a two year period at
$17,287 per quarter. This amount can be allocated to another expense
category in the accompanying consolidated statements of operations as
consulting fees.
12. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
<TABLE>
<CAPTION>
=====================================================================================================================
Cumulative
From Six Month Six Month
Incorporation Period Ended Period Ended
to September 30, September 30, September 30,
2000 2000 1999
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid for income taxes $ - $ - $ -
=====================================================================================================================
Cash paid for interest $ - $ - $ -
=====================================================================================================================
</TABLE>
The following non-cash operating, investing and financial transactions
occurred during the six month period ended September 30, 2000:
The Company issued 75,000 shares of common stock at a deemed
value of $37,500 for consulting services.
There were no non-cash operating, investing and financing transactions
during the six month period September 30, 1999.
16
<PAGE>
VIAVID BROADCASTING INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
12. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (cont'd...)
The following non-cash operating, investing and financial transactions
occurred during the period from date of incorporation to September 30,
2000:
The Company issued 5,100,000 shares of common stock at a
deemed value of $5,100 for the acquisition of ViaVid
Broadcasting Corp.
The Company issued 75,000 shares of common stock at a deemed
value of $37,500 in exchange for consulting services.
13. SUBSEQUENT EVENT
Subsequent to September 30, 2000, the Company completed a private
placement of 142000 units at $1.00 per unit pursuant to a unit offering
under Regulation S of the Securities Act of 1933, as amended. The unit
offering consisted of two common shares and one share purchase warrant
to purchase an additional common share at $0.50 per share, until
September 30, 2003. The proceeds to the Company were $140,000 net of a
finders fee of $2000.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
We are in the business of providing digital streaming technology to
create, develop and offer live event coverage, participant interviews, news and
information and video and audio feeds through our website located at
www.viavid.com and other syndicated distribution sites. We deliver live and
archived available on-demand video content across a variety of digital platforms
from narrow band Internet to broadband Internet. We offer a technology platform
to capture an Internet audience when traditional media broadcast coverage may
not be available.
We have only recently commenced business and we have earned only
minimal revenues to date. There can be no assurance that our business plans will
be successful. Our business is still in the development stage. We started
development of our business in January, 1999. We established the Business
Channel, VBC News 1 Channel in January, 1999 and commenced commercial operations
in March, 1999. Over the past year, we have been producing and broadcasting a
variety of new programs and special events over the Internet.
Our business objective is to develop an Internet video broadcasting
company that offers a wide variety of video services utilizing streaming video
technology. We have established Channels to provide viewers with access to news
and information relating to such topics as business, entertainment, health and
lifestyles and sports. There can be no assurance that we will be able to attain
our business objective.
RESULTS OF OPERATIONS
REVENUES. Our revenues were $12,373 for the six month period ending September
30, 2000, compared to revenues of $15,553 for the period September 30, 1999. Our
revenues for the year ended March 31, 2000 were $50,148. Our revenues were
achieved primarily from video production and Internet broadcast services
provided to our customers. We also achieved revenues from hosting services
provided to customers
Our revenues are minimal in comparison to our operating expenses as the Company
is currently in the start-up phase of its operations. We are attempting to
increase our future revenues by completing our plan of operations, as discussed
below. In addition, we have commenced "live" Internet broadcasts in December,
1999. Our objective is to attract corporate sponsorship and advertising for
these "live" Internet broadcasts.
OPERATING EXPENSES. Our operating expenses were $466,648 for the six month
period ending September 30, 2000, compared to operating expenses of $259,815 for
the six months ending September 30, 1999. The increase in operating expenses
during this quarter was due to the move to the new production facilities and the
additional expenses incurred to run a live feed from the studio. We will incur
additional operating expenses as we continue to provide live broadcast feeds of
our productions on the Internet. We will continue to have operating expenses in
connection with the continued up-grade of our Web site. We also anticipate that
operating expenses will increase as the number of video productions which we
produce and broadcast for our customers increases.
NET LOSS. Our net loss was $454,275, or $0.07 per share, for the six months
ending September 30, 2000. Our net loss was $244,262, or $0.04 per share, for
the six months ended September 30, 1999. Our net loss reflects the fact that we
have not earned significant revenues to date.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES AND PLAN OF OPERATIONS
Our operations have been financed principally through sales of our
equity securities.
We had cash of $198,830 as of September 30, 2000 compared to cash of
$153,749 as of March 31, 2000.
During the period August 17 through October 27, 2000, we realized net
proceeds of $370,000 from the sales of our equity securities. These proceeds
were used to finance our operating activities.
We plan on meeting our operating expenses during the year by focusing
on generating revenues through advertisements and sponsorship on live
broadcasts, video productions for broadcast on our website and hosting of video
productions as well as from additional capital intended to be provided by the
proposed sale of equity securities. There can be no assurance that any
additional capital can be raised or, if equity securities are sold, the terms of
any such transaction.
Subject to the availability of sufficient funds, we currently intend to
pursue the following Plan of Operations during the twelve months ended March 31,
2001:
o Continue to develop a customer base of public and financial
companies to use our services for digital video productions
and Internet broadcasting. We anticipate we will spend
approximately $100,000 on this marketing expense over the
twelve-month period;
o Continue to develop the Business Channel for broadcast from
our Web site. We anticipate we will spend approximately
$200,000 on this development expense over the twelve-month
period;
o Develop additional programming for our Sports, Entertainment
and Health and Lifestyles Channels. We anticipate we will
spend approximately $500,000 on various programs for these
additional channels over the twelve-month period;
o Evaluate whether to set up an additional office or offices in
additional cities in order to expand our business and meet
customer demand. If we proceed to establish additional
offices, we anticipate we will spend approximately $50,000 for
this purpose over the twelve-month period;
o Expand our Web site to attempt to extract marketing
information and data from users in order to obtain a basis for
earning advertising revenue. We anticipate we will spend
approximately $50,000 on expansion of our Web site over the
twelve-month period;
o Purchase additional equipment to expand our digital video
production studio and video production capabilities. We
anticipate we will spend approximately $250,000 on additional
production equipment over the twelve-month period.
Accordingly, subject to the availability of funds, we anticipate that we
will spend approximately $1,150,000 over the twelve-month period in pursuing our
Plan of Operations described above.
19
<PAGE>
Substantially all these funds will need to be obtained from additional
equity financings to be completed in the future. In the event we are unable to
obtain these funds from these sources, our ability to pursue our business plan
will be adversely affected.
Our actual expenditures and business plan may differ from this stated
Plan of Operations. Although we have no present plans or proposals pending, a
strategic alliance relating to one aspect of streaming content or encoding may
cause our Board of Directors to modify our plans. In addition, we may modify our
Plan of Operations based on the available amounts of financing in the event that
we cannot obtain the required equity financings to pursue our Plan of
Operations. We do not have any arrangement in place for any debt or equity
financing which would enable us to meet our Plan of Operations.
We are currently receiving revenues from video production , advertising
and hosting services. We anticipate an increase in revenue from production,
advertising, sponsorship and hosting video footage and web content if we are
successful in increasing our customer base over the next twelve months.
Notwithstanding the above Plan of Operations, we anticipate we will
experience continuing operating losses in the foreseeable future. We base this
expectation in part on the following:
o We will incur substantial marketing expense in order to
advertise and promote our Web site, to establish a customer
base and to increase the usage of our Web site.
o Increased usage of our Web site will lead to increased
operating expenses and require additional capital expenditures
on new computer equipment, software and technology.
o Our operating expenses will continue to increase as we expand
the technical capabilities of our Web site.
o Our operating expenses will increase as we solicit potential
customers and complete video productions for customers for
broadcast via our Web site.
o Our operating expenses will increase as we solicit potential
advertisers and sponsors and attempt to enter into agreements
for advertising and sponsorship on our Web site.
o Our operating expenses will increase as we undertake to
implement programs to monitor usage of our Web site and
develop customer profiles of our users.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1996
With the exception of historical matters, the matters discussed in
this 10QSB are "forward-looking statements" as defined under the Securities Act
of 1933, as amended, and the Securities Exchange Act of 1934, as amended, that
involve risks and uncertainties. Forward-looking statements made herein include,
but are not limited to, the statements in this report regarding our plans and
objectives of management for our future operations, including plans or
objectives relating to our intentions to provide digital streaming technology to
create, develop and offer live event coverage, participant interviews, news and
information, and other content through our Website, Internet news broadcasting
and other dissemination services and other products or services, our plans and
objectives regarding revenues and expenses in future periods, our plans and
objectives and needs to raise additional capital, the terms on which such
capital can be raised, the period over which any capital available currently to
us or raised in the future will be sufficient to meet our current
20
<PAGE>
level of operating expenses, and our plans regarding the uses of that capital,
as well as any other prospective financial information concerning us.
Forward-looking statements made in this report include the assumptions made by
management as to the future growth and business direction of the Internet,
e-commerce through the facilities of the Internet and the role of video
production and Internet news broadcasting and dissemination services on the
Internet. They also include our beliefs as to the importance of privacy to
users, their willingness to view our broadcasting services and programs, as well
as our plans to improve the capabilities of our servers and facilities. They
also include our beliefs as to the willingness of small-cap public companies to
broadcast corporate news and information on the internet and for us to derive
revenues from providing this service. We cannot assure you that our assumptions
in this regard or our views as to the commercial viability of our business plans
discussed herein will prove to be accurate. Likewise, we cannot assure you that
we will be successful in growing our user and customer base as we plan,
attracting companies to use our Internet based broadcast services for the
dissemination of their news information, realizing material amounts of
advertising or other revenues, achieving any commercial advantage relative to
other Internet or other financial news dissemination media companies or raising
the additional capital required to support our operations or the terms and
conditions on which such capital can be raised. Our ability to realize revenues
and raise additional capital from the business plans discussed herein cannot be
assured. If our assumptions are incorrect or our advertising and other growth
plans or plans to realize revenues or raise additional capital fail to
materialize, we may be unsuccessful in developing as a viable business
enterprise. Under such circumstance your entire investment will be in jeopardy
and may be lost. Our inability to meet our goals and objectives or the
consequences to us from adverse developments in general economic or capital
market conditions and our inability to raise additional capital could have a
material adverse effect on us. We caution you that various risk factors
accompany those forward looking statements and are described, among other
places, under the caption "Risk Factors" herein, beginning on page 23. They are
also described in our Annual Report on Form 10KSB, Quarterly Reports on Form
10-QSB, and our Current Reports on Form 8-K. These risk factors could cause our
operating results, financial condition and ability to fulfill our plans to
differ materially from those expressed in any forward-looking statements made in
this report and could adversely affect our financial condition and our ability
to pursue our business strategy and plans.
RISK FACTORS
An investment in shares of our Common Stock involves a high degree of
risk. You should consider the following factors, in addition to the other
information contained in this report, in evaluating our business and proposed
activities before you purchase any shares of our common stock. You should also
see the "Cautionary Statement for Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1996" regarding risks and
uncertainties relating to us and to forward looking statements in this report.
RISKS APPLICABLE TO OUR BUSINESS
EXTREMELY LIMITED OPERATING HISTORY; HISTORY OF NET LOSSES
We have had an extremely limited operating history. Our business was
established in January 1999 and our Web site began operations on the Internet in
February 1999. Our total revenues since inception through September 30, 2000
were $65,957. An investor must consider the
21
<PAGE>
risks, expenses and difficulties frequently encountered by companies such as
ours, in the early stages of their development particularly in the new and
rapidly evolving market for Internet products, content and services. We cannot
assure you that we will be successful in addressing such risks. We cannot assure
you that our revenue will grow sufficiently to assure our future success. New
companies, such as ours, experience expenses, difficulties and unforeseen
problems that create a higher risk of business failure. If we are not successful
in overcoming these expenses and difficulties, our business may fail.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The report of our independent auditors on their audit of our financial
statements as of March 31, 2000 contains an explanatory paragraph that describes
an uncertainty as to our ability to continue as a going concern due to our
recurring losses and the necessity to obtain additional financing. At September
30, 2000 we had cash of $183,556. In order to meet our Plan of Operations, we
will need to raise additional capital. We are currently seeking to raise this
additional capital. There can be no assurance that any additional financing will
be available to us on favorable terms, or at all. If adequate funds are not
available or not available on acceptable terms, we may not be able to fund our
business plans as we desire, or, develop or enhance services or respond to
competitive pressures. Any such inability could have a material adverse effect
on our business, results of operations and financial condition. Additional funds
raised through the issuance of equity or convertible debt securities, will
result in reducing the percentage ownership of our stockholders and, our
stockholders may experience additional dilution and such securities may have
rights, preferences or privileges senior to those of the rights of our Common
Stock.
As a result of our limited Internet operating history, we have limited
meaningful historical financial data upon which our planned operating expenses
can be based. Accordingly, our anticipated expense levels in the future are
based in part on our expectations as to future revenue and will become, to a
large extent, fixed. Revenues and operating results generally will depend on the
volume of, timing of and ability to complete transactions, which are difficult
to forecast.
In addition, there can be no assurance that we will be able to
accurately predict our revenue, particularly in light of the unproven manner in
which we intend to derive our Internet revenue, the intense competition for the
sale of products and services on the Web, revenue-sharing opportunities, our
limited operating history and the uncertainty as to the broad acceptance of the
Web as a news broadcasting medium. We may be unable to adjust our spending in a
timely manner to compensate for disappointing results of our marketing efforts
and efforts to develop Internet revenue, any unexpected revenue shortfall or
other unanticipated changes in the Internet industry. Our failure to accurately
make such predictions or adjustments in our spending would have a material
adverse effect on our business, results of operations and financial condition.
POSSIBLE INABILITY TO IMPLEMENT OUR BUSINESS STRATEGY
Our business strategy includes completion of the following business objectives:
o Attracting public companies and other financial industry customers who
are prepared to pay for having us prepare digital video productions and
broadcast these video productions on our Web site, as well as seeking
out potential advertisers and sponsors who are willing to advertise or
sponsor various programs on our Web site. We have only recently begun
to seek payment from customers for these services;
o Continuing to expand the usage of our Web site by attracting both
financial industry customers and a variety of viewers for our other
programs;
22
<PAGE>
o Expanding the functionality and capability of our Web site;
o Attracting advertising to our Web site and establishing other revenue
generating opportunities for our Web site;
o Responding to competitive developments;
o Implementing and executing our business strategy successfully; and
o Continuing to develop and upgrade our technologies and our Web site.
If we are not successful in implementing all components of our business
strategy successfully, our operating results and financial condition may be
harmed and our business may fail.
POSSIBLE INABILITY TO GENERATE REVENUES AND PROFITABLE OPERATIONS
We have earned minimal revenues to date and we are presently not
profitable. Our business and marketing strategy contemplates that we will earn
revenues from public customers who pay for the broadcast of digital video
productions on the Internet via our Web site, through advertising posted on our
Web site and sponsorship. If we are not able to generate revenues from these
activities or if the revenues generated do not exceed the operating costs of our
business, then our business will not be profitable and our business may fail.
ANTICIPATED LOSSES IN FUTURE PERIODS
During the quarter ended September 30, 2000, we incurred a loss of
$224,783 compared to a loss of $134,670 for the quarter ended September 30,
1999. We expect that our operating expenses will increase as we implement our
business and marketing strategy due to the following factors:
o We will incur substantial marketing expense in order to advertise and
promote our Web site, to establish a customer base and to increase
usage of our Web site.
o We expect that increased usage of our Web site will lead to increased
operating expenses and require additional capital expenditures on new
computer equipment, software and technology.
o We expect our operating expenses will continue to increase as we expand
the technical capabilities of our Web site.
o We expect our operating expenses will increase as we solicit potential
customers and complete video productions for customers for broadcast
via our Web site.
o We expect our operating expenses will increase as we solicit potential
advertisers and attempt to enter into agreements for advertising on our
Web site.
o We expect our operating expenses will increase as we undertake to
implement programs to monitor usage of our Web site and develop
customer profiles of Web site users.
If our operating expenses increase as anticipated, we will realize additional
losses for the foreseeable future.
23
<PAGE>
LOCAL NATURE OF OUR PRESENT OPERATIONS
We focused our operations initially on public companies located in
Vancouver, British Columbia. We are able to provide services to companies
located in other markets, but our ability to provide on-location productions has
been constrained by financial and personnel limitations. At present, we have
produced only a few events outside the Vancouver area. Our objective is to
expand production of news and information throughout the United States and
Canada, as well as elsewhere. This sort of expansion, however, is subject to
available funding and our ability to market our services in diverse areas. There
can be no assurance that we will be successful in developing our business plan
throughout these areas.
DEPENDENCE ON ADVERTISING AND SPONSORSHIP REVENUE
We intend to derive the principal portion of our revenue from the sale
of advertising and sponsorship on our Internet site, and we intend that
advertising and sponsorship revenue will continue to be the principal source of
our revenue in the foreseeable future.
Our ability to generate advertising and sponsorship revenue will depend
on several factors, including:
o the continued development of the Internet as an advertising
and sponsorship medium,
o the pricing of advertising and sponsorship on other Internet
sites,
o the amount of traffic on our site,
o pricing pressures, delays and new product launches,
o our ability to achieve, demonstrate and maintain user
demographics attractive to advertisers and sponsors, and
o our ability to develop and retain a skilled
advertising/sponsorship sales force.
Others engaged in seeking to attract users to their Internet sites have
significantly greater assets and substantially larger advertising budgets than
we have. These limitations on our advertising budget can be expected to
adversely affect our ability to attract users to our site.
We believe Internet advertising typically slows in the first quarter of
the year. Seasonality and cyclicality in the level of Internet advertising
expenditures generally could become more pronounced in the future as the
Internet becomes more accepted as an advertising vehicle.
MANAGEMENT OF GROWTH AND RELATIONSHIPS; BRIEF TENURE OF MANAGEMENT; DEPENDENCE
ON KEY PERSONNEL
In developing our business plan, we expect to be required to establish
and manage multiple relationships with various strategic providers of services,
technology licensors, marketers and other third parties. To date, only a limited
number of such relationships have been established. The requirements to enter
into these relationships will be exacerbated in the event of our material growth
or in the number of third party relationships, and there can be no assurance
that our systems, procedures or controls will be adequate to enable us to
establish and enter into these
24
<PAGE>
relationships, to support any substantial growth in our operations or that our
management will be able to implement or manage any growth effectively.
To effectively manage growth, we must establish, implement and improve
operational, financial and management information systems and expand, train and
manage our employee base. Our development is and will continue to be
substantially dependent on the abilities and performance of our executive
officers and other key employees. The loss of the services of any of our
executive officers or other key employees could have a material adverse effect
on our prospects, business development, and results of operations and financial
condition. Competition for senior management, experienced sales and marketing
personnel, qualified Web engineers and other employees is and is expected to
continue to be intense. There can be no assurance that we will be successful in
attracting and retaining such personnel. There can be no assurance that we may
not experience difficulty from time to time in hiring and retaining the
personnel necessary to support the growth of our business. Our failure to
successfully manage our personnel requirements would have a material adverse
effect on our business, results of operations and financial condition.
Our performance is substantially dependent on the continued services
and performance of our senior management and other key personnel, including
Brian Kathler, President and a Director, Paul Watkins, Secretary/Treasurer and a
Director, Robert Gamon, a Director and James King, a Director. We do not have
long-term employment agreements with any of our key personnel and maintain no
"key person" life insurance policies. Our future success also depends on our
ability to identify, attract, retain and motivate highly skilled, technical,
managerial, sales, marketing and customer service personnel. Competition for
such persons is intense. We cannot assure you that we will be able to attract or
retain such personnel. The failure to do so could have a material adverse effect
on our business, financial condition and results of operations.
DEPENDENCE ON THIRD PARTIES FOR INTERNET TRAFFIC
We believe that traffic originating from links on other Internet sites
(particularly search engines, directories and other navigational tools managed
by Internet service providers and Web browser companies) will be an important
segment of the overall traffic on our Internet site. These linking arrangements
are expected to be either short-term contracts and/or be able to be terminated
with little notice. There is intense competition for these types of linking
arrangements. We cannot assure you that these arrangements will be able to be
created or that advertising or links will be available on reasonable commercial
terms or at all. Likewise, we cannot assure you that any such relationships,
once established, will be maintained and continued. Our failure to establish and
retain these links can be expected to adversely affect our ability to attract
persons to our site.
DEPENDENCE ON LICENSED TECHNOLOGY
We rely on certain technology licensed from third parties for use in
operating and managing our Internet site and providing related services to users
and advertisers. We cannot assure you that such technology licenses will be
available at all, that they will be available on reasonable commercial terms or
that they will operate as intended.
RISKS APPLICABLE TO INTERNET BUSINESS ACTIVITIES
UNPREDICTABILITY OF FUTURE REVENUE;
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
As a result of the evolving nature of the Internet and our limited
operating history, we cannot accurately forecast our revenue. Current and future
expense levels are based principally on
25
<PAGE>
anticipated future revenues and, as we increase the scope of our activities,
these expenses, to a large extent, will increase and become fixed. Accordingly,
we may be unable to adjust spending to compensate for shortfalls in our
anticipated revenues. If our revenues do not materialize as anticipated, this
could have an immediate material adverse effect on our business, financial
condition and results of operations which could lead to an investor's loss of
his investment in our company.
Our quarterly operating results may fluctuate significantly because of
a variety of factors, many of which are outside our control, including:
o overall usage levels of the Internet and of our sites in particular,
o demand for Internet advertising and sponsorship and the loss of
advertisers or sponsors,
o seasonal trends in Internet use and advertising and sponsors,
o the amount and timing of our capital expenditures,
o costs relating to the expansion of our operations and the introduction
of new sites and services and Channels,
o price competition or pricing changes in Internet advertising, and
o costs relating to technical difficulties or system downtime.
Quarterly comparisons of our results of operations are not expected to
be a reliable indication of our future performance.
DEPENDENCE ON GROWTH IN INTERNET USE AND ACCEPTANCE AS AN ADVERTISING AND
COMMERCE MEDIUM
Our future revenue will depend largely on the widespread acceptance and
use of the Internet as an information source and as an advertising and commerce
vehicle. Rapid growth in Internet use is a recent trend and market acceptance of
the Internet as an advertising and commercial medium is highly uncertain. The
Internet may not be accepted as a viable advertising and commerce medium for
distribution of information and engaging in commerce for a number of reasons,
including:
o inadequate development of the network infrastructure,
o inadequate development of enabling technologies,
o insufficient commercial support for Internet advertising or
sponsors,
o concerns about privacy and security among users, and
o lack of widely accepted standards for measuring the
effectiveness of advertising on the Internet.
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<PAGE>
RAPID TECHNOLOGICAL CHANGE
The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. We will be required to continually improve the performance,
features and reliability of our infrastructure and Internet site, particularly
in response to competition and changing customer demands. We cannot assure you
that we will be successful in responding rapidly, cost-effectively or adequately
to such developments.
COMPETITION
The business of broadcasting news through the Internet is new, rapidly
evolving and extremely competitive. We compete with a variety of other companies
who offer competing means of broadcasting financial news and corporate
information through the Internet, substantially all of whom are larger and more
well established than we are. We expect new competitors to enter into this
market due to the expansion of use of the Internet and changes in technology
that will increase the ability of companies to use video streaming technology on
the Internet. Substantially all of our current competitors have significantly
greater financial, technical, marketing and other resources than we do. If we
experience increased competition in the business of broadcasting news and video
productions on the Internet, our ability to obtain customers and achieve
revenues for our services will be limited. In addition, the potential rates that
we may be able to charge for advertising on our Web site may decrease if the
growth of the Internet and electronic commerce brings increased competition.
Competition among Internet content providers, including news
broadcasters, is intense and is expected to increase significantly in the
future. The market for Internet content sites is rapidly evolving and barriers
to entry are low, enabling newcomers to launch competitive sites at relatively
low cost. We also generally compete for users and advertisers with a large
number of Internet portals, search sites and content aggregators, general news
sites (such as those provided by CNN and ABC) and general purpose online service
providers (such as America Online and MSN). In addition, we compete with
traditional media content businesses such as newspapers, magazines, radio and
television. In order to compete successfully and attract users, advertisers and
strategic partners, we must provide high quality, engaging content in a timely
and cost-effective manner. We cannot assure you that we will be able to do so.
Moreover, increased competition could result in price reductions, reduced
margins or loss of market share, any of which could have a material adverse
effect on our business, financial condition and results of operations.
NEW SERVICE RISKS
Our future success may depend in part on our ability to expand our
Internet site to include new subject matters and services and other Internet
sites. Costs related to developing new content areas and services are expensed
as they are incurred while revenue related to these new content areas and
services typically builds over time and, accordingly, our profitability from
year to year may be adversely affected by the number and timing of new launches.
In addition, we cannot assure you that any new areas or services will be
developed in a timely or cost-effective manner or that they will be successful.
RISKS ASSOCIATED WITH BRAND DEVELOPMENT
We believe brand identity is important to attracting and expanding our
user base, Internet traffic and advertising and commerce relationships. We
believe the significance of brand and name recognition will intensify as the
number of Internet sites increases. We cannot assure you that we will be able to
continue to develop our brand.
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RISK OF CAPACITY CONSTRAINTS AND SYSTEM DISRUPTIONS
The performance and reliability of our Internet site and network
infrastructure are critical to our reputation and ability to attract and retain
users, advertisers and strategic partners. Any system error or failure, or a
sudden and significant increase in traffic, may result in the unavailability of
our site and significantly delay response times. Individual, sustained or
repeated occurrences could result in a loss of potential or existing users,
advertisers or strategic partners. In addition, because our advertising revenue
is expected to directly relate to the number of advertisements we deliver to
users, system interruptions or delays would reduce the number of impressions
delivered and thereby reduce our revenue.
Our systems and operations are vulnerable to interruption or
malfunction due to certain events beyond our control, including natural
disasters, telecommunications failures and computer hacking. We also rely on Web
browsers and online service providers to provide Internet access to our sites.
We cannot assure you that we will be able to expand our network infrastructure,
either internally or through use of third-party hosting systems or service
providers, on a timely basis sufficient to meet demand. We presently have only a
limited amount of redundant facilities or systems, no formal disaster recovery
plan and no sufficient business interruption insurance to compensate for losses
that may occur. Any interruption to our systems or operations could have a
material adverse effect on our business, financial condition and results of
operations.
Substantially all of our communications hardware and computer hardware
is located at a leased facility in Vancouver, British Columbia, Canada. Our
systems are vulnerable to damage from earthquake, fire, floods, power loss,
telecommunications failures, break-ins and similar events. We do not presently
have fully redundant systems and have not yet completed implementing a formal
disaster recovery plan. Despite our implementation of network security measures,
our servers are also vulnerable to computer viruses, physical or electronic
break-ins, attempts by third parties deliberately to exceed the capacity of our
systems and similar disruptive problems. If our computer systems fail to operate
for any of these reasons, then we will not be able to operate our Web site or
achieve revenues from customers and advertisers and our business will be harmed.
SECURITY RISKS
Our system may be vulnerable to unauthorized access, computer viruses
and other security problems. A user who circumvents security measures could
misappropriate proprietary information or cause interruptions or malfunctions in
our operations. We may be required to expend significant resources to protect
against the threat of such security breaches or to alleviate problems caused by
such breaches. Although we intend to continue to implement industry-standard
security measures, such measures may be inadequate.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
We are not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally. There are
currently few laws or regulations directly applicable to access to or commerce
on the Internet. However, due to the increasing popularity and use of the
Internet, a number of legislative and regulatory proposals are under
consideration by U.S. and Canadian federal, state, provincial, local and foreign
governmental organizations. It is possible that a number of laws or regulations
may be adopted with respect to the Internet relating to such issues as user
privacy, user screening to prevent inappropriate uses of the Internet by, for
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example, minors or convicted criminals, taxation, infringement, pricing, content
regulation, quality of products and services and intellectual property ownership
and infringement. The adoption of any such laws or regulations may decrease the
growth in the use of the Internet, which could, in turn, decrease the demand for
our community, increase our cost of doing business, or otherwise have a material
adverse effect on our business, results of operations and financial condition.
Moreover, the applicability to the Internet of existing laws governing
issues such as property ownership, copyright, trademark, trade secret,
obscenity, libel and personal privacy is uncertain and developing. Any new
legislation or regulation, or application or interpretation of existing laws,
could have a material adverse effect on our business, results of operations and
financial condition. There can be no assurance that any legislation will not be
enacted in the future that could expose us to substantial liability. Legislation
could also dampen the growth in the use of the Web generally and decrease the
acceptance of the Web as a communications and commercial medium. The result
could, thereby, have a material adverse effect on our business, results of
operations and financial condition.
It is also possible that our use of "cookies" to track demographic
information and user preferences and to target advertising may become subject to
laws limiting or prohibiting their use. A "cookie" is a bit of information keyed
to a specific server, file pathway or directory location that is stored on a
user's hard drive, possibly without the user's knowledge. A user is generally
able to remove cookies. Germany, for example, has imposed laws limiting the use
of cookies, and a number of Internet commentators, advocates and governmental
bodies in the United States and other countries have urged the passage of laws
limiting or abolishing the use of cookies. Limitations on or elimination of our
use of cookies could limit our effectiveness in targeting of advertisements,
which could have a material adverse effect on our business, results of
operations and financial condition.
In addition, a number of legislative proposals have been made at the
U.S. and Canadian federal, state, provincial and local level that would impose
additional taxes on the sale of goods and services over the Internet and certain
jurisdictions have taken measures to tax Internet-related activities. The U.S.
Congress enacted the Internet Tax Freedom Act on October 21, 1998 which imposes
a national moratorium in the United States on state and local taxes on Internet
access services, on-line services, and multiple or discriminatory taxes on
electric commerce effective October 1, 1998 and ending three years after its
enactment. There can be no assurance that, once such moratorium is lifted, some
type of U.S. federal and/or state taxes will be imposed upon Internet commerce,
and there can be no assurance that such legislation or other attempts at
regulating commerce over the Internet will not substantially impair the growth
of commerce on the Internet and as a result, our opportunity to derive financial
benefit from these activities may be adversely affected.
In addition to the foregoing areas of recent legislative activities,
several telecommunications carriers are currently seeking to have
telecommunications over the Web regulated by the U.S. Federal Communications
Commission (the "FCC") in the same manner as other telecommunications services.
In addition, because the growing popularity and use of the Web have burdened the
existing telecommunications infrastructure and many areas with high Web use have
begun to experience interruptions in phone service, local telephone carriers
have petitioned the FCC to regulate ISPs and OSPs in a manner similar to long
distance telephone carriers and to impose access fees on the ISPs and OSPs. If
either of these petitions is granted, or the relief sought is otherwise granted,
the costs of communicating on the Web could increase substantially, potentially
slowing growth in use of the Web. This could, in turn, decrease demand for our
services or increase our cost of doing business.
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Due to the global nature of the Web, it is possible that, although our
transmissions over the Internet originate primarily in British Columbia, Canada,
the governments of various states in the United States and foreign countries
might attempt to regulate our transmissions or prosecute us for violations of
their laws. There can be no assurance that violations of local laws will not be
alleged or charged by state or foreign governments, that we might not
unintentionally violate such laws or that such laws will not be modified, or new
laws enacted, in the future. Any of the foregoing developments could have a
material adverse effect on our business, results of operations and financial
condition.
In addition, as our services are available over the Internet in
multiple foreign countries, provinces, states and other jurisdictions, such
jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in each of those jurisdictions. We are qualified to do
business only in British Columbia, and our failure to qualify as a foreign
corporation in a jurisdiction where we are required to do so could subject us to
taxes and penalties and could result in our inability to enforce contracts in
such jurisdictions. Any such new legislation or regulation, the application of
laws and regulations from jurisdictions whose laws do not currently apply to our
business, or the application of existing laws and regulations to the Internet
and other online services could have a material adverse effect on our business,
results of operations and financial condition.
LIABILITY FOR INFORMATION RETRIEVED FROM THE WEB; ABSENCE OF LIABILITY INSURANCE
Because materials may be downloaded by users of our Web site and
subsequently distributed to others, there is a potential that claims will be
made against us for defamation, negligence, copyright or trademark infringement,
personal injury or other theories based on the nature, content, publication and
distribution of these materials, including financial and other information
disseminated by use of our Web site by the small-cap public companies that are
our customers. Such claims have been brought, and sometimes successfully
pressed, against OSPs for example, in the past.
In addition, the increased attention focused upon liability issues as a
result of these lawsuits and legislative proposals could impact the overall
growth of Internet use. We could also be exposed to liability with respect to
the offering of third party content that may be accessible through our Web site,
or through content and materials that may be posted by Members on their personal
Web sites or chat rooms, or on-line discussions offered by us. Such claims might
include, among others, that by directly or indirectly hosting the personal Web
sites of third parties, we are liable for copyright or trademark infringement,
or other wrongful actions by such third parties through such Web sites.
It is also possible that if any third party content information
provided on our web site contains errors, third parties could make claims
against us for losses incurred in reliance on such information. Even to the
extent that such claims do not result in liability to us, we could incur
significant costs in investigating and defending against such claims. The
imposition on us of potential liability for information carried on or
disseminated through our systems could require us to implement measures to
reduce our exposure to such liability, which may require the expenditure of
substantial resources and limit the attractiveness of our services to Members
and visitors.
Currently, we do not carry general liability insurance intended to
protect us from any liability arising out of the foregoing. In any event,
however, insurance may not cover all potential claims to which we are exposed or
may not be adequate to indemnify us for all liability that may be imposed. Any
imposition of liability that is not covered by insurance or is in excess of our
insurance coverage would have a material adverse effect on our business, results
of operations and financial condition. In addition, the increased attention
focused upon liability issues as a result of these lawsuits and legislative
proposals could impact the overall growth of Internet use.
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RELIANCE ON INTELLECTUAL PROPERTY RIGHTS
To establish and protect our trademark, service mark and other
proprietary rights in its products and services, we rely on a combination of:
o copyright, unfair competition, trademark, service mark and
trade secret laws and
o confidentiality agreements with our licensees and other third
parties and confidentiality agreements and policies covering
its employees.
We cannot assure you that these measures will be adequate, that we will
be able to secure registrations for all of its marks in the U.S. or
internationally or that third parties will not infringe upon or misappropriate
our proprietary rights. Any infringement or misappropriation, or litigation
relating to intellectual property rights, may have a material adverse effect on
our business, financial condition and results of operations.
We have applied to the United States Trademark office for registration
of "ViaVid" as a trademark in the United States. We have also applied to the
Canada Patent and Trademark Office for registration of "ViaVid" as a trademark
in Canada. A trademark has been issued in Canada for "ViaVid". We are not aware
of any other companies currently using the name "ViaVid" in the United States.
We have conducted searches of trademark databases in the United States and have
not found any registration of the name "ViaVid" as a trademark. There is no
assurance that we will be able obtain a trademark for the "ViaVid" name in the
United States, or that once obtained it will stand up to objections by others
who have made prior use of the name. Also, there can be no assurance that we
will obtain any significant commercial advantage from this trademark if granted
or that we will have the financial resources to protect our rights in the name
through legal proceedings or otherwise. It is also possible that our competitors
or others will adopt product or service names similar to "ViaVid" or other
similar service marks or trademarks, thereby impeding our ability to build brand
identity and possibly leading to customer confusion. Our inability to protect
the name "ViaVid" adequately could have a material adverse effect on our
business, results of operations and financial condition.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related business are
uncertain and evolving. In particular, new registration and ownership priority
procedures may be adopted which may make it more difficult for us to retain or
obtain desirable domain names.
CONTROL BY PRINCIPAL STOCKHOLDERS AND POTENTIAL CONFLICTS OF INTEREST
Our officers and Directors own approximately 54% of our outstanding
shares of Common Stock. As a result, such persons could elect all the members of
our Board. Such persons could also control those actions requiring the approval
of the holders of a majority of our voting stock, including amendments to our
Articles of Incorporation and any business combinations. Such persons
concentration of ownership could prevent a change in control of our company that
might otherwise be beneficial to stockholders.
DIFFICULTIES IN CREATING AWARENESS OF OUR WEB SITE
We believe that development and awareness of our Web site is critical
to our success in attracting consumers and advertisers. The importance of
customer awareness will increase as low barriers to entry encourage the
proliferation of Web sites. Subject to the availability of funds, we
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intend to increase our marketing and advertising spending in order to attract
and retain users and advertisers, and to promote and maintain awareness of our
Web site in response to competitive pressures. If we are unsuccessful in
building strong recognition of our Web site and if our marketing efforts are not
successful, we will not be successful in attracting customers for our Web site
and earning revenues from our Web site with the result that our business will be
harmed.
The success of our business will depend on acceptance of our business
format by customers of the video production and Internet broadcast service that
we offer. There is no assurance that potential customers will accept the format
of our Web site. Potential customers have a variety of competing means for which
to disseminate corporate information and news, both via the Internet and through
traditional commercial means. If we are not successful in creating an awareness
of our Web site and attracting users to our Web site, then we will not be
successful in achieving revenues and our business will be harmed.
EXPENSE OF TECHNOLOGICAL DEVELOPMENTS AND EQUIPMENT UPGRADES
The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and consumer demands. It
is possible that the introduction of new technology could render our existing
Web site technology and the services we offer obsolete. We anticipate that the
introduction of new technology will require us to continually upgrade and change
our Web site technology in order to maintain our competitive position and offer
competitive services. We anticipate that the incorporation of new technology
into our Web site will result in us incurring increased operating expenses. If
we are required to incur these expenses and increased revenues do not match
these expenses, our business will be harmed. If we do not incorporate new
technology into our Web site operations, then our competitive position and our
ability to attract customers and advertisers may be harmed.
RISKS APPLICABLE TO THE MARKET FOR OUR COMMON STOCK
NO ACTIVE PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF
STOCK PRICE
Prior to January 4, 2000, there was no active public market for our
Common Stock. Since then, our Common Stock has been quoted on the OTC Bulletin
Board. There can be no assurance that an active trading market for our Common
Stock will be sustained or that the market price of our Common Stock will not
decline based upon market or other conditions. The market price may bear no
relationship to our revenues, earnings, assets or potential and may not be
indicative of our future business performance. The trading price of our Common
Stock has been and can be expected to be subject to wide fluctuations in
response to variations in our quarterly results of operations, the gain or loss
of significant strategic relationships, unanticipated delays in our development,
changes in estimates by analysts, announcements of technological innovations or
new solutions by us or our competitors, general conditions in the technology and
Internet sectors and in Internet-related industries, other matters discussed
elsewhere in this report and other events or factors, many of which are beyond
our control.
In addition, the stock market in general and the technology and
Internet sectors in particular have experienced extreme price and volume
fluctuations which have affected the market price for many companies in
industries similar or related to us and which have been unrelated to the
operating performance of these companies. These market fluctuations, as well as
general economic, political and market conditions, may have a material adverse
effect on the market price of our Common Stock.
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In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such companies. Such litigation, if instituted, and
irrespective of the outcome of such litigation, could result in substantial
costs and a diversion of management's attention and resources and have a
material adverse effect on our business, results of operations and financial
condition.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of significant amounts of our Common Stock in the public market
or the perception that such sales will or could occur could materially and
adversely affect the market price of our Common Stock or our future ability to
raise capital through an offering of our equity securities. We had, as of
October 30, 2000, 7,651,000 shares of common stock outstanding. Of such shares,
4,094,800 shares were held by officers and Directors of the Company. The
4,094,800 shares held by officers and Directors, as well as 817,000 shares held
by the wife of an officer and Director, are "restricted securities" as such term
is defined in Rule 144 under the Securities Act. Restricted securities may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rules 144, 144(k) or 701 promulgated under the
Securities Act. Approximately 1,446,000 shares of our Common Stock are freely
transferable under U.S. Federal securities laws, including the offer and sale of
1,037,000 shares that has previously been registered under the Securities Act,
subject to the requirements of the Securities Act for the selling
securityholders to deliver a current prospectus in connection with a sale of
those shares. In addition, the 1,116,000 shares included in this prospectus will
also be freely transferrable subject to the same prospectus delivery
requirements. The sale of these shares or the perception that such sales will or
could occur could materially and adversely affect the market price for our
Common Stock.
On January 27, 2000, Kathler Holdings Inc., Paul Watkins, Cheryl
Watkins and 549419 BC Ltd., our principal shareholders, notified us that they
sold or intend to sell an aggregate of 195,000 shares of Common Stock pursuant
to Rule 144. Subsequent to the sale of those shares, the shares become freely
transferrable under U.S. Federal securities laws.
We have filed a Form S-8 registration statement under the Securities
Act to register all shares of Common Stock issuable pursuant to outstanding
options and all shares of Common Stock reserved for issuance under our 1999
Stock Option Plan. Such registration statement became effective immediately upon
filing in December 1999 and the shares issuable on exercise of options granted
under the 1999 Stock Option Plan are covered by that registration statement. The
shares issuable on exercise of the options granted under the Plan are eligible
for sale, subject to Rule 144 limitations applicable to affiliates. As of
October 30, 2000, we have options outstanding under the 1999 Stock Option Plan
to purchase 922,000 shares at a price of $1.00 per share and 25,000 shares at a
price of $3.50 per share. An aggregate of 186,000 shares were issued on exercise
of options granted under the 1999 Stock Option Plan on March 14 and April 12,
2000 and are included in the shares described above that are freely
transferrable under U.S. Federal securities laws. In addition, there are 3,000
shares reserved for the future grant of options under the Plan. We intend to
attract employees to work for us through the grant of options to purchase these
shares. These options granted to attract additional employees may be immediately
exercisable and the shares freely transferrable under the Securities Act. The
sale of these shares or the preception that such shares will be sold could have
an adverse effect on the market price for our Common Stock.
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PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On July 6, 2000, the Registrant issued 75,000 shares to a Consultant for
consulting services rendered. These shares are "restricted securities".
Restricted securities may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144() or 701
promulgated under the Securities Act.
During the period August 17 through October 27, 2000, the Registrant completed
the sale to 16 persons of 372,000 units of securities, each unit consisting of
two shares of common stock and one warrant expiring September 30, 2003 to
purchase one share of common stock at an exercise price of $0.50 per share. The
securities were sold pursuant to Regulation D and Regulation S under the Act.
Each purchaser represented to the Registrant that the purchaser was a "Non-U.S.
Person" and an "accredited investor". Each purchaser represented his intention
to acquire the securities for investment only and not with a view to
distribution. Legends were affixed to the stock certificates. None of the
securities were sold through an underwriter and, accordingly, there were no
underwriting discounts or commissions involved.
Item 4. Submission of Matters to a Vote of Security Holders
On September 29, 2000, the Registrant held it's first Annual Meeting. The
shareholders voted in favour of the following proposals: (1) The election of
four Directors to hold office until the next Annual Meeting of Shareholders in
2001 or until their respective successors are elected and qualified; and (2) The
approval of the proposal to amend the Company's Articles of Incorporation to
contain certain provisions to eliminate or limit the personal liability of
Directors and Officers of the Company under certain circumstances.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant did not file any current reports on Form 8-K
during the quarter ended September 30, 2000.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 2000 By: /s/ Brian Kathler
-------------------------------
President
(Principal Executive Officer and
Principal Accounting Officer)
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