SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ending March 31, 2000.
Commission File Number: 000-28481
DIGITAL VIDEO DISPLAY TECHNOLOGY CORP.
(Exact name of registrant as specified in its charter)
Nevada 86-0891931
(State of organization) (I.R.S. Employer Identification No.)
590 Madison Avenue- 21st Floor
New York New York 10022
(Address of principal executive offices)
Company's telephone number, including area code: (212) 521-4075
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months and (2) has been
subject to such filing requirements for the past 90 days. Yes X
Securities registered under Section 12(g) of the Exchange Act:
There are 23,250,000 shares of common stock outstanding as of December 31, 1999.
The shares are traded on the OTC Bulletin Board, under the symbol "DVDT".
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained , to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. X.
State issuer's revenues for its most recent fiscal year: $_______
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. On May 30, 2000, the aggregate market
value was $____________.
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TABLE OF CONTENTS
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Part I
Item 1 Description of Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
Part II
Item 5 Market for Common Equity and Related Stockholder Matters
Item 6 Management's Discussion and Analysis of Plan of Operations.
Item 7 Financial Statements
Item 8 Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure.
Part III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners and
Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits, List and Reports on Form 8-K
PART I
======
Item 1 Description of Business
=======================
Background and Reorganization
-------------------------------
Digital Video Display Technology Corp. (Company) was incorporated under the laws
of the State of Nevada on August 1, 1997, under the name Meximed Industries. On
January 27, 1999, Company filed an Amendment to its Articles of Incorporation
changing its name to Digital Video Display Technology Corp.
Company was initially formed to engage in the business of developing, producing
and distributing a non-reusable medical syringe. In July 1998, Company raised a
total of $200,000 in a public offering pursuant to an
<PAGE>
exemption provided by Rule 504 of Regulation D, promulgated under the Securities
Act of 1933, as amended. The offering was approved for sale by The New York
State Department of Law. After recognizing the syringe project was going to be
far too expensive and difficult to pursue, Company began looking for another
business to acquire.
In January 1999, Company completed a reorganization and change in control and
acquired a License to a U.S. Patent for proprietary technology for an audio
video jukebox system from Software Control Systems International Inc., a
Canadian corporation and unrelated third party (SCSI). As consideration for the
License, Company agreed to pay SCSI the sum of $250,000 U.S. in cash and issued
SCSI 2,000,000 shares of its restricted common stock. The License is for a term
of 15 years and grants Company an exclusive right to market and sell the SCSI
proprietary technology and products throughout Canada and the states of Oregon,
Washington, Montana, Idaho and Hawaii. Subsequently, on May 10, 1999, registrant
entered into a Distributor Agreement with SCSI granting SCSI the right to act as
a distribution agent for Company. Pursuant to the Agreement, Company will supply
SCSI a minimum of 500 jukebox systems at a price of $7,500 which may be paid in
full at the time of delivery or at the rate of $150 per month for 60 months.
On September 1, 1999, the SCSI agreement was modified. The amendment
stated that the Company was obligated to pay the $250,000 in $20,000
installments, beginning December 15, 1999, with a final payment of
$10,000 due on December 15, 2000. This amendment was never ratified by
the Company's Board. As of December 31, 1999, no payment has been made
to the third party. The 2,000,000 restricted shares were to be held by
SCSI for two years. SCSI had attempted to sell 230,000 shares of the
stock before the two years expired, so the Company stopped the sale,
and canceled the shares.
On May 5, 2000, the Company received a letter from the SCSI attorneys.
This letter demanded that the 2,000,000 shares be reinstated, and that
the Company pay the $250,000 that was originally agreed upon. The
letter also demanded a distributorship for two of the officers of SCSI
to distribute the Company's video jukeboxes at 10% commission in Canada
and the Northwestern United States. Other settlement alternatives were
also offered. The Company has responded to SCSI attorney deadlines, and
is awaiting response. The Company believes this dispute can be settled
without litigation.
<PAGE>
Proprietary Technology and Products
-----------------------------------
Company's proprietary technology creates an interactive, audio-visual jukebox
system (the "DVD Juke System") linked to a satellite server network (the "DVD
Satellite System"). The DVD Juke System and the DVD Satellite System are
collectively referred to as the DVD System." In addition to revolutionizing the
conventional jukebox, the DVD System was designed to create a totally new
marketing venue.
(a) The DVD Juke System: Company's main product is the DVD Juke System, which is
an interactive audio/video entertainment kiosk. The DVD Juke System has
significantly greater flexibility and content than any product currently on the
market since it is capable of playing individual musical selections similar to a
standard jukebox; however, the DVD Juke System also has many additional revenue
generating capabilities. A standard jukebox is able to store approximately 100
CD's, whereas the DVD Juke System is currently capable of storing on the
internal hard drive 1,000 songs and 250 music videos. Company expects to install
improvements to the System such that, within a year, the DVD Juke System will be
capable of storing 4,500 audio tracks and 3,000 music videos. Unlike
conventional jukebox, the DVD Juke System is capable of playing music videos, as
well as audio tracks. Any number of video terminals and TV's are connected by
cable to the DVD Juke System and placed throughout each location. When a
customer chooses a video selection, the DVD Juke System displays the video on
the video terminals and TV's and plays the audio track of the song on the
location's sound system. The DVD Juke System also contains a user interface that
enables a consumer to seek information about artists, receive coupons providing
discounts on merchandise, and provides e-commerce connectivity to prime retail
web sites that offer products.
The DVD Juke System's audio and video capability allows it to run the
full-fledged audio-visual advertisements seen on television. The system has
approximately 12,000 minutes of available ad space per month. The Company will
be attempting to sell advertising time slots to national advertisers and is
currently in discussions with several companies in this regard. The
advertisements will run for 15, 30 or 45 seconds. There are 16 advertising spots
per hour during prime time that will be interlaced between the music video
selections. In addition, the system will offer customized content such as
concerts, chat groups, custom comedy selections, new artist previews,
infomercials, entertainment product marketing and merchandising video with
instant click-through e-commerce opportunities, as well as many other potential
programming highlights. This content is expected to create marketing
opportunities for marketers and enhance the DVD Juke System's unique features.
The DVD Juke System will also print discount and cross-promotional coupons.
Certain musical selections will trigger the Juke System to print coupons
extending offers from various marketers. The Company will derive revenue on a
per-coupon-issued basis or by receiving a percentage of the sales generated by
redeemed coupons.
In addition, the DVD Juke System will be connected to the Internet via a virtual
private network, proprietary to Company. Consumers will be automatically linked
to the web sites of the record companies whose songs have been selected, and
will be able to "click through" to additional web sites. Consumers will be able
to browse through these web sites and to purchase CD's and merchandise at the
sites.
The DVD Juke System's advertising, marketing and promotional capabilities will
provide advertisers and marketers with a new avenue with which they will be able
to target a captive audience where they have chosen to sit and relax and may be
prone to impulse purchasing. This aspect of the DVD Juke System is unique to
Company and currently unavailable by any other means. The DVD Juke System
effectively creates a new advertising and promotional channel for marketers.
Currently conventional jukeboxes allow for payment in cash only. The DVD Juke
System allows for payment by cash, credit card, debit cards and smart cards/
loyalty cards.
The DVD Juke System is also capable of collecting, storing and disseminating
data, including play lists and personal information input by its customers. The
play lists generated by the DVD Juke System are flexible and are capable of
providing the total number of plays of a given song, record company totals and
location-specific information, depending on the desired output. Company intends
to market this information to record companies and brand advertisers.
The conventional jukebox is different in that it holds complete CD's. Because of
this, several songs take up space in the jukebox that would otherwise not have
been chosen by the jukebox owner. That is, in order to stock the
<PAGE>
one or two popular songs of a given artist on a given CD, the jukebox owner has
no choice but to stock the rest of the songs on that artist's CD. With DVD Juke
System technology, each song is copied in digital format onto the hard drive of
the DVD Juke System, just as files are copied onto a computer's hard drive
allowing the location owner to stock only the specific tracks he/she wishes to
stock. In this way, only the most popular songs by any given artist will be
loaded onto the DVD Juke System's hard drive without any extraneous, unwanted
songs taking up potential revenue-generating space.
An important and unique programming feature of the DVD Juke System is that the
content can be customized for each location, and may be updated as frequently as
a location owner desires. The location owner may order the Juke System pre-
programmed with standard combinations of rock and pop standards, jazz, country
and western, and recent hits, or can order programming specifically tailored to
their geographic area and/or their customers' demographics. Company will provide
content and updating of content for $100.00 per month, providing an additional
source of income to Company.
(b) The DVD Satellite System: The DVD Satellite System is a proprietary
satellite server network which will provide content and updated content to DVD
Juke Systems throughout North America. The content will be transmitted, or
"uplinked," from Company's central server to satellites, and then "downlinked"
from the satellites to satellite dishes stationed at each location. The content
will be stored in digital format on the DVD Juke Systems' high capacity hard
drives. The Satellite System will also create a private network, which will be
capable of collecting data and remotely managing the stand-alone DVD Juke
Systems.
The DVD Satellite System technology is expected to significantly reduce the time
and cost involved in providing content and updated content to sites once a
critical mass of locations has been installed. The Satellite System technology
also allows for the easy and flexible loading and re-loading of content by
providing updates by satellite, obviating the need to send service technicians
to individual locations to update each DVD Juke System's content.
Service and Support
---------------------
The DVD Juke System will be sold with a content, service, maintenance, and
management contract which will be subcontracted to an independent third party.
Company has been verbally negotiating with several large, well-established
independent service organizations which offer seven-day a week, 24-hour a day
maintenance and service. Company feels service will be a primary concern to
location owners who have installed or are contemplating installing a jukebox.
Industry Background
--------------------
Currently, the conventional jukebox industry generates over $2.5 billion per
year in coin drop revenues in the United States alone (Vending Times, 1998).
There are approximately 350,000 jukeboxes operating in the United States. The
average jukebox generates revenues of approximately $600 per month based on
1,800 selections played. Currently there are approximately 50 large distributors
and 7,500 operators managing this business.
The business model for the jukebox industry has been under tremendous pressure
over the past five years due to the emergence of broadcast music video, video
game narrowcast networks, and other media competing for the attention of
consumers. In addition, certain basic economic factors must be considered in
evaluating any entry into the jukebox industry, which are set forth below:
- The cost for audio plays has remained static at three plays for a $1.00.
(This number is trending downward to as low as 5 plays for $1.00.)
- The average play time of a jukebox is 7,200 minutes per month, based on
1,800 plays within a 13 hour day, six days a week. The total playtime
possible within this timeframe is 20,280 minutes.
- A cost efficient video jukebox does not exist in the market today.
- Service, maintenance, and content-update costs continue to rise.
- Theft, and pilferage continue to be on the rise.
- Intense competition for prime locations continue to erode operating
margins.
Any entrant into the jukebox industry must be prepared to operate within these
parameters and to cooperate with the current distributors, while at the same
time introducing cutting edge technology into the industry to obviate potential
competitive technologies. Today, in this industry, jukebox manufacturers all
suffer from technological obsolescence.
<PAGE>
Competition
-----------
Company's primary competitors are manufacturers of conventional jukeboxes. The
largest manufacturers of conventional jukeboxes and their estimated market share
as of 1997 are the following companies:
<TABLE>
<CAPTION>
<S> <C>
Rowe International, Grand Rapids, Michigan: 40%
NSM America, Bensenville, Illinois: 25%
Rock-Ola Manufacturing, Torrance California: 25%
Wurlitzer Jukebox, Gurnee Illinois: 10%
</TABLE>
Company has not been able to identify any competitors with technology comparable
or similar to the DVD Juke System . However, all of Company's primary
competitors are substantially larger and have significantly greater financial
resources than Company. In addition, their distribution channels are fully
established and their brand names are well-known.
In 1997, manufacturers sold approximately 22,000 jukebox units for a total
retail value of $132 million. The average retail price of a jukebox, loaded with
content, was $6,000 per unit.
Company has identified other competition for the DVD Juke System, primarily from
audio music private networks, cable and satellite. Examples are MTV, MuchMusic,
and VH1. Because these companies have entirely different distribution and
pricing models than the conventional electro-mechanical jukebox companies,
direct comparisons cannot be made.
Marketing Plan
--------------
Company intends to aggressively market the superior technology of the DVD Juke
System. Its initial goal is to replace approximately 10%-15% of the 350,000
conventional jukeboxes located primarily in bars and restaurants with the DVD
Juke System within the next 3 years, as more fully described below. Company
believes it can accomplish this goal by forming business relationships with the
top distributors in the jukebox industry by offering a unique split of the coin
drop revenues generated by the DVD Juke System, thereby enhancing the total
revenue generated by its partners within the industry. However, Company has not
yet formed any such business relationships. Company will also attempt to expand
the market for the DVD Juke System beyond bars and restaurants to fast food
restaurants, colleges, shopping centers, etc.
The incentives provided to distributors for forging such relationships will be
(i) significant new revenue potential from their distribution network, (ii)
exclusive territorial boundaries granted by Company, thereby ensuring maximum
penetration of the new product, (iii) long-term access to new video products and
(iv) access to the entertainment, e-commerce business. In addition, Company has
addressed the problems of the industry as follows:
- By providing video, the cost per play can be increased to two selections for
$1.00, thereby increasing the pay-for-play revenue
- Because the DVD Juke System includes video, it can offer 600 minutes per
month of prime time consumer and brand advertising (
- The company can offer off-peak customized content of 12,480 minutes at
Internet prices ($15.00 per hour) representing a minim
- The DVD Juke system will retail at comparable prices to the standard jukebox
- The entire system is networked for cost effective remote diagnostics and
satellite downloading of content, reducing infrastructure
- The distributors and operators will be able to remotely access each DVD Juke
System, ensuring security and optimum management
- The industry will have a state-of-the-art product for their locations that is
revenue generating, versus subscription or cost
- The distributors will have a product that they can expand into many new
channels of distribution, such as hotels, malls, fast
Company intends to work closely with its distributors in marketing the DVD Juke
System to the bars and restaurants that commonly have jukeboxes.
Company is in the process of introducing the DVD Juke System to several national
brand name advertisers, most of which have requested a demonstration.
<PAGE>
To date, presentations have been made to several potential Advertisers. The
response of these advertisers has been positive and discussions are currently
under way with various advertisers to become sponsors of the DVD Juke System.
However, no such sponsors have entered into agreements to date.
Company's marketing plan also includes the following marketing and promotional
activities, which Company anticipates will create further interest in the DVD
Juke System:
(a) Test Marketing: Company expects the DVD Juke System to be fully operational
by mid-February 2000 and intends to perform a 20-unit trial in the New York
metropolitan area between March and April of 2000. Certain test locations will
be chosen to market the DVD Juke System to the Hispanic and African American
communities. This market segment represents the largest coin-drop per unit of
any group. Company expects to fully launch the Juke System to the public in May
2000.
(b) Trade Shows: Company will participate as an exhibitor to demonstrate the DVD
Juke System and issue new product releases at selected national and
international trade shows sponsored by the Amusement and Music Operators
Association (AMOA) and Amusement Showcase International (ASI). Company considers
the following Year 2000 trade shows to be excellent venues in which to
demonstrate its DVD Juke System: the Point-of-Purchase Advertising Institute
Show, the Annual Nightclub and Bar Show, the Family Entertainment Centers Show,
and the International Amusement Parks and Attractions Show. Other possible
venues will include the National Restaurant Show, the Convenience Store Show,
the American Hotel and Motel Show, and the International Shopping Center Show.
(c) Trade Publications: A number of print media opportunities exist for
promoting the DVD Juke System in order to communicate the superiority of the DVD
Juke System compared to conventional jukeboxes. These publications include
Replay Magazine, Playmeter Magazine, Vending Times, Street Beat Magazine,
Nightclub and Bar Magazine and Fun World Magazine. Company intends to advertise
its DVD Juke System in some or all of these publications to promote the product.
(d) Promotional Video and Informational Kit: Company intends to produce a
promotional/informational video describing the DVD Juke System and its features,
benefits and values. A brochure and informational kit will also be created
summarizing the features of the DVD Juke System. The materials will
differentiate the product from its competitors' products outlining the
advantages and superiority of the DVD Juke System over conventional jukeboxes.
Manufacturing and Distribution
--------------------------------
Company has established business relationships with some distributors in the
jukebox industry and has verbal agreements with certain distributors and written
agreements with additional distributors to market the DVD Juke System to the
locations that they service.
Software Control Systems International, Inc., the Canadian distributor, has
entered into a Letter of Intent with the Windfield Group, one of Canada's
largest distributors, to form a joint venture for the purpose of distributing
jukeboxes. The joint venturers and Company are entering into a distribution
agreement which includes a commitment to install 1,000 units in the first year
of Company's operations at the rate of approximately 80 units per month.
Patents and Copyright Protection
-----------------------------------
Company has entered into a License Agreement for the rights to use U.S. Patent
#5481509, issued by the United States Patent and Trademark Office on January 2,
1996, with Software Control Systems International Inc. (SCSI), an unrelated
third party. The License Agreement grants Company the exclusive right to use
SCSI's patented technology, which is the basis for the DVD Juke System. The
License Agreement was executed on March 1, 1999 and is effective until 2017. As
consideration for the licensing right, Company agreed to pay SCSI the amount of
$250,000 in cash; 2,000,000 restricted shares of common stock of Company; and
the right to appoint one director Company's Board. According to the terms of the
License Agreement, Company is not required to pay SCSI any additional
consideration for the rights granted therein. SCSI is unrelated to the Company,
and does not control Company's Board or govern its business decisions and
policies.
Company has also developed additional technology of its own which is utilized in
the DVD Juke System, and continues to develop technology to further enhance the
DVD Juke System. The software comprising the DVD Juke System will be covered by
appropriate patent protection and copyright registration.
<PAGE>
Licenses
--------
Company is actively pursuing license agreements with several record companies
for the right to display music videos. Company does not expect to incur a cost
for such rights, but rather, in exchange for the right to display their videos,
Company is offering record companies programming information such as play lists
compiled by the DVD Juke System and cross-promotions. As an example of the
latter, every time a certain music video by a well-known artist is selected by a
customer, Company will program the DVD Juke System to also play at no additional
cost a music video by an unknown artist that the record company is attempting to
promote. Additionally, since music videos are primarily considered promotional
materials by the record companies, as opposed to revenue generating assets,
Company expects to obtain the rights to display music videos on the DVD Juke
System at no cost to Company.
Company intends to generate revenue from e-commerce, specifically by
automatically linking consumers to the web sites of the record companies whose
songs have been selected. The consumers will then be able to "click through" to
additional web sites to browse as well as to purchase CD's and merchandise.
Company intends to obtain licenses from web sites such as Amazon.com and CD Now
to allow consumers to click through to such sites and purchase CD's and
merchandise.
In accordance with The Copyright Act of 1976, as amended, Company is not
required to obtain licenses to stock the audio content of the DVD Juke System.
Payment of a performance royalty is required for the songs played over the DVD
Juke System; however, this fee is the responsibility of the location owner and
Company has no responsibility for this fee or for obtaining performance licenses
for the locations.
Company also intends to expand the scope of its content licenses and obtain
licenses that will enable it to display sports highlight films, comedy clips and
pay-per-view events on the DVD Juke System.
Relationships with Third-Parties
--------------------------------
On March 30, 1999, Company entered into a Letter of Agreement with The Investor
Relations Group (IRG), an unrelated third party. Pursuant to the terms of the
Agreement, IRG will provide Company investor relations and corporate
communications services in exchange for $10,000 per month in cash, beginning
April 1, 1999, for a period of 1 year, renewable annually thereafter. As
additional compensation, Company granted IRG stock options, with piggy- back
rights, to purchase up to a total of 150,000 shares of Company's restricted
common stock at an exercise price of $2.50 per share. In addition, Company has
agreed to register the shares subject of the option with its first appropriate
registration statement.
On November 19, 1999, Company entered into an Agreement for Financial
Communication Services with North American Corporate Consultants, Inc. (NACC),
an unrelated third party. Pursuant to the Agreement, NACC will assist Company on
a non-exclusive basis in developing, implementing and maintaining an ongoing
market awareness program for a period of 6 months from the date of the
Agreement. As compensation for its services, NACC shall receive 277,500 shares
of Company's restricted common stock, payable in monthly increments of 87,500
shares for the first two months, 27,500 shares the third month, and 25,000
shares the last 3 months of the term. In addition, in the event NACC is the
procuring cause in a successful merger, acquisition or corporate financing on
behalf of Company, NACC shall be compensated in the amount of 5% of the
merger/acquisition value, or the total value of the corporate financing,
whichever is applicable. Any such fees would be due and payable at the close of
the transaction.
Company is also currently in negotiations with NeTune Communications to provide
satellite links and telecommunications technology that will allow Company to
transmit content to the DVD Juke Systems. NeTune provides wireless multimedia
network and telecommunications services primarily to the motion picture,
television and advertising industry. NeTune's technology allows high quality
sound and images to be transmitted via satellite from remote locations to
production studios. NeTune's technology also includes an elaborate, multilevel,
state-of-the-art encryption and security system which protects the content
transmitted over its system. The technology utilized by NeTune is proprietary
and covered by 40 United States patents. NeTune is currently in the process of
expanding its business and technology model to other industries that require
high resolution, broadband telecommunications services. NeTune utilizes leased
satellite transponders which cover most of North America. The NeTune satellite
delivery system provides global connectivity on demand 24 hours a day, 7 days a
week. NeTune's ability to transmit extremely high-quality sound and images is
extremely beneficial to Company, since Company will save time
<PAGE>
and money delivering content to its DVD Juke Systems, while maintaining a high
quality of digital sound and images.
In April, 1999, Company retained The Marshall Firm, an entertainment law firm
located in New York City, of which Marilyn Haft, an officer, director and
shareholder of Company, is associated, to obtain and negotiate licenses for
music and music video content for the DVD Juke System. The Marshall Firm is
well-known for its expertise in entertainment law and its many contacts in
entertainment industry, especially the music industry. Pursuant to the letter of
engagement, Company paid The Marshall Firm a retainer in the sum of $15,000
against which legal fees will be billed at The Marshall Firm's customary rates
of between $125 and $475 an hour.
In August, 1999, Company entered into an Agreement for Computer and/or
Programming Services with FirePlug Computers Inc., an unrelated third party, to
design and system software development, documentation, testing, project
management and implementation of the DVD Juke System. All services will be
billed on an hourly rate ranging from $45 to $150/hour.
In November, 1999, Company entered into an Agreement for Financial Communica-
tion Services with North American Corporate Consultants, Inc., (NACC) an
unrelated third party to assist Company on a non-exclusive basis to develop,
implement and maintain an ongoing market awareness program for its products. The
term of the Agreement is for 6 months. As consideration for the services,
Company has agreed to issue to NACC a total of 277,500 shares of its restricted
common stock in the following denominations: 87,500 for each of the first two
months of the Agreement, 27,500 shares the third month and 25,000 for shares
each of the last three months. In addition, in the event NACC is the procuring
cause of a successful merger, acquisition or corporate financing on behalf of
Company, NACC will receive 5% of the merger/acquisition value or the total value
of the corporate financing, whichever applies, payable at the time of closing of
the transaction.
Future Projects in Development
---------------------------------
Company intends to generate additional future revenues by pressing, or
"burning," CD's at each DVD Juke System. "Burning" a CD means copying a song or
songs onto a blank CD.
Company projects the DVD Juke System to be able to burn CD's by the third
quarter of 2000. When this process is fully operational, consumers will be able
to copy onto a CD a song or songs they have selected on a fee-per-song basis.
Company expects to generate revenue by retaining a percentage of the cost per
song charged to the consumer. Company intends to offer the record companies a
percentage of the income generated by each burned CD in exchange for the right
to reproduce their songs, while retaining a five to ten percent (5-10%) royalty
for each song copied onto a CD by the DVD Juke System.
The Company is also developing technology which will allow the DVD Juke System
to be capable of video-conferencing and dispensing cash as an automatic teller
machine ("ATM"). These additional uses of the DVD Juke System involve only minor
modifications to the Company's current technology. For example, the Juke System
technology is already capable of accepting and calculating the amounts of
currency input into the unit; dispensing cash will involve only minor
adjustments to already existing technology. Therefore, Company expects to be
able to implement these additional uses of the DVD Juke System in the second
quarter of 2000.
In addition, with only minor additions to Company's content, the DVD Juke System
will be capable of playing sports highlight films, comedy clips and pay-per-view
events. These additional content categories do not involve technological
advances, but merely expanding Company's content licenses and marketing these
additional uses of the DVD Juke System to distributors, location owners and
ultimate consumers. Company intends to launch these efforts in the fourth
quarter 2000.
Company is also developing an independent audio and video network designed to
provide background video and advertising for hospitality and retail locations.
The system is designed to replace the VCR and Laser Disc players used by tens of
thousands of hospitality and retail locations. The product will provide
interactive commercial support at the point of sale, creating a new media
channel for locations to assist consumer brand companies in enhancing their
visibility on the sites where their products are sold.
Additional Information
-----------------------
The Company intends to provide annual reports to its security holders, and to
make quarterly reports available for inspection by its security holders. The
annual report will include audited financial statements.
The Company is subject tothe informational requirements of the Securities
<PAGE>
Exchange Act of 1934 (the Exchange Act) and, in accordance therewith, will file
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected at public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street
N.W., Washington D.C. 20549; Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; 7 World Trade Center, New York, New York,
10048; and 5670 Wilshire Boulevard, Los Angeles, California 90036. Copies of
such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at
prescribed rates.
ITEM 2. DESCRIPTION OF PROPERTY
=========================
The Company owns no property.
ITEM 3. LEGAL PROCEEDINGS
==================
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
===================================================
During the fourth quarter of the fiscal year, no matters were submitted to a
vote of security holders.
PART II
=======
Item 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
========================================================
The Company's shares of Common Stock are traded on the OTC Bulletin Board. The
High/Low bid quotations for the period ending December 31, 1999, was
$2.00/$1.50.
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSES
======================================
Forward-Looking Statements
--------------------------
This Form 10-QSB contains forward-looking statements that involve risks and
uncertainties. The statements contained in this document that are not purely
historical are forward-looking statements, including without limitation,
statements regarding the Company's expectations, beliefs, plans, intentions,
projections or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. The Company's actual results may differ materially
as a result of certain factors, including those set forth elsewhere in this
document. These forward-looking statements are made under the safe-harbor
provisions of applicable securities laws, rules and regulations.
Selected Consolidated Financial Data
---------------------------------------
The following historical financial data for the period from inception through
March 31, 2000 was derived from the historical consolidated financial statements
of Company that have been audited by Mark Bailey & Co., Ltd., Certified Public
Accountants and independent auditors (the Financial Statements).
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
------------------
3-31-00 12-31-99
========== ==========
Current Assets
--------------
<S> <C> <C>
Cash $ 131,363 $ 2,079
Interest receivable $ 329 $ 11
Prepaid expenses $ 24,734 $ -
---------- ----------
$ 156,426 $ 2,090
Other Assets
------------
Deposits $ 600 $ 600
Other assets (net of accumulated
Amortization of $21,000 and $16,500)
$ 249,000 $ 253,500
Deferred tax asset (net of valuation
Allowance of $31,947 and $255,891) - -
---------- ---------
Total assets $ 406,026 $ 256,190
========== =========
Current Liabilities
-------------------
Accounts payable $ 127,920 $ 206,453
Related party payable $ 152,500 $ 107,500
Interest payable $ 20,632 $ 12,226
Line of credit (Note 4) $ 494,425 $ 215,500
Patent right payable $ 250,000 $ 250,000
---------- ---------
Total liabilities $1,045,477 $ 791,679
---------- ---------
Total shareholders'
equity $ (639,451) $ (535,489)
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS DATA:
------------------------------
From Three Mos.
Inception to Ended Year Ended
March 31, March 31 December 31,
2000 2000 1999
------------- --------- --------------
<S> <C> <C> <C>
Revenue $ - $ - $ -
-------
Costs and Expenses
------------------
Operating and
Administrative expense (818,918) (91,595) (691,812)
Amortization expense (21,000) (4,500) (16,500)
Other Income 10,800 539 10,261
----------- ---------- ------------
Interest Expense (27,468) (8,406) (19,062)
Net Loss $ (856,586) $ (103,962) $ (717,113)
=========== ========== ============
Loss per share $ (0.0368) $ (0.0045) $ (0.0312)
=========== ========== ============
</TABLE>
<PAGE>
Results of Operations
-----------------------
Limited Operating History; Accumulated Deficit; Need for Additional Capital
There is limited historical financial information about the Company upon which
to base an evaluation of the Company's performance or to make a decision
regarding an investment in shares of the Company's Common Stock. The Company has
an accumulated deficit of $856,586 through March 31, 2000. The Company's cash
increased from $2,079 at December 31, 1999 to $131,363 at March 31, 2000.
Three Months Ended March 31, 2000 Compared to Three Months Ended
March 31, 1999
The Company has not yet realized any revenue from its business operations.
Operating and administrative expenses from inception to the nine months ended
March 31, 2000 were $818,918, and represent the majority of the Company's net
loss to date.
Net cash provided by financing activities increased from $215,500 for the three
months ended March 31, 1999 to $494,425 for the period ended March 31, 2000, as
a result of proceeds in the amount of $278,925 received from Line of Credit.
The Company's net loss for the period from inception to March 31, 2000 was a
deficit of $856,586, or a deficit of $.0368 per share, based on 23,250,000
weighted average shares outstanding at March 31, 2000. Since there have been no
revenues realized since inception, no comparison of net loss is made.
Liquidity and Capital Resources
-------------------------------
Due to the infant stage of its operations, substantial ongoing investment in
software development, and expenditures required to build the appropriate
infrastructure to support expected future growth, The Company has been
substantially dependent on private placements of its equity securities and a
bank line of credit to fund its cash requirements.
Net cash used in operating activities increased from $407,545 for the year ended
December 31, 1999 to $567,697 for the period from inception to March 31, 1999.
As of March 31, 2000, the Company had total assets of $406,026 and total
liabilities of $1,045,477.
ITEM 7. FINANCIAL STATEMENTS
=====================
The audited financial statements for the twelve-month period from inception
through March 31, 2000, prepared by Mark Bailey & Co. Ltd., and expressed in
U.S. Dollars, immediately follow.
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000
AND THE YEAR ENDED
DECEMBER 31, 1999
WITH
REVIEW REPORT OF
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TABLE OF CONTENTS
Accountants' Review Report ...................................................2
Balance Sheets.................................................................3
Statements of Operations.......................................................4
Statements of Stockholders' Equity.............................................5
Statements of Cash Flows.......................................................6
Notes to Financial Statements..................................................8
<PAGE>
MARK BAILEY & CO. LTD.
Certified Public Accountants
Management Consultants
OFFICE ADDRESS: MAILING ADDRESS:
1495 Ridgeview Drive, Ste. 200 Phone: 775/332.4200 P.O. Box 6060
Reno, Nevada 89509-6634 Fax: 775/332.4210 Reno, Nevada 89513
June 5, 2000
Board of Directors
Digital Video Display Technology Corporation
We have reviewed the accompanying balance sheets of Digital Video Display
Technology Corporation (a Company in the development stage) as of March 31,
2000, and the related statements of operations, stockholders' equity, and cash
flows the three months then ended, in accordance with Statements on Standards
for Accounting and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial statements is
the representation of the management of Digital Video Display Technology
Corporation.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The financial statements for the period from inception (August 1, 1997) through
December 31, 1997, and for the years ended December 31, 1998 and 1999, were
audited by us, and we expressed an unqualified opinion on them in our audit
report dated May 31, 2000, but we have not performed any auditing procedures
since that date.
As discussed in Note 1, certain conditions indicate that the Company may be
unable to continue as a going concern. The accompanying financial statements do
not include any adjustments to the financial statements that might be necessary
should the Company be unable to continue as a going concern.
Mark Bailey & Co., Ltd.
Reno, Nevada
-2-
<PAGE>
<TABLE>
<CAPTION>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
BALANCE SHEETS
--------------
March 31, 2000 (unaudited) and December 31, 1999 (audited)
ASSETS
------
CURRENT ASSETS MARCH 31, 2000 DECEMBER 31, 1999
-------------- -------------- -----------------
<S> <C> <C>
Cash $ 131,363 $ 2,079
Interest receivable 329 11
Prepaid expenses 24,734 -
---------- ---------
Total current assets 156,426 2,090
---------- ---------
OTHER ASSETS
------------
Deposits 600 600
Other assets (net of amortization of $21,000
and $16,500) 249,000 253,500
Deferred tax asset (net of valuation allowance
of $291,238 and $255,891) - -
---------- ---------
Total assets $ 406,026 $ 256,190
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
-------------------
Accounts payable $ 127,920 $ 206,453
Related party payable 152,500 107,500
Interest payable 20,632 12,226
Line of credit 494,425 215,500
Patent right payable 250,000 250,000
---------- ---------
Total current and total liabilities 1,045,477 791,679
---------- ---------
COMMITMENTS AND CONTINGENCIES
-----------------------------
SHAREHOLDERS' EQUITY
--------------------
Common stock, $.001 par value, 100,000,000 shares
authorized, 23,250,000 shares issued and outstanding 23,250 23,250
Additional paid-in capital 193,885 193,885
Deficit accumulated during the development stage (856,586) (752,624)
---------- ---------
Total shareholders' equity (639,451) (535,489)
---------- ---------
Total liabilities and shareholders' equity $ 406,026 $ 256,190
========== =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
-3-
<PAGE>
<TABLE>
<CAPTION>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
STATEMENTS OF OPERATIONS
------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended December 31, 1999 and 1998 (audited)
THREE
CUMULATIVE DURING MONTHS ENDED YEAR ENDED YEAR ENDED
DEVELOPMENT STAGE MARCH 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUE
-------
OPERATING COSTS AND EXPENSES
----------------------------
Operating and administrative expense $ (818,918) $ (91,595) $ (691,812) $ (34,513)
Amortization expense (21,000) (4,500) (16,500) -
---------- --------- ---------- ---------
Total operating costs and expenses (839,918) (96,095) (708,312) (34,513)
NON-OPERATING INCOME
--------------------
Dividend income 800 539 261 -
Gain on cancellation of stock 10,000 - 10,000 -
---------- --------- ---------- ---------
Total non-operating income 10,800 539 10,261 -
INTEREST EXPENSE (27,468) (8,406) (19,062) -
---------------- ---------- --------- ---------- ---------
Net loss (restated for 1998) $ (856,586) $(103,962) $ (717,113) $ (34,513)
========== ========= ========== =========
Loss per share (0.0368) (0.0045) (0.0312) (0.0009)
========== ========= ========== =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
-4-
<PAGE>
<TABLE>
<CAPTION>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended December 31, 1999 and 1998 (audited)
ACCUMULATED
COMMON STOCK ADDITIONAL DEFICIT DURING
------------------ PAID-IN DEVELOPMENT TOTAL
SHARES AMOUNT CAPITAL STAGE EQUITY
------ ------ ------- ----- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 1,000,000 1,000 9,000 (998) 9,002
Issuance of shares for cash from an offering on
April 30, 1998, at $.20 per share 1,000,000 1,000 199,000 - 200,000
Costs associated with the offering on April 30, 1998 - - (5,365) - (5,365)
Issuance of shares to a related company for
distribution rights, valued at the fair market value
of the shares issued, on May 1, 1998, at $.20
per share 100,000 100 19,900 - 20,000
Net loss, as restated at December 31, 1998 - - - (34,513) (34,513)
--------- ------- -------- -------- --------
Balance at December 31, 1998 2,100,000 2,100 222,535 (35,511) 189,124
Cancellation of the stock issued to the officers,
directors, and the related company on
January 25, 1999 (1,100,000) (1,100) (28,900) (30,000)
Stock split of 21:1 for the outstanding stock,
retaining original par value, on January 25, 1999 20,000,000 20,000 (20,000) - -
Issuance of shares for patent rights, valued at the
fair market value of the shares issued, on February
11, 1999 at $.01 per share 2,000,000 2,000 18,000 - 20,000
Issuance of shares for consulting services, valued
at the fair market value of the services received, on
July 7, 1999 at $.01 per share 250,000 250 2,250 2,500
Net loss at December 31, 1999 - - - (717,113) (717,113)
---------- -------- --------- ----------- ----------
Balance at December 31, 1999 23,250,000 $ 23,250 $ 193,885 $ (752,624) $(535,489)
Net loss for three months ended March 31, 2000 - - - $ (103,962) $(103,962)
---------- -------- --------- ----------- ----------
Balance at March 31, 2000 23,250,000 $ 23,250 $ 193,885 $ (856,586) $(639,451)
========== ======== ========= ========== =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
-5-
<PAGE>
<TABLE>
<CAPTION>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended December 31, 1999 and 1998 (audited)
CUMULATIVE DURING THREE MONTHS ENDED YEAR ENDED YEAR ENDED
DEVELOPMENT STAGE MARCH 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
Net loss (Restated for 1998) $ (856,586) $(103,962) $ (717,113) $ (34,513)
Adjustments to reconcile net loss to net
cash used in operating activities
Amortization expense 21,000 4,500 16,500 -
Gain from cancellation of common stock (10,000) - (10,000) -
Increase in interest receivable (329) (318) (11) -
Increase in deposits (600) - (600) -
Increase in deferred tax asset (287,838) (31,947) (243,818) (11,733)
Increase (decrease) in accounts payable 127,920 (78,533) 181,453 25,000
Increase in related party payable 152,500 45,000 107,500 -
Increase in interest payable 20,632 8,406 12,226 -
Increase in deferred tax valuation allowance 287,838 31,947 243,818 11,733
Increase in prepaid expenses (24,734) (24,734) - -
Expenses paid by issuance of
common stock 2,500 - 2,500 -
-------- --------- -------- ------
Net cash used in operating activities (567,697) (149,641) (407,545) (9,513)
-------- -------- -------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Proceeds received from issuance of stock 204,635 - - 194,635
Deferred offering costs - - - 4,865
Proceeds received from line of credit 494,425 278,925 215,500 -
------- -------- ------- -------
Net cash provided by financing activities 699,060 278,925 215,500 199,500
------- -------- ------- -------
Net increase (decrease) in cash and 131,363 129,284 (192,045) 189,987
Cash at December 31, 1999, 1998 and 1997 - 2,079 194,124 4,137
------- -------- ------- -------
Cash at March 31, 2000 and December 31,
1999, and 1998 $ 131,363 $ 131,363 $ 2,079 $ 194,124
========== ========== ======= =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
-6-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
------------------------
For the Three Months Ended March 31, 2000(unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
SUPPLEMENTARY INFORMATION
-------------------------
During 1998, the Company issued 100,000 shares of common stock, with a fair
market value of $20,000, for the distribution rights to a non-reusable medical
syringe. In January 1999, these shares of common stock were canceled, and the
distribution rights were abandoned.
On February 11, 1999, the Company issued 2,000,000 shares of common stock, with
a fair market value of $20,000, for patent rights to Digital Video Display
computer technology. In addition, the Company incurred a patent right payable in
the amount of $250,000. In April 2000, these shares of common stock were
canceled. The Company is currently renegotiating the agreement.
On July 7, 1999, the Company issued 250,000 shares of stock for consulting
services, with a fair market value of $2,500.
No amounts were actually paid for either interest or income taxes for the three
months ended March 31, 2000, and the years ended December 31, 1999 and 1998.
The Accompanying Notes are an Integral Part of These Financial Statements
-6-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------------
The Company was incorporated in the State of Nevada on August 1, 1997,
under the name Meximed Industries, Inc. The Company is in the
development stage as its operations principally involve research and
development, market analysis, and other business planning activities,
and no revenue has been generated from its business activities.
Originally, the Company intended to distribute non-reusable medical
syringes. In January 1999, the Company abandoned its plan to distribute
medical syringes and changed its name to Digital Video Display
Technology Corporation. The Company intends to create a Digital Video
Display jukebox system for distribution in Canada and the United
States.
These financial statements have been prepared assuming that the Company
will continue as a going concern. The Company is currently in the
development stage, and existing cash and available credit are
insufficient to fund the Company's cash flow needs for the next year.
As discussed in Note 4, on April 15, 1999, an unrelated third party
extended the Company a line of credit, which is due on demand June 1,
2000. The Company plans to raise additional capital in the near future
through private placements, ranging from $6,000,000 to $8,000,000.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. As of March 31, 2000, the
Company held no cash equivalents.
-7-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------------
PRIOR PERIOD ADJUSTMENT
-----------------------
The accompanying financial statements for 1998 have been restated to
correct an error made in 1998. Legal fees incurred in 1998 were not
expensed during 1998. The effect of the restatement was to increase the
net loss for 1998 by $25,000 ($0.0007 per share).
ADVERTISING COSTS
-----------------
Advertising costs are charged to operations when incurred. Total
advertising costs charged to expense for the three months ended March
31, 2000, and the years ended December 31, 1999 and 1998, and were $0,
$3,750 and $0 respectively.
RENT EXPENSE
------------
For the three months ended March 31, 2000, and the years ended December
31, 1999 and 1998, the total rent expense was $755, $864 and $0,
respectively.
RESEARCH AND DEVELOPMENT COSTS
------------------------------
Research and development costs are expensed as incurred. Such costs
were $0, $159,027 and $0 at March 31, 2000 and December 31, 1999 and
1998, respectively.
2. FEDERAL INCOME TAXES
--------------------
The Company recognizes deferred tax liabilities and benefits for the
expected future tax impact of transactions that have been accounted for
differently for book and tax purposes.
Deferred tax benefits and liabilities are calculated using enacted tax
rates in effect for the year in which the differences are expected to
reverse. A valuation allowance has been provided to reduce the asset to
the amount of tax benefit management believes it will more likely than
not realize. As time passes, management will be able to better assess
the amount of tax benefit it will realize from using the carryforward.
-8-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
2. FEDERAL INCOME TAXES (CONTINUED)
--------------------------------
The following is a schedule of the composition of the provision for
income taxes:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Deferred noncurrent tax asset $ 291,238 $ 255,891 $ 12,073
Valuation allowance (291,238) (255,891) (12,073)
--------- --------- --------
Total provision for income taxes $ -0- $ -0- $ -0-
========= ========= ========
</TABLE>
The net change in the valuation account was $35,347, $243,818 and
$11,733 in 2000, 1999 and 1998, respectively.
Deferred federal and state income taxes consist of future tax benefits
attributed to:
<TABLE>
<CAPTION>
2000 1999 1998 restated
---- ---- -------------
<S> <C> <C> <C>
Loss carryforward $ 103,962 $ 717,113 $ 34,513
</TABLE>
At December 31, 1999, the Company had the following unused net
operating losses for regular income tax purposes:
<TABLE>
<CAPTION>
EXPIRES NET OPERATING LOSS
------- ------------------
<S> <C>
2017 998
2018 34,513
2019 717,313
2020 103,962
</TABLE>
3. OTHER ASSETS
------------
The other assets at December 31, 1998, consist of the distribution
rights of a non-reusable medical syringe. The Company purchased these
distribution rights from a related company for 100,000 shares of common
stock (see Note 5). In January 1999, these distribution rights were
abandoned and the related asset was written off.
-9-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
3. OTHER ASSETS (CONTINUED)
------------------------
The other assets at December 31, 1999, consist of patent rights to a
jukebox entertainment system. In February 1999, the Company purchased
the patent rights from an unrelated third party in exchange for
2,000,000 shares of common stock and $250,000 due in September 1999.
The purchase agreement was subsequently modified to provide for payment
of the $250,000 in monthly installments of $20,000 with the final
payment due in December 2000. As of December 31, 1999, no payments have
been made. In a subsequent action in April 2000, the Company canceled
the 2,000,000 shares previously issued and is currently renegotiating
the purchase agreement. Legal questions have also been raised as to the
seller's rights to the patent due to a previous sale (see Note 9).
4. LINE OF CREDIT
--------------
During the year ended December 31, 1999, an unrelated third party
issued the Company an unsecured $500,000 line of credit. The line of
credit carries interest at 12% per annum and is due on demand June 1,
2000. The balances at March 31, 2000 and December 31, 1999 were
$494,425 and $215,500, respectively.
5. RELATED PARTY TRANSACTIONS
--------------------------
In May 1998, the Company issued 100,000 shares of common stock to a
separate entity, owned by the directors of the Company, in
consideration for the distribution rights to a non-reusable medical
syringe. In January 1999, this stock was canceled and the related
distribution rights were written off (see Note 3).
In March 1999, the Company issued an option to purchase 500,000 shares
of common stock at $2.50 per share to the President, CEO and Director
of the Company. The option expires March 31, 2001 (see Note 8). In
March 1999, the Company entered into a consulting agreement with the
President, and included in operating and administrative expenses for
the three months ended March 31, 2000, and the years ended December 31,
1999 and 1998, are consulting fees paid to the President of $45,000,
$120,500 and $0, respectively.
-10-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
--------------------------------------
In April 1999, the Company issued an option to purchase 500,000 shares
of common stock at $4.00 per share to a Director of the Company. The
option expires April 30, 2009, (see Note 8).
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Financial Accounting Standards Board ("FASB") Statement No. 107,
"Disclosure About Fair Value of Financial Instruments" is a part of a
continuing process by the FASB to improve information on financial
statements. The following methods and assumptions were used by the
Company in estimating its fair value disclosures for such financial
instruments as defined by the Statement.
The carrying amounts reported in the balance sheets for cash and
receivables approximate fair value at March 31, 2000, and December 31,
1999 and 1998.
The carrying amounts reported in the balance sheets for the other
assets approximate fair value at March 31, 2000, and December 31, 1999
and 1998, as the assets were recently purchased at fair market value.
The carrying amounts reported in the balance sheets for accounts
payable approximate fair value at March 31, 2000, and December 31, 1999
and 1998, as the payables mature in less than one year.
The estimated fair values of the line of credit are not materially
different from the carrying values for financial statement purposes at
March 31, 2000, and December 31, 1999 and 1998.
-11-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
7. STOCKHOLDERS' EQUITY
--------------------
In August 1997, the Company issued 1,000,000 shares of common stock to
its officers and directors at $0.01 per share, for a total of $10,000
in cash.
In May 1998, the Company issued 100,000 shares of common stock, with a
fair market value of $20,000, to a related company for the distribution
rights to a non-reusable medical syringe.
Also during 1998, the Company issued 1,000,000 shares of common stock
as part of an offering memorandum at $0.20 per share, for a total of
$200,000 in cash. In January 1999, the Company canceled the 1,100,000
shares of common stock previously issued to the officers, directors,
and the related company. The Company recorded a gain of $10,000 on the
cancellation of 100,000 of the above shares, as cash of $10,000
received by the Company when the stock was originally issued was
retained by the Company upon cancellation of the shares.
In January 1999, the Company declared a forward stock split of 21:1 for
the remaining 1,000,000 shares of common stock outstanding, retaining
the $0.001 par value.
In February 1999, the Company issued 2,000,000 shares of common stock,
with a fair market value of $20,000, for the patent rights to a jukebox
entertainment system (see Note 3).
The Company also issued 250,000 shares of its common stock to unrelated
third parties at $.01 per share for a total of $2,500 for consulting
services provided. These shares were issued at the fair market value of
the consulting services.
-12-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
8. STOCK OPTIONS
-------------
The Company issued an option to purchase 500,000 shares of common stock
at $2.50 per share, to the President, CEO, and Director. The option
expires March 31, 2001 (see Note 5). The Company also issued an option
to purchase 500,000 shares of common stock at $4.00 a share to a
Director. The option expires April 30, 2009 (see Note 5). The Company
issued an option to purchase 150,000 shares of common stock at $2.50
per share to an unrelated third party in exchange for consulting
services. The options expired unexercised on April 1, 2000. The option
price for all stock options exceeded the fair market value of the stock
at the grant date; accordingly, no compensation costs have been
recognized. The fair market value of the stock options is $0.
In March and April 2000, the Company entered into several employment
agreements that include stock options for certain directors and
employees. These options have been granted at $5.00 per share of the
Company's common stock and will become exercisable at specific times
according to a plan to be created by the Compensation Committee.
9. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is involved in a dispute pertaining to the purchase of the
patent rights for the jukebox entertainment system. The original
purchase provided for payment of $250,000 and issuance of 2,000,000
shares of common stock in exchange for the patent rights. No monies
have been paid and in April 2000, the Company canceled the stock that
had been previously issued (see Note 3).
Questions have also arisen as to the seller's legal rights to the
patent. The seller has made legal demands for reinstatement of the
shares and fulfillment of other conditions. Negotiations are underway
and management believes that the matter will be resolved without
further legal action.
-13-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the Three Months Ended March 31, 2000 (unaudited), and the Years Ended
December 31, 1999 and 1998 (audited)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
-----------------------------------------
The Company is a defendant in an action by a former service provider
over services provided and fees due. In the opinion of the Company,
amounts accrued at this time for such services are adequate and the
ultimate resolution of this matter will not have a material adverse
effect on the financial position or overall trends in the results of
operations of the Company.
10. SUBSEQUENT EVENTS
-----------------
During April 2000, the Company entered into agreements with unrelated
third parties for the provision of content management server side
applications and marketing services and leases for office space in Las
Vegas and Los Angeles.
In March 2000, the Company merged with E-Media, with the Company being
the Surviving Corporation. The merger agreement provided for conversion
of 1,000,000 shares of E-Media common stock into 20,000,000 Company
shares of $.001 par value common stock. The sole shareholder of E-Media
was appointed COO of the Company. The 20,000,000 shares were issued on
March 20, 2000, but were not delivered until the final condition of the
agreement was met on May 25, 2000.
-14-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
==================================================
The Company has not had any changes in or disagreements with Accountants since
inception.
PART III
========
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
==================================================================
The following table sets forth the names, ages and positions of the Directors
and Executive Officers of the Company:
<TABLE>
<CAPTION>
Name and Address Age Position(s) Held (1)
---------------- --- --------------------
<S> <C> <C>
Lee Edmondson 45 President and Director
590 Madison Avenue
New York, NY 10022
Marilyn G. Haft 56 Secretary, Treasurer,
111 West 40th Street Executive Vice President and
11th Floor Director
New York, NY 10018
</TABLE>
Each director of the Company is elected by the stockholders to a term of one one
year and serves until his successor is elected and qualified. Each officer of
the Company is elected by the Board of Directors to a term of one one year and
serves until his successor is duly elected and qualified, or until he is removed
from office. The Board of Directors has no nominating, auditing or compensation
committees.
Background of Officers and Directors
----------------------------------------
Lee Edmondson - Mr. Edmondson has been the President and Chairman of the Board
of Directors of the the Company since January 1999. From April to November,
1998, he was CEO and a Director of VTI Acquisition, N.V., a privately- held
research and development firm. From 1994 to 1997, he was Manager and a Director
of Software Control Systems International Inc. He has been involved in several
retail kiosk and multi-media companies since 1986. In 1998, he assisted in the
formation of Digital Video Display Technology and is responsible for the
formative activities of the commercialization of the products and business. He
devotes full time to the business of the Company.
Marilyn G. Haft - Ms. Haft has been the Secretary, Treasurer, Executive Vice
President and a Director of the Company since January 1999. From October 1998,
she has also been Of Counsel with The Marshall Firm, in New York City, New York.
From March 1996 to December 1997, she was a Partner with Look Here Pictures,
Inc. in New York. From June 1994 to March 1996, she was General Counsel for
Dover Film Finance Group Ltd., a financial services company that provides
short-term funding requirements for major film studios, independent film
producers and distributors, cable and record companies. In that role, Ms. Haft
acted as a liaison with the CEOs and CFOs of film companies, guiding them
through the financing structure, and conducted due diligence on all contractual
and cash flow aspects of film distribution from theatrical, home video, pay and
free television, pay-per view and ancillary rights. She also oversaw all legal
issues and documentation for Dover programs.
<PAGE>
Ms. Haft was a law partner of Tanner, Propp & Farber, a partner of Fischbein,
Badillo, Wagner and Itzler and Of Counsel to Summit, Rovins and Feldesman. She
also acted as a test case constitutional law litigator on the national level for
a period of six years. Ms. Haft served in the Carter Administration in the
following capacities: Associate Director of the Office of Public Liaison in the
White House, Deputy Counsel to Vice President Walter Mondale in the White House
and U.S. Representative to the United Nations. She ran the New York City primary
campaign for Carter/Mondale in 1980.
She has been an award-winning independent film producer and worked at NBC News
and ABC News on content and production. She is also an author of general
non-fiction works, including legal works. She has been an adjunct professor of
law at New York University School of Law and is an adjunct professor at NYU's
Tisch School of the Arts Graduate Film and TV program where she teaches
entertainment law and business to third year film graduate students. Ms. Haft is
a graduate of the New York University School of Law and a member of the bar in
New York State, the District of Columbia and the U.S. Supreme Court. She
received a B.A. in 1965 from Brooklyn College and her J.D. from New York
University in 1968. She devotes her time as required to the business of the
Company.
Employment Agreements
----------------------
None of the Company's officers or directors are currently party to employment
agreements with the Company. The Company presently has no pension, health,
annuity, bonus, insurance, profit sharing or similar benefit plans; however, it
may adopt such plans in the future. There are presently no personal benefits
available for directors, officers or employees of the Company, except for
options granted by the Board of Directors to certain officers, directors and
consultants to the Company.
ITEM 10. EXECUTIVE COMPENSATION
========================
None of the Company's officers or directors currently receive a salary for their
services; however, Lee Edmondson, President of the Company, received a
consulting fee of $94,000 through December 31, 1999, $65,000 of which is unpaid
and accrued and is included in the accounts payable figure in the Company's
financial statements included herein.
There are no employment contracts between the Company and any of its officers or
directors.
The Company does not have any plan or arrangement with respect to compensation
to its executive officers which would result from the resignation, retirement or
any other termination of employment with the Company or from a change in control
of the Company, or a change in the executive officers' responsibilities
following any change in control, where in respect of an executive officer, the
value of such compensation exceeds $120,000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
------------------------------------------
In March 1999, the Company granted the following stock options to the following
officers and/or directors as compensation and incentives for services rendered
to the Company:
<TABLE>
<CAPTION>
PERCENT
OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED EXERCISE DATE OF
NAME OF HOLDER GRANTED (#) FISCAL YR PRICE EXERCISE
-------------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C>
Lee Edmondson 500,000 40% $2.50/Share Until 3/31/01
Marilyn Haft 500,000 40% $4.00/Share Until 4/30/09
</TABLE>
(1) These percentages are based on the total number of option shares granted
since inception.
<PAGE>
Any shares acquired through exercise of these options shall be restricted shares
and may not, under any circumstances, be registered or in any way become free
trading until two years from the date the shares are acquired through exercise
of the option. The records of the stock transfer agency, as well as any
certificates issued upon exercise of these options shall contain said
restrictive legend.
There are no other bonus, pension, deferred compensation, long-term incentive
plans or awards, or any other similar plans for executive officers and/or
directors of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
=========================================================
MANAGEMENT
==========
The following table sets forth information regarding the shares of the Company's
Common Stock, par value $.001, beneficially owned for (i) each stockholder known
by the Company to be the beneficial owner of 5% or more of the Company's issued
and outstanding Common Stock; (ii) each of the Company's officers and directors;
and (iii) all officers and directors as a group. At December 31, 1999, there
were 23,250,000 shares of Common stock outstanding.
<TABLE>
<CAPTION>
Amount &
Nature of
Title Beneficial Percent of
Name and address Of Class Ownership Class
----------------- ---------- ----------- ----------
<S> <C> <C> <C>
Lee Edmondson Common Stock 575,000(1) 2%
590 Madison Avenue
New York, NY 10022
Marilyn G. Haft Common Stock 500,000(2) 2%
111 West 40th Street,
11th Floor
New York, NY 10018
Software Control Systems
International Inc. Common Stock 2,000,000 9%
#250-5711 No. 3 Road
Richmond, B.C., Canada V6X 2C9
--------------------------
All officers and directors
as a group 1,075,000 5%
</TABLE>
(1) Includes stock options to purchase up to 500,000 shares of common stock at
$2.50 per share until March 31, 2001.
(2) Includes stock options to purchase up to 500,000 shares of common stock at
$4.00 per share until April 30, 2009.
There are no arrangements, known to the Company, including any pledge by any
person of securities of the Company, which may, at a subsequent date, result in
a change in control of Company.
Future Sales by Existing Stockholders
-----------------------------------------
All shares of Common Stock of Company are "restricted securities", as that term
is defined in Rule 144 of the Rules and Regulations of the SEC promulgated under
the Act ("Rule 144"), save and except the shares which were issued under a
public offering in the State of New York, pursuant to an exemption provided by
Rule 504 of Regulation D, promulgated under the Securities Act of 1933, as
amended, which are not "restricted securities" under Rule 144 and can be
publicly sold, except for those Shares purchased by "affiliates" of the Company,
as that term is defined in Rule 144.
Under Rule 144, restricted shares can be publicly sold, subject to volume
<PAGE>
restrictions and certain restrictions on the manner of sale, commencing one (1)
year after their acquisition. Sales of shares by "affiliates" are subject to
volume restrictions and certain other restrictions pertaining to the manner of
sale, all pursuant to Rule 144.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
==================================================
In April, 1999, Company retained The Marshall Firm, an entertainment law firm
located in New York City, of which Marilyn Haft, an officer, director and
shareholder of Company, is associated, to obtain and negotiate licenses for
music and music video content for the DVD Juke System. The Marshall Firm is
well-known for its expertise in entertainment law and its many contacts in
entertainment industry, especially the music industry. Pursuant to the letter of
engagement, Company paid The Marshall Firm a retainer in the sum of $15,000
against which legal fees will be billed at The Marshall Firm's customary rates
of between $125 and $475 an hour.
Item 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
=======================================
a) All required exhibits, as set forth below, including the Company's Articles
of Incorporation, and Bylaws, are attached to the Company's Form 10-SB, filed on
December 13, 1999. All previously filed exhibits are incorporated herein by
reference.
b) Reports on Form 8-K: No reports were on filed on Form 8K during the quarter
ended December 31, 1999.
Exhibit No. Document Description
----------- ---------------------
3.1 Articles of Incorporation and any Amendments
3.2 Bylaw
8 Consent of Mark Bailey & Co. Ltd.,
Certified Public Accountants
10.1 Agreement with Software Control Systems International, Inc.
and Addendum
10.2 Distributor Agreement with Software Control Systems
International Inc.
10.3 Letter of Agreement with The Investor Relations Group
10.4 Agreement-North American Consultants, Inc.
10.5 Retainer Agreement- The Marshall Firm
10.6 Agreement - FirePlug Computers
10.7 Consulting Agreement with 386878 B.C. Ltd.
10.8 Consulting Agreement with Richard Brunette
10.9 Consulting Agreement with Bob Noble
10.10 Stock Option Agreement - Marilyn G. Haft
10.11 Consulting Agreement- Lee Edmondson
SIGNATURES
===========
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated this 30th day of May, 2000.
Digital Video Display Technology Corp.
By: /s/LEE EDMONDSON
--------------------
Lee Edmondson, President
