U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended October 31, 2000.
[ ] Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______________ to
_______________.
Commission file number 33-2310-D
VIDEOLOCITY INTERNATIONAL, INC.
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(Name of small business issuer in its charter)
Nevada 87-0429154
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
136 Heber Avenue, Suite 209, Park City, Utah 84060
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (801)-230-0839
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Pine View Technologies, Inc., 1242 Roosevelt Avenue, Salt Lake City, Utah 84105
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(Former name or former address, if changed since last report)
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities registered under Section 12(g) of the Act:
None
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for the fiscal year ended October 31, 2000, were $2,274.
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days (See definition of affiliate in Rule
12b-22 of the Exchange Act).
As of December 7, 2000, based on the average of the bid and asked price
on the OTC Bulletin Board interdealer quotation system on that date,
the aggregate market value of the approximately 25,286,860 shares held
by non-affiliates was $104,308,290.
(Issuers involved in bankruptcy proceedings during the past five years) Check
whether the issuer has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes [ ] No [ ]
(Applicable only to corporate registrants) State the number of shares
outstanding of each of the issuer's classes of common equity, as of the latest
practicable date.
As of December 7, 2000, there were 42,786,860 Shares of the Issuer's
Common Stock, par value $0.001, issued and outstanding.
Documents Incorporated by reference. If the following documents are incorporated
by reference, briefly describe them and identify the part of the Form 10-KSB
(e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any
annual report to security holders; (2) any proxy or information statement; (3)
any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of
1933 ("Securities Act"). The list of documents should be clearly described for
identification purposes (e.g., annual report to security holders for fiscal year
ended December 24, 1990).None.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. These statements reflect Videolocity's
views with respect to future events based upon information available to it at
this time. These forward-looking statements are subject to certain uncertainties
and other factors that could cause actual results to differ materially from
these statements. Forward-looking statements are typically identified by the use
of the words "believe," "may," "will," "should," "expect," "anticipate,"
"estimate," "project," "propose," "plan," "intend," and similar words and
expressions. Examples of forward-looking statements are statements that describe
the proposed operation and marketing of Videolocity's video-on-demand systems,
statements that describe the functions and operations of technology it has
licensed but not tested, statements that describe the functions and operation of
technologies that have not yet been acquired by Videolocity, statements with
regard to the nature and extent of competition Videolocity may face in the
future, and statements with respect to future strategic plans, goals or
objectives. Forward-looking statements are contained in this information report
under the captions "Business Strategies," "Technologies and Manufacturing,"
"Sales and Marketing Strategies," "The Potential Market," "Financing,"
"Competition," and "Plan of Operation." The forward-looking statements are based
on present circumstances and on Videolocity's predictions respecting events that
have not occurred, that may not occur, or that may occur with different
consequences and timing than those now assumed or anticipated. Actual events or
results may differ materially from those discussed in the forward-looking
statements as a result of various
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factors, including the risk factors discussed in this report. These cautionary
statements are intended to be applicable to all related forward-looking
statements wherever they appear in this report. Any forward-looking statements
are made only as of the date of this information report statement and
Videolocity assumes no obligation to update forward-looking statements to
reflect subsequent events or circumstances.
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Part I
Item 1. Description of Business
General
Videolocity International, Inc. ("Videolocity") is a development stage company
engaged in the business of developing and marketing systems, products and
solutions for the delivery of video and other content to end users on demand.
Stock Split
Videolocity effected a 0.61-for-1 reverse stock split in its issued and
outstanding shares on December 1, 2000. All share figures in this report have
been adjusted to give effect to such stock split.
Recent Developments
On December 4, 2000, Videolocity acquired Videolocity, Inc., a Nevada
corporation ("Video"), as a wholly owned subsidiary of Videolocity pursuant to
an Agreement and Plan of Reorganization dated as of November 15, 2000.
Videolocity formed a new, wholly owned subsidiary that was merged into Video and
the outstanding shares of Video were converted into shares of Videolocity's
common stock. In connection with the transaction, Videolocity issued 30,281,250
shares to the Video shareholders and sold 6,100,000 shares for $500,000 in a
private placement that was conducted subject to the completion of the
reorganization and was closed immediately following the reorganization. As a
result of its acquisition of Video, Videolocity has a total of 42,786,860 shares
of common stock issued and outstanding, of which 6,405,610 shares or 15% are
held by the persons that were shareholders of Videolocity prior to the merger,
30,281,250 shares or 71% are held by the former shareholders of Video, and
6,100,000 shares or 14% are held by the purchasers in the private placement. At
the closing of the reorganization, the former management of Videolocity resigned
and the persons nominated by Video were elected as the new directors of
Videolocity.
In connection with the reorganization, Videolocity adopted Video's stock
incentive plan and reserved 9,093,750 shares of its common stock for issuance in
connection with awards made by Video under that plan to its key employees and
consultants. Videolocity also amended and restated its articles of incorporation
to: change the name of the corporation from Pine View Technologies, Inc. to
Videolocity International, Inc.; increase the authorized shares of common stock
to 125,000,000 shares, par value $0.001; authorize 10,000,000 shares of
preferred stock, par value $0.001; limit the liability of the corporation's
directors and officers to the maximum extent permitted by Nevada law; and other
items. Videolocity also adopted an omnibus stock option and stock award plan
pertaining to 5,000,000 post-split shares of its common stock. The
reorganization and related proposals were approved by the written consent of
shareholders holding a majority of the Company's issued and outstanding shares
of common stock.
The reorganization has been treated for accounting purposes as a reverse
acquisition of Videolocity by Video, although for corporate purposes Videolocity
is the acquiring entity.
Historical Information
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Videolocity was organized under the laws of the State of Nevada on November 5,
1985 under the name Pine View Technologies, Inc. In connection with its
organization, Videolocity sold 2,440,000 shares of its restricted common stock
to its original founders, officers and directors for $5,000. During 1987,
Videolocity completed a public offering of 3,965,610 shares of common stock at
an offering price of $0.033 per share, from which it received net proceeds of
approximately $103,361, after deducting the costs of the offering. The offering
was conducted pursuant to the a registration statement on Form S-18 filed with
the U.S. Securities and Exchange Commission. Prior to its acquisition of
Videolocity, Inc., a Nevada corporation ("Video"), as discussed above,
Videolocity did not conduct active business operations.
Video, Videolocity's wholly owned subsidiary, was incorporated in Nevada in May
2000 under the name Moviesonline, Inc. for the purpose of developing and
marketing systems, products and solutions for the delivery of video and other
content to end users on demand. From the date of its incorporation through the
date of its acquisition by Videolocity, Video conducted research in the
video-on-demand industry, developed a business plan, assembled an experienced
management team, acquired rights to proprietary technology, and raised $519,000
as initial working capital through the private placement of common stock. Unless
otherwise specifically indicated to the contrary, Videolocity and Video are
referred to collectively in this report as "Videolocity."
Business Strategies
Videolocity has designed and plans to implement video-on-demand systems that
will permit customers to select movies from an extensive library of titles, and
view them "on-demand" on their television screens. The movies will run in
near-DVD quality, in real-time, full-screen, and full-motion. The movies will be
protected through proprietary processes to limit viewing to the person or
household paying for the movie and to prevent unauthorized reproduction or
rebroadcast of the movies ordered. The movies will be played through a
proprietary, multi-functional set-top box that will be sold or leased to the
customers of Videolocity and its licensees. Residential subscribers will be able
to select and obtain their movies over conventional telephone lines, while
customers, patients, and visitors of hotels, hospitals, and resorts will be able
to select and obtain their movies over a broadband connection in a closed
system.
Videolocity will be required to obtain licenses or other agreements from major
movie studios and other content owners allowing it to deliver their movies
through Videolocity's video-on-demand systems. Such content owners will not
grant rights for the delivery of their movies in a digital format unless they
can be assured that the files will be secure and will not be susceptible to
unauthorized copying. Videolocity believes its video-on-demand system will
provide the safeguards necessary to satisfy such concerns and that it will be
able to obtain the required content licenses. However, Videolocity has not
entered into any signed agreement or arrangement with any content provider with
respect to the use or delivery of its content through Videolocity's
video-on-demand systems.
Videolocity believes its systems will be popular with consumers from all walks
of life because it will offer them the following conveniences:
* Watch the movie of their choice any time, day or
night.
* The movie they want is just a click away.
* No waiting in long video store checkout lines.
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* No late return fees.
* No charges for lost or damaged videos.
* Anonymity in renting movies.
The set-top boxes are being designed with a user-friendly graphic user interface
that may allow sending and receiving text, data, graphics and video at the click
of a mouse. The set-top boxes are being built to enable end users to perform a
variety of functions, including the following:
* View movies on-demand
* Play video games on-demand
* Listen to music on-demand
* Use business application software on-demand
* Access corporate and personal e-mail
* Access the Internet
Videolocity plans to use automated accounting and billing, with most
transactions being electronically charged to credit cards, which is anticipated
to substantially reduce bad debt and provide an electronic, real-time data base
enabling Videolocity to efficiently monitor its operations.
Technology and Manufacturing
Videolocity is moving forward with the development of a video-on-demand solution
using the wireless LAN (Ethernet) protocol. This technological breakthrough will
enable extremely rapid deployment as compared to conventional hardline wire
installations. This broadband wireless application will be used in a "closed
end" as well as geographic residential area delivery of Videolocity's
video-on-demand systems, while still maintaining security of content.
Videolocity intends to license the proprietary technologies required to operate
its proposed video-on-demand systems from third parties and to acquire the
set-top boxes for use with such systems from third party manufacturers on an
"off-the-shelf" or "custom order" basis. Videolocity plans to focus its efforts
on the design and marketing of its video-on-demand systems and does not
anticipate establishing its own manufacturing operations. Videolocity has
determined that the set-top boxes and related components will be readily
available from several different manufacturers and suppliers and that
Videolocity will not be dependent upon any single manufacturer or supplier.
During the fiscal year ended October 31, 2000, Videolocity did not spend any
significant amount for research and development, although it plans to conduct
more extensive research and development activities in the future.
Videolocity entered into a license agreement with Merit Studios, Inc. on October
27, 2000, pertaining to Merit's proprietary compression software, as it applies
to the compression of video and other content. Merit
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has represented that its technology will allow Videolocity's digital movie files
and other content files to be compressed to an extent not currently available
through any other technology while still providing DVD like quality when
uncompressed and played through a proprietary set-top box. The high rate of
compression will allow the rapid transmission of digital movie files over a
regular telephone line, permit significantly more film files to be stored on a
single server, and make it virtually impossible to decompress the files without
an authorized copy of the decompression software. The initial term of the
agreement is for five years, which is extended thereafter for additional terms
of one year each unless terminated by either party. Videolocity owns the
exclusive rights to the technology for the first two years of the agreement,
which rights are thereafter extended for additional one-year periods as long as
Videolocity enters into at least three sublicenses for the subject technology
during each such additional year. Videolocity is obligated to make fixed
payments under the agreement of $250,000, $50,000 of which has been paid, and
$200,000 of which is due on January 1, 2001. Videolocity also agreed to
compensate Merit for compressing movie and other content files at a fixed fee
per movie and to pay Merit a fixed fee for each movie provided to the end users
of Videolocity's video-on-demand system through the use of the technology.
Videolocity and Merit plan to begin beta testing of the compression and delivery
system in January 2001. No assurances can be given that the system will be
tested successfully and, if such tests should be unsuccessful and the problems
cannot be corrected within acceptable budget and time parameters, Videolocity
would have to acquire or develop other video-on-demand technology before it
would be able to market products or services, which could significantly delay
the implementation of its business plan.
Videolocity is negotiating with several companies to acquire rights to other
proprietary technologies that would permit it to provide its customers with
on-demand viewing of videos in near DVD quality with delivery being accomplished
in a secure format over a broadband connection in a closed system. However,
there is no assurance that Video will be able to acquire any such additional
technologies.
Sales and Marketing Strategies
Videolocity will not generate revenues from sales of its video-on-demand systems
until such systems have been completed and successfully tested, and Videolocity
has obtained licenses from movie studios or other owners of video content
permitting it to deliver such video content through its video-on-demand systems.
However, Videolocity has already commenced advance marketing efforts for its
video-on-demand systems.
Videolocity will initially focus its marketing efforts toward hotels, hospitals,
long-term care homes and developments, universities, resorts, multi-dwelling
units, and planned residential communities. Management believes there is a
strong potential for strategic alliances and partnerships with network and
content providers such as telecommunications companies, cable companies, and
Internet/broadband based content providers.
Videolocity is focusing its sales, marketing, and distribution activities in the
following primary channels:
* Direct Sales Organization
* Traditional Distribution channels for target markets
* Strategic Alliances and Partnerships
* Trade Shows and Conferences
* Leverage existing contacts of management team and
investors
* Website and Hyperlinks to trade sites
* Advertising in trade publications
* Direct marketing efforts
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Videolocity will also promote its products through its Website, Videolocity.com,
and will ensure that the Website is easily searchable through all the major
search engines. Videolocity also plans to place advertisements on other
strategic Websites attracting the target markets described above.
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The Potential Market
Videolocity believes the potential market for its video-on-demand products
includes homes, hotels, resorts, retirement homes, universities, hospitals, and
extended stay facilities. Besides availability in the home, Videolocity intends
to make its products available to corporate travelers, students, patients, the
elderly, tourists, and residents in resort destinations or metropolitan areas
for use as entertainment, business, general information, and as a communication
gateway to stay in touch with home or business. The Videolocity system will be
designed to permit access to all applications from one device in the privacy of
a subscriber's home or at another subscribed location with the click of a mouse,
keyboard, or other remote control device.
Videolocity does not believe it will require extensive market penetration in any
single market segment in order to achieve its business model. As a result of the
incremental scalability of the Videolocity business model, relatively small
market share percentages in any number of the potential market categories can
result in potential profits. These multiple markets are also projected to
mitigate risks from competition or technological changes that could potentially
have an adverse effect on Videolocity in any single market segment.
Competition
The home entertainment industry is extremely competitive and is dominated by
several large companies with worldwide name brand recognition and substantial
financial resources. In attracting subscribers to its video-on-demand system,
Videolocity will be competing with traditional video rental chains such as
Blockbuster Video, Hollywood Video, and Movie Gallery; providers of video
entertainment over cable and satellite networks, such as DirectTV and AT&T;
video stores, supermarkets, mass merchandisers, club stores, and other retail
outlets that sell video cassettes; web-based video channels; and movie theaters,
live theater, sporting events, and other similar businesses that compete for the
general public's entertainment dollar. In the hotel, resort, and hospital
markets, Videolocity will be competing with several established companies, such
as Spectravision, Lodgenet, On-Demand, and others that already have established
systems for the delivery of movies in a closed system. In addition, numerous
companies including Blockbuster Video, Microsoft WebTV, EchoStar, and TIVO, all
of which have substantially greater resources and name recognition than
Videolocity, have announced their intent to deliver state of the art
video-on-demand systems in the near future, although to the knowledge of
Videolocity no such systems are available for widespread public use as of this
date. Several major movie studios, including Sony, Walt Disney Co. and 20th
Century Fox have also announced their intention to develop systems for the
delivery of movies directly to consumers over the Internet, which could impede
Videolocity's ability to obtain content for use with its video-on-demand
systems and could provide significant additional competition from large,
established companies with a high degree of name recognition in the
entertainment industry. There can be no assurance that other companies will not
develop technologies superior to those of Videolocity, that new technology will
not emerge that renders Videolocity's technology obsolete, that Videolocity will
be precluded from licensing the video content it requires to effectively compete
in the market, or that a competing company or companies will not be able to
capture more market share than Videolocity due to name recognition and the
expenditure of greater amounts for marketing and advertising.
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Regulation
Videolocity will not be required to obtain any government approval as a
condition to marketing its video-on-demand systems, however, such systems will
be required to operate in compliance with applicable regulations of the Federal
Communications Commission and the set-top boxes used in connection with such
systems may require approval from Underwriters' Laboratories. Videolocity will
also be subject to various federal, state and local laws that govern the conduct
of its business, including state and local advertising, consumer protection,
credit protection, licensing, and other labor and employment regulations.
Videolocity has not incurred any expenses resulting from compliance with
federal, state or local environmental laws.
Employees
Videolocity has eight full-time employees, one consultant, and one part-time
consultant. Videolocity does not anticipate the need to hire additional
high-level employees for the next several months except for a high- level
technical director and two or more assistants. Videolocity does not anticipate
that its employees will be represented by unions and considers its relationship
with its employees to be good.
Facilities
Videolocity's principal executive offices are located at 136 Heber Avenue, Suite
209, Park City, Utah 84060, where its telephone number is (435) 615-8338,
however, Videolocity, Inc. is currently evaluating its need for space and may
relocate its offices in the near future. Videolocity also maintains a Salt Lake
City mailing address at 358 S. 700 E., #B-604, Salt Lake City, Utah 84102, and
maintains the Salt Lake City telephone number of (801) 230-0839.
Risk Factors
The implementation and conduct of Videolocity's business is subject to several
significant risks, including those set forth below. You should carefully read
and consider such risk factors. Videolocity has a limited operating history and
it is difficult to evaluate its business. Videolocity, Inc. was only recently
incorporated in May 2000, has not initiated the deployment of its technology,
has not commenced its planned operations, and has not produced any earnings.
Videolocity faces all the risks inherent in a new business and there can be no
assurance it will be successful and/or profitable. Videolocity's planned entry
into a new industry in reliance on unproven technology and its lack of an
operating history make it difficult to evaluate the risks and uncertainties it
faces. Videolocity's failure to address these risks and uncertainties could
cause its business results to suffer and result in a decline in the price of its
stock.
Videolocity has licensed technology for use in a video-on-demand system but has
not yet tested such technology and cannot be certain such technology will
operate in the manner anticipated. Videolocity has entered into a license
agreement granting it certain exclusive rights with respect to a third party's
proprietary compression software, as it applies to the compression of video and
other content. The third party has represented that its technology will allow
Videolocity's digital movie files to be compressed to an extent not currently
available through any other technology, while still providing DVD like quality
when uncompressed and played through a proprietary set-top box. Videolocity
plans to begin beta testing of such technology in January 2001 and, if such
tests should be unsuccessful and the problems cannot be corrected within
acceptable budget and time parameters, Videolocity would have to acquire or
develop other video-on-demand
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technology before it would be able to market products or services, which could
significantly delay the implementation of its business plan.
Videolocity plans to enter into a license agreement for a "closed system"
video-on-demand technology and the failure to do so may delay or impede the
implementation of its business plan. Videolocity intends to acquire rights other
proprietary technologies that would permit Videolocity to provide its customers
with on-demand viewing of videos in near DVD quality, with delivery being
accomplished in a secure format over a broadband connection in a closed system.
In the event Videolocity is not successful in obtaining a license for such
technologies or another technology providing similar capabilities, or if such
technologies do not perform as represented when subjected to beta testing,
Videolocity may be required to acquire or develop other video-on-demand
technologies before it would be able to market products or services, which could
significantly delay the implementation of its business plan.
Videolocity has not yet obtained licenses from studios and other content owners
that would allow Videolocity to deliver movies through its video-on-demand
systems and the failure to obtain such licenses would prevent Videolocity from
implementing its business plan. Videolocity will be required to obtain licenses
or other agreements from major movie studios and other content owners allowing
it to deliver their movies through Videolocity's video-on-demand systems. Such
content owners will not grant rights for the delivery of their movies in a
digital format unless they can be assured that the files will be secure and will
not be susceptible to unauthorized copying. Videolocity believes its
video-on-demand system will provide the safeguards necessary to satisfy such
concerns and that it will be able to obtain the required content licenses.
However, Videolocity has not entered into any agreement or arrangement with any
content provider with respect to the use or delivery of its content through
Videolocity's video-on-demand systems and no assurance can be given that
Videolocity will be able to obtain such rights.
Videolocity will require substantial additional equity or debt financing to
successfully launch its video-on-demand business and its failure to obtain such
financing could delay or curtail its operations. Videolocity must obtain
substantial additional equity or debt financing in order to launch its
video-on-demand system and continue its operations. Videolocity has not entered
into any agreements or arrangements for the provision of such additional
financing, and no assurance can be given that such financing will be available
on terms acceptable to Videolocity or at all.
Videolocity depends on its key employees and the loss of their services would
have an adverse effect on its business. Videolocity is dependent on the key
employees named under "Management" below to operate the company and the loss of
any of such persons may be expected to have an adverse impact on its operations
until such time as they could be replaced. Videolocity does not carry key man
life insurance on the lives of such key employees.
The shares of common stock available for sale in the future could adversely
affect the market price for Videolocity's common stock. Of the approximately
42,787,000 shares outstanding, approximately 6,406,000 shares are freely
tradable or eligible for resale under Rule 144 promulgated under the Securities
Act of 1933, as amended. Sales of substantial amounts of this common stock in
the public market could adversely affect the market price for Videolocity's
common stock. The approximately 36,381,000 remaining shares will become
available for sale under Rule 144 on December 4, 2001 and the availability of
those shares for sale could also adversely affect the market price for
Videolocity's common stock in any trading market which has developed as of that
time. In addition, approximately 9,093,750 shares will be issued under the
Videolocity 2000 Stock Incentive Plan as vesting conditions are satisfied with
respect to plan units awarded under that
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plan and such units are converted to Videolocity common stock. Approximately 78%
of the plan units granted to date will vest on January 1, 2004, which could
create additional selling pressure in any trading market which has developed as
of that time.
The price for Videolocity's stock could be volatile. In the event an established
market for Videolocity's common stock should develop, market prices will be
subject to significant fluctuation in response to many factors, including:
variations in Videolocity's operations; investors' perception of Videolocity;
developments with regard to Videolocity's activities, financial condition and
management; developments in the available technology for video-on-demand systems
and products; investors' perceptions of the technology industry in general;
supply and demand; interest rates; and general economic conditions.
Control by Officers, Directors, and Principal Shareholders. The officers,
directors and principal shareholders of Videolocity own over 51% of
Videolocity's outstanding shares of common stock. As a result, these
shareholders will be able to control the management and policies of Videolocity
through their ability to determine the outcome of elections for Videolocity's
board of directors and other matters requiring the vote or consent of
shareholders.
Item 2. Description of Property.
Videolocity's principal executive offices are located at 136 Heber Avenue, Suite
209, Park City, Utah 84060, where its telephone number is (435) 615-8338. Such
offices consist of approximately 1,865 square feet of office space, which are
leased on a month-to-month basis from a third party at the rate of $3,885 per
month plus its share of operating expenses estimated at $775 per month.
Videolocity, Inc. is currently evaluating its need for space and may relocate
its principal offices in the near future. Videolocity also maintains a Salt Lake
City mailing address at 358 S. 700 E., # B-604, Salt Lake City, Utah 84102, and
maintains the Salt Lake City telephone number of (801) 230-0839.
During the fiscal year ended October 31, 2000, Videolocity used office space at
the residence of its former president at 1242 Roosevelt Avenue, Salt Lake City,
Utah 84105, at no charge to Videolocity.
Item 3. Legal Proceedings
In September, 2000, Videolocity, Inc. filed a complaint in the Third Judicial
District Court for the District of Utah captioned Moviesonline, Inc. v.
iStreamTV, Inc., alleging breach of a contract entered into between Videolocity
and the defendant in July 2000 pertaining to manufacturing and licensing rights
to a video-on-demand technology and other items. The complaint seeks specific
performance and/or damages. Videolocity amended the complaint in November 2000
and, while the defendant has entered an appearance, it has not yet answered the
complaint. Videolocity believes it will prevail in the action. Except for the
foregoing, Videolocity is not a party to any pending legal proceedings and, to
the best of its knowledge, no litigation by or against Videolocity has been
threatened.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted during the fourth quarter of the fiscal year ended
October 31, 2000 to a vote of Videolocity's security holders
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Part II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
Videolocity's common stock is quoted on the OTC Bulletin Board under the symbol
"VIDC." On December 7, 2000, the high bid and low asked prices for Videolocity's
common stock on the OTC Bulletin Board were $3.25 and $5.00, respectively.
Prior to Videolocity's acquisition of Videolocity, Inc. on December 4, 2000,
Videolocity's common stock was included on the OTC Bulletin Board under the
symbol "PVTC." The following table sets forth the high and low bid quotations
for Videolocity's common stock on the OTC Bulletin Board for the preceding three
fiscal years ended October 31, 2000, 1999, and 1998. The quotations have been
adjusted to give effect to the .61-for-1 reverse stock split effected December
1, 2000. Despite the publication of quotations during such periods, there was no
significant trading volume and there existed no established trading market for
the common stock.
2000 High Bid Low Bid
---- -------- -------
First Quarter $ 0.033 $ 0.033
Second Quarter 0.033 0.033
Third Quarter 0.033 0.033
Fourth Quarter (ended 0.033 0.033
10-31-00)
1999 High Bid Low Bid
---- -------- -------
First Quarter $ 0.033 $ 0.033
Second Quarter 0.033 0.033
Third Quarter 0.033 0.033
Fourth Quarter (ended 0.033 0.033
10-31-99)
1998 High Bid Low Bid
---- -------- -------
First Quarter $ 0.033 $ 0.033
Second Quarter 0.033 0.033
Third Quarter 0.033 0.033
Fourth Quarter (ended 0.033 0.033
(10-31-98)
The foregoing quotations represent inter-dealer prices without retail mark-up,
mark-down, or commission, and may not represent actual transactions.
Videolocity has never paid cash dividends on its common stock and does not
anticipate paying cash dividends in the foreseeable future.
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At November 15, 2000, there were 323 holders of record of Videolocity's common
stock, including broker-dealers and clearing firms holding shares on behalf of
their clients, as reported by Videolocity's transfer agent.
Transfer Agent
Colonial Stock Transfer Company, 455 East 400 South, Salt Lake City, Utah 84111,
telephone (801) 355-5740, serves as transfer agent and registrar for
Videolocity's common stock.
Recent Sales of Unregistered Securities
On December 4, 2000, Videolocity issued 30,281,250 shares of its common stock to
the 27 shareholders of Videolocity, Inc. to acquire Videolocity, Inc. On
December 4, 2000, Videolocity also sold an aggregate of 6,100,000 shares of its
restricted common stock to ten sophisticated investors for $500,000. No
underwriter was involved in the transactions and the shares were issued or sold
by Videolocity directly to the shareholders and investors. The shares were sold
without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on the exemption from such registration
requirements provided by Section 4(2) of the Securities Act for transactions not
involving any public offering. The shares were sold without general advertising
or solicitation. The purchasers acknowledged that they were purchasing
"restricted securities" which had not been registered under the Securities Act
and which were subject to certain restrictions on resale, and the certificates
representing the shares were imprinted with the usual and customary restricted
stock legend.
Item 6. Management's Discussion and Analysis or Plan of Operation
You should read the following discussion in conjunction with our financial
statements, which are included elsewhere in this prospectus. The following
information contains forward-looking statements. Videolocity's plan of operation
is to use its existing capital together with the proceeds from future financings
to complete development and commence deployment and sales of its video-on-demand
system. As of December 7, 2000, Videolocity had net cash assets in the amount of
approximately $800,000.
Videolocity estimates that its minimum expenses during the next twelve months
will be approximately $1,400,000, consisting of the $200,000 fixed license
payment under an existing contract, $900,000 in payroll, $75,000 for office
rent, and $225,000 for general and administrative expenses, including legal, and
accounting. Videolocity will also incur substantial additional costs in
connection with the manufacture of set-top-boxes for use with its
video-on-demand systems. Videolocity estimates that such costs will be a minimum
of $10,000,000 but plans to finance those costs based on contracts entered into
for the deployment of its video-on-demand systems. Videolocity may also incur
additional expenses in connection with its acquisition of rights to the closed
system video-demand technology, however, no agreement has been entered into at
this time and the amount of such fees cannot be determined.
Videolocity plans to generate revenues from the delivery of video content to the
end users of its video-on-demand systems. Videolocity will charge a fee for
each movie or other item of content viewed through its system and anticipates
that it will remit a portion of such fee to the studio or other content
provider. Videolocity also plans to sell or lease the set-top boxes for use with
its video-on-demand system to its viewers at a price calculated to return its
out of pocket costs and a small profit over a period of three years.
14
<PAGE>
Videolocity plans to seek additional equity financing in two or more offerings
during the next twelve months in a total amount of up to approximately
$55,000,000, which will permit it to cover its minimum expenses described above
and to accelerate the deployment of its video-on-demand systems. Videolocity has
not entered into any agreement or arrangement for the provision of such
financing and no assurances can be given that it will be able to obtain such
financing on terms acceptable to it or at all. Based on its current costs of
operation and contract commitments, Videolocity estimates that its current
assets will be sufficient to fund its cost of operations for approximately six
months and that it will be required to obtain additional financing before that
time in order to continue its operations.
Item 7. Financial Statements
The following financial statements are being filed with this report and are
located immediately following the signature page to this report.
Financial Statements of Videolocity, Inc. (formerly
Moviesonline, Inc.), October 31, 2000
Report of Independent Certified Public
Accountants
Balance Sheet, October 31, 2000
Statement of Operations, for the period May 26,
2000 (date of inception) to October 31, 2000
Statement of Changes in Stockholders' Equity, for
the period May 26, 2000 (date of inception) to
October 31, 2000
Statement of Cash Flows, for the period May 26,
2000 (date of inception) to October 31, 2000
Notes to Financial Statements
Financial Statements of Pine View Technologies, Inc.,
October 31, 2000
Independent Auditor's Report
Balance Sheets, October 31, 2000 and 1999
Statements of Operations, for the years ended
October 31, 2000 and 1999 and from the date of
inception on November 5, 1985 through October
31, 2000
Statement of Stockholders' Equity, from the date
of inception on November 5, 1985 through
October 31, 2000
Statements of Cash Flows, for the years ended
October 31, 2000 and 1999 and from the date of
inception on November 5, 1985 through October
31, 2000
Notes to Financial Statements
Summary Unaudited Pro Forma Combined Financial
Statements of Videolocity International, Inc.
(formerly Pine View Technologies, Inc.) and
Videolocity, Inc. (formerly Moviesonline, Inc.), Inc.,
October 31, 2000
Introduction
Unaudited Pro Forma Combined Balance Sheet
Unaudited Pro Forma Combined Statement of Income
Adjustments
15
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Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Videolocity has had no disagreements with its principal independent accountant
with respect to accounting practices or procedures or financial disclosure.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Directors and Executive Officers
The following table sets forth the names, ages, and titles of each of the
executive officers and directors of Videolocity. Stephen B. Cluff served as
President and Director of Videolocity during the fiscal year ended October 31,
2000, and resigned from such positions on December 4, 2000, following the
closing of Videolocity's acquisition of Videolocity, Inc.
Name Age Title*
---- --- ------
Dr. James P. Hill 64 Vice Chairman and Director
Douglas B. Meadows 48 Chairman of the Board and Director
Larry R. McNeill 59 Vice President, CFO, and Director
D. T. Norman 40 Secretary, Treasurer, and Director
Jerry E. Romney, Jr. 47 President and Director
Lawrence Turel 57 Vice President Corporate
Development and Director
*The term of office of each director is one year and until his or her
successor is elected at Videolocity's annual shareholders' meeting and
is qualified, subject to removal by the shareholders. The term of
office for each officer is for one year and until a successor is
elected at the annual meeting of the board of directors and is
qualified, subject to removal by the board of directors. Each of
Videolocity's officers and directors has served in the offices
indicated above since December 4, 2000.
Certain biographical information of Videolocity's directors and
officers is set forth below.
Dr. James P. Hill. Dr. Hill is and has since 1998 served as the Chief
Development Officer of Community Hospitals Indianapolis Foundation in
Indianapolis, Indiana. Prior to that he served as Vice President and Associate
Dean of Southern Illinois University School of Medicine; President of Indiana
Wesleyan University; Academic Dean, Peidmont Community College; Division Chair
of Math and Science, Virginia Western Community College; and Department Chair of
Chemistry, Virginia Western Community College. Dr. Hill has served on numerous
boards and community civic groups including the Chamber of Commerce Board,
Economic Development Council, Crisis Nursery Center Board, Symphony Board and
President, and Area Scout Council Board. He also holds memberships in several
national and state professional associations and honor societies. Dr. Hill holds
a Doctorate in Administration and Statistical Research Design Methodology from
Virginia Polytechnic Institute and State University, a Masters degree in
Chemistry and Biology from the University of Virginia, and a Bachelor's degree
in Biology and Chemistry from Roanoke
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College. Dr. Hill is the brother-in-law of George Norman, a co-founder, officer
and director of Videolocity, Inc.
Douglas B. Meadows. From 1996 to November 2000, Mr. Meadows was President and a
director of Major Video Concepts, Inc. of Indianapolis, Indiana, the second
largest video distributor in the U.S. with annual sales in excess of $350
million and over 450 employees. Major Video Concepts services over 13,000 dealer
locations through 12 branch offices and represents all major motion picture
studios. Mr. Meadows joined Major Video in 1988 and held various senior
management positions of increasing responsibility prior to becoming its
President. Mr. Meadows received an M.B.A. degree in Finance from the University
of Denver in 1976 and a B.S. degree in Marketing from Indiana University in
1974.
Larry R. McNeill. From 1998 to the present, Mr. McNeill has been the Chief
Financial Officer of Theatre Candy Distributing Company, Inc. of Salt Lake City,
Utah. In 1996, Mr. McNeill retired from Salt Lake City based Smith's Food & Drug
Centers, Inc. after 17 years as an executive officer of that company, most
recently Senior Vice President of Corporate Development. In that capacity he
managed over 60 employees within the real estate, legal, and research
departments of the company. Mr. McNeill is a director of Theatre Candy
Distributing Company, Inc.; American Polymer Corp.; Water and Wellness Centers
LLC; Construction.com, LLC; and Financial Services, LLC. He is the Treasurer of
the West Valley Colonels Association and past president and founder of the
Cystic Fibrosis Foundation of Utah. Mr. McNeill holds a B.A. degree in Business
Administration, Economics and Russian, a MBA degree in Business Management, and
has been pursuing his Ph.D. in Business Management.
D. T. Norman. Mrs. Norman is a co-founder of Videolocity, Inc. and serves as
Secretary, Treasurer and a director of that company. She is also Secretary,
Treasurer and a director of Brain Tree International, Inc., an inactive public
company, and is Secretary and a director of Dynamic Software, Secretary and a
director of Santa Barbara Oil Corp., past Secretary and director of Pacifica
Financial Corp., a director of Worldwide Ministries and Education Fund, and a
director of the Stubbs Foundation. Mrs. Norman is the wife of George Norman, a
co-founder, officer and director of Videolocity, Inc.
Jerry E. Romney, Jr. Mr. Romney was the founder of Teltrust, Inc. and served as
its President from 1986 to 1998. Under Mr. Romney's supervision, Teltrust grew
from a start-up provider of pay telephones to a multi-division telephone
communications company with sales of over $100 million at the time Mr. Romney
left the company in 1998. While at Teltrust, Mr. Romney: grew the pay telephone
division to become one of the largest competitive pay telephone vendor in the
U.S. with more than 2,000 payphone locations in a four state area and
successfully sold that division in 1994; designed and implemented National
Directory Assistance as a business unit of Teltrust in 1990, which eventually
handled more than 3.2 million directory requests per month and became a standard
product for most other telephone companies; and developed the pre-paid calling
card unit of Teltrust in 1992, which provided pre-paid calling cards to
Teltrust's expanding client base of pay telephone companies, long distance
carriers, and local phone companies and grew to sales of over $15 million per
year. Mr. Romney also founded the Utah Pay Phone Association in 1986 (serving as
its President until 1994) and successfully lobbied for a fair competitive
environment for pay telephone providers. From 1990 to 1998 he also served as a
director of the nationally recognized "A.P.C.C.," lobbying successfully in
Washington D.C. for a fair competitive marketplace and was instrumental in
having language to that effect added to the landmark "Telecom Act of 1996." From
1980 until its sale in 1986, Mr. Romney founded and served as president of
"National Inn-Formation Network" a company pioneering "video magazines" for
broadcast in hotels. From 1974 to 1980 Romney was National Sales Manager for
International Film, Inc., a
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distributor of movies on videotape to hotels. Mr. Romney attended the University
of Utah from 1972 to 1978. Mr. Romney is also President and a director of
Videolocity, Inc.
Lawrence Turel. From 1996 to the present, Mr. Turel has managed his own
investments and acted as a consultant to various companies. From 1999 to the
present, he has also been vice president corporate development and a director of
David Sullivan, Inc., a high line sports apparel designer and manufacturer. From
1988 to 1996, Mr. Turel was a securities trader with Barron Chase Securities of
Boca Raton, Florida. Mr. Turel holds a Bachelor of Science in Business
Administration degree from Ithaca College.
The board of directors has formed an executive committee, the members of which
are Larry McNeill, D. T. Norman, and Jerry E. Romney, Jr.
The following table sets forth information with respect to the current directors
and executive officers of Videolocity, Inc., the wholly owned operating
subsidiary of Videolocity. Such persons are expected to make a significant
contribution to Videolocity's business.
Name Age Positions
---- --- ---------
D. T. Norman 40 Secretary/Treasurer and Director
George Norman 70 Chairman of the Board and Director
Jerry E. Romney, Jr. 47 President and Director
Martin P. Senn 38 Senior VP Marketing
Robert E. Spafford 46 Senior VP Sales and Marketing
David "Mickey" Smith 57 Senior VP Operations
D. T. Norman. See above.
George Norman. Mr. Norman is the co-founder of Videolocity, Inc. and served as
its president through July 1999. Prior to founding Videolocity, he was
semi-retired. He is President and a director of Dynamic Software, President and
a director of Santa Barbara Oil Corp., past President and director of Pacifica
Financial Corp., a director of Worldwide Ministries and Education Fund, and a
director of the Stubbs Foundation. Approximately thirty years ago, in 1970, Mr.
Norman was convicted of two counts of aiding and abetting the misapplication of
bank funds and was sentenced to two years on each of the counts of conviction,
of which he served thirteen months at the Federal Medical Center in Rochester,
Minnesota. Prior to 1970, Mr. Norman spent many years in the operation and
ownership of broadcasting properties and other general business activities. Mr.
Norman is the husband of D.T. Norman and the brother-in-law of Dr. James P.
Hill.
Jerry E. Romney, Jr. See above.
Martin P. Senn. From 1999 until he joined Videolocity in November 2000, Mr. Senn
was Vice President, Sales & Marketing of Teleflex Systems, Inc., a provider of
state-of-the-art billing solutions, voice/data processing platforms, calling
cards, and operator services software, where he handled public relations and
corporate development. From 1995 to 1999, Mr. Senn served as Vice President of
Sales & Marketing for Teltrust Inc, forming and managing its Teleservices
division and actively working on applications and designs with Teltrust's
Internet division. The Teleservices division grew in 4 years to annual revenue
of over $10 million with over 700 employees. From 1993 to 1995, Mr. Senn managed
Online Reservations Systems, Inc., a Park City, Utah based company providing
wholesale and retail travel operations. Mr. Senn holds a Masters degree in
Travel Industry Management, Marketing and
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Languages from the University of Zurich, Switzerland. He speaks fluent English,
German, Italian and French, and speaks conversational Spanish.
Robert E. Spafford. Mr. Spafford is a professional with over 17 years of
experience in general management/distribution with wireless and
telecommunications companies. From 1997 until he joined Videolocity in November
2000, Mr. Spafford served as Senior Director, Wireless Services for Teltrust
Inc. In that capacity he designed and implemented its complete wireless strategy
resulting in annual revenue in excess of $5,000,000. From 1994 to 1996 he was
Regional Vice President for Choice Cellular growing it from a start-up to the
second largest wireless reseller in the nation, and selling it to WorldCom in
1996. In that capacity he was responsible for all facets of the business in the
Utah market. From 1984 to 1996 Mr. Spafford worked for U S West Cellular in
positions of increasing responsibility including Area General Manager for Utah
and Idaho, in which capacity he managed 8 offices with responsibility for
customer service, sales/distribution and profit/loss with annual revenue of
$45,000,000. Mr. Spafford holds a B.S. degree in Arts and Social Science from
Utah State University.
David Michael "Mickey" Smith. From August 2000 until he joined Videolocity in
November 2000, Mr. Smith was the CEO of JDS, Inc. From 1995 to 1999, Mr. Smith
served as Vice President of Operations of Teltrust, Inc. from 1995 to 1999,
where he was responsible for four operating divisions and over 1200 employees.
Prior to 1995, Mr. Smith had 15 successful years of national management and
ownership experience in the restaurant industry.
Videolocity has adopted provisions in its articles of incorporation that limit
the liability of its officers and directors and provide for indemnification by
Videolocity of its officers and directors to the fullest extent permitted by
Nevada law. Such provisions substantially limit the shareholders' ability to
hold officers and directors liable for monetary damages resulting from breaches
of their fiduciary duties.
Section 16(a) Beneficial Ownership Reporting Compliance
Videolocity does not have securities registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and its
directors, officers and affiliates are not required to file reports under
Section 16(a) of the Exchange Act.
Item 10. Executive Compensation
Videolocity and Videolocity, Inc. did not pay any compensation to any officer of
either company during the fiscal years ended October 31, 2000, 1999 or 1998 and
neither company granted any stock options or restricted stock to its officers
during the past three fiscal years.
During the year ended October 31, 2000, neither Videolocity nor Videolocity,
Inc. had any retirement, pension, profit sharing, or insurance or medical
reimbursement plans covering their officers or directors.
Videolocity does not currently compensate its directors for serving in their
capacities as directors but does reimburse such persons for expenses reasonably
incurred by them in connection with Videolocity's business.
Subsequent to the fiscal year ended October 31, 2000, Videolocity, Inc. entered
into three-year employment agreements with five of its officers that provide
for payment of a base salary, a grant of plan units
19
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under the Videolocity, Inc. 2000 Stock Incentive Plan, the provision of medical
insurance, vacation and other benefits, and contain other customary provisions.
The Videolocity, Inc. 2000 Stock Incentive Plan (the "Plan") was adopted by
Videolocity in connection with its acquisition of Videolocity, Inc. A total of
10,000,000 shares of common stock are reserved for issuance under the Plan, plan
awards with respect to 9,093,750 shares have been made to date, and plan awards
with respect to 906,250 shares remain available for issuance under the Plan. All
awards made under the Plan are made in plan units. Each plan unit becomes
convertible at the option of the participant into one share of common stock on
the date the vesting requirements for the plan units have been satisfied. The
shares of common stock to be issued under the Plan will be registered under the
Securities Act of 1933. The awards granted to date provide that 1.33% of the
plan award will vest at the beginning of each of the four calendar quarters
commencing with April 1, 2001; 2.0% of the plan award will vest at the beginning
of each of the four calendar quarters beginning April 1, 2002; 2.67% of the plan
award will vest at the beginning of each of the three calendar quarters
beginning April 1, 2003; and the remaining 78.67% of the award will vest on
January 1, 2004. If a plan participant voluntarily terminates his employment or
is terminated for cause, any unvested plan awards will be forfeited. If a plan
participant is terminated without cause, terminates for good reason (including a
change of control), dies, or becomes disabled, all as defined in the Plan, any
unvested plan awards will vest on the date of such termination.
Subsequent to October 31, 2000, Videolocity also adopted an omnibus stock option
and stock award plan but to date no awards have been granted under that plan.
The Stock Option and Stock Award Plan is to be administered either by the Board
of Directors or by a committee to be appointed from time to time by the Board of
Directors. Awards granted under the Stock Option and Stock Award Plan may be
stock options, appreciation rights, or stock awards which are awarded to
employees, including officers and directors, who, in the opinion of the board or
the committee, have contributed, or are expected to contribute, materially to
the success of the Videolocity. In addition, at the discretion of the Board of
Directors or the committee, options or bonus stock may be granted to individuals
who are not employees but contribute to the success of Videolocity. All of the
employees, officers, directors and consultants of Videolocity are eligible to
participate under the Stock Option and Stock Award Plan. A maximum of 5,000,000
shares of common stock are available for grant under the Stock Option and Stock
Award Plan. The identification of individuals entitled to receive awards, the
terms of the awards, and the number of shares subject to individual awards, are
determined by the Board of Directors or the committee, in their sole discretion.
20
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Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of December 7, 2000, the number of shares of
Videolocity's common stock, par value $0.001, owned of record or beneficially by
each person known to be the beneficial owner of 5% or more of the issued and
outstanding shares of Videolocity's common stock, and by each of Videolocity's
officers and directors, and by all officers and directors as a group. On
December 7, 2000, there were 42,786,860 shares of Videolocity's common stock
issued and outstanding.
Title Number of Percent
of Class Name Shares Owned(1) of Class
-------- -------------- ------------ --------
Principal Shareholders
Common Kirk Schneider(2) 3,720,000 8.7%
Common Mark Schneider(3) 3,577,000 8.4%
Officers and Directors(4)
Common Dr. James P. Hill(5) 6,250,000 14.6%
Common Douglas B. Meadows 625,000 1.5%
Common Larry R. McNeill 1,875,000 4.4%
Common D. T. Norman(6) 6,250,000 14.6%
Common Jerry E. Romney, Jr.(7) 1,250,000 2.9%
Common Lawrence Turel 1,250,000 2.9%
Common All Officers and Directors 11,250,000 26.3%
as a Group (6 persons)(5)(6)(7)
---------------------------------
(1) Unless otherwise indicated, all shares are held beneficially and of
record by the person indicated.
(2) Includes 2,500,000 shares held of record by a limited liability company
of which Kirk Schneider is the manager. Kirk Schneider's address is
1201 S. Main Street, Salt Lake City, Utah 84111. Kirk Schneider is the
brother of Mark Schneider.
(3) Includes 200,000 shares held of record by Mark Schneider's minor child
and 100,000 shares held by a family limited partnership. Does not
include 200,000 shares held by Mr. Schneider's spouse with respect to
which he disclaims beneficial ownership. Mark Schneider's address is
265 E. 100 S., Suite 250, Salt Lake City, Utah 84111. Mark Schneider is
the brother of Kirk Schneider.
(4) The address for each of Videolocity's officers and directors is 358 S.
700 East, #B-604, Salt Lake City, Utah 84102.
(5) Includes 6,250,000 shares held of record by a limited liability company
of which Dr. Hill is the manager.
(6) Includes 6,250,000 shares held of record by a limited liability company
of which Mrs. Norman is the manager.
(7) Includes 1,250,000 shares held of record by Mallard Investments, L.C.,
a limited liability company of which Mr. Romney is a member.
Item 12. Certain Relationships and Related Transactions
Except as described herein there were no material transactions, or series of
similar transactions, during Videolocity's last two fiscal years, nor are there
any currently proposed transactions, in which Videolocity was or is to be party,
in which the amount involved exceeds $60,000, and in which any director or
executive
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officer, or any security holder who is known by the Company to own of record or
beneficially more than 5% of any class of the Company's common stock, or any
member of the immediate family of any of the foregoing persons, has an interest.
The following persons purchased shares of Videolocity common stock in the
private placement of 6,100,000 shares completed on December 4, 2000 immediately
following the acquisition of Videolocity, Inc.: Stephen B. Cluff, a former
officer and director, 122,000 shares; Kirk Schneider, a greater than 5%
shareholder, 610,000 shares; Mark Schneider, a greater than 5% shareholder,
549,000 shares; Noland Schneider, the father of Kirk Schneider and Mark
Schneider, 1,220,000 shares; and Jeri Staten, the sister of Kirk Schneider and
Mark Schneider, 610,000 shares. Such persons purchased the shares at a price of
approximately $0.082 per share, which was the same price paid by the other
purchasers in the private placement. Noland Schneider provided assistance in
locating Videolocity as an entity to be used in the acquisition of Videolocity,
Inc. and assisted Videolocity in negotiating the terms of the reorganization,
but did not receive any compensation for such activities.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following documents are included as exhibits to this
report.
Exhibit SEC Ref.
No. No. Title of Document Location
--- --- ----------------- --------
2.1 2 Agreement and Plan of Reorganization This Filing
With Pine View Technologies, Inc.
Dated as of November 15, 2000
2.2 2 Articles of Merger Between Pine View This Filing
Merger Co. and Videolocity, Inc.
Dated December 1, 2000
3.1 3 Amended and Restated This Filing
Articles of Incorporation
3.2 3 Bylaws Incorporated by
Reference*
10.1 10 License Agreement Between Videolocity, This Filing
Inc. (formerly Moviesonline, Inc.) and
Merit Studios, Inc. dated October 27, 2000
27 27 Financial Data Schedule This Filing
*Incorporated by reference to the Company's registration statement on
Form S-18 filed with the Commission, SEC file no. 33-2310-D.
(b) No reports on Form 8-K were filed during the last quarter of the
fiscal year ended October 31, 2000.
22
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Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Videolocity International, Inc.
(Registrant)
Date: December 7, 2000 By /s/ Douglas B. Meadows
-----------------------
Douglas B. Meadows, Chairman
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Dated: December 7, 2000 By /s/ Douglas B. Meadows
-----------------------
Douglas B. Meadows
Chairman and Director
(Principal Executive Officer)
Dated: December 7, 2000 By /s/ Larry R. McNeill
---------------------
Larry R. McNeill
Vice President, Chief Financial
Officer and Director (Principal
Financial and Accounting Officer)
Dated: December 7, 2000 By /s/ D. T. Norman
-----------------
D. T. Norman
Secretary, Treasurer, and Director
Dated: December 7, 2000 By /s/ Dr. James P. Hill
----------------------
Dr. James P. Hill, Vice Chairman
and Director
Dated: December 7, 2000 By /s/ Jerry E. Romney, Jr.
-------------------------
Jerry E. Romney, Jr., President
and Director
Dated: December 7, 2000 By /s/ Lawrence Turel
-------------------
Lawrence Turel, Vice President
Corporate Development and Director
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VIDEOLOCITY INTERNATIONAL, INC.
(A Development Stage Company)
CONTENTS
Page
Financial Statements of Videolocity, Inc. (formerly Moviesonline, Inc.),
October 31, 2000
-- Report of Independent Certified Public Accountants F-2
-- Balance Sheet, October 31, 2000 F-3
-- Statement of Operations, for the period May 26, F-4
2000 (date of inception) to October 31, 2000
-- Statement of Changes in Stockholders' Equity, F-5
for the period May 26, 2000 (date of inception)
to October 31, 2000
-- Statement of Cash Flows, for the period May 26, F-6
2000 (date of inception) to October 31, 2000
-- Notes to Financial Statements F-7
Financial Statements of Pine View Technologies, Inc., October 31, 2000
-- Independent Auditor's Report F-10
-- Balance Sheets, October 31, 2000 and 1999 F-11
-- Statements of Operations, for the years ended F-12
October 31, 2000 and 1999, and from the date of
inception on November 5, 1985 through October
31, 2000
-- Statement of Stockholders' Equity, from the F-13
date of inception on November 5, 1985 through
October 31, 2000
-- Statements of Cash Flows, for the years ended F-15
October 31, 2000 and 1999 and from the date of
inception on November 5, 1985 through October
31, 2000
-- Notes to Financial Statements F-16
Summary Unaudited Pro Forma Combined Financial Statements of Videolocity
International, Inc. (formerly Pine View Technologies, Inc.) and Videolocity,
Inc. (formerly Moviesonline, Inc.), Inc., October 31, 2000
-- Introduction F-19
-- Unaudited Pro Forma Combined Balance Sheet F-20
-- Unaudited Pro Forma Combined Statement of Income F-21
-- Adjustments F-22
F-1
<PAGE>
Andersen Andersen & Strong, L.C.
Certified Public Accountants and Business Consultants
Member SEC Practice Section of the AICPA
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
Telephone 801-486-0096
Board of Directors
Moviesonline, Inc.
Salt Lake City, Utah
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheet of Moviesonline, Inc.
(development stage company) at October 31, 2000, and the related statement of
operations, stockholders' equity, and cash flows for the period May 26, 2000
(date of inception) to October 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall balance sheet presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Moviesonline, Inc. at October
31, 2000, and the results of operations, and cash flows for the period May 26,
2000 (date of inception) to October 31, 2000, in conformity with generally
accepted accounting principles.
/s/ Andersen Andersen & Strong
Salt Lake City, Utah
November 10, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
MOVIESONLINE, INC.
(Development Stage Company)
BALANCE SHEET
October 31, 2000
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 346,527
---------
Total Current Assets 346,527
---------
OTHER ASSETS
Advance deposits - Note 7 10,656
Marketable securities - available-for-sale - Note 3 50,000
License agreement - Note 4 200,000
---------
260,656
---------
$ 607,183
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable - license agreement - Note 4 $ 200,000
Accounts payable 17,737
---------
Total Current Liabilities 217,737
---------
STOCKHOLDERS' EQUITY
Common stock 2,000,000 shares authorized, at $0.001 par
value; 1,211,250 shares issued and outstanding 1,211
Capital in excess of par value 518,014
Deficit accumulated during the development stage (129,779)
---------
Total Stockholders' Equity 389,446
---------
$ 607,183
=========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
MOVIESONLINE, INC.
(Development Stage Company)
STATEMENT OF OPERATIONS
For the Period May 26, 2000
(Date of Inception) to October 31, 2000
<S> <C>
REVENUES $ -
EXPENSES 129,779
---------
NET LOSS $(129,779)
=========
NET LOSS PER COMMON SHARE
Basic $ (0.23)
---------
AVERAGE OUTSTANDING SHARES
Basic 576,750
---------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
MOVIESONLINE, INC.
(Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period May 26, 2000 (Date of Inception)
to October 31, 2000
Common Stock Capital in
------------------------------ Excess of Accumulated
Shares Amount Par Value Deficit
------ ------ --------- -------
<S> <C> <C> <C> <C>
Balance May 26, 2000 (date of inception) - $ - $ - $ -
Issuance of common stock for cash
at $.02 - August 2000 961,250 961 18,264 -
Issuance of common stock for cash
at $2.00 - October 2000 250,000 250 499,750 -
Net operating loss for the period May 26,
2000 to October 31, 2000 - - - (129,779)
--------- ------ --------- ----------
Balance October 31, 2000 1,211,250 $1,211 $ 518,014 $ (129,779)
========= ====== ========= ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
MOVIESONLINE, INC.
(Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period May 26, 2000
(Date of Inception) to October 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net loss $ (129,779)
Adjustments to reconcile net loss to
net cash provided by operating activities
Change in accounts payable 17,737
Net Decrease in Cash From Operations (112,042)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Advance deposits (10,656)
Purchase of marketable securities (50,000)
---------
(60,656)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 519,225
---------
Net Increase in Cash 346,527
Cash at Beginning of Period -
---------
Cash at End of Period $ 346,527
=========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-6
<PAGE>
MOVIESONLINE, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on May 26,
2000 with authorized common stock of 2,000,000 shares at $0.001 par value.
The Company was organized for the purpose of developing and marketing systems,
products, and solutions for the delivery of video and other content to end users
on demand.
Since its inception the Company has completed a private placement offering of
250,000 common shares at $2.00 per share for cash.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
On October 31, 2000, the Company had a net operating loss carry forward of
$129,779. The tax benefit from the loss carry forward has been fully offset by a
valuation reserve because the use of the future tax benefit is doubtful since
the Company has no operations. The net operating loss will expire in 2022.
Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share amounts are computed based on the weighted
average number of shares actually outstanding. Diluted net income (loss) per
share amounts are computed using the weighted average number of common shares
and common equivalent shares outstanding as if shares had been issued on the
exercise of any preferred share rights unless the exercise becomes antidilutive
and then only the basic per share amounts are shown in the report.
Amoritization of the License Agreement
The license agreement will be amortized to expense over five years starting
November 1, 2000.
F-7
<PAGE>
MOVIESONLINE, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130. The
adoption of this standard had no impact on the total stockholder's equity.
Other Recent Accounting Pronouncements
The Company does not expect that the adoption of other recent accounting
pronouncements will have a material impact on its financial statements.
Financial Instruments
The carrying amounts of financial instruments, including cash, marketable
securities, advance deposits, the license agreement, and accounts payable, are
considered by management to be their estimated fair values.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
3. MARKETABLE SECURITIES - AVAILABLE - FOR - SALE
On October 27, 2000 the Company acquired 1,000,000 common shares of Merit
Studios, Inc. for $50,000 as part of the acquisition of the license agreement
outlined in Note 4.
4. ACQUISITION OF LICENSE AGREEMENT
On October 27, 2000, the Company entered into a technology license agreement
with Merit Studios, Inc. pertaining to Merit's proprietary compression
technology as it applies to the compression and delivery of video and other
content. The term of the agreement is for five years, which is extended for
additional one-year periods unless terminated by either party. The Company is
granted exclusive rights to the technology for the first two years of the
agreement, and thereafter, the exclusive rights will be extended for additional
one-year periods as long as the Company enters into at least three sublicense
agreements for the technology during each additional year. The terms of the
agreement was $250,000, with $50,000 down payment and balance of $200,000 due on
or before January 1, 2001. The $50,000 down payment was allocated to the
purchase price of the 1,000,000 common shares of Merit Studios, Inc. outlined in
Note 3.
F-8
<PAGE>
MOVIESONLINE, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
5. STOCK INCENTIVE PLAN
On October 1, 2000 the Company established a stock incentive plan to attract and
retain qualified people to serve as key employees. Awards made under the plan
shall be in plan units and each unit can be convertible, at the option of the
participant, into one share of the Company's common stock after the vesting
requirement has been satisfied. The Company has reserved 400,000 common shares
that can be issued under the plan. On the date of this report no awards had been
made under the plan.
6. RELATED PARTY TRANSACTIONS
Officers, directors, employees and their affiliates, have acquired 79 % of the
common stock issued.
7. LEGAL ACTIONS
On July 25, 2000 the Company entered into an exclusive license agreement to
manufacture and market all technologies, hardware and software, developed by the
vendor, which includes a movie delivery technology using a device known as a
"set-top box". The Company paid an advance deposit of $4,000, which is included
in the advance deposits in the balance sheet. After the agreement was completed
the vendor refused to comply with terms of the agreement. The company has
started a legal action against the vendor to enforce the terms of the agreement.
Management, with counsel, believes the court will enforce the terms of the
contract.
F-9
<PAGE>
DAVID T. THOMSON P.C. Certified Public Accountant
Independent Auditor's Report
Board of Directors and Stockholders
PINE VIEW TECHNOLOGIES CORPORATION
Salt Lake City, Utah
I have audited the accompanying balance sheets of Pine View Technologies
Corporation (a development stage company) as of October 31, 2000 and 1999, and
the related statements of operations, stockholders' equity and cash flows for
the years then ended and for the period from November 5, 1985 (inception) to
October 31, 2000. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Pine View Technologies Corporation
as of October 31, 2000 and 1999, and the results of its operations and its cash
flows for the years then ended and from November 5, 1985 (inception) to October
31, 2000 in conformity with generally accepted accounting principles.
/S/ DAVID T. THOMPSON P.C.
Salt Lake City, Utah
November 27, 2000
P.O. Box 571605 - Murray, Utah 84157 -(801) 966-9481
F-10
<PAGE>
<TABLE>
<CAPTION>
PINE VIEW TECHNOLOGIES CORPORATION
(A Development Stage Company)
BALANCE SHEETS
OCTOBER 31, 2000 AND 1999
ASSETS
2000 1999
---------------- ----------------
CURRENT ASSETS:
<S> <C> <C>
Cash in bank $ 56,407 $ 61,335
Prepaid expenses - 165
Accrued interest receivable, less
allowance of $12,823, both years - -
---------------- ----------------
Total Current Assets 56,407 61,500
---------------- ----------------
TOTAL ASSETS $ 56,407 $ 61,500
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,183 $ 300
Income taxes payable - -
---------------- ----------------
Total Current Liabilities 2,183 300
---------------- ----------------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 50,000,000
shares authorized, 10,501,000 shares
issued and outstanding both periods 10,501 10,501
Capital in excess of par value 98,150 98,150
Earnings (deficit) accumulated during
the development stage (54,427) (47,451)
---------------- ----------------
Total Stockholders' Equity 54,224 61,200
---------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 56,407 $ 61,500
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
<TABLE>
<CAPTION>
PINE VIEW TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From Inception on
For The For The November 5, 1985
Year Ended Year Ended Through
October 31, October 31, October 31,
2000 1999 2000
------------- ------------- --------------
<S> <C> <C> <C>
REVENUE:
Interest Income $ 2,274 $ 2,066 $ 55,011
------------- ------------- --------------
2,274 2,066 55,011
------------- ------------- --------------
EXPENSES:
Office and general 505 210 10,438
Amortization - - 110
Professional fees 8,745 5,314 39,396
Realized loss on
marketable securities - - 40,515
Bad debt expense - - 12,823
Loss from operations
of discontinued
subsidiary - - 3,357
------------- ------------- --------------
Total Expenses 9,250 5,524 106,639
------------- ------------- --------------
INCOME (LOSS) BEFORE TAX
PROVISIONS OR BENEFIT (6,976) (3,458) (51,628)
(PROVISION) FOR BENEFIT OF
INCOME TAXES - - (2,799)
------------- ------------- ---------------
NET INCOME (LOSS) $ (6,976) $ (3,458) $ (54,427)
============= ============= ==============
EARNINGS (LOSS) PER SHARE $ (0.00) $ (0.00) $ (0.00)
============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-12
<PAGE>
<TABLE>
<CAPTION>
PINE VIEW TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON NOVEMBER 5, 1985
THROUGH OCTOBER 31, 2000
Earnings
Accumulated
Capital in During The
Common Stock Excess of Development
Shares Amount Par Value Stage
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, November 5, 1985 - $ - $ - $ -
Shares issued to initial stockholders for
cash, November 1985 at $.00125 per share 4,000,000 4,000 1,000 -
Net loss for the period ended
October 31, 1986 - - - (141)
---------- ---------- ---------- ----------
BALANCE, October 31, 1986 4,000,000 4,000 1,000 (141)
Shares issued to the public for cash,
July, 1987 at $.02 per share - net
of offering costs of $26,369 6,501,000 6,501 97,150 -
Net loss for year ended October 31, 1987 - - - (1,115)
---------- ---------- ---------- ----------
BALANCE, October 31, 1987 10,501,000 10,501 98,150 (1,256)
Net income for year ended October 31, 1988 - - - 3,097
---------- ---------- ---------- ----------
BALANCE, October 31, 1988 10,501,000 10,501 98,150 1,841
Net loss for year ended October 31, 1989 - - - (4,493)
---------- ---------- ---------- ----------
BALANCE, October 31, 1989 10,501,000 10,501 98,150 (2,652)
Net income for year ended October 31, 1990 - - - 2,848
---------- ---------- ---------- ----------
BALANCE, October 31, 1990 10,501,000 10,501 98,150 196
Net income for year ended October 31, 1991 - - - 3,856
---------- ---------- ---------- ----------
BALANCE, October 31, 1991 10,501,000 10,501 98,150 4,052
Net income for year ended October 31, 1992 - - - 3,235
---------- ---------- ---------- ----------
BALANCE, October 31, 1992 10,501,000 10,501 98,150 7,287
Net loss for year ended October 31, 1993 - - - (7,116)
---------- ---------- ---------- ----------
BALANCE, October 31, 1993 10,501,000 10,501 98,150 171
Net loss for year ended October 31, 1994 - - - (29,700)
---------- ---------- ---------- ----------
BALANCE, October 31, 1994 10,501,000 $ 10,501 $ 98,150 $ (29,529)
The accompanying notes are an integral part of these financial statements
F-13
<PAGE>
<CAPTION>
PINE VIEW TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (continued)
FROM THE DATE OF INCEPTION ON NOVEMBER 5, 1985
THROUGH OCTOBER 31, 2000
Earnings
Accumulated
Capital in During The
Common Stock Excess of Development
Shares Amount Par Value Stage
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss for year ended October 31, 1995 - - - (2,465)
---------- ---------- ---------- ----------
BALANCE, October 31, 1995 10,501,000 $ 10,501 $ 98,150 $ (31,994)
Net loss for year ended October 31, 1996 - - - (5,010)
---------- ---------- ---------- ----------
BALANCE, October 31, 1996 10,501,000 $ 10,501 $ 98,150 $ (37,004)
Net loss for year ended October 31, 1997 - - - (2,503)
---------- ---------- ---------- ----------
BALANCE, October 31, 1997 10,501,000 $ 10,501 $ 98,150 $ (39,507)
Net loss for year ended October 31, 1998 - - - (4,486)
---------- ---------- ---------- ----------
BALANCE, October 31, 1998 10,501,000 $ 10,501 $ 98,150 $ (43,993)
---------- ---------- ---------- ----------
Net loss for year ended October 31, 1999 - - - (3,458)
---------- ---------- ---------- ----------
BALANCE, October 31, 1999 10,501,000 $ 10,501 $ 98,150 $ (47,451)
Net loss for year ended October 31, 2000 - - - (6,976)
---------- ---------- ---------- ----------
BALANCE, October 31, 2000 10,501,000 $ 10,501 $ 98,150 $ (54,427)
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-14
<PAGE>
<TABLE>
<CAPTION>
PINE VIEW TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From Inception on
For The For The November 5, 1985
Year Ended Year Ended Through
October 31, October 31, October 31,
2000 1999 2000
------------- ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Loss) $ (6,976) $ (3,458) $ (54,427)
------------ ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization expense - - 330
Realized Loss on marketable securities - - 40,515
Changes in assets and liabilities:
Other receivable - - -
Prepaid expenses 165 (165) -
Deferred tax asset - - -
Accounts payable 1,883 300 2,183
------------ ------------ ------------
2,048 135 43,028
------------ ------------ ------------
Net Cash Flows provided (used)
from Operating Activities (4,928) (3,323) (11,399)
------------ ------------ ------------
CASH FLOWS FROM IN INVESTING ACTIVITIES:
Organization costs - - (330)
Purchase of marketable securities - - (45,000)
Sale of marketable securities - - 4,485
------------ ------------ ------------
Net Cash Flows provided (used)
from Investing Activities - - (40,845)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance - - 135,020
Cost of stock issuance - - (26,369)
Advance proceeds 100,000 - 100,000
Advance repayment (100,000) - (100,000)
------------ ------------ ------------
Net Cash Flows from Financing Activities - - 108,651
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (4,928) (3,323) 56,407
CASH AT BEGINNING OF PERIOD 61,335 64,658 -
------------ ---------- ------------
CASH AT END OF PERIOD $ 56,407 $ 61,335 $ 56,407
============ ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
PINE VIEW TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Pine View Technologies Corporation (PVT) was organized under the
laws of the State of Nevada on November 5, 1985 and has adopted October 31 as
its fiscal year end. PVT has not commenced planned principle operations and is
considered a development stage company as defined in SFAS No. 7. PVT proposes to
seek potential business ventures which will allow for its long term growth. PVT
has at the present time, not paid any dividends and any dividends that may be
paid in the future will depend upon the financial requirements of PVT and other
relevant factors. Almost all of PVT's revenue to date is from interest.
Earnings Per Share - The computation of earnings per share of common stock is
based on the weighted average number of shares outstanding during the period.
Income Taxes - Income taxes will be provided on financial statement income. An
allowance for bad debt on accrued interest has been recognized for financial
statement purposes as an expense but has not been recognized for income tax
purposes. It will not be recognized for tax purposes until the interest is
actually written off.
Statement of Cash Flows - For purposes of the statement of cash flows, PVT
considers all highly liquid debt investments purchased with a maturity of three
months or less to be cash equivalents, PVT did not have noncash investing and
financing activities during the periods presented.
Supplemental disclosures of cash flow information:
Cash paid during the period ended;
For the For the November 5, 1985
Year Ended Year Ended Through
October 31, October 31, October 31,
2000 1999 2000
---- ---- ----
Interest $ - $ - $ 77
========= ======== ==========
Income taxes $ - $ - $ 3,291
========= ======== ==========
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2 - RELATED PARTY TRANSACTIONS
Office Rental - PVT has used the home of an officer as its office on a rent free
basis. The Company is basically dormant and the expense for the above has been
deemed to be of nominal value.
Management Compensation - PVT has not compensated officers or directors for time
or services. The Company is basically dormant and the expense for the above has
been deemed to be of nominal value.
F-16
<PAGE>
PINE VIEW TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INCOME TAXES
Income tax expense includes federal taxes currently payable less deferred taxes
arising from timing differences between financial statement and tax basis
income. The income tax expense which is currently payable amounts to $-0- (zero)
at October 31, 2000 and $-0- (zero) at October 31, 1999 less deferred tax
expense of $-0- for 2000 and deferred tax expense of $-0- for 1999. The Company
has an allowance of $1,923 for October 31, 2000 and 1999 against a deferred tax
benefit on a bad debt not yet recognized for tax purposes but has been
recognized for financial statement purposes. (See Note 4).
PVT has a net operating loss carryover (NOL) of $13,225 at October 31, 2000 and
a NOL of $6,249 at October 31, 1999. The NOL expires between 2011 and 2016. PVT
has set up an allowance for the NOL benefit of $1,984 and $937 at October 31,
2000 and 1999 respectively. The change in the NOL allowance for 2000 was $1,047
and $518 in 1999.
NOTE 4 - LOAN INTEREST RECEIVABLE
At October 31, 1992 PVT had loaned $50,309 to F.D.G., Inc., which is located in
Utah. The loans were secured and had interest paying at a rate of four percent
(4%) per month. The amounts to be loaned and repaid were done per specific
provisions of a loan and security agreement between PVT and F.D.G., Inc.
At October 31, 1992 all of the principal amount loaned to F.D.G. had been
repaid. At October 31, 2000 and 1999, $12,823 of interest due on money loaned to
F.D.G., Inc. remains unpaid and in 2000 and 1999 a valuation allowance of the
total amount owed of $12,823 for both years was applied against the accrued
receivable shown in the balance sheets for both years.
NOTE 5 - ADVANCE
PVT was advanced $100,000 from an individual on July 25, 2000 to accomplish
temporary interim funding requirements for a possible business transaction. When
it was determined that the funding was not needed the $100,000 was repaid on
August 16, 2000.
NOTE 6 - SUBSEQUENT EVENT
On November 15, 2000, PVT signed an Agreement and Plan of Reorganization with
Videolocity, Inc. a Nevada Corporation. (Video). Video is a Development Stage
Company. Under the agreement PVT is to acquire Video as a wholly owned
subsidiary through the issuance of 30,281,250 post-split shares of common stock.
The Closing of the business combination is subject to PVT raising $500,000
through the sale of additional shares of its common stock. PVT is to effect a
.61-for-1 reverse split of its issued and outstanding common stock, which split
shall be implemented prior to Closing. The above is subject to stockholder
approval. The stockholders will also be asked to approve a name change of PVT
F-17
<PAGE>
to Videolocity International, Inc. and amended articles of incorporation to
increase the authorized shares of common stock to 125,000,000, and add a class
of preferred stock, and limit the officers' and directors' liability, and other
items. It is contemplated that the business combination will be treated for
accounting purposes as a reverse acquisition.
F-18
<PAGE>
Videolocity International, Inc.
(Formerly Pine View Technologies, Inc.)
Videolocity, Inc.
(Formerly Moviesonline, Inc.)
Pro Forma Combined Financial Statements
(Unaudited)
The following summarized, combined, unaudited pro forma balance sheet and
statement of income aggregate the audited balance sheet and statement of income
of Videolocity International, Inc. (formerly Pine View Technologies, Inc.), a
Nevada corporation (Videolocity International), and the audited balance sheet
and statement of income of Videolocity, Inc. (formerly Moviesonline, Inc.), a
Nevada corporation (Video), as of October 31, 2000, giving effect to a
transaction that was completed on December 4, 2000, wherein Videolocity
International acquired all of the issued and outstanding shares of Video in
exchange for 30,281,250 post-split shares of Videolocity International, which
were issued following a 0.61-for-1 reverse stock split in the issued and
outstanding shares of Videolocity International's common stock (the
Acquisition). For reporting purposes, the business combination is treated as an
acquisition of Videolocity International by Video (reverse acquisition) and a
recapitalization of Video. The historical operating statement, prior to October
31, 2000, is that of Video. Good will was not recognized from the acquisition.
The following pro forma balance sheet and statement of income used management
assumptions as described in the notes to the audited financial statements. All
intercompany transactions have been eliminated.
The pro forma combined balance sheet and statements of income should be read in
conjunction with the separate financial statements and related notes thereto of
Videolocity International and Video. The pro forma combined financial statements
are not necessarily indicative of the combined balance sheet and statements of
income which might have existed for the period indicated or the results of
operations as they may be now or in the future.
F-19
<PAGE>
<TABLE>
<CAPTION>
VIDEOLOCITY INTERNATIONAL, INC. AND SUBSIDIARY
COMBINED BALANCE SHEETS
(unaudited)
October 31, 2000
Videolocity Videolocity Combined
International Inc. Adjustments Balance
------------- ---- ----------- -------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 56,407 $ 346,527 (2)$500,000 $ 902,934
-------- --------- -----------
Total Current Assets 56,407 346,527 902,934
-------- --------- -----------
OTHER ASSETS 260,656 260,626
-------- --------- -----------
$ 56,407 $ 607,183 $ 1,163,590
======== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current liabilities $ 2,183 $ 217,737 (4) $ 15,000 $ 234,920
-------- --------- -----------
Total Current Liabilities 2,183 217,737 234,920
-------- --------- -----------
STOCKHOLDERS' EQUITY
Capital Stock 125,000,000 shares authorized
at $0.001 par value; 42,786,860 shares
outstanding 10,501 1,211 (1) (4,096)
(2) 6,100
(3) 30,282
(5) (1,211) 42,787
Capital in excess of par value 98,150 518,014 (1) 4,096
(2) 493,900
(3) (30,282)
(4) (15,000)
(5) (53,216) 1,015,662
Deficit (54,427) (129,779) (5) 54,427 (129,779)
-------- --------- -----------
Total Stockholders' Equity 54,424 389,446 928,670
-------- --------- -----------
$ 56,407 $ 607,183 $ 1,163,590
======== ========= ===========
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
VIDEOLOCITY INTERNATIONAL, INC. AND SUBSIDIARY
STATEMENT OF OPERATION
(unaudited)
For the Period May 26, 2000
(Date of Inception) to October 31, 2000
<S> <C>
REVENUES $ -
EXPENSES 129,779
----------
NET LOSS $ (129,779)
==========
NET LOSS PER COMMON SHARE
Basic $ (.023)
----------
AVERAGE OUTSTANDING SHARES
Basic 576,750
----------
</TABLE>
F-21
<PAGE>
ADJUSTMENTS
Pro Forma Adjustments
(1) To record the reverse common stock split of Videolocity International
of 0.61 shares for each outstanding share.
(2) To record the completion of a private placement and the issuance of
6,100,000 post-split common shares for $500,000 immediately following
closing of the business combination.
(3) To record the issuance of 30,281,250 post-split shares of Videolocity
International common stock for all outstanding shares of Moviesonline.
(4) To record the costs incurred by both companies in connection with the
business combination in the estimated amount of $15,000.
(5) Consolidation adjustments.
F-22
