U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): December 22, 2000
VIDEOLOCITY INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 33-2310-D 87-0429154
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
1762-A Prospector Drive
Park City, Utah 84060
(Address of Principal Executive (Zip Code)
Offices)
(801) 230-0839
(Registrant's telephone number, including area code)
136 Heber Avenue, Suite 209, Park City, Utah 84060
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. Acquisition or Disposition of Assets
On December 22, 2000, Videolocity International, Inc. ("Videolocity") acquired
5th Digit Technologies, LLC ("5th Digit") pursuant to an Agreement (the
"Agreement") dated as of December 20, 2000.
5th Digit, a development stage company, has developed a "Video-On-Demand" system
that permits a viewer in a closed system to select movies from an extensive
library of titles and view "Video-On-Demand" on a monitor or television screen.
The "5th Digit System" plays movies through a proprietary, multi-functional
set-top box in near-DVD quality, in real-time, full-screen, and full-motion.
Movies are encoded and encrypted through proprietary processes to limit viewing
to the person renting a movie, preventing unauthorized reproduction or
rebroadcast of the movies ordered.
Videolocity acquired 5th Digit as a wholly owned subsidiary by issuing 950,000
shares of Videolocity's newly authorized Series A Voting Preferred Stock to the
owners of 5th Digit in exchange for their interests in 5th Digit. At the closing
of the acquisition, 5th Digit had liabilities in the amount of $200,000,
consisting of a loan from Videolocity and a consulting contract with its
managing member, which calls for a $100,000 payment on or before March 1, 2001.
5th Digit is also subject to ongoing obligations under employment agreements
with three of its former owners. At the closing, Fifth Digit had no significant
assets other than its intellectual property, prototypes, and miscellaneous items
of equipment. The foregoing summary of the transaction is qualified in its
entirety by reference to the Agreement, a copy of which is being filed as an
exhibit to this report.
Prior to closing of the transaction, Videolocity filed a Designation of Rights,
Preferences, and Privileges for the Series A Voting Preferred Stock with the
Nevada Secretary of State designating 950,000 shares of Videolocity's authorized
preferred stock as Series A Voting Preferred Stock. The Series A Voting
Preferred Stock: is entitled to one vote per share with the Common Stock on all
matters submitted to Videolocity's shareholders; participates with the Common
Stock on all dividends; is callable by Videolocity at a price of $5.00 per share
through January 31, 2002, subject to prior conversion by the holders; is
redeemable by Videolocity at the request of the holders at a price of $5.00 per
share during the period from January 2, 2002 through January 31, 2002; is
convertible at any time at the option of the holders into Videolocity Common
Stock on a share-for-share basis, and will automatically be converted to Common
Stock on February 1, 2002; and is entitled to a liquidation preference of $5.00
per share. The foregoing summary is qualified in its entirety by reference to
the Designation of Rights, Privileges, and Preferences of Series A Voting
Preferred Stock, a copy of which is being filed as an exhibit to this report.
Forward-Looking Statements
This release contains "forward-looking" statements including statements that
describe the proposed operation of Fifth Digit's video-on-demand systems and
statements with respect to future strategic plans, goals or objectives. Any
forward-looking statements, including those regarding Videolocity's or its
management's current beliefs, expectations, anticipations, estimations,
projections, proposals, plans or intentions, are not guarantees of future
performance or results and involve risks and uncertainties, such as those
discussed in Videolocity's report on Form 10-KSB for the year ended October 31,
2000. 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. Any forward-looking statements are made only as of the
date of this report and Videolocity assumes no obligation to update
forward-looking statements to reflect subsequent events or circumstances.
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ITEM 5. Other Events
As reported in the Company's 2000 Form 10-KSB, in September 2000, Videolocity,
Inc. (formerly named Moviesonline, Inc.), a wholly-owned subsidiary of
Videolocity International, filed an action in the Third District Court for the
District of Utah against iStreamTV, Inc. ("iStream") of New York, New York. On
December 17, 2000, Videolocity, Inc. amended the complaint to add an additional
cause of action alleging common law fraud resulting from the misrepresentations
made by iStream and its representatives, which seeks compensatory damages of not
less than $10.2 million. To date, the defendants have filed no response to the
Utah action. However, on January 2, 2000, Videolocity, Inc. learned that its
registered agent had been served with a complaint filed in the Supreme Court of
the State of New York, County of New York, captioned iStreamTV, Inc. v.
Moviesonline, Inc. et al., which includes 5th Digit and its former owners as
defendants. The complaint sets forth claims against the individuals for breaches
of fiduciary and other duties to iStream, misappropriation of information and
equipment, and interference with iStream's corporate opportunities. The
corporate defendants are alleged to have aided and abetted such acts and to have
tortiously interfered with iStream's employment relationships with its
employees. The complaint seeks injunctive relief requiring assignment to iStream
of intellectual property rights to certain products, enjoining the individual
defendants from further disclosing the proprietary information and trade secrets
of iStream and interfering with its business opportunities, and seeks
compensatory damages of not less than $1 million against the individual
defendants and each of the corporate defendants, and punitive damages of not
less than $2 million against one individual defendant and the corporate
defendants. Videolocity, Inc. and 5th Digit believe the action to be without
merit and further believe it should be dismissed due to the prior jurisdiction
of the Utah court. Videolocity and 5th Digit intend to vigorously pursue their
claims against iStream, and to vigorously defend and attempt to have dismissed
the New York action.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of businesses acquired.
(b) Pro forma financial information.
The following financial statements and pro forma financial information
will be included in an amendment to this report to be filed as soon as
practicable, but not later than sixty days after the due date for this
report on Form 8-K:
Exhibit
No. Title of Document Location
1.1 Audited Financial Statements of 5th Digit To be
Technologies, LLC Filed by
Amend.
1.2 Unaudited Pro Forma Combined Financial Statements To be
of Videolocity International, Inc. and 5th Digit Filed by
Technologies, LLC Amend.
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(c) Exhibits.
The following documents are included as exhibits to this report:
Exhibit SEC Ref.
No. No. Title of Document Location
-------- ------ ----------------- --------
2.1 2 Agreement between Videolocity International, This
Inc. and Fifth Digit Technologies, Inc. dated Filing
as of December 20, 2000*
3.1 3 Designation of Rights, Preferences and This
Privileges for the Series A Voting Preferred Filing
Stock of Videolocity International, Inc.
*The exhibits to the Agreement are not included in the foregoing exhibits. The
Registrant undertakes to furnish supplementally to the Commission copies of any
omitted items on request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Videolocity International, Inc.
Dated: January 4, 2001 By /s/ Jerry E. Romney, Jr.
-------------------------
Jerry E. Romney, Jr.
President
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