SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999; or
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[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934/For the transition period from ________ to ________
Commission File No. 33-55254-25
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VisionGlobal Corporation
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(Exact name of Registrant as specified in its charter)
NEVADA 87-0438636
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
251 Kearny Street, 8th Floor
San Francisco, California 94108
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 901-2700
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [] Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not 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. [ ]
As of April 12, 2000, the aggregate market value of the voting stock held by
non-affiliates of the registrant is approximately $66,709,000, based on
11,235,250 shares at a price of $5.9375.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of December 31, 1999
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$.001 PAR VALUE CLASS A COMMON STOCK 22,034,250 Shares
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FORM 10-KSB
VISONGLOBAL CORPORATION
FOR THIS YEAR ENDED
December 31, 1999
TABLE OF CONTENTS
Item
Number Description Page
PART I
1. Description of Business......................................... 3
2. Description of Properties....................................... 12
3. Legal Proceedings............................................... 13
4. Submission of Matters to a Vote of Security Holders............. 13
PART II
5. Market for Registrant's Common Stock and Related
Stockholder Matters........................................... 13
6. Management's Discussion and Analysis or Plan of Operation....... 14
7. Financial Statements............................................ 15
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 15
PART III
9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.... 15
10. Executive Compensation.......................................... 17
11. Security Ownership of Certain Beneficial Owners and Management.. 18
12. Certain relationships and Related Transactions.................. 19
13. Compliance with Section 16(a) of the Exchange Act............... 19
PART IV
14. Exhibits and Reports on Form 8-K................................ 19
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PART I
ITEM 1. BUSINESS.
Overview
VisionGlobal Corporation is a development stage company that intends to
provide very high speed, high quality, low cost, wireless broadband
telecommunications services to customers using a system of proprietary and
off-the-shelf components. We initially intend to limit our services to Internet
access and data network services, but also intend to develop relationships with
a number of strategic partners to provide enhanced voice, video and data
content. We will market our services under the brand name "VisionZOOM."
Our telecommunications networks will make use of 16 point Quadrature
Amplitude Modulation technology,which will allow one-way network data rates of
up to 36 megabits per second or Mbps. We believe we will be able to improve
these transmission rates as we further develop our transmission and network
technology. Our networks will use transceivers that have built-in intelligence
algorithms that dynamically route content over different possible transmission
routes and in a manner that maintains the highest possible transmission speeds.
The transmitters also allow our network to overcome some of the pitfalls of
other systems that use wireless technology, such as line-of-sight transmission
problems. Our networks will primarily use the 5 band 5.725 to 5.825 gigahertz,
or Ghz, portion of the radio spectrum. These frequencies, while regulated, do
not currently require to be licensed by the United States Federal Communications
Commission, or FCC.
We completed the basic development of our intelligent transceivers and
network systems in March 2000 and we believe that, by September 2000, we will be
able to initiate beta tests on the system. Depending on the results of the beta
tests and our ability to secure financing, we anticipate we will begin rollout
of our systems and networks in six major metropolitan markets during the third
or fourth quarters of 2000.
Our Market Opportunity
The combined telecommunications market worldwide is believed to be in
excess of $700 billion and is expected to grow to $1 trillion by the year 2002.
Growth in the market is driven by a number of factors, including increased
demand for applications such as electronic commerce, or e-commerce,
video-on-demand, and data networking. Internet access and data services are some
of the fastest growing segments of the telecommunications market, with an
estimated 116 million Internet users worldwide.
The growth of e-commerce, especially business-to-business e-commerce,
will further fuel the demand for high speed links to the Internet. The worldwide
business-to-business e-commerce market is expected to grow from 1999's figure of
approximately $145 billion to approximately $7.3 trillion in 2004.
Business-to-business e-commerce in the United States alone is expected to reach
$2.7 trillion by that time. In addition, as the application service provider, or
ASP, phenomenon takes off, experts believe that demand for more bandwidth will
increase. ASPs essentially host applications and rent them out to corporate,
governmental and residential customers who access those applications over the
Internet. Many experts believe that worldwide spending on ASP services will grow
to approximately $7.8 billion by the year 2004.
In many instances, however, operators of telecommunications systems
have had difficulty responding to the market's demand for efficient service, new
fixed lines and the bandwidth necessary for the transmission of data and high
speed Internet access. Incumbent and existing telecommunications providers are
hampered by a number of problems, including the following:
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o Installing land lines requires a significant dollar investment
and takes significant time to complete. Land lines can also
trigger environmental concerns in ecologically sensitive
locations.
o Cable and other existing land lines, including DSL, have
limited transmission speeds, and generally offer only a single
pathway to the end user from a metropolitan area network,
which creates a data bottleneck. As a result, DSL and cable
subscribers often suffer outages or technical problems with
their service.
o Although Cellular phone service providers are planning to
offer high speed Internet access over existing wireless
networks, experts generally believe that the transmission
speeds for those services will be limited to approximately 400
kilobytes per second, or Kbps.
o Standard wireless transmission services are generally faster
than land lines or other forms of transmission, but still have
limited maximum transmission speeds of approximately 10 Mbps.
Broadband satellites using the KA band offering speeds of
between 1.5 mbps and 40 mbps are being developed, but experts
believe that they are between one and three years away from
being commercially viable.
Our Business Solution
We believe emerging technologies have significantly enhanced the value
and capacity of telecommunications networks that use wireless transmission as
part of their basic architecture. We have developed, and intend to market by the
end of this year, a network that uses 16 point Quadrature Amplitude Modulation
technology and which offers half- duplex (i.e. one-way) network data rates of up
to 36 Mbps. We expect those speeds to increase as we further develop our
products and network technology. One of the principal components of our network
is our proprietary transceiver design, which incorporates a built-in series of
intelligent algorithms that allows them to dynamically route information
(including to other transceivers in the network) to maintain the highest
possible speeds within the network. The ability to dynamically route information
also allows our network to overcome some of the problems normally associated
with wireless networks, such as line-of-sight transmission problems, reflection,
deflection and scattering.
We have adopted an aggressive business plan that (assuming adequate
financing) calls for a rollout of our network in over 60 major cities, beginning
in the fourth quarter of the year 2000. We believe that the prices for our
network services will be competitive with other alternative telecommunications
delivery technologies based on our superior engineering and the design of our
networks and products. Although we initially intend to focus our services in the
United States market, we have also identified several potential international
markets.
In addition to our basic data and Internet access services, we are
actively seeking strategic relationships with a number of content providers to
provide our customers with enhanced video, voice and data-rich services. Content
providers are currently limited in the quality and type of content that they can
provide by the limited transmission speeds of the incumbent telecommunications
networks. We believe that these content providers will view our network as a
logical, viable and cost effective means of providing enhanced content services
to customers. We intend to acquire the rights to use, provide or access that
enhanced telecommunications content through acquisitions, joint ventures,
partnering or other contractual arrangements and then use our wireless
transmissions networks as a "pipeline" to deliver those services and content to
customers.
Wireless Telecommunications Networks
The Internet, which is a network of thousands of interconnected,
separately administered public and commercial networks, has grown dramatically
over the past few years. The number of world-wide Internet users was estimated
to be approximately 46 million in 1997, and is expected to grow to approximately
152 million by the end of the year 2000. The Company believes that the growth
and the number of users will result in substantial increases in both Internet
advertising (which International Data Corporation estimates will grow from $181
million in 1996 to approximately $2.9 billion by the end of the year 2000) and
Internet commerce. Further, increased usage, as well as the availability of
powerful new
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software and hardware for the development and distribution of Internet content,
have resulted in a proliferation of Internet- based services.
The use of the Internet and related data arrays as a medium for
communication, education, entertainment and commerce has been hampered by
problems with its performance and reliability. The Internet's performance
limitations primarily stem from its basic architecture, which was not designed
for the distribution of data-intensive multi-media content. This architecture
has resulted in a number of bottlenecks in the delivery system, including
bottlenecks relating to acquiring access to copper-based cable networks and the
slower-than-optimal transmission speed over the systems.
Our telecommunication services will be carried over our very high speed
broadband wireless networks. Those networks will use the license free microwave
radio frequencies that are controlled by governmental agencies, including the
FCC in the United States. The microwave signals are transmitted over the air
from a primary transmission facility to a transceiver at each customer's
location, eliminating the need for the networks of cable and amplifiers used by
traditional copper wire and fiberoptic based, or hardwire, network operators.
Wireless networks typically deliver the same types of services offered by
hardwire systems, including Internet access, long distance and telephony
services, data transmission and reception and multi-channel television services.
Wireless networks can also be used to connect related customers (such as all the
banks in a particular banking system) to the same database or services.
To a customer, a wireless communications network operates in the same
manner as a traditional hardwire system. At the customer's location, microwave
signals will be received by a transceiver and are delivered to the customer's
computer through a simple ethernet interface. Because wireless signals are
transmitted over the air rather than through underground or above-ground cable
arrays, wireless systems are generally less susceptible to outages and are less
expensive to operate and maintain than hardwire systems. In contrast to
traditional hardwire systems, most service problems experienced by wireless
communications network customers are customer-specific, rather than
neighbor-wide problems.
Engineering and construction of a wireless communications network
typically can be completed in a significantly shorter period of time than a
traditional hardwire network with comparable coverage areas. The radio
frequencies in wireless networks are typically in the 2.3, (2.4, 5.250, 5.350,
5.725, 24), 18, 28 and/or 40 GHz frequency bands, depending on local frequency
licensing standards and practices. The 18 GHz frequency range is typically used
by satellite cable operators for point-to-point service transmission between
geographically separate properties and to eliminate the requirement to build a
complete satellite signal reception facility for each property. Channels in the
40 GHz range are now being used in parts of Europe and are generally considered
to be an alternative to 28 GHz systems, which are typically used in the United
States and Latin America. We have designed our network systems to operate in the
unlicensed U-NII band, which, in the United States, is currently a relatively
unregulated portion of the radio spectrum.
One of the primary advantages of a wireless communications network is
its ability to transmit wireless data and other communications at much higher
speeds than is normally possible through traditional copper wire provided by the
phone company or cable company. Typically, dial-up modems offer a peak
transmission speed of approximately 56 Kbps over existing telephone lines and up
to 128 Kbps over enhanced copper wire systems. Based on our calculations, we
believe our current top data rate of 36 Mbps is 642 times faster than the
current top of the line 56 Kbps dial-up modems, 281 times faster than enhanced
copper wire transmission services (commonly referred to as "ISDN" networks),
about 141 times faster than DSL and approximately 18 times faster than cable
modems. We believe this increased speed will provide us with a significant
market advantage, since it will allow customers to access streaming voice and
video, streaming music files and rich text and data files, in addition to the
simple web pages currently accessible over systems using lower transmission
speeds. According to Forester Research, more than 92% of the online consumers
will communicate using personal rich media, creating and insuring multi media
content by the year 2005.
Our Technology
Our networks will make use of 16 point Quadrature Amplitude Modulation
technology and offer half-dulplex (i.e. one-way) network data rates of up to
36Mbps. We believe we will be able to increase the network in the future. Our
network will also use transceivers that have built-in intelligence algorithms
that dynamically route data packets to the best
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route available to maintain the highest possible transmission speeds for the
data. This feature also allows our networks to overcome a number of the pitfalls
of other wireless networks, such as line-of-sight transmission problems, and
minimizes the difficulties associated with microwave data packet radio
transmission, including reflection, deflection and scattering.
We have adopted an "open architecture" standard for our networks which
will allow us to engineer and implement upgrades and improvements more easily.
The open architecture standard will also allow our strategic partners to
leverage their existing technology investments and attract a wider variety of
end users by extending their current networks with point-to-point,
point-to-multi-point, and multipoint-to-multipoint wireless bridges.
One of the key components of our network will be our "intelligent"
transceivers, which will be linkable to existing computers and communications
architectures through a standard Ethernet interface. The transceivers
incorporate algorithms which allow each unit used in a network to act as a
dynamic routing packet switched node, and automatically re-route incoming data
packets to other transceivers to maintain maximum transmission speeds on the
network. This function allows us to create true multi-point networks. We believe
this ability will also allow our networks to function without experiencing
significant line-of-sight problems (where transmission fails when the direct
line-of-sight between a transmitter and a receiver is blocked), because the
packets being transmitted over the network will immediately be sent through
alternative routing paths. Further, because the transceivers and network
architecture will allow data to be transported from one transceiver to another
in a dynamic fashion, intelligently rerouting packets to take optimum routes and
maintain data integrity, we believe data integrity over our network will not be
affected by such factors as weather, people, atmospheric interference or
obstructions.
We have designed our network to support existing industry standards,
including TCP/IP, SNMP, and IEEE802.11a. We anticipate that we could add support
for asynchronous transfer mode, video and telephony standards in the future.
We believe that security for any data transmitted over a network is one
of the primary concerns of the customers using that network, and so we have
designed our networks to incorporate state of the art encryption and security
technologies. The available encryption technology includes dynamic private key
encryption, which insures security of transmissions by separately keying
encryption and decryption data that is transmitted. We have also designed our
network to provide for unlimited scalability (the ability to add an unlimited
number of users), and to be uniform, so that users will be able to download both
consumer and business files.
We intend to use third party manufacturers to construct and manufacture
the components of our network which are not available off-the-shelf. In
addition, we intend to use third party integration services and, to the maximum
extent possible, third party contractors, to assist us in the construction and
maintenance of our networks in each of our markets. We believe the majority of
the components for our networks will be manufactured by several parties. As a
result, we believe we will have the ability to source key network components
from a number of equipment vendors.
Our Strengths and Strategies
We believe we have several business, management and marketing strengths
that will differentiate us from our competitors and which will allow us to reach
our business objective of being the premier provider of integrated broad-band
wireless telecommunications solutions to subscribers. These strengths and
strategies include the following:
o High data transmission speeds. The built-in intelligence in
our transceivers will send data packets through the fastest
route for maximum transmission speeds. We believe that we can
upgrade to 50 to 100 Mbps within approximately fifteen months.
o Security. We will use state-of-the-art dynamic private key
encryption, which will ensure security data transmissions.
Separate keys are used to encrypt and decrypt data
transmitted. The keys are randomly generated for each
transmission through the use of algorithms so they cannot be
compromised. The encryption algorithms are compatible with
existing virtual private network solutions.
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o Open architecture. Our network solution uses technology that
complies with IEEE 802.11a. That compliance will allow our
strategic partners to leverage their existing technology
without tying them into some other proprietary solution.
o Ability to upgrade software. We will be able to upgrade the
software components of our transceivers to attain higher
network data rates. Our ability to upgrade the software will
reduce the expense and time needed for upgrades and allow us
to deliver higher speeds without changing the hardware.
o Our networks are scalable. Each individual cell, or component
of our network, can theoretically handle an unlimited number
of users, but we will restrict the number of users to ensure
that each user gets sufficient bandwidth. If the bandwidth
level is reached in a cell, another cell site can be added in
order to handle the increased traffic. This process can be
continued for scalability. The ease with which we can scale up
to meet consumer demand will keep our costs down for both
corporate and residential uses.
o Attractive market demographics. We have targeted a number of
market cities which we believe have demographic and other
characteristics favorable to the ownership and operation of
wireless telecommunications networks, including limited
affordable or unreliable data telecommunications provider
alternatives, moderate-to-medium income per capita, and high
telecommunications demand with low telecommunications services
penetration rates. We intend to commence beta testing in
September 2000, and depending on the results of those tests
and the availability of capital, we intend to rollout our
networks with the first six of our target markets by the end
of the third quarter of this year. Assuming adequate
financing, we intend to initiate network development in a
total of 60 cities.
o Limited Market Competition. We believe there is currently
limited competition within our proposed market cities that has
the ability to provide data and Internet access services
similar to the type we will provide at prices that will be
competitive with our anticipated pricing structures. The lack
of competition in our projected markets results, in part, from
the fact that telecommunications services have historically
been provided by regional or local monopolies that typically
use copper wire or fiberoptic networks. These hardwire
networks are difficult and expensive to build-out, expand and
maintain. Further, they typically suffer from "last mile
bottlenecks," which result in data routing or security
problems. For example, the Internet frequently becomes
overloaded when transmitting the same data streams from
popular websites to millions of individual users. In addition,
dial-up users frequently encounter busy signals when
attempting to connect to their Internet service providers over
hardwire systems and are unable to access quality multi-media
content easily because of the slow speed of their modems and
the networks over which the content is transmitted. We provide
our services through very high-speed broadband wireless
networks. We believe that, because we will be one of the first
service providers in many of our projected markets to provide
competitively priced, comprehensive communication service
packages that are reliable, fast and secure, we will be able
to build a significant subscriber base with minimal subscriber
turnover.
o Broadband Network Rights. In the United States and in other
countries in which we anticipate providing services in the
future, the rights to the radio frequency spectrum that is
used for wireless transmission have already been acquired by
other service providers who provide services over networks
that have maximum transmission speeds of approximately 10
Mbps. We believe that new wireless transmission competitors,
even if they could provide substantially increased
transmission speeds, would need to spend significant sums in
acquiring rights to those frequency ranges. In contrast, our
technology operates in the unlicensed U-NII band at a
transmission frequency (5.725 to 5.825 GHz) that has, in the
United States, been reserved for small telecommunications
providers, and which has not been auctioned off or bid out to
telecommunications providers. As a result, we believe our cost
of entering the markets will be substantially less than if our
technology used other frequency ranges for transmission, such
as the 2.5 MHz, 18 GHz or 28 GHz frequency ranges.
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o Low-Cost Structure. The nature of our wireless communications
technology permits us to build out our markets in a more
efficient and cost-effective manner than is possible using
traditional hardwire systems. A traditional hardwire system
requires construction of a network of copper wires from a
central facility to each subscriber location, often through
areas where no viable subscriber base exists. In contrast,
wireless communication networks can broadcast directly to
customer locations. This translates into a lower incremental
cost of adding cusstomers to wireless networks in comparison
to traditional, hardwire telecommunications networks.
o Customer Penetration. In order to achieve positive cash flow
as soon as possible, we plan initially to offer services in
markets in which we believe there is the most potential to
generate significant customer growth. These markets will
include most major metropolitan areas, which have denser
populations with potentially greater demand and use of
telecommunication services and more disposable income.
o Strategic Acquisitions of Customer Bases and Ancillary
Enriched Services. In addition to developing our own customer
base through the promotion of our telecommunications services,
we intend to engage in selective acquisitions of existing
telecommunication customers bases, from telephony and video
service operations and content providers. We believe strategic
acquisitions can provide us with additional positive cash
flow, provide us with benefits resulting from the vertical
integration of key service providers in the telecommunications
industry and, in cases where the acquired company relies
primarily on hardwire networks to provide its services,
provide the acquired company with a viable method of
increasing its existing customer base through the promotion of
our wireless telecommunications networks. We also intend to
enter into joint venture, acquisition or partnership
agreements with a number of ancillary service providers to
provide enhanced video, data and telephony content.
Our Network Operations
Before initiating the buildout of any new market, we intend to conduct
pre-launch studies to evaluate the population demographics, interference and
physical terrain of that market. We have already conducted several such studies
in our target markets. We then intend to create development plans that identify
the customer potential of various areas within the target markets and, based on
such factors as available telecommunications penetration rates, income levels
and existing competition, we will (in consultation with third-party engineering
experts) then define the probable locations of our network central transmission
facilities and any required sites for retransmission.
As construction of our central transmission sites nears completion, we
will initiate marketing programs targeted to those areas identified as having
the greatest potential for customer growth. Our marketing programs will
typically include:
o inbound telemarketing
o neighborhood door-to-door sales, including multiple dwelling
unit meetings and door hangers
o a marketing-tied to regionally sensitive events, such as high
interest sporting events
o telephone, television and print advertisements
o promotional activities, such as referral programs and
promotional gifts
o direct mailings
o internet web pages
o advertising on installation vehicles
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o participation in professional forums
o automated e-mail messages
o free or promotional services to key or high-profile users
o launch promotional activities
o the use of resellers, agents and direct marketing agencies
Installation packages will generally include a standard
rooftop mounted transceiver and other related equipment, such as
cabling, which will be located at the customer's location. We currently
anticipate that, depending on the type of service involved, the cost of
a residential subscriber installation will initially range from $75 to
$125.
We believe that providing high levels of customer service and
installation and maintenance will enable us to maintain high levels of
customer satisfaction and minimize customer turnover. With this
objective in mind, our operating policies will include policies
designed to insure that we:
o Complete installations promptly,
o Provide prompt customer service using a customer hotline,
o Provide timely repair service, and
o Make new customer follow-up calls after installation to ensure
customer satisfaction.
We also intend to impart a "customer service" mentality to our
employees through ongoing in-house training sessions and intend to
establish an employee forum to facilitate an exchange of ideas for
improvements in customer service. We also intend to adopt various
employee incentive programs linked to achieving high levels of customer
satisfaction.
Our Competition
The telecommunications market is intensely competitive. We have not
begun to market our wireless services to potential customers, we have not
obtained any market share in any of our proposed markets, and we do not expect
to obtain a significant market share in any of our proposed markets in the short
term following the introduction of our services in those markets, given the size
of the telecommunications industry, the diversity of customer requirements and
the capital (human and economic) that will be necessary to build-out, promote
and maintain our networks.
We will eventually compete with numerous other telecommunications
service providers in our markets. Some of these competitors may have
long-standing relationships with their customers and suppliers, greater name
recognition and significantly greater financial, technical and marketing
resources. Nevertheless, we expect to compete on the basis of local service
features, quality, price, content, reliability, transmission speed, customer
service and rapid response to customer needs for telecommunication services. We
anticipate that, as our competitors face increased competition, they may respond
with increased pricing flexibility which, in turn, may result in increased price
competition. There can be no assurance that such increased price competition
will not have a material adverse effect on our business, financial condition and
results of our operations.
Several technologies are currently used, or are under development, for
the transmission of data and to obtain Internet access. Although we believe we
have competitive advantages over existing technologies, we cannot predict the
competitive impact of new technologies or the actions of our competitors. We
expect, however, that wireless
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telecommunications operators will be able to expand their services capacity and
introduce new services while continuing to maintain a cost advantage over other
providers of those services. Our current and potential competitors include the
following:
o Traditional Hardwire Systems. Traditional hardwire systems
have historically been limited by their use of analog
transmission and coaxial cable technologies. A number of new
technologies are under development or have recently been
developed to increase the capacity of these systems. These new
developments including replacing traditional copper wire
networks with fiberoptic networks and using digital techniques
to compress more programming signals and data onto existing
copper wire or other networks. We believe our current
transmission speeds are significantly faster than the
transmission speeds offered by these traditional hardware
systems. Further, improvements in the hardwire systems, such
as DSL, will be expensive to implement, are currently not
available in the majority of the markets served by the
hardwire systems, and vary greatly in bandwidth availability.
As of the end of 1998, there were only approximately 39,000
DSL subscribers, with 2.7 million being projected by the end
of the year 2002.
o Cable Modems. Cable television service providers have begun
using their transmission networks to provide Internet access
and data services over their existing cable networks and using
cable modems. Only approximately 12% of the cable industry
systems have the ability to deliver these types of services,
however, and before the services are available on a widespread
basis, the industry will need to make significant investments
to retrofit or rebuild their transmission systems. Upgrading a
coaxial system to be bi-directional can cost as much as $1,000
per home passed. Since the number of "homes passed" in a cable
system can be significantly higher than the number of homes
actually subscribing for a service, we believe the cost of
providing bi-directional or hybrid fiber/cable modifications
will require a significant capital outlay by the existing
cable companies. We believe those costs will be significantly
more than the cost to build systems of comparable coverage
using our wireless technology. Further, cable modems have a
maximum downstream data rate of only 1.5 Mbps. However, the
top speed over the cable system is reduced with each
additional customer. As of the end of 1998, the cable industry
had approximately 700,000 modem customers, which is expected
to increase to approximately 4 million by the end of 2002.
o Satellite Systems. Although we anticipate we will focus our
initial business efforts on the provision of the data services
and Internet access, we may also provide audio or video
streaming or other media-rich content at a future date. As a
result, our potential competitors could include multi-channel
television programming service providers, including "backyard
dish" or "direct-to-home," or DTH, and other distributors
using satellites to provide television or video programming.
The primary advantages of wireless multi-channel networks over
DTH networks are lower equipment costs and broader
availability of local programming. DTH systems, on the other
hand, enjoy the advantages of access to a wider variety of
satellite programming and the ability to serve areas not
serviced by traditional hardwire or wireless communications
networks.
o Other Wireless Systems. We will provide our services over
microwave frequencies in the 5.725 to 5.825 GHz range.
Frequencies other than those frequencies, including 2.5 MHz,
28 GHz, 18 GHz and 40 GHz, are currently authorized for
wireless telecommunications networks in the United States and
in other countries. We believe the 5.725-5.825 GHz frequency
band provides advantages over other frequency bands, including
the fact that those other frequency bands are subject to
substantial restrictions by the FCC and other governing bodies
and, for the most part, have been allocated (through bidding
or otherwise) in most of the major metropolitan areas in the
United States. As a result, we believe we will be able to
maintain a price advantage over the competitors using these
other frequency bands because we will not have to spend
significant amounts to acquire or pay for our frequency
rights. We also believe we will have a competitive advantage
over other wireless systems based on our ability to provide
significantly faster delivery speeds.
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Our Marketing Strategy
We have identified a number of market segments that we believe we can
market aggressively to based on our network configuration. These market segments
include business users of high speed data transmission services, telecommuters,
schools and universities, home businesses, single family homeowners and
apartment residents and government facilities. Our strategy to penetrate each of
those market segments is to offer high quality, faster-than-
otherwise-available, reliable telecommunications services which are
competitively priced. We initially intend to focus our marketing efforts on the
residential, SOHO, small and medium business market segments, where we believe
we will obtain the greatest return for our investment dollars, and then focus on
large businesses and governmental customer market segments.
We will market our services under the brand name of "VisionZOOM." We
have applied for trademark and service mark protection for that brand name in
the United States.
Governmental Regulation
The use of airways for microwave transmission is subject to extensive
government regulation. The type and extent of that regulation, and the cost of
complying with a regulatory agency's policies, varies from country to country
and depends, to a large extent, on the frequency range in question. Those
regulations are subject to change, sometimes significantly. Historically,
wireless cable systems have not been treated as "cable systems" for purposes of
the Communications Act of 1934, and therefore, have not needed a local
government franchise to operate. Those systems use portions of the radio
frequency spectrum, however, and the FCC maintains jurisdiction over those
frequency rights and has promulgated extensive regulations regarding their
acquisition, disposal and use. Those regulations include regulations relating to
the offer of certain portions of the radio spectrum for bid or pursuant to
auction processes.
To promote the competitive use of the radio frequency spectrum of the
United States, the FCC has set aside a portion of the spectrum (including the
5.725 GHz through 5.825 GHz range) for use by everyone. The use of that
frequency range is generally subject to relatively minimal FCC regulation, and,
in particular is currently not subject to bidding or auction processes used for
other portions of the spectrum. Our networks are designed to operate most
efficiently in that frequency range and our business plan assumes that we will
not expend significant amounts to use that range. There can be no assurance
however, that we will be allowed to use that portion of the radio frequency
spectrum in the manner our business plan currently anticipates (particularly if
our business operations significantly expand), or that the FCC or the U.S.
Congress will not adopt regulations or procedures which will require us to pay
significant amounts to use those portions of the radio frequency spectrum.
Our use of the radio spectrum in countries outside the United States
will also be subject to the regulations imposed by the jurisdictions controlling
the local radio spectrum. Those laws may be similar to, or substantially
different from, the FCC's rules and regulations regarding the 5.725 through
5.825 GHz range. There can be no assurance we will be able to use those
frequency ranges in any countries outside the United States or that, if we do
so, we will be able to do so on commercially viable terms.
Our Corporate Information
On January 16, 1998, the Company, VisionCorp, Inc., a Delaware
Corporation ("VisionCorp") and the shareholders of VisionCorp entered into an
Acquisition Agreement and Plan of Reorganization (the "Reorganization
Agreement"). Under the Reorganization Agreement, the shareholders of VisionCorp
contributed their shares of VisionCorp to the Company in exchange for 10,000,000
shares of the Company's common stock. Upon consummation of those transactions,
VisionCorp became the Company's wholly-owned subsidiary and VisionCorp's
shareholders acquired approximately 91% of the issued and outstanding common
stock of the Company. VisionCorp is an inactive subsidiary of the Company.
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On August 12, 1999, the Company entered into a Plan of Merger with Lone
Peak Research, Inc., a Utah corporation ("Lone Peak"), for Lone Peak's merger
with and into the Company. Pursuant to the merger, the Company acquired all of
the assets and all of the liabilities of Lone Peak. Prior to the merger, Lone
Peak owned the technology that now belongs to the Company. Lone Peak was owned
100% by Mr. Jeffrey G. Ballif, the Company's chief technology officer and lead
engineer. The Company issued 100,000 shares of common stock to Mr. Ballif in
consideration for Lone Peak's merger with the Company.
When we discuss our operations in this report, you should assume we are
describing our own and our controlled subsidiaries' operations. Our principal
executive offices are located at 251 Kearny Street, 8th Floor, in San Francisco,
California 94108, and our telephone number there is (415) 901-2700. Our
worldwide web site is located at www.visionzoom.com. The information on that
site is not part of this report. Our logo and certain titles and logos for our
services, including our service mark and brand name "VisionZOOM" are our
property. Each trademark, trade name or service mark of any other company
appearing in this report belongs to its holder.
We have previously reported some of the transactions and operations
information set forth in this report in greater detail in other reports we have
filed with the Securities and Exchange Commission, including the reports
described in the section entitled "Reports on Form 8-K" and our quarterly
reports on Form 10-QSB for the periods covered by this report. You should read
the information in this report in connection with those other reports and
filings. In addition, some of the matters described in this report occurred or
are scheduled to occur after December 31, 1999, the close of the period covered
by this report. We have included descriptions of those matters in this report to
provide a more balanced description of our operations.
ITEM 2. PROPERTIES.
We lease our corporate headquarters located at 251 Kearny Street, 8th
Floor, San Francisco, California 94108, under a five year lease that expires on
December 31, 2004. The leased premises consists of the eighth floor of an eight
story office building called the Panco Building. The premises consists of
approximately 4,500 square feet, which we use for general office purposes. We
pay $14,220.95 per month rent and have paid a security deposit of $75,524.53. We
pay our pro rata share of utilities for the building and for our electricity,
which is separately metered and billed to us. The lease for our San Francisco
office contains commercially reasonable, standard insurance and indemnity
provisions and standard provisions relating to assignments, subletting, defaults
and remedies, holding over and other matters.
We also lease an apartment in San Francisco located at 1388 Gough St.,
Apt. 1108, San Francisco, California 94109, which our officers and directors use
when they travel to San Francisco on business. Mr. Hipple is currently living in
the apartment while he finds permanent housing. We pay $3,500.00 per month rent
and we paid a $6,000 security deposit. The lease is for a term of one year.
We lease approximately 5,010 square feet in a commercial development
called Broadstone Square V located in American Fork, Utah. The lease for that
property is dated August 8, 1999, and continues until September 30, 2002. For
the first year of the term, the Company pays $7,117.00 per month rent, for the
second year the Company pays $7,331.00 per month rent and for the third year the
Company pays $7,551.00 per month rent. We paid $7,117 as a security deposit for
the American Fork facility. We also pay our pro rata portion of utilities and
common area maintenance expenses. There is an expense stop of $3.50 per square
foot for all utilities and common area maintenance expenses. We use our American
Fork facility as our principle research and development laboratory and also for
general office purposes. The lease for our American Fork facility contains
commercially reasonable, standard insurance and indemnity provisions and
standard provisions relating to assignments, subletting, defaults and remedies,
holding over and other matters.
We will need to rent additional space in connection with our proposed
operations. We anticipate that we will need additional space for our research
and development activities and our operational activities as well. We think that
we can obtain such additional facilities on commercially reasonable terms, but
there is no assurance that such facilities will be available on such terms when
our need arises. Our ability to lease any additional property will depend on our
ability to raise sufficient capital. We have negotiated a lease for back office
support space in Hayward, California. The Company
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<PAGE>
has signed that lease. Its rental obligations will not begin until August 2000.
The premises consists of approximately 26,278 square feet. We will pay $27,065
per month rent and have paid a security deposit of $162,390. We believe that our
facilities are in good condition and that the facilities are adequate for our
current operating needs.
ITEM 3. LEGAL PROCEEDINGS.
Prior to the change in control of the Company which took place when it
was acquired by Shiretalk Investments, Inc. and certain other shareholders of
VisionCorp., Inc. on January 16, 1998, the Company was involved in proceedings
with the State of New Jersey, the State of Utah and the Securities and Exchange
Commission. These proceedings have been fully described in the company's annual
report dated December 31, 1997, which is hereby incorporated by reference. The
actions pertained to the former owners of the Company and the proceedings did
not involve any of our current Directors, Officers or major shareholders.
A former officer, director and shareholder of ours filed a lawsuit
against us in the Third Judicial District Court for Salt Lake County, Utah
alleging breach of contract, conversion and a request for relief based on
purported stock transfers of 200,000 shares of our common stock in 1998. We
contend that, among other defenses, the plaintiff did not pay any consideration
for the stock and the purported transfers are, therefore, void. Plaintiffs'
motion for a temporary restraining order and preliminary injunction seeking
removal of the stop transfer orders was denied. The Company believes it has
valid defenses to all claims asserted against it. However, it is impossible to
predict the likely outcome of this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to the Company's security holders for a vote
during the fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Active trading in our stock (VIZG) began on a regular basis in January
1998. The principal market on which our securities are traded is the
over-the-counter market on the OTC Bulletin Board. The following table shows,
for the periods indicated, the range of high and low bid quotes for our common
stock which were obtained from the National Quotation Bureau and are between
dealers, do not include retail mark-ups, mark-downs, or other fees or
commissions, and may not necessarily represent actual transactions:
COMMON STOCK TRADING HISTORY
High Low
Quarter ended March 31, 1998 3.00 .375
Quarter ended June 30, 1998 1.50 .15
Quarter ended September 30, 1998 .50 .1875
Quarter ended December 31, 1998 .1875 .0937
Quarter ended March 31, 1999 1.3125 .12
Quarter ended June 30, 1999 2.70 .90
Quarter ended September 30, 1999 2.10 1.10
Quarter ended December 31, 1999 14.00 1.25
As of December 31, 1999 the number of record holders of our Common
Stock was 770. There currently are three market makers for our securities.
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We have not paid any dividends, and we have no plans to pay any cash
dividends in the foreseeable future. The declaration and payment of dividends in
the future, of which there can be no assurance, will be determined by our Board
of Directors based upon conditions then existing, including earnings, financial
condition, capital requirements and other factors. We are subject to any
contractual restrictions on our ability to pay dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
The following information may contain forward-looking statements that
involve risks and uncertainties. Our actual results may differ significantly
from the results discussed in such forward-looking statements. Factors that
might cause such differences include, but are not limited to, our history of
unprofitability and the continuing uncertainty of our profitability, our ability
to attract investors, our ability to develop and implement our services, the
uncertainty of market acceptance of our services, our reliance of collaborative
partners, our limited sales and marketing experience, the highly competitive
industry in which we operate and the rapid pace of technological change within
that industry, the Company's dependence on key employees and general economic
and business conditions, some or all of which may be beyond our control.
Overview
VisionGlobal Corporation is a development stage company that intends to
provide very high speed, high quality, low cost, wireless telecommunications
services to customers using a system of proprietary and off-the-shelf
components. We initially intend to limit our services to internet access and
data network services, but also intend to develop relationships with a number of
strategic partners to provide enhanced voice, video and data content. Since our
new management team was in place, and we began our business activities, in
approximately 1998, we have sustained net losses and negative cash flow, both of
which have been significant. We expect our losses and negative cash flow to
continue until we develop a customer base that will generate sufficient revenues
to fund our operating expenses.
Plan of Operation
We currently have enough cash to satisfy our working capital
requirements for the next 6 months. However, we will need to raise additional
funds within the next twelve months to meet our capital investment plans and we
are currently negotiating with an investment banking firm to raise between
$72,000,000 to $125,000,000.
We anticipate that the execution of our business plan will result in a
rapid expansion of our operations, which may place a significant strain on the
Company's management, financial and other resources. Our ability to effectively
manage the problems associated with our expansion will depend upon, among other
things, our ability to monitor operations, control costs, maintain effective
quality control, secure necessary regulatory approvals, expand internal
management, technical, information and accounting systems and attract,
assimilate and retain qualified management and professional personnel. Our
inability or failure to effectively manage these issues could result in
significant customer turnover, stagnant or decrease in customer growth,
managerial deficiencies, missed corporate opportunities and continuing or
increased losses. We currently estimate that it will require between $72,000,000
and $125,000,000 to build out and launch our operations in accordance with our
business plan.
We have the ability to moderate our capital spending and losses by
varying the number and extent of our market build out activities and the
services we will offer in various cities. If we elect to slow the speed (or
narrow the focus) of our business plan, we will be able to reduce our capital
requirements and losses. The actual costs of building out and launching our
networks in the cities we are currently targeting will depend on a number of
factors, however, including our ability to negotiate favorable prices for
purchases of our network equipment, the number of customers we obtain, the
nature and success of the services that we may offer, regulatory changes and
changes in technology. In addition, actual costs and revenues could vary from
the amounts the Company expects or budgets, possibly materially, and such
variations are likely to effect how much additional financing we will need for
our operations. Accordingly, there can be no assurance that our actual financial
needs will not exceed the anticipated amounts available to us.
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<PAGE>
We have entered into a letter of intent with an investment banking firm
to raise between $72,000,000 to $125,000,000. The funds to be raised are
dependent on, among other things, the share price for our common stock. If we
are successful in raising the full amount, or $125,000,000, then we could
support our business for the next two years and complete the build out of the
Greater San Francisco Bay Area plus a second metropolitan area of similar size.
If we are not able to raise the full amount of funding as envisioned, we would
need to scale back our build out and limit it to the San Francisco Bay Area.
However, if we are not successful in raising the funds, we would not be able to
realize the business plan, which would make it difficult, if not impossible, to
meet our financial obligations.
We expect to have a wireless, broadband prototype radio in June 2000
and an Alpha test of the radios and our network in the Salt Lake City area.
Following the Alpha test, we expect to proceed with a Beta test in the San
Francisco Bay area in September 2000. If the results of our tests are
satisfactory, then we have planned the commercial rollout of our very high-speed
Internet service in the San Francisco Bay area after September 2000.
Based on our long-term plan to build out 60 major metropolitan areas in
the next three years, we will continue to require additional funding, which
could come in the form of debt or equity. It will be this external funding that
will permit us to continue the build out of additional metropolitan areas.
In order to complete the build out of the cities, we will be making
significant investments in computer equipment and other hi-tech products needed
to implement and operate our networks. In addition, we will have to invest in
our wireless broadband radios, which will be manufactured for us and sold to us
by a third party.
In order to meet our business objectives and financial plans, we will
have to add a significant number of new employees to the payroll. We will need
engineers, customer service representatives, sales people, managers, back office
administration and accounting personnel to help our business grow.
In addition to bringing our wireless broadband radio to market, we will
be constantly working to improve our products, our networks and our systems.
Research and development got us to this point and it will be an important
element in keeping us ahead of the competition. We anticipate that we will
maintain ongoing research and development activities to continually improve and
enhance our radios and networks.
ITEM 7. FINANCIAL STATEMENTS.
The response to this item is submitted as a separate section to this
report (see Pages F-1 to F-12).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes in and no disagreements with accountants on
accounting and financial disclosure.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table shows the positions held by the Company's officers
and directors. Mr. Martin G. Wotton and Mr. B. Bruce Freitag were appointed as
directors in January, 1998 and Mr. Joseph W. Hipple was appointed as a director
in August, 1999. All directors will serve until the next annual meeting of the
Company's stockholders, and until their successors have been elected and have
qualified. The officers were appointed to their positions, and continue in such
positions, at the discretion of the directors.
Martin G. Wotton, Age 38. Mr. Wotton has been the Chief Executive
Officer, President and Board Member of VisionGlobal Corporation since January
1998. Prior to that he was a director of the Greatlands Group of Companies, an
Australian company specializing in acquisitions, venture capital raising and
investments. In late 1997 Mr. Wotton decided
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to concentrate on building a Global Company with a U.S. base, focused
specifically on technology ventures with early revenue opportunities. Prior to
that, Mr. Wotton worked as a Senior Derivatives Representative in the Australian
Securities Markets and specialized in Institutional Derivatives Management. Mr.
Wotton's experience in the Securities Industry spans some 12 years, the
highlights of which include development and commercialization of a derivatives
pricing, valuation, risk management system that is now an Industry standard and
managing a rated team of specialists for a number of years in the Institutional
Derivatives Market. From 1995 to 1996, Mr. Wotton was associated with the stock
brokerage firm of Burdett, Buckeridge & Young, Ltd., Sydney, Australia. From
1990-1995 Mr. Wotton was associated with the stock brokerage firm of McKinley
Wilson and Co. Ltd., Sydney, Australia.
B. Bruce Freitag, Age 69. Mr. Freitag has been Secretary and a Board
Member of VisionGlobal Corporation since January 1998. He is presently a
practicing attorney for 38 years in the area of securities and business law. He
is formerly a director of Thor Energy Resources, Inc., an American Stock
Exchange oil exploration company, Tyler, Texas, where he was chairman of the
audit committee and a member of the compensation committee. Management of Thor
recently repurchased all of the shares on the market and Thor became a
privately-owned corporation. Mr. Freitag was also a member of the Board of
Directors of Tucker Drilling Company, Inc., a contract oil drilling company, San
Angelo, Texas. Tucker recently merged with Paterson Energy Corporation.
Joseph W. Hipple, III, Age 53. Mr. Hipple has been the Executive
Vice-President and Chief Operating Officer of VisionGlobal Corporation and Chief
Executive Officer and President of VisionGlobal Network Corporation since August
1999. He serves on the Board of Directors of both companies. He is also an
Advisory Director for the Peninsula Group; a New York based company specializing
in Pacific Rim high technology investments. Prior to that, Mr. Hipple was Chief
Executive Officer of Business Smart, LLC, a company he founded to assist
companies in new market expansion, fund raising, strategic business planning and
finding strategic partners. Prior to that, Mr. Hipple was President, Chief
Operating Officer, Director and Member of the Executive Committee of People's
Choice TV Corp., one of the largest owners and operators of wireless frequencies
in the country, from 1989 to 1996. Mr. Hipple assisted in raising private equity
funds of $12 million; IPO funding of $26 million; a secondary offering of $32
million; a $16 million senior debt placement from the Bank of Montreal; a $50
million equity placement and a $175 million bond offering. Prior to that, Mr.
Hipple was an Area Vice President of Comcast Corporation, the nation's fourth
largest cable operator, from 1985 to 1989. At Comcast, Mr. Hipple had complete
management authority over the company's Philadelphia and Indianapolis based
regions with over 300,000 customers and $100 million in revenue. From 1978 to
1982, Mr. Hipple was a founder and Chief Operating Officer of Black Hawk Cable,
a Texas based multiple system operator in the Dallas/Forth Worth metro region.
Black Hawk was sold to CBS and Mr. Hipple became a vice president of CBS working
on new market development throughout the United States and serving as a member
of CBS's Strategic Planning and Evaluation team of new business opportunities.
Prior to that, Mr. Hipple was Area Manager for several upstate New York systems
for Teleprompter Corporation and assistant regional manager responsible for
400,000 customers. Mr. Hipple was awarded a Medal of Commendation from the
United States Navy for his leadership and administrative skills while serving in
Vietnam.
Jeffrey G. Ballif, Age 34. Mr. Ballif has been the Senior Vice
President of Engineering and Chief Technology Officer of VisionGlobal
Corporation since October 1999. He also serves as the Senior Vice President of
Engineering and Board Member of VisionGlobal Network Corporation. Mr. Ballif has
over nine years experience in developing wireless communications solutions and
has been involved in the design, development and manufacturing of wireless
communications equipment, including 900 MHz, 2.4 Ghz, 5.7 GHz frequencies and
spread spectrum, FSK, QPSK, and narrow band FM technologies. Mr. Ballif worked
for World Wireless Communications, a developer and manufacturer of wireless,
high speed communications and telecommunications systems from April 1998 to
August 1998. He also worked for Digital Radio Communications Corp. from June
1990 to April 1998 where he worked extensively with Motorola, Inc. and Phillips.
Albert Bracht, Age 48. Mr. Bracht has been the Senior Vice President
and Chief Financial Officer of VisionGlobal Corporation since February, 2000.
Mr. Bracht has over 23 years of experience in the banking and finance
industries. Prior to joining us, Mr. Bracht was the Senior Vice President in
corporate finance for IBS Banking Group from 1998 to January 2000. From 1995
through the end of 1997, Mr. Bracht served as Chief Financial Officer for New
Planet Radio. His experience includes financial engineering, leverage buyouts,
debt for equity swaps, and other structured financings. He has approximately
nine years experience in the telecommunications industry focusing on
acquisitions, due diligence and structuring debt and equity placement focusing
on the cable television and radio business.
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ITEM 10. EXECUTIVE COMPENSATION.
<TABLE>
<CAPTION>
Annual Compensation Table
Annual Compensation Long-term Compensation
Other Restricted
Name and Annual Stock Options LTIP All other
Principal Position Year Salary Bonus ($) Compensation Awards /SARs(5) Payout Compensation
- ---------------------- -------- ------------- ----------- ------------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Martin Wotton 1999 $ 200,000(1) $ 0 $ 500,000(4) $ 0 $11,969,200$ 0 $ 0
President, CEO,
Director
Joe Hipple, Executive 1999 150,000(2) 0 0 0 8,276,150 0 0
Vice President,
Director
Jeff Ballif, Senior 1999 50,000(3) 0 0 0 464,650 0 0
Vice President
Albert Bracht, Senior 1999 0 0 0 0 3,002,800(6) 0 0
Vice President, CFO
</TABLE>
(1) includes $48,188 accrued at December 31, 1999.
(2) includes $19,153 accrued at December 31, 1999.
(3) includes $20,000 accrued at December 31, 1999.
(4) value of stock issued to entity controlled by Mr. Wotton.
(5) based on Black-Sholes model - no options were vested or exercised
in 1999.
(6) options granted in 2000.
Employment Agreements.
The Company has entered into employment agreements with Mr. Martin
Wotton, Mr. Joseph W. Hipple, III, Mr. Albert Bracht and Mr. Jeffrey G. Ballif,
the Company's Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Chief Technology Officer, respectively. The terms of the employment
agreements are nearly identical except for the salary and stock option portions.
The Company has agreed to pay Mr. Wotton an annual salary of $250,000
and has granted Mr. Wotton options to purchase 6,000,000 shares of the Company's
common stock at an average exercise price of $0.866 per share.
The Company has agreed to pay Mr. Hipple an annual salary of $250,000
and has granted Mr. Hipple options to purchase 4,500,000 shares of the Company's
common stock at an average exercise price of $0.75 per share.
The Company has agreed to pay Mr. Bracht an annual salary of $175,000
and has granted Mr. Bracht options to purchase 300,000 shares of the Company's
common stock at an average exercise price of $1.75 per share.
The Company has agreed to pay Mr. Ballif an annual salary of $120,000
and has granted Mr. Ballif options to purchase 250,000 shares of the Company's
common stock at an average exercise price of $2.00 dollars per share.
The remaining terms of the employment agreements are virtually
identical and are described in more detail below.
The employment agreements require our employees to devote their full
time and attention to the performance of their obligations under the agreements.
In addition to the salary and stock options, employees are entitled to
participate in our benefit plans and employees are entitled to four weeks
vacation annually. The employment agreements contain provisions that prohibit
the employees from competing with us and soliciting our clients, customers and
employees for a period of two years after the termination of the agreements. The
employees are also required to sign an Employee Confidentiality Agreement that
prohibits the employees from disclosing our confidential information and also
requires the employees to assign any inventions and patent rights to us. If the
employees own inventions prior to their employment, then they were required to
disclose those inventions on an attachment to the Employee Confidentiality
Agreement.
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<PAGE>
We can terminate our employees' agreements with or without cause.
However, if we terminate the employees without cause, then we must pay them
severance payments. "Cause" is defined in the agreements to include such things
as the employee's refusal to obey the directions of our board of directors or
senior executive officers, employee's failure to perform his or her duties with
diligence, employee's violation of any employment guidelines, employee's fraud
or dishonesty or commission of a criminal offense constituting a felony.
The agreements provide that non-vested portions of the stock options
terminate upon termination of the employment agreements, unless we terminate the
agreements without cause. In that case, non-vested portions of the stock options
which would have vested within the year following the termination vest
immediately. The agreements also provide that non-vested portions of the options
vest in full upon a change of control of the Company. The employment agreements
contain an arbitration provision which requires disputes to be arbitrated.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth at the date of this Report, the stock
ownership of each person known by the Company to be beneficial owner of five
percent (5%) or more of the Company's Common Stock and by all officers and
directors as a group:
<TABLE>
<CAPTION>
Name and Address Amount of Percent
of Beneficial Owner Beneficial Ownership of class
------------------------------- --------------------------- ---------------------
<S> <C> <C>
Shiretalk Investments, Inc.(1)(2)(3) 10,000,000 45.38%
590 Madison Avenue, 21st Floor
New York, New York 10022
R. Marriott 1,763,000 8.00%
206 Tablelands Road, Opotiki,
North Island, New Zealand
Lionsgate Holdings, Inc. 1,370,000 6.22%
Aspen Orchard, R.D. 1, Opotiki
North Island, New Zealand
Aspen Horticulture Limited 1,340,000 6.08%
Martin G. Wotton 150,000 0.68%
251 Kearny Street, 8th Floor
San Francisco, CA 94108
Joseph Hipple 150,000 0.68%
251 Kearny Street, 8th Floor
San Francisco, CA 94108
B. Bruce Freitag(3) 140,000 0.64%
599 Lexington Ave., Suite 2300
New York, NY 10022
Jeffrey G. Ballif 125,000 0.57%
251 Kearny Street, 8th Floor
San Francisco, CA 94108
Albert Bracht 25,000 0.11%
251 Kearny Street, 8th Floor
San Francisco, CA 94108
All Officers and 10,590,000 48.06%
Directors as a Group
(Consisting of five Persons) (5)
</TABLE>
(1) Shiretalk Investments, Inc. may be deemed to be the Company's
"parent" and "promoter," pursuant to the Rules and Regulations promulgated under
the1933 Act.
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<PAGE>
(2) Martin G. Wotton is the sole owner of the outstanding capital stock
of Shiretalk Investments, Inc. and, since he is in a position to control the
actions of Shiretalk, the beneficial interest in the shares of Common Stock held
by Shiretalk are attributable to Mr. Wotton.
(3) Messrs Wotton and Freitag are each holders of options to purchase
common stock at $.50 per share in the amounts of 5,000,000 and 150,000
respectively.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Shiretalk Investments, Inc., and certain other stockholders of
VisionCorp., Inc, a Delaware corporation, entered into an agreement with the
Company in January, 1998 in which it was agreed that the Company would acquire
all of the issued and outstanding common stock of VisionCorp. in exchange for a
total of 10,000,000 shares of our common stock. That agreement was negotiated at
"arms length" with the then management of the Company. At the time of the
consummation of the agreement, our common stock was traded infrequently on the
OTC Bulletin Board at approximately $0.25 per share. That agreement originally
contemplated that the 10,000,000 shares of common stock would be issued to the
shareholders of VisionCorp. It was originally intended that Shiretalk would own
50% of VisionCorp. and another shareholder, Globe Chain, Inc. would own 50% of
VisionCorp. However, Globe Chain never paid the subscription price for its
shares of VisionCorp. and, therefore, was never a VisionCorp shareholder. Since
Globe Chain did not own any shares of VisionCorp., the shares that were intended
to be issued to Globe Chain in exchange for its shares of VisionCorp., were
cancelled.
ITEM 13. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Paragraph 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our executive officers and directors, and persons who
own 10% or more of a registered class of our equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission under certain conditions. We have not received or reviewed any
filings under Section 16(a) for any of those reporting persons or entities for
any period covered by this report.
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed pursuant to Item 601 of
Regulation S-K:
None
(b) Reports on Form 8K
On October 13, 1999, the Company filed an 8-K to
announce issuing 100,000 shares of common stock to acquire
Lone Peak Research, Inc. Lone Peak merged with and into the
Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VISIONGLOBAL CORPORATION
Date: May 5, 2000 By:
Martin G. Wotton, President, Chief Executive Officer,
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: May 5, 2000
Martin G. Wotton, President,
Chief Executive Officer, Chief
Financial Officer and Director
Date: May 5, 2000
B. Bruce Freitag, Secretary/Treasurer,
and Director
19
<PAGE>
Smith
&
Company
A Professional Corporation of Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
Board of Directors
VisionGlobal Corporation
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of VisionGlobal
Corporation (a development stage company) and subsidiaries as of December 31,
1999 and 1998, and the related statements of operations, changes in
stockholders' equity (deficit), and cash flows for the years ended December 31,
1999, 1998, and 1997, and for the period of April 16, 1986 (date of inception)
to December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of VisionGlobal
Corporation (a development stage company) and subsidiaries as of December 31,
1999 and 1998, and the results of their operations, changes in stockholders'
equity (deficit), and their cash flows for the years ended December 31, 1999,
1998, and 1997, and for the period of April 16, 1986 (date of inception) to
December 31, 1999 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. At December 31, 1999, the
Company had a retained deficit of $2,098,299. The Company has no operations and
has a substantial need for working capital. This raises substantial doubt about
its ability to continue as a going concern. Management's plans in regards to
these matters are described in Note 14 to the financial statements. The
accompanying financial statements do not include any adjustments that may result
from the outcome of this uncertainty.
Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
April 25, 2000
10 West 100 South, Suite 700o Salt Lake City, Utah 84101-1554
Telephone: (801) 575-8297o Facsimile: (801) 575-8306
E-mail: [email protected]
Members: American Institute of Certified Public Accountants
o Utah Association of Certified Public Accountants
F-1
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------ ------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 249,544 $ 0
Prepaid expenses 145,327 0
Stock subscription (Note 9) 886,768 0
------------------ ------------------
TOTAL CURRENT ASSETS 1,281,639 0
EQUIPMENT (Note 1) 171,676 0
OTHER ASSETS
Security deposits 88,642 0
------------------ ------------------
$ 1,541,957 $ 0
================== ==================
LIABILITIES & EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 98,210 $ 59,979
Accrued expenses 110,703 0
Payable - officer (Note 4) 0 70,200
Current portion of long-term debt (Note 11) 4,524 0
Loans payable (Note 7) 25,000 25,000
------------------ ------------------
TOTAL CURRENT LIABILITIES 238,437 155,179
LONG-TERM LIABILITIES
Long-term debt (Note 11) 24,288 0
------------------ ------------------
TOTAL LIABILITIES 262,725 155,179
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock $.001 par value:
Authorized - 100,000,000 shares
Issued and outstanding 22,034,250 shares (11,200,000
in 1998) 22,034 11,200
Additional paid-in capital 4,005,497 227,931
Stock subscription (Note 9) (650,000) 0
Deficit accumulated during
the development stage (2,098,299) (394,310)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 1,279,232 (155,179)
------------------ ------------------
$ 1,541,957 $ 0
================== ==================
</TABLE>
See notes to Consolidated Financial Statements.
F-2
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
4/16/86
(Date of
Year Ended December 31, inception) to
1999 1998 1997 12/31/99
------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 0 $ 0 $ 0 $ 0
Cost of sales 0 0 0 0
------------- ------------- ------------- -----------------
GROSS PROFIT 0 0 0 0
General & administrative expenses 1,703,989 392,310 0 2,098,299
------------- ------------- ------------- -----------------
NET LOSS $ (1,703,989) $ (392,310) $ 0 $ (2,098,299)
============= ============= ============= =================
Net income (loss) per weighted
average share $ (.10) $ (.04) $ .00
============= ============= =============
Weighted average number of common
shares used to compute net income
(loss) per weighted average share 17,758,188 10,350,000 1,000,000
============= ============= =============
</TABLE>
See notes to Consolidated Financial Statements.
F-3
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
Par Value $0.001 Paid-in Stock Development
Shares Amount Capital Subscription Stage
------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at 4/16/86
(Date of inception) 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock (restricted)
at $.002 per share at 6/16/86 1,000,000 1,000 1,000
Net loss for period (1,950)
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/86 1,000,000 1,000 1,000 0 (1,950)
Net loss for year (10)
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/87 1,000,000 1,000 1,000 0 (1,960)
Net loss for year (10)
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/88 1,000,000 1,000 1,000 0 (1,970)
Net loss for year (10)
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/89 1,000,000 1,000 1,000 0 (1,980)
Net loss for year (10)
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/90 1,000,000 1,000 1,000 0 (1,990)
Net loss for year (10)
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/91 1,000,000 1,000 1,000 0 (2,000)
Net income for year 0
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/92 1,000,000 1,000 1,000 0 (2,000)
Net income for year 0
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/93 1,000,000 1,000 1,000 0 (2,000)
Net income for year 0
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/94 1,000,000 1,000 1,000 0 (2,000)
Net income for year 0
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/95 1,000,000 1,000 1,000 0 (2,000)
Net income for year 0
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/96 1,000,000 1,000 1,000 0 (2,000)
Net income for year 0
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/97 1,000,000 1,000 1,000 0 (2,000)
Issued for subsidiaries 1/26/98 10,200,000 10,200 226,931
Net loss for year (392,310)
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/98 11,200,000 11,200 227,931 0 (394,310)
Issuance of common stock(restricted) at $.10
for services 2/99 5,618,000 5,618 556,182
Sale of common stock(restricted) at $.15 3/99 484,000 484 72,116
Sale of common stock(restricted) at $.43 10/99 3,453,250 3,453 2,128,547 (650,000)
Issuance of common stock (restricted) at $.001
for subsidiary 10/99 100,000 100 (100)
Issuance of common stock (restricted) at $.64
for services and debt 10/99 440,000 440 279,560
Issuance of common stock (restricted) at $.50
for services 12/99 349,000 349 174,151
Sale of common stock (restricted) at $1.46 12/99 390,000 390 567,110
Net loss for year (1,703,989)
------------- ------------- --------------- ------------- ---------------
Balances at 12/31/99 22,034,250 $ 22,034 $ 4,005,497 $ (650,000) $ (2,098,299)
============= ============= =============== ============= ===============
</TABLE>
See notes to Consolidated Financial Statements.
F-4
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
4/16/86
(Date of
Year Ended December 31, inception) to
1999 1998 1997 12/31/99
------------- ------------- ------------- ------------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ (1,703,989) $ (392,310) $ 0 $ (2,098,299)
Adjustments to reconcile net income (loss)
to cash used by operating activities:
Stock issued for expenses 996,300 0 0 996,300
Amortization 0 0 0 50
Changes in assets and liabilities:
Prepaid expenses (145,327) 0 0 (145,327)
Accounts payable and accrued expenses 148,934 59,979 0 208,913
Payable - officer (70,200) 70,200 0 0
------------- ------------- ------------- ------------------
NET CASH USED BY
OPERATING ACTIVITIES (774,282) (262,131) 0 (1,038,363)
INVESTING ACTIVITIES
Purchase equipment (142,864) 0 0 (142,864)
Organization costs 0 0 0 (50)
Security deposits (88,642) 0 0 (88,642)
------------- ------------- ------------- ------------------
NET CASH USED BY
INVESTING ACTIVITIES (231,506) 0 0 (231,556)
FINANCING ACTIVITIES
Proceeds from sale of common stock 1,235,332 0 0 1,237,332
Loans 20,000 25,000 0 45,000
Cash from subsidiary 0 237,131 0 237,131
------------- ------------- ------------- ------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,255,332 262,131 0 1,519,463
------------- ------------- ------------- ------------------
INCREASE IN CASH
AND CASH EQUIVALENTS 249,544 0 0 249,544
Cash and cash equivalents at beginning of year 0 0 0 0
------------- ------------- ------------- ------------------
CASH & CASH EQUIVALENTS
AT END OF YEAR $ 249,544 $ 0 $ 0 $ 249,544
============= ============= ============= ==================
</TABLE>
SUPPLEMENTAL INFORMATION
During 1999, the Company issued 20,000 shares of its restricted common stock to
retire debt of $20,000. The Company also incurred debt of $28,812 related to the
purchase of equipment.
See notes to Consolidated Financial Statements.
F-5
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Principals of Consolidation
The financial statements for 1999 include the accounts of the
Company and its wholly owned subsidiaries VisionCorp, Inc.
(inactive in 1999), Visionglobal Corporation (inactive in 1999),
and VisionGlobal Network Corporation.
Accounting Methods
The Company recognizes income and expenses based on the accrual
method of accounting.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends.
Organization Costs
The Company amortized its organization costs over a five year
period.
Stock Options
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations in accounting for its employee
stock options rather than adopting the alternative fair value
accounting provided for under Financial Accounting Standards Board
("FASB") FASB Statement No. 123, Accounting for Stock Based
Compensation (SFAS 123).
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 disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investments with an original maturity of three months or
less when purchased to be cash equivalents.
Loss per Share
Loss per common share is computed by dividing net loss by the
weighted average shares outstanding during each period.
Equipment
Equipment will be depreciated over five to seven years beginning
in 2000. All equipment was purchased in late 1999.
Income Taxes
The Company records the income tax effect of transactions in the
same year that the transactions enter into the determination of
income, regardless of when the transactions are recognized for tax
purposes. Tax credits are recorded in the year realized. Since the
Company has not yet realized income as of the date of this report,
no provision for income taxes has been made.
In February, 1992, the Financial Accounting Standards Board
adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, which supersedes substantially all
existing authoritative literature for accounting for income taxes
and requires deferred tax balances to be adjusted to reflect the
tax rates in effect when those amounts are expected to become
payable or refundable. The Statement was applied in the Company's
financial statements for the fiscal year commencing January 1,
1993.
At December 31, 1999 a deferred tax asset has not been recorded
due to the Company's lack of operations to provide income to use
the net operating loss carryover of $1,998,709 which expires as
follows:
F-6
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
<TABLE>
<CAPTION>
Year Ended Expires Amount
----------------------- ------------------------- --------------
<S> <C> <C> <C>
December 31, 1986 December 31, 2001 $ 1,950
December 31, 1987 December 31, 2002 10
December 31, 1988 December 31, 2003 10
December 31, 1989 December 31, 2004 10
December 31, 1990 December 31, 2005 10
December 31, 1991 December 31, 2006 10
December 31, 1998 December 31, 2018 383,060
December 31, 1999 December 31, 2019 1,613,649
--------------
$ 1,998,709
==============
</TABLE>
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Utah
on April 16, 1986 as Flamingo Capital, Inc. and has been in the
development stage since incorporation. On December 30, 1993, the
Company was dissolved as a Utah corporation and reincorporated as
a Nevada corporation. On March 3, 1998, the name was changed to
VisionGlobal Corporation.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000 shares of
its common stock to Capital General Corporation for $2,000 cash,
for an average consideration of $.002 per share. The Company's
authorized stock includes 100,000,000 shares of common stock at
$.001 par value.
NOTE 4: RELATED PARTY TRANSACTIONS
During 1999, the Company's President received compensation of $
700,000, including stock valued at $575,000.
During 1998, the Company's President received compensation of
$25,000. An entity controlled by the President was paid $23,916
for expenses paid on behalf of the Company. At December 31, 1998,
the Company owed $70,200 to its President for expenses paid on
behalf of the Company.
NOTE 5: ACQUISITION OF SUBSIDIARY
On January 16, 1998, the Company entered into an agreement with
all of the shareholders of VisionCorp, Inc., ("VisionCorp") a
Delaware corporation, to acquire all of the outstanding shares of
common stock of VisionCorp, so that VisionCorp would become a
wholly owned subsidiary of the Company. The consideration for the
purchase was the issuance of ten million shares of the Company's
common stock in exchange for all of the outstanding shares of
VisionCorp.
Since the Company issued ten million shares of its common stock in
the transaction to VisionCorp shareholders, the holders of all of
the common stock of VisionCorp became control shareholders in the
Company.
NOTE 6: INCOME TAXES
Income tax expense was $0 for the years ended December 31, 1999,
1998, and 1997. Such amounts differ from the amounts computed by
applying the United States Federal income tax rate of 34% to loss
before income taxes as a result of the following:
F-7
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE 6: INCOME TAXES (continued)
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Computed "expected" tax benefit $ (579,356) $ (133,385) $ 0
Decrease (increase) in income tax benefit
resulting from:
Change in valuation allowance for
deferred federal, state, and local
income tax assets 579,356 133,385 0
State income taxes and other, net 0 0 0
------------- ------------- -------------
$ 0 $ 0 $ 0
============= ============= =============
</TABLE>
The tax effects of temporary differences that give rise to a
substantial portion of the deferred income tax assets are
presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net operating loss carryforwards $ 682,706 $ 133,385 $ 0
------------- ------------- -------------
Total gross deferred tax assets 682,706 133,385 0
Less valuation allowance (682,706) (133,385) 0
------------- ------------- -------------
Net deferred tax assets $ 0 $ 0 $ 0
============= ============= =============
</TABLE>
The valuation allowance for deferred tax assets was $682,706 and
$133,385 at December 31, 1999 and 1998, respectively. The net
change in the total valuation allowance for the period ended
December 31, 1998 was $549,321. The net change in the total
valuation allowance for the year ended December 31, 1998 was
$133,385.
During the years ended December 31, 1999, 1998, and 1997, the
Company made no Federal income tax payments.
At December 31, 1999, the Company has approximately $1,999,000
available in net operating loss carryforwards for income tax
purposes. These carryforwards expire in 2001 through 2019. Due to
a change in control and business activity, the pre-1999 net
operating loss carryforwards will most likely never be realized.
NOTE 7: LOANS PAYABLE
At December 31, 1999, the Company owes $25,000 to an entity. The
amount bears interest at 11%. Accrued interest at December 31,
1999 is $4,362.
NOTE 8: 1999 EVENTS
In August of 1999, the Company entered into a plan and agreement
of merger with Lone Peak Research Corp. ("Lone Peak"), a Utah
corporation which will be engaged in providing internet services.
The Company issued 100,000 shares to acquire Lone Peak as a wholly
owned subsidiary. Lone Peak subsequently merged with the Company
and Lone Peak ceased to exist.
In February, 1999, the Company granted 5,000,000 stock options to
its largest shareholder, 150,000 options to its
secretary/treasurer and 50,000 options to another shareholder. The
options have an exercise price of $.50 per share and expire in
February, 2004. Under the Black-Sholes model, the 5,000,000
options have a value of about $3,639,000, the 150,000 options have
a value of about $109,200, and the 50,000 options have a value of
about $36,400.
NOTE 9: STOCK SUBSCRIPTION
During 1999, the Company sold 3,453,250 shares of restricted
common stock for $2,132,000. At December 31, 1999, $1,536,768 had
not been received. $886,768 was received prior to the issuance of
these financial statements. The Company has received a promissory
note for the other $650,000.
F-8
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE 10: LEGAL MATTERS
A shareholder has filed a case involving claims for breach of
contract, conversion and a request for relief based on purported
stock transfers of 200,000 shares of the Company's common stock in
1998. The Company contends the stock transfers were without
consideration and void, and placed stop transfer orders on the
stock certificates. Plaintiffs seek an injunction ordering the
removal of the stop transfer orders, claim money damages and claim
entitlement to an additional 100,000 shares of stock, which the
Company denies. A motion for a temporary restraining order and
preliminary injunction seeking removal of the stop transfer orders
was denied. At an April 5, 2000 scheduling conference, the Court
established a trial date of August 15, 2000 and a discovery
cut-off date of June 26, 2000, and ordered the parties to conduct
a mediation no later than May 18, 2000. No discovery has been done
by either side. Plaintiff's latest settlement demand is
$1,000,000. The Company believes it has valid defenses to all
claims asserted against it. However, at this time prior to any
discovery, it is impossible to predict the likely outcome of this
matter. The prospects of settlement appear reasonable.
NOTE 11: CONTRACT PAYABLE
Contract payable at December 31, 1999 is as follows:
Principle Balance
Interest 1999
Rate Current Long-term
---- ------------- -------------
Ford credit 11.50% $ 4,524 $ 24,288
============= =============
Scheduled principal reductions of the contract payable are as
follows:
2000 $ 4,524
2001 5,072
2002 5,688
2003 6,377
2004 7,151
-----------
$ 28,812
===========
NOTE 12: STOCK OPTIONS
The Company has granted stock options to various employees.
The President and Chief Executive Officer has been granted options
with the following terms:
Number Vesting Price
of options Date per share
----------------- ------------- ------------
2,000,000 2/1/2000 $ .10
1,000,000 8/1/2000 .50
1,000,000 8/1/2001 1.00
1,000,000 8/1/2002 1.50
1,000,000 8/1/2003 2.00
-----------------
6,000,000
Total possible proceeds to the Company: $5,200,000.
Under the Black-Sholes model, the options have a value of about
$11,969,200.
The Senior Vice President and Chief Financial Officer has the
following options:
Number Vesting Price
of options Date per share
----------------- ------------- ------------
75,000 2/7/2001 $ 1.00
75,000 2/7/2002 1.50
75,000 2/7/2003 2.00
75,000 2/7/2004 2.50
-----------------
300,000
F-9
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE 12: STOCK OPTIONS (continued)
Total possible proceeds to the Company: $525,000.
Under the Black-Sholes model, the options have a value of about
$3,002,800.
The Executive Vice President and Chief Operating Officer has the
following options:
Number Vesting Price
of options Date per share
----------------- ------------- ------------
1,500,000 2/1/2000 $ .10
1,000,000 8/1/2000 .50
1,000,000 8/1/2001 1.00
500,000 8/1/2002 1.50
500,000 8/1/2003 2.00
-----------------
4,500,000
Total possible proceeds to the Company: $3,400,000.
Under the Black-Sholes model, the options have a value of about
$8,276,150.
The Senior Vice President of Engineering has the following
options:
Number Vesting Price
of options Date per share
----------------- ------------- ------------
75,000 7/31/2000 $ 2.00
75,000 acceptance
of prototype 2.00
50,000 7/31/2002 2.00
50,000 7/31/2003 2.00
-----------------
250,000
Total possible proceeds to the Company: $500,000.
Under the Black-Sholes model, the options have a value of about
$464,650.
The Senior Financial Analyst has the following options:
Number Vesting Price
of options Date per share
----------------- ------------- ------------
15,000 1/17/2001 $ 2.00
15,000 1/17/2002 2.50
15,000 1/17/2003 3.00
10,000 1/17/2004 3.50
-----------------
55,000
Total possible proceeds to the Company: $147,500.
Under the Black-Sholes model, the options have a value of about
$514,300.
The Manager of Marketing & Promotions has the following options:
Number Vesting Price
of options Date per share
----------------- ------------- ------------
2,500 10/8/2000 $ 2.00
2,500 10/8/2001 2.50
2,500 10/8/2002 3.00
2,500 10/8/2003 3.50
-----------------
10,000
F-10
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE 12: STOCK OPTIONS (continued)
Total possible proceeds to the Company: $27,500.
Under the Black-Sholes model, the options have a value of about
$18,100.
NOTE 13: COMMITMENTS
The Company leases office space for its corporate headquarters in
San Francisco under a five year lease that expires December 31,
2004. Monthly rent is $14,221 for the first year with 5% increases
each year thereafter. Future lease expense under this lease is
expected to be as follows:
Year ending December 31, 2000 $ 170,651
Year ending December 31, 2001 179,184
Year ending December 31, 2002 188,143
Year ending December 31, 2003 197,550
Year ending December 31, 2004 207,428
-------------
$ 942,956
=============
The Company maintains an apartment in San Francisco for officers
and directors to use when they travel to San Francisco. The lease
was for six months at $4,000 per month and expired on February 29,
2000. The lease was renewed at $3,500 per month for an additional
twelve months.
The Company leases space for its research operations in American
Fork, Utah. The lease is from October 1, 1999 through September
30, 2002. Monthly rent is $7,117 for the first year, $7,331 for
the second year and $7,551 for the third year. Future lease
expense is expected to be as follows:
Year ending December 31, 2000 $ 86,046
Year ending December 31, 2001 88,632
Year ending December 31, 2002 67,954
-------------
$ 242,632
=============
The Company is in the process of finalizing another lease in
Hayward, California to be effective August 1, 2000 for five years.
Monthly payments will be as follows: $27,065 for the first year,
$28,380 for the second year, $29,695 for the third year, $31,010
for the fourth year, and $32,320 for the fifth year. Future lease
expense is expected to be as follows:
Year ending December 31, 2000 $ 135,325
Year ending December 31, 2001 331,355
Year ending December 31, 2002 347,135
Year ending December 31, 2003 362,915
Year ending December 31, 2004 378,670
Year ending December 31, 2005 226,240
-------------
$ 1,781,640
=============
The Company has a twelve month non-cancellable lease on equipment
with a cost of about $458,000. At December 31, 1999 the Company
had paid three of the twelve payments. Monthly payments are about
$15,370 and will resume when all of the equipment is placed into
service. Future expected payments are $138,330. The Company has
the option to purchase the equipment at the end of the twelve
month rental period for about $353,000.
Rent expense was $88,747 for the year ended December 31, 1999
($26,333 in 1998).
The Company has employment agreements with several individuals.
The Company's President has a seven year agreement which expires
August 1, 2006. The agreement calls for salary of $250,000 per
year with an increase to $275,000 per year when a certain project
becomes effective. Future expected payments are about $1,600,000.
The Senior Vice President and Chief Financial Officer has a five
year agreement which expires February 7, 2005. The agreement calls
for a salary of $175,000 per year with an increase to $200,000 per
year when the Company has received funding in excess of $25
million. Future expected payments are about $875,000.
F-11
<PAGE>
VISIONGLOBAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE 13: COMMITMENTS (continued)
The Executive Vice President and Chief Operating Officer has a
seven year agreement which expires August 1, 2006. The terms are
the same as for the Company's President.
The Senior Vice President of Engineering has a five year agreement
which expires July 1, 2004. The agreement calls for a salary of
$120,000 per year. Future expected payments are about $550,000.
NOTE 14: GOING CONCERN ITEMS
The financial statements are presented on the basis that the
Company is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business over a reasonable length of time. At December 31, 1999,
the Company has an accumulated deficit of $(2,098,299), and a loss
from operations for 1999 of $(1,703,989). The Company has a
substantial need for working capital.
Management intends to raise from $72,000,000 to $125,000,000,
which will provide sufficient working capital for two years.
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from VisionGlobal Corporation and Subsidiaries December 31, 1999
financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000894535
<NAME> VisionGlobal Corpoation
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.00
<CASH> 249,544
<SECURITIES> 0
<RECEIVABLES> 886,768
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,281,639
<PP&E> 171,676
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,541,957
<CURRENT-LIABILITIES> 238,437
<BONDS> 24,288
0
0
<COMMON> 22,034
<OTHER-SE> 1,257,198
<TOTAL-LIABILITY-AND-EQUITY> 1,541,957
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,703,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,362
<INCOME-PRETAX> (1,703,989)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,703,989)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,703,989)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
