SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 2001
-------------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
----------- ------------
Commission file number 0-27043
-------
E-VIDEOTV, INC.
--------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 51-0389325
------------------------------- ---------------------
(State or Other Jurisdiction of IRS Employer
Incorporation or Organization) Identification No.)
7333 E. Doubletree Ranch Rd, Scottsdale, AZ 85258
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)
480-778-1499
--------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name Of Each Exchange
Title Of Each Class On Which Registered
---------------------- ---------------------
---------------------- ---------------------
---------------------- ---------------------
Securities registered under Section 12(g) of the Exchange Act:
Common stock, par value $0.0001 per share
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
State issuer's revenues for its most recent fiscal year. Nil
---
-1-
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold or the average bid and asked prices of such common equity, as of
a specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)
$883,548 As of March 22, 2002
------------------------- -----------------------------
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common shares, as of the latest practicable date: 29,451,594 As of March 22,
2002
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c)of the Securities Act of 1933. The listed documents should be clearly
described for identification purposes.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
-2-
TABLE OF CONTENTS
PART I.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . 4
Item 2. Description of Property. . . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 10
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 5. Market for Common Equity and Related Stockholder Matters.. . . . 11
Item 6. Management's Discussion and Analysis and Plan of Operation.. . . 11
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 13
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 30
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act. . . . . . . . 31
Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 33
Item 11. Security Ownership of Certain Beneficial Owners and Management . 34
Item 12. Certain Relationships and Related Transactions . . . . . . . . . 35
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 36
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-3-
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL DEVELOPMENT OF THE BUSINESS
The Company was incorporated in Delaware on July 25, 1997 under the name Oro
Rico Mining Corporation. On August 25, 1997, ORM, Inc., an inactive company
incorporated in Colorado on July 25, 1997, was merged into the Company. The
name of the Company was changed to Asia Pacific Enterprises, Inc. on October 16,
1997. On June 23, 1999, the Company acquired EVideo U.S.A., Inc. by issuing
6,623,016 of its common shares to EVIDEO International,Inc. On August 6, 1999
the Company changed its name to e-VideoTV,Inc.
Unless otherwise indicated, all references to the Company include the operations
of the Company and its wholly owned subsidiary, EVideo U.S.A., Inc.
The primary business of the Company is to develop, deploy, acquire and license
technologies related to Video Compression and the electronic delivery of videos.
The Company believes that a growth opportunity exists for the delivery of video
content over wireless connectivity. This includes video cell phones, wireless
PDAs (Personal Digital Assistants), other wireless hand held devices, wireless
computer networks, and remote video surveillance. Bandwidth limitations, on a
per user basis, in these wireless networks typically require efficient digital
video compression technologies.
In support of this strategy, the Company has acquired Ziracom Digital
Communications and its video compression technologies. Ziracom's proprietary
video compression technologies offer several advantages for video transmission
in the entertainment, Internet and wireless industries. Ziracom has been
developing video compression technologies targeted at bandwidth restrained
applications. This video compression technology is currently being expanded to
incorporate features applicable to low and medium bandwidth wired and wireless
connectivity.
The Company also believes that the VOD (Video-On-Demand) industry will move
towards a download model, where movies and videos will be downloaded as
compressed digital files to a hard drive located in the personal computer, home
terminal or set top box. The cost of hard drive storage has shown a decreasing
trend and is enabling such new product and service opportunities. A limiting
factor for electronically delivering video programs is the available bandwidth.
Although broadband accessibility is increasing, the massive size of digital
video files compels the use of efficient digital video compression technologies.
For some time, the Company has felt that the major Hollywood movie studios would
begin offering their feature films for electronic delivery to the home as a
Video-On-Demand offering. The Company had obtained the exclusive rights from
Macrovision Corporation to use their analog copy protection technology for
Pay-Per-View (PPV) and Video-On-Demand (VOD) movies digitally downloaded to set
top boxes in "faster than real time"(FTRT)in cable, satellite and broadband
applications in the USA.
-4-
After reviewing the latest market information, the Company concluded that it
would be at least 12 to 18 months, and possibly longer, before significant moves
would be made by the major studios in the area of VOD. The Company also reviewed
the required financial obligations to Macrovision for continuing the agreement,
and concluded that without foreseeable revenue from this area that it would not
be prudent to continue with the license agreement and negotiated a cancellation
of this agreement with Macrovision.
At the present time, the Company is in the development stage, and has sold only
one license to date. It did not generate any revenue in 2001 but in the first
quarter of 2002, has generated revenues of $400,000 and has several sales
contract negotiations underway at this time. The Company currently has 10
employees, who are employed by the Company through consulting contracts
and/or as employees. The Company's head office is located in Scottsdale,
Arizona. The Company expects to expand its workforce in the next 12 months.
All of the shares issued and to be issued to EVIDEO International, Inc. for the
acquisition of EVideo U.S.A., Inc. have been released from escrow. As the
business model has changed significantly from what was contemplated at the time
of the transaction, both the Board of Directors and other significant
shareholders deemed it both applicable and appropriate to cancel the escrow
agreement and release the shares.
COMPETITION
Other companies that provide certain forms of video compression software
technology include Microsoft, Real Networks, Apple Computer, Sorenson, etc. The
majority of these have been designed to provide video solutions over the
Internet and require the use of a powerful Personal Computer platform to receive
and play the video content.
Since these compression products available from the major competitors tend to
require large computer resources most are not readily adaptable to applications
like wireless cell phones. Also some of these products are not adaptable to
other hand-held devices for similar reasons.
Although the Company also utilizes the Internet and PC platforms for testing and
demonstration, and has products available for this environment, the Company is
working to also target its technology for deployment in smaller platforms such
as wireless PDAs, video cell phones, etc. The Company believes this will give it
the technological edge to enter these markets more quickly than larger
competitors. The Company also plans to maintain a market edge by offering to
create customized versions as needed by large commercial customers.
-5-
THE INDUSTRY
The Company has identified several market areas that are potential users of the
Company's technologies. These include electronic delivery to the home of VOD
movies, video cell phones, wireless PDA's, and remote video surveillance.
Electronically delivered VOD movies will compete directly with the video store
business that represents $15 billion in revenue per year. Cable operators,
satellite operators, and broadband DSL operators are eager to enter the VOD
market and capture a share of this revenue. These operators will offer VOD by
electronically delivering movies to the home with full VCR-like control over the
movie.
The Company believes that the next major growth in the home entertainment
industry is focused on Personal Television, powered by set-top boxes with hard
drives that can store programs, VOD movies, provide time shifting and Personal
TV - channels (PTV). Many have sufficient capacity to store 10-15 movies. Video
compression technology is applicable both for the delivery of the video content
and for the compression/storage on the hard drive.
The major Hollywood studios have announced that they intend to undertake VOD
trials for the delivery of feature films over the Internet using video
compression. However, the specific timelines and operational details are not yet
known. The Company believes its technologies would be of benefit to this market.
The Company believes that the next growth area for the cell phone market will be
video cell phones. Each phone would contain a tiny camera and require both
internal video compression encoding for the camera and decoding for the display.
The Company believes that a growth opportunity exists for delivering video
signals to other handheld wireless devices such as PDAs and other hand-held
computers. The screen displays tend to be larger than those on video cell phones
and users may be more apt to watch video content such as news, instructional
videos, or corporate communications videos.
The Company also believes that a market opportunity exists for remote video
camera surveillance. Video compression will allow these remote cameras to send
their signals over lower cost digital networks, including wireless networks
allowing surveillance in transportation vehicles. This market will require a
cost-effective, low-power, compact-size video compression encoding module.
OTHER TECHNOLOGIES & PATENT PENDING
The Company has also developed a technical methodology related to the
pre-caching of video programs and movies in set top boxes prior to the viewer
ordering the movie content. This innovation offers industry advantages in
delivery efficiencies and consumer satisfaction. The Company has an outstanding
patent application with the US Patent Office. The Company has subsequently
learned that an existing patent by others has some similar claims. The Company
has not yet received any further advice or requests from the US Patent Office on
this patent application.
-6-
In addition, the Company is continuously seeking and reviewing issued patents
that it may wish to acquire to compliment the Company's work in the areas of
video compression, VOD and caching.
The Company plans to explore these opportunities. While the company wishes to
acquire existing patents, it should be noted that it currently does not have the
cash resources to make such patent acquisitions. None-the-less, the Company will
continue to pursue opportunities in video compression technology and will
continue to seek out financial assistance either by loans or equity.
During the year, the company spent $214,000 on research and development. This is
represented by fees paid or payable to Nickerson and Bennett. In 2000 the
company spent $254,000 on research and development. These expenses are included
in management and consulting fees.
RISK FACTORS
An investment in stock of the Company is highly speculative, involves a high
degree of risk, and should not be made by any person who cannot afford the loss
of the entire investment. The following factors should be considered carefully
in evaluating the Company and its business.
Lack of Prior Operations and Experience
The Company is a development stage company, has no revenues from operations and,
except for the services of its officers and directors and the cash on hand, has
no other significant tangible assets. Accordingly, there can be no assurance
that the Company will operate at a profitable level. The Company's proposed
business involves selling software and licensing technology related to video
compression and to the electronic delivery of videos. Future development and
operating results will depend on many factors, including the initial sales, sign
up of customers and licensees, the demand for the Company's technology, price
sensitivity, and the Company's ability to develop markets and control costs. In
addition, the Company's future prospects must be considered in light of the
risks, expenses and difficulties frequently encountered in establishing a new
business in the video communications industry which is characterized by intense
competition, rapid technological change, significant regulation and significant
consolidation of ownership.
Acceptance of Company's Technology;
There can be no assurance that the Company's technologies will be purchased or
licensed in large quantities. Although the Company believes that there will be a
large market for its video compression technology, there can be no assurance
that a profitable market will develop, or how quickly such development may
occur. If potential customers do not perceive that the Company's technologies
offers them technical benefits or image quality improvements that they are
willing to pay for then the Company will be unable to continue as a going
concern.
-7-
Additional Financing Required - Dilution to Present Shareholders
The Company does not currently have sufficient funds to reach full market
penetration of its technology and generate significant sales income and be
competitive in the industry. The Company's capital requirements will depend on
a variety of factors, including the signing up of customers, the time involved
to achieve significant sign ups, the acquisition of further licenses, patents,
and other technologies and market acceptance of and demand for its technologies.
The timing and amount of such capital requirements cannot be accurately
predicted. There is no assurance that additional funds will be available from
any source when needed by the Company. If additional funds are not available,
the Company may not be able to continue in business.
In order to raise additional capital, the Company may issue additional shares of
common stock at prices that will be determined by the Company's Board of
Directors. The issuance of any such shares may result in a reduction of the Net
book value per share or market price of the outstanding shares of the Company's
common stock, and will reduce proportionate ownership and voting power of all
other shareholders. Further, any such issuance may result in a change in
control of the Company.
The Company is currently negotiating with several parties regarding additional
funding. The outcome of these negotiations will not be known for at least 60
days.
Stock Options
The Company has approved a stock option plan that sets aside 7,500,000 of the
company's common stock for issuance upon the exercise of stock options. During
the year, the following stock options were granted:
Date Granted Optionee No. of Shares Effective Date Expiration Date
------------- -------------------- ------------- -------------- ---------------
Nov 30, 2000 Glen Williamson 155,000 Nov 30, 2000 Nov 30, 2005
Nov 30, 2000 Karen Blandini 155,000 Nov 30, 2000 Nov 30, 2005
Nov 30, 2000 Dan Cravens 120,000 Nov 30, 2000 Nov 30, 2005
Nov 30, 2000 Phil Dion 120,000 Nov 30, 2000 Nov 30, 2005
Nov 30, 2000 Jennifer Schrier 20,000 Nov 30, 2000 Nov 30, 2005
Nov 30, 2000 Peter Van der Gracht 50,000 Nov 30, 2000 Nov 30, 2005
Nov 30, 2000 Lisa Payne 50,000 Nov 30, 2000 Nov 30, 2005
Sub-total ----------
670,000
Nov 30, 2000 Peter Wilson 400,000 Nov 30, 2000 Nov 30, 2005
----------
1,070,000
Options of 1,000 belonging to Williamson were exercised during 2001.
On Jan 12, 2001, the following options were granted to Roy Bennett-1,100,000,
Robert Dinning - 1,100,000, Harvey Nickerson - 1,100,000, and Charles Weber -
300,000. Mr. Bennett and Mr. Weber both resigned from the company and their
options expired. Subsequent to the year end options to Mr. Dinning, Mr.
Nickerson and Mr. Wilson were cancelled and new options were established as
follows:
Jan 23, 2002 Robert Dinning 1,000,000 Mar 15, 2002 Mar 15, 2007
Jan 23, 2002 Harvey Nickerson 1,000,000 Mar 15, 2002 Mar 15, 2007
Jan 23, 2002 Gianfranco Fiorio 750,000 Mar 15, 2002 Mar 15, 2007
Jan 23, 2002 Peter Wilson 600,000 Mar 15, 2002 Mar 15, 2007
Mar 15, 2002 Rod Gunn 750,000 Mar 15, 2002 Mar 15, 2007
----------
Sub-total 4,100,000
----------
Total Options as at
March 22, 2002 4,769,000
==========
The issuance of options under the stock option plan could adversely affect the
market price of the Company's common stock and could impair the Company's
ability to raise additional capital through the sale of its equity securities or
debt financing. Exercise of any such options will result in dilution to the
proportional interests of shareholders of the Company at the time of exercise
and, to the extent that the exercise price is less than the book value of the
common stock at that time, to the book value per share of the common stock.
-8-
No Dividends
The Company never has paid and does not anticipate paying dividends on its
common stock in the foreseeable future. Retained earnings, if any, will be
utilized for the operation and expansion of the Company's business.
Limited Public Market for Common Stock
The Company's common stock is traded in the over-the-counter market. An
investment in the Company's common stock should be considered highly illiquid,
and there can be no assurance that a market for the Company's common stock will
continue.
Penny Stock Regulation
The Securities and Exchange Commission (the "SEC") has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks". Penny stocks generally are equity securities with a price of less than
$5.00 per share (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ National Market System, provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document prepared by the
SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from such rules, the broker-dealer must
make a special written determination that a penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure requirements often have the effect of reducing
the level of trading activity in any secondary market for a stock that becomes
subject to the penny stock rules. The Company's common stock is subject to the
penny stock rules, and accordingly, owners of the Company's common stock may
find it difficult or impossible to sell their shares.
Need for Experienced Management and Key Employees
-9-
The Company is dependent upon the services of a few key management and technical
personnel. The loss of any one of their services, or an inability to recruit and
retain additional qualified personnel, could have a material adverse effect on
the Company.
Corporate Size Disadvantage & New Technologies
The video compression industry is characterized by a large percentage of the
industry controlled by a small number of large companies. The Company will be
at a disadvantage in negotiating licenses with other companies having larger
technical and legal staffs, established market positions and greater financial
and operational resources than the Company. There can be no assurance that the
Company will be able to conclude licenses or sales in a timely manner. There
can be no assurance that other companies will not succeed in developing
products, or new competing technologies that are more effective or more
effectively marketed than technologies marketed by the Company or that render
the Company's technology obsolete.
Dependence on Third Parties
The Company intends to sell licenses and technologies to other companies that
will, in turn, provide and sell the end products. The Company expects its
success will be dependent upon the deployment of products and services by
others.
Control by Principal Shareholders.
The Company's officers, directors and principal shareholders own approximately
45.28% of the Company's outstanding common stock. The Company's officers and
directors will therefore be able to influence the election of the Company's
Directors and thereby direct the Company's policies and affairs.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not currently own any material amount of property or equipment.
ITEM 3. LEGAL PROCEEDINGS.
The Company is named in a lawsuit pertaining to Ziracom and three of its former
directors. This lawsuit appears to be without merit and is being vigorously
defended. e-VideoTV, Inc is named even though it was not even a shareholder at
the time of the allegations. At the present time a motion is being filed to
eliminate e-VideoTV, Inc. from the lawsuit. The Company has declined an offer to
settle this matter. The Company is not aware of any proceeding that a government
authority is contemplating.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of the fiscal year covered by this report.
-10-
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock has been quoted on the National Association of
Securities Dealers' Over-the-Counter market since May 11, 1999. There is no
other public trading market for the Company's equity securities.
The following table summarizes trading in the Company's common stock, as
provided by quotations published on the OTC Bulletin Board for the period
indicated. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
Quarter ended High Bid Low Bid High Bid Low Bid
------------------ --------- -------- -------- -------
March 31, 2001 $ 0.65 $ 0.59 March 31,2000 $ 5.19 $4.81
June 30, 2001 $ 0.84 $ 0.61 June 30, 2000 $ 2.69 $2.53
September 30, 2001 $ 0.40 $ 0.33 Sept 30, 2000 $ 0.81 $0.68
December 31, 2001 $ 0.06 $ 0.05 Dec 31, 2000 $ 0.30 $0.22
As of March 22, 2002, there were approximately 390 holders of record of the
Company's common stock.
The Company has not paid, and, in the foreseeable future, the Company does not
intend to pay, any dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
The Company is focusing on video compression technologies used to electronically
deliver video signals in such applications as VOD movies-to-the-home, video cell
phones, wireless hand-held computers and video surveillance. The Company has
moved its focus away from the analog copy protection used in home movie devices
and set-top boxes for video received in Faster Than Real Time (FTRT) and more
towards video compression technologies. To this end, it negotiated a
cancellation of its license with Macrovision Corp and in return Macrovision
agreed to return the 502,713 common shares of e-VideoTV, Inc it had received in
2000. The Company felt the continuing financial obligations attached to the
license far exceeded the return projected in the next 18 months. The Company
decided that funds were better utilized in the area of video compression
technologies.
The Company commenced negotiations for the acquisition of Ziracom Digital
Communications Inc, and reached a preliminary agreement in October 2001. On
February 14, 2002, the Company completed the acquisition of Ziracom by issuance
of 8,655,139 restricted common shares for 100% of the outstanding shares of
Ziracom. At December 31, 2001, the Company had advanced $269,744 to Ziracom to
assist in completion of its version 4.1 alpha omega video compression
technology.
-11-
As a result of the termination of the license agreement with Macrovision, the
Company wrote off distribution rights and software development costs in the
amount of $892,904.
During the year, the Company completed private placements for 588,000 common
shares, resulting in proceeds of $444,000. These shares were sold at an average
price of $0.75 per share. The Company has also issued 45,000 common shares re
$45,000 received in 2000 and settled in 2001 for shares at $1.00 each. During
the year, the Company negotiated financing by way of a convertible debenture of
$1,000,000 which netted the Company $836,750 after expenses. At December 31,
2001 the debenture holder had converted $66,630 of the debt into 475,000 common
shares. These shares are free trading pursuant to a registration statement that
went effective August 22, 2001.
The Company settled a debt of $59,500 by issuance of 119,000 common shares at
$0.50 per share. Management fees outstanding of $238,000 were also settled by
issuance of 915,384 restricted common shares at $0.26 per share.
Activities for the year resulted in the net issuance of 1,640,671 common shares,
increasing the shares outstanding to 18,397,743. Subsequent to the year-end, an
additional 8,655,139 common shares were issued to complete the acquisition of
Ziracom Digital Communications Inc.
The Company strengthened its management team with the addition of Gianfranco
Fiorio and Rod Gunn to its team. Mr. Fiorio has extensive experience in
financial and sales management and will assist the Company in sales
opportunities on the east coast of the USA. He assumed the role of CEO on Feb 1,
2002. Mr. Gunn was appointed President and COO on March 15, 2002. Mr. Gunn has
had a 35-year career in broadcasting and business entertainment. Mr. Gunn will
become the Chief Operating Officer of the Company and direct its marketing and
technology efforts. Mr. Dinning will continue as Chairman and CFO.
The Company is committed to continuing development of video compression
technology in the next 12 months as it feels video content for wireless
applications is the market direction. These wireless applications include video
cell phones, wireless computer networks, remote video surveillance, and wireless
PDA's. Bandwidth limitations requires efficient video compression technologies
and Ziracom technology is applicable for both high and low bandwidth
applications.
In the next 12 months, the Company estimates it will require funding for:
Continuous development of its alpha omega video compression as well as marketing
costs to market its technology. The majority of these funds are estimated to be
generated internally as marketing efforts accelerate. It plans to add additional
technical personnel to assist in further product development.
The Company further recognizes that its development schedule will be delayed
unless additional capital required is available when needed. The Company
acknowledges that it currently does not have sufficient capital to continue its
operation. It is actively pursuing financing opportunities and the success of
this activity will not be known for 60 days.
Inflation has not been a factor during the year ending December 31, 2000.
-12-
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included in this Annual Report on Form
10-KSB:
PAGE #
Report of the Independent Auditors 14
Consolidated Balance Sheets as at December 31, 2001 and
2000 15
Consolidated Statements of Operations for the
cumulative period from inception, March 5, 1999, to
December 31, 2001, and the years ended December 31, 2001 and 2000 16
Consolidated Statements of Cash Flows for the
cumulative period from inception, March 5, 1999, to
December 31, 2001, and the years ended December 31, 2001 and
2000 17
Consolidated Statement of Shareholders' Equity from
inception, March 5, 1999, to December 31, 2001 18
Notes to the Consolidated Financial Statements 19-30
-13-
INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS
To the Shareholders of e-VideoTV, Inc.
We have audited the consolidated balance sheet of e-VideoTV, Inc. (A Development
Stage Company) as at December 31, 2001 and 2000 and the statements of
operations, cash flows and stockholders' equity for the years 2001 and 2000 and
for the period from March 5, 1999 (inception) to December 31, 2001. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 2001
and 2000 and the results of its operations and its cash flows for the years then
ended and for the period from March 5, 1999 (inception) to December 31, 2001 in
accordance with accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements have been prepared assuming
the company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the company has no established source of
revenue and is dependent on its ability to raise substantial amounts of equity
funds. This raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Vancouver, Canada GRANT THORNTON LLP
March 7, 2002 Chartered Accountants
-14-
E-VIDEOTV, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
December 31 December 31
2001 2000
=================================================================================================
ASSETS
Current
Cash $ - $ 2,276
Receivables - 6,726
Prepaid expenses 4,225 2,450
------------- -------------
4,225 11,452
Non-current receivables (Note 3) 32,500 -
Computer equipment (net of accumulated depreciation of $22,398
(2000: $10,181)) 21,097 19,622
Distribution rights and software development (Note 4) - 1,229,418
Advances to Ziracom Digital Communications, Inc. (Note 5) 269,744 -
Debt issue costs (Note 8) 113,782 -
------------- -------------
$ 441,348 $ 1,260,492
============= =============
=================================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities (Note 6) $ 233,341 $ 495,149
Loans from related parties (Note 7) 102,713 99,000
Convertible debentures (Note 8) 237,667 -
Loan payable (Note 9) 100,139 -
------------- -------------
673,860 594,149
------------- -------------
SHAREHOLDERS' (DEFICIENCY) EQUITY
Capital stock (Note 10)
Authorized:
100,000,000 shares of common stock, $0.0001 par value
5,000,000 shares of preferred stock, $0.0001 par value
Issued and outstanding:
18,397,743 (2000: 16,757,072) common shares 1,840 1,676
Additional paid-in capital 5,151,439 3,328,136
Share subscriptions 79,200 45,000
------------- -------------
5,232,479 3,374,812
Deficit accumulated during the development stage (5,464,991) (2,708,469)
------------- -------------
(232,512) 666,343
------------- -------------
$ 441,348 $ 1,260,492
============= =============
-------------------------------------------------------------------------------------------------
Continuance of operations (Note 1)
Commitments (Note 13)
Contingency (Note 15)
See accompanying notes to the consolidated financial statements.
-15-
E-VIDEOTV, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
Cumulative Year Year
March 5, 1999 Ended Ended
to December 31 to December 31 to December 31
2001 2001 2000
================================================================================================================
Revenue $ - $ - $ -
---------------- ---------------- ----------------
General and administrative expenses
Compensation expense for stock options 392,583 - 392,583
Corporate promotion 260,119 98,914 119,068
Depreciation and amortization 626,170 318,568 307,355
General corporate expenses 175,399 38,288 81,499
Interest expense 391,017 391,017 -
Management and consulting fees 1,213,738 473,833 583,265
Office expenses 188,661 73,521 101,108
Professional fees 347,197 98,826 82,450
Rent 134,732 57,143 53,761
Royalties 250,000 250,000 -
Travel 179,814 64,826 86,510
---------------- ---------------- ----------------
4,159,430 1,864,936 1,807,599
Write-off of distribution rights and software development
costs (Note 4) 1,316,935 892,904 424,031
Interest income (11,374) (1,318) (1,198)
---------------- ---------------- ----------------
Net loss $ (5,464,991) $ (2,756,522) $ (2,230,432)
================ ================ ================
Weighted average number of common shares
Outstanding 17,180,666 9,543,179
================ ================
Net loss per share, basic and diluted $ (0.16) $ (0.23)
================ ================
================================================================================================================
See accompanying notes to the consolidated financial statements.
-16-
E-VIDEOTV, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
Cumulative Year Year
March 5, 1999 Ended Ended
to December 31 to December 31 to December 31
2001 2001 2000
============================================================================================================================
Cash derived from (applied to)
Operating
Net loss for period $ (5,464,991) $ (2,756,522) $ (2,230,432)
Compensation expense for stock options 392,583 - 392,583
Write-off of distribution rights and software development costs 1,316,935 892,904 424,031
Depreciation and amortization 636,104 318,568 317,289
Amortization of debenture discount 352,490 352,490 -
Debenture Interest paid in shares 1,275 1,275 -
Management fee paid in shares 238,000 238,000 -
Subscription of shares for services 25,200 25,200 -
Change in non-cash operating capital
Receivables and prepaids 8,379 4,951 (6,272)
Payables and accruals 255,111 (207,808) 246,250
---------------- ---------------- ----------------
(2,238,914) (1,130,942) (856,551)
---------------- ---------------- ----------------
Financing
Proceeds from issuance of common shares 1,538,101 489,500 1,048,600
Shares subscribed - (45,000) 45,000
Convertible debentures issued 1,000,000 1,000,000 -
Convertible debenture issue costs (163,250) (163,250) -
Loans from related parties 162,213 63,213 99,000
Loans from parent company prior to acquisition 115,000 - -
Loan payable 100,139 100,139 -
Cash acquired on acquisition of parent company 1,001,481 - -
---------------- ---------------- ----------------
3,753,684 1,444,602 1,192,600
---------------- ---------------- ----------------
Investing
Advances to Ziracom Digital Communications, Inc. (269,744) (269,744) -
Non-current receivables (32,500) (32,500) -
Computer equipment (43,495) (13,692) -
Distribution rights (300,000) - -
License (445,000) - (415,000)
Software development (424,031) - (23,775)
(1,514,770) (315,936) (438,775)
---------------- ---------------- ----------------
Net decrease in cash - (2,276) (102,726)
Cash, beginning of period - 2,276 105,002
---------------- ---------------- ----------------
Cash, end of period $ - $ - $ 2,276
================ ================ ================
Non-cash activities not included in cash flows
Shares issued to pay management fees $ 238,000 $ 238,000 $ -
Shares issued on conversion of debentures $ 65,355 $ 65,355 $ -
Debenture interest paid in shares $ 1,275 $ 1,275 $ -
Shares issued to settle loan from related party $ 59,500 $ 59,500 $ -
Shares subscribed to settle trade payables $ 54,000 $ 54,000 $ -
Shares cancelled on termination of license $ 30,163 $ 30,163 $ -
Shares issued to acquire license $ 791,773 $ - $ 791,773
Compensation expense for stock options $ 392,583 $ - $ 392,583
Cancellation of loans from parent company on acquisition $ 115,000 $ - $ -
Value of shares issued in excess of cash acquired on
acquisition of parent company $ 95,374 $ - $ -
See accompanying notes to the consolidated financial statements.
-17-
E-VIDEOTV, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Expressed in U.S. Dollars)
Inception, March 5, 1999 to December 31, 2001
=================================================================================================================
ADDITIONAL TOTAL
NUMBER PAR PAID-IN SHARE STOCKHOLDERS'
OF SHARES VALUE CAPITAL SUBSCRIPTION DEFICIT EQUITY
---------- -------- ------------ -------------- ------------ ------------
Issuance of shares for cash on
incorporation 1 $ 1 $ - $ - $ - $ 1
Adjustment for change in share
structure resulting from
acquisition of e-Video
U.S.A., Inc. 6,623,015 661 (661) - - -
Shares outstanding at date of
acquisition of e-Video
U.S.A., Inc., previously
issued for cash, net of issue
costs 8,965,343 897 1,095,958 - - 1,096,855
Net loss, inception to
December 31, 1999 - - - - (478,037) (478,037)
----------- ------- ------------ -------------- ------------ ------------
Balance, December 31, 1999 15,588,359 1,559 1,095,297 - (478,037) 618,819
Issuance of shares for cash 666,000 67 1,048,533 - - 1,048,600
Issuance of shares to acquire
copy protection license 502,713 50 791,723 - - 791,773
Share subscriptions received - - - 45,000 - 45,000
Compensation expense for
stock options - - 392,583 - - 392,583
Net loss, year ended
December 31, 2000 - - - - (2,230,432) (2,230,432)
----------- ------- ------------ -------------- ------------ ------------
Balance, December 31, 2000 16,757,072 1,676 3,328,136 45,000 (2,708,469) 666,343
Share subscriptions received - - - 54,000 - 54,000
Issuance of shares for
subscriptions 45,000 4 44,996 (45,000) - -
Units issued for cash (Note 10) 588,000 59 443,941 - - 444,000
Issuance of shares to pay
management fees 915,384 92 237,908 - - 238,000
Issuance of shares on exercise
of stock options 1,000 - 500 - - 500
Issuance of shares in
settlement of loan from
related party (Note 7) 119,000 12 59,488 - - 59,500
Subscription of shares for
services - - - 25,200 - 25,200
Value of warrants issued as
part of debentures (Note 8) - - 486,600 - - 486,600
Beneficial conversion feature
of debentures (Note 8) - - 513,400 - - 513,400
Issuance of shares on
conversion of debentures
and interest 475,000 47 66,583 - - 66,630
Shares cancelled on
termination of copy
protection license (Note 4) (502,713) (50) (30,113) - - (30,163)
Net loss, year ended
December 31, 2001 - - - - (2,756,522) (2,756,522)
----------- ------- ------------ -------------- ------------ ------------
Balance, December 31, 2001 18,397,743 $1,840 $ 5,151,439 $ 79,200 $(5,464,991) $ (232,512)
=========== ======= ============ ============== ============ ============
See accompanying notes to the consolidated financial statements.
-18-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
1. Basis of presentation
The company was incorporated in the state of Delaware, U.S.A. on July 25, 1997
under the name Oro Rico Mining Corporation. On August 25, 1997, ORM, Inc., an
inactive company incorporated in Colorado on July 25, 1997, was merged into the
company. The name of the company was changed to Asia Pacific Enterprises, Inc.
on October 16, 1997 and to e-VideoTV, Inc. on August 6, 1999.
On June 23, 1999 the company acquired all of the outstanding shares of e-Video
U.S.A., Inc. This business combination has been accounted for as an acquisition
of the company by e-Video U.S.A., Inc.
The company had previously commenced its planned principal operations although
it had not yet earned any revenue. The company's previous operational focus was
to secure licensing operators for its Faster-Than-Real-Time ("FTRT") video on
demand service. To that end, management devoted substantially all of the
company's resources to the identification and qualification of such potential
licenses.
In November 2001, the company changed its operational focus from the licensing
of FTRT video on demand service to focus on the acquisition of technologies,
especially in the field of video compression, and sell these technologies to
interested parties and/or enter into reseller agreements. The company has sold
its exclusive license rights in the U.S.A. for analog copy protection for video
transmissions received in FTRT back to Macrovision Corporation (Note 4). The
company still has its agreement with U.S.A. Video Interactive Corp. to
exclusively sub-license their "Store and Forward Video System" patent in areas
related to digital set-top boxes with hard-drives in the U.S.A. (Note 13). This
agreement has yet to be completed.
The company will acquire (through its planned acquisition of Ziracom Digital
Communications, Inc. ("Ziracom") (Note 14)), video compression technology. The
Alpha-Omega CODEC uses a set of proprietary algorithms to analyse a video signal
and determine how best to apply its selection of compression techniques. The
compression techniques utilized in Alpha-Omega include MPEG-Discrete Cosine
Transforms, Wavelet Transforms, Color Tables, Color Quantization, and Video
Masking. The company has not yet commenced its new planned principal operations
and has not yet earned any revenues.
These financial statements have been prepared on the basis of accounting
principles applicable to a going concern which assumes that the company will
continue to operate for the foreseeable future and will be able to realize its
assets and discharge its liabilities in the normal course of operations. The
company's continued existence is dependent upon its ability to raise additional
capital and to ultimately achieve profitable operations. It is management's
intention to obtain private financing to fund the continued development of the
Ziracom compression technologies as well as the acquisition of related
technologies.
If the going concern assumptions were not appropriate for these financial
statements, then adjustments would be necessary in the carrying values of assets
and liabilities, the reported expenses and the balance sheet classifications
used.
2. Summary of significant accounting policies
Basis of presentation
These consolidated financial statements are presented in U.S. dollars in
accordance with accounting principles generally accepted in the United States of
America and include the accounts of the company and its wholly-owned subsidiary,
e-Video U.S.A., Inc.
-19-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
TRANSLATION OF FOREIGN CURRENCIES
The company considers the U.S. dollar its functional currency. Monetary assets
and liabilities are translated at the exchange rate in effect at the balance
sheet date and non-monetary assets and liabilities at the exchange rates in
effect at the time of acquisition or issue. Revenues and expenses are
translated at the rates in effect at the time of the transaction. Exchange
gains or losses arising on translation are included in net income or loss for
the period.
FINANCIAL INSTRUMENTS
The company has various financial instruments, including cash, receivables,
accounts payable and accrued liabilities, loans from related and unrelated
parties and convertible debentures. It was not practicable to determine the
fair value of the loans from a related party or the convertible debenture. The
carrying values of all other financial instruments approximates their fair
values.
DISTRIBUTION RIGHTS AND SOFTWARE DEVELOPMENT
The costs incurred to acquire the company's distribution rights and develop its
software were previously capitalized based on AICPA Statement of Position 98-1.
During 2000, as a result of a change in business focus from licensing and
distribution to concentrate solely on licensing, management determined that the
capitalized software development costs should be written off (Note 4).
The costs associated with the acquisition of distribution rights and required
payments under license agreements have been capitalized and have been amortized
over the term of the underlying license. As the company has terminated its
license with Macrovision, these capitalized costs have been written off (Note
4).
Management regularly reviews the carrying value of its distribution rights to
assess whether or not there has been an impairment in its carrying value. When
the carrying values of these assets exceed their estimated net recoverable
amounts, an impairment provision is recorded.
DEFERRED INCOME TAXES
Deferred income taxes are provided for significant carry forwards and temporary
differences between the tax basis of an asset or liability and its reported
amount in the financial statements that will result in taxable or deductible
amounts in future periods. Deferred tax assets or liabilities are determined by
applying the presently enacted tax rates and laws. A valuation allowance is
required when it is more likely than not that some portion or all of the
deferred tax asset will not be realized.
-20-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
2. Summary of significant accounting policies (Continued)
Loss per share
The company follows Statement of Financial Accounting Standard No. 128, to
calculate earnings per share. Basic loss per share is computed using the
weighted effect of all common shares issued and outstanding.
Accounting for stock options
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS No. 123"), which requires
entities to calculate the fair value of stock awards granted to employees. This
statement provides entities with the option of either electing to expense the
fair value of employee stock-based compensation or to continue to recognize
compensation expense under previously existing accounting pronouncements and to
provide pro forma disclosures of net earnings (loss) and, if presented, earnings
(loss) per share, as if the above-referenced fair value method of accounting was
used in determining compensation expense.
The company accounts for stock-based employee or director compensation
arrangements in accordance with Accounting Principles Board Opinion No. 25 -
Accounting for Stock Issued to Employees ("APB No. 25").
Stock options issued to non-employees are recorded at the fair value of the
services received or the fair value of the options issued, whichever is more
reliably measurable. Compensation is charged to expense over the shorter of the
service or vesting period. Unearned amounts are shown as deferred compensation
in stockholders' equity.
Stock issued for non-cash consideration
Stock issued for non-cash consideration is recorded at the fair market value of
the stock issued.
Recent accounting pronouncements
SFAS 141 and 142
On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 142 is effective for fiscal
years beginning after December 15, 2001; however, certain provisions of this
statement apply to goodwill and other intangible assets acquired between July 1,
2001 and the effective date of SFAS 142. Major provisions of these Statements
and their effective dates for the company are as follows:
- all business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method of accounting
is prohibited except for transactions initiated before July 1, 2001;
- intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part
of a related contract, asset or liability;
- acquired entity and can be sold, transferred, licensed, rented or
exchanged, either individually or as part of a related contract, asset or
liability;
- effective January 1, 2002, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator;
- all acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.
Management's preliminary assessment of these Statements is that they will not
have a material impact on the company's financial position or results of
operations.
-21-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SFAS 143 and 144
In July 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This Statement applies to all entities. It
applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations of lessees. This
Statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. The statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of. The provisions of the statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001.
The company is evaluating the impact of the adoption of these standards and has
not yet determined the effect of adoption on its financial position and results
of operations.
================================================================================
3. NON-CURRENT RECEIVABLES
During 2001, the company advanced $32,500 to companies that it is considering
either acquiring or entering into a business relationship with. These loans
bear no interest and have no set terms of repayment.
================================================================================
4. DISTRIBUTION RIGHTS AND SOFTWARE DEVELOPMENT
December 31 December 31
2001 2000
------------ ------------
Accumulated Net Net
Cost Amortization Book Value Book Value
----- ------------- ------------ ------------
Distribution rights $ - $ - $ - $ 240,000
Payments under license agreement - - - 989,418
----- ------------- ------------ ------------
$ Nil $ Nil $ Nil $ 1,229,418
===== ============= ============ ============
In 1999, the company paid $300,000 to a company controlled by an officer and
director for the right to distribute video movies electronically in the United
States in accordance with a system developed by that officer and director. At
the time, that company had an option to acquire an exclusive license from an
unrelated corporation (Macrovision Corporation) to use certain technology that
prevents a video from being copied on to a video cassette tape or other
unauthorized device. The rights to the technology are limited to the electronic
distribution of videos in the United States by means that transmit the video in
FTRT for subsequent playback and viewing at normal speed.
-22-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
4. DISTRIBUTION RIGHTS AND SOFTWARE DEVELOPMENT (CONTINUED)
During 2000, the company paid the optionor an additional $415,000 to maintain
and exercise the option and acquire the license. In addition to the cash
consideration, the company issued 502,713 shares of its common stock valued at
$791,773 to the licensor, which represents 3% of the company's outstanding
common shares, and agreed to issue the licensor 3 additional shares for each 97
shares the company subsequently issues to third parties.
The copy-protection license was for a five year term ending January 31, 2005 and
could be extended until January 31, 2010. A usage royalty of 1% of the gross
pay-per-view transaction fees charged to viewers was payable to the licensor.
Minimum annual royalties of $250,000 were due each January 31 from 2001 until
2004, and, if the license was extended, of $350,000 each January 31 from 2005
until 2009. The January 2001 option payment was made in February, 2001.
With effect as of November 30, 2001, the company terminated its license
agreement with Macrovision. The termination of this license agreement was
consistent with the company's change of business focus from securing licensing
operators for its FTRT video on demand service to that of the acquisition of
technologies predominantly in the field of video compression with the intention
to resell such technologies.
In exchange for the company and Macrovision terminating all rights and
obligations under their licensing agreement, Macrovision returned the 502,713
shares in the company issued under the agreement. The return of these shares
has been recorded at their fair value on the date that they were returned.
The net capitalized costs related to the company's distribution rights and the
foregoing license agreement have been written off in the year ended December 31,
2001.
================================================================================
5. ADVANCES TO ZIRACOM DIGITAL COMMUNICATIONS, INC.
The advances to Ziracom were unsecured and non-interest bearing until October
31, 2001 at which time they became due. Commencing November 1, 2002, the
company became entitled to secure the advances by a debenture covering all
tangible and intangible assets owned by Ziracom. This security is not yet in
place.
The debenture is due October 31, 2002 and accrues interest at 9% per annum.
Subsequent to December 31, 2001, the company acquired all of the issued and
outstanding shares of Ziracom Digital Communications, Inc. ("Ziracom") (Note
14).
================================================================================
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
December 31 December 31
2001 2000
------------ ------------
Accrued management fees (Note 12) $ 70,000 $ 223,000
Trade payables and accrued liabilities 163,341 272,149
------------ ------------
$ 233,341 $ 495,149
============ ============
-23-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
December 31, 2001 and 2000
========================================================================================
December 31 December 31
7. LOANS FROM RELATED PARTIES 2001 2000
------------ ------------
Loans from directors with no specific terms of repayment $ 78,713 $ 51,500
Loans from shareholders bearing no interest, unsecured
and repayable at $3,000 per month. At December 31, 2001,
the company's payments under this loan are four months
in arrears 24,000 -
Demand loan from a shareholder. Interest free until
August 16, 2001 and bears interest at U.S. prime
plus 2% thereafter. During 2001, this loan was repaid
through the issuance of shares in the company - 47,500
------------ ------------
$ 102,713 $ 99,000
============ ============
8. Convertible debentures
On July 6, 2001, the company received $1,000,000 from the sale of convertible
debentures and warrants to purchase up to 666,666 shares of the company's common
stock (Note 10). The principal on the debentures is due June 6, 2003. Interest
at 8% per annum on the debenture principal outstanding is due quarterly
commencing September 30, 2001. The debentures and any unpaid and accrued
interest may be converted at the option of the holder into common shares of the
company. The conversion price per share is the lesser of $0.4747 and 80% of the
average of the three lowest closing prices of the common shares on the principal
market where the shares trade for the sixty trading days prior to conversion.
The company may redeem the convertible debentures on five days notice by paying
the holders 190% of the principal outstanding plus accrued interest. Upon
receiving the repayment notice, the debenture holders have the option of
converting the debentures to common shares within five days.
The company has determined the fair value of the warrants to be $486,600, using
the Black Scholes option-pricing model. This warrant value is reflected as an
addition to paid-in capital and a discount to the debenture principal.
The debentures contain a "beneficial conversion" feature as the fair value of
the underlying stock was greater than the fair value of the debenture at the
date of issuance. The value of the beneficial conversion feature has been
calculated as $513,400, which has been recognized as an addition to paid-in
capital and a discount to the debenture principal.
The discounts to the debenture principal are amortized over the life of the
debentures as interest expense. Any unamortized discounts related to debentures
converted to common stock are written off as interest expense at the conversion
date.
The company incurred $163,750 in cash commissions and expenses related to the
issuance of the debentures, which has been recognized as a deferred cost to be
amortized by the interest method over the term of the debt. Any unamortized
issue costs related to debentures converted to common stock are written off as
interest expense at the conversion date.
-24-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
8. Convertible debentures (Continued)
The following table summarizes the activity in the debentures during the year
ended December 31, 2001.
Convertible Debentures
--------------------------------------
Deferred
Original Unamortized Net Book Issue
Principal Discounts Value Costs
----------- ------------- ---------- ----------
Debentures issued on July 6, 2001 $1,000,000 $ 1,000,000 $ - $ 163,250
Debentures converted to common stock (65,354) (59,251) (6,103) (9,673)
Amortization of discounts - (243,770) 243,770 (39,795)
----------- ------------- ---------- ----------
Balance, December 31, 2001 $ 934,646 $ 696,979 $ 237,667 $ 113,782
=========== ============= ========== ==========
The company has not made interest payments as required under the terms of the
convertible debenture agreements. At December 31, 2001, $36,531 in interest on
these convertible debentures has been accrued but is unpaid. Notwithstanding
this technical default, the creditor has agreed not to demand repayment of the
loan.
--------------------------------------------------------------------------------
9. Loan payable
In November and December 2001, the company received $100,139 under a bridge loan
facility provided by an unrelated party. The loan bore interest at 12% per
annum, was unsecured and was repaid on January 7, 2002.
================================================================================
10. Capital stock
Authorized capital
During 2000 the company increased its authorized capital from 30,000,000 common
shares with a par value of $0.0001, to 100,000,000 shares of common stock, par
value $0.0001 per share and 5,000,000 shares of preferred stock, par value
$0.0001 per share.
Stock options
The company's directors resolved to create a stock option plan that sets aside
7,500,000 shares of the company's common stock for issuance upon the exercise of
stock options to directors, employees and consultants.
-25-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
10. CAPITAL STOCK (CONTINUED)
STOCK OPTIONS (Continued)
The company accounts for the options issued to directors and employees in
accordance with the provisions of APB Opinion No. 25, Accounting for Stock
Options Issued to Employees. Had compensation cost for the stock option plan
been determined based on the fair value at the grant date consistent with the
method of SFAS No. 123, Accounting for Stock-Based Compensation, the company's
net loss and net loss per share would have been the pro forma amounts indicated
below:
December 31 December 31
2001 2000
------------- -------------
Net loss:
Actual net loss $ (2,756,522) $ (2,230,432)
Pro forma net loss $ (3,300,362) $ (2,230,432)
Loss per share:
Actual net loss per share $ (0.16) $ (0.23)
Pro forma net loss per share $ (0.19) $ (0.23)
The fair value of each option grant was estimated at the grant date using the
Black-Scholes option-pricing model for the year ended December 31, 2001,
assuming a risk-free interest rate of 4.88%, volatility of 2.05%, zero dividend
yield, and an expected life of 5.89 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options and warrants which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions, including the expected stock price volatility.
Because the company's employee stock options and warrants have characteristics
significantly different from traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimates, in
management's opinion, the existing models do not necessarily provide a reliable
measure of the fair value of its employee stock options.
The company granted options to purchase 3,600,000 shares of the company's common
stock to directors during the year ended December 31, 2001. During the year,
two optionee directors resigned from the board and forfeited their options
totalling 1,400,000.
During 2000, the company granted 1,070,000 options to purchase shares to
non-employees and recognized expense related to these options of $392,583. The
expense amount was determined by the fair value of the options issued calculated
using the Black-Scholes model.
-26-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
10. CAPITAL STOCK (Continued)
A summary of the status of the company's options as at December 31, 2001 and
changes during the year ended December 31, 2001 is presented below:
OPTIONS GRANTED
Weighted
Exercise Average
Price Exercise
Per Share Price Shares
---------- --------- ----------
Granted at fair market value $ 0.25 $ 0.25 3,600,000
==========
Options outstanding at December 31, 2001 2,200,000
==========
Options exercisable at December 31, 2001 2,200,000
==========
Weighted average fair value of options granted
during the year $ 0.25
==========
CHANGES DURING THE YEAR ENDED
December 31 December 31
2001 2000
------------ -----------
Balance, beginning of year 1,070,000 -
Granted 3,600,000 1,070,000
Cancelled (1,400,000) -
Exercised (1,000) -
------------ -----------
Balance, end of year 3,269,000 1,070,000
============ ===========
The following table summarizes information concerning options outstanding at
December 31, 2001:
Total Outstanding Exercisable
------------------------------- ---------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Prices of Shares Life Price Of Shares Price
--------- --------- --------- --------- --------- ---------
0.50 1,069,000 2.10 $ 0.50 1,069,000 $ 0.50
0.25 2,200,000 4.02 0.25 2,200,000 0.25
--------- --------- --------- --------- ---------
3,269,000 4.00 $ 0.33 5,269,000 $ 0.33
========= ========= ========= ========= =========
-27-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
10. CAPITAL STOCK (Continued)
WARRANTS
Warrants that entitled the holder to purchase up to 307,693 shares of common
stock at $3.25 per share expired on May 25, 2000 without being exercised.
The following warrants to purchase shares of common stock were issued during the
year ended December 31, 2001 and are outstanding:
Number of
shares issuable
on exercise exercise price per share expiry date particulars of issuance
-----------------------------------------------------------------------------------------------
588,000 0.30 until March 15, 2002 March 15, 2003 Issued in connection with the
and $0.50 after then issuance of shares for cash
666,666 the lesser of $0.73 and July 6, 2006 Issued in connection with the
120% of the average of the issuance of the convertible
three lowest closing prices of debentures (Note 8)
the common shares on the
principal market where the
shares trade for the ten
trading days prior to exercise
SHARE SUBSCRIPTIONS
December 31, 2001 December 31, 2000
----------------- -----------------
Number Amount Number Amount
------- ------- ------ -------
Shares to be issued for cash received - $ - 45,000 $45,000
Shares to be issued in settlement of
trade payables 180,000 54,000 - -
Subscription of shares for services 84,000 25,200 - -
------- ------- ------ -------
264,000 $79,200 45,000 $45,000
======= ======= ====== =======
ESCROWED SHARES
During 1999, a former director of the company placed 345,000 shares of common
stock into escrow. These shares were released to the former director on
February 9, 2001.
In addition, all of the 6,623,016 common shares issued on the acquisition of
e-VideoTV, Inc. were held in escrow at December 31, 2000. These shares were
released from escrow on February 9, 2001.
-28-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
10. CAPITAL STOCK (Continued)
SHARES ISSUABLE UNDER CONVERTIBLE DEBENTURES
Based on an estimate of the company's share price at December 31, 2001, the
terms of the company's convertible debenture (Note 8) would enable the debenture
holder to exercise its conversion rights in the amount of approximately
23,400,000 common shares. During 2001, the company registered 10,190,476 common
shares for conversion under this convertible debenture.
================================================================================
11. INCOME TAXES
At December 31, 2001, the company had net operating losses carried forward of
approximately $5,140,000 (December 31, 2000: $2,400,000) that may offset
against future taxable income until 2020. The potential tax benefits of the
losses carried forward are offset by a valuation allowance of the same amount as
there is substantial uncertainty that the losses will be used before they
expire.
================================================================================
12. RELATED PARTY TRANSACTIONS
Consulting and management fees of $357,000 (2000: $593,500) have been paid to
companies that employ current and former directors and officers of the company.
Accrued liabilities at December 31, 2001 include $70,000 (2000: $223,000) of
amounts due to related parties under management or consulting agreements.
================================================================================
13. COMMITMENTS
ADVISORY SERVICES AGREEMENT
On January 30, 2001, the company entered into a one-year exclusive agreement
with a financial advisory company, which will provide advisory services to the
company in the areas of corporate finance and capital placement transactions.
This agreement terminated January 31, 2002 and there are no obligations owing to
this financial advisory company.
PATENT LICENSING AGREEMENT
On June 27, 2001, the company entered into a short form sub-licensing agreement
for certain digital video delivery technology with an international designer and
supplier of high-tech internet streaming video and video-on-demand systems,
services and innovative end-to-end solutions.
In consideration of this sub-license, the company has agreed to issue $300,000
of its common shares on the date a long form agreement is signed. The parties
have yet to finalize this long form agreement. Based on an estimate of the
company's share price at December 31, 2001, the company would be required to
issue 6,000,000 shares upon finalization of a long form agreement.
-29-
E-VIDEOTV, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
DECEMBER 31, 2001 AND 2000
================================================================================
14. SUBSEQUENT EVENTS
On August 24, 2001, the company agreed to purchase all of the outstanding shares
of Ziracom Digital Communications, Inc., a Nevada corporation with its principal
offices located in Vancouver, British Columbia, Canada, in exchange for
8,655,139 shares of common stock in the company.
The agreement was approved by a majority of the shareholders of Ziracom and was
approved by the board of directors of the company on October 23, 2001.
Subsequent to October 23, 2001, certain amendments were negotiated and on
January 21, 2002, the amendments were approved by the company. These amendments
included agreement to cancel the floor price on the company's shares previously
negotiated and cancel the performance clauses previously agreed to. The parties
agreed that on closing the company would issue all agreed shares, being
8,655,138, provided the company was satisfied with the status of the software
technology. The company approved the technology and submitted the acquisition
agreement to the board for final approval on January 10, 2002.
Ziracom shareholders will also receive additional shares should earnings before
interest, taxes, depreciation and amortization exceed $500,000 for the period
August 1, 2001 to August 31, 2002. Shares priced at their closing bid price on
August 31, 2002 would be issued in an amount that equaled the amount of Ziracom
earnings achieved during the foregoing period.
The agreement closed February 14, 2002 and Ziracom shareholders received
8,655,138 shares of common stock of the company on that date.
================================================================================
15. CONTINGENCY
On January 8, 2002, the company was served with a writ regarding allegations of
intentional and negligent interference with business relationships. This writ
was also served to Ziracom Digital Communications, Inc., and three of its
directors. The plaintiffs in the lawsuit have claimed damages of approximately
$2,000,000. In a settlement proposal received from the plaintiffs on February
25, 2002, they offered to settle all claims under this writ for the total
principal sum of $100,000.
Company's counsel has concluded that it is reasonably possible that an agreement
on the amount of damages exigible will be met. The amount of damages to be
awarded (if any) however, is not determinable at this time and as such, no
amounts have been recorded in these financial statements.
The accompanying notes are an integral part of these consolidated financial
statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No disagreements.
-30-
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors and executive officers of the Company are:
Name Age Position Director Since
----------------- --- -------------------- ----------------
Robert Dinning 62 Chairman and Chief
Financial Officer June 22, 1999
Gianfranco Fiorio 51 CEO, and Director February 1, 2002
Rod Gunn 57 President and Chief
Operating Officer, March 15, 2002
and Director
Harvey Nickerson 44 Chief Technology
Officer and Director April 1, 2000
Jason Allen 27 Director March 15, 2002
ROBERT DINNING has been a director of the Company since June 1999 and an officer
of the Company since January 2000. On August 30, 2001, Mr. Dinning was appointed
Chairman, President and CEO of the company following the resignation of Mr.
Charles Weber. Mr. Dinning held all these positions until Feb 1, 2002, when
Gianfranco Fiorio was appointed CEO and March 15, 2002 when Mr. Gunn was
appointed President and COO. Mr. Dinning is a Chartered Accountant, who has been
a Business and Financial Management Consultant since 1977. He has provided
management and financial advice to clients (both public and private companies)
in the software technology, resource, hospitality and retail industries since
1977. In the past five years, positions held include; Chief Financial Officer
and Director of First American Scientific Corp. from October 1995 to June 1999,
and has been a Director of Visionary Solutions Ltd. He is currently a Director
of Apolo Gold Inc. Prior to 1977 Mr. Dinning was CFO and Secretary of a large
national public broadcasting company in Canada.
GIANFRANCO FIORIO was appointed a director and CEO on February 1, 2002. Mr.
Fiorio is a self-employed consultant, who specializes in management of trusts,
and is a financial consultant to high net worth clients. In addition to this
area, he has consulted for numerous companies in sales and general management
matters. Mr. Fiorio lives in Arlington Virginia, and assists the Company in
marketing matters primarily in Eastern USA. Mr. Fiorio is a lifelong resident of
the Washington D.C. Area.
ROD GUNN was appointed President and Chief Operating Officer (COO) on March 15,
2002. Mr. Gunn in currently President of One World Communications Inc, a
consulting and management company specializing in business entertainment and
public service endeavors. Mr. Gunn has had a 35-year career in broadcasting,
including President and General Manager of CKNW-AM and CFMI-FM, two of Canada's
largest broadcast entities based on audience penetration and revenue generation.
HARVEY NICKERSON has been an officer of the Company since January 2000 and a
director since April 2000. Mr. Nickerson is responsible for the architecture,
technical direction and development of the Company's products. Prior to joining
e-Video, Mr. Nickerson had an 18-year career in the technology, semiconductor
and cable TV industry. After success as a design engineer, his career has
expanded to include executive management, business planning, international
product marketing, and technology licensing. Mr. Nickerson has two degrees in
Electrical Engineering.
JASON ALLEN has been C.O.O. of Ziracom for the past two years. Prior to that, he
was involved as a technical consultant in the forest industry. Mr. Allen was
appointed to the board of directors on February 22, 2002 and is involved in the
marketing of the video compression technology.
-31-
During the past five years, none of the Company's directors, executive officers,
promoters or control persons:
(1) have been involved in any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time;
(2) have been convicted in a criminal proceeding or are subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) have been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting such person's involvement in any type of business, securities or
banking activities; or
(4) have been found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated.
All directors are appointed until next annual meeting of shareholders. There is
no compensation for attending meetings but travel expenses are reimbursed.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 furnished to the registrant under
Rule 16a-3(e) during the year ended December 31, 1999 and Forms 5 furnished to
the registrant, or written representations from reporting persons that no Form 5
is required to be filed, with respect to the year ended December 31, 1999, -All
required filings re form 3, 4 and 5 have been carried out by the directors and
officers of the Company at Dec 31, 2001.
-32-
ITEM 10. EXECUTIVE COMPENSATION.
The following table on discloses all compensation received by the Company's
President (the Chief Executive Officer) during the years ending December 31,
1997, 1998, 1999 and 2000. During 1997, 1998 and 1999 no executive officer
received cash or other compensation from the Company in excess of $100,000.
Compensation Annual Compensation Long-Term
--------------------- ------------------------------------ -------------------
Name and Other Securities
All Other Annual Restricted Underlying
Principal Compen- Stock Options/
LTIP- Year Payment Bonus sation Awards SAR's
Position
Payouts
Robert G. Dinning 2001 $ 108,000(1) 0 0 0 0
Director - June 21, 2000 $ 126,000(1) 0 0 0 0
1999. CFO/Sec since Jan
31,2000Chairman & CEO
Aug 31,2001 to Feb 1,
2002.Currently Chairman
and CFO.
Gianfranco Fiorio 2001 - 0 0 0 0
Director - Feb 1, 2002
CEO - Feb 1, 2002 2000 - 0 0 0 0
Rod Gunn 2001 - 0 0 0 0
Director - March 15, 2002 2000 - 0 0 0 0
President & COO
Harvey Nickerson 2001 $ 108,000 0 0 0 0
CTO since Jan31, 2000 2000 $ 111,000(1) 0 0 0 0
Secretary Sept 1, 2001
Director April 1,
2000.
Charles J. Weber 2000 $ 45,000 (1) 0 0 0 0
President/CEO 2000 $ 77,500 (1) 0 0 0 0
July 10, 2000 - Aug 31,
2001.Director July 1, 2000
to Oct 31, 2001
Roy B. Bennett 2001 $ 96,000 (1) 0 0 0 0
President June 21 2000 $153,000 (1) 0 0 0 0
To July 10, 2000 1999 $76,000 (1) 0 0 0
Director - June 21,
1999 to Nov 22, 2001.
Adrian Rollke 1999 $ 20,538 (1) 0 0 0 0
President from
Aug 27,1997 to
June 21,1999
(1) Paid or due to a corporation wholly owned by the named executive officer for
the services of the named
executive officer.
The Company has employment agreements with Dinning and Nickerson. The
Company entered into a two-year non-cancelable management agreement with Roy B.
Bennett and Associates Ltd ("RBA Ltd."), a company wholly owned by Roy B.
Bennett, the Company's president, effective June 21, 1999. This contract
was extended and then cancelled January 23, 2002.
-33-
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table shows the ownership of the Company's common stock by the
Company's officers and directors and by those persons known by the Company to be
the beneficial owner of more than 5% of the Company's common stock. Unless
otherwise indicated all shares are owned of record.
Amount Owned
and nature of Percent of
Name and Address of Beneficial Owner ownership Class
--------------------------------------- -------- ------------- -----------
Robert G. Dinning, Director, 2,777,672 9.43%
Indirect 309,615 1.05%
Chairman, and Chief Financial Officer.
#900 -1055 West Hastings St
Vancouver, BC, Canada V6E 2E9
Gianfranco Fiorio, Director 0 0.0%
CEO, Feb 1, 2002
2600 North Nelson St
Arlington Virginia 22207
Rod Gunn, Director 0 0.0%
President & COO
3205 Canterbury Drive
Surrey, B.C. Canada V3S OJ4
Harvey Nickerson, Director, 2,777,672 9.43%
Secretary and CTO Indirect 246,154 0.84%
8631 E. San Jacinto Drive
Scottsdale, AZ 85258
Jason Allen, Director 1,745,445 5.93%
6472 Selma Ave
Burnaby, B.C. Canada V5H 3R4
Roy B. Bennett, 2,777,672 9.43%
8266 East del Cadena Drive Indirect 201,923 0.69%
Scottsdale, AZ 85258
Directors and Executive Officers as a 7,856,558 26.68%
group (5 persons)
There are no arrangements known to the Company, which may result in a change in
control of the Company.
-34-
Options have been granted to the following officers and directors:
Date Granted
Name and Exercisable No. of Shares/ Price Expiration Date
----------------- --------------- -------------- ----------- ---------------
Robert Dinning Jan 23, 2002 1,000,000 $0.10 March 15, 2007
Gianfranco Fiorio Jan 23, 2002 750,000 $0.10 March 15, 2007
Rod Gunn Mar 15, 2002 750,000 $0.10 March 15, 2007
Harvey Nickerson Jan 23, 2002 1,000,000 $0.10 March 15, 2007
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
From February 1999 to March 31, 2000 Cebu Holdings Inc. ("Cebu") has provided
office space, furniture, equipment and management services to the Company. Cebu
is wholly owned by Karl Rollke, the father of Adrian Rollke, a former director
and former officer of the Company. Adrian Rollke is also an officer of Cebu.
Cebu did not charge the Company for any costs or expenses during 1997 or 1998.
During the year ended December 31, 2000, Cebu charged $14,618 to the Company for
rent, office supplies and services. This arrangement terminated March 31, 2000
by mutual consent.
See Part I, Item 1 of this Annual Report for information concerning the
acquisition of EVideo USA, Inc. from Roy Bennett, an officer and director of the
Company.
On February 9, 2001 an escrow agreement regarding 6,623,016 of the company's
common shares was cancelled. These shares were under an escrow agreement which
was cancelled after discussion with the board of directors of the company and
other parties involved at the time of the escrow agreement. The business model
had changed significantly since the escrow agreement was executed and all
parties felt it was appropriate to cancel such agreement.
-35-
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K PAGE
Exhibit 2 Articles of Incorporation, as amended, and Bylaws
Exhibit 2.1 Articles of Incorporation, as amended on
August 5, 1999
Exhibit 3 Instruments Defining the Rights of Security Holders
Exhibit 3.1 Warrant Agreement
Exhibit 4 Subscription Agreement None
Exhibit 5 Voting Trust Agreement None
Exhibit 6 Material Contracts
Exhibit 6.1 Agreement dated June 8, 1999 between the
Registrant, EVIDEO U.S.A., Inc., EVIDEO
International, Inc., Roy B. Bennett & Associates
Ltd. and Roy B. Bennett with respect to the
acquisition of EVIDEO U.S.A., Inc. by the
Registrant
Exhibit 6.2 Management agreement effective June 21, 1999
between EVIDEO U.S.A., Inc. Roy B. Bennett &
Associates Ltd. pursuant to which Roy B. Bennett
and Associates Ltd. agrees to provide the services
of Roy Bennett and a project manager
Exhibit 7 Material Foreign Patents None
Exhibit 8 Plan of Acquisition, Reorganization, Arrangement,
Liquidation, etc. None
Exhibit 10 Amendment dated September 1, 1999 to the Agreement
dated June 8, 1999 between the Company, EVIDEO
U.S.A., Inc., EVIDEO International Inc., Roy B.
Bennett & Associates Ltd. and Roy B. Bennett
Exhibit 10 Amendment dated January 31, 2000 to the Agreement
dated June 8, 1999 between the Company, EVIDEO
U.S.A., Inc., EVIDEO International Inc., Roy B.
Bennett & Associates Ltd. and Roy B. Bennett
-36-
SIGNATURES
In accordance with Section 13 or 15(d) of Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
E-VIDEOTV, INC.
Date: March 28, 2001 By:
--------------------------- ---------------------------
Robert G. Dinning
Director, Chairman and Chief Financial
Officer
In accordance with Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated
Date: March 28, 2001
--------------------------- ---------------------------
Gianfranco Fiorio
Director and CEO
Date: March 28, 2001
--------------------------- ---------------------------
Rod Gunn
Director, President and COO
Date: March 28, 2001
--------------------------- ---------------------------
Harvey Nickerson
Director, Secretary and Chief Technology
Officer
Date: March 28, 2001
-------------------------- -----------------------------
Jason Allen
Director - and Director of Sales
and Marketing
-37-