SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Video Without Boundaries, Incorporated
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(Exact name of registrant as specified in this charter)
Florida 65-1001686
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(State of other jurisdiction (IRS Employer
of incorporation) Identification No.)
1975 E. Sunrise Blvd, 5th Floor, Fort Lauderdale, FL 33312
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Address of principal executive offices
954-462-8302
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Registrant's telephone number, including area code
Check whether the issuer (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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of September 30, 2002 there were 120,886 shares of the Issuer's Common Stock
outstanding.
Video Without Boundaries, Inc.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets: September 30, 2002 and December 31, 2001 1
Statement of Operations: Nine Months Ending September 30, 2002
and Year Ending December 31, 2001 2
Statement of Shareholder's Equity 3
Statements of Cash Flows: Nine Months Ending September 30, 2002
and Year Ending December 31, 2001 4
Notes to Financial Statements for September 30, 2002 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 3. Qualitative and Quantitative Disclosures About Market Risk 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Certification 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VIDEO WITHOUT BOUNDARIES, INC.
BALANCE SHEETS
ASSETS
12/31/01 09/30/02
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Audited Unaudited
Current Assets
Cash $ 22,128 $ 64,940
Accounts Receivable -- --
Inventories -- --
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Total Current Assets 22,128 64,940
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Property and Equipment 91,498 91,498
Other Assets 50,950 285,950
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Total Assets $ 164,576 $ 442,388
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LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable and accrued liabilities $ 169,424 $ 37,548
Due to Shareholder 209,686 209,786
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Total Current Liabilities 379,110 247,334
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Other Liabilities
Convertible Debentures 485,500 679,374
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Total Liabilities $ 864,610 $ 926,708
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Shareholders Equity
Common stock-par value $.001; 50,000,000
shares authorized, 828,557 issued and outstanding
at December 31, 2001 and 120,886 issued and
outstanding at September 30, 2002 829 121
Additional paid-in capital 430,379 466,159
Deficit (1,131,242) (950,600)
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Total Shareholder's Equity $ (700,034) $(484,320)
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Total Liabilities and Shareholder's Equity $ 164,576 $ 442,388
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The accompanying notes are an integral part of these financial statements.
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VIDEO WITHOUT BOUNDARIES, INC.
STATEMENTS OF OPERATIONS
For the year ended December 31, 2001 & YTD September 30, 2002
YTD
12/31/01 09/30/02
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Audited Unaudited
Revenues $ 597,076 $739,013
Cost of Sales 428,212 402,194
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Gross Profit 168,864 336,819
Selling, General, and Administrative Expenses 733,276 104,643
Research and Development 178,000 51,534
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Net Income (Loss) $ (742,412) $180,642
============ ========
Basic Profit (Loss) per Share $ (0.982) $ 1.494
============ ========
Diluted Earnings Per Share $ (0.070)
============
Weighted- average common shares outstanding
Basic 756,404 120,886
============ ========
Diluted 10,466,404
============
The accompanying notes are an integral part of these financial statements.
2
VIDEO WITHOUT BOUNDARIES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
March 19, 1999 (Inception) to September 30, 2002
Additional
Common Stock Paid-In
Shares Amount Capital Deficit
Sales of common stock-net 63 $ -- $ 293,591
Stock issued for services 175 -- 102,360
Stock issued for acquired companies 150 -- 855
Sale of common stock
for cash 446 1 174,867
Purchase of September Project II, Corp. (175,000)
Reverse acquisition
of Video Without Boundaries, Inc. 833 1 4,750
(Loss) for period March 19, 1999 (inception)
to December 31, 1999 $ (162,116)
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Balance December 31, 1999 (audited) 1,667 2 401,423 (162,116)
(Loss) for the year ended December 31, 2000 (226,714)
Stock issued for services 614 1 3,501
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Balance December 31, 2000 (audited) 2,281 3 404,924 (388,830)
Private Placement Offer 481 -- 25,455
(Loss) for the year ended December 31, 2001 (742,412)
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Balance December 31, 2001 (audited) 2,762 3 430,379 (1,131,242)
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Stock Issued 118,124 118 35,780 180,642
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Balance September 30, 2002 (unaudited) 120,891 $ 121 $ 466,159 $ (950,600)
======= ===== ========= ===========
The accompanying notes are an integral part of these financial statements.
3
VIDEO WITHOUT BOUNDARIES, INC.
STATEMENTS OF CASH FLOWS
Year Ended December 31, 2001 and YTD September 30, 2002
YTD
12/31/01 09/30/02
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Audited Unaudited
Cash flows from operating activities
Net (loss) $(742,412) $ 180,642
Adjustments to reconcile net (loss) to net cash (used) by
operating activities
Stock issued for services and acquired companies -- 118
Depreciation 32,230 --
Decrease (increase) in accounts receivable 275,534 --
Decrease (Increase) in inventories 112,454 --
(Increase) in other Assets (42,101) (235,000)
Increase (Decrease) in accounts payable (210,751) (131,876)
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Total Adjustments 167,366 (366,758)
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Net cash (used) by operating activities (575,046) (186,116)
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Cash flows from investing activities
Purchase of property and equipment (84,491) --
Purchase of other assets (35,000)
Net cash (used) by investing activities (84,491) (35,000)
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Cash flows from financing activities
Loan from shareholder 138,686 100
Sale of common stock 25,600 --
Convertible Debentures 485,500 193,874
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Net cash provided by financing activities 649,786 193,974
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Net change in cash (9,751) 42,812
Cash - beginning 31,879 22,128
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Cash - end $ 22,128 $ 64,940
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ -- $ --
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Taxes paid $ -- $ --
========= =========
The accompanying notes are an integral part of these financial statements.
4
VIDEO WITHOUT BOUNDARIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
unaudited
Note 1. Summary of Significant Accounting Policies
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been condensed or omitted in this Form 10-QSB in compliance with the Rules
and Regulations of the Securities and Exchange Commission. However, in the
opinion of Video Without Boundaries, Inc. the disclosures contained in this Form
10-QSB are adequate to make the information fairly presented.
Note 2. Basis of Presentation
In the opinion of the Company, the accompanying unaudited financial statements
reflect all adjustments (consisting of normal recurring accruals) necessary to
present fairly the financial position and the results of operations for the nine
month period ended September 30, 2002. The results of operations for the nine
months ended September 30, 2002 are not necessarily indicative of the results
which may be expected for the entire year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements, including the Notes thereto, of the Company included elsewhere in
this Form 10-QSB.
OVERVIEW
Video Without Boundaries provides Internet and Technology products and
services for clients ranging from small to medium sized customers looking for a
solution to develop and integrate a web site, advertising and marketing,
technology products, and streaming video into their business. Our Company
Division's include e-business solutions and streaming video technology. We
believe that our primary strengths that distinguish us from our competitors are
our:
o understanding of new Internet and Technology business
strategies;
o broad service offerings and end-to-end solutions;
o experience in various technology product engagements
Examples of Video Without Boundaries Internet and Technology products
and services include (1) website strategy, development, and design for
entertainer Nestor Torres, including event scheduling, (2) website strategy,
development, and design for equipment distributor Pantropic Power, including a
complete product catalog, and (3) website strategy, development, design,
streaming video, corporate identity, and advertising for Advantage Diabetic
Care, including streaming product videos for pharmaceutical manufacturers,
Medicare and insurance invoicing, and integration with the company's IBM AS400
system and Medicare architectures, and (4) consulting, design, and production of
streaming video's for Buy Domains.com, one of the first domain name resellers to
use streaming video technologies for Internet video interviews of their CEO for
public relations.
VIDEO WITHOUT BOUNDARIES.COM DIVISIONS
o E-BUSINESS SOLUTIONS - www.webodyssey.cc
WebODYSSEY was formed in April 2000 to help our clients
evaluate and formulate e-business strategies and solutions
that will result in a competitive advantage. Our services
include Internet strategy formulation, web site design,
development, and hosting, e-commerce website design, graphic
design and layout, programming, business-to-business services,
quantitative market research, competitive analysis, business
process design and implementation, delivery of streaming video
and multimedia, Intranet/Extranet, and domain services. An
example of a Video Without Boundaries e-business solution is
the strategy, development, design, streaming video, and
corporate identity for Advantage Diabetic Care, including
streaming product videos for pharmaceutical manufacturers,
Medicare and insurance invoicing, and integration with the
company's IBM
6
AS400 system and Medicare architectures. Odyssey Advertising,
the Company's advertising and marketing division was merged
with WebODYSSEY in September 2001 to facilitate a more simple
approach to offering our clients full service. Sales revenues
at the Odyssey Advertising group were decreasing so the net
affect on Company revenue was neglible but the General and
Administrative savings were positive.
o STREAMING VIDEO TECHNOLOGY - www.videowithoutboundaries.com
In October 2000 Video Without Boundaries.com formed its
Streaming Video Technology Division. Simply Streaming is a
streaming media group that enables companies to efficiently
and cost-effectively prepare videos for web distribution by
encoding and compressing them in a way that ensures reliable
high quality streaming broadcasts on their corporate web
sites.
This division allows Video Without Boundaries to enter a new
vertical market on the Internet by delivering advanced
streaming video products and services to the rapidly expanding
Internet & wireless Internet marketplace. Many marketing and
information business sectors are beginning to employ streaming
video and its different delivery systems to disseminate
various corporate information. This technology by Video
Without Boundaries enables its division, WebODYSSEY to offer
its clients the ability to capitalize on the use of these new
technologies.
Streaming video is a very powerful website marketing tool. It
is an efficient method of delivering audio, video and other
multimedia in real-time over the Internet or corporate
intranets, without wasting hard disk space and without any
downloading time. With this addition, Video Without Boundaries
becomes a one-stop shop for businesses to develop and enhance
their corporate websites and identities.
Video Without Boundaries Simply Streaming division has seen a
dramatic down turn in its revenue because of current economic
trends and the lack of working capital to maintain its sales
and marketing group.
o INTERNET MORTGAGE BANKING - www.valumortgages.com
In January 2000, Video Without Boundaries created its
ValuMORTGAGES.com group. There were no significant startup
costs and no related commitments when we established this
group because the Company used existing internal resources.
ValuMortgages.com division has ceased operations effective
August 31, 2002 because the company's financial net worth was
not sufficient to renew its State of Florida Mortgage Lender
License. The company is in negotiations to sell the assets of
this division.
Video Without Boundaries derives substantially all of its revenues from
fees and product sales for services and products generated on a
project-by-project basis. Video Without Boundaries services and products are
provided on both a fixed-time, fixed-price basis and on a time and material
basis. Historically, Video Without Boundaries has not operated on a retainer
basis; however, in the future, Video Without Boundaries may utilize such
arrangements.
Agreements and purchase orders entered into in connection with time and
materials projects and product sales are generally terminable by the client upon
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30-days' prior written notice, and clients are required to pay Video Without
Boundaries for all time, materials and expenses incurred by Video Without
Boundaries through the effective date of termination. Agreements and purchase
orders entered into in connection with fixed-time, fixed-price projects, are
generally terminable by the client upon payment for work performed and the next
progress payment due. If clients terminate existing agreements and purchase
orders or if Video Without Boundaries is unable to enter into new engagements,
Video Without Boundaries' business, financial condition, and results of
operations could be materially and adversely affected. In addition, because a
proportion of Video Without Boundaries' expenses is relatively fixed, a
variation in the number of client engagements can cause significant variations
in operating results from quarter to quarter.
Video Without Boundaries' projects vary in size and scope; therefore, a
client that accounts for a significant portion of Video Without Boundaries'
revenues in one period may not generate a similar amount of revenue in
subsequent periods. No client accounted for more than 10.0% of Video Without
Boundaries' revenues in the periods ended December 31, 2001 or September 30,
2002.
Video Without Boundaries does not believe that it will derive a
significant portion of its revenues from a limited number of clients in the near
future. However, there is a risk that the source of Video Without Boundaries'
revenues may be generated from a small number of clients. These clients may not
retain Video Without Boundaries in the future. Any cancellation, deferral, or
significant reduction in work performed for these principal clients or a
significant number of smaller clients could have a material adverse affect on
Video Without Boundaries' business, financial condition, and results of
operations.
Quarter-to-quarter fluctuations in margins
The Company's operating results and quarter-to-quarter margins may fluctuate in
the future as a result of many factors, some of which are beyond the Company's
control. Historically, the Company's quarterly margins have been impacted by:
.. the number of client engagements undertaken or completed;
.. a change in the scope of ongoing client engagements;
.. seasonality;
.. a shift from fixed-fee to time and materials-based contracts;
.. the number of days during the quarter;
.. utilization rates of employees;
.. marketing and business development expenses;
.. charges relating to strategic acquisitions;
.. pricing changes in the information technology services market; and
.. economic conditions generally or in the information technology services
market.
The Company expects this trend to continue.
Results of Operations:
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The following table sets forth certain statements of operations data of the
Company both in actual dollars and as a percentage of revenue for the period
indicated:
VIDEO WITHOUT BOUNDARIES, INC.
YTD 2001 YTD 2002
09/30/01 09/30/02
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unaudited unaudited
Revenues $1,314,761 $739,013
Cost of sales $799,518 60.81% $402,194 54.42%
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Gross profit $515,243 39.19% $336,819 45.58%
Selling, general, and administrative expenses $500,085 38.04% $104,643 14.16%
Research and Development $51,534 6.97%
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Net Income $15,158 1.15% $180,642 24.44%
============== ==============
Profit (Loss) per share-basic $0.0009 $1.4943
Weighted-average common shares outstanding 16,271,000 120,886
8
Nine Months Ended September 30, 2002
Compared to Nine Months Ended September 30, 2001
REVENUES
Net Revenues are comprised of product and services revenues, net of
returns and allowances. Net revenues decreased 44%, or $575,748 to $739,013 for
the Nine months ended September 30, 2002 from $1,314,761 for the comparable
period in 2001. This decrease was due to the continued decrease in customer
requirements for our products and services and the consolidation and elimination
of company divisions, specifically ValuComputers.com and ValuMortgages.com.
GROSS PROFIT
Gross Profit decreased 35%, or $178,424 to $336,819 for the Nine
months ended September 30, 2002 from $515,243 for the comparable period in 2001.
As a percentage of revenue gross profit increased to 46% for the Nine months
ended September 30, 2002 from 39% in the comparable period in 2001. The
increase in gross profit was primarily due to the change of the focus of the
Company to the sales and marketing of our interactive streaming video products.
GENERAL AND ADMINISTRATIVE
General and administrative expense includes personnel costs,
administrative expenses, general office expenses, depreciation expenses,
advertising costs, and professional fees. General and administrative expenses
decreased 79%, or $395,622 to $104,463 for the Nine months ended September 30,
2002 from $500,085 for the comparable period in 2001. As a percentage of
revenue, general and administrative expenses decreased to 14% for the Nine
months ended September 30, 2002 from 38% in the comparable period in 2001. The
decrease in general and administrative expenses as a percentage of revenue was a
result of the reorganization that occurred in 2001 and this period, dramatically
reducing company expenditures and focusing our efforts on our interactive
streaming video products and services.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2002 the Company had cash and net working capital
of $64,940 and ($182,394), respectively. The Company believes that its current
working capital, and cash generated from operations will not be sufficient to
meet the Company's cash requirements for the next twelve months without the
ability to obtain profitable operations and/or obtain additional financing. Our
independent public accountant has included as a footnote in their report on our
financial statements, stating that certain factors raise substantial doubt about
our ability to continue as a going concern.
If the Company is not successful in generating sufficient cash flow from
operations or in raising additional capital when required in sufficient amounts
and on acceptable terms, these failures could have a material adverse effect on
the Company's business, results of operations and financial condition. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the Company's then-current stockholders would be
diluted.
There can be no assurance that the Company will be able to raise any
required capital necessary to achieve its targeted growth rates and future
continuance on favorable terms or at all.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending legal proceedings against the Company.
9
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) No Exhibits
(b) Reports on Form 8-K
One report on Form 8-K was filed on September 5, 2002 to report the
1 for 300 reverse split of the Company's common stock.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Video Without Boundaries, Inc.
Date: November 13, 2002 By: /s/ V. JEFFREY HARRELL
--------------------------
V. Jeffrey Harrell, President & CEO
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CERTIFICATION
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I, V. Jeffrey Harrell, certify, that:
1. I have reviewed this quarterly report on Form 10-QSB of Video Without
Boundaries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. As the registrant's certifying officer I am responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
I have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to me
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based
on my evaluation as of the Evaluation Date;
5. As the registrant's certifying officer I have disclosed, based on my
most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of the
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. As the registrant's certifying officer I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
the internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 12, 2002 By: /s/ V. Jeffrey Harrell
-------------------- --------------------------------------------
V. Jeffrey Harrell, Chairman of the Board,
President and Chief Executive Officer
12