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, 2003
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, 2003 there were 8,598,747 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, 2003 and December 31, 2002
Statement of Operations: Nine Months Ending September 30, 2003 and Year
Ending December 31, 2002
Statement of Shareholder's Equity: Nine Months Ending September 30,
2003
Statements of Cash Flows: Nine Months Ending September 30, 2003 and
Year Ending December 31, 2002
Notes to Financial Statements for September 30, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Qualitative and Quantitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
VIDEO WITHOUT BOUNDARIES, INC.
BALANCE SHEETS
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12/31/02 09/30/03
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Assets audited unaudited
Current assets:
Cash $ 12,047 $ 70,856
Accounts receivable $ 621 --
Inventory -- $ 4,250
Deposit Neon Tech $ 10,000 $ 60,000
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Total current assets $ 22,668 $ 135,106
Fixed assets:
Property and equipment $ 66,006 $ 70,735
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Net fixed assets $ 66,006 $ 70,735
Other assets -- $ 1,850
Deposit CAC Media $ 70,000 $ 118,000
Investment Cornerstone Entertainment $ 210,871 $ 210,871
International Consortium $ 25,000 $ 25,000
Media Ready Software -- $ 298,003
Prepaid Box Tooling -- $ 40,000
Brokenremote.tv -- $ 300,000
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Total other assets $ 305,871 $ 993,724
Total assets $ 394,545 $ 1,199,565
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Liabilities and owner's equity
Current liabilities:
Accounts payable $ 85,375 $ 207,801
Due To Shareholders $ 763,780 $ 1,035,592
Interest Payable $ 9,948 $ 5,400
Notes Payable $ 20,000 $ 30,000
Other -- --
Convertible Debentures $ 268,000 --
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Total current liabilities $ 1,147,103 $ 1,278,793
Shareholders Equity
Common stock-par value $.001, 50,000,000 shares
authorized, 8,598,747 issued and outstanding
at September 30, 2003 and 119,087 at
December 31, 2002 $ 119 $ 8,599
Additional paid -in capital $ 1,415,770 $ 2,714,701
Deficit $(2,168,447) $(2,802,528)
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Total owner's equity $ (752,558) $ (79,228)
Total liabilities and stockholders' equity $ 394,545 $ 1,199,565
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The accompanying notes are an integal part of these financial statements
VIDEO WITHOUT BOUNDARIES, INC.
STATEMENTS OF OPERATIONS
For year ended December 31, 2002 & YTD September 30, 2003
12/31/02 09/30/03
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audited unaudited
Revenues $ 330,621 $ 190,770
Costs of Sales $ 3,921 $ 175,926
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Gross Profit $ 326,700 $ 14,844
Selling,General, and Administrative Expenses $ 715,651 $ 648,925
Research and Development $ 427,000 --
Loss on Discontinued Business $ 107,125 --
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$ 1,249,776 $ 648,925
Net Loss $ (923,076) $ (634,081)
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Basic Loss Per Share $ ( 7.75) $ (0.074)
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Diluted Earnings Per Share $ (7.75) $ (0.074)
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Weighted-average common shares outstanding
Basic 119,057 4,358,902
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Diluted 119,057 4,358,902
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The accompanying notes are an integal part of these financial statements
VIDEO WITHOUT BOUNDARIES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
March 19, 1999 (Inception) to September 30, 2003
Common Stock Additional Paid-In
Shares Amount Capital Deficit
------ ------ ------- -------
Sales of common stock-net 18,750 $ 19 $ 293,591 --
Stock issued for services 52,600 $ 53 $ 102,360 --
Stock issued for acquired companies 45,000 $ 45 $ 855 --
Sale of common stock for cash 133,650 $ 133 $ 174,867 --
Purchase of September Project II, Corp -- -- ($ 175,000) --
Reverse acquisition of Video Without Boundaries, Inc. 250,000 $ 250 $ 4,750 --
(Loss) for period March 19,1999(inception) to December 31, 1999 -- -- -- $ (162,116)
----------- ----------- ----------- -----------
Balance December 31, 1999 500,000 $ 500 $ 401,423 $ (162,116)
(Loss) for the year ended December 31, 2000 -- -- -- $ (226,714)
Stock issued for services 184,250 $ 184 $ 3,501 --
----------- ----------- ----------- -----------
Balance December 31, 2000 684,250 $ 684 $ 404,924 $ (388,830)
Private Placement Offer 144,307 $ 145 $ 25,455 --
(Loss) for the year ended December 31, 2001 -- -- -- $ (742,412)
----------- ----------- ----------- -----------
Balance December 31, 2001 828,557 $ 829 $ 430,379 $(1,131,242)
Reverse Split 1 for 20 (787,130) $ (787) -- --
Stock Issued For Services 75 $ 7 $ 492,450 --
Stock Issued For Convertible Debenture 94,866 $ 242 $ 492,940 --
Reverse Split 1 for 300 (17,281) $ (172) -- --
Dividend Cornerstone Entertainment -- -- -- $ (114,129)
(Loss) For The Year Ended December 31,2002 -- -- -- $ (923,076)
----------- ----------- ----------- -----------
Balance December 31,2002 119,087 $ 119 $ 1,415,769 $(2,168,447)
Stock Issued 8,479,660 $ 8,480 $ 1,298,931 --
(Loss) For The Period Ended September 30, 2003 -- -- -- $ (634,081)
----------- ----------- ----------- -----------
Balance September 30,2003 8,598,747 $ 8,599 $ 2,714,700 $(2,802,528)
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The accompanying notes are an integal part of these financial statements
VIDEO WITHOUT BOUNDARIES, INC.
STATEMENTS OF CASH FLOWS
YTD
12/31/02 09/30/03
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audited unaudited
Cash flows from operating activities
Net (loss) $ (923,076) $ (634,081)
Adjustments to reconcile net (loss) to net cash (used) by operating activities
Stock issued for services and acquired companies $ 7 --
Depreciation $ 34,294 --
Decrease (increase) in accounts receivable $ (621) $ 621
Decrease (Increase) in inventories -- $ (4,250)
(Increase) in other Assets $ (254,921) $ (50,000)
Increase (Decrease) in notes payable -- $ 15,400
Increase (Decrease) in accounts payable $ (84,049) $ 122,426
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Total Adjustments $ (305,290) $ 84,197
Net cash (used) by operating activities $(1,228,366) $ (549,884)
Cash flows from investing activities
Purchase of property and equipment $ 0 $ 0
Net cash (used) by investing activities $ 0 $ (692,582)
Cash flows from financing activities
Loan from shareholder $ 554,094 $ 271,812
Sale of common stock $ 427,191 $ 1,307,410
Convertible Debentures $ 237,000 $ (277,948)
Net cash provided by financing activities $ 1,218,285 $ 1,301,274
Net change in cash $ (10,081) $ 58,808
Cash - beginning $ 22,128 $ 12,047
Cash - end $ 12,047 $ 70,855
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ -- $ --
Taxes paid $ -- $ --
The accompanying notes are an integal part of these financial statements
VIDEO WITHOUT BOUNDARIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
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, 2003. The results of operations for the nine
months ended September 30, 2003 are not necessarily indicative of the results
which may be expected for the entire year.
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 (VWB) now provides products and services in the
converging digital media on demand, enhanced home entertainment and emerging
interactive consumer electronics markets. VWB is focused on home entertainment
media products and solutions that enhance the consumer experience, while
providing new revenue opportunities for online music and movie content
providers. VWB is becoming a supplier of broadband products, services and
content including its ability to deliver broadcast quality digital video and web
interactivity at transfer rates as low as 56K.
Video Without Boundaries (VWB) a provider of streaming digital media and video
on demand (VOD) services, has recently taken actions to reduce the company's
operating cost. These changes will also balance the company's investment across
its two key markets: streaming digital media and video on demand (VOD) services.
Due to the continued decline in economic activity and weakened capital and
business spending for emerging technology products and services, VWB has
redirected its human and capital resources towards its most profitable products
and services, while reducing its exposure to unprofitable markets.
The company is attempting to develop new business partnerships in regards to its
streaming media business within the home entertainment marketplace. Over the
last 12 months, all major PC, consumer electronics, and set-top box manufactures
have added streaming media players within their products to capitalize on the
growth of broadband connections and streaming content offered over the Internet.
With more than 10 million broadband households and nearly 35 million
broadband-enabled screens, VWB is attempting to capitalize on the growth of this
market through its professional services division and potential new partnerships
and business ventures.
Video Without Boundaries (VWB) is repositioning itself within the entertainment
and home broadband marketplace. VWB's goals are 1) to become a producer &
distributor of interactive consumer electronics equipment 2) establish itself as
a software infrastructure player within the home entertainment media-on-demand
marketplace, 3) attempt to capture revenue and market share from services and
products within the video on demand (IP) marketplace.
Media Convergence
Consumers are becoming acclimated to the benefits and quality of digital media
goods and on-line digital media. DVDs and CDs dominate the audio/video sales
market, and digital cameras and emailing images have become a standard method of
exchanging and sharing photographs.
The acceptance of digital media and storage options, coupled with new digital
distribution (IP) methods, is resulting in new convergence devices being
introduced to consumers that allow for:
o Universal Playback and storage of all digital media rented and
purchased by the consumer
o Consumers to have "on-demand" or immediate access to all
digital media purchased & available for rental.
o All forms of digital media to be played on all traditional
audio/video equipment within the home, but also on relatively
new, increasingly portable equipment (laptops, MP3 players)
As a result of the above, consumer interaction with media is changing in
significant ways. Supporting and exploiting this new consumer behavior requires:
o Simple to use devices that conform to existing consumer
behavior and media needs
o Conceptual bridge between the "home PC" and the living room
environment Robust Digital Rights Management (DRM) solution to
support secure IP media delivery
Convergence Approaches
The existing industry participants are not successfully integrating convergence
functionality in devices suitable for the living room. The result is that
consumers: 1) have too many discrete devices connected to their TVs; and 2) lack
the basic PC functionality required to exploit their TVs as "monitors" with
which to access the Internet.
Industry Product Line Example
PC Manufacturers: Multimedia PC "Media Station"
o Form factor (design) and connectivity is not living room &
stereo/TV friendly
o Designed for early adopter market
o Expensive ($1,000-$2,000)
Networking/Wireless Approach: Wireless PC to TV/Stereo Devices
o Complicated for consumers & expensive
o Does not support DVD/CD quality playback from PC to TV
Consumer Electronics Manufacturers: Kenwood Soverign Product Line
o Offers limited and fixed chip-set functionality
Cannot be upgraded or changed
Product Architecture ("MediaReady 4000")
Based on the MediaReady software, this product utilizes the basic form factor
and functionality of mainstream DVD players (top selling main platform of home
entertainment) and offers:
o "Simple-stupid" Graphical User Interface (GUI) functionality
o Internet Media Player that enables full-screen video playback
on TV with DVD- like functionality (MPEG4)
o Killer IP applications (email, Internet browsing,
internet-based audio/video streaming)
o Form factor and Audio/Video connecters that mimic and connect
to all consumer electronics products
o Picture in picture (PIP) functionality (i.e. TV and Web at
same time)
Advanced Features include:
o Progressive downloading, storage and playback of digital media
files stored on inexpensive external USB and Firewire
connected storage devices
o Networked digital media playback from any connected PC device
within the home network.
o Seamless DRM compatibility with mainstream Internet DRM
technologies, but enhanced to base DRM ownership to "an
individual" rather than a device via CAC Media's proprietary
DRM technology
o Standard Linux-based operating system to support application
scalability and extended power-on usage
In addition, the MediaReady platform allows consumers to upgrade their units
with additional services based on a one-time or subscription charge. Retailers
and resellers of the MediaReady line of products also participate in the
residual revenue stream offered by these upgrades. VWB offers value-added
applications and upgrades that include:
o Video Conferencing & IP Telephony
o Games (Single or Multiplayer)
o PVR (i.e. Tivo)
o Online Digital Media Rental and Purchase
Product Marketing and Sales Approach
------------------------------------
MediaReady products provide retailers and resellers with royalty commissions
(sales incentive) on future upgrades and point-of-sale add-on purchases (i.e.
external storage for media). Since consumers already understand the basic
MediaReady features (DVD, PVR, Internet Access) and broadly accept the $299 -
$399 price point, the key sales/marketing proposition is that the product:
o Consolidates several popular devices (and features) into one
universal unit
o Is easily and inexpensively upgradeable via software downloads
o Stands out as the "best buy for the dollar" (also provides the
best profit ($$) for the retailer/salesperson)
The company expects to become cash/flow positive by Q4 2003 primarily through
Retail Distribution (VAR and End User) and OEM Licensing Sales. In addition, VWB
will also receive incremental revenue streams based upon:
o Purchases of value-added applications through the MediaReady
platform
o Professional Services Revenue based upon customized
value-added applications
In January 2003, Video Without Boundaries acquired all assets of
Brokenremote.tv, for 500,000 shares of restricted common stock, a privately held
on-line publisher and subsidiary of CAC Media Inc. Brokenremote.tv publishes
news and market analytics about the emerging convergence of the Interactive TV &
Consumer Electronics, Video On Demand (VOD), & Broadband Internet Entertainment
markets. The acquisition will support Video Without Boundaries attempt to build
its brand recognition within this new emerging market and leverage its existing
relationships with streaming media clients as new advertising clients.
Brokenremote.tv provides day-to-day news updates on topics such as: ongoing
copyright and consumer rights legislation regarding digital media distribution,
Video on Demand, Interactive TV, new technology standards and product
announcements.
In addition to the acquisition of Brokenremote.tv, the company has also made a
strategic investment in privately held CAC Media, Inc. Video Without Boundaries
invested $100,000 to complete the transaction. CAC Media, a privately held
corporation, specializes in interactive consumer electronics software
development, digital rights management, and digital media distribution
infrastructure.
In February 2003, Video Without Boundaries, Inc. (VWB) agreed to a strategic
alliance with Neon Technology, Inc. a privately held corporation and a designer
of advanced set-top box hardware, under which the companies will collaborate on
the design and production of a line of next-generation multifunction set-top
boxes for the interactive consumer electronics marketplace. Video Without
Boundaries and Neon Technology, have been working together to develop a tightly
integrated multifunction interactive DVD player and set-top box solution.
Next-generation interactive set- top boxes will be the delivery point for new
entertainment programs and services for the home. They will combine Internet
access, web browsing, streaming media playback, video-on-demand, email, online
shopping, and a host of other capabilities into a single, unified system. Since
this is a new market and product, there are may be unforeseen delays in design
and production because of cash flow and manufacturing problems.
In February 2003, Video Without Boundaries, Inc. (VWB) debuted the MediaReady
Internet/DVD Player (VWB-3000), an easy-to-use home entertainment device that
makes it possible to surf the Web, send email, watch DVD videos, and even sing
karaoke from any television. Similar in size and appearance to a conventional
DVD player, MediaReady combines a DVD player and Web browser with a full-sized
wireless keyboard, a media player for playback of Web-based streaming media,
Dolby Digital 5.1 Surround Sound, picture-in-picture capability, a karaoke
microphone jack, and other features that enable consumers to access all popular
forms of home entertainment from the comfort of their couch. The DVD player
supports CDs, VCDs, SVCDs and CDs with MP3 files as well as DVDs, allowing users
to play the latest video and audio. MediaReady supports all forms of Internet
connection including 56 kbps modem, dynamic DSL and cable modems, and 10/100
Base-T Ethernet. The built-in Web browser includes SSL 3.0 for secure online
shopping. MediaReady's VWB Internet PIP picture-in-picture feature allows users
to multi-task their favorite pastimes, such as viewing the Web while watching a
DVD movie or television program. A user- friendly, TV-optimized user interface
allows even first-time users to navigate with ease. The unit carries a
manufacturer's suggested retail price of $349 and ships with a remote control,
microphone, and all cables needed for easy hookup. The MediaReady product is a
result of the strategic alliance with Neon Technology.
In March 2003 Video Without Boundaries licensed the Lafayette name for its
MediaReady set-top boxes. As a result of this licensing agreement with Lafayette
Electronics, Video Without Boundaries will produce a set-top box under the
Lafayette brand. The Lafayette-branded units will appear in specialty retail
stores and coincide with the introduction of Lafayette's new line of home audio
and video electronic products designed to re-launch the Lafayette brand.
Additionally, Video Without Boundaries signed a Consulting Agreement with Steve
Cavayero, President of Lafayette Electronics for 50,000 shares of restricted
common stock.
In April 2003 Video Without Boundaries announced the debut of a VAR program for
its MediaReady Internet/DVD Player, the combo entertainment unit that brings
email, web surfing, karaoke, MP3, CD music playback, and more to any television.
Focused on specialty and high-end home electronics and computer retailers, the
VAR program gives merchants an exceptional opportunity to capitalize on the
developing market for convergent home entertainment devices.
In May 2003 Video Without Boundaries signed a manufacturing agreement with Lung
Hwa Electronics, a major consumer electronics manufacturer, to begin production
of Video Without Boundaries' new line of MediaReady Internet/DVD Players.
MediaReady, a revolutionary combo entertainment device that brings email, web
surfing, karaoke, MP3, CD/DVD playback, and more to any television and home
theater system, will ship to retailers in September 2003.
Lung Hwa Electronics Co. Ltd., established in 1973, is a public company listed
on the Taiwan Stock Market (TSEC: 2424) with a current market capitalization of
$28 million (USD). Lung Hwa, an ISO 9001 certified manufacturer, consistently
provides the most qualified professional products to the market and has become
one of the leading 3C manufacturers in Taiwan. Foreseeing rapid business growth,
Lung Hwa invested in a new factory, Expert Electronics (Wujiang) Co. Ltd., in
Shanghai, China. The 45,000-square-foot factory produces 600,000 PCBA pieces and
200,000 Box Build sets each month. The huge capacity of the China factory
enables Lung Hwa to bring to market more cost-effective products. With 29 years
of innovation, Lung Hwa is expanding its product lines into two categories: EMS
(Electronics Manufacturing Services) and DMS (Design Manufacturing Services).
In June 2003, Video Without Boundaries began production of its new and more
advanced MediaReady 4000 Internet/DVD player. The convergent device, which
unifies DVD playback, feature-rich TV, Internet, email, karaoke, and CD/MP3
playback with local and networked digital storage along with a host of possible
upgrades and options, is expected to reach consumer electronics shelves in late
November 2003. The biggest change in the MediaReady 4000 is the addition of
powerful PC componentry, including an onboard hard drive for storage of digital
entertainment. The unit's new connectivity options, including Ethernet 10B/100BT
wired and wireless connections, USB 2.0 and 1394 connectors, enables the device
to download, play, and manage digital movies and other forms of digital
entertainment from the Internet, or from a home networked PC. An improved Web
browser and other feature upgrades ensure that the MediaReady 4000 will be the
one-stop entertainment and communications choice for the new age of digital
technology.
In July 2003, VWB announced the selection of Sigma's EM8475 digital media
processor, for Video Without Boundaries' new MediaReady(TM) 4000 Internet/DVD
Player, from Sigma Designs, Inc. (Nasdaq: SIGM), a leader in digital media
processing for consumer appliances. The EM8475, an advanced MPEG-4 decoder
designed for set-top box applications, will drive digital video playback on the
MediaReady 4000, a breakthrough in convergent home entertainment. Sigma Designs'
EM8475 MPEG-4 digital processor is the premier product for IP video streaming in
set-top boxes and media gateways. Incorporating the company's award-winning
REALmagic(R) Video Streaming Technology, the chip was the industry's first
MPEG-4 chip to support full-resolution (720x576) and streaming video based on
ISMA specification 1.0. The EM8475 provides highly integrated solutions for
decoding of MPEG-4, as well as DVD, MPEG-2 and MPEG- 1 formats.
The EM8475 enables the rapid development of adding PVR, progressive DVD playback
and streaming video playback functionality to advanced set-top boxes and other
PCI-based devices. In addition to providing state-of-the-art MPEG-4 playback
capability, the EM8475 will allow the MediaReady(TM) 4000 to access
sophisticated online multimedia content containing audio, video, text, graphics
and interactivity. MPEG-4's object- oriented environment supports complex scene
manipulation at low bit rates, making it ideal for streaming content over
today's broadband connections.
Sigma Designs specializes in silicon-based MPEG decoding for steaming video,
progressive DVD playback, and advanced digital set-top boxes. The company's
award- winning REALmagic(R) Video Streaming Technology is used in both
commercial and consumer applications providing highly integrated solutions for
high-quality decoding of MPEG-1, MPEG-2, and MPEG-4. Headquartered in Milpitas,
Calif., the company also has offices in China, Europe, Hong Kong, Japan, Korea,
and Taiwan.
In September 2003, VWB announced a partnership with Sound Choice(R), the leading
brand and distributor of karaoke sound tracks in the U.S., today announced an
alliance aimed at adding bundled karaoke music titles to VWB's new
MediaReady(TM) 4000 Internet/DVD player. Under the terms of the agreement, VWB's
initial production run, will be factory-equipped with popular karaoke titles,
giving purchasers a chance to enjoy the fun of karaoke in the privacy of their
home. Sound Choice's premium-quality karaoke content will be presented on the
MediaReady 4000 under Sound Choice's Performer's Choice(R) brand. The
Performer's Choice logo will appear on MediaReady 4000 packaging; other
cooperative marketing activities will include the promotion and sale of
MediaReady 4000 players on Sound Choice's websites.
In September 2003, VWB announced it was demonstrating its breakthrough
MediaReady 4000(TM) convergent Internet/DVD Player to OEM manufacturers at
Computex Taipei 2003. The MediaReady 4000, one of the world's first integrated
consumer set-top devices, combines popular media entertainment options including
DVD/MPEG-1/MPEG- 2/MPEG-4 playback, feature-rich television, email, web surfing,
karaoke, CD/MP3 playback and more, with an open source, Linux-based architecture
that allows it to support virtually any kind of OEM configuration or upgrade.
Video Without Boundaries' MediaReady 4000 has partnered with Lung Hwa
Electronics Co., Ltd., a leading worldwide consumer electronics equipment
manufacturer, to produce the convergent device. The MediaReady 4000 is being
demonstrated at Computex Taipei 2003 from the Lung Hwa Electronics exhibit,
Booths 427, 429, and 431.
Currently Video Without Boundaries has minimal revenue but will derive
substantially all of its revenues from product sales and licensing fees
associated with the sale of its MediaReady line of set-top boxes on an order by
order basis which will start in Q4 2003.
Agreements and purchase orders that may be entered into in connection with
product sales are generally on an order by order basis. If customers terminate
purchase orders or if Video Without Boundaries is unable to acquire new customer
and orders for its products, 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 products sold can cause
significant variations in operating results from quarter to quarter.
Video Without Boundaries' product sales will vary in size; therefore, a customer
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.
Since the company had no revenue for the period no customer accounted for more
than 10.0% of Video Without Boundaries' revenues in the periods ended December
31, 2002 or September 30, 2003. Video Without Boundaries does not know the scope
of its product sales or customer profile as yet because the products are so new.
Any cancellation, deferral, or significant reduction in future orders could have
a material adverse affect on Video Without Boundaries' business, financial
condition, and results of operations.
Results of Operations:
--------------------------------------------------------------------------------
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:
YTD 2002 YTD 2003
9/30/02 9/30/03
--------- ----------
unaudited unaudited
Revenues $ 739,013 $ 190,770
Cost of sales $ 402,194 $ 175,926
--------- ---------
Gross $ 336,819 $ 14,844
profit
Selling, general, and administrative expenses $ 104,643 $ 648,925
Research and Development $ 51,534 $ 0
--------- ---------
Net Income $ 180,642 $(634,081)
========= =========
Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30,
2002
REVENUES
Net Revenues are comprised of product and services revenues, net of returns and
allowances. Net revenues decreased 74%, or $548,243 to $190,770 for the Nine
months ended September 30, 2003 from $739,013 for the comparable period in 2002.
This decrease was due to the re-focusing of the Company as we invested heavily
in Research and Development, sales and marketing and manufacturing of our new
MediaReady line of Internet/DVD set-top boxes. The company shipped its first
products to the market in Q2.
GROSS PROFIT
Gross Profit decreased 96%, or $321,975 to $14,844 for the Nine months ended
September 30, 2003 from $336,819 for the comparable period in 2002. The decrease
in gross profit was due to the re-focusing of the Company as we invested heavily
in Research and Development, sales and marketing and manufacturing of our new
MediaReady line of Internet/DVD set-top boxes. The company shipped its first
products to the market in Q2.
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 increased 520%, or
$544,282 to $648,925 for the Nine months ended September 30, 2003 from $104,643
for the comparable period in 2002. The increase in general and administrative
expenses as a percentage of revenue was a result of the re-focusing of the
Company as we invest heavily in Research and Development and manufacturing of
our new MediaReady line of Interent/DVD set-top boxes. The company has allocated
all available resources to the research and development, sales and marketing and
manufacturing of our MediaReady product line. The company shipped its first
products to the market in Q2 2003.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2003 the Company had cash and net working capital of $70,856
and ($1,143,687), 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 which the
company is in negotiation to receive. 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
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our principal executive
officer and principal financial officer, after evaluating the effectiveness of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-14(c) and 15d-14(c)) within 90 days prior to the filing of this report, have
concluded that, based on such evaluation, our disclosure controls and procedures
were adequate and effective to ensure that material information relating to us,
including our consolidated subsidiaries, was made known to them by others within
those entities, particularly during the period in which this Quarterly Report on
Form 10-QSB was being prepared.
Changes in Internal Controls. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, nor were there any significant
deficiencies or material weaknesses in our internal controls. Accordingly, no
corrective actions were required or undertaken.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending legal proceedings against the Company.
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
31 Certifications Pursuant to 18 USC Section 1350, Section 302 of
the Sarbanes-Oxley Act of 2002
32 Certification Pursuant to 18 USC Section 1350, Section 906 of
the Sarbanes-Oxley Act of 2002
No Reports on form 8-K
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 14, 2003 By: /s/ V. JEFFREY HARRELL
--------------------------
V. Jeffrey Harrell, President & CEO