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 March 31, 2004
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 March 31, 2004 there were 25,948,747 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: March 31, 2004 and December 31, 2003
Statement of Operations: Three Months Ending March 31, 2004 and Year
Ending December 31, 2003
Statement of Shareholder's Equity: Three Months Ending March 31, 2004
Statements of Cash Flows: Three Months Ending March 31, 2004 and Year
Ending December 31, 2003
Notes to Financial Statements for March 31, 2004
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
1
VIDEO WITHOUT BOUNDARIES, INC.
Balance Sheets
12/31/03 03/31/04
----------- -----------
ASSETS audited unaudited
Current assets:
Cash $ 73,912 $ 842,528
Accounts receivable $ 300,000 $ 302,064
Inventory $ 3,250 $ 11,375
Note - CAC -- $ 75,000
----------- -----------
Total current assets $ 377,162 $ 1,230,967
Fixed assets:
Property and equipment $ 94,198 $ 97,427
----------- -----------
Net fixed assets $ 94,198 $ 97,427
Other assets $ 1,850 $ 1,850
Deposit CAC Media $ 163,000 $ 253,000
Media Ready Software $ 198,668 $ 198,668
Prepaid Box Tooling $ 40,000 $ 40,000
Brokenremote.tv -- --
----------- -----------
Total other assets $ 403,518 $ 493,518
TOTAL ASSETS $ 874,877 $ 1,821,912
=========== ===========
LIABILITIES AND OWNER'S EQUITY
Current liabilities:
Accounts payable $ 224,769 $ 44,292
Due To Shareholders $ 1,238,258 $ 1,411,478
Interest Payable $ 7,301 --
Notes Payable $ 30,000 --
Other -- --
Convertible Debentures -- --
----------- -----------
Total current liabilities $ 1,500,328 $ 1,455,770
Shareholders Equity
Common stock-par value $.001, 50,000,000 shares
authorized, 15,448,747 issued and outstanding
at December 31, 2003 and 25,948,747 at
March 31, 2004 $ 15,449 $ 25,949
Additional paid -in capital $ 2,789,851 $ 3,954,351
Deficit $(3,430,750) $(3,614,158)
----------- -----------
Total owner's equity $ (625,450) $ 366,142
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 874,877 $ 1,821,912
=========== ===========
The accompanying notes are an integal part of these financial statements
2
VIDEO WITHOUT BOUNDARIES, INC.
STATEMENTS OF OPERATIONS
For year ended December 31, 2003 & quarter ended March 31, 2004
12/31/03 03/31/04
------------ ------------
audited unaudited
Revenues $ 190,770 $ 86,563
Costs of Sales $ 176,046 $ 68,310
------------ ------------
Gross Profit $ 14,724 $ 18,253
Selling,General, and Administrative Expenses $ 1,277,027 $ 201,661
Research and Development -- --
Loss on Discontinued Business -- --
------------ ------------
$ 1,277,027 $ 201,661
------------ ------------
Net Income / Loss $ (1,262,302) $ (183,408)
============ ============
Basic Loss Per Share $ (0.082) ($ 0.007)
============ ============
Diluted Earnings Per Share $ (0.162) $ (0.009)
============ ============
Weighted-average common shares outstanding
Basic 15,448,747 25,948,747
============ ============
Diluted 7,783,917 20,698,747
============ ============
The accompanying notes are an integal part of these financial statements
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VIDEO WITHOUT BOUNDARIES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
March 19, 1999 (Inception) to March 31, 2004
Additional
Common Stock 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 $ 492,941
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 $1,415,770 $(2,168,447)
Stock Issued For Acquisitions 750,000 $ 750 $ 449,250
Stock Issed For Convertible Debenture 949,660 $ 950 $ 495,510
Stock Issued For Debt 12,795,000 $ 12,795 $ 220,155
Stock Issued For Services 835,000 $ 835 $ 209,165
(Loss) For The Year Ended December 31, 2003 $(1,262,302)
----------------------------------------------------
Balance December 31, 2003 15,448,747 $ 15,449 $2,789,850 $(3,430,749)
Stock Issued For Debt 7,500,000 $ 7,500 $ 67,500
Stock Issued For Stock Sale 3,000,000 $ 3,000 $1,097,000
(Loss) For The Period Ended March 31, 2004 $ (183,408)
----------------------------------------------------
Balance March 31, 2004 25,948,747 $ 25,949 $3,954,350 $(3,614,157)
The accompanying notes are an integal part of these financial statements
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VIDEO WITHOUT BOUNDARIES, INC.
STATEMENTS OF CASH FLOWS
12/31/03 03/31/04
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audited unaudited
Cash flows from operating activities
Net (loss) ($1,262,302) ($183,408)
Adjustments to reconcile net (loss) to net cash (used)
by operating activities
Stock issued for services and acquired
companies $15,330 $0
Depreciation $140,001 $0
Decrease (Increase) in accounts receivable ($299,379) ($2,064)
Decrease (Increase) in inventories ($3,250) ($8,125)
Decrease (Increase) in other Assets ($6,850) ($75,000)
Increase (Decrease) in notes payable $17,301 ($37,301)
Increase (Decrease) in accounts payable $139,394 ($180,477)
------------- -------------
Total Adjustments $2,546 ($302,966)
Net cash (used) by operating
activities ($1,259,757) ($486,374)
Cash flows from investing activities
Purchase of property and equipment ($8,857) ($3,229)
Net cash (used) by investing activities ($240,132) ($90,000)
Cash flows from financing activities
Loan from shareholder $474,478 $173,220
Sale of common stock $1,374,080 $1,175,000
Convertible Debentures ($277,948) $0
Net cash provided by financing
activities $1,570,610 $1,348,220
Net change in cash $61,865 $768,617
Cash - beginning $12,047 $73,912
Cash - end $73,912 $842,528
============= =============
Supplemental disclosures of cash flow information:
Interest paid $ -- $ --
---- ----
Taxes paid $ -- $ --
---- ----
The accompanying notes are an integal part of these financial statements
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Video Without Boundaries, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 2004
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
three month period ended March 31, 2004. The results of operations for the three
months ended March 31, 2004 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 (VWB) 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.
The company is developing new products and services in regards to its media
convergance 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) has repositioned 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)
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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
o 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
o 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:
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o Video Conferencing & IP Telephony
o Games (Single or Multiplayer)
o PVR (i.e. Tivo)
o Online Digital Media Rental and Purchase
STRATEGY
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 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 June 2003, Video Without Boundaries announced 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(TM) 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(TM) 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-
9
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 January 2004, the company sold 3,000,000 shares of its Restricted Common
Stock pursuant to Rule 144 Under the Securities Act of 1933 to Margaux
Investment Management Group S.A. for $1,100,000.
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 Q2 2004.
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 minimal revenue for the period no customer accounted for
more than 10.0% of Video Without Boundaries' revenues in the period ended March
31, 2004. 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.
CUSTOMERS
We have focused and will continue to focus on long-term relationships
with client's that will range from retail consumers to small, medium, and large
business customers. If its clients terminate purchase orders or if Video Without
Boundaries is unable to enter into new engagements or sell its new products and
services its business, financial condition and results of operations could be
materially and adversely affected.
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 200 3 YTD 2004
3/31/2003 3/31/2004
--------- ----------
unaudited unaudited
Revenues $ 0 $ 86,563
Cost of sales $ 0 $ 68,310
--------- ---------
Gross profit $ 0 $ 18,253
Selling, general, and administrative expenses $ 474,225 $ 201,661
Research and Development $ 12,311 $ 0
--------- ---------
Net Income ($486,536) ($183,408)
========= =========
Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003
REVENUES
Net Revenues are comprised of product and services revenues, net of
returns and allowances. Net revenues increased 100%, or $86,563 for the three
months ended March 31, 2004 from $0 for the comparable period in 2003. This
increase was due to the initial evaluation orders of our new MediaReady line of
set-top boxes.
GROSS PROFIT
Gross Profit increased 100%, or $18,253 for the three months ended
March 31, 2004 from $0 for the comparable period in 2003.
The increase in gross profit was due to the initial evaluation orders of our new
MediaReady line of set-top boxes.
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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 57.5%, or $272,564 to $201,661 for the three months ended March 31,
2004 from $474,225 for the comparable period in 2003. The decrease in general
and administrative expenses as a percentage of revenue was a result of the
consolidation of operations and re-focusing of the Company as we develop and
manufacture our new MediaReady line of set-top boxes.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2004 the Company had cash and net working capital
of $842,528 and ($224,804), respectively. The Company believes that its current
working capital, and cash generated from operations will be sufficient to meet
the Company's cash requirements for the current year. 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.
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 Certification Pursuant to 18 USC Section 1350, Section 906 of the
Sarbanes-Oxley Act of 2003
32 Certification Pursuant to 18 USC Section 1350, Section 906 of the
Sarbanes-Oxley Act of 2002
No Reports on form 8-K
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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: May 14, 2004 By: /s/ V. JEFFREY HARRELL
-----------------------------------
V. Jeffrey Harrell, President & CEO
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