10QSB 1 form.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 000-26037 VISUAL BIBLE INTERNATIONAL, INC. -------------------------------- (Exact name of registrant as specified in its charter) Florida 65-1030068 (State or Other Jurisdiction (IRS Employer Identification of Incorporation) Number) 1235 Bay Street, Suite 300, Toronto, Ontario M5R 3K4 Canada ------------------------------------------------------------- (Address of Principal Executive Offices, Including Zip Code) (416) 921-9950 -------------- (Issuer's Telephone Number, Including Area Code) 5115 Maryland Way, Suite 223, West Brentwood, TN 37027 ------------------------------------------------------ (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act after the distribution of securities under a plan confirmed by a court: YES [X] NO [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of November 12, 2002, there were 39,949,324 shares of the Registrant's $.001 par value common stock outstanding. Transitional Small Business Disclosure Format (check one): YES [ ] NO [X] TABLE OF CONTENTS Part I - FINANCIAL INFORMATION Item 1. Financial Statements. (a) Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 (b) Consolidated Statements of Operations for three month periods ended September 30, 2002 and September 30, 2001 and for the nine month periods ended September 30, 2002 and September 30, 2001 (c) Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2002 and September 30, 2001 (d) Notes to Financial Statements Item 2. Management's Discussion and Analysis or Plan of Operation. Item 3. Controls and Procedures. PART II. OTHER INFORMATION Item 1. Legal Proceedings. Item 2. Changes in Securities and Use Of Proceeds. Item 3. Defaults on 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 Item 1. Financial Statements. (a) Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 VISUAL BIBLE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (unaudited) (audited) September December 31, 30, 2002 2001 ---------- ---------- Current Assets: Cash and cash equivalents $2,402,408 $62,034 Cash in escrow 166,817 - Accounts receivable, net 86,342 13,348 Inventories 460,976 539,374 Prepaids and other current assets 56,973 56,586 ---------- ---------- Total Current Assets 3,173,516 671,342 Film Cost, Production in Process 342,567 - Property and Equipment, Net of 19,878 14,000 Accumulated Depreciation Intangible Assets, Net of 780,112 1,000,112 Accumulated Amortization ---------- ---------- Total Assets 4,316,073 $1,685,454 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Current portion of notes payable $225,000 $360,233 Accounts payable and accrued 3,599,442 5,923,437 expenses Deferred revenue 1,190,453 823,636 Due to related parties 781,882 5,737,925 ---------- ---------- Total Current and Total Liabilities 5,796,777 12,845,231 ---------- ---------- Commitments and Contingencies Stockholders' Equity (Deficit): Preferred stock, class B, 1,557 - 8,333,333 authorized $.001 par value, 1,556,728 and 0 issued or outstanding at September 30, 2002 and December 31, 2001 Common stock, 25,000,000 39,957 2,294 authorized $.001 par value, 39,956,824 and 2,293,576 issued and outstanding at September 30, 2002 and December 31, 2001 Additional paid-in capital 34,278,694 24,684,892 Receivables from stockholders (427,060) (417,060) Retained earnings (deficit) (35,373,852) (35,429,903) ---------- ---------- Total Stockholders' Equity (Deficit) (1,480,704) (11,159,777) ---------- ---------- Total Liabilities and $4,316,073 $1,685,454 Stockholders' Equity (Deficit) ========== ==========
____________________ The accompanying notes are an integral part of these consolidated financial statements. (b) Consolidated Statements of Operations for three month periods ended September 30, 2002 and September 30, 2001 and for the nine month periods ended September 30, 2002 and September 30, 2001 VISUAL BIBLE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (unaudited) (unaudited) (unaudited) For the For the For the For the Three Three Months Nine Months Nine Months Months Ended Ended Ended Ended September September September September 30, 2002 30, 2001 30, 2002 30, 2001 ---------- ---------- ---------- ---------- Sales: Royalty income $35,356 $315,594 $233,183 627,715 Product sales 20,834 49,170 165,848 270,439 ---------- ---------- ---------- ---------- Total Sales 56,190 362,764 399,031 898,154 Cost of Goods Sold 4,000 7,000 26,000 27,384 ---------- ---------- ---------- ---------- Gross Profit 52,190 355,764 373,031 870,770 Costs and Expenses: Selling, general and 641,658 1,371,211 1,748,093 4,295,891 administrative Costs relating to stock issued 2,900 - 890,900 13,057,500 Write off production costs - - - 3,515,295 ---------- ---------- ---------- ---------- 644,558 1,371,211 2,638,993 20,868,686 ---------- ---------- ---------- ---------- Gain on settlement of liabilities 254,858 - 2,311,216 - ---------- ---------- ---------- ---------- Net Income (Loss) from Operations (337,510) (1,015,447) 45,254 (19,997,916) before Other Income Other Income Interest Income 10,797 - 10,797 - Net Income (Loss) before Taxes (326,713) (1,015,447) 56,051 (19,997,916) Provision (Credit) for Income Taxes - - - - ---------- ---------- ---------- ---------- Net Income (Loss) (326,713) (1,015,447) 56,051 (19,997,916) ========== ========== ========== ========== Income (Loss) per Share: Basic and diluted income (loss) ($0.01) ($0.44) $0.00 ($18.51) per share: ========== ========== ========== ========== Basic and diluted common shares 39,956,824 2,282,145 17,007,971 1,080,385 outstanding ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. (c) Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2002 and September 30, 2001 VISUAL BIBLE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the For the Nine Nine Months Months Ended Ended September 30, 2001 September ---------- 30, 2002 ---------- Cash Flows from Operating Activities: Net income (loss) $56,051 $(19,997,916) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities Depreciation and amortization 223,500 218,250 Gain on settlements (2,311,216) - Write down of film costs to net realizable value - 2,784,353 Write down of inventory - 450,000 Reserve for note receivable - 285,513 Issuance of common stock - 13,057,500 Change in operating assets and liabilities: Accounts receivable (72,994) (205,242) Inventories 73,398 (1,397,118) Film Costs (342,567) - Due to/from affiliate - - Prepaid expenses and other current assets (387) (64,173) Accounts payable 461,210 1,767,120 Deferred revenues 366,817 (170,086) Other assets - 41,417 ---------- ---------- Net cash (used in) provided by operating activities (1,541,188) (3,230,382) ---------- ---------- Cash Flows from Investing Activities: Cash in escrow (166,817) - Acquisition of property and equipment (9,378) - Advance of security deposit - - Acquisition of intangibles - - ---------- ---------- Net cash used in investing activities (176,195) - ---------- ---------- Cash Flows from Financing Activities: Payment of notes payable (35,233) (1,297,900) Proceeds from note payable financing - 4,197,697 Proceeds from issuance of common stock 4,092,990 285,000 ---------- ---------- Net cash provided by (used in) financing activities 4,057,757 3,184,797 ---------- ---------- Net (Decrease) Increase in Cash and Cash Equivalents 2,340,374 (45,585) Cash and cash equivalents, beginning of period 62,034 63,445 ---------- ---------- Cash and cash equivalents, end of period $2,402,408 $17,860 ========== ========== Supplemental Disclosure of Cash Flow Information: Interest paid during the period $394 $8,686 ========== ========== Income taxes paid during the period $ - $ - ========== ========== Supplemental Disclosure of Noncash Investing and Financing Activities: Common stock issued on conversion of promissory note - $1,994,500 ========== ========== Common and preferred stock issued on conversion and $5,260,020 - settlement of debt ========== ==========
____________________ The accompanying notes are an integral part of these consolidated financial statements. (d) Notes to Financial Statements VISUAL BIBLE INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2002 1. THE COMPANY Visual Bible International, Inc. ("Visual Bible International" or "the Company") is a global faith-based media company that owns, through certain license agreements, the exclusive visual and digital rights to popular versions of the Bible. The Company has produced and successfully released the word-for-word books of Matthew and Acts. Visual Bible's mission is to use all forms of media to inspire the lives of present and future generations by carrying God's Word to everyone on earth regardless of their religious affiliation, culture or geographic location. The Company is seeking to acquire additional intellectual property rights, is actively pursing the production of new products and is building its sales and distribution networks in order to position itself as the pre-eminent creator and distributor of the word-for-word productions of the Bible. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Basis of Presentation The accompanying financial statements consolidate the accounts of Visual Bible International and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts from prior years have been reclassified to conform to the current year presentation. The accompanying unaudited consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, in the opinion of management, all adjustments that are of a normal and recurring nature necessary to present fairly the results of operations, financial position and cash flows have been made. It is suggested that these statements be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-KSB, dated May 7, 2002 for the year ended December 31, 2001. The statements of operations for the three months and nine months ended September 30, 2002 and 2001 are not necessarily indicative of results for the full year. Earnings (Loss) per Share The Company computes earnings or loss per share in accordance with the Financial Accounting Standards Board Statement No. 128 "Earnings Per Share" (SFAS 128) which replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes the dilutive effects of options, warrants and convertible securities and thus is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is similar to the previous fully diluted earnings per share. Diluted earnings per share reflects the potential dilution that could occur if securities or other agreements to issue common stock were exercised or converted into common stock. Diluted earnings per share is computed based upon the weighted average number of common shares and dilutive common equivalent shares outstanding. Recent Accounting Pronouncements In July, 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 142 requires that goodwill be tested for impairment under certain circumstances, and written off when impaired, rather then being amortized as previous standards required. SFAS 142 is effective for fiscal years beginning after December 15, 2001. In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144 supercedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of". The primary objectives of SFAS 144 are to develop one accounting model based on the framework established in SFAS 121 for long-lived assets to be disposed of by sale, and to address significant implementation issues. The Company will adopt both SFAS 142 and 144 for its fiscal year beginning January 1, 2002 and management has determined that the adoption of these two pronouncements will not have a material effect on its operating results or financial condition. 3. LIQUIDITY - SIGNIFICANT CORPORATE EVENT During March, 2002, the Company entered into an agreement with Covenant Film Productions, Inc. ("Covenant") in which Covenant will provide for the development of film adaptations, on a word-for-word basis of books of the Bible, film production financing and assistance in raising additional equity capital. See Note 6. During June, 2002, the Company completed a private placement equity financing totaling $4.5 million and issued 9,020,000 shares of common stock. The proceeds of this financing will be used for general corporate purposes and to provide the Company with working capital. In conjunction with this financing, the Company has also reached an agreement with the holders of $4.6 million of its outstanding debt. Under the terms of this agreement, the debtholders exchanged their interest as to $500,000 for 10 million common shares and approximately $4.1 million for 1,556,728 preferred shares of the Company, which are convertible at the rate of one share of preferred for one share of common stock at $2.75 per share until December 31, 2005. In addition Covenant, on behalf of the Company, reached agreement with various of its vendors and settled outstanding debt and claims totaling $2,598,266 for cash payments of $248,175. and 777,500 shares of its common stock valued at $38,875 which resulted in the Company recognizing a gain of $2,311,216 on these settlements. After the equity financing, debt reduction transactions and other third party facilities to finance the Company's future productions Covenant, or its designees, and other parties received 17,460,169 common shares of the Company and Visual Bible will have approximately 40 million common shares outstanding. 4. DISTRIBUTION AGREEMENT During February 2002, Visual Bible International, Inc. entered into a termination agreement with The Columbia House Company whereby the Company paid $45,000 to terminate two agreements with Columbia House. 5. NASHVILLE OFFICE LEASE During March 2002, the Company negotiated a termination of its lease agreement for office space in Nashville, Tennessee. The termination fee totaled $100,000 and was recorded as a liability at December 31, 2001 and paid in June, 2002. Additionally, the Company forfeited a rent deposit totaling $32,000 related to this settlement. 6. COMMITMENTS AND CONTINGENCIES Production Management Agreement In connection with the Covenant transaction, as described in Note 3, the Company entered into a 7 year management and production agreement with JBM Entertainment, Inc. ("JBM"). JBM is headed by Joel B. Michaels, who brings to the Company experience in the film industry, including 25 years as a producer. His films have received a total of 6 Academy Award nominations. Under the agreement JBM will be primarily responsible for all aspects of the creative development, production and marketing for all of the Company's filmed productions including recruiting senior management and consultants experienced in these areas. JBM will receive an annual fee of $600,000 plus reimbursement of expenses. The fee will be increased by $100,000 per year commencing on completion of the first film, subject to not less than one new film being commenced during each fifteen month marketing period. Visual Bible also announced the appointment of a new board of directors and an advisory committee. The new board of directors includes Dr. Steven Small, who has assumed the role of Chairman. Dr. Small has acted as a founder and director of several public and private companies including Newcourt Credit Group, and Capital Partners Corporation. He is joined on the board by Maurice Colson, an independent investment banker, Dr. Jon S. Dellandrea, Professor of Faculty Management, University of Toronto, Peter Richardson, Professor Emeritus, Center and Department for the Study of Religion, University of Toronto, and Moshe Safdie, an internationally renowned architect. Contemporaneous with the appointment of the new board of directors, the previous members of the board of directors and President resigned. Effective June 1, 2002, the Company entered into a five year agreement with Dr. Small to serve as Chairman of the Board. The agreement provided a stock grant of 100,000 shares of the Company's common stock and annual compensation of $90,000. The annual compensation shall automatically be increased on June 1 of each and every year during the term by 5% over and above the past year's annual compensation. The Company's advisory committee includes seven distinguished scholars of religion and theology representing a broad spectrum of religious persuasions. The role of the advisory committee is to collaborate in the creative development and film producing process relating to the appropriate choice of books of the Bible, including sequence and translations, for film adaptation and the production design thereof. The members of the Advisory Committee will serve a term of three years, renewable, and receive compensation as determined by management. New Office Lease On October 1, 2002 ,the Company entered into a Sub Tenancy Agreement with a company controlled by its Chairman for office space in Toronto, Canada at a fair market 5 year renewal rate of $9 per square foot net plus common area maintenance for approximately 6,000 square feet of space. In addition, the Company issued 200,000 shares of its common stock in consideration for existing leasehold improvements, furnishings, fixtures and equipment. IBS Dispute On April 25, 2002 the Company received a letter from the International Bible Society ("IBS") terminating their agreement based upon, among other things, alleged nonpayment of royalties by the Company. The Company does not believe that the IBS termination is justified and the Company's counsel has advised IBS of this position. The Company continues to attempt to settle this matter and has deposited $166,817 in escrow with its attorney during these negotiations. This amount is segregated on the September 30, 2002 consolidated balance sheet. The process by which this matter will be resolved is through mediation and arbitration. In the meantime , IBS has sought and obtained through the Preliminary Arbitrator a preliminary injunction which compels the Company to cease its sale of IBS products by November 27,2002. The results of mediation or arbitration could be different from the preliminary injunction decision. The mediation process could take two months and arbitration an additional six months thereafter. The Company is now focusing its efforts on producing word-for-word visual representations of The Good News Translation under an exclusive license with the American Bible Society. Over 125 million copies of The Good News Translation have been sold. Employment Agreement The Company entered into a five year employment agreement commencing June 1, 2002 with its Executive Vice President and Chief Financial Officer. The agreement provides for an initial annual base salary of $192,500. The salary will increase 12.5% in the second year and will be not less than $300,000 in year three, with 12.5% annual increases in years four and five. 7. STOCKHOLDERS' EQUITY (DEFICIT) On April 15, 2002, pursuant to an action by written consent of the majority of the Company's stockholders, the Company's Articles of Incorporation were amended and restated to increase the authorized shares of common stock from 2,500,000 shares to 300,000,000 shares, par value $.001 and to increase the authorized shares of preferred stock from 833,000 to 200,000,000 shares, par value $.001. All references to common stock issued and outstanding within these financial statements have been retroactively restated to reflect the 1 for 2, 1 for 3 and 1 for 10 combinations of shares that occurred on April 16, 2001, September 25, 2001 and February 19, 2002 respectively. After giving effect to all of these stock combinations, the Company had 39,956,824 and 2,293,576 shares of common stock issued and outstanding at September 30, 2002 and December 31, 2001, respectively. Item 2. Management's Discussion and Analysis. The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes to the financial statements included elsewhere in this report. The discussion may contain "forward looking" statements or statements which arguably imply or suggest certain things about our future. Statements, which express that we "believe", "anticipate", "expect", or "plan to", as well as, other statements which are not historical fact, are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions that we believe are reasonable, but a number of factors could cause our actual results to differ materially from those expressed or implied by these statements. We do not intend to update these forward looking statements. Overview We are a global, faith-based media company that has secured the exclusive visual and digital rights to versions of the Bible. We have produced and successfully released the word-for-word books of Matthew and Acts. We are the successor by merger (the "Merger") to American Uranium, Inc. ("American Uranium"). During June 2000, American Uranium changed its state of incorporation from New Jersey to Florida by means of a merger into a wholly-owned Florida subsidiary, American Uranium Reincorporation, Inc., which then changed its name to American Uranium, Inc. During August, 2000, American Uranium amended and restated its articles of incorporation, which among other things, changed its name to Visual Bible International, Inc. On July 31, 2000, we concluded a voluntary share exchange transaction (the "Share Exchange Transaction") with all of the shareholders of Visual Bible, Inc., a Florida corporation ("Visual Bible") whereupon Visual Bible became our wholly owned subsidiary. As a result of the Share Exchange Transaction the shareholders of Visual Bible received in excess of 51% of our outstanding Common Stock. Prior to the Merger, we had limited operations and were looking to consummate a business combination with another company which had operations. Our primary strengths are our intellectual property rights to the visual representation of popular versions of the Bible and our sales and distribution networks. The Bible remains the largest selling book of all time and Bible sales are driven by Bible translations. We have received exclusive licenses for the film rights for the word-for-word film adaptations of the Good News Translation, New International Version, Contemporary English Version, and Holman Christian Standard Version of the Bible. We intend to utilize our intellectual property rights as the basis to build a global distribution system for faith-based, audio-visual products. Past distribution of such products has been primarily focused on the traditional Christian marketplace. We believe the opportunity continues to exist to take our products into the mainstream domestic marketplace and simultaneously into the much larger global marketplace where, we believe, the potential for sales is substantial. Our distribution agreement with Thomas Nelson, Inc., a major distributor of faith based products, provides Thomas Nelson with the exclusive license to distribute videos through the mass market, general retail outlets, the Christian Booksellers Association and the church markets in the United States. During the third quarter of 2001, we executed a termination agreement with Stewart House Publishing, Inc. as to our existing distribution agreement. Prior to the termination, Stewart House had distributed our products to the general or mass market in the United States and Canada. We are continuing to pursue strategic relationships with the United Bible Societies. Results of Operations Net sales revenue for the three month period September 30, 2002 of $56,190 were approximately 85% less than the net revenue amount of $362,764 for the corresponding 2001 period as no new product or repackaging of existing product was available. For the nine month period ended September 30, 2002, net sales revenue of $399,031, declined by $499,123 or 56% as compared to the nine month period ended September 30, 2001 The decrease in the 2002 third quarter revenue was the primary reason for the decline in net revenue for the nine month period ended September 30, 2002 when compared to the corresponding period a year earlier. Selling, general and administrative expenses for the third quarter of $641,658 was $729,553 or 53% lower than the three month period ended September 30, 2001. At the end of the 2002 third quarter the Company had only two administrative employees whereas in the corresponding period a year ago there were ten employed during the quarter. For the nine months ended September 30, 2002, selling, general and administrative expense of $1,748,093 was 59% less than the corresponding 2001 period, primarily as a result of the decline in the number of employees , reductions in rent, consulting and other supporting administrative costs. In the third quarter the Company had additional gains of $254,858 related to the negotiation, settlement and reduction of liabilities. For the nine month period ended September 30, 2002 similar additional gains totaled $2,311,216. There were no corresponding gains in the previous year. Liquidity and Capital Resources At September 30, 2002, the Company had $2,402,408 in cash and cash equivalents and a working capital deficit of $2,623,261 compared to $62,034 in total cash and a working capital deficit of $12,173,889 as at December31, 2001.. The substantial improvement in these measurements resulted from the Company's receipt of cash proceeds of approximately $4.5 million from the issuance of its common stock for cash, the conversion of approximately $4.6 million of debt into equity and the settlement of approximately $2.6 million of debts resulting in approximately $2 million in gains. For the remainder of the 2002 fiscal year, the Company anticipates that it will require approximately $850,000 in cash to carry on its operations. With respect to the announcement of the Company's next film, "The Gospel of John", the Company is arranging funding of the production through tax assisted financing and debt. Item 3. Controls and Procedures. a.) Our principal executive officer and our principal financial officer, who was on the Evaluation Date (as hereinafter defined) and is on the date of the filing of this quarterly report the same person, has on a date which is within ninety days of the date that we have filed this quarterly report (the "Evaluation Date"), evaluated the effectiveness of our disclosure controls and procedures and has concluded that no significant deficiencies or material weaknesses exist. b.) There have been no significant changes in our internal controls or in any other factors that could significantly affect these controls subsequent to the Evaluation Date. PART II. OTHER INFORMATION Item 1. Legal Proceedings. As previously reported, we received a letter from the International Bible Society ("IBS") terminating our agreement with IBS (the "IBS Agreement") based upon, among other things, alleged nonpayment by us of royalties. We do not believe that the IBS termination is justified and our counsel has advised IBS of our position. We continue to attempt to settle this matter, and in connection with such settlement attempts we have deposited what we believe to be royalty payments that may be due to IBS in the amount of $166,817 in escrow with our counsel. The process by which this matter will be resolved is through mediation and arbitration. However, in the interim, IBS has, through the Preliminary Arbitrator, sought and obtained a preliminary injunction which compels us to cease our sale of our products emanating from the IBS Agreement by November 27, 2002 (the "Sale Termination Date"). We do not agree with the findings of the Preliminary Arbitrator, and we intend to continue to pursue settlement, mediation and arbitration to resolve this matter. The mediation process could take two months or more and the arbitration process could take an additional six months or more thereafter. The results of mediation or arbitration could produce a more favorable result to us than the decision obtained from the Preliminary Arbitrator, but we can provide no assurance that we will obtain any result that is more favorable to us. Accordingly, we intend to cease our sale of our products emanating from the IBS Agreement by the Sale Termination Date and to continue to focus our efforts on producing word-for-word visual representations of The Good News Translation of the Bible under our exclusive license agreement with the American Bible Society. Item 2. Changes in Securities. a). Not Applicable. b). Not Applicable. c). 1. In connection with certain Regulation S offerings previously undertaken by us (collectively, the "Prior Offerings") and in order to settle various claims advanced by the purchasers of our common stock sold pursuant thereto, including but not limited to continuing claims against us for failure to timely file a registration statement, we issued 1,573,500 shares of common stock (the "Regulation S Supplemental Shares") to 13 parties (the "Regulation S Shareholders"). There were no commissions or discounts associated with the issuance of the Regulation S Supplemental Shares, such Regulation S Supplemental Shares are not convertible or exchangeable and there are no warrants or options issued in connection therewith. We claimed exemption from the registration provisions of the Act with respect to the common stock so issued pursuant to Section 4(2) thereof inasmuch as no public offering will be involved. Each of the parties to whom the Regulation S Supplemental Shares were issued in connection foregoing, made an informed investment decision based upon negotiation with us and were provided with access to material information regarding us. We believe that all parties that acquired the Regulation S Supplemental Shares pursuant to the foregoing had knowledge and experience in financial matters such that they were capable of evaluating the merits and risks of acquisition of the Regulation S Supplemental Shares. All certificates representing the Regulation S Supplemental Shares issued pursuant to the foregoing bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. 2. In connection with certain requirements of the Small Consulting Agreement (as same was described in Item 5 of our Form 10-QSB for the quarter ended June 30, 2002), we issued 100,000 shares (the "Small Shares") of our common stock to Dr. Steven Small (Dr. Small became one of our Directors prior to the issuance of the Small Shares, see Item 5, in our Form 10-QSB for the quarter ended June 30, 2002). There were no commissions or discounts associated with the issuance of the Small Shares, such Small Shares are not convertible or exchangeable and there are no warrants or options issued in connection therewith. We claimed exemption from the registration provisions of the Act with respect to the common stock so issued pursuant to Section 4(2) thereof inasmuch as no public offering will be involved. In connection with the issuance of the Small Shares, Dr. Small made an informed investment decision based upon negotiation with us and was provided with access to material information regarding us. We believe that Dr. Small had knowledge and experience in financial matters such that he was capable of evaluating the merits and risks of acquisition of the Small Shares. All certificates representing the Small Shares issued pursuant to the foregoing bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. 3. In connection with certain leasehold improvements provided by Capital Partners ("Capital Partners") under a sublease agreement (the "Sublease") with Capital Partners (as same was described in Item 5 of our Form 10-QSB for the quarter ended June 30, 2002), we issued 200,000 shares (the "Capital Partners Shares") of our common stock to Capital Partners (Capital Partners is controlled by Dr. Steven Small who became one of our Directors subsequent to the authorization of the issuance of the Capital Partners Shares, see Item 5 of our Form 10-QSB for the quarter ended June 30, 2002). There were be no commissions or discounts associated with the issuance of the Capital Partners Shares, such Capital Partners Shares are not convertible or exchangeable and there were no warrants or options issued in connection therewith. We claimed exemption from the registration provisions of the Act with respect to the common stock so issued pursuant to Section 4(2) thereof inasmuch as no public offering was involved. In connection with the issuance of the Capital Partners Shares, Capital Partners made an informed investment decision based upon negotiation with us and was provided with access to material information regarding us. We believe that Capital Partners had knowledge and experience in financial matters such that Capital Partners was capable of evaluating the merits and risks of acquisition of the Capital Partners Shares. All certificates representing the Capital Partners Shares issued pursuant to the foregoing bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. 4. We issued 2,796,668 shares of common stock (the "Entitled Parties Shares") to 7 employees, consultants and other parties associated with us (collectively, the "Entitled Parties") who are largely responsible for our management, growth and protection of our business, and to provide an incentive for such Entitled Parties to continue to provide their services to us. There were commissions or discounts associated with the issuance of the Entitled Parties Shares, such Entitled Parties Shares are not convertible or exchangeable and there are no warrants or options issued in connection therewith. We claimed exemption from the registration provisions of the Act with respect to the common stock so issued pursuant to Section 4(2) thereof inasmuch as no public offering was involved. Each of the Entitled Parties to whom the Entitled Parties Shares was issued in connection foregoing, made an informed investment decision based upon negotiation with us and was provided with access to material information regarding us. We believe that the Entitled Parties that acquired the Entitled Parties Shares pursuant to the foregoing had knowledge and experience in financial matters such that they were capable of evaluating the merits and risks of acquisition of the Entitled Parties Shares. All certificates representing the Entitled Parties Shares issued pursuant to the foregoing bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. 5. In connection with certain outstanding debts due from the Corporation (the "Pan Zone Debt") to Pan Zone Company, Ltd. ("Pan Zone") and in order to settle the Pan Zone Debt, we issued 10,000,000 shares of our common stock (the "Pan Zone Common Shares") to Pan Zone in exchange for the discharge by Pan Zone of $500,000.00 of the Pan Zone Debt. Before the issuance of the Pan Zone Common Shares, Pan Zone owned approximately 1,125,000 shares(approximately, 10%) of our common stock (See Item 5 below of our Form 10-QSB for the quarter ended June 30, 2002). There were no commissions or discounts associated with the issuance of the Pan Zone Common Shares, such Pan Zone Common Shares are not convertible or exchangeable and there are no warrants or options issued in connection therewith. We claimed exemption from the registration provisions of the Act with respect to the common stock so issued pursuant to Section 4(2) thereof inasmuch as no public offering will be involved. In connection with the issuance of the Pan Zone Common Shares, Pan Zone made an informed investment decision based upon negotiation with us and was provided with access to material information regarding us. We believe that Pan Zone had knowledge and experience in financial matters such that Pan Zone was capable of evaluating the merits and risks of acquisition of the Pan Zone Common Shares. All certificates representing the Pan Zone Common Shares issued pursuant to the foregoing bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. 6. In connection with closing of certain transactions (the "Transactions") between us and Covenant Film Productions, Inc. ("Covenant"), as such Transactions were described in Item 5 below of our Form 10-QSB for the quarter ended June 30, 2002, we issued 13,500,000 shares of our common stock (the "Covenant Parties Shares") to 8 parties (the "Covenant Parties"). There were no commissions or discounts associated with the issuance of the Covenant Parties Shares, such Covenant Parties Shares are not convertible or exchangeable and there are no warrants or options issued in connection therewith. We claimed exemption from the registration provisions of the Act with respect to the common stock so issued pursuant to Section 4(2) thereof inasmuch as no public offering was involved. In connection with the issuance of the Covenant Parties Shares, the Covenant Parties made an informed investment decision based upon negotiation with us and were provided with access to material information regarding us. We believe that the Covenant Parties had knowledge and experience in financial matters such that the Covenant Parties were capable of evaluating the merits and risks of acquisition of the Covenant Parties Shares. All certificates representing the Covenant Parties Shares issued pursuant to the foregoing bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. 7. In connection with the remainder of the Pan Zone Debt due to Pan Zone and in order to settle the balance of the Pan Zone Debt, our Board of Directors authorized the issuance of 1,184,364 shares of Series B Preferred Shares (the "Pan Zone Preferred Shares") to Pan Zone. We have not yet amended our articles of incorporation to create the Series B Preferred Shares, but we anticipate doing so in the near future, and shortly after filing such amendment we expect to issue the Pan Zone Preferred Shares (See Item 5 below). There will be no commissions or discounts associated with the issuance of the Pan Zone Preferred Shares, such Pan Zone Preferred Shares are convertible and exchangeable (see Item 5 below for a description of such rights and preferences) but there will be no warrants or options issued in connection therewith. We expect to claim exemption from the registration provisions of the Act with respect to the Pan Zone Preferred Shares so issued pursuant to Section 4(2) thereof inasmuch as no public offering will be involved. In connection with the issuance of the Pan Zone Preferred Shares, Pan Zone will have made an informed investment decision based upon negotiation with us and will have been provided with access to material information regarding us. We believe that Pan Zone will have had knowledge and experience in financial matters such that Pan Zone will be capable of evaluating the merits and risks of acquisition of the Pan Zone Preferred Shares. All certificates representing the Pan Zone Preferred Shares issued pursuant to the foregoing will bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. 8. In connection with outstanding debts due from us (the "Canco Holdings Debt") to Canco Holdings Corp. ("Canco") and in order to settle the Canco Debt, we expect to issue 186,909 shares of Series B Preferred Shares (the "Canco Preferred Shares") to Canco. We have not yet amended our articles of incorporation to create the Series B Preferred Shares, but we anticipate doing so in the near future, and shortly after filing such amendment we expect to issue the Canco Preferred Shares (See Item 5 below). There will be no commissions or discounts associated with the issuance of the Canco Preferred Shares, such Canco Preferred Shares are convertible and exchangeable (see Item 5 below for a description of such rights and preferences) but there will be no warrants or options issued in connection therewith. We expect to claim exemption from the registration provisions of the Act with respect to the preferred stock so issued pursuant to Section 4(2) thereof inasmuch as no public offering will be involved. In connection with the issuance of the Canco Preferred Shares, Canco will have made an informed investment decision based upon negotiation with us and will have been provided with access to material information regarding us. We believe that Canco will have had knowledge and experience in financial matters such that Canco will be capable of evaluating the merits and risks of acquisition of the Canco Preferred Shares. All certificates representing the Canco Preferred Shares issued pursuant to the foregoing will bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. 9. In connection with outstanding debts due from us (the "Wong Debt") to Paul Wong ("Wong") and in order to settle the Wong Debt, we expect to issue 185,455 shares of Series B Preferred Shares (the "Wong Preferred Shares") to Wong. We have not yet amended our articles of incorporation to create the Series B Preferred Shares, but we anticipate doing so in the near future, and shortly after filing such amendment we expect to issue the Canco Preferred Shares (See Item 5 below). There will be no commissions or discounts associated with the issuance of the Wong Preferred Shares, such Wong Preferred Shares are convertible and exchangeable (see Item 5 below for a description of such rights and preferences) but there will be no warrants or options issued in connection therewith. We expect to claim exemption from the registration provisions of the Act with respect to the preferred stock so issued pursuant to Section 4(2) thereof inasmuch as no public offering will be involved. In connection with the issuance of the Wong Preferred Shares, Wong will have made an informed investment decision based upon negotiation with us and will have been provided with access to material information regarding us. We believe that Wong will have had knowledge and experience in financial matters such that Wong will be capable of evaluating the merits and risks of acquisition of the Wong Preferred Shares. All certificates representing the Wong Preferred Shares issued pursuant to the foregoing will bear an appropriate legend restricting the transfer of such shares, except in accordance with the Securities Act. After issuance of our preferred shares as described above, we anticipate that approximately 1,557,000 shares of our Series B Preferred Stock will be outstanding. Each 1 share of Series B Preferred Stock may be converted, at the election of the holders thereof, into 1 share of our common stock (see Item 5, below). Accordingly, in the event that the approximate 1,557,000 shares of our Series B Preferred Stock is issued and is converted into our common stock, an additional 1,557,000 shares of our common stock will be outstanding. (See Item 5, below). d). 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. a.) In connection an authorized amendment to our articles of incorporation to create a class of preferred shares designated as our Class B Preferred Shares (the "Class B Preferred Shares"), the following is a summary of what we currently believe will be the relative rights and preferences of the Class B Preferred Shares, although such summary is qualified in its entirety by reference to the amendment to our Articles of Incorporation that is actually filed by us with the Secretary of State of Florida: 1. Dividends. A. Each issued and outstanding share of Series B Preferred Stock shall entitle the holder of record thereof to receive, when, as and if declared by the Board of Directors, out of any funds legally available therefor, dividends of eight and one quarter cents ($0.0825) annually per share (the "Dividend Amount") of the Series B Preferred Stock (subject to adjustment as hereinafter set forth). Dividends shall be paid in the form of cash and shall be paid semi-annually on each June 30 and December 31 (each date being a "Dividend Due Date") with respect to such semi annual period (or in the case of the first dividend payment, the period commencing on the date of issuance) ending on the day immediately preceding such Dividend Due Date. B. In the event of a split or subdivision of the outstanding shares of Series B Preferred Stock, or the combination or the outstanding shares of Series B Preferred Stock, as the case may be, the dividends provided for herein shall automatically and without any further action be decreased, in the case of a split or subdivision, or increased, in the case of a combination, in proportion to the increase or decrease in the number of shares of Series B Preferred Stock outstanding immediately before such split, subdivision or combination. 2. Priority. A. So long as any Series B Preferred Stock shall be outstanding, no dividends, whether in cash or property, shall be paid or declared, nor shall any other distribution be made, on our common shares or any other security junior to the Series B Preferred Stock as to dividend rights, unless all dividends on the Series B Preferred Stock for all past semi annual dividend periods and the full dividends for the then current semi annual period shall have been paid or declared and duly provided for. B. We may issue, in the future, without the consent of holders of the Series B Preferred Stock, other series of preferred stock which rank on parity with or junior to the Series B Preferred Stock as to dividend and/or liquidation rights. The consent of the holders of a majority of the outstanding Series B Preferred Stock is required for the issuance of any series or preferred stock which is senior as to dividend and/or liquidation rights to the Series B Preferred Stock. 3. Redemption Rights. In the event that any Series B Preferred Stock is outstanding subsequent to December 31, 2005, we may, at the option of our Board of Directors, at any time or from time to time thereafter, redeem the whole or any part of the then outstanding shares of the Series B Preferred Stock upon not less than thirty (30) days prior written notice duly given at a redemption price of $2.75 per share, subject to appropriate adjustment in the event of a stock split or subdivision or a stock combination of the Series B Preferred Stock, plus accrued and unpaid dividends through the date of redemption (collectively, the "Redemption Price"). 4. Liquidation. Upon our liquidation, dissolution or winding up, whether voluntary or involuntary (a "Liquidation"), the then holders of record of the Series B Preferred Stock shall be entitled to receive, before and in preference to any distribution or payment of our assets or the proceeds thereof may be made or set apart for the holders of our common stock or any other security junior to the Series B Preferred Stock in respect of distributions upon Liquidation out of our assets legally available for distribution to its stockholders, an amount in cash equal to $2.75 per share (subject to adjustment if the number of Series B Preferred Stock has been adjusted pursuant hereto (the "Liquidation Preference") plus accrued and unpaid dividends, if any, on each such share on the date fixed for the distribution to the holders of Series B Preferred Stock and any other series of preferred stock then outstanding ranking on parity with the Series B Preferred Stock upon liquidation ("Parity Stock") and in the event our assets legally available for distribution to our stockholders shall be insufficient to permit payment in full of the Liquidation Preference to the holders of the Series B Preferred Stock and Parity Stock, then the entire assets and funds of the Corporation legally available for distribution to such holders of the Series B Preferred Stock and the Parity Stock then outstanding shall be distributed ratably among the holders of the Series B Preferred Stock and Parity Stock based upon the proportion the total amount distributable on each share upon liquidation bears to the aggregate amount available for distribution on all Series B Preferred Stock and on all such Parity Stock. 5. Voting Rights. For so long as the Series B Preferred Stock is outstanding, each share of the Series B Preferred Stock shall entitle the holder thereof to vote on all matters to be voted on by the holders of the Common Stock; and the number of votes per share of Series B Preferred Stock such holder shall be entitled to shall be equal one (1) vote for each one (1) shared of Series B Preferred Stock. 6. Conversion. A. Each share of the Series B Preferred Stock shall be convertible, at the option of the respective holders thereof, at any time after the date of issuance and prior to redemption, at the office of any transfer agent for the Series B Preferred Stock, or if there is none, then at the office of the transfer agent for our common stock, or if there is no such transfer agent, at our principal executive office, into fully paid and non-assessable shares of Common Stock into one (1) share of Common Stock for each one (1) share of Series B Preferred Stock (the "Conversion Price"), subject to adjustment from time to time in certain instances, as hereinafter provided. The right to convert the Series B Preferred Stock called for redemption shall terminate at the close of business on the last business day prior to the date fixed for redemption, unless default is made in payment of the Redemption Price. B. The Conversion Price shall be subject to adjustment from time to time in case we shall (i) issue Common Stock as a dividend or distribution on any class of the capital stock of the Corporation; (ii) split or otherwise subdivide its outstanding Common Stock; (iii) combine the outstanding Common Stock into a smaller number of shares; or (iv) issue by reclassification of its shares of capital stock of the Corporation (whether pursuant to a merger or consolidation or otherwise), the Conversion Price in effect on the record date for any stock dividend or the effective date any such other event shall be increased (or decreased in the case of a reverse stock split) so that the holder of each share of the Series B Preferred Stock thereafter be entitled to receive, upon the conversion of such share, the number of shares of our common stock or other capital stock which it would own or be entitled to receive immediately after the happening of any of the events mentioned above had such share of the Series B Preferred Stock been converted immediately prior to the close of business on such record date or effective date. Likewise, in case of any reclassification or similar change of our outstanding shares of common stock (other than as set forth immediately above), or in case of the consolidation or merger of us with another corporation, or the conveyance of all or substantially all of our assets in a transaction in which holders of our common stock receive shares of stock or other property including cash, each share of the Series B Preferred Stock shall thereafter be convertible only into the number of shares of stock or other securities or property, including cash, to which a holder of the number of shares of our common stock deliverable upon conversion of such Series B Preferred Stock would have been entitled upon such reclassification, change, consolidation, merger or conveyance had such share been converted immediately prior to the effective date of such event. 7. Payment of Taxes. We will pay any taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series B Preferred Stock. 8. Notice. Each share of the Series B Preferred Stock shall entitle the holder thereof to notice of any special or annual meetings of the holders of our common stock in the same manner as notice given to the holders of the common stock under the Florida Business Corporation Act. Item 6. Exhibits, Lists and Reports on Form 8-k: (a) Exhibits. The following is a list of exhibits filed as part of this quarterly report on Form 10-QSB. Where so indicated by footnote, exhibits which were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated in parentheses. DESCRIPTION EXHIBIT NO. 2.1 Stock Exchange Agreement (2) 3.1 Articles of Incorporation of American Uranium, Inc. (1) 3.2 Bylaws of American Uranium, Inc.(1) 3.3 Articles of Incorporation of American Uranium Reincorporation, Inc. (2) 3.4 Bylaws of American Uranium Reincorporation, Inc. (2) 3.5 Amended and Restated Articles of Incorporation of Visual Bible International, Inc. (3) 3.6 Bylaws of Visual International, Inc. (3) 3.7 Amended and Restated Articles of Incorporation of Visual Bible International, Inc. dated April 3, 2001 (4) 3.8 Amended and Restated Articles of Incorporation of Visual Bible International, Inc. dated September 10, 2001 (5) 3.9 Amended and Restated Articles of Incorporation of Visual Bible International, Inc. dated February 19, 2002(6) 3.10 Amended and Restated Articles of Incorporation of Visual Bible International, Inc. dated March 14, 2001 (7) 3.11 Amendment to the Articles of Incorporation of Visual Bible International, Inc., dated March 28, 2002 (8) 9.1 Shareholder Voting Agreement (3) 9.2 Form of Irrevocable Proxy(3) 10.1 Agreement with Stewart House Publishing, Inc. (4) 10.2 Agreement with Thomas Nelson, Inc. (4) 10.3 Agreement with Columbia House, Inc. (4) 21.1 List of Subsidiaries (8) 99.1 Certifications (9)
(1) Previously filed with Form 10 of the Company dated May 19, 1999 and incorporated herein by reference. (2) Previously filed with Schedule 14-A of the Company on June 2, 2000 and incorporated herein by reference. (3) Previously filed with Form 8-K on August 16, 2000 and incorporated herein by reference. (4) Previously filed with Form 10-KSB of the Company filed on May 23, 2001 and incorporated herein by reference. (5) Previously filed with Form 10-QSB of the Company filed on November 11, 2001 and incorporated herein by reference. (6) Previously filed with Form 8-K on March 26, 2002 and incorporated herein by reference. (7) Previously filed with Schedule 14-C of the Company filed on March 25, 2002 and incorporated herein by reference. (8) Previously filed with Form 10-KSB of the Company filed on May 14, 2002 and incorporated herein by reference. (9) Filed electronically herewith (b) Reports on Form 8-K. None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VISUAL BIBLE INTERNATIONAL, INC. Date: 11/20/02 By: /s/ Harold Kramer Harold Kramer, Executive Vice President Date: 11/20/02 By: /s/ Harold Kramer Harold Kramer, Principal Financial Officer