10KSB 1 form10ksb.txt FORM 10KSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-KSB Mark One: |X| Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended March 31, 2004; or |_| Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________. COMMISSION FILE NO. 0-26535 VIAVID BROADCASTING, INC. -------------------------------------------------------------------------------- (Name of Small Business Issuer in its Charter) NEVADA 98-0206168 -------------------------------------------------------------------------------- (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 11483 WELLINGTON CRESCENT, SURREY, BRITISH COLUMBIA V3R 9H1 -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 604-588-8146 -------------------------------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) Securities registered under Section 12(b) of the Exchange Act: Title of Each Class Name of Each Exchange on Which Registered -------------------------------------------------------------------------------- None -------------------------------------------------------------------------------- Securities Registered Under Section 12(g) of the Exchange Act: -------------------------------------------------------------------------------- Common Stock, par value $.001 per share -------------------------------------------------------------------------------- (Title of Each Class) Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past twelve (12) months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of Issuer's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB, or any amendment to this Form 10-KSB. |X| State Issuer's revenues for its most recent fiscal year: $736,364. The aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of June 29, 2004, was $811,030 (Non-affiliates have been determined on the basis of holdings set forth in the information under Item 11 of this Annual Report on Form 10-KSB.) The number of shares outstanding of each of the Issuer's classes of common equity, as of June 9, 2004, was 14,438,000. DOCUMENTS INCORPORATED BY REFERENCE None - 1 - PART I ------ ITEM 1 - DESCRIPTION OF BUSINESS: --------------------------------- OVERVIEW Our primary business is to provide webcasting, teleconferencing and transcription services to corporate clients throughout North America. These services utilize systems that integrate traditional telephony technology with powerful streaming media technology and Web-based tools. From a simple conference call to a dynamic online presentation, our clients are able to choose the solution that best meets their unique communication needs. A key component of our business model, resulting from the ready availability of in-house expertise, infrastructure, and equipment, is the ability to offer our clients a cost-effective, yet scaleable, means of communications that can be customized to meet individual customer needs. We currently provide our services primarily as a means whereby our clients can communicate up-to-date corporate information, such as current financial information, to a mass audience, including market professionals, institutions, analysts, shareholders, and other key stakeholders. In addition, we also market our services and solutions to resellers of conferencing and communications services as well as a variety of associations and other entities seeking to broadly disseminate current information through a webcast or teleconference. We believe that as a result of recent changes in practices relating to the dissemination of corporate financial information and the increasing reliance on issuers' websites as a means for disseminating information to investors and market professionals, the demand for webcasting, teleconferencing and web page management services is on the rise. In marketing our services, we are currently targeting public companies affected by a Regulation F-D and other recently adopted rules of the U.S. Securities and Exchange Commission that reinforce the requirement that all public reporting companies make earnings and analyst conference calls, corporate media announcements and other information available simultaneously to all investors, not just industry insiders. Other recent rule adoptions require, under certain circumstances, that reports of changes in beneficial ownership of the issuer's securities and amendments to and waivers of the issuer's code of ethics appear on the issuer's website. Our services meet the communication needs of these corporate clients and we have seen a marked increase in interest in our services. Webcasting and website disclosures have been singled out by the U.S. Securities and Exchange Commission as compliance solutions for those public companies affected by the new regulations. Since our inception in 1999, when we commenced offering live-event coverage, participant interviews, online meetings and presentations, and teleconferencing services, we have developed a state-of-the-art digital platform capable of supporting our webcasting and teleconferencing business model. So as to ensure our competitiveness within the marketplace, - 2 - we believe it necessary from time to time to modify and enhance this digital streaming technology platform. In addition, we are continually seeking to make changes to update our proprietary systems to keep our technology current. Using our platform, we believe we are able to provide webcasting and teleconferencing services that are capable of maximizing the quality of the disclosure broadcast and thereby enhancing the participant's experience. We use third party conferencing technology that allows us to accommodate in excess of 2,000 participants at a level of quality consistent with the highest business standards. Our services provide efficient, cost-effective solutions for our customers teleconferencing needs, including: o Earnings events o Annual shareholder meetings o Analysts presentations o Product Launches o 24 Hour Transcription Services o Investor Relations Web Page Management Suite o All special events Our Investor Relations Web Page Management Suite provides a platform for public reporting issuers to make available to investors and market professionals their: o SEC filings o press releases o annual reports to stockholders o shareholder updates o presentations o other investor relations related materials We have had limited revenues and have incurred losses since our inception in 1999. Our growth in revenues is substantially dependent upon our ability to remain abreast with the application and use of the latest technological developments in offering our webcasting and teleconferencing services. We believe that currently we are able to fund our operations from our cash flow generated by our operations. Further development of our technology, whether mandated by competitive pressures or otherwise, may require us to raise additional capital which may be unavailable or may only be available on terms disadvantageous to our stockholders. At March 31, 2004, webcasting, teleconferencing and transcription services, as well as I.R. Web Page Management Suites provided substantially all of our revenues. - 3 - OUR SERVICES Webcasting, Teleconferencing and Transcription Services. By integrating the Internet with traditional telephony technology, we are able to provide presentation, conferencing and web management services for our customers. These services empower our customers with real-time, interactive communication tools that allow for an effective and efficient means of communication. With our services, companies can broadcast conference calls that allow for the rapid dissemination of important information. In addition, a company can create a presenter-controlled linear presentation for such purposes as the unveiling of a new business model. Or a company can choose to develop a viewer-controlled non-linear presentation where the viewer chooses information they want to read. A company can also choose to develop a dynamic, interactive Internet broadcast where viewers can actively participate in the online experience. For example, a company may choose to broadcast a question and answer session with the CEO where the audience can pose their questions via phone or via the Internet. Utilizing our services, a customer has the ability to record a voice and visual presentation, store the presentation, distribute it via email to a wide group and play back the presentation using advanced, yet easy-to-use, streaming technologies. Additionally, we provide our customers with the option to obtain valuable real-time information and viewer statistics, such as the number and identity of participants, which help companies identify their shareholders and interested stakeholders, among others. By utilizing voice, video, and text data, companies are able to effectively communicate key information to a mass audience. Our services include automated, on-demand audio conferencing, ideal for the broadcast of earnings and analyst conference calls, and webconferencing, ideal for the creation and broadcast of interactive, dynamic online corporate presentations. We believe that our services are cost effective and easy to use. Our services enable viewers to access, view, and interact with an online event from most computers. Conducting a conference or attending a presentation using our services requires only a telephone and personal computer equipped with an Internet connection and a standard Web browser. Our services do not require our customer or the user to acquire any specialized hardware or software. ViaVision, our flagship service, was developed to support day-to-day business meetings. ViaVision is an automated Web and telephone presentation service that combines the availability of traditional telephone conferencing services with simple to use Web presentations and controls. Our ViaVision service allows up to three types of participants: o Phone only: These participants listen and talk via phone; - 4 - o Phone and Web: These participants listen and talk via phone, while viewing visuals and interacting via a Web browser; and o Web only: These participants listen via streaming audio, while viewing visuals and interacting via a Web browser. Other service enhancements that we provide include ViaContent and ViaTracker. ViaContent is designed to manage live audio / video streams and ViaVision events, such as online presentations. ViaContent allows clients to maintain a single Web link to an event, both for the initial live transmission and for the later on-demand playback transmission. ViaTracker is a proprietary statistical data tracking solution that enables customers to track event participants and obtain viewer contact information. This data enables customers to analyze participant data and as a result, better target future events. In addition to the statistical features of ViaTracker, customers can also use the solution to enter online booking information and manage questions and answers during a live event. Web Page Management. Our I.R. Web Page Management Suite has been specifically designed to help public companies meet the ever increasing demands for disclosure of material developments on their website. These disclosures may be in response to Regulation F-D or other rules recently adopted by the U.S. Securities and Exchange Commission. The IR Page product is designed to integrate with a company's existing web site, maintaining the look and feel of the corporate site, while providing a powerful suite of tools for disclosure and investor communications. Our suite of web page management tools include: o automatic update of key financial disclosure information such as news releases, quarterly earnings information and other SEC filings. Current stock quotes, charts and price history are also updated automatically. o enabling an I.R. professional to update and manage the I.R. portion of the corporate site quickly and easily without any technical skills or outside assistance. o maintenance of an online electronic database of investor contacts which allows the IR professional to quickly and easily broadcast information such as press releases, earnings announcements, shareholder updates and other announcements. Benefits Our Services Afford to Our Customers. Our services offer customers the following benefits: - 5 - o Customization. Customers can use their own images, colors, text and logos to customize their online presentation or event. In addition, our customers can use our service to create a custom branded interface that integrates our service into the customer's own Web site. o Presenter Controlled Visuals. With our ViaVision service, moderators are able to guide participants through a controlled online presentation while interacting with participants via phone. Presenters no longer need to distribute in advance their presentations via email to ensure remote attendees are following along. By uploading and presenting visual material online, moderators are able to present charts and graphs, such as Microsoft PowerPoint slides, to remote conference participants in real-time. o Live and Recorded Webcasting. Our live and recorded web-casting lets meeting moderators stream their phone conference and synchronized slide presentations over the Internet. Webcasts can be executed live for press conferences or announcements, or can be recorded and made available to an unlimited number of participants. Thousands of individuals can listen to the conference and view online presentations using a standard media player and an Internet connection of 28.8 kbps or greater. Businesses can record training presentations to view over time or may make presentations of new products, services or policies to a global workforce available for viewing online at the audience's convenience. o 24 Hour Transcription Services. We have a team of transcriptionists that can provide us with a hard copy transcription within 4 hours of receiving a digital copy of the telephone conference call. o I.R. Web Page Management Suite. This product is designed to integrate with a company's existing web site, maintaining the look and feel of the corporate site, while providing a powerful suite of tools for disclosure and investor communications. The product has been designed to provide economics to the marketplace, bringing automated IR web page management to a new level of cost savings. o Account Management and Statistics. Our customers can easily update and maintain their account information, upload new presentations and update existing presentations, and set access and viewing preferences. In addition, customers can view statistical reports. These reports enable our customers to track and view information about specific events, such as attendee click-thru statistics. With the help of ViaTracker, customers are also able to view information about event participants, including contact information. We believe our services benefit our customers in a number of ways: - 6 - o By enabling companies to communicate with a large audience via the Internet, our services are able to decrease the need for costly business travel. o By providing to our customers outsourcing communication tools and solutions, our services are able to decrease their need for costly purchases of complex software and hardware solutions. o By increasing the quality and frequency of business meetings and sales presentations, our services are able to help increase productivity and strengthen key corporate relationships. o By enabling access from any telephone and most personal computers with an Internet connection, our services are able to allow companies to reach a diverse, worldwide audience. Our Webcasting service currently includes the following options: o PowerPoint Slides: a PowerPoint presentation is controlled by the presenter, with audio synchronization both in real-time and for later playback; o Online Question and Answer: by adding a question and answer session to an online presentation or interview, a company encourages audience participants to pose questions to the presenter in real-time via the Internet; o Conference Tracking: a feature of our services is the ability for a company to track viewers and participants. These statistics help companies determine exactly who attended an online event regardless of whether it was live or later playback of a live event. o I.R. Web Page Management Suite: this service is bundled with ViaVid's existing webcasting and teleconferencing products and services. Included in the suite are quarterly web-casts and text based transcripts of those web-casts, both of which are automatically linked within the clients IR Page. We provide customer support upon request. However, most of our services are fully automated, requiring little user setup or intervention, thereby reducing the risk of user error. Our automated services allow us to handle high user click-thru volume, while reducing the number of user errors. Ultimately, this high level of automation makes the service easier to use, more reliable, and more cost-effective for our customers. - 7 - OUR REVENUES We charge our teleconferencing customers a per-minute fee based on each phone participant's actual participation time in the conference. For the year ended March 31, 2004, approximately 48% of our revenues were derived from this source. A customer using our webcasting services is charged a flat fee for the addition of an audio/video webcast, in addition to the per participant per minute fee for teleconferencing services. For the year ended March 31, 2004, approximately 20% of our revenues were derived from this source. A customer is charged a flat fee for the use of the ViaVision service for a web conference or a recorded webcast. The ViaVision service adds to an audio/video webcast the ability of the presenter and his audience to interact through the telephone or a web browser. For the year ended March 31, 2004, approximately 5% of our revenues were derived from this source. A customer is charged a flat fee for the I.R. Web Page Management Suite. For the year ended March 31, 2004, approximately 7% of our revenues were derived from this source. Also, a customer is charged a flat fee for our transcription services. For the year ended March 31, 2004, approximately 20% of our revenues were derived from this source. We believe that a growing proportion of future revenues will be derived from areas of enhanced services including provision of video, data, and other Internet-based services. OUR STRATEGY Our business objective is to become a leader in the teleconferencing and webcasting industry. Our primary business is to provide simple, reliable, and scalable, yet cost-effective, online presentation and conferencing services. To achieve our objective, we believe we must: o Aggressively sell our services to a wide range of business customers, using both direct and indirect sales channels to drive revenue growth. The primary objective for our direct sales efforts is to target businesses in diverse vertical markets, such as those in the financial services industry. The primary objective of our indirect sales efforts is to establish strategic partnerships with resellers, such as conferencing and communications providers, so as to leverage their large and established customer bases. o Create a positive online experience for our customers and their target audience, thereby encouraging participants to virally promote our services within the corporate and online community. - 8 - o Promote our services as day-to-day business communication tools used for teleconference meetings, real-time corporate demonstrations, and interactive training sessions, among other corporate communications needs. Rather than limiting our services to meet the investor and public relational needs of companies, our goal is to target all departments within the enterprise, including human resources and sales and marketing. We believe our services should enable customers to better manage and grow their workforce by providing timely and cost-effective training and education solutions, along with enabling better communication within the enterprise. o Continue to develop proprietary software and hardware enhancements that integrate traditional telephony solutions with the most current Internet technologies. As new technologies emerge, our goal is to integrate these technologies into our services and, where necessary, to create the tools necessary to enable these technologies to be integrated into our services. We intend to continue to invest resources to the extent available on research and development activities so as to best facilitate the integration of new technologies applicable to the services we provide into our existing services. As the Internet and telecommunications continue to evolve, so must our services continue to grow and evolve in order to be able to continue to meet the needs of our customers. In the event we are unable to grow and evolve our services, our ability to compete with others and earn revenues will be adversely affected. o Expand our telephony, Internet, and supporting hardware infrastructure in anticipation of the development of future services and enhancements and expand our storage capacity in anticipation of increased customer demand. Our current technology platform integrates telephony and Internet communications technologies to support multiple simultaneous communication events and thousands of meeting minutes per day. Our goal is to continuously expand our infrastructure so as to support the demands of our growing customer base, in addition to supporting our day-to-day operational needs. In the event we are unable to expand our infrastructure, our ability to compete with others and earn revenues will be adversely affected. o Explore possible strategic relationship opportunities that will expand our position within the Webcasting and teleconferencing industry that will enhance our service offerings, technology, infrastructure, and distribution channels. - 9 - CUSTOMERS Since the inception of our offering webcasting services for corporate clients in early January 2001 through June, 2004, we have serviced more than 1,100 webcasts for more than 200 corporate clients, the majority of which have their securities traded on the New York Stock Exchange or the NASDAQ Stock Market. In addition to the dissemination of corporate financial information through webcasting, our capabilities enable us to provide our services in connection with a variety of other business and other meetings, conferences and seminars including: o product introductions and demonstrations o marketing, sales, and training programs o video presentations o broadcast commercials, informational and public service announcements Our customers for these other services include a variety of news organizations, boards and associations. We are not dependent on any single or small number of customers for any material portion of our revenues. STRATEGIC PARTNERS We intend to seek to explore possible strategic relationship opportunities that will expand our position within the webcasting and teleconferencing industry. We believe that such relationships can be used to enhance our service offerings, technology, infrastructure, and distribution channels. To date, we have not entered in any such relationships and there can be no assurance that we will be successful in entering into any strategic relationships. TECHNOLOGY AND RESEARCH AND DEVELOPMENT Since our inception in 1999, we have expended approximately $950,000 for research and development and the enhancement of our telephony and webcasting capabilities. Our approach is to enhance existing services and develop future solutions that integrate traditional telephony with Internet communication technologies available from third parties that allows us to effectively improve upon our existing infrastructure, technologies, and proprietary systems to accommodate and remain current with changes within the teleconferencing and webcasting industries. - 10 - We maintain our own facilities for webcasting and our other services and development activities in Vancouver, British Columbia. Our services are designed and developed using Microsoft development tools. They reside on a common infrastructure that has backup power systems, redundant cooling systems, fire suppression systems, and sophisticated security systems. We evaluate new technologies from time to time to determine if they will be beneficial to our users and also build systems and software that assist us in their management and integration into web-based applications. In cases where no existing technology meets our needs, we may seek to develop our own solution or modify an existing technology. We believe that by developing proprietary systems and applications on top of new and existing technologies, we can leverage the benefits of emerging technologies and integrate these technologies into our services. Our web-conferencing service uses hardware that we purchase and software either licensed from third persons or that we develop in-house. We currently employ three persons engaged in the enhancement of our services through software development. We use telephony hardware that allows us to connect to outside teleconferencing providers. We currently obtain our teleconferencing services from four teleconferencing providers whose service we resell at a mark-up. All our reseller agreements are non-exclusive and are for periods of one year or longer. These agreements are terminable by either party on notice. In October, 2003, we released our proprietary webconferencing product, ViaVision using Micrososft's .NET platform. The platform is designed to handle presentations in a one-to-one, or one-to-many environment. Full webcast capabilities have been incorporated for additional cost-savings and replay purposes. ViaVision is now capable of handling two audiences at the same time; the conference call attendees will have access to the online presentation, and the Internet, listen-only, audience will get the whole presentation delivered through a webcast. This sets ViaVision a step ahead of its competition who generally target one audience or the other. SALES AND MARKETING Currently, we have two full-time employees engaged in sales and marketing. Our sales force directly sells our services to targeted companies and associated organizations. These include individual corporations and IR/PR firms with an established and diverse client base. - 11 - In addition, through indirect sales channels, we seek to extend our services to a wider, broader audience. The primary focus of our indirect sales effort is to establish strategic partner relationships with resellers, such as conferencing and communications providers. Our objective is to benefit from the large and established customer bases of our partners. In return, resellers can take advantage of our reseller discount program. Our direct marketing efforts seek to generate leads through direct mail, email, and telemarketing campaigns aimed at our targeted companies and associated audience. In addition, we seek to maintain and grow positive relationships with our existing customers through newsletters, training initiatives, promotions, and value-add incentives. Our goal is to retain existing customers and to encourage the continued use of our services. Our sales and marketing strategy is reinforced by the viral nature of our services. The very act of participating in an online event exposes new users to our services. It is our goal to convert these new users into new customers. Our public relation efforts include highlighting important technical developments, the announcement of new and enhanced service offerings, promotion of newly established strategic partnerships, along with recognition for awards and company milestones. We seek to enhance our position in our industry through active participation in such public events as industry trade shows, conferences, and speaking engagements. CUSTOMER SERVICE Though our services are primarily automated, requiring limited user interaction or intervention, we offer customer support and technical assistance 24 hours a day, seven days a week. Support is available via telephone or email. COMPETITION The business of providing communication services over the Internet is rapidly evolving and is intensely competitive. We believe as the market for these services grows, competition will further intensify. Substantially all our competitors are larger companies with greater financial resources. We believe that in order for our services to be attractive and to be competitive with others providing Internet webcasting services, we will need to continually enhance and improve our computer hardware and software. Furthermore, as the Internet communications industry evolves and develops, in order to meet competition, we may be required to acquire or develop additional computer hardware and software. We may not have available to us the necessary financial - 12 - resources to acquire or develop these products. We must continually enhance our services to stay competitive Over the next few years, we expect the market for web-conferencing services to continue to evolve. As more opportunities arise within this market, more companies will enter this market and invest significant resources to develop services that compete with ours. As a result, we expect that competition will continue to intensify. This increase in competition may result in price reductions, reduced sales and margins, loss of market share, and reduced acceptance of our services. There are numerous other companies able to provide webcasting services all of whom may be deemed to be our competitors There are also numerous other companies providing teleconferencing services substantially all of whom are larger with greater capitalization. These companies have large and established customer bases. Although our marketing efforts are currently directed primarily to a niche of teleconferencing relating to earnings reports and financial reporting, our competitors can be deemed to include AT&T, Global Crossing and Sprint, as well as a large number of traditional operator-assisted teleconferencing providers. We believe that the primary competitive factors in the webcasting and teleconferencing services market include: o ease of use of services; o quality and reliability of services; o implementation of features that meet the needs of customers; o ability to develop new technologies that seamlessly integrate into the infrastructure of a rapidly evolving industry; o ability to develop and support secure formats for delivery of services; o scalability of communication services; o quality and timeliness of customer service; o competitive pricing; o strong brand recognition; o ability to achieve broad distribution through direct and indirect sales initiatives; and o ability to develop technologies that circumvent the challenges caused by bandwidth constraints and other limitations of the Internet infrastructure. In addition to newly established webcasting and teleconferencing providers, our primary source of competition stems from standalone providers of traditional teleconferencing, such as AT&T, Sprint, and other telecommunications giants. These companies currently offer bundled - 13 - teleconferencing services to their customer base, which may include video and data conferencing services and other web streaming services. We also compete with traditional operator-assisted conferencing providers, such as Conference Plus, Genesys, Intercall, and Premier Conferencing. Competitors of our webcasting services include: Vcall and CCBN. We face further competition from resellers of webcasting and teleconferencing services. Also, some streaming providers have announced their intention to provide web conferencing services in addition to their streaming services. There are also a number of software and distance-learning companies that may enter the web conferencing services market. Current competitors or potential competitors may enter the market in the future or expand existing positions in the web conferencing market through the acquisition of competitors, services, or technologies with the goal of developing an integrated, feature-rich offering of services. In addition, we also face competition from potential strategic alliances among our competitors. Our ability to compete could be significantly hampered should these companies possess large and established customer bases, substantial financial resources, and established distribution channels. To protect our proprietary rights, we rely on a combination of trademarks, service marks, trade secrets, copyrights, employee confidentiality agreements, third parties nondisclosure agreements, and protective contractual provisions. Our protection efforts may prove unsuccessful, and unauthorized parties may copy or infringe upon aspects of our technology, services, or other intellectual property rights. In addition, these parties may develop similar technology independently. Existing trade secret, copyright, and trademark laws offer only limited protection and may not be available in every country in which we sell and market our services. Policing unauthorized use of our proprietary information is difficult. Each trademark, trade name, or service mark appearing in this report belongs to its holder. EMPLOYEES We currently have nine employees, including Mr. Brian Kathler, our President, and Mr. Paul Watkins, our Secretary and Treasurer. Of these employees, three are engaged in marketing activities, two are engaged in software and other development activities, four are engaged in production, administration and accounting activities. From time to time, we employ the services of outside consultants and third parties who provide software development services, marketing and promotional services, transcription services and management services. - 14 - GENERAL Our company was incorporated in January, 1999 under the laws of the state of Nevada. Prior to that time, we conducted operations as ViaVid Broadcasting, Corp., a British Columbia company formed in July, 1994. The British Columbia company was inactive and did not carry on any business operations prior to January, 1999. At that time, it began development of the business described in this Report. We continue to carry on our business through the British Columbia company as a wholly-owned operating subsidiary of the Nevada corporation. In November 1998, the British Columbia company changed its corporate name to ViaVid Broadcasting Corp. We acquired all the outstanding shares of ViaVid Broadcasting Corp. in January, 1999 from Paul Watkins, Cheryl Watkins, 549419 BC Ltd. and Kathler Holdings Inc. in consideration for the issue of a total of 5,100,000 shares of our common stock. Our principal executive offices are located at 11483 Wellington Crescent, Surrey, British Columbia V3R 9H1. Our telephone number is (604) 588-8146. Our Web site is located at http://www.viavid.com. Information contained on our Web site does not constitute part of this Report. ITEM 2 - DESCRIPTION OF PROPERTY -------------------------------- Our primary business activities are carried on at leased premises located at 11483 Wellington Crescent, Surrey, British Columbia V3R 9H1. These premises are comprised of approximately 1,500 square feet and are rented on a month-to-month basis at a rate of $769 per month. We believe they are adequate for our present activities. ITEM 3 - LEGAL PROCEEDINGS: -------------------------- We are not currently a party to any material legal proceedings. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: ------------------------------------------------------------ No matter was submitted during the fourth quarter of the fiscal year ended March 31, 2004 to a vote of security holders. - 15 - PART II ------- ITEM 5 - MARKET FOR COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND SMALL ---------------------------------------------------------------------------- BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES: ---------------------------------------------- Our Common Stock has been quoted on the OTC Bulletin Board since January 4, 2000 under the symbol VVDB. The following table sets forth the high and low bid quotations on the OTC Bulletin Board for our Common Stock for the period January 1, 2002 through June 8, 2004. BID --------------------------------- CALENDAR QUARTER HIGH LOW -------------------------------------------------------------- 2002: First Quarter $0.19 $0.09 2002: Second Quarter $0.14 $0.05 2002: Third Quarter $0.11 $0.04 2002: Fourth Quarter $0.11 $0.01 2003: First Quarter $0.09 $0.02 2003: Second Quarter $0.09 $0.03 2003: Third Quarter $0.13 $0.05 2003: Fourth Quarter $0.285 $0.05 2004: First Quarter $0.28 $0.135 2004: Second Quarter $0.20 $0.08 (through June 8, 2004) The foregoing amounts, represent inter-dealer quotations without adjustment for retail markups, markdowns or commissions and do not represent the prices of actual transactions. On June 8, 2004, the closing bid quotation for the Common Stock, as reported on the OTC Bulletin Board, was $0.08. - 16 - As of June 29, 2004, we had approximately 154 shareholders of record. DIVIDEND POLICY We do not intend to pay any dividends on our Common Stock for the foreseeable future. Any determination as to the payment of dividends on our Common Stock in the future will be made by our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial condition and future prospects as well as such other factors as our Board of Directors may deem relevant. RECENT ISSUANCES OF UNREGISTERED SECURITIES During the fiscal year ended March 31, 2004, we have issued the following unregistered securities. 1. During the year ended March 31, 2004, we issued an aggregate 600,000 shares to two persons for consulting services rendered. Each person represented his intention to acquire the securities for investment only and not with a view to distribution. Legends were affixed to the stock certificates. The securities were issued in reliance upon the exemption from the registration requirements of the Act afforded by Section 4(2). No underwriter was involved in the issuance of the securities. 2. In October, 2003, we issued 500,000 shares at a price of $0.10 per share. The proceeds were $50,000.The securities were offered and sold pursuant to Regulation S under the Act. The purchaser represented his intention to acquire the securities for investment only and not with a view to their distribution. A legend was affixed to the stock certificate restricting the further transfer of the shares. The securities were issued in reliance upon the exemption from the registration requirements of the Act afforded by Section 4(2). No underwriter was involved in the issuance of the securities. PURCHASES OF EQUITY SECURITIES No purchases of shares of our Common Stock were made by us or on our behalf or by any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the U.S. Securities Exchange Act of 1934, as amended, during the quarter ended March 31, 2004. - 17 - ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION: ------------------------------------------------------------------ STATEMENT OF OPERATIONS YEAR ENDED MARCH 31, 2004 SALES. Our revenues were $736,364 for the year ended March 31, 2004 compared to revenues of $568,517 for the year ended March 31, 2003. Our revenues were achieved primarily from webcasting, teleconferencing, transcription services and I.R. Web Page Management Suites. The increase in our revenues is due to the increase in our client base and providing a greater volume of services. EXPENSES. Our operating expenses were $881,101 for the year ended March 31, 2004, compared to operating expenses of $912,088 for the year ended March 31, 2003. Consulting fees, salaries and benefits totalled $352,982 for the year ended March 31, 2004, compared to $301,297 for the year ended March 31, 2003. Consulting fees and salaries increased by $51,685 because additional consultants were required for the increased workload. Our amortization expenses decreased from $35,958 in the year ended March 31, 2003 to $25,199 in the year ended March 31, 2004 because of the reduction in assets required for our new services and the lower asset base. Office and miscellaneous expenses increased from $98,076 in 2003 to $145,678 in 2004 because of the increase in teleconferencing, as well as an adjustment in foreign exchange. Travel and promotion increased from $2,468 in 2003 to $7,864 in 2004 because of the additional conferencing shows we attended. We will incur additional operating expenses as we continue to grow our business. We will continue to have operating expenses in connection with the continued up-grade of our services and related research and development expenses. We also anticipate that operating expenses will increase as the number of teleconferences and webcasts which we provide to our customers increases. NET LOSS. Our net loss was $(144,584) or $(0.01) per share for the year ended March 31, 2004. Fully diluted loss per share was the same. Our net loss was $(343,470) or $(0.03) per share for the year ended March 31, 2003. Our reduced net loss reflects our improved revenues and steps we have taken to reduce our expenses - 18 - YEAR ENDED MARCH 31, 2003 SALES. Our revenues were $568,517 for the year ended March 31, 2003 compared to revenues of $275,280 for the year ended March 31, 2002. Our revenues were achieved primarily from teleconferencing, webcasting, transcription and I.R. Web Page Management Suite services. OPERATING EXPENSES. Our operating expenses were $912,088 for the year ended March 31, 2003, compared to operating expenses of $1,040,872 or the year ended March 31, 2002. The decrease in operating expenses was due to the reduction of office expenses. NET LOSS. Our net loss was $343,470, or $(0.03) per share, for the year ended March 31, 2003. Our net loss was $764,696 or ($0.07) per share, for the year ended March 31, 2002. LIQUIDITY AND CAPITAL RESOURCES We had cash of $44,524 as of March 31, 2004 compared to cash of $1,820 as of March 31, 2003. During the period April 1, 2003 through March 31, 2004, we realized net proceeds of $50,000 from the sales of our equity securities. These proceeds were used to finance our operating activities. We plan on meeting our operating expenses during the year by focusing on generating revenues through the sales of corporate conference call services and the sales of webcasting products, I.R. Web Page services, transcription services and services related to broadcasts of conference calls, corporate presentations, annual general meetings and other related meetings, as well as from additional capital intended to be provided by the proposed sale of equity securities. There can be no assurance that any additional capital can be raised or, if equity securities are sold, the terms of any such transaction. While our intention is to fund our activities out of our revenues and not rely on raising additional capital for that purpose, there can be no assurance that we will be successful in that regard. Subject to the availability of sufficient funds, we currently intend to pursue the following business plan during the twelve months ended March 31, 2005: o Continue to develop a customer base of companies to use our services for teleconferencing and Webcasting of corporate information, as well as customers requiring I.R. Pages and transcription services. - 19 - o Market our teleconferencing services to public companies required to release earnings and analyst conference calls, corporate media announcements and other information. o Subject to the availability of additional capital, purchase additional equipment to expand our teleconferencing service and Webcasting capabilities. Our actual expenditures and business plan may differ from this stated business plan. There can be no assurance that we can raise additional capital on terms we will consider acceptable. Although we have no present plans or proposals pending, strategic alliances relating to teleconferencing or webcasting may cause our Board of Directors to modify our plans. In addition, we may modify our business plan based on the available amounts of financing. We do not have any arrangement in place for any debt or equity financing which would enable us to fully fund our business plan. We are currently receiving revenues from our teleconferencing, webcasting, transcription and I.R. Web Page Management Suite services. We believe we will experience an increase in revenue from these sources if we are successful in increasing our customer base. Because our revenues are limited, we expect that we will continue to operate at a loss for the foreseeable future. Our expenses include a number of items that do not involve cash expenditures and we believe that these non-cash expenditures will contribute substantially to our continuing losses. However, there can be no assurance that our revenues will be sufficient to meet our cash expenses. We base our expectations in part on the following: o We will maintain our current level of revenues and rate of growth in revenues. o Increased usage of our services will lead to increased operating expenses and require additional capital expenditures on new computer equipment, software and technology. o Our operating expenses will continue to increase as we expand the technical capabilities of our software and services. o Our operating expenses will increase as we market our services to potential customers and complete teleconferencing and Webcasting services for our customers. In the event the above expectations are not fulfilled, our business plan may not be realized and we may have to make changes to our plans. - 20 - CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996 With the exception of historical matters, the matters discussed in this Report are "forward-looking statements" as defined under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements made herein include, but are not limited to, the statements in this Report regarding our plans and objectives for our future operations, including plans or objectives relating to our intentions to provide webcasting and teleconferencing services, streaming media technology and Web-based tools to create, develop and offer financial news and information, and other content through the Internet and other dissemination services and products or services, our plans and objectives regarding revenues and expenses in future periods, our needs for capital expenditures, research and development, our ability to maintain our competitive position, our plans and objectives and needs to raise additional capital, the terms on which such capital can be raised, the period over which any capital available currently to us or raised in the future will be sufficient to meet our current or future levels of operating and other expenses, and our plans regarding the uses of that capital, as well as any other prospective financial information concerning us. Forward-looking statements made in this Report include the assumptions made by management and management's expectations as to the future growth and business direction of the publication of corporate financial information over the Internet, e-commerce through the facilities of the Internet and the role of video and audio production, Internet news broadcasting and websites in the distribution of financial and securities market sensitive information. They also include our beliefs as to our ability to compete successfully and maintain our technological position relative to other providers of streaming media and Web-based communication services. They also include our beliefs as to the willingness of public reporting issuers of securities to use our services for Webcasting and teleconferencing and to broadcast corporate news and information on the Internet and for us to derive material revenues from providing this service. We cannot assure you that our assumptions and expectations in this regard or our views as to the commercial viability of our business plans discussed herein will prove to be accurate. Likewise, we cannot assure you that we will be successful in growing our user and customer base as we plan, attracting companies to use our Internet-based communication services for the dissemination of their news information, realizing material amounts of Webcasting or other revenues, achieving any commercial advantage relative to other financial news dissemination media companies or raising the additional capital required to support our operations or the terms and conditions on which such capital can be raised. Our ability to realize revenues and raise additional capital from the business plans discussed herein cannot be assured. If our assumptions are incorrect or our webcasting or other growth plans or plans to realize revenues or raise additional capital fail to materialize, we may be unsuccessful in developing as a viable business enterprise. Under such circumstance your entire investment will be in jeopardy and may be lost. Our business plan has evolved over time, and we expect that our plans will evolve further in the future. Our inability to meet our goals and objectives or the consequences to us from adverse - 21 - developments in general economic or capital market conditions and our inability to raise additional capital could have a material adverse effect on us. We caution you that various risk factors accompany those forward looking statements and are described, among other places, under the caption "Risk Factors" herein, beginning on page 22 They are also described in our Annual Reports on Form 10KSB, Quarterly Reports on Form 10-QSB, and our Current Reports on Form 8-K. These risk factors could cause our operating results, financial condition and ability to fulfill our plans to differ materially from those expressed in any forward-looking statements made in this Report and could adversely affect our financial condition and our ability to pursue our business strategy and plans. RISK FACTORS An investment in shares of our Common Stock involves a high degree of risk. You should consider the following factors, in addition to the other information contained in this Report, in evaluating our business and proposed activities before you purchase any shares of our common stock. You should also see the "Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1996" regarding risks and uncertainties relating to us and to forward looking statements in this Report. RISKS APPLICABLE TO OUR BUSINESS WE HAVE AN EXTREMELY LIMITED OPERATING HISTORY AND ALSO HAVE A HISTORY OF NET LOSSES We have had an extremely limited operating history. Our business was established in January 1999 and we began operations on the Internet in February 1999. Our total revenues since inception through March 31, 2004 are $1,668,025. Our total losses since inception through March 31, 2004 are $3,347,925. An investor must consider the risks, expenses and difficulties frequently encountered by companies such as ours with a limited history of operations and revenues. Our business plan has evolved over time and therefore, we experience additional risks resulting from the changes we make in our business plan. As changes in the industry further develop, we may need to make further changes to our business plan. We cannot assure you that we will be successful in addressing the risks we confront. We cannot assure you that our revenue will grow sufficiently to assure our future success. We must increase our revenues in order to continue our operations. New companies, such as ours, experience expenses, difficulties and unforeseen problems that create a higher risk of business failure. If we are not successful in overcoming these expenses and difficulties, our business may fail. - 22 - FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING The report of our independent auditors on their audit of our financial statements as of March 31, 2004 contains an explanatory paragraph that describes an uncertainty as to our ability to continue as a going concern due to our recurring losses and our necessity to obtain additional financing. At March 31, 2004, we had total current assets of $244,595 and total current liabilities of $599,147. During the second quarter of the fiscal year ended March 31, 2003, we restructured our operations to reduce and eliminate certain expenses. While we believe that with the completion of this restructuring we will be able to support our operations out of our cash flow, there can be no assurance that these expectations will materialize. We expect to continue, as opportunities arise, to seek to raise additional capital through the sale of equity securities. We are unable to state whether we will be able to raise any additional capital from such sources or the terms on which it may be raised. The sale of our equity securities may dilute the interests of our existing stockholders. As a result of our limited operating history, we have limited meaningful historical financial data upon which our planned operating expenses can be based. Accordingly, our anticipated expense levels in the future are based in part on our expectations as to future revenue. Once established, these expense levels will become, to a large extent, fixed. Revenues and operating results generally will depend on the volume of, timing of and ability to complete transactions, which are difficult to forecast. In addition, there can be no assurance that we will be able to accurately predict our revenue, particularly in light of the unproven and evolving manner in which we derive our revenue, the intense competition for the marketing of our services, revenue-sharing opportunities, and our limited operating history. We may be unable to adjust our spending in a timely manner to compensate for disappointing results of our marketing efforts and efforts to develop revenue, any unexpected revenue shortfall or other un-anticipated technological or other changes in the Internet industry. Our failure to accurately make such predictions or adjustments in our spending would have a material adverse effect on our business, results of operations and financial condition. POSSIBLE INABILITY TO IMPLEMENT OUR BUSINESS STRATEGY Our business strategy includes increasing our revenues from the teleconferencing, webcasting, transcription and I.R. Web Page industry. To achieve our business objective, we believe we must: o Sell our services to a wide range of business customers, using both direct and indirect sales channels to drive revenue growth. - 23 - o Create a positive online experience for our customers and their target audience, thereby encouraging participants to virally promote our services within the corporate and online community. o Promote our services as day-to-day business communication tools used for teleconference meetings, real-time corporate demonstrations, and interactive training sessions, among other corporate communications needs. o Continue to develop proprietary software and hardware enhancements that integrate traditional telephony solutions with the most current Internet technologies and thereby maintain our competitive position. o Expand our telephony, Internet, and supporting hardware infrastructure in anticipation of the development of future services and enhancements and expand our storage capacity in anticipation of increased customer demand. o Explore possible strategic relationship opportunities that will expand our position within the webcasting, teleconferencing, transcription and I.R. Web Page Management industry that will enhance our service offerings, technology, infrastructure, and distribution channels. If we are not successful in implementing all components of our business strategy successfully, our operating results and financial condition may be harmed and our business may fail. POSSIBLE INABILITY TO GENERATE REVENUES AND PROFITABLE OPERATIONS We have earned limited revenues to date and we are presently not profitable. Our business and marketing strategy contemplates that we will earn revenues from providing webcasting, teleconferencing, transcription and I.R. Web Page Management services to corporate clients throughout North America. If we are not able to generate material revenues from these activities or if the revenues generated do not exceed the operating costs of our business, then our business will not be profitable and our business may fail. ANTICIPATED LOSSES IN FUTURE PERIODS During the year ended March 31, 2004, we incurred a loss of $(144,584) on revenues of $736,364. We expect that our operating expenses will increase as we implement our business and marketing strategy due to the following factors: o We expect that increased usage of our services will lead to increased operating expenses and require additional capital expenditures on new computer equipment, - 24 - software and technology. o We expect our operating expenses will continue to increase as we expand the technical capabilities of our products and services to meet competition. o We expect our operating expenses will increase as we solicit potential customers. If our operating expenses increase as anticipated, we will realize continuing losses for the foreseeable future. DEPENDENCE ON WEBCASTING, TELECONFERENCING AND TRANSCRIPTION REVENUE We currently expect that webcasting, teleconferencing, transcription and I.R. Page Web Management will continue to be the principal source of our revenue in the foreseeable future. Our ability to generate webcasting, teleconferencing, I.R. Web Page Management and transcription revenue will depend on several factors, including: o the pricing of webcasting, teleconferencing, I.R. Web Page Management and transcription services by others, o our ability to develop and retain a skilled sales force. As a result of the evolving nature of webcasting and the use of the Internet as a communication medium and our limited operating history, we cannot accurately forecast our revenue. Current and future expense levels are based principally on anticipated future revenues and, as we increase the scope of our activities, these expenses, to a large extent, will increase and become fixed. Accordingly, we may be unable to adjust spending to compensate for shortfalls in our anticipated revenues. If our revenues do not materialize as anticipated, this could have an immediate material adverse effect on our business, financial condition and results of operations, which could lead to an investor's loss of his investment in our company. Our quarterly operating results may fluctuate significantly because of a variety of factors, many of which are outside our control, including: o overall usage levels of our services, o the amount and timing of our capital expenditures, o costs relating to the expansion of our operations, o price competition or pricing changes in Webcasting, teleconferencing, I.R. Pages and transcription, and o costs relating to technical difficulties or system downtime. - 25 - Quarterly comparisons of our results of operations are not expected to be a reliable indication of our future performance. COMPETITION IN THE WEBCASTING SERVICES MARKET IS INTENSE AND WE MAY BE UNABLE TO COMPETE SUCCESSFULLY. The market for webcasting services is relatively new, rapidly evolving and intensely competitive. Competition in the marketing of these services will continue to intensify and may force us to reduce our prices, or cause us to experience reduced sales and margins, loss of customers and reduced acceptance of our services. Substantially all of our current and potential competitors have larger and more established customer bases, longer operating histories, greater name recognition, broader service offerings, more employees and significantly greater financial, technical, marketing, public relations and distribution resources than we do. As a result, these competitors may be able to spread costs across diversified lines of business, and therefore, adopt aggressive strategies, such as pricing structures and marketing campaigns, that reduce our ability to compete effectively. Telecommunication providers, for example, enjoy lower per-minute long distance costs as a result of their ownership of the underlying telecommunication network. We expect that many more companies will enter this market and invest significant resources to develop webcasting services. These current and future competitors may also offer or develop products or services that perform better than ours. In addition, the Internet industry has recently experienced substantial consolidation and a proliferation of strategic transactions. We expect this consolidation and strategic partnering to continue. Acquisitions or strategic partnerships involving our current and potential competitors could harm us in a number of ways. For example: o competitors could acquire or partner with companies with which we have distribution relationships and discontinue our relationship, resulting in the loss of distribution opportunities for our services; o a competitor could be acquired by or enter into a strategic relationship with a party that has greater resources and experience than we do, thereby increasing the ability of the competitor to compete with our services; or o a competitor could acquire or partner with one of our key suppliers. IF WE FAIL TO OFFER COMPETITIVE PRICING, WE MAY NOT BE ABLE TO ATTRACT AND RETAIN CUSTOMERS. - 26 - Because the webcasting market is relatively new and still evolving, the prices for these services are subject to rapid and frequent changes. In many cases, businesses provide their services at significantly reduced rates, for free or on a trial basis in order to win customers. Due to competitive factors and the rapidly changing marketplace, we may be required to significantly reduce our pricing structure, which would negatively affect our revenues, margins and our ability to achieve or sustain profitability. BRIEF TENURE OF MANAGEMENT; DEPENDENCE ON KEY PERSONNEL To effectively manage growth, we must establish, implement and improve operational, financial and management information systems and expand, train and manage our employee base. Our development is and will continue to be substantially dependent on the abilities and performance of our executive officers and other key employees. The loss of the services of any of our executive officers or other key employees could have a material adverse effect on our prospects, business development, and results of operations and financial condition. Competition for senior management, experienced sales and marketing personnel, qualified Web engineers and other employees is and is expected to continue to be intense. There can be no assurance that we will be successful in attracting and retaining such personnel. There can be no assurance that we may not experience difficulty from time to time in hiring and retaining the personnel necessary to support the growth of our business. Our failure to successfully manage our personnel requirements would have a material adverse effect on our business, results of operations and financial condition. Our performance is substantially dependent on the continued services and performance of our senior management and other key personnel, including Brian Kathler, President and a Director, Paul Watkins, Secretary/Treasurer and a Director and Robert Gamon, a Director. We do not have long-term employment agreements with any of our key personnel and maintain no "key person" life insurance policies. Our future success also depends on our ability to identify, attract, retain and motivate highly skilled, technical, managerial, sales, marketing and customer service personnel. Competition for such persons is intense. We cannot assure you that we will be able to attract or retain such personnel. The failure to do so could have a material adverse effect on our business, financial condition and results of operations. OUR WEBCASTING SERVICES MAY BECOME SUBJECT TO TRADITIONAL TELECOMMUNICATIONS CARRIER REGULATION BY FEDERAL AND STATE AUTHORITIES, WHICH WOULD INCREASE THE COST OF PROVIDING OUR SERVICES AND MAY SUBJECT US TO PENALTIES. We believe our Webcasting service is not subject to regulation by the U.S. Federal Communications Commission or any other state or provincial public service commission. The - 27 - FCC and state or provincial public service commissions, however, may require us to submit to traditional telecommunications carrier regulations for our Webcasting service under the Communications Act of 1934, as amended, and various state laws or regulations as a provider of telecommunications services. If the FCC or any state public service commission seeks to enforce any of these laws or regulations against us, we could be prohibited from providing the voice aspect of our Webcasting service until we have obtained various U.S. federal and state licenses and filed tariffs. We believe we would be able to obtain those licenses, although in some states, doing so could significantly delay our ability to provide services. We also would be required to comply with other aspects of federal and state laws and regulations. Subjecting our Web-conferencing service to these laws and regulations would increase our operating costs, could require restructuring of those services to charge separately for the voice and Internet components, and would involve on-going reporting and other compliance obligations. We also might be subject to fines or forfeitures and civil or criminal penalties for non-compliance. OUR BUSINESS WILL SUFFER IF OUR SYSTEMS FAIL OR BECOME UNAVAILABLE. A reduction in the performance, reliability or availability of our systems will harm our ability to distribute our services to our users, as well as our reputation. These disruptions may be due to service or network outages, periodic system upgrades, and internal system failure. To the present, we have not experienced any material service disruptions. Because our revenue depends largely on the numbers of calls and users and the amount of minutes consumed by users, our business will suffer if we experience frequent or extended system interruptions. We maintain our primary data facility and hosting servers at our headquarters in Vancouver, British Columbia, Canada. Our operations depend on our ability to protect these facilities and our systems against damage or interruption from fire, power loss, water, telecommunications failure, vandalism, sabotage and similar unexpected events. In addition, a sudden and significant increase in traffic on our systems or infrastructure could strain the capacity of the software, hardware and systems that we use. This could lead to slower response times or system failures. The occurrence of any of the foregoing risks could cause service interruptions and, as a result, materially harm our reputation, negatively affect our revenue, and our ability to achieve or sustain profitability. IF OUR SECURITY SYSTEM IS BREACHED, OUR BUSINESS AND REPUTATION COULD SUFFER. We must securely receive and transmit confidential information over public networks and maintain that information on internal systems. Our failure to prevent security breaches could damage our reputation and expose us to risk of loss or liability. Our internal systems are accessible to certain of our employees and we may be unable to prevent the misappropriation of this information. Our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays or loss of data. We may be - 28 - required to expend significant capital and other resources to ensure adequate encryption and additional technologies to protect against security breaches or to alleviate problems caused by any breach. If we fail to provide adequate security measures to protect the confidential information of our customers, our customers may refrain from using our services, potential customers may not want to use our services, and as a result, our operating results would be harmed. DEPENDENCE ON LICENSED TECHNOLOGY We rely on certain technology licensed from third parties for use in operating and managing our Internet site and providing related services to users. We cannot assure you that such technology licenses will be available at all, that they will be available on reasonable commercial terms or that they will operate as intended. RAPID TECHNOLOGICAL CHANGE The market for Internet services is characterized by rapid technological developments, frequent new product introductions and evolving industry standards. We will be required to continually improve the performance, features and reliability of our infrastructure and products and services, particularly in response to competition and changing customer demands. We cannot assure you that we will be successful in responding rapidly, cost-effectively or adequately to such developments. NEW SERVICE RISKS Our future success will depend in part on our ability to expand our Internet communications abilities to include new services. Costs related to developing new services are expensed as they are incurred while revenue related to these new services typically builds over time and, accordingly, our profitability from year to year may be adversely affected by the number and timing of new service launches. In addition, we cannot assure you that any new areas or services will be developed in a timely or cost-effective manner or that they will be successful. RISKS ASSOCIATED WITH BRAND DEVELOPMENT We believe brand identity is important to attracting and expanding our client base. We believe the significance of brand and name recognition will intensify as the number of competing companies increases. We cannot assure you that we will be able to develop our brand identity so as to gain any significant market recognition. - 29 - GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES We are not currently subject to direct regulation by any U.S. or Canadian government agency, other than regulations applicable to businesses generally. There are currently few laws or regulations directly applicable to access to or commerce on the Internet. However, due to the increasing popularity and use of the Internet, a number of legislative and regulatory proposals are under consideration by U.S. and Canadian federal, state, provincial, local and foreign governmental organizations. It is possible that a number of laws or regulations may be adopted with respect to the Internet relating to such issues as user privacy, user screening to prevent inappropriate uses of the Internet by, for example, minors or convicted criminals, taxation, infringement, pricing, content regulation, quality of products and services and intellectual property ownership and infringement. The adoption of any such laws or regulations may decrease the growth in the use of the Internet, which could, in turn, decrease the demand for our services, increase our cost of doing business, or otherwise have a material adverse effect on our business, results of operations and financial condition. Moreover, the applicability to the Internet of existing laws governing issues such as property ownership, copyright, trademark, trade secret, obscenity, libel and personal privacy is uncertain and developing. Any new legislation or regulation, or application or interpretation of existing laws, could have a material adverse effect on our business, results of operations and financial condition. There can be no assurance that any legislation will not be enacted in the future that could expose us to substantial liability. Legislation could also dampen the growth in the use of the Web generally and decrease the acceptance of the Web as a communications and commercial medium. The result could, thereby, have a material adverse effect on our business, results of operations and financial condition. A number of legislative proposals have been made at the U.S. and Canadian federal, state, provincial and local level that would impose additional taxes on the sale of goods and services over the Internet and certain jurisdictions have taken measures to tax Internet-related activities. The U.S. Congress enacted the Internet Tax Freedom Act on October 21, 1998 which imposes a national moratorium in the United States on state and local taxes on Internet access services, on-line services, and multiple or discriminatory taxes on electric commerce effective October 1, 1998 and ending three years after its enactment. In November, 2001, the moratorium was extended through November 1, 2003. Various proposals are under discussion regarding possible further extension or expansion of the moratorium. There can be no assurance that some type of U.S. federal and/or state taxes will not be imposed upon Internet commerce, and there can be no assurance that such legislation or other attempts at regulating commerce over the Internet will not substantially impair the growth of our services on the Internet and as a result, our opportunity to derive financial benefit from these activities may be adversely affected. Due to the global nature of the Web, it is possible that, although our transmissions over the Internet originate primarily in British Columbia, Canada, the governments of various states in the United States and foreign countries might attempt to regulate our transmissions or prosecute - 30 - us for violations of their laws. There can be no assurance that violations of local laws will not be alleged or charged by state or foreign governments, that we might not unintentionally violate such laws or that such laws will not be modified, or new laws enacted, in the future. Any of the foregoing developments could have a material adverse effect on our business, results of operations and financial condition. In addition, as our services are available over the Internet in multiple foreign countries, provinces, states and other jurisdictions, such jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each of those jurisdictions. We are qualified to do business only in British Columbia, and our failure to qualify as a foreign corporation in a jurisdiction where we are required to do so could subject us to taxes and penalties and could result in our inability to enforce contracts in such jurisdictions. Any such new legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and other online services could have a material adverse effect on our business, results of operations and financial condition. LIABILITY FOR INFORMATION RETRIEVED FROM THE WEB; ABSENCE OF LIABILITY INSURANCE Because financial and other information is broadcast to the securities marketplace and elsewhere using our services, there is a potential that claims will be made against us as a participant in the process of distributing this information to investors. We may also be exposed to claims for alleged defamation, negligence, copyright or trademark infringement, personal injury or other theories based on the nature, content, publication and distribution of these materials. Claims may be asserted against us for errors or omissions in the financial and other information disseminated by use of our services by the companies that are our customers. In addition, the increased attention focused upon liability issues as a result of these lawsuits and legislative proposals could impact the overall growth of Internet use and our services. We could also be exposed to liability with respect to the offering of third party content that may be accessible through our services. It is also possible that if any financial information content provided through our services contains errors, third parties could make claims against us for losses incurred in reliance on such information. Even to the extent that such claims do not result in liability to us, we could incur significant costs in investigating and defending against such claims. The imposition on us of potential liability for information carried on or disseminated through our systems could require us to implement measures to reduce our exposure to such liability, which may require the expenditure of substantial resources and limit the attractiveness of our services. Currently, we do not carry general liability insurance intended to protect us from any liability arising out of the foregoing. In any event, however, insurance may not cover all potential claims to which we are exposed or may not be adequate to indemnify us for all liability - 31 - that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of our insurance coverage would have a material adverse effect on our business, results of operations and financial condition. In addition, the increased attention focused upon liability issues as a result of these lawsuits and legislative proposals could impact the overall growth of Internet use. RELIANCE ON INTELLECTUAL PROPERTY RIGHTS To establish and protect our trademark, service mark and other proprietary rights in our products and services, we rely on a combination of: o copyright, unfair competition, trademark, service mark and trade secret laws, and o confidentiality agreements with our licensees and other third parties and confidentiality agreements and policies covering our employees. We cannot assure you that these measures will be adequate, that we will be able to secure registrations for all of our marks in the U.S. or internationally or that third parties will not infringe upon or misappropriate our proprietary rights. Any infringement or misappropriation, or litigation relating to intellectual property rights, may have a material adverse effect on our business, financial condition and results of operations. On May 22, 2001, the U.S. Patent and Trademark Office registered the mark "ViaVid" in the United States. We have also applied to the Canada Patent and Trademark Office for registration of "ViaVid" in Canada. A trademark has been issued in Canada for "ViaVid". We are not aware of any other companies currently using the name "ViaVid" in the United States. We have conducted searches of trademark databases in the United States and have not found any registration of the name "ViaVid" as a trademark. There is no assurance that the trademark for the "ViaVid" name in the United States will stand up to objections by others who may have made prior use of the name. Also, there can be no assurance that we will obtain any significant commercial advantage from this trademark or that we will have the financial resources to protect our rights in the name through legal proceedings or otherwise. It is also possible that our competitors or others will adopt product or service names similar to "ViaVid" or other similar service marks or trademarks, thereby impeding our ability to build brand identity and possibly leading to customer confusion. Our inability to protect the name "ViaVid" adequately could have a material adverse effect on our business, results of operations and financial condition. Legal standards relating to the validity, enforceability and scope of protection of certain proprietary rights in Internet-related business are uncertain and evolving. In particular, new registration and ownership priority procedures may be adopted which may make it more difficult for us to retain or obtain desirable domain names. - 32 - CONTROL BY PRINCIPAL STOCKHOLDERS AND POTENTIAL CONFLICTS OF INTEREST Our officers and Directors own approximately 43.3%, excluding shares issuable on conversion of debentures they own, of our outstanding shares of Common Stock. As a result, such persons could elect all the members of our Board. Such persons could also control those actions requiring the approval of the holders of a majority of our voting stock, including amendments to our Articles of Incorporation and any business combinations. Such persons concentration of ownership could prevent a change in control of our company that might otherwise be beneficial to stockholders. RISKS APPLICABLE TO THE MARKET FOR OUR COMMON STOCK NO ACTIVE PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE Prior to January 4, 2000, there was no active public market for our Common Stock. Since then, our Common Stock has been quoted on the OTC Bulletin Board. There can be no assurance that an active trading market for our Common Stock will be sustained or that the market price of our Common Stock will not decline based upon market or other conditions. The market price may bear no relationship to our revenues, earnings, assets or potential and may not be indicative of our future business performance. The trading price of our Common Stock has been and can be expected to be subject to wide fluctuations in response to variations in our quarterly results of operations, the gain or loss of significant strategic relationships, unanticipated delays in our development, changes in estimates by analysts, announcements of technological innovations or new solutions by us or our competitors, general conditions in the technology and Internet sectors and in Internet-related industries, other matters discussed elsewhere in this report and other events or factors, many of which are beyond our control. In addition, the stock market in general and the technology and Internet sectors in particular have experienced extreme price and volume fluctuations which have affected the market price for many companies in industries similar or related to us and which have been unrelated to the operating performance of these companies. These market fluctuations, as well as general economic, political and market conditions, may have a material adverse effect on the market price of our Common Stock. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted against such companies. Such litigation, if instituted, and irrespective of the outcome of such litigation, could result in substantial costs and a diversion of management's attention and resources and have a material adverse effect on our business, results of operations and financial condition. - 33 - ITEM 7 - FINANCIAL STATEMENTS: ----------------------------- The response to this Item is included in a separate section of this report. See page F-1. ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND ------------------------------------------------------------------------ FINANCIAL DISCLOSURE: -------------------- We filed a Current Report on Form 8-K dated June 5, 2003 in response to Item 4. Change in Registrant's Certifying Accountant. Accordingly, information responsive to this Item 8 has been previously reported, as that term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, and, as provided in Instruction 1 to Item 304 of Regulation S-B, such information need not be reported in this Annual Report. ITEM 8A - CONTROLS AND PROCEDURES --------------------------------- Under the supervision and with the participation of our management, including Brian Kathler, our President and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, and, based on the evaluation, Mr. Kathler has concluded that these controls and procedures are effective. 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. Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including Mr. Kathler, as appropriate to allow timely decisions regarding required disclosure. - 34 - PART III ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; ---------------------------------------------------------------------- COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT: ------------------------------------------------- Our Directors and executive officers, their ages, and positions with us, as well as their employment background for the past five years are as follows: NAME AGE POSITION ---- --- -------- Brian Kathler 41 President and Director Paul Watkins 40 Secretary, Treasurer and Director Robert Gamon 56 Director Howard Bouch 58 Director Brian Kathler has been our President and a Director since January, 1999. Mr. Kathler has served as the President and a director of our subsidiary, ViaVid Broadcasting Corp. since October 31, 1998. Prior to joining us, Mr. Kathler was a self-employed computer consultant from July, 1997 to November, 1998. Mr. Kathler provided technical consulting services to several public companies based in Vancouver, British Columbia, Canada as a self-employed computer consultant. Mr. Kathler was a co-founder and a director of Riptide Technologies, a company involved in the business of software consulting, from 1996 to July, 1997. Mr. Kathler was employed as a senior software engineer by MPR Teltech, a company involved in the business of telephone research from 1994 to 1996. Mr. Kathler possesses more than fourteen years of experience in the computer software development, consulting and management industry. Over this fourteen year period, Mr. Kathler has worked in a number of areas of the software development industry ranging from programming to assisting companies in getting started. Paul Watkins has been a Director since January, 1999. Mr. Watkins has also served as a director of our subsidiary, ViaVid Broadcasting Corp., since October 31, 1998. Mr. Watkins founded Watkins Communications Inc., an Internet marketing and news dissemination company with clients in the financial industry, in 1994. Mr. Watkins has been the president and director of Watkins Communications Inc. from 1994 to the present. Mr. Watkins has a background in computer sciences and has over 10 years experience in the business of investor communications. Robert Gamon joined our board of directors on November 23, 1999. Mr. Gamon has been a director of our subsidiary, ViaVid Broadcasting Corp. since November, 1998. Mr. Gamon was an investment advisor with Pacific International Securities of Vancouver, British - 35 - Columbia from November, 1997 to November, 1999. Mr. Gamon was an investment advisor with Georgia Pacific Securities of Vancouver, British Columbia from 1991 to November, 1997. Howard Bouch was elected a Director of our company on April 12, 2004. Since 1984, Mr. Bouch has been employed as a management accountant to a variety of local businesses in Cumbria, England. Mr. Bouch became a Chartered Accountant in 1968 and has been employed in a number of positions as an accountant since 1970. Our Directors are elected for terms of one year to hold office until the next annual meeting of the holders of our common stock, as provided by the Nevada Revised Statutes, or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT Our Board of Directors has appointed an Audit Committee consisting of Messrs. Gamon and Watkins. Our Audit Committee, among other things, meets with our independent accountants to review our accounting policies, internal controls and other accounting and auditing matters; makes recommendations to the Board of Directors as to the engagement of independent accountants; and reviews the letter of engagement and statement of fees relating to the scope of the annual audit and special audit work which may be recommended or required by the independent accountants. Our securities are not listed on a registered national securities exchange or in an automated inter-dealer quotation system and, accordingly, we are not subject to the listing standards imposed by rules adopted under the U.S. Securities Exchange Act of 1934, as amended, relating to audit committees. Our Board of Directors has determined that we do not have an Audit Committee Financial Expert serving on our Audit Committee. We do not have an Audit Committee Financial Expert serving on our Audit Committee because at this time the limited magnitude of our revenues and operations does not, in the view of our Board of Directors, justify or require that we obtain the services of a person having the attributes required to be an Audit Committee Financial Expert on our Board of Directors and Audit Committee. The Board of Directors may in the future determine that a member elected to the Board in the future has the attributes to be determined to be an Audit Committee Financial Expert. NOMINATING COMMITTEE. We do not have a standing nominating committee. Because our shares of Common Stock are not listed on any National Securities Exchange in the United States and are not quoted on any automated quotation system such as NASDAQ, we are not required to have such a committee. Our Board of Directors is of the view that because of the limited magnitude of our revenues and - 36 - operations at this time, it is appropriate for us not to have a nominating committee. Each of our Directors has the opportunity to participate in the consideration of nominees for election as Directors. Our Board of Directors has not adopted a charter for a nominating committee. We have not adopted a policy with regard to the consideration of candidates recommended by our stockholders for nomination for election as Directors. Because of the limited magnitude of our revenues and operations at this time, our Board of Directors believes it is appropriate for us not to have such a policy. DIRECTOR AND OFFICER SECURITIES REPORTS The Federal securities laws require our Directors and executive officers, and persons who own more than ten percent (10%) of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of any of our equity securities. Copies of such reports are required to be furnished to us. To our knowledge, based solely on a review of the copies of such reports and other information furnished to us, all persons subject to these reporting requirements filed the required reports on a timely basis with respect to the year ended March 31, 2004. CODE OF ETHICS We have adopted a Code of Ethics that applies to our principal executive officer and principal financial and accounting officer. A copy of our Code of Ethics has been filed as an exhibit to this annual report. - 37 - ITEM 10. EXECUTIVE COMPENSATION: -------------------------------- SUMMARY COMPENSATION TABLE The following table sets forth the compensation paid or awarded to our President during the three fiscal years ended March 31, 2004 for all services rendered to us in that year.
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION -------------------------------------------------------------------------------- BONUS/ANNUAL SECURITIES LONG-TERM NAME AND INCENTIVE UNDERLYING INCENTIVE ALL OTHER PRINCIPAL POSITION YEAR SALARY AWARD OPTIONS PAYOUTS COMPENSATION ----------------------------------------------------------------------------------------------------- Brian Kathler $ 2002 $17,000 -0- -0- -0- -0- 2003 $41,908 -0- -0- -0- -0- 2004 $59,259 -0- -0- -0- -0-
EMPLOYMENT AGREEMENTS The services of Brian Kathler, our President, are provided pursuant to a consulting agreement dated March 31, 2004 between Kathler Holdings Ltd and us. The following services of Mr. Kathler are provided pursuant to this agreement: (1) general direction and supervision of our business and financial affairs; (2) overall direction to our management; (3) management of our day to day operations; and (4) performing such other duties and observing such instructions as may be reasonably assigned to Mr. Kathler by our Board of Directors. The agreement has a term of one year. The compensation we pay to Kathler Holdings Inc., which is payable in Canadian dollars, was increased from approximately (US)$5000 per month to approximately (US)$6,500 per month effective March 31, 2002. The services of Mr. Kathler under this agreement are on a full time basis. The services of Paul Watkins, Secretary, Treasurer and a director, are provided pursuant to a consulting agreement dated March 31, 2004 between Watkins Communications Inc and us. The following services of Mr. Watkins are provided to us pursuant to this agreement: (1) the exercise of general direction and supervision over the marketing and development of our business; (2) providing direction to our management; (3) assisting with our day to day operations; and (4) performing such other duties and observing such instructions as may be reasonably assigned by our Board of Directors. The agreement is for a term of one year. The compensation that we pay to Watkins Communications Inc., which is payable in Canadian dollars, was - 38 - increased from approximately (US)$5,000 per month to approximately (US)$6,500 per month effective March 31, 2002. The services of Mr. Watkins under this agreement are on a full time basis. The services of Robert Gamon, a director, are provided pursuant to a consulting agreement between us and Mr. Gamon. dated March 31, 2004. The following services of Mr. Gamon are provided to us pursuant to this agreement: (1) supervising the financing activities of the Company; (2) advising the Company on its capital structure and the structure of future financings; and (3) performing such other duties and observing such instructions as may be reasonably assigned by our Board of Directors. The agreement is for a term of one year. The compensation that we pay to Mr. Gamon, which is payable in Canadian dollars, was increased from approximately (US)$5,000 per month to approximately (US)$6,500 per month effective March 31, 2002. The services of Mr. Gamon under this agreement are on a full time basis. ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND ---------------------------------------------------------------------------- RELATED STOCKHOLDER MATTERS: --------------------------- The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding common stock as of June 9, 2004 and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly. NAME AND ADDRESS PERCENT OF BENEFICIAL OWNER(1) AMOUNT OF CLASS(2) --------------------- ------ ----------- Brian Kathler (3) 2,695,000 shares 17.4% Director, President Paul Watkins(4) 1,877,500 shares 12.1% Secretary, Treasurer, and Director Robert Gamon (5) 2,935,000 shares 18.9% Director Howard Bouch 1,920,000 shares 13.3 % Grove House, 13 Low Seaton Workington, Cumbria England CA14 1PR Cheryl Watkins (6) 817,500 shares 5.6% - 39 - All Officers and Directors 7,417,500 shares 42.1% as a Group (4 persons) ----------------------------------------------------------------------- (1) Unless otherwise indicated, the address of such person is c/o of the Company. (2) Under Rule 13d-3, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of Common Stock actually outstanding at June 9, 2004. As of June 9, 2004, there were 14,438,000 shares of the Company's common stock issued and outstanding. In addition, there were 540,000 shares subject to options exercisable within 60 days of the date of this registration statement. (3) The 1,635,000 shares of common stock beneficially owned by Brian Kathler are registered in the name of Kathler Holdings Inc., a private company controlled by Mr. Kathler. Also, includes 1,060,000 shares of Common Stock issuable upon conversion of the principal and interest on a $50,000 convertible promissory note issued in March 2002. The conversion price is based on a price equal to 80% of the fair market value of a share of Common Stock as of March 31, 2003. See Item 12. Certain Relationships and Related Transactions, for a description of the terms of the note, including the manner in which the conversion price is determined. (4) Also, includes 1,060,000 shares of Common Stock issuable upon conversion of the principal and interest on a $50,000 convertible promissory note issued in March 2002. The conversion price is based on a price equal to 80% of the fair market value of a share of Common Stock as of March 31, 2004. See Item 12. Certain Relationships and Related Transactions, for a description of the terms of the note, including the manner in which the conversion price is determined. Excludes 817,500 shares held by Mr. Watkins' wife as to which Mr. Watkins disclaims a beneficial interest. Paul Watkins and Cheryl Watkins are husband and wife. (5) 1,635,000 shares of common stock are beneficially owned by Robert Gamon and are registered in the name of 549419 BC Ltd., a private company controlled by Mr. Gamon. Also, includes 1,060,000 shares of Common Stock issuable upon conversion of the principal and interest on a $50,000 convertible promissory note issued in March 2002. The conversion price is based on a price equal to 80% of the fair market value of a share of Common Stock as of March 31, 2003. See Item 12. Certain Relationships and Related Transactions, for a description of the terms of the note, including the manner in which the conversion price is determined. Mr. Gamon also purchased an aggregate of 240,000 shares which he holds through 549419 BC Ltd. (6) Excludes 817,500 shares held by Ms. Watkins' husband as to which Ms. Watkins disclaims a beneficial interest. Paul Watkins and Cheryl Watkins are husband and wife. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The Company has one equity compensation plan for its employees, Directors and consultants pursuant to which options, rights or shares may be granted or issued. See Note 9 to the Notes to Consolidated Financial Statements for further information on the material terms of these plans. The following table provides information as of March 31, 2004 with respect to compensation plans (including individual compensation arrangements), under which securities - 40 - are authorized for issuance aggregated as to (i) compensation plans previously approved by stockholders, and (ii) compensation plans not previously approved by stockholders: EQUITY COMPENSATION PLAN INFORMATION
(A) (B) (C) PLAN CATEGORY NUMBER OF SECURITIES WEIGHTED-AVERAGE NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE PRICE OF REMAINING AVAILABLE FOR EXERCISE OF OUTSTANDING FUTURE ISSUANCE UNDER OUTSTANDING OPTIONS, OPTIONS, WARRANTS EQUITY COMPENSATION WARRANTS AND RIGHTS AND RIGHTS PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (A)) --------------------------------------------------------------------------------------------------------- Equity compensation plans 540,000 $0.37 approved by security holders Equity compensation plans 600,000 not approved by security holders Total 540,000
In addition, we issued 600,000 shares for consulting services rendered during the year ended March 31, 2004. Under Nevada corporate law, shareholder approval was not required in connection with entering into these agreements and was not obtained. ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: -------------------------------------------------------- We have entered into a consulting contract with Kathler Holdings Inc. for the services of Brian Kathler, our President and a Director. We have also entered into a consulting contract with Watkins Communications Inc. for the services of Mr. Paul Watkins, our Secretary/Treasurer and a Director, and Mr. Robert Gamon for his services as a Director. As of March 31, 2004, we are indebted to each of Mr. Kathler, Mr. Robert Gamon and Mr. Watkins an aggregate of $265,086 for their monthly compensation that was deferred. In March 2002, we issued our 3% convertible promissory notes in the principal amount of $50,000 to each of Kathler Holdings, Inc., 595871 BC Ltd. and Watkins Communications Inc. The notes were issued in place of amounts owing to those persons for services rendered by Brian - 41 - Kathler, Robert Gamon and Paul Watkins, respectively, during the period May 31, 2000 to February 28, 2002. Interest is payable on the notes at 3% per annum (5% if past due) and is payable at maturity in cash or by issuance of shares of common stock based on their fair market value. The principal and accrued interest on the notes is convertible at any time into shares of our common stock at a conversion price equal to the lesser of $0.50 and 80% of the fair market value of a share of common stock, subject to adjustment in the event of stock splits or combinations. Fair market value is determined based on the average of the closing bid and asked prices for our common stock on the 20 trading days preceding the date on which we receive notice of conversion of the note or the date interest is paid by deliver of shares. The notes become due and payable on December 31, 2004, or prior thereto in the event of a default. We have agreed to file on one occasion a registration statement under the U.S. Securities Act of 1933, as amended, to register the offer and sale of the shares issuable on conversion of the notes on the demand of any holder of the notes. On June 11, 2003, we received a loan in the amount of $18,356 from Robert Gamon, a director of our company. We issued a Promissory Note to Mr. Gamon. Interest accrues and is payable on the outstanding principal at the rate of 6% per annum, payable monthly. The term of the Promissory Note is one year, expiring on June 11, 2004. The loan is not secured. During the year ended March 31, 2004, we paid Mr. Gamon principal and interest in the amount of $13,813. As of March 31, 2004, $5,147.06 remains outstanding on the loan. - 42 - PART IV ------- ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K: ------------------------------------------
(A) EXHIBIT DESCRIPTION ---------------------------- ---------------------------------------------------------------------------------- 3.1 Articles of Incorporation* 3.2 By-Laws of the Company* 10.1 Acquisition Agreement dated January 26, 1999 between the Company and Mr. Paul Watkins, Ms. Cheryl Watkins, 549419 BC Ltd. and Kathler Holdings Inc.* 10.2 Consulting Contract dated March 31, 2004 with Kathler Holdings Inc. and Brian Kathler.** 10.3 Consulting Contract dated March 31, 2004 with Watkins Communications Inc. and Paul Watkins.** 10.4 Consulting Contract dated March 31, 2004 with Robert Gamon** 10.5 Promissory Note dated June 11, 2003 issued to Robert Gamon** 14 Code of Ethics** 21.0 Subsidiaries of Registrant: Name State or Jurisdiction of Incorporation ---- -------------------------------------- ViaVid Broadcasting Corp. British Columbia 99.1 Certification of President and Chief Executive Officer Pursuant to Rule 13a-14(a)** 99.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)** 99.3 Certification of President and Chief Executive Officer Pursuant to Section 1350 (furnished, not filed)**
- 43 -
(A) EXHIBIT DESCRIPTION ---------------------------- ---------------------------------------------------------------------------------- 99.4 Certification of Chief Financial Officer Pursuant to Section 1350 (furnished, not filed)**
-------------------------- * Filed as an exhibit to the Registrant's Registration Statement on Form 10-SB filed June 29, 1999 (File No. 0-26535). ** Filed or furnished herewith (b) Reports on Form 8-K The Registrant has not filed any Current Reports on Form 8-K for the quarter ended March 31, 2004. ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES: ------------------------------------------------ The following sets forth fees we incurred for services provided by Telford, Sadovnick for accounting services rendered during the years ended March 31, 2004 and March 31, 2003 for audit rendered during those years: Audit Fees Audit Related Fees Tax Fees All Other Fees ---------------------------------------------------------------- 2004 $14,328 - - - 2003 $10,746 - - - We comply with the requirements of US Federal securities laws regarding the pre-approval of all audit and non-audit services performed by our independent auditors. The decision to retain Telford, Sadovnick as our principal accountant to audit our consolidated financial statements as of March 31, 2004 and March 31, 2003 was approved at meetings of our Board of Directors held on April 18, 2004 and June 5, 2003. Our Audit Committee has not adopted any pre-approval policies and procedures for engaging an accountant to render audit or non-audit services that are subject to the pre-approval requirement. - 44 - SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. VIAVID BROADCASTING, INC. BY: /s/ Brian Kathler ---------------------------------------- Brian Kathler, PRESIDENT Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/Brian Kathler President (Principal July 5, 2004 ------------------- Brian Kathler Executive Officer and Principal Financial and Accounting Officer and Director) /s/ Paul Watkins Director July 5, 2004 ------------------- Paul Watkins /s/ Robert Gamon Director July 5, 2004 ------------------ Robert Gamon /s/ Howard Bouch Director July 5, 2004 ------------------ Howard Bouch - 45 - VIAVID BROADCASTING INC. CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN UNITED STATES DOLLARS) MARCH 31, 2004 AND 2003 TABLE OF CONTENTS ----------------- Page Report of Independent Registered Public Accounting Firm 3 Consolidated Balance Sheets 4 Consolidated Statements of Stockholders' Equity (Deficiency) 5 Consolidated Statements of Operations 6 Consolidated Statements of Cash Flows 7 Notes to the Consolidated Financial Statements 8-16 -2- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Board of Directors of ViaVid Broadcasting Inc. We have audited the accompanying Consolidated Balance Sheets of ViaVid Broadcasting Inc. as of March 31, 2004 and 2003 and the related Consolidated Statements of Operations, Stockholders' Equity (Deficiency) and Cash Flows for each of the years then ended. These financial statements are the responsibility of ViaVid Broadcasting Inc.'s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ViaVid Broadcasting Inc., as of March 31, 2004 and 2003, and the results of its operations and its cash flows for each of the years then ended in conformity with US generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that ViaVid Broadcasting Inc. will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's losses from operations since inception raises substantial doubt as to the Company's ability to continue as a going concern, unless the Company attains future profitable operations and/or obtains additional financing. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might result from the outcome of this uncertainty. /s/ TELFORD SADOVNICK, P.L.L.C. CERTIFIED PUBLIC ACCOUNTANTS Bellingham, Washington June 2, 2004 - 3 - VIAVID BROADCASTING INC. CONSOLIDATED BALANCE SHEETS (Expressed in United States Dollars)
=========================================================================================================================== March 31, March 31, 2004 2003 --------------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents $ 44,524 $ 1,820 Short-term investments 2,473 -- Accounts receivable 197,598 114,459 ---------------- --------------- Total current assets 244,595 116,279 PROPERTY AND EQUIPMENT 69,815 85,289 ---------------- --------------- TOTAL ASSETS $ 314,410 $ 201,568 =========================================================================================================================== LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT Accounts payable and accrued liabilities $ 184,061 $ 176,357 Due to related parties 265,086 139,542 Convertible promissory notes 150,000 - ---------------- --------------- Total current liabilities 599,147 315,899 CONVERTIBLE PROMISSORY NOTES -- 150,000 ---------------- --------------- Total liabilities 599,147 465,899 ---------------- --------------- STOCKHOLDERS' DEFICIENCY Capital stock Authorized 25,000,000 common stock with a par value of $0.001 per share Issued 13,523,000 common stock (12,423,000 at March 31, 2003) 13,523 12,423 Additional paid-in capital 3,012,118 2,940,718 Subscriptions received in advance 79,500 -- Deficit (3,347,925) (3,203,341) Accumulated other comprehensive loss (41,953) (14,131) ---------------- --------------- Total stockholders' deficiency (284,737) (264,331) ---------------- --------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 314,410 $ 201,568 ===========================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. - 4 - VIAVID BROADCASTING INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (Expressed in United States Dollars)
=================================================================================================================================== Common Stock ---------------------------- Accumulated Additional Subscriptions Other Number Paid-in Received Comprehensive Of Shares Amount Capital In Advance Deficit Loss Total BALANCE AT MARCH 31, 2002 12,023,000 $ 12,023 $ 2,829,351 $ -- $ (2,859,871) $ -- $ (18,497) Components of comprehensive (loss) Net (loss) -- -- -- -- (343,470) -- (343,470) Foreign currency translation -- -- -- -- -- (14,131) (14,131) ------------ Total comprehensive (loss) (357,601) ------------ Shares issued for - consulting fees 200,000 200 13,800 - -- -- 14,000 - cash 200,000 200 9,800 - -- -- 10,000 Stock-based compensation -- -- 87,767 - -- -- 87,767 ---------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2003 12,423,000 12,423 2,940,718 -- (3,203,341) (14,131) (264,331) Components of comprehensive (loss) Net (loss) -- -- -- -- (144,584) -- (144,584) Foreign currency translation -- -- -- -- -- (27,822) (27,822) ------------ Total comprehensive (loss) (172,406) ------------ Shares issued for - consulting fees 600,000 600 21,900 - -- -- 22,500 - cash 500,000 500 49,500 - -- -- 50,000 Subscriptions received in advance - - - 79,500 -- -- 79,500 ---------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2004 13,523,000 $ 13,523 $ 3,012,118 $ 79,500 $ (3,347,925) $ (41,953) $ (284,737) ==========================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. - 5 - VIAVID BROADCASTING INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in United States Dollars)
============================================================================================================================ Year Ended Year Ended March 31, March 31, 2003 2004 ---------------------------------------------------------------------------------------------------------------------------- REVENUE Broadcast and web income $ 736,364 $ 568,517 --------------- -------------- EXPENSES Amortization 25,199 35,958 Bad debts 1,680 3,228 Conference calls 315,057 294,925 Consulting 298,335 247,027 Interest 5,094 4,533 Loss on sale of property and equipment -- 3,994 Office and miscellaneous 145,678 98,076 Professional fees 18,678 49,132 Rent 8,869 30,710 Salaries and benefits 54,647 54,270 Stock based compensation -- 87,767 Travel and promotion 7,864 2,468 --------------- -------------- 881,101 912,088 LOSS BEFORE OTHER ITEM (144,737) (343,571) OTHER ITEM Interest income 153 101 --------------- -------------- LOSS FOR THE YEAR $ (144,584) $ (343,470) ============================================================================================================================ BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.01) $ (0.03) ============================================================================================================================ WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 12,990,398 12,111,000 ============================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. - 6 - VIAVID BROADCASTING INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in United States Dollars)
===================================================================================================================== Year Ended Year Ended March 31, March 31, 2004 2003 --------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year $ (144,584) $ (343,470) Items not affecting cash: Amortization 25,199 35,958 Foreign currency translation (27,822) (14,131) Stock-based compensation -- 87,767 Consulting fees 22,500 14,000 Loss on sale of property and equipment -- 3,994 Changes in non-cash working capital items: Increase in accounts receivable (83,139) (28,383) Increase in short-term investments (2,473) -- Increase in accounts payable and 7,704 87,448 accrued liabilities --------------------------------------- Net cash (used in) operating activities (202,615) (156,817) --------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment (9,725) (6,352) Proceeds from sale of property and equipment -- 10,689 --------------------------------------- Net cash (used in) provided by investing activities (9,725) 4,337 --------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from shares issued 50,000 10,000 Subscriptions received in advance 79,500 -- Loans from related parties 125,544 133,684 --------------------------------------- Net cash provided by financing activities 255,044 143,684 --------------------------------------- CHANGE IN CASH AND CASH EQUIVALENTS FOR THE YEAR 42,704 (8,796) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,820 10,616 --------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 44,524 $ 1,820 =====================================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 10) The accompanying notes are an integral part of these consolidated financial statements. - 7 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) =============================================================================== 1. NATURE OF OPERATIONS ViaVid Broadcasting Inc., a Nevada corporation, was incorporated on January 20, 1999. The Company is engaged in providing webcasting, teleconferencing and transcription services to corporate clients throughout North America. 2. GOING CONCERN As at March 31, 2004, the Company has an accumulated deficit of $3,347,925 and a working capital deficiency of $354,552. The Company's ability to continue as a going concern is dependent on continued financial support in the form of loans from its shareholders and other related parties, the ability of the Company to raise equity financing, and the attainment of profitable operations. Based upon recent changes made by management to reduce expenses, management is of the opinion that cash flow from operations will provide sufficient working capital to meet the Company's liabilities as they become due. The Company may, as and when opportunities arise, seek to raise additional equity from the sale of shares of common stock. These consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of business. They do not include any adjustments to the recoverability and classification of recorded asset amounts and liabilities that might be necessary should the Company be unable to continue as a going concern. 3. SIGNIFICANT ACCOUNTING POLICIES ESTIMATES In preparing these consolidated financial statements in conformity with United States generally accepted accounting principles, management was required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the balance sheet and revenues and expenses for the year. Actual results in future periods could be different from these estimates made in the current year. PRINCIPLES OF CONSOLIDATION These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, ViaVid Broadcasting Corp. All significant inter-company balances and transactions have been eliminated. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. - 8 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) =============================================================================== 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) TRADING SECURITIES AND AVAILABLE-FOR-SALE SECURITIES Under Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"), unrealized holding gains and losses for trading securities are included in statements of operations. Unrealized holding gains and losses for available-for-sale securities are excluded from statements of operations and reported as a net amount in a separate component of shareholders' equity until realized. PROPERTY AND EQUIPMENT Capital assets are recorded at cost and are amortized over their useful lives using the declining balance method at the following rates: Computer equipment 30% Office furniture 20% Telephone and video equipment 20% LOSS PER SHARE Basic loss per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding in the year. Diluted loss per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares. The weighted average number of shares outstanding at March 31, 2004, 12,990,398 (2003 - 12,111,000) do not include the Nil (2003 - 1,112,000) warrants outstanding and the 540,000 (2003 - 530,000) stock options as their effect would be anti-dilutive. TRAVEL AND PROMOTION EXPENSES Travel and promotion expenses are charged to operations in the period incurred. INCOME TAXES Income taxes are provided in accordance with SFAS No 109, "Accounting for Income Taxes". A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expenses (benefit) results from the net change during the year of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. - 9 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) STOCK-BASED COMPENSATION As permitted by SFAS No. 148 "Accounting for Stock-based Compensation", the Company continued to account for stock-based compensation using Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" and has adopted the disclosure only provisions of SFAS 123. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee is required to pay for the stock. The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". FINANCIAL INSTRUMENTS The Company's financial instruments consist of accounts receivable, short-term investments, accounts payable and accrued liabilities, due to related parties and convertible promissory notes. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximate their carrying values, unless otherwise noted. REVENUE RECOGNITION Revenue is recognized once the audio conference, webcast, transcription or presentation has been completed and collection of the amounts is reasonably assured. FOREIGN CURRENCY TRANSLATION In accordance with the Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation," ("SFAS No. 52"), the financial statements of the Company's Canadian subsidiary for the year ended March 31, 2004 and 2003 are translated into U.S. dollars as follows: assets and liabilities at year-end exchange rates; income, expenses and cash flows at average exchange rates; and stockholders' deficiency at historical exchange rates. The resulting translation adjustment is recorded as a component of accumulated other comprehensive loss in the accompanying Consolidated Balance Sheets. For the years ended March 31, 2004 and 2003, the Company records its operations in the Canadian subsidiary, VBC, using the US dollar. Accordingly, carrying values of monetary assets and liabilities are adjusted at each balance sheet date to reflect the exchange rate at that date. Non-monetary assets and liabilities are translated at the exchange rate on the original transaction date. Gains and losses from restatement of foreign currency monetary and non-monetary assets and liabilities are included in income. Revenues and expenses are translated at the rates of exchange prevailing on the dates such items are recognized in earnings. - 10 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) =============================================================================== 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) OPERATING SEGMENTS The Company conducts and reports its operations as a single operating segment, which primarily consists of broadcast and web income to clients and in one geographic region: the United States and Canada. Management reviews the operating and financial results on a consolidated basis. RECENT ACCOUNTING PRONOUNCEMENTS In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS 149"). This statement amends SFAS 133 by requiring that contracts with comparable characteristics be accounted for similarly and clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003 and must be applied prospectively. In May 2003, the FASB issued SFAS No. 150 "Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150"). This statement established standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 and must be applied prospectively by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. The adoption of these recent pronouncements are not expected to have a material effect on the Company's financial position or results of operations. COMPARATIVE FIGURES Certain comparative figures have been reclassified in order to comply with the presentation adopted in the current year. 4. PROPERTY AND EQUIPMENT
=============================================================================================== Accumulated Net Book Cost Amortization Value ----------------------------------------------------------------------------------------------- MARCH 31, 2004 Computer equipment $ 184,528 $ 133,494 $ 51,034 Office furniture 17,011 10,255 6,756 Telephone and video equipment 42,722 30,697 12,025 -------------- -------------- -------------- $ 244,261 $ 174,446 $ 69,815 =============== ================= =============== MARCH 31, 2003 Computer equipment $ 174,803 $ 112,742 $ 62,061 Office furniture 17,011 8,281 8,730 Telephone and video equipment 42,721 28,223 14,498 -------------- -------------- -------------- $ 234,535 $ 149,246 $ 85,289 ===============================================================================================
- 11 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) =============================================================================== 5. RELATED PARTY TRANSACTIONS 0 The Company entered into the following transactions with related parties: Paid or accrued consulting fees as follows: a) $266,075 (2003 - $232,378) to three directors of the Company. b) During the year, the Company received a loan in the amount of $25,000 in Canadian funds from a director. The Company issued a Promissory Note to the Director. Interest shall accrue and be payable on the outstanding principal at the rate of 6% per annum, payable monthly. The term of the Promissory Note is one year, expiring on June 11, 2004. The loan is not secured and is included in due to related parties. During the current year, the Company has paid to the Director, principal and interest in the amount of $18,000 and $786 respectively. c) During the 2002 fiscal year, the Company issued three 3% convertible promissory notes of $50,000 each for a total debt of $150,000 to related parties (Note 6). During the current year, the Company has accrued interest payable in the amount of $4,500 (2003 - $4,500). The amounts charged to the Company for the services provided have been determined by negotiation among the parties, and in certain cases, are covered by signed agreements. These transactions were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the related parties. Amounts due to related parties are unsecured and are non-interest bearing except for the convertible promissory notes and the Canadian $25,000 promissory note; therefore the fair value of the amounts owed to the related parties are not determinable. 6. CONVERTIBLE PROMISSORY NOTES
============================================================================================================ March 31, March 31, 2004 2003 ------------------------------------------------------------------------------------------------------------ On March 11, 2002, the Company issued three convertible promissory notes maturing on December 31, 2004, to related parties at $50,000 each bearing interest at 3% per annum, payable quarterly. Interest is payable at the option of the holder, in either cash or shares of common stock, based upon the amount of interest owing and the fair market value of the shares on the interest payment date. The outstanding principal on the promissory notes is convertible at any time into common stock of the Company at the lesser of $0.50 per share and 80% of the fair market value of the common shares, but not less than $0.05 per share. The intrinsic value of the beneficial conversion feature of $37,500 was charged to interest expense in the 2002 fiscal year. $ 150,000 $ 150,000 Current portion 150,000 -- --------------- --------------- Long-term $ -- $ 150,000 ============================================================================================================
- 12 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) =============================================================================== 7. CAPITAL STOCK WARRANTS
====================================================================================== March 31, March 31, 2004 2003 -------------------------------------------------------------------------------------- Balance, beginning of the year 1,112,000 1,112,000 Expired during the year (1,112,000) -- ---------------- -------------- Balance, end of the year -- 1,112,000 ======================================================================================
8. INCOME TAXES The Company's total deferred tax asset is as follows:
====================================================================================== March 31, March 31, 2004 2003 -------------------------------------------------------------------------------------- Tax benefit of net operating loss carry forward $ 963,740 $ 917,108 Valuation allowance (963,740) (917,108) -------------- -------------- $ -- $ -- ======================================================================================
The Company has an operating loss carryforward of approximately $547,958 in the United States which expires in the fiscal year 2024. The Company's subsidiary, ViaVid Broadcasting Corp., has Canadian operating losses carryforward of approximately $2,066,544 which expire from 2005 to 2011. The Company has provided a full valuation allowance on the deferred tax asset due to the uncertainty regarding realizability. 9. STOCK-BASED COMPENSATION EXPENSE Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", encourages but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the option price. No stock based compensation has resulted from the use of this standard. - 13 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) =============================================================================== 9. STOCK-BASED COMPENSATION EXPENSE (cont'd...) Following is a summary of the stock option activities:
================================================================================================ March 31, 2004 March 31, 2003 -------------- -------------- Weighted Weighted Average Average Number Exercise Number Exercise of Shares Price of Shares Price ------------------------------------------------------------------------------------------------ Outstanding, beginning of the year 530,000 $ 0.43 1,117,000 $ 0.30 Granted 200,000 0.19 50,000 0.20 Forfeited (190,000) 0.35 (637,000) 0.18 ------------ ----------- ------------ ----------- Outstanding, end of the year 540,000 $ 0.37 530,000 $ 0.43 ================================================================================================
The weighted average fair value of options granted to employees, non-employees and consultants during the year was approximately $0.19 (2003 - $0.20) per option. Following is a summary of the status of options outstanding at March 31, 2004:
============================================================================================================ Remaining Exercise Number of Contractual Price Shares Life (Years) ------------------------------------------------------------------------------------------------------------ $ 0.20 150,000 0.01 0.30 15,000 0.25 0.30 100,000 0.60 0.20 50,000 1.44 0.10 50,000 2.33 0.10 25,000 2.52 0.20 25,000 2.96 0.25 100,000 2.96 3.50 25,000 5.92 ---------------- 540,000 ============================================================================================================
- 14 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) =============================================================================== 9. STOCK-BASED COMPENSATION EXPENSE (cont'd...) COMPENSATION During the year ended March 31, 2004, the Company granted 175,000 stock options to consultants and 25,000 stock options to an employee and accordingly, the stock-based compensation recognized using the Black Scholes Option Pricing Model was $18,583. Compensation costs for consultant and employees have been recognized on the basis of fair value pursuant to the Statement of Financial Accounting Standards No. 123 for the March 31, 2004 pro-forma net loss and basic and diluted loss per share.
========================================================================================== March 31 March 31 2004 2003 ------------------------------------------------------------------------------------------ NET LOSS As reported $ (144,584) $ (343,470) ========================================= Pro-forma $ (163,167) $ (343,470) ========================================= BASIC AND DILUTED LOSS PER SHARE As reported $ (0.01) $ (0.03) ========================================= Pro-forma $ (0.01) $ (0.03) ==========================================================================================
The fair value of each option granted is estimated using the Black Scholes Option Pricing Model. The assumptions used in calculating fair value were as follows:
========================================================================================== March 31 March 31 2004 2003 ------------------------------------------------------------------------------------------ Risk-free interest rate 2.422% 1.960% Expected life of the options 3 years 2 years Expected volatility 73.5% 75% Expected dividend yield -- -- ==========================================================================================
10. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
======================================================================================== March 31, March 31, 2004 2003 ---------------------------------------------------------------------------------------- Cash paid for income taxes $ -- $ -- ======================================================================================== Cash received from interest $ 153 $ 101 ======================================================================================== Cash paid for interest $ 5,094 $ 4,533 ========================================================================================
- 15 - VIAVID BROADCASTING INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND 2003 (Expressed in United States Dollars) 10. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (cont'd) The following non-cash, investing and financing transactions occurred during the year ended March 31, 2004: The Company issued 600,000 shares of common stock at an agreed value of $22,500 for consulting services. The following non-cash, investing and financing transactions occurred during the year ended March 31, 2003: The Company issued 200,000 shares of common stock at an agreed value of $14,000 for consulting services. 11. SUBSEQUENT EVENTS a) Subsequent to March 31, 2004, the Company issued 795,000 shares of common stock for the $79,500 amount recorded as subscriptions received in advance at year end. b) Subsequent to March 31, 2004, the Company issued 120,000 shares of common stock at an agreed upon value of $12,000 for consulting services and committed to issue a further 150,000 shares of common stock on January 1, 2005 at an agreed upon value of $15,000 for further consulting services. - 16 -