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1: 10QSB Quarterly Report -- Small Business 23± 92K
2: EX-31 Certification per Sarbanes-Oxley Act (Section 302) 2± 9K
3: EX-31 Certification per Sarbanes-Oxley Act (Section 302) 2± 9K
4: EX-32 Certification per Sarbanes-Oxley Act (Section 906) 1 6K
5: EX-32 Certification per Sarbanes-Oxley Act (Section 906) 1 6K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 000-26037
VISUAL BIBLE INTERNATIONAL, INC.
--------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-1030068
(State or Other Jurisdiction (IRS Employer Identification
of Incorporation) Number)
1235 Bay Street, Suite 300, Toronto, Ontario M5R 3K4 Canada
-------------------------------------------------------------
(Address of Principal Executive Offices)
(416) 921-9950
--------------
(Issuer's Telephone Number, Including Area Code)
------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
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 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of
May 28, 2004, there were 73,792,518 shares of the Registrant's $.001
par value common stock outstanding.
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
TABLE OF CONTENTS
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
(a). Consolidated Balance Sheets as of March 31, 2004 and December
31, 2003
(b). Consolidated Statements of Operations for the three month
periods ended March 31, 2004 and 2003
(c). Consolidated Statements of Cash Flows for the three month
periods ended March 31, 2004 and 2003
(d). Notes to Financial Statements
Item 2. Management's Discussion and Analysis.
Item 3. Controls and Procedures.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities and Use Of Proceeds.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
Item 1. Financial Statements.
(a) Consolidated Balance Sheets as of March 31, 2004 and December
31, 2003
VISUAL BIBLE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
[Download Table]
March 31, December 31,
2004 2002
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $295,670 $2,204,949
Cash in escrow 200,000 -
Accounts receivable, net of
allowance for doubtful accounts of
$300,000 and $0, at March 31, 2004
and December 31, 2003 respectively 1,185,390 36,039
Inventories 650,852 265,358
Canadian film tax credits receivable
1,200,000 1,200,000
Prepaids and other current assets 323,666 392,717
---------- ----------
Total Current Assets 3,855,598 4,099,063
Film Cost, Production in Process
Film costs Gospel of John, net of
accumulated amortization of
$1,657,864 and $574,058 at March
31, 2004 and December 31,2003,
respectively 9,766,847 10,850,653
Pre-production costs Gospel of Mark 185,000 185,000
Property and equipment, net 200,193 206,661
---------- ----------
Total Assets $14,007,638 $15,341,377
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current Liabilities:
Current portion of notes payable $325,000 $325,000
Bank film production loan payable 2,490,848 2,494,848
Other film production loans 1,026,585 1,026,585
Accounts payable and accrued 7,715,471 6,781,491
expenses
Accrued Interest Payable 1,156,534 1,102,046
Deferred Revenue 617,116 708,293
Due to related parties 681,882 681,882
---------- ----------
Total Current Liabilities 14,013,436 13,116,145
---------- ----------
Long-term debt:
Debentures Payable
Series A 6,533,646 6,533,646
Series B 8,500,000 8,500,000
---------- ----------
Total Debentures Payable 15,033,646 15,033,646
---------- ----------
Total Liabilities 29,047,082 28,149,791
---------- ----------
Commitments and Contingencies:
Stockholders' Equity (Deficit):
Preferred stock 200,000,000
authorized, par value $.001,
2,000,000 designated Class B,
1,556,728 issued and outstanding at
March 31, 2004 and December 31,
2003, respectively 1,557 1,557
Common stock, 300,000,000
authorized $.001 par value,
61,316,987 and 60,695,938 issued
and outstanding at March 31, 2004
and December 31, 2003, respectively 61,317 60,696
Additional paid-in capital 36,548,166 36,393,525
Unamortized finance costs on
debentures payable (779,167) (1,249,364)
Receivables from stockholders (427,060) (427,060)
Retained earnings (deficit) (50,444,257) (47,587,768)
---------- ----------
Total Stockholders' Equity
(Deficit) (15,039,444) (12,808,414)
---------- ----------
Total Liabilities and
Stockholders' Equity (Deficit) $14,007,638 $15,341,377
========== ==========
____________________
The accompanying notes are an integral part of these consolidated
financial statements.
(b) Consolidated Statements of Operations for the three month
periods ended March 31, 2004 and 2003
VISUAL BIBLE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
[Download Table]
For the For the
Three Three Months
Months Ended March
Ended March 31, 2003
31, 2004
Sales:
Product sales - IBS distributor $91,177 $35,556
Product sales - Gospel of John 4,220,224 -
---------- ----------
Total Sales 4,311,401 38,555
Cost of Goods Sold (includes
$1,083,806 and $0 amortization of
film costs at March 31, 2004 and
2003, respectively) 1,948,303 15,087
---------- ----------
Gross Profit 2,363,098 23,468
---------- ----------
Costs and Expenses:
General and administrative 883,889 711,412
Advertising, marketing and selling
expenses 2,723,235 -
Royalty expense 122,534 -
Costs relating to stock issued as
additional imputed interest expense
and for general and administrative
expenses 155,262 -
Provision for doubtful accounts 300,000 -
Interest and finance costs expense 1,034,667 123,375
--------- ---------
5,219,587 836,787
--------- ---------
Net Income (Loss) before Income Taxes (2,856,489) (813,319)
---------- ----------
Provision (Credit) for Income Taxes - -
---------- ----------
Net (Loss) (2,856,489) (813,319)
========== ==========
(Loss) per Share:
Basic and diluted (loss) per common
share: $(0.04) $(0.02)
========== ==========
Basic and diluted weighted average
of common shares outstanding 60,943,304 43,780,547
========== ==========
___________________
The accompanying notes are an integral part of these consolidated
financial statements.
(c) Consolidated Statements of Cash Flows for the three month
periods ended March 31, 2004 and 2003
VISUAL BIBLE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
[Download Table]
For the Three For the
Months Ended Three Months
March 31, 2004 Ended March
---------- 31, 2003
----------
Cash Flows from Operating
Activities:
Net (loss) $(2,856,489) $(813,319)
Adjustments to reconcile net
(loss) to net cash used in
operating activities:
Depreciation 10,536 -
Amortization of finance costs on
debentures payable 470,197 -
Amortization of film costs 1,083,806 -
Provision for doubtful accounts 300,000 -
Issuance of common stock for
finance costs 155,262 -
Change in operating assets and
liabilities:
Accounts receivable (1,449,351) 64,327
Inventories (385,494) 15,020
Film costs - (9,847,413)
Prepaid expenses and other current
assets 69,031 (28,045)
Accounts payable and accrued
liabilities 988,468 1,160,172
Deferred revenues (91,177) (35,568)
---------- ----------
Net used in operating activities (1,705,211) (9,484,826)
---------- ----------
Cash Flows from Investing
Activities:
Cash in escrow (200,000) 166,817
Acquisition of property and
equipment (4,068) (10,175)
---------- ----------
Net cash (used in) provided by
investing activities (204,068) 156,642
---------- ----------
Cash Flows from Financing
Activities:
Proceeds from debentures payable - 4,750,000
Proceeds from film production
financing - 2,689,893
Proceeds from other film
production loans - 1, 045,431
Foreign currency translation - (8,247)
---------- ----------
Net cash provided by financing
activities - 8,477,077
---------- ----------
Net (Decrease)in cash and cash
equivalents (1,909,279) (851,107)
Cash and cash equivalents,
beginning of period 2,204,949 946,462
---------- ----------
Cash and cash equivalents, end of
period $295,670 $93,355
========== ==========
Supplemental Disclosure of Cash
Flow Information:
Interest paid during the period $510,139 $1,022
========== ==========
Income taxes paid during the period $ - $ -
========== ==========
Supplemental Disclosure of Noncash
Investing and Financing Activities:
Common stock issued for finance
costs $ 155,262 $-
========== ==========
____________________
The accompanying notes are an integral part of these consolidated
financial statements.
(d) Notes to Financial Statements
VISUAL BIBLE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2004
1. THE COMPANY
Visual Bible International, Inc. ("Visual Bible International",
"VBII" or "the Company") is a global faith-based media company which
has secured the exclusive visual and digital rights to popular
versions of the Bible. The Company has produced and successfully
released the word-for-word books of Matthew and Acts and a
production of a word-for-word film adaptation of The Gospel of John
was released during September 2003.
Visual Bible's mission is to use all forms of media to inspire the
lives of present and future generations by carrying God's Word
regardless of their religious affiliation, culture or geographic
location. The Company intends to acquire additional intellectual
property rights, producing new products and intends to build its
sales and distribution networks to position itself as the
pre-eminent creator and distributor of the word-for-word productions
of the Bible.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying financial statements consolidate the accounts of
Visual Bible International and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation. Certain amounts from prior years have
been reclassified to conform to the current year presentation.
The accompanying unaudited consolidated financial statements have
been prepared pursuant to rules and regulations of the Securities
and Exchange Commission and, therefore, do not include all
information and footnote disclosures normally included in audited
financial statements. However, in the opinion of management, all
adjustments that are of a normal and recurring nature necessary to
present fairly the results of operations, financial position and
cash flows have been made. It is suggested that these statements be
read in conjunction with the financial statements included in the
Company's Annual Report on Form 10-KSB, dated May 22, 2004 for the
year ended December 31, 2003.
The statements of operations for the three months ended March 31,
2004 and 2003 are not necessarily indicative of results for the full
year.
Earnings (Loss) per Share
The Company computes earnings or loss per share in accordance with
the Financial Accounting Standards Board Statement No. 128 "Earnings
Per Share" (SFAS 128) which replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share
excludes the dilutive effects of options, warrants and convertible
securities and thus is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding. Diluted earnings per share is similar to the previous
fully diluted earnings per share. Diluted earnings per share
reflects the potential dilution that could occur if securities or
other agreements to issue common stock were exercised or converted
into common stock. Diluted earnings per share is computed based
upon the weighted average number of common shares and dilutive
common equivalent shares outstanding.
During February and March, 2004, the Company issued 621,049 shares
of the Company's common stock valued at $0.25 to certain parties in
connection with post production financing and loan guarantees.
Item 2. Management's Discussion and Analysis.
The following discussion of our financial condition and results of
operations should be read in conjunction with the financial
statements and the notes to the financial statements included
elsewhere in this report. The discussion may contain "forward
looking" statements or statements which arguably imply or suggest
certain things about our future. Statements, which express that we
"believe", "anticipate", "expect", or "plan to", as well as, other
statements which are not historical fact, are forward looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are based on assumptions that
we believe are reasonable, but a number of factors could cause our
actual results to differ materially from those expressed or implied
by these statements. We do not intend to update these forward
looking statements.
Overview
We are a global, faith-based media company that has secured the
exclusive visual and digital rights to popular versions of the
Bible. We have produced and released in the fall of 1993 the
word-for-word film adaptation of The Gospel of John.
Our primary strengths are our intellectual property rights to the
visual representation of popular versions of the Bible, our
creative constituents and our sales and distribution networks. The
Bible remains the largest selling book of all-time and Bible sales
are driven by Bible translations. From the American Bible Society
we have secured the exclusive worldwide rights to develop, produce
and market film adaptations on a word-for-word basis in the English
language from the American Bible Society's Good News Translation
Bible and contemporary English Version, including both Books of the
Old and New Testaments. We also could have access, as negotiated,
to non-English translations of the Bible from the United Bible
Societies and their affiliates. The Good News Translation Bible
represents a significant portion of US Bible Sales and has sold
approximately 140 million Bibles worldwide. The Latin American
Spanish translation of The Gospel of John has been licensed to us.
The US Latino population is in excess of 35 million.
Although, based upon our exclusive license we believe that others
are unable to recreate our video products exactly in the versions we
utilize, we recognize that others presently do and may in the future
create products and services that are directly competitive with our
products. There are a myriad of products and services offered by
numerous individuals, for profit companies and non profit companies
and organizations targeted toward our customers and potential
customers. However, due to our exclusive license agreement, we
believe that for so long as this agreement remains in effect any
potential customer specifically seeking video recreations of the
versions of the Bible produced by us under our license agreement
would be required to purchase our product.
We intend to utilize our intellectual property rights as the basis
to build a global distribution system for faith-based, audio visual
products. Past distribution of such products has been primarily
focused on the traditional Christian marketplace. We believe the
opportunity continues to exist to take our products into the
mainstream domestic marketplace and simultaneously into the much
larger global marketplace where, we believe, the potential for sales
is very significant.
Results of Operation
Net sales for the three month period ended March 31, 2004 totaled
$4,311,401, compared to the net sales amount of $38,555 reported in
the corresponding 2003 period. The increase in sales was
attributable to the retail, rental and direct response marketing
initiatives associated with the word-for-word film adaptation of
The Gospel of John.
General and administrative expenses of $883,889 for the three month
period ended March 31, 2004 increased 24% over the $711,412 amount
incurred in the corresponding 2003 three month period. The current
quarter expenses included professional fees of approximately
$362,000. The expense in the current period was primarily in support
of the Company's new production, The Gospel of John.
Interest and financial costs related mainly to the Company's
debenture issues and totaled $1,034,667 for the quarter ended March
31, 2004. In the corresponding 2003 quarter, the expense was $125,375.
Liquidity & Capital Resources
At March 31, 2004, we had approximately $297,000 in cash and cash
equivalents, exclusive of a cash escrow amount of $200,000, and a
working capital deficit of $10,158,000. The primary source of
liquidity to meet our obligations during the three months ended
March 31, 2004 was provided from the direct response sales for
DVD/video units of The Gospel of John.
For fiscal year 2004, we anticipate cash needs of approximately
$6,250,000, consisting of approximately $750,000 for marketing of
The Gospel of John, approximately $2,000,000 relating to operations,
approximately $3,500,000 earmarked for reduction of liabilities and
exclusive of payments of interest and principle relating to the
debentures, which is subject to a Forbearance Agreement until July
31, 2004. We expect these cash needs to be funded by our collection
of accounts receivable principally arising from sales of DVD/VHS
units of The Gospel of John and the sale of common shares. Without
the collection of such accounts receivables, our revenue from
operations will not be sufficient to sustain our current working
capital obligations and requirements.
Item 3. Controls and Procedures.
a.) Our principal executive officer and our principal financial
officer have on a date which is within ninety days of the date that
we have filed this quarterly report (the "Evaluation Date"),
evaluated the effectiveness of our disclosure controls and
procedures and have concluded that no significant deficiencies or
material weaknesses exist.
b.) There have been no significant changes in our internal controls
or in any other factors that could significantly affect these
controls subsequent to the Evaluation Date.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The legal proceedings filed with the Circuit Court for Davidson
County, Tennessee by a David Seibert, a former employee, against us
have been settled. The terms of settlement require us to have made
3 payments of $20,000 each over the period January 2003 to March
2004. All such amounts have been paid by us.
The legal proceedings filed with the Circuit Court for Palm
Beach County, Florida by First Property Holdings, Limited, against
us on February 8, 2003, in which the plaintiff is claiming damages
from a default in payment of a promissory note are still pending.
The plaintiff is seeking $150,000 plus prejudgment interest,
attorney fees and costs of the litigation.
The legal proceedings filed with the Federal Court of Canada
(Trial Division) by us against CVC Management Ltd, carrying on
business as Crown Video are still pending.
The legal proceedings filed with the Ontario Superior Court of
Justice by Cinram International Inc. against us, were settled. The
terms of settlement agreement, as amended, requires us to make
payments in the amount of $201,000 over the period September 15,
2003 to July 15, 2004. As of this date, approximately $22,500
remains to be paid by us.
The legal proceedings with the International Bible Society have
been settled. Under the terms of the settlement, we have
relinquished the right to sell our prior productions of the books of
Matthew and Acts.
We instituted legal proceedings against Cinemavault Releasing
Inc. On March 26, 2004 in the Ontario Superior Court of Justice for
damages and injunctive relief in connection with the breach of a
distribution agreement by Cinemavault and for the return of certain
elements of our film, The Gospel of John improperly obtained from
the film production laboratory, Deluxe Toronto Ltd. "Deluxe"). On
March 26, 2004, an interim order was obtained restraining
distribution and further use by Cinemavault.
Legal proceedings were instituted against us by Thomas Nelson
Publishing on December 30, 2003 in the Chancery Court for Davidson
County, Tennessee. On our motion, the action was moved to the
United States District Court for the Middle District of Tennessee.
The central allegations made by Thomas Nelson is that our film The
Gospel of John is subject to the distribution agreement between our
subsidiary Visual Bible, Inc. and Thomas Nelson. Thomas Nelson is
seeking an injunction to restrain us from distributing The Gospel of
John in area in which Thomas Nelson claims they have distribution
rights. At the suggestion of the Court, the parties have been
engaged in settlement negotiations. The Court has been notified of
these ongoing negotiations and is not expected to issue a ruling
pending the results of the settlement negotiations.
A claim has been asserted by Steven Small, our former chairman
of our Board of Directors, against in connection with our removal of
Dr. Small as chairman and termination of his consulting agreement.
Dr. Small is demanding payment of approximately $345,000 on account
of amounts Dr. Small alleges as are owed to him under his consulting
agreement. Pursuant to the terms of the consulting agreement, the
matter is proceeding to arbitration which is scheduled to commence
on June 17, 2004.
Item 2. Changes in Securities.
(c).
In connection with the First Forbearance Agreement and the
Second Forbearance Agreement (as each such term is defined
hereinafter) we issued an aggregate of 15,033,645 shares of our
common stock to the A Unit Debenture holders and to the B Unit
Debenture holders. There are no commissions or discounts associated
with the issuance of our common stock under the First Forbearance
Agreement.
We claimed exemption from the registration provisions of the
Act with respect to issuance of our shares pursuant to Section 4(2)
thereof inasmuch as no public offering was involved. In connection
with the issuance of the shares of our common stock, the purchasers
thereof made an informed investment decision based upon negotiation
with us and were provided with access to material information
regarding us. We believe that the purchasers thereof had knowledge
and experience in financial matters such that the purchasers were
capable of evaluating the merits and risks of acquisition of our
common stock. All of the shares of our common stock issued pursuant
to the foregoing bear an appropriate legend restricting the transfer
of same, except in accordance with the Act.
We expect (i) to issue an aggregate of 1,471,107 shares of our
common stock to Lang Michener, LLP, Edward H. Gilbert, P.A.,
Goodmans, LLP, Deluxe Laboratories and JBM Entertainment(those
creditors identified in section 7.1(n)(ii) of the Second Forbearance
Agreement)as required by section 7.1(n)(i)(A) of the Second
Forbearance Agreement; and (ii) to issue 1,500,000 shares of our
common stock to JBM in connection with the termination of the JBM
Agreement (as same is described hereinafter). There will be no
commissions or discounts associated with the issuance of our common
stock described above.
We expect to claim exemption from the registration provisions
of the Act with respect to issuance of our shares pursuant to
Section 4(2) thereof inasmuch as no public offering will be
involved. In connection with the issuance of the shares of our
common stock, the purchasers thereof will have made an informed
investment decision based upon negotiation with us and will have
been provided with access to material information regarding us. We
believe that the purchasers thereof will have had knowledge and
experience in financial matters such that the purchasers will be
capable of evaluating the merits and risks of acquisition of our
common stock. All of the shares of our common stock to be issued
pursuant to the foregoing will bear an appropriate legend
restricting the transfer of same, except in accordance with the
Securities Act.
We are in the process of concluding an offering of up to
800,000 shares of our common stock to approximately 10 accredited
investors at an offering price of $.50 per share (the "Current
Offering"). There are no commissions or discounts associated with
the Current Offering. We expect to claim exemption from the
registration provisions of the Act with respect to the common stock
issued as part of the Current Offering pursuant to Section 4(2)
thereof inasmuch as no public offering was involved. In connection
with the issuance of the common stock, the purchasers thereof will
have made an informed investment decision based upon negotiation
with us and will have been provided with access to material
information regarding us. We expect that each such purchaser will
have knowledge and experience in financial matters such that such
purchaser will be capable of evaluating the merits and risks of
acquisition of the common stock. All certificates representing the
common stock issued as part of the Current Offering will bear an
appropriate legend restricting the transfer of such shares, except
in accordance with the Securities Act.
Item 3. Defaults upon Senior Securities.
As a result of our inability to meet our obligations under the
A Unit Debentures and the B Unit Debentures and as previously
described in our Form 8-K filed March 4, 2004, our Form 8-K filed
April 23, 2004, and our Form 10-K for the fiscal year ended December
31,2004 the Company concluded, as of April 1, 2004, certain
agreements (collectively, the "Forbearance Documents"). The
Forbearance Documents consist of the following:
1. A Forbearance Agreement (the "Forbearance Agreement")
between us and the holders (collectively, the "Debenture Holders")
of the A Unit and the B Unit Debentures (collectively, the
"Debentures").
The Forbearance Agreement is dated as of February 19, 2004 with
and provides among other things, that, subject to our compliance
with the terms and conditions of the Forbearance Agreement, the
Debenture Holders would forbear until March 5, 2004 (the
"Forbearance Termination Date") or the occurrence of an Event of
Default under the Forbearance Agreement, whichever was earlier, from
enforcing the security rights of the Debenture Holders under the
Debentures, certain security agreements granted by us in connection
with the Debentures, guarantees (the "Subsidiary Guarantees")
granted by each of Visual Bible International (Canada) Inc. ("Visual
Canada") and The Book of John, Inc., ("TBOJ") and certain security
agreements granted by each of Visual Canada and TBOJ in connection
with the Subsidiary Guarantees (collectively, the "Documents"). In
consideration of the forbearance by the Debenture Holders, the
Company granted additional security to the Debenture Holders and the
Company, Visual Canada and TBOJ rectified certain errors of
inadvertence in the security granted in connection with the
Debentures, the Subsidiary Guarantees and the security granted in
connection with the Subsidiary Guarantees. If on the Forbearance
Termination Date, all of the terms of the Forbearance Agreement had
been met, then, except for certain surviving obligations upon the
Company under the Forbearance Agreement, the Forbearance Agreement
was automatically to have terminated.
2. A Second Forbearance Agreement (the "Second Forbearance
Agreement") between us and the Debenture Holders.
As a result of our continued default and the continued default
of Visual Canada and TBOJ of their obligations under the Documents
(as defined in item 1 above), we requested that the Debenture
Holders further forbear from exercising their rights and remedies
under the Documents and the First Forbearance Agreement so as to
permit us an opportunity to accomplish certain restructuring of our
business. Accordingly, as of April 1, 2004 we concluded the Second
Forbearance Agreement. The Second Forbearance Agreement provides,
among other things, that, subject to compliance by the Company with
the terms and conditions of the Second Forbearance Agreement and
with the terms and conditions of certain related agreements, the
Debenture Holders will forbear until July 31, 2004 or the occurrence
of an Event of Default under the Forbearance Agreement, whichever is
earlier, from enforcing the security rights of the Debenture Holders
under the Documents and the First Forbearance Agreement. If the
Company has not committed an Event of Default under the Second
Forbearance Agreement and, provided that all amounts payable by the
Company on and as of July 31, 2004, under the Second Forbearance
Agreement and the applicable related agreements, to, among others,
the Debenture Holders, have been paid then, except for certain
surviving obligations upon the Company under the Second Forbearance
Agreement, the Second Forbearance Agreement shall terminate.
3. An Inventory Security Agreement (the "Deluxe Inventory
Security Agreement between us and Deluxe (as hereinafter defined).
As a result of our default under the Fulfillment Services
Agreement, a certain video duplication, DVD replication and
distribution services agreement (the "Video Agreement") dated as of
August, 2002 with Deluxe Media Services, Inc. ("Deluxe Media") and a
certain film processing agreement (the "Deluxe Labs Agreement", and
collectively with the Fulfillment Agreement and the Video Agreement,
the "Deluxe Agreements") dated August 27, 2002 with Deluxe Labs, we
granted to Deluxe Media, Deluxe Labs and Deluxe Toronto, Inc.
(collectively, "Deluxe") a purchase money security interest (the
"Deluxe Inventory Security Interest") in and to certain products
produced or manufactured by Deluxe for us on or after March 1, 2004
for shipment on or after March 7, 2004 and all proceeds therefrom to
secure obligations owing to Deluxe by the Company, all pursuant to
the Deluxe Inventory Security Agreement.
4. A priorities agreement (the "Priorities Agreement" between
us, the Debenture Holders, Elly Reisman and Deluxe.
The Priorities Agreement is dated as of March 23, 2004, and
provides, among other things, that, subject to certain conditions
the Deluxe Inventory Security Interest shall have priority over
security interests granted by us to each of the Debenture Holders
and Elly Reisman.
5. A security agreement (the "Security Agreement") between us
and Deluxe.
As a result of the continued default by us of our obligations
under the Deluxe Agreements and an inducement agreement (the
"Inducement Agreement") dated as of August, 2002 by and among us,
Deluxe Labs and Deluxe Media, we granted to Deluxe a security
interest (the "Deluxe Security Interest") in and to certain products
produced or manufactured by Deluxe for us, but excluding any and all
Obligations (as such term is defined in the Inventory Security
Agreement) and all proceeds therefrom to secure obligations owing to
Deluxe by us under the Deluxe Agreements and the Inducement Agreement.
6. A second priorities agreement (the "Second Priorities
Agreement" between us the Debenture Holders, Deluxe and Elly Reisman.
The Second Priorities Agreement is dated as of April 1, 2004,
and provides, among other things, that subject to certain terms and
conditions, the security interests granted by us to each of the
Debenture Holders shall have priority over the Deluxe Security
Interest.
7. A disbursement agreement (the "Disbursement Agreement")
between us Visual Canada, the Debenture Holders, Deluxe and a
disbursement agent (the "Agent").
To facilitate the payment of our obligations to certain of our
creditors, we and Visual Canada entered into the Disbursement
Agreement with Debenture Holders, Deluxe and the Agent. Pursuant to
the Disbursement Agreement, we are required to cause all funds
received from direct response sales and non-direct response sales of
The Gospel of John to be deposited into accounts maintained
exclusively by the Agent. Pursuant to the Disbursement Agreement we
have directed that all non-direct response customers to pay to the
Agent any amounts owing to us. The Agent is required to disburse
such funds to the Debenture Holders, Deluxe and certain other
creditors in accordance with the procedure established by, and in
the amounts set out in, the Disbursement Agreement.
8. The Rescission Agreement.
The Rescission Agreement is between us and JBM Entertainment
Inc. ("JBM"), Velveteen Consulting Inc., 1485352 Ontario Limited,
Garth H. Drabinsky ("GHD") and Myron I. Gottlieb pursuant to which
our consulting agreement dated as of June 1, 2003 with JBM, as
amended (the "JBM Consulting Agreement"), was rescinded. As part of
the Rescission Agreement, we agreed, within 45 days after the date
of the Rescission Agreement, to issue 2,129,910 shares of our common
stock (the "JBM Shares") to JBM and/or its affiliates in
consideration of the agreement of JBM to rescind the JBM Consulting
Agreement and settlement of a debt due from us to JBM in the amount
of $629,910. The Rescission Agreement provides that if we fail to
issue the JBM Shares then the JBM Consulting Agreement will be
immediately reinstated as if the Rescission Agreement never existed.
As part of the Rescission Agreement we provided certain
registration rights to JBM and its affiliates in connection with the
JBM Shares to be issued thereunder. We have not yet issued the JBM
Shares, but we expect to do so in the near future.
9. The 108 Ontario Consulting Agreement.
Concurrently with the execution of the Rescission Agreement, we
concluded a consulting agreement the 108 Ontario Consulting
Agreement with 1080409 Ontario Limited ("108 Ontario"), a
corporation controlled by Garth H. Drabinsky ("GHD"). Pursuant to
the 108 Ontario Consulting Agreement, we retained the services of
GHD to provide marketing and production consulting services to us,
as same may be required from time to time. During the first
eighteen (18) months following the execution of the 108 Ontario
Consulting Agreement, we granted to GHD the first right to negotiate
with us for engagement by us as the producer of the next motion
picture produced by us or a subsidiary of, or entity controlled by,
us. The term of the 108 Ontario Consulting Agreement runs until
December 31, 2004 and, unless terminated in accordance with the
provisions thereof, shall automatically renew on a month to month
basis. In consideration for the services provided by 108 Ontario
under the 108 Ontario Consulting Agreement, during the term thereof
we agreed to pay $25,000, plus GST, per month to 108 Ontario and to
reimburse 108 Ontario for all pre-approved expenses. We also agreed
with 108 Ontario that after repayment by us of the indebtedness due
from us to the holders of our Unit A and Unit B Debentures, we would
pay $450,000 to 108 Ontario.
108 Ontario has entered into an agreement (the "Sub
Consulting Agreement") with 1485352 Ontario Limited ("148 Ontario"),
a corporation controlled by Bonnie Gottlieb, the wife of Myron
Gottlieb ("Gottlieb") whereby certain of the services to be provided
by GHD under the 108 Ontario Consulting Agreement will be provided
to 108 Ontario by Gottlieb. Based upon the existence of the Sub
Consulting Agreement, fifty percent of the amounts paid by us under
the 108 Ontario Consulting Agreement will be paid to 148 Ontario and
Gottlieb will be benefitted as a result thereof.
Item 4. Submission of Matters to a Vote of Security Holders. Not
Applicable.
Item 5. Other Information.
The following sets forth certain information with respect to
our current executive officers and directors.
[Download Table]
Name and Address Age Positions with the Company
Maurice Colson (1) 61 Chief Executive Officer,
64 Russell Hill Road Interim Chief Financial
Toronto, Ontario M4V 2T2 Officer, President,
Canada Secretary and Sole Director
Harold Kramer (2) 63 Executive Vice President
1235 Bay Street and Past Chief Financial
Suite 300 Officer
Toronto, Ontario M5R 3K4
Canada
(1)Maurice Colson has been a director since June 13, 2002 and became
our chairman on January 27, 2004. On February 6, 2004, Mr. Colson
became our Chief Executive Officer, president and secretary, and on
May 22, 2004, Mr. Colson became our interim Chief Financial Officer.
(2)Harold Kramer has been acting as our executive vice president,
secretary and chief financial officer since June 13, 2002. On May
22, 2004, Mr. Kramer was removed as Chief Financial Officer, due in
part, to a certain letter from Mr. Kramer to us dated May 20, 2004
(the "Kramer Letter"). The Kramer letter has been filed by us as an
Exhibit to our Form 10-KSB for our fiscal year ended December 31, 2003.
As indicated above, Mr. Colson assumed the duties of Chief
Financial Officer from Mr. Kramer on May 22, 2004, as a result of
the Kramer Letter. The Kramer Letter has been attached as an
exhibit to our Form 10-KSB for our fiscal year ended December 31,
2003. Due to the nature of the Kramer Letter, we believe that we
had no alternative other than to appoint Mr. Colson as our interim
Chief Financial Officer. We strongly disagrees with each and every
of the allegations contained as part of the Kramer Letter and
believed that the timing of the issuance of the Kramer Letter by Mr.
Kramer was calculated, in part, to cause us harm by, among other
things, stymieing our ability to file our Form 10-KSB for our fiscal
year ended December 31, 2004. We are continuing to evaluating our
relationship with Mr. Kramer, under our employment agreement with
Mr. Kramer or otherwise, to determine what, if any, further action
we deem appropriate. We do not intend for Mr. Colson to remain as
our Chief Financial Officer, and subject to discussions with Mr.
Kramer and others, we expect to replace Mr. Colson in that capacity
as soon as is reasonably possible.
Item 6. Exhibits, Lists and Reports on Form 8-K:
(a) Exhibits.
The following is a list of exhibits filed as part of this
quarterly report on Form 10-QSB. Where so indicated by footnote,
exhibits which were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit
in the previous filing is indicated in parentheses.
Sdfasdfsdf
[Download Table]
DESCRIPTION
EXHIBIT
NO.
2.1 Stock Exchange Agreement (2)
3.1 Articles of Incorporation of American Uranium, Inc. (1)
3.2 Bylaws of American Uranium, Inc.(1)
3.3 Articles of Incorporation of American Uranium
Reincorporation, Inc. (2)
3.4 Bylaws of American Uranium Reincorporation, Inc. (2)
3.5 Amended and Restated Articles of Incorporation of
Visual Bible International, Inc. (3)
3.6 Bylaws of Visual International, Inc. (3)
3.7 Amended and Restated Articles of Incorporation (1 for 2
combination) of Visual Bible International, Inc. dated
April 3, 2001 (4)
3.8 Amended and Restated Articles of Incorporation (1 for 3
combination)of Visual Bible International, Inc. dated
September 10, 2001 (5)
3.9 Amended and Restated Articles of Incorporation (1 for
10 combination) of Visual Bible International, Inc.
dated February 19, 2002 (6)
3.10 Amendment to the Articles of Incorporation (Series A
Preferred designation) of Visual Bible International,
Inc., dated March 28, 2002 (8)
3.11 Amendment to the Articles of Incorporation
(capitalization increase) of Visual Bible
International, Inc., dated April 15, 2002 (7)
3.12 Amendment to the Articles of Incorporation (Series B
Preferred designation) of Visual Bible International,
Inc., dated December 17, 2002 (8)
4.1 Form of A Unit Debenture dated December 24, 2002 (8)
4.2 Form of A Unit Warrant dated December 24, 2002 (8)
4.3 Form of A Unit Registration Rights Agreement (8)
4.4 Form of A Unit Investor Rights Agreement (8)
4.5 Addenda to A Unit Debentures (First Addendum, Second
Addendum, Third Addendum and Fourth Addendum)(8)
4.6 Addendum to A Unit Debentures (Fifth Addendum)(10)
4.7 Form of B Unit Debenture(10)
4.8 Form of B Unit Warrant Agreement(10)
4.9 Form of B Unit Registration Rights Agreement(10)
4.10 Conditions Precedent Agreement(10)
9.1 Shareholder Voting Agreement (3)
9.2 Form of Irrevocable Proxy (3)
10.1 Agreement with Stewart House Publishing, Inc. (4)
10.2 Agreement with Thomas Nelson, Inc. (4)
10.3 Agreement with Columbia House, Inc. (4)
10.4 The JBM Management Agreement and Amendments (8)
10.5 The Velveteen Consulting Agreement (8)
10.6 The 148 Ontario Consulting Agreement (8)
10.7 Agreement to Provide Guaranty (8)
10.8 The Fulfillment Services Agreement (11)
10.9 The Forbearance Agreement (11)
10.11 The Second Forbearance Agreement (11)
10.12 The Deluxe Inventory Security Agreement (11)
10.13 The Priorities Agreement (11)
10.14 The Security Agreement (11)
10.15 The Second Priorities Agreement (11)
10.16 The Disbursement Agreement (11)
10.17 The Rescission Agreement (11)
10.18 The 108 Ontario Consulting Agreement (11)
21.1 List of Subsidiaries (11)
31.1 Certification of Chief Financial Officer under Rule
13a-14(a)/15d-14(a)(12)
31.2 Certification of Chief Executive Officer under Rule
13a-14a/15d-14(a)(12)
32.1 Certification of Chief Financial Officer under Section
1350(12)
32.2 Certification of Chief Executive Officer under Section
1350(12)
99.1 Letter from Harold Kramer (11)
____________________
(1) Previously filed with Form 10 of the Company dated May 19, 1999
and incorporated herein by reference.
(2) Previously filed with Schedule 14-A of the Company on June 2,
2000 and incorporated herein by reference.
(3) Previously filed with Form 8-K on August 16, 2000 and
incorporated herein by reference.
(4) Previously filed with Form 10-KSB of the Company filed on May
23, 2001 and incorporated herein by reference.
(5) Previously filed with Form 10-QSB of the Company filed on
November 11, 2001 and incorporated herein by reference.
(6) Previously filed with Form 8-K on March 26, 2002 and
incorporated herein by reference.
(7) Previously filed with Schedule 14-C of the Company filed on
March 25, 2002 and incorporated herein by reference.
(8) Previously filed with Form 10-KSB of the Company filed on May
16, 2003 and incorporated herein by reference.
(9) Previously filed with Form 10-QSB of the Company filed on May
23, 2003 and incorporated herein by reference.
(10) Previously filed with Form 10-QSB of the Company for the
quarter ended September 30, 2003 and incorporated herein by reference.
(11) Previously filed with Form 10-KSB of the Company for the fiscal
year ended December 31, 2003 and incorporated herein by reference.
(12) Filed electronically herewith.
(b) Reports on Form 8-K.
We did not file any reports on Form 8K during the quarter for
which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VISUAL BIBLE INTERNATIONAL, INC.
Date: 06/08/04 By: /s/ Maurice Colson
-----------------------------
Maurice Colson, President and
principal executive officer
Date: 06/08/04 By: /s/ Maurice Colson
-----------------------------
Maurice Colson, principal financial
officer
Dates Referenced Herein and Documents Incorporated by Reference
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