UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-25114
IMAGINON, INC.
--------------
(Exact name of registrant as specified in its charter)
Delaware 84-1217733
-------- ----------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
1313 Laurel Street, San Carlos, CA 94070
-----------------------------------------
(Address of principal executive offices) (Zip Code)
(650) 596-9300
--------------
(Registrants telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such report(s)
and (2) has been subject to such filing requirements for the past 90 days. YES
[X] NO [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 66,947,943 common shares, par value
$.01 per share, outstanding at August 15, 2001.
Transitional Small Business Disclosure Format (Check One) YES ___ NO X
---
IMAGINON, INC. AND SUBSIDIARIES
Index
-----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Report
Condensed Consolidated Balance Sheet - June 30, 2001
Condensed Consolidated Statements of Operations - Three and Six
Months Ended June 30, 2001 and 2000
Condensed Consolidated Statement of Shareholders' Deficit - Six
Months Ended June 30, 2001
Condensed Consolidated Statements of Cash Flows - Six Months Ended
June 30, 2001 and 2000
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
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
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
ImaginOn, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
ImaginOn, Inc. and subsidiaries as of June 30, 2001, the related condensed
consolidated statements of operations for the three-month and six-month periods
ended June 30, 2001 and 2000, the condensed consolidated statement of
shareholders' deficit for the six months ended June 30, 2001, and the condensed
consolidated statements of cash flows for the six-month periods ended June 30,
2001 and 2000. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
GELFOND HOCHSTADT PANGBURN, P.C.
Denver, Colorado
August 17, 2001
IMAGINON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
June 30, 2001
(Unaudited)
Assets
Current assets
Cash $ 26,346
Accounts receivable, less allowance for doubtful accounts of $9,500 74,853
Inventories 27,141
Prepaid expenses 20,504
------------
Total current assets 148,844
------------
Other receivable 19,922
Furniture and equipment, net of accumulated depreciation of $226,451 190,342
Other assets 49,831
------------
260,095
------------
$ 408,939
============
Liabilities and Shareholders' Deficit
Current liabilities
Accounts payable $ 572,058
Accrued expenses 89,357
Deposits 2,500
Notes and advances payable 707,000
------------
Total liabilities (all current) 1,370,915
------------
Commitments and contingencies
Mandatory redeemable Series G, 8% convertible preferred stock; 13.1 1,391,580
shares issued and outstanding; liquidation preference $1,391,580
Common stock issued upon conversion of Series G preferred stock; 1,074,826
12,846,660 shares subject to redemption ------------
2,466,406
------------
Shareholders' deficit
Preferred stock, $0.01 par value; authorized 5,000,000 shares; 13.1 -
shares issued and outstanding
Common stock, $0.01 par value; authorized 100,000,000 shares; 669,479
66,947,943 shares issued and outstanding
Warrants and options 1,720,479
Capital in excess of par 14,578,970
Accumulated deficit (20,397,310)
------------
Total shareholders' deficit (3,428,382)
------------
$ 408,939
============
See notes to condensed consolidated financial statements.
IMAGINON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ---------------------------
2001 2000 2001 2000
------------- -------------- ------------- -------------
Revenues $ 815 $ 79,158 $ 2,421 $ 92,173
Cost of revenues 253 13,053 573 22,089
----------- ----------- ----------- -----------
Gross profit 562 66,105 1,848 70,084
----------- ----------- ----------- -----------
Operating expenses
Research and development 196,147 298,235 481,222 563,728
Sales and marketing 168,482 917,361 282,877 1,836,622
General and administrative 405,118 1,118,239 934,801 1,966,326
Impairment of intangible assets 498,266
----------- ----------- ----------- -----------
769,747 2,333,835 2,197,166 4,366,676
----------- ----------- ----------- -----------
Loss from operations (769,185) (2,267,730) (2,195,318) (4,296,592)
----------- ----------- ----------- -----------
Other income (expense)
Interest, net (58,337) 46,822 (57,090) 106,956
Other 800
----------- ----------- ----------- -----------
(58,337) 47,622 (57,090) 106,956
----------- ----------- ----------- -----------
Loss from continuing operations (827,522) (2,220,108) (2,252,408) (4,189,636)
----------- ----------- ----------- -----------
Discontinued operations
Loss from operations of INOW (22,858) (51,704) (84,585) (111,517)
Loss on disposal of INOW (6,040) (6,040)
----------- ----------- ----------- -----------
(28,898) (51,704) (90,625) (111,517)
----------- ----------- ----------- -----------
Net loss (856,420) (2,271,812) (2,343,033) (4,301,153)
Series F preferred stock dividend (36,667)
Series F redemption premium (200,000)
Amortization of discount on preferred stock (65,000) (102,000)
Series G preferred stock dividend (25,600) (63,122)
----------- ----------- ----------- -----------
Net loss applicable to common shareholders $ (947,020) $(2,271,812) $(2,508,155) $(4,537,820)
=========== =========== =========== ===========
Basic and diluted loss per common share
from continuing operations $ (.01) $ (.05) $ (.04) $ (.10)
Basic and diluted loss per common share
from discontinued operations $ * $ * $ * $ *
----------- ----------- ----------- -----------
Basic and diluted loss per common share $ (.01) $ (.05) $ (.04) $ (.10)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding 64,726,365 44,653,018 60,594,070 44,598,888
=========== =========== =========== ===========
* LESS THAN ($.01) PER SHARE.
See notes to condensed consolidated financial statements.
IMAGINON, INC., AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Deficit
Six Months Ended June 30, 2001
(Unaudited)
Capital in Total
Common Stock Warrants and Excess Shareholders'
--------------------------
Shares Amount Options of Par Deficit Deficit
----------- ------------ ------------- ------------ ------------- -------------
Balances, January 1, 2001 52,434,617 $524,346 $1,720,479 $14,680,003 $(18,054,277) $(1,129,449)
Issuance of common stock 1,666,666 16,666 27,434 44,100
Conversion of Series G preferred
stock to common stock 12,846,660 128,467 (128,467)
Net loss (2,343,033) (2,343,033)
---------- -------- ---------- ----------- ------------ -----------
Balances, June 30, 2001 66,947,943 $669,479 $1,720,479 $14,578,970 $(20,397,310) $(3,428,382)
========== ======== ========== =========== ============ ===========
See notes to condensed consolidated financial statements.
IMAGINON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements Of Cash Flows
Six Months Ended June 30, 2001 And 2000
(Unaudited)
2001 2000
----------- -----------
Cash flows from operating activities:
Net loss $(2,343,033) $(4,301,153)
----------- -----------
Adjustments to reconcile net loss to net cash used in operating
activities from continuing operations:
Loss from discontinued operations 90,625 111,517
Depreciation and amortization 194,369 494,719
Provision for losses on accounts receivable 19,400
Impairment of intangible assets 498,266
Loss on disposal of assets
Expense incurred upon issuance of common stock 70,089
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 9,943 (50,504)
Decrease (increase) in inventories 190 (10,493)
Decrease (increase) in prepaid expenses (5,406) (137,436)
Decrease in other assets
Increase in accounts payable 164,775 23,875
Increase in accrued expenses 20,712
Decrease in deposits (8,000)
----------- -----------
Total adjustments 965,474 521,187
----------- -----------
Net cash used in operating activities (1,377,559) (3,779,966)
of continuing operations ----------- -----------
Cash flows from investing activities:
Capital expenditures (114,406)
Proceeds on disposal of assets 25,000
----------- -----------
Net cash provided by (used in) investing activities 25,000 (114,406)
of continuing operations ----------- -----------
Cash flows from financing activities:
Proceeds from note payable and advances 819,000 300,000
Payments on notes payable and advances (112,000)
Dividends on Series F preferred stock (2,200,000)
Redemption of Series F preferred stock (194,000)
Proceeds from issuance of Series G preferred stock 315,900
Proceeds from collection of receivable from sale of common stock 2,000,000
Proceeds from issuance of common stock and warrants, net 44,100 957,451
----------- -----------
Net cash provided by financing activities 1,067,000 863,451
of continuing operations ----------- -----------
Net cash used in discontinued operations (134,902) (231,704)
----------- -----------
Net decrease in cash (470,461) (2,799,217)
Cash, beginning 496,807 4,959,694
----------- -----------
Cash, ending $ 26,346 $ 2,160,477
=========== ===========
See notes to condensed consolidated financial statements.
IMAGINON, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2001 and 2000
(Unaudited)
1. Interim Financial Statements
- --------------------------------
The interim financial statements have been prepared by Imaginon, Inc. (the
"Company"), and in the opinion of management, reflect all adjustments which are
necessary to present fairly the financial position, results of operations, and
cash flows of the Company for the interim periods presented. Those adjustments
consist only of normal and recurring adjustments except for those described
below.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is the Company's
opinion that, when the interim financial statements are read in conjunction with
the December 31, 2000 Annual Report on Form 10-KSB, the Company's disclosures
are adequate to make the information presented not misleading. The results of
operations for the six months ended June 30, 2001 are not necessarily indicative
of the operating results to be expected for the full year.
The accompanying condensed consolidated financial statements include the
accounts of Imaginon, Inc., and its wholly-owned subsidiaries, Imaginon Digital
Productions, Inc. ("IDP"), and Imaginon Network Specialists, Inc. ("INOW")
through the date of disposition of INOW (Note 5), as well as its majority-
owned subsidiary, Vizario, Inc. (formerly known as Wireless Web Data, Inc.
("WWDI") (Note 2). Intercompany transactions have been eliminated in
consolidation.
Going Concern and Management's Plans
- ------------------------------------
The accompanying condensed consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business. The
Company reported a net loss of $2,343,033 for the six months ended June 30,
2001, the Company has an accumulated deficit of $20,397,310 as of June 30, 2001,
and the Company is subject to certain contingencies at June 30, 2001. The
Company has not recognized any substantial revenues from its broadband Internet
television systems and expects to incur continued cash outflows, which are
expected to result in a working capital deficiency within the next year. As a
result, the Company may experience difficulty and uncertainty in meeting its
liquidity needs during the next fiscal year.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. The condensed consolidated financial statements do not include
any adjustments relating to the recoverability and classification of assets or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
IMAGINON, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2001 and 2000
(Unaudited)
1. Basis of presentation (continued)
- -------------------------------------
To address its current cash flow concerns, the Company is in discussions with
potential investors attempting to raise funds to support current and future
operations. This includes attempting to raise additional working capital
through the sale of additional capital stock and/or through the issuance of debt
(Notes 4 and 7). Currently, the Company does not have a revolving loan
agreement with any financial institution, nor can the Company provide any
assurance that it will be able to enter into any such agreement in the future,
or be able to raise funds through a further issuance of debt or equity in the
Company. The Company continues to develop, market and license its products,
which may provide additional funds to address the Company's capital
requirements.
2. WWDI transactions
- ---------------------
On May 24, 2001, pursuant to a Stock Exchange Agreement and Plan of
Reorganization (the "Agreement"), WWDI, a wholly owned subsidiary of the
Company, completed a merger with Vizario, Inc. ("Vizario"), a publicly-held
Nevada corporation previously known as Gallagher Research Corporation. WWDI, a
development stage company, was formed as a Delaware corporation on July 17, 2000
by the Company for the purpose of continuing development and commercialization
of internet and intranet database processing software for wireless applications.
Immediately prior to the merger, Vizario had no operations and no significant
assets, and its plan of operation was to seek and acquire an operating business
by entering into a business combination. The Agreement provided for the sale to
Vizario of all the issued and outstanding capital stock of WWDI in exchange for
Vizario's issuance of 20,000,000 of its authorized but unissued common stock to
the Company. Vizario acquired ownership of all 6,000,000 issued and outstanding
capital shares of WWDI, and as a result, WWDI became a wholly owned subsidiary
of Vizario. The Company, as the sole shareholder of WWDI, became the holder of
20,000,000 shares, out of 24,768,000 shares issued, or 80.7% of the issued and
outstanding common stock of Vizario. Subsequently, 920,000 shares of the
20,000,000 shares were then transferred to officers and directors of the
Company, reducing the Company's ownership percentage to 77%.
IMAGINON, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2001 and 2000
(Unaudited)
3. Intangible assets:
- ----------------------
Management assesses the carrying value of intangible and other long-lived
assets, including goodwill, for impairment when circumstances warrant such a
review, primarily by comparing current and projected sales, operating income and
annual cash flows on an undiscounted basis, with the related annual amortization
expenses. The Company recognizes impairment losses on intangible assets when
undiscounted cash flows estimated to be generated from the intangible assets are
less than the amount of unamortized assets.
4. Notes and Advances Payable
- ------------------------------
On March 15, 2001, the Company borrowed $100,000 under a note payable to an
individual. Interest on the note is charged at 9%, with principal and interest
payable upon demand by the lender. During the three months ended June 30, 2001,
the Company borrowed an additional $46,000 under notes payable, with interest
charged at 15%. The principal of $46,000, plus accrued interest of $532, was
repaid by June 30, 2001.
During the three months ended June 30, 2001, the Company received advances of
$673,000 from investors. These advances are unsecured and non-interest bearing.
The Company repaid $66,000, leaving a balance of $607,000 as of June 30, 2001.
In July and August, 2001, the Company borrowed an additional $105,000 under
notes payable, with interest charged at 15%, and received additional advances of
$33,000, which are unsecured and non-interest bearing.
5. Discontinued operations
- ---------------------------
In April 2001, the Company made a decision to abandon further efforts in
developing and marketing INOW products and services and in May 2001, the Company
entered into an agreement to sell its INOW subsidiary, which was the sole
business in the Internet service provider segment. Accordingly, INOW is reported
as a discontinued operation in the statements of operations. Based on the terms
of the sale, March 31, 2001 the Company concluded that an impairment charge of
$498,266 was necessary during the quarter ended March 31, 2001. to write off the
carrying amount of goodwill related to the Company's acquisition of INOW, which
was recorded in May 2001, the Company sold all of its investment in INOW for
$25,000.
IMAGINON, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2001 and 2000
(Unaudited)
6. Commitments and Contingencies
- ---------------------------------
Leases
- ------
The Company leases office space under various non-cancelable operating lease
agreements expiring at various dates through 2007. Certain lease agreements
provide for annual incremental rent increases.
Litigation
- ----------
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse impact either
individually or in the aggregate on consolidated results of operations,
financial position or cash flows of the Company.
7. Redeemable Series G Preferred Stock and Common Stock Issued Upon Conversion
- -------------------------------------------------------------------------------
of Series G Preferred Stock
---------------------------
At December 31, 2000, the Company had 22 shares of Series G preferred stock
issued and outstanding. The Series G preferred stock has a par value of $0.01
per share, a stated value of $100,000 per share, and a liquidation preference
equal to the stated value plus unpaid dividends. During the six months ended
June 30, 2001, the Company issued an additional .6 share of Series G preferred
stock along with 1,666,666 shares of common stock for total proceeds of $60,000.
Out of the total $60,000 proceeds, $15,900 was allocated to preferred stock and
$44,100 was allocated to common stock. In addition, 3 shares of Series G
preferred stock was issued for $300,000. During the six months ended June 30,
2001, the Company converted 12.5 shares of Series G preferred stock for a total
of 12,846,660 shares of the Company's common stock.
The Series G preferred stock is convertible into shares of the Company's common
stock at the lower of $0.60 per share, or 80% of the market price of the
Company's common stock on the conversion date, subject to a minimum conversion
price limit of $0.10 per share. The Series G preferred stock is convertible, at
any time, for five years from the issue date. Shares of Series G preferred stock
that have not been converted within five years of the original issue date are to
be redeemed by the Company at a price equal to the stated value of the shares
plus accumulated unpaid dividends. Dividends are cumulative at 8% per year and
are payable semiannually. Dividends not paid when due are subject to an 18% late
fee, payable in cash. Cumulative dividends through June 30, 2001, are $8,580.
IMAGINON, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2001 and 2000
(Unaudited)
7. Redeemable Series G Preferred Stock and Common Stock Issued Upon Conversion
- -------------------------------------------------------------------------------
of Series G Preferred Stock (continued)
---------------------------------------
The conversion feature was "in the money" at the date of issue (a "beneficial
conversion feature"). The Company allocated $102,500 of the proceeds, equal to
the intrinsic value of the beneficial conversion feature, to capital in excess
of par during the six months ended June 30, 2001, and allocated the entire
portion to the Series G preferred stock.
The Series G preferred stock has voting rights consistent with the voting rights
of the common shareholders. Each share of Series G preferred stock is entitled
to 166,666 votes. The Series G preferred stock contains a provision that if the
Company issues or sells shares of common stock at a price per share lower than
the Series G preferred stock conversion price during the period that any of the
Series G preferred stock is outstanding, the Series G preferred stock conversion
price shall be adjusted downward to equal that price, subject to terms and
conditions as defined in the agreement.
The Series G preferred stock is also subject to a mandatory redemption provision
upon the triggering of certain events, as defined, the majority of which were
satisfied in connection with a registration of common shares underlying the
Series G preferred stock in February 2001. In addition, in connection with the
private placement of the Series G preferred stock in October 2000, the Company
paid $75,000 to an entity, which was not registered as a broker-dealer; however,
it may have been required to be registered as a broker-dealer in connection with
the Series G preferred stock transaction. If the entity acted as a broker-dealer
in connection with the private placement, it would have been required to be
registered with the Securities Exchange Act (the "Act") unless it was exempt
from the broker-dealer registration requirements under the Act.
If the entity was not properly exempt from the broker-dealer registration
requirements, various parties could potentially assert claims, including perhaps
the following: the investors could assert claims for rescission of their
investment in the Company; and the Company, or its shareholders, could have a
claim against the entity for rescission of the $75,000 payment. In response to a
possible rescission by the investors, the Company believes it has defenses and
other legal rights, and would vigorously defend itself in such an action.
As a result of this contingency and other redemption features of the Series G
preferred stock, the Company has not included the Series G preferred stock or
the 12,846,660 shares of common stock issued during the six months ended June
30, 2001 upon the conversion of 12.5 shares of Series G preferred stock in
shareholders' equity (deficit).
IMAGINON, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2001 and 2000
(Unaudited)
8. Subsidiary equity transactions
- ----------------------------------
In June 2001, Vizario granted options to purchase up to 720,000 shares of
Vizario common stock at $.10 per share to certain employees of the Company.
These options vest over a one-year period.
In July 2001, Vizario issued 100,000 shares of its common stock in exchange for
consulting services valued at $75,000.
9. Shareholders' equity (deficit)
- ----------------------------------
Options
- -------
In May 2001, the Company granted options to purchase up to 800,000 shares of the
Company's common stock to employees and an officer of the Company. The options
vest over a one-year period and expire in December 2009. The options' exercise
price is $.10 per share, which is based on the market price of the Company's
common stock on the date of the grant.
IMAGINON, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2001 and 2000
(Unaudited)
8. Business Segment Information
- --------------------------------
As of, and during the periods ended, June 30, 2001 and June 30, 2000, segment
results from continuing operations were as follows:
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------- --------------------------------
2001 2000 2001 2000
---------------- ---------------- -------------- ----------------
Computer software products
ImaginOn.com
Revenues $ 445 $ 77,165 $ 542 $ 79,454
Segment loss (552,323) (2,201,600) (1,915,074) (4,147,224)
Total assets 393,406 4,076,089 393,406 4,076,089
IDP
Revenues 24 1,993 1,453 12,719
Segment loss (10,767) (15,953) (24,745) (37,807)
Total assets 8,359 36,506 8,359 36,506
Internet wireless applications
Vizario
Revenues 346 426
Segment loss (264,432) (312,589)
Total assets 7,174 7,174
Corporate
Segment income (loss) - (2,555) - (4,605)
Total assets 19,922 113,500 19,922 113,500
Net loss all segments and
corporate from continuing
operations $ (827,522) $(2,220,108) $(2,252,408) $(4,189,636)
There are no differences in the basis of segmentation or in the basis of
measurement of segment loss from the Company's last annual report.
IMAGINON, INC. AND SUBSIDIARIES
PART 1 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD-LOOKING STATEMENTS
This report may contain certain "Forward-Looking Statements" as such term is
defined in the private securities litigation reform act of 1995 or by the
Securities and Exchange Commission in its rules, regulations and releases, which
represents Imaginon, Inc. expectations or beliefs, including but not limited to,
statements concerning Imaginon, Inc. operations, economic performance, financial
condition, growth and acquisition strategies, investments, and operational
plans. For this purpose, any statements contained from here on that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the generality of the foregoing, words such as "may", "will",
"expect", "believe", "anticipate", "intent", "could", "estimate", "might" or
"continue" or the negative or other variations or comparable terminology are
intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, certain of which are beyond
Imaginon's control, and actual results may differ materially depending on a
variety of important factors, including uncertainty related to acquisitions,
governmental regulation, managing and maintaining growth, volatility of stock
price and any other factors discussed in this and other Imaginon, Inc. filings
with the Securities and Exchange Commission.
OVERVIEW
The independent auditors' report on the Company's consolidated financial
statements as of December 31, 2000, and for each of the years in the two-year
period ended December 31, 2000 includes a "going concern" paragraph that
describes substantial doubt about the Company's ability to continue as a going
concern.
On January 20, 1999 Imaginon, Inc., formerly known as California Pro Sports,
Inc. (the "Company" or "Imaginon"), through Imaginon Acquisition Corp., a wholly
owned subsidiary of Imaginon, completed a merger with ImaginOn.com of San
Carlos, California. Imaginon is a publicly held company with common stock
currently trading on the Over the Counter Bulletin Board under the symbol
"IMON". Imaginon has three operating units.
Imaginon designs, manufactures and sells: (i) consumer software products for the
CD/DVD-ROM market and (ii) a research tool for Internet users. Imaginon's
proprietary technology, called "Transformational Database Processing and
Playback" ("TDPP"), enables the creation of new business and consumer products
that provide user-friendly and entertaining access to multimedia databases.
Imaginon's founders were granted a U.S. patent on May 18, 1999 for its "TDPP"
technology. The Company has brought its first three products, WebZinger,
WorldCities 2000 and sellONstream, to market. These products are trademarked and
are protected under two U. S. Patents issued to the founders of Imaginon, which
they have assigned to the Company. As of June 30, 2001, Imaginon has 9 full time
employees plus 6 consultants, compared to 30 full time employees and 6
consultants at June 30, 2000.
Beginning January 2000, Imaginon focused upon its information technology and
developing and marketing broadband Internet television systems to businesses and
institutions. Imaginon's Internet television system, Imon.comTV, now upgraded
and renamed "ImaginVideo", a software system and licensed turnkey package that
enables any Website to present interactive television within a standard browser
window on any suitably connected computer. The ImaginVideo interactive virtual
console offers its users video on demand, video that branches under user
command, automated Web searching, and many additional features that can be
customized for each licensee.
During the third quarter 2000, in order to initiate a presence of Imaginon's
ImaginVideo interactive Internet television to multiple markets, the Company
began new installations of this product to a broad range of clients. While some
clients were charged at the full list price of the ImaginVideo stations, others
were charged at less than full-list price. Some of these sales were made for
strategic key marketing positions rather than for income. The Company's
clientele is made up of magazine publishers, colleges, communication companies
and sports franchises. ImaginVideo offers a complete turnkey product that turns
any existing Website into an interactive TV station on the broadband Internet.
Imaginon implemented a seven-channel sales and marketing strategy targeting
broadcast, education, e-commerce, publishing, corporate training, telemedicine,
and adult entertainment.
Also in the third quarter 2000, Imaginon aggressively marketed and presented its
Interactive Internet Television, ImaginVideo, also referred to as a "television
station in a box" at conferences such as Syllabus 2000, one of the education
industry's largest gathering of teachers, administrators, and consultants in San
Jose, California. The Company also attended the European Market Debut at IBC
2000, Europe's single largest broadcasters' conference in Amsterdam, and
introduced ImOn.comTV to a pan-European audience and began building a network of
distributors in the major markets. Imaginon, served as a Silver Sponsor of the
year 2000 Intel Developer Forums where Imaginon demonstrated the corporate
training, educational and e-commerce applications of ImaginVideo.
In July 2000, Imaginon formed a new wholly owned subsidiary, Wireless Web Data,
Inc. ("WWDI"). WWDI plans to purchase assets, a patent license and information
from Imaginon. WWDI was formed to develop and commercialize a new application of
Imaginon technology targeted at WWDI acquisition, formatting and delivery. The
server and client software to be developed by WWDI will enable new services such
as instant Web searches on any digital cell phone. The first new development by
WWDI will be the Wireless Data Engine. The storage and forward capability of
this system will allow users to initiate an Internet or Intranet data request
from their desktop PC and see or hear the results at a later time on their phone
or other portable device.
Imaginon's technology will be utilized by WWDI to develop software for WWDI
servers to allow cellular phone and portable computing device users to request
any type of data, including text, audio and video, and receive it properly
formatted for their individual device. Data such as stock quotes, weather
information, maps, MP3 audio files and video clips will be available to portable
handheld device users by using the WWDI system.
On May 24, 2001, pursuant to a Stock Exchange Agreement and Plan of
Reorganization, the Company merged its subsidiary WWDI with Vizario, Inc.
(formerly Gallagher Research Corporation), a publicly-held Nevada corporation
("Vizario"). Under the terms of the agreement, the Company transferred all of
the outstanding shares of WWDI common stock to Vizario, and in exchange,
Vizario issued an aggregate of 20,000,000 shares of its common stock to the
Company and certain of its officers and directors. Immediately following this
transaction, Vizario had 24,768,000 shares of issued and outstanding common
stock, and the Company held 19,080,000 shares, or 77%, of the issued and
outstanding shares of Vizario common stock.
Vizario management plans to raise capital in two phases:
The first phase consists of an initial investment of up to $500,000 in exchange
for rights to purchase shares of 8% Convertible Series A Preferred Stock of
Vizario. Through June 2001, advances and notes payable totalling $773,000 has
been received from investors. No preferred shares by Vizario have been issued
through June 30, 2001.
Under the proposed second phase, with the successful completion of the merger of
WWDI and Vizario, the Company is now negotiating terms of an additional
financing for sale of 8% Convertible Preferred Series A Stock and an equity line
of credit for $5,000,000.
In January 2001, Imaginon management and directors evaluated the assets and
direction of the Company, seeking to optimize the use of resources. The goal of
the Company remains unchanged: to create a profitable business based on
Imaginon's proprietary software technology. However, the strategy for reaching
this goal has substantially changed.
Imaginon management and directors' analysis of the results of the year 2000
marketing and sales efforts concluded that the ImOn.comTV product offering
itself was too complex, too expensive, too difficult to deploy, and outside the
mainstream market for Internet and intranet software products. Consequently, a
new strategy was devised to achieve entry into the mainstream of Internet and
intranet software. Imaginon's year 2001 strategy includes simplifying the
product offering, integrating closely with Microsoft's software systems, and
unbundling Imaginon's core technology from hardware, media content and Internet
hosting services.
The revamped, simplified version of ImOn.comTV is now "ImaginVideo for Windows
2000 Server." As the name implies, this product is a software application for
Microsoft's server operating system. As such, bundling of Imaginon software
with hardware is unnecessary, so Imaginon is not selling software and hardware
as turnkey systems. The close integration of Imaginon software with Microsoft's
systems has earned Imaginon "Microsoft Gold Certified Partner" status, as well
as "Certified for Windows 2000 Server" approval. With these certifications,
Imaginon qualifies for a wide range of co-marketing opportunities with
Microsoft.
ImaginVideo for Windows 2000 Server is accompanied by ImaginAuthor for Windows
2000, an intuitive authoring tool for interactive streaming video. This tool
makes it easy for any corporate training department or educator to create
content for ImaginVideo, without relying on Imaginon content production and
support. As a result, Imaginon no longer needs a video production and editing
department.
Since most Windows 2000 servers are hosted by their owners, or large service
companies, Imaginon no longer needs to offer hosting or Internet service
provisioning to sell its ImaginVideo software. The INOW subsidiary of Imaginon
was sold in May 2001, which will result in a reduction of operating losses for
Imaginon.
Imaginon intends to market ImaginVideo for Windows 2000 Server, and
seek to license its technology to other companies. The first substantial
technology license sale is anticipated to be to WWDI.
ImaginVideo, WebZinger, ImaginAuthor and sellONstream are trademarks of Imaginon
and are protected under U.S. patents.
COMPETITION
In the Internet service industry segment, Imaginon competes with numerous
companies, large and small, that offer similar services. Imaginon's competitive
advantage in this area is derived from its unique proprietary technology that
implements interactive video and media-intensive data mining.
In the high bandwidth interactive streaming video authoring and playback
software business, Imaginon does not yet have a direct competitor. Several
companies offer components that can be used to implement portions of a networked
system, but no other company offers a complete turnkey solution like Imaginon.
Within the Internet "search engine" marketplace, there are at least two dozen
products aimed at Web users for the purpose of searching the Internet. All of
these search engines are primarily list generators; leaving the actual data
evaluation and retrieval to the user. The few search engines that offer media
retrieval provide little control or formatting of the output. Positioned as a
"Research Engine", WebZinger actually retrieves rich media assets from the Web.
In the Internet television systems industry segment, there is currently no
direct competition. In the high bandwidth interactive streaming video authoring
and playback software business, there are no direct competitors as of this time.
Numerous companies, offer some portion of the services or capabilities of
ImaginVideo, but there are no other single vendor integrated solutions.
Imaginon's competitive advantage in this field is derived from the Company's
unique proprietary technology that integrates interactive video playback with
media-intensive data mining. Imaginon anticipates that revenues will be
generated by license agreements for its technology and sales of its software.
New products created with Imaginon technology are characterized by seamless
real-time access to video, audio, graphics, text, HTML and 3D objects from
multiple remote or local databases. Imaginon will license tool sets to
businesses for building e-commerce, data mining, interactive entertainment and
training applications.
RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Company's condensed
consolidated financial statements and notes.
The following table sets forth certain consolidated operating results from
continuing operations of the Company for the periods as indicated below.
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- -------------------------
2001 2000 2001 2000
--- ---- ---- ----
Net revenues $ 815 $ 79,158 $ 2,421 $ 92,173
Cost of revenues 253 13,053 573 22,089
Gross profit 562 66,105 1,848 70,084
Research and development 196,147 298,235 481,222 563,728
Sales and marketing 168,482 917,361 282,877 1,836,622
General and administrative 405,118 1,118,239 934,801 1,966,326
Impairment of intangible assets 498,266
Net loss $(856,420) $(2,271,812) $(2,343,033) $(4,301,153)
========= =========== =========== ===========
Net loss applicable to common $(947,020) $(2,271,812) $(2,508,155) $(4,537,820)
shareholders ========= =========== =========== ===========
NET REVENUES
Consolidated net revenues from continuing operations were $815 and $2,421 for
the three-month and six-month periods ended June 30, 2001, respectively, as
compared with $79,158 and $92,173 in the corresponding periods in 2000. The
decreases in overall revenues for the Company are due largely to the sale of the
INOW subsidiary in May 2001. These decreases reflect management's focus on the
development of the Company's revised business strategy to simplify product
offerings, achieve entrance into the mainstream of Internet and intranet
software, and to continue development of new and more profitable software tools.
COST OF REVENUES AND GROSS PROFIT
Consolidated cost of revenues was $253, or 31% of net revenues, for the three
months ended June 30, 2001, compared to $13,053, or 17% of net revenues, for the
three months ended June 30, 2000. For the six months ended June 30, 2001, cost
of revenues was $573, or 24% of net revenues, compared to $22,089, or 24% of net
revenues for the corresponding period of 2000. The decrease in cost of revenues
is consistent with the decrease in sales and the revision of the Company's
business strategy in the three and six month periods ended June 30, 2001
compared to the same periods ended June 30, 2000.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenditures for continuing operations for the three
months ended June 30, 2001 decreased to $196,147, compared to $298,235 for the
three months ended June 30, 2000. During the second quarter of 2001, nearly
82.5% of research and development expenses were due to payroll for engineers and
outside consultants, 7.5% was for other related ImaginVideo and Vizario project
expenses, and the remaining 10% was for office rent, utilities, communications,
computer equipment and supplies. For the six months ended June 30, 2001,
expenses decreased to $481,222 compared to $562,728 for the six months ended
June 30, 2000. The decrease compared to last year was primarily due to reducing
engineering staff, however, the Company is continuing to invest significant
resources in product research and development
SALES AND MARKETING EXPENSES
For the three months ended June 30, 2001, sales and marketing expenses for
continuing operations decreased to $168,482 compared to $917,361 for the three
months ended June 30, 2000. During the second quarter of 2001, nearly 24% was
attributable to the marketing, advertising, sales promotions and materials,
trade shows and presentations, and public relations of Imaginon's ImaginVideo
product, 18% was for marketing, advertising, public relations and business wires
for Vizario project, 47% was for employee payroll (which included employer
taxes) and consultants, and the remaining 11% was for general office supplies,
rent, utilities, communications and computer equipment, travel and
accommodations. For the six months ended June 30, 2001, expenses decreased to
$282,877 compared to $1,836,622 for the six months ended June 30, 2000. This
decrease compared to the prior year was primarily attributable to reducing the
sales and sales-support staff, as well as sales and marketing activities during
the development of the Vizario technology.
GENERAL AND ADMINISTRATIVE EXPENSES
For the three months ended June 30, 2001, general and administrative expenses
for continuing operations decreased to $405,118 compared to $1,118,239 in the
three months ended June 30, 2000. Of the general and administrative expenses
for the second quarter of 2001, nearly __% was for professional legal and
accounting and audit services as well as corporate filings and reporting, and
costs for legal proceedings, __% was for employee payroll (including employer
taxes), and __% was for technology amortization related to Vizario project. The
remaining __% was for rent, utilities, communications, computer equipment and
supplies, office supplies, depreciation, bad debts, public relations and
business wires, travel and accommodations, and for general liability and
directors & officers insurance. For the six months ended June 30, 2001,
expenses decreased to $934,801 compared to $1,966,326 for the six months ended
June 30, 2000. This decrease was largely attributable to the goodwill from the
acquisitions of INOW and IDP having been fully amortized by March 31, 2001, and
the reduction in employees during the development of the Vizario technology.
OTHER INCOME (EXPENSE)
Interest income of $3,835 was earned in the six months ended June 30, 2001, as
compared to $107,644 of interest earned in the six months ended June 30, 2000
from money market and CD deposits primarily from the private placements.
Interest expense for this same period increased to $60,925, as compared to
$1,688, due to increased use of debt financing by the Company.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, Imaginon's cash and working capital had decreased to $26,346
and a deficit of $1,122,071, respectively, as compared to $2,160,477 and
$782,173, respectively on June 30, 2000. This decrease in cash and working
capital was primarily related to the use of cash in meeting the capital
expenditures for the three primary categories of General and Administrative,
Sales and Marketing, and Research and Development.
On December 30, 1999, the Company issued 1,873,360 shares of common stock and
warrants to purchase an additional 749,344 shares of common stock for a total of
$5,000,000. The Company received $3,000,000 on December 30, 1999, and received
the remaining $2,000,000 on January 3, 2000. In connection with this
transaction, the Company incurred $280,000 of issuance costs, which were paid in
January 2000.
In January 2000, the Company issued 374,672 shares of common stock and warrants
to purchase an additional $149,869 shares of common stock for a total of
$1,000,000. In connection with this transaction, the Company incurred issuance
costs of $50,000.
In September 2000, the Company signed a non-binding letter of intent with third-
party investors for a multi-stage, $12 million equity financing, in which the
Company agreed to issue up to $3 million of Series G, 8% cumulative convertible
preferred stock (the "Series G Preferred Stock") and up to $9 million of the
Company's common stock.
The Series G Preferred Stock has a par value of $0.01 per share, a stated value
of $100,000 per share, and is convertible into shares of the Company's common
stock at the lower of $0.60 per share, or 80% of the market price of the
Company's common stock on the conversion date, subject to a minimum conversion
price limit of $0.10 per share (Note 12). The Series G Preferred Stock is
convertible at the option of the holder, at any time, for five years from the
issue date. Shares of Series G Preferred Stock that have not been converted
within five years of the original issue date are to be redeemed by the Company
at a price equal to the stated value of the shares plus accumulated unpaid
dividends. Dividends are cumulative at 8% per year and are payable
semiannually.
The Series G Preferred Stock is subject to a mandatory redemption provision upon
the triggering of certain events, as defined, including failure to register
shares of common stock underlying the Series G Preferred Stock within 120 days
of the issue date. The Series G Preferred Stock also has a liquidation
preference equal to stated value of the Series G Preferred Stock.
In October 2000, the Company issued 15 shares of Series G Preferred Stock for
$1.2 million cash (net of $100,000 of offering costs and in satisfaction of a
$200,000 payable to the investor). The Company also issued 7 shares of Series G
Preferred Stock valued at $700,000 to another investor in exchange for $233,000
cash and in satisfaction of a $467,000 payable.
In February 2001, the Company issued 1.5 shares of Series G Preferred Stock for
$150,000 cash. Also in February 2001, Series G Preferred stockholders converted
10 shares of Series G Preferred stock into 10,266,110 common shares of the
Company. Because of the redemption features of the Series G Preferred Stock, the
Company has not included the Series G Preferred shares in shareholders' equity
(deficit) (Note 7).
In March 2001, the Company borrowed $100,000 from an individual, at an interest
rate of 9%, with principal and interest payable upon demand by the lender at any
time.
In April 2001, the Company issued .6 shares of Series G Preferred Stock and
1,666,666 shares of common stock to an investor for $60,000, as well as 1 share
for $100,000. In addition, 2.5 shares of Series G Preferred Stock were converted
by a stockholder into 2,580,550 shares of common stock.
In June 2001, the Company issued .5 shares of Series G Preferred Stock to an
investor for $50,000.
Imaginon expects to continue using its working capital to finance ongoing
operations and to fund marketing programs of its products and services. The
Company anticipates that cash on hand, cash provided by operating activities,
and cash available from the capital markets will be sufficient to fund its
operations for the next twelve months.
PART II - OTHER INFORMATION
Item 1. Legal proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
Changes in Securities
On March 2, 2001 the Company issued 1,539,663 shares of its common stock to
Gage, LLC upon conversion of 1.5 of shares of the Company's Series G Preferred
Stock at the conversion price of $0.10 per share. The Company placed appropriate
restrictive legends and stop transfer instructions with its transfer agent
regarding the restricted nature of the common stock. The Series G Preferred
Stock was issued on October 30, 2000. Under the terms of the Series G Preferred
Stock, conversion does not require the payment of any consideration. The Company
relied upon the exemption provided under Section 3(a)(9) of the Securities Act
for the issuance of the common stock upon conversion, based upon the following
factors: (i) the Company was the issuer of the Series G Preferred Stock and the
common stock issued upon conversion; (ii) the conversion right is only available
to holders of the Series G Preferred Stock; (iii) no additional consideration
was paid to the Company by the holders of the Series G Preferred Stock to
complete the conversion, nor were the terms of the Series G Preferred Stock
modified to provide for the conversion; and (iv) no commission or other
remuneration was paid in connection with the conversion.
On April 25, 2001, the Company issued 1 share of Series G Preferred Stock to
Resonance Limited pursuant to a purchase agreement effective February 20, 2001
for $100,000 in cash. The Company relied upon the exemptions from registration
provided by Sections 4(6) and 4(2) of the Securities Act and Rule 506
promulgated thereunder based upon (i) representations provided by Resonance
Limited in the purchase agreement that it is an accredited investor; (ii) that
no general solicitation of the securities was made by the Company; (iii) the
Series G Preferred Stock was a "restricted security" as that term is defined
under Rule 144 promulgated under the Securities Act, and that a restrictive
legend was placed on the certificate; (vi) written representations by Resonance
Limited to the Company that it would comply with the manner of sale provisions
described in the purchase agreement and registration rights agreement covering
its resale of the securities; and (vii) prior to completion of the transaction,
Resonance Limited was provided with all information regarding the Company as
required under Rule 502 of Regulation D and was given the opportunity to ask
questions of and receive additional information from the Company regarding its
financial condition and operations. The Company did not pay any fees or
commissions to third parties with respect to this transaction.
On April 25, 2001, the Company issued .5 shares of Series G Preferred Stock to
Gage LLC pursuant to a purchase agreement effective February 22, 2001 for
$50,000 in cash. The Company relied upon the exemptions from registration
provided by Sections 4(6) and 4(2) of the Securities Act and Rule 506
promulgated thereunder based upon (i) representations
provided by Gage LLC in the purchase agreement that it is an accredited
investor; (ii) that no general solicitation of the securities was made by the
Company; (iii) the Series G Preferred Stock was a "restricted security" as that
term is defined under Rule 144 promulgated under the Securities Act, and that a
restrictive legend was placed on the certificate; (iv) written representations
by Gage LLC to the Company that it would comply with the manner of sale
provisions described in the purchase agreement and registration rights agreement
covering its resale of the securities; and (vii) prior to completion of the
transaction, Gage LLC was provided with all information regarding the Company as
required under Rule 502 of Regulation D and was given the opportunity to ask
questions of and receive additional information from the Company regarding its
financial condition and operations. The Company did not pay any fees or
commissions to third parties with respect to this transaction.
Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
3(i).1 Certificate of Incorporation of the Registrant. (Incorporated by
reference to Exhibit 3.1 to the Registrant's Registration Statement on
Form SB-2, Registration No. 33-85108 as filed with the Securities and
Exchange Commission "SEC" on October 13, 1994 (the "1994 Registration
Statement").)
3(i).2 Amendment to Certificate of Incorporation of the Registrant dated July
22, 1998. (Incorporated by reference to Exhibit 3(I).5 of the
Registrant's registration statement on Form S-3A, Registration No. 333-
71989 as filed with the Securities and Exchange Commission on March 17,
1999 (the "1999 Form S-3/A.").)
3(i).3 Amendment to Certificate of Incorporation of the Registrant dated
December 17, 1998. (Incorporated by reference to Exhibit 3(I).6 of the
1999 Form S-3/A).
3(i).4 Certificate of Designations, Preferences and Rights of Series G 8%
Convertible Preferred Stock dated August 3, 2000. (Incorporated by
reference to Exhibit 4.2 of the Registrant's September 30, 2000 10-QSB).
3(i).5 Amended certificate of Designations, Preferences and Rights of Series G
8% Convertible Preferred Stock dated August 16, 2000. (Incorporated by
reference to Exhibit 4.3 of the Registrant's September 30, 2000 10-QSB).
3(i).6 Amended Certificate of Designations, Preferences and Rights of Series G
8% Convertible Preferred Stock dated October 16, 2000 (Incorporated by
reference to Exhibit 4.4 of the Registrant's September 30, 2000 10-QSB).
3(i).7 Amended Certificate of Designations, Preferences and Rights of Series G
8% Convertible Preferred Stock dated October 16, 2000. (Incorporated by
reference to Exhibit 4.4 of the Registrant's September 30, 2000 10-QSB).
3(ii) Bylaws as currently in effect. (Incorporated by reference to Exhibit 3.2
to the 1994 Registration Statement.)
4.1 Specimen of Common Stock certificate. (Incorporated by reference to
Exhibit 4.1 to Amendment No. 4 to the 1994 Registration Statement, filed
with the SEC on December 22, 1994 ("1994 Amendment #4).)
10.1 1997 Stock Option Plan. (Incorporated by reference to Exhibit 10.1 of
the Registrant's Registration Statement on Form S-1, Registration #333-
88729, as filed with the SEC on October 8, 1999).
10.2(a) Form of Purchase Agreement dated December, 1999 by and among the
Registrant and investors in $6 million private placement. (Incorporated
by reference to Exhibit 10.23(a) of Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1999 filed with the SEC on March
15, 2000 (the "December 31, 1999 10-KSB")).
10.2(b) Form of Registration Rights Agreement dated December, 1999 by and among
the Registrant and investors in $6 million private placement.
(Incorporated by reference to Exhibit 10.23(b) of the December 31, 1999
10-KSB).
10.2(c) Form of Warrant dated December, 1999 by and among the Registrant and
investors in $6 million private placement. (Incorporated by reference to
Exhibit 10.23(c) of the December 31, 1999 10-KSB).
10.3 1999 Equity Incentive Plan. (Incorporated by reference to Exhibit A to
the Registrant's Definitive Proxy Statement for the 2000 annual meeting
on Schedule 14A as filed with the Securities and Exchange Commission).
10.4 Form of Purchase Agreement date October 2000 by and among the Registrant
and the Series G Preferred investors. (Incorporated by reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 2000).
10.5 Form of Registration Rights Agreement dated October, 2000 by and among
the Registrant and the Series G Preferred investors. (Incorporated by
reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 2000).
Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
and has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Carlos, State of California, on
August 20, 2001.
IMAGINON, INC.
By:/s/ David M. Schwartz
----------------------
David M. Schwartz,
Chairman, Chief Executive Officer and
President
SIGNATURES TITLE DATE
---------- ----- ----
/s/ David M. Schwartz Chief Executive Officer August 20, 2001
--------------------- And Director
David M. Schwartz
/s/ James A. Newcomb Chief Financial Officer August 20, 2001
-------------------- and Director
James A. Newcomb