UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number: 0-18824
CORPORATE VISION, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1380820
(State or other jurisdiction of incorporation)(IRS Employer Identification No)
8908 South Yale Avenue, Suite 360
Tulsa, OK 74137
(Address of principal executive offices, including zip code)
(918) 488-0057
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[ X ] Yes [ ] No
As of April 30, 1997, the Registrant had 12,620,638 shares of common stock,
$0.01 par value, (the "Common Stock") issued and outstanding.
Page 1 of 10
PART I - FINANCIAL INFORMATION
General
CVI is an interactive multimedia production company that develops and
produces custom CD-ROM, CD-i, On-line, and Internet products for the
corporate and consumer markets. The Company's primary business has centered
on developing custom CD-ROM and CD-i applications for companies to use in
their training and marketing activities.
During 1996, the Company was principally involved in the development and
production of interactive training programs on CD-ROM for one corporate
customer, the Dowell Division of Schlumberger Technology Corporation, an
international well logging, seismic and service company, under a production
agreement dated January 1, 1995. Payments to the Company for services
rendered under the agreement commenced during 1995 and continued at regular
intervals throughout 1996. As of December 31, 1996, the Company completed
the interactive training project for Dowell, and as of March 31, 1997, had
no backlog of orders or new contracts to develop additional CD-ROM titles.
Since its inception in 1991, the Company has not generated positive earnings
from operations, but rather has incurred losses. See "Financial Statements."
As a result, the Company has been, and will continue to be, materially
dependent on the issuance of its common stock for cash, debt and services to
provide liquidity for its operations.
Growth Strategy
CVI's objective is to acquire companies in the video production and
multimedia development businesses that enhance the Company's production
capabilities and expand its client base. By acquiring superior production
capabilities, and providing the working capital necessary to develop
marketing and distribution strengths, the Company anticipates it can expand
its scope of products and services to the corporate market as well as
develop CD-ROM and Internet products for the consumer market and broadcast
programming for cable, satellite and interactive television.
To accomplish its strategy, the Company will be dependent upon the
successful completion of additional corporate financings, including the sale
of its common stock, convertible debt, and warrants in public and private
offerings for such consideration as may be necessary under the
circumstances, rather than earnings to continue the conduct of its business
activities as discussed below. There can be no assurance such offerings can
be successfully completed, or if completed, that such acquisitions can be
successfully integrated into the operations of the Company.
Cautionary Statement and Risk Factors
Cautionary Statement Regarding Forward-Looking Statements. In the interest
of providing the Company's shareholders and potential investors with certain
information regarding the Company, including management's assessment of the
Company's future plans and operations, certain statements set forth in this
Report relate to management's future plans and objectives or to the
Company's future economic and financial performance. Such statements are
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and are made pursuant to and in reliance
on the safe harbor provisions of such sections.
Although any forward-looking statements contained in this report or
otherwise expressed by or on behalf of the Company are, to the knowledge and
in the judgment of the officers and directors of the Company, expected to
prove true and to come to pass, management is not able to predict the future
with absolute certainty. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the Company's actual
performance and financial results in future periods to differ materially
from any projection, estimate or forecasted result. These risks and
uncertainties include, among other things: the Company's ability to
generate sufficient cash flow from operations to meet its current and future
obligations, the Company's ability to access external sources of debt and
equity capital; the Company's ability to identify, evaluate and acquire
other companies; and other such risks and certainties described from time to
time in the Company's periodic reports and filings with the Securities and
Exchange Commission. These and other risks are described elsewhere in this
report and in the Company's other filings with the Securities and Exchange
Commission. Accordingly, shareholders and potential investors are cautioned
that certain events or circumstances could cause actual results to differ
materially from those projected, estimated or predicated. In addition,
forward-looking statements are based on management's knowledge and judgment
as of the date of this report, and the Company does not intend to update any
forward-looking statements to reflect events occurring or circumstances
existing hereafter.
Page 2 of 10
History of Losses; Accumulated Deficit. It is expected that the Company
will continue to experience losses and that, in order to achieve
profitability and generate cash flow, it will be dependent upon acquiring
additional debt or equity capital and acquiring other business
opportunities. There can be no assurance that the Company will be able to
do so.
Limited Available Capital; Need for Additional Financing. Without raising
additional capital, the Company will be unable to execute its growth by
acquisition strategy and its ability to develop its existing CD-ROM
production business will be limited to the extent of available cash flow.
Accordingly, in order for the Company to achieve its business objective and
achieve profitable operations, it will be necessary to generate additional
cash flow from operations, raise additional debt and/or equity capital. The
Company has plans to raise additional capital from the sale of its
securities. No assurance can be given as to the availability or terms of
any such additional financing or that such terms as are available may not be
dilutive to the interests of the Company's shareholders. See "Item 2.
Management's Discussion and Analysis or Plan of Operations- Liquidity and
Capital Resources."
No backlog of orders or new contracts. At March 31, 1997, the Company had
no backlog of orders or contracts to develop additional CD-ROM titles. Total
sales volumes for future periods are significantly impacted by the degree of
success the Company experiences in its efforts to attract new business. As
a result, quarterly operating results generally depend on the payments
received under pre-existing or new contracts within the quarter, which are
difficult to forecast. Accordingly, any significant shortfall of demand for
the Company's services in relation to the Company's expectations will have
an immediate adverse impact on the Company's business, operating results and
financial condition. In addition, the Company plans to increase its
operating expenses to fund increased sales and marketing operations. To the
extent that such expenses precede or are not subsequently followed by
increased revenues, the Company's business, operating results and financial
condition will be materially adversely affected.
Significant fluctuations in future quarterly operating results. The Company
expects to experience significant fluctuations in future quarterly operating
results that may be caused by many factors, including demand for the
Company's services, introduction or enhancement of products by the Company
and its competitors, market acceptance of new products, mix of distribution
channels through which products are sold, mix of products and services sold,
and general economic conditions. As a result, the Company believes that
period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as any indication of
future performance. Due to all of the foregoing factors, it is likely that
in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the
price of the Company's common stock would likely be materially adversely
affected.
Reliance on Key Personnel. The Company is dependent upon the services of
its President, Sheryl D. Mabie; of its Secretary, Treasurer and Chief
Financial Officer, Rhonda Vincent; and of its key consultant, Gifford M.
Mabie. The loss of their services could have a material adverse effect upon
the Company. The Company does not have employment agreements with Ms.
Mabie, Ms. Vincent, or Mr. Mabie. The Company does maintain insurance on
the lives of Ms. Mabie and Ms. Vincent, but does not maintain insurance on
the life of Mr. Mabie.
Dividends Unlikely. The Company has never declared or paid dividends on its
common stock and currently does not intend to pay dividends in the
foreseeable future. The payment of dividends in the future will be at the
discretion of the Board of Directors.
Page 3 of 10
Item 1. Financial Statements
CORPORATE VISION, INC.
BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
ASSETS 1997 1996
Current Assets
Cash $ 442,238 $ 52,550
Accounts receivable 0 5,029
Prepaid expenses (related party) 25,001 33,334
Prepaid expenses 183,617 183,617
650,856 274,530
Property and Equipment
Property and equipment 594,367 592,569
Less: accumulated depreciation (345,447) (320,703)
248,920 271,866
Other Assets
Capitalized software 70,013 76,378
Goodwill 75,989 82,897
Other assets 189,491 189,491
Licensing agreement 43,946 46,167
Consulting Agreements 131,250 174,999
Marketing and distribution rights 30,556 33,334
541,245 603,266
TOTAL ASSETS $1,441,021 $1,149,662
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 89,059 $ 75,068
Accrued liabilities 12,288 7,999
Payable to stockholders (related party) 28,153 43,520
Current portion of long term debt 20,451 30,292
149,951 156,879
Long Term Liabilities
Debentures payable 729,413 0
Discount on debentures (109,413) 0
Unamortized Debenture Issue Costs (79,400) 0
Deferred income taxes 15,600 15,600
556,200 15,600
Stockholders' Equity
Preferred stock, $0.01 par value
1,000,000 shares authorized, no shares issued
or outstanding at March 31, 1997 and December
31, 1996 0 0
Common stock, $0.01 par value
20,000,000 shares authorized, 12,620,638 shares
issued and outstanding at March 31, 1997 and
December 31, 1996 126,206 126,206
Additional paid in capital 2,992,120 2,992,120
Deficit accumulated during development stage (2,383,456) (2,141,143)
734,870 977,183
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,441,021 $1,149,662
Page 4 of 10
CORPORATE VISION, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
March 31, March 31,
1997 1996
Revenue $ 10,656 $244,068
Production expenses
Personnel 71,056 69,850
Audio/Visual 16,014 6,870
87,070 76,720
General and administrative
Office 18,015 34,681
Selling 20,121 32,138
Professional fees 15,432 21,957
Investor relations 69,312 26,643
Depreciation and amortization 43,018 40,841
165,899 156,260
Income (loss) from operations (242,313) 11,088
Interest expense 0 6,449
Income (loss) before income taxes (242,313) 4,639
Provision for income taxes
Current 0 0
Deferred 0 0
0 0
Net income (loss) ($242,313) $ 4,639
Earnings (loss) per share ($0.02) $0.00
Weighted average common shares 12,955,459 10,181,522
Page 5 of 10
CORPORATE VISION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended
March 31, March 31,
1997 1996
Cash provided by (used in) operating activities
Net income (loss) ($242,313) $ 4,639
Non-cash charges to earnings:
Depreciation and amortization 43,018 40,841
Consulting services 52,080 43,000
Changes in operating assets and liabilities:
Change in accounts receivable 5,029 (80,346)
Change in accounts payable 13,991 23,900
Change in other current liabilities 4,289 (23,040)
(123,906) 8,994
Cash provided by (used in) investing activities
Investment in other assets 0 (18,197)
Purchase of equipment (1,798) (26,058)
(1,798) (44,255)
Cash provided by (used in) financing activities
Payments of stockholder loans (related party) 0 (18,807)
Payments of loans from non-affiliate stockholders (15,367) 0
Payments of long-term debt (9,841) (8,231)
Proceeds from issuance of convertible debentures 540,600 86,973
515,392 59,935
Net change in cash 389,688 24,674
Cash at beginning of period 52,550 40,335
Cash at end of period $442,238 $ 65,009
Supplemental Disclosures
Cash paid for interest and income taxes:
Interest $0 $ 6,449
Income taxes $0 $0
Non-cash investing and financing activities:
Stock issued to convert note payable to stockholder $0 $ 42,644
Stock issued in advance for services rendered by
non-affiliates $0 $219,000
Page 6 of 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
In order to carry out its plans for additional corporate financing, the
Company, on December 18, 1996, entered into an arrangement with Select
Capital Advisors, Inc. ("Select") to provide investment advisory, brokerage
participation and other financial services for the purpose of securing
approximately $1,500,000 in additional equity and/or debt funding from
investors and/or financial institutions. Under the terms of the
arrangement, the Company paid a due diligence fee of $5,000 in cash and
obligated itself to pay commissions to the Placement Agent of varying
percentages depending on the nature and amount of funds secured under the
arrangement.
As of March 31, 1997, Select had successfully completed the placement of
$729,413 in convertible debentures, which resulted in net proceeds to the
Company of $540,600 (See Item 5- Other Information). Management believes
that the net proceeds received as of March 31, 1997 are not sufficient to
fund the Company's long-term working capital requirements and acquisition
plans. Accordingly, the Company plans to raise additional equity and/or
debt capital. In the event the Company is unsuccessful in raising
additional funds during 1997, the business acquisitions planned by the
Company may, by necessity, be delayed or abandoned and the operations of the
Company reduced significantly.
During the first quarter of 1997, the Company purchased $1,798 in computers
and related CD production equipment, compared to $26,058 during the first
quarter of 1996. It is anticipated that during 1997, the Company will have
additional capital expenditures to maintain and upgrade its computer and
related CD production equipment, however, these expenditures will depend
upon the level of revenues generated by the Company, which can not be
estimated at this time.
Results of Operations: First Quarter of 1997 Compared to First Quarter of
1996
During the first quarter of 1997, the Company obtained and completed two
contracts for interactive marketing CD's, which generated approximately
$10,656 in total revenue. As compared to the first quarter of 1996, revenues
decreased by approximately $233,000 because of the completion of the Dowell
project during 1996. Since then the Company has generated only nominal
revenues from its CD production activities. (See "Item 1. Business:
Cautionary Statement and Risk Factors".)
Production expenses during the first quarter of 1997 increased by
approximately $10,350, or 13%, compared to the first quarter of 1996, due
primarily to expenses for CD replication and packaging related to the Dowell
project. The Company does not expect any additional expenses related to the
Dowell project in any subsequent quarters of 1997.
Office expense during the first quarter of 1997 decreased by approximately
$16,666, or 48%, as compared to the first quarter of 1996, primarily as a
result of cost control measures. Selling expenses during the first quarter
of 1997 decreased by approximately $12,000, or 37% compared to the first
quarter of 1996, primarily as a result of lower expenses for commissions.
Professional fees during the first quarter of 1997 decreased by approximately
$6,000, or 27%, compared to the first quarter of 1996 primarily because of
lower legal and accounting expenses.
During the first quarter of 1997, the Company incurred approximately $69,312
in expenses for its investor relations activities. Of such expenses,
approximately $17,000 were paid in cash for certain media programs to
increase investor awareness of the Company. The remaining $52,000 in
expenses were non-cash related, resulting from the amortization of two
services contracts as follows:
The Company has retained the services of Investor Relations Corporation
("IRC") of Tulsa, Oklahoma under the terms of a services agreement dated
December 1, 1994 to provide certain investor relations functions for the
Company, including the preparation of annual and quarterly reports and the
coordination of compliance with state and federal securities disclosure and
reporting requirements. The principal owners of IRC are Rhonda R. Vincent,
an officer and director of the Company and Gifford M. Mabie, the spouse of
the founder, President and Chief Executive Officer of the Company. As
compensation to IRC for services rendered under the contract, the Company
issued 500,000 shares of its voting common stock to IRC during December,
1994. As of December 31, 1996, the unamortized portion of the IRC contract
was $33,334. IRC is expected to continue providing such services through
the initial term of the contract. During the first quarter of 1997, the
Company amortized $8,333 related to the IRC contract.
Page 7 of 10
In February, 1996, the Company entered into an agreement with RDG
Investments ("RDG") of Vancouver, British Columbia, to provide certain
consulting services to the Company with an objective of expanding investor
and brokerage firm awareness and interest in the Company and the common
stock. Under the terms of the agreement, RDG received a total of 550,000
shares of restricted common stock and 400,000 incentive stock options at
$0.10 per share, which were exercised during 1996. As of December 31, 1996,
the unamortized portion of the consulting contract was $175,000. RDG is
expected to continue providing such services through the initial term of
the contract. During the first quarter of 1997, the Company amortized
$43,750 related to the RDG contract.
The Company has incurred losses since inception and, therefore, has not been
subject to federal income taxes. As of March 31, 1997, the Company had
generated net operating loss carryforwards for financial reporting purposes
of approximately $2.0 million available to reduce future federal income
taxes. These carryforwards will begin to expire in 2007. The Company's
ability to utilize the carryforwards could be limited by a "change in
ownership," as such term is defined by federal income tax laws and
regulations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to claims of third parties from time to time arising
in the ordinary course of business. While the outcome of proceedings and
claims against the Company cannot be predicted with certainty, management
does not expect these matters to have a material adverse effect on the
financial position of the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On December 18, 1996, the Company entered into an arrangement with Select
Capital Advisors, Inc. ("Placement Agent") to provide investment advisory,
brokerage participation and other financial services for the purpose of
securing approximately $1,500,000 in additional equity and/or debt funding
from investors and/or financial institutions. During the first quarter of
1997, the Company offered and sold ("Offering") an aggregate principal
amount of $729,413 of the Company's 12% subordinated convertible debentures
("the Convertible Debentures"), at a 15% discount to the principal face
amount. The Convertible Debentures bear interest at a rate of 12% per
annum, payable in cash or common stock of the Company. The Offering was
offered and sold on a "best efforts" basis by the Placement Agent to a
limited number of sophisticated investors (the "Holder(s)"), each of whom do
not qualify as a "U.S. Person," as such term is defined under Regulation S,
as promulgated by the Securities and Exchange Commission ("SEC"), under the
Securities Act of 1933, as amended ("1933 Act").
In connection with the Offering, the Company paid the Placement Agent a cash
sales commission equivalent to 12% of the discounted sales price of the
Convertible Debentures. The Offering was effected under an exemption from
the registration requirements of Section 5 of the 1933 Act afforded by
Section 4(2) and/or Regulation S of the 1933 Act.
Page 8 of 10
The Holder of each Convertible Debenture is entitled, at its option, at any
time commencing 45 days after closing of the Offering to convert all or any
amount over $25,000 of the principal face amount of the Convertible
Debenture then outstanding into shares of common stock of the Company at a
conversion price equal to the lower of (a) 80% of the average closing bid
price of the Common Stock for the five (5) business days immediately
preceding the date of receipt by the Company of notice of conversion or (b)
80% of the average closing bid price of the Common Stock for the five (5)
business days immediately preceding the date of subscription by the Holder.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
During the first quarter of 1997, one report on Form 8-K was regarding the
change in certifying accountants. Such report was filed on March 20, 1997.
Page 9 of 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORPORATE VISION, INC.
/s/ Rhonda R. Vincent
Rhonda R. Vincent,
Treasurer and Chief Financial Officer
Dated: May 20, 1997
Page 10 of 10