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 June 30, 1997
Commission File Number: 0-18824
CORPORATE VISION, INC.
(Exact name of registrant as specified in its charter)
Oklahoma
(State or other jurisdiction of incorporation)
73-1380820
(I.R.S. Employer Identification No.)
4545 South Mingo Road
Tulsa, OK 74146
(Address of principal executive offices, including zip code)
(918) 743-1090
(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 July 31, 1997, the Registrant had 17,677,112 shares of common stock,
$0.01 par value, (the "Common Stock") issued and outstanding.
PART I - FINANCIAL INFORMATION
CORPORATE VISION, INC.
BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1997 1996
----------- -----------
ASSETS
Current Assets
Cash $1,845 $52,550
Accounts Receivable 18,730 5,029
Prepaid expenses (related party) 16,667 33,334
Prepaid expenses 171,965 183,617
----------- -----------
209,206 274,530
----------- -----------
Property and Equipment
Property and Equipment 604,103 592,569
Less: Accumulated Depreciation (369,528) (320,703)
----------- -----------
234,575 271,866
----------- -----------
Other Assets
Investment in T.L. Phipps & Co. 580,535 0
Capitalized Software 63,647 76,378
Goodwill 69,081 82,897
Other assets 2,519 189,491
Licensing Agreement 41,725 46,167
Consulting Agreement 87,500 174,999
Marketing and distribution rights 27,778 33,334
----------- -----------
872,785 603,266
----------- -----------
TOTAL ASSETS $1,316,566 $1,149,662
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $55,299 $75,068
Accrued Liabilities 24,603 7,999
Payable to Stockholders (related party) 0 43,520
Current portion of long term debt 0 30,292
----------- -----------
79,902 156,879
----------- -----------
Long Term Liabilities
Debentures payable 1,008,383 0
Discount on debentures (167,133) 0
Unamortized debt issue costs (100,950) 0
Deferred income taxes 15,600 15,600
------------ -----------
755,900 15,600
------------ -----------
Stockholders' Equity
Preferred Stock, $0.01 par value,
1,000,000 shares authorized, no shares
issued or outstanding at June 30, 1997
and December 31, 1996 0 0
Common Stock, $0.01 par value,
100,000,000 shares authorized,
15,531,595 and 12,620,638 shares issued
and outstanding at June 30, 1997 and
December 31, 1996 155,316 126,206
Additional Paid in Capital 3,381,688 2,992,120
Accumulated Deficit (3,056,240) (2,141,143)
----------- -----------
480,764 977,183
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,316,566 $1,149,662
----------- -----------
CORPORATE VISION, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
---------- --------- --------- ---------
Revenue $18,536 $241,047 $29,192 $485,115
Production expenses
Personnel 81,702 80,238 152,758 150,090
Audio/Visual 5,270 23,702 21,284 30,002
---------- --------- --------- ---------
86,972 103,947 152,758 180,092
---------- --------- --------- ---------
General and administrative
Office 33,898 37,580 51,913 68,406
Selling 19,181 16,392 39,302 48,530
Professional fees 34,199 13,920 49,631 35,877
Investor relations 210,866 17,575 280,178 45,677
Other 0 1,367 0 4,339
Depreciation/amortization 42,352 40,842 85,370 86,683
---------- --------- --------- --------
340,496 127,676 506,394 284,512
---------- --------- --------- --------
Income (loss) from Operations (408,932) 9,424 (651,244) 20,511
Other income (expenses)
Interest expense (2,002) (4,413) (2,002) (10,862)
Debenture discount and
issue costs (74,878) 0 (74,878) 0
Write-off of acquisition
costs (186,972) 0 (186,972) 0
----------- --------- --------- --------
(263,852) (4,413) (263,852) (10,862)
----------- --------- --------- --------
Income (loss) before income
taxes (672,784) 5,011 (915,096) 9,649
Provision for income taxes 0 0 0 0
----------- --------- --------- --------
Net income (loss) (672,784) 5,011 (915,096) 9,649
----------- --------- --------- --------
Earnings (loss) per share ($0.05) $0.00 $(0.07) $0.00
----------- --------- --------- --------
Weighted average common
shares 13,410,568 12,955,459 13,017,785 10,181,522
----------- ---------- ---------- ----------
CORPORATE VISION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
6 Months ended 6 Months ended
June 30, 1997 June 30, 1996
-------------- --------------
Cash provided by (used in) operating
activities
Net income (loss) $(915,097) $9,649
Non-cash charges to earnings:
Depreciation and amortization 85,370 81,683
Consulting services 112,318 21,000
Write-off of acquisition of TVP 186,972 0
Debenture discounts and issue costs 74,878 0
Other 0 46,142
Changes in operating assets and
liabilities
Change in accounts receivable (13,701) (87,905)
Change in accounts payable (19,769) 52,038
Change in prepaid assets 3,500 0
Change in other current liabilities 16,604 (24,189)
--------- ----------
(468,925) 98,418
--------- ----------
Cash provided by (used in) investing
activities
Investment in T.L. Phipps & Co. (438,035) 0
Investment in other assets 0 (91,186)
Purchase of equipment (11,533) (69,531)
--------- ----------
(449,568) (160,717)
Cash provided by (used in) financing
activities
Loans from stockholders (related
party) 20,549 0
Payments of stockholder loans
(related party) (64,069) (66,645)
Payments of loans from non-affiliated
shareholders 0 (145,000)
Payments of long-term debt (30,292) (21,158)
Proceeds from issuance of convertible
debentures 941,600 278,932
--------- -----------
867,788 46,129
--------- -----------
Net change in cash (50,705) (16,170)
Cash at beginning of period 52,550 40,335
--------- -----------
Cash at end of period $1,845 $24,165
--------- -----------
Supplemental Disclosures
Cash paid for interest and taxes
Interest $2,003 $10,862
Income taxes 0 0
Non-cash investing and financing
activities
Stock issued for convertible
debentures $276,177 0
Stock issued for conversion of
note payable to non-affiliated
stockholder 0 $42,644
Stock issued in advance for
services rendered by non-
affiliates 0 $466,495
Stock issued for services in
advance (related party) 0 $25,000
PART I- FINANCIAL INFORMATION
General
The financial statements have been prepared by the Company without audit and
should be read in conjunction with the Company's financial statements and notes
thereto included in the Company's annual report and Form 10-K as of December
31, 1996.
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. During 1996, the Company was principally involved in the
development and production of interactive training programs on CD-ROM for one
corporate customer, which accounted for substantially all of the Company's
revenues in 1995 and 1996. As of December 31, 1996, the Company completed
the interactive training project for Dowell, and had no backlog of orders or
new contracts to develop additional CD-ROM titles. (See Subsequent Events)
Investment in T.L. Phipps & Company
On May 15, 1997, the Company signed a definitive agreement to acquire 100% of
the common stock of T.L.Phipps & Company in exchange for 750,000 shares of
common stock of the Company. The acquisition of Phipps is consistent with
the Company's growth strategy of acquiring companies in the video production
and multimedia businesses. In anticipation of closing the transaction,
the Company advanced approximately $450,000 to certain creditors of Phipps
and obligated itself to pay certain other costs in connection with the
transaction. (See Subsequent Events)
Growth Strategy
The Company'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. 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
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 uncertainties 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.
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.)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
On December 18, 1996, the Company entered into an arrangement with Select
Capital Advisors, Inc. to provide services for the purpose of securing
equity and/or debt funding from investors and/or financial institutions
(See Item 5. Below). An Offering pursuant to Regulation S was structured
for a maximum issuance of convertible debentures in an aggregate principal
face amount of $1,875,000. During March and April of 1997, the Company issued
$1,284,560 (face amount), for which net proceeds of $941,600 were received.
In addition, the Company received signed debentures for an aggregate
principal amount of $279,410, for which net proceeds have not yet been
received.
In anticipation of receiving the remaining proceeds from the $279,410
(face amount) (estimated net of $200,000) of signed Debentures and in
reliance upon assurances from Select Capital that additional financing was
forthcoming, the Company advanced approximately $450,000 to certain creditors
of Phipps and committed itself to pay certain liabilities on behalf of Phipps.
At June 30, 1997, management determined that the net proceeds from the sale of
Debentures and other funding sources were not sufficient to fund the
Company's long-term working capital requirements and the Phipps acquisition.
Attempts to renegotiate the timing and amount of funding requirements for the
Phipps acquisition have to date been unsuccessful.
Results of Operations: Second Quarter of 1997 Compared to Second Quarter
of 1996
During the second quarter of 1997, the Company obtained and completed two
contracts for interactive CD's, which generated approximately $18,536 in
total revenue. Since the completion of the Dowell project, the Company
has generated nominal revenues from its CD production activities and no
projects are currently in backlog.
Production expenses during the second quarter of 1997 decreased by
approximately $10,350, or 13%, compared to the second quarter of 1996, due
primarily to lower revenues from CD production activities.
Personnel, Office, Selling, and Depreciation and Amortization costs for the
second quarter of 1997 remained consistent with the second quarter of 1996.
During the second quarter of 1997, the Company incurred approximately $210,866
in expenses for its investor relations activities. Of such expenses,
approximately $150,000 was for certain expenses paid by a non-affiliate
shareholder on behalf of the Company and $52,000 was non-cash related,
resulting from the amortization of investor relations services contracts.
In 1994, the Company retained the services of Investor Relations Corporation
(IRC) to provide certain investor relations and consulting functions for the
Company. 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. During the second
quarter of 1997, the Company paid no fees to IRC for its services and paid
Gifford Mabie a $15,000 consulting fee for his efforts in securing the funding
through Select Capital (See Item 5). In addition, the Company amortized
$8,333 related to the IRC contract. Rhonda R. Vincent has performed her
duties without compensation since October, 1996.
During the second quarter of 1997, the Company recognized $75,000 in debenture
discounts and issue costs related to the conversion of the Company's
convertible debentures.
During the second quarter of 1997, the Company incurred a one-time charge
related to the write-off of certain costs related to the proposed acquisition
of Texas Video & Post. During the second quarter, TVP elected not to
proceed with the acquisition.
The Company has incurred losses since inception and, therefore, has not been
subject to federal income taxes. As of June 30, 1997, the Company had
generated net operating loss carryforwards for financial reporting purposes in
excess of $2.0 million, and this amount may be available to reduce future
federal income taxes. These carryforwards will begin to expire in 2007.
The Company's ability to utilize the carryforwards will be limited by a
"change in ownership," as such term is defined by federal income tax laws and
regulations.
Subsequent Event
On August 11, 1997, the Board ratified the acquisition of T.L. Phipps &
Company,Inc., the plan to consolidate operations at Phipps 17,000 square
foot production studio at 4545 South Mingo Road in Tulsa, Oklahoma, and the
intent to settle by mutual agreement the dispute with Terry Phipps, subject to
mutual releases. The Company has not made certain payments required by the
Phipps acquisition agreement because (1) the funds were not available to
make those payments and (2) because of certain inaccurate representations by
Phipps relating to accounts receivable of T.L. Phipps & Co. In addition,
additional conditions to the closing have not yet occurred, including the
conveyance in recordable form by Terry Phipps of the building housing the
production studio of T.L. Phipps & Co. The Company's production facility at
8908 South Yale Avenue in Tulsa, Oklahoma has been closed, excess equipment
has been sold, and the employees of the Company terminated. The Board also
approved the sale of certain assets and the application of the proceeds in
settlement of claims by the Company's landlord and other liabilities.
Sheryl Mabie, founder of CVI, resigned as President, CEO and Chairman of the
Board. Rhonda Vincent resigned as Vice President, Secretary, Treasurer, CFO
and Director. The resignations were effective on August 11, 1997.
Jack Arnold, a member of the Board of Directors, was elected Chairman,
President, CEO, Secretary,Treasurer and CFO of the Company. The two
vacancies on the Board have not yet been filled.
Terry Phipps has threatened suit over the Company's acquisition of
T.L. Phipps & Company. The parties are in negotiation to settle that dispute.
There is no assurance that the matter will be settled successfully. The
resolution of this dispute may have a materially adverse effect on the
Company.
The Company has no pending business, no active production employees, no
production facility or other assets necessary to carry out its business.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In late 1996, James Herrod filed suit against the Company seeking $30,000 in
damages and to obtain possession of 50,000 shares of unrestricted common
stock of the Company as a secured creditor of Richard Bridge and Prime
South Investments, a company that provided investment advisory services to
the Company. In response to the claim and other conflicting claims of
ownership, the Company issued 50,000 shares of restricted common stock as
required by Rule 144 and filed an interpleader action in Tulsa County District
Court. By interpleading the stock, the Company has relinquished any claim to
the stock but denies any liability or responsibility for the claim for damages.
Although the Company has relinquished any claim of ownership of the stock, the
Company intends to vigorously defend the claim for money damages.
Item 2. Changes in Securities
During the second quarter of 1997, the Company issued 750,000 shares of its
restricted common stock to the shareholders of T.L. Phipps & Company in
exchange for 100% of the common stock of T.L. Phipps. This transaction has
not yet closed.
During the second quarter of 1997, the Company issued 2,160,957 shares of its
common stock in connection with the conversion of convertible debentures
previously issued by the Company in a transaction effected pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended. The
recipients of such shares of common stock were "non-US" persons as defined
by Regulation S.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On May 28, 1997, the Company held its annual meeting of shareholders. At the
meeting, approximately 73% of the total outstanding shares were represented
in person or by proxy. The shareholders (a) approved the election of
Sheryl Mabie, Rhonda Vincent, Jack Arnold, Pete Ramsaroop and Art Walsh as
directors to serve until the next annual meeting, (b) ratified the
appointment of Cross & Robinson as independent accountants for the fiscal year
ended December 31, 1997; (c) approved the proposal granting authority to the
Board of Directors to change the name of the Company by amending the
Company's Certificate of Incorporation; (d) approved the increase in the
number of shares of common stock authorized from 20,000,000 shares to
100,000,000 shares; and (e) approved an increase in the number of shares of
common stock reserved for the Company's Stock Option to 6,000,000 shares.
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 equity and/or debt funding from investors and/or financial
institutions. During March and April of 1997, the Company offered and
sold ("Offering") an aggregate principal amount of $1,284,560 of the Company's
12% subordinated convertible debentures ("the Convertible Debentures"), at
discounts ranging from 15%-20% of 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 of $128,400 (equivalent to
12% of the discounted sales price of the Convertible Debentures) and 62,000
warrants to purchase common stock of the Company at $0.35 per share.
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 second quarter of 1997, one report on Form 8-K regarding the
acquisition of T.L. Phipps & Company was filed. Such report was filed on
May 31, 1997.
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/ JACK ARNOLD
- -----------------------------
Jack Arnold
President and Treasurer
Dated: August 19, 1997