SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(MarkOne)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2000
[__] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO
Commission File No. 00-22661
INVU, INC.
(Exact name of small business issuer as specified in charter)
Colorado 84-1135638
- -------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
The Beren, Blisworth Hill Farm
Stoke Road
Blisworth, Northamptonshire NN7 3DB
- -------------------------------------------------------------------------------
(Address of principal (Postal Code)
executive offices)
Issuer's telephone number, including area code: (01604) 859893
--------------
- -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the issuer (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.
YES X NO
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As of September 13, 2000 there were 30,206,896 shares of the common stock, no
par value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
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INVU, INC.
July 31, 2000
INDEX
Page No.
PART I. FINANCIAL INFORMATION.........................................................................................F-1
Item 1. Financial Statements.................................................................................F-1
Consolidated Balance Sheets as of July 31, 2000......................................................F-1
Consolidated Statements of Operations................................................................F-2
Consolidated Statements of Deficit in Stockholders' Equity...........................................F-3
Consolidated Statements of Cash Flows................................................................F-5
Notes to Financial Statements........................................................................F-6
Item 2. Management's Discussion and Analysis or Plan of Operation..............................................1
PART II. OTHER INFORMATION...............................................................................................5
Item 1. Legal Proceedings......................................................................................5
Item 2. Changes in Securities..................................................................................5
Item 3. Default Upon Senior Securities.........................................................................6
Item 4. Submission of Matters to a Vote of Security Holders....................................................6
Item 5. Other Information......................................................................................6
Item 6. Exhibits and Reports on Form 8-K.......................................................................6
SIGNATURES.............................................................................................................S-1
Exhibit Index..........................................................................................................E-1
2
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
July 31, January 31,
2000 2000
(unaudited) (audited)
$ $
ASSETS
Current assets
Accounts receivable:
Trade, net 63,319 1,916
VAT recoverable and other 32,452 22,000
Inventories 58,158 25,110
Prepaid expenses 21,912 12,390
----------- -----------
Total current assets 175,841 61,416
Equipment, furniture and fixtures
Computer equipment 53,833 42,450
Vehicles 259,082 226,348
Office furniture and fixtures 102,491 31,096
----------- -----------
415,406 299,894
Less accumulated depreciation 109,196 73,135
----------- -----------
306,210 226,759
----------- -----------
482,051 288,175
=========== ===========
LIABILITIES
Current liabilities
Short-term credit facility 744,050 413,247
Current maturities of long-term obligations 1,169,421 1,074,185
Accounts payable 292,901 126,204
Accrued liabilities 195,715 198,529
----------- -----------
Total current liabilities 2,402,087 1,812,165
Long-term obligations, less current maturities 1,053,109 525,777
Deficit in stockholders' equity
Preferred stock, no par value
Authorised - 20,000,000 shares; nil shares issued and outstanding - -
Common stock, no par value
Authorised - 100,000,000 shares; issued and outstanding
- 30,206,896 shares 288,355 288,355
Accumulated other comprehensive income 118,022 6,844
Accumulated deficit during the development stage (3,379,522) (2,344,966)
------------ ------------
(2,973,145) (2,049,767)
482,051 288,175
============ ============
The accompanying notes are an integral part of these statements
F-1
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
For the periods ended
February 18, 1997
For the three months ended For the six months ended (date of
July 31, July 31, July 31, July 31, inception) to
2000 1999 2000 1999 July 31, 2000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $ $
Revenues 41,376 897 54,319 19,813 80,312
Expenses:
Production costs 14,265 1,676 23,135 8,410 238,293
Selling and distribution costs 205,750 32,437 398,339 105,193 770,933
Research and development costs 59,470 94,033 122,602 140,158 509,727
Administrative costs 246,136 145,969 486,688 309,040 1,795,619
----------- ----------- ----------- ---------- ------------------
Total operating expenses 525,621 274,115 1,030,764 562,801 3,314,572
Operating loss (484,245) (273,218) (976,445) (542,988) (3,234,260)
Other income (expense)
Interest, net (26,794) (13,700) (58,111) (27,317) (147,625)
Other - - - - 2,363
----------- ----------- ----------- ---------- -----------------
Total other income (expense) (26,794) (13,700) (58,111) (27,317) (145,262)
Loss before income taxes (511,039) (286,918) (1,034,556) (570,305) (3,379,522)
Income taxes - - - - -
----------- ----------- ----------- ---------- -----------------
Net loss (511,039) (286,918) (1,034,556) (570,305) (3,379,522)
=========== =========== =========== =========== =================
Weighted average shares outstanding:
Basic and Diluted 30,206,896 30,206,896 30,206,896 30,206,896 30,206,896
=========== =========== =========== =========== =================
Net loss per common share:
Basic and Diluted (0.02) (0.01) (0.03) (0.02) (0.11)
=========== =========== =========== =========== =================
The accompanying notes are an integral part of these statements.
F-2
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF DEFICIT IN STOCKHOLDERS' EQUITY
Accumulated
other
Common stock Accumulated Comprehensive Comprehensive
Shares Amount deficit income Total Income
$ $ $ $ $
February 18, 1997
(date of inception) - - - - -
Issuance of common stock
($1.64 per share) 176,000 288,640 - - 288,640
Reclassification of $1.64
common stock (176,000) (288,640) - - (288,640)
Issuance of no par common stock in
connection with reverse acquisition 28,696,552 288,355 - - 288,355
Issuance of common stock
($0.50 per share) 1,510,344 750,000 - - 750,000
Reverse acquisition transaction
costs - (750,000) - - (750,000)
Comprehensive income:
Foreign currency translation
adjustment - - - 440 440 440
Net loss during the period - - (217,153) - (217,153) (217,153)
---------------
Total comprehensive loss (216,713)
Balance at January 31, 1998 30,206,896 288,355 (217,153) 440 71,642
Comprehensive income:
Foreign currency translation
adjustment - - - 8,655 8,655 8,655
Net loss during the year - - (694,809) - (694,809) (694,809)
---------------
Total comprehensive loss (686,154)
Balance at January 31, 1999 30,206,896 288,355 (911,962) 9,095 (614,512)
The accompanying notes are an integral part of these statements.
F-3
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF DEFICIT IN STOCKHOLDERS' EQUITY (CONTINUED)
Accumulated
other
Common stock Accumulated comprehensive Comprehensive
Shares Amount deficit income Total income
$ $ $ $ $
Comprehensive income:
Foreign currency translation adjustment - - - (2,251) (2,251) (2,251)
Net loss during the year - - (1,433,004) - (1,433,004) (1,433,004)
-----------
Total comprehensive loss (1,435,255)
----------- --------- ------------ ------------- ----------- ===========
Balance at January 31, 2000 30,206,896 288,355 (2,344,966) 6,844 (2,049,767)
Comprehensive income:
Foreign currency translation adjustment - - - 111,178 111,178 111,178
(unaudited)
Net loss during the period (unaudited) - - (1,034,556) - (1,034,556) (1,034,556)
-----------
Total comprehensive loss (923,378)
----------- --------- ------------ ------------ ----------- ===========
Balance at July 31, 2000 (unaudited) 30,206,896 288,355 (3,379,522) 118,022 (2,973,145)
=========== ========= ============ ============ ===========
The accompanying notes are an integral part of these statements.
F-4
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
Feb 18, 1997
For the six For the six (date of
months ended months ended inception) to
July 31, 2000 July 31, 1999 July 31, 2000
(unaudited) (unaudited) (unaudited)
$ $ $
Net cash flows used in operating activities
Net loss during the period (1,034,556) (570,305) (3,379,522)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 42,862 15,866 126,967
Accounts receivable (76,082) (17,800) (99,824)
Inventories (36,072) 1,635 (65,504)
Prepaid expenses (10,788) 2,596 (23,610)
Accounts payable 181,913 65,461 308,775
Accrued liabilities 12,288 (2,192) 211,159
Net cash used in operating activities (920,435) (504,739) (2,921,559)
Cash flows used in investing activities:
Acquisitions of property and equipment (96,281) (12,484) (229,534)
Disposals of property and equipment - - 19,356
Net cash used in investing activities (96,281) (12,484) (210,178)
Cash flows provided by financing activities:
Short-term credit facility 373,460 (58,384) 784,026
Borrowings received from notes payable 762,570 591,300 3,568,564
Repayment of borrowings (83,623) (10,794) (1,439,979)
Principal payments on capital leases (21,041) (4,899) (54,275)
Proceeds from issuance of stock - - 288,640
Net cash provided by financing activities 1,031,366 517,223 3,146,976
Effect of exchange rate changes on cash (14,650) - (15,239)
Net increase in cash - - -
Cash at beginning of period - - -
Cash at end of period - - -
Supplemental disclosure of
Cash flow information:
Cash paid during the period for:
Interest 58,100 26,800 147,300
Income taxes - - -
The accompanying notes are an integral part of these statements.
F-5
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The interim financial statements presented herein are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required for complete
audited financial statements. These statements should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's filing on 10-KSB for the year ended January 31, 2000. In the opinion
of management, the accompanying unaudited consolidated financial statements of
INVU, Inc. and Subsidiaries (the Company) contain all adjustments (consisting of
only normal recurring adjustments) necessary to fairly present the Company's
financial position as of July 31, 2000 and the results of operations for the
period of February 18, 1997 (date of inception) to July 31, 2000 and for the
three and six month periods ended July 31, 2000 and 1999, and cash flows for the
six month periods ended July 31, 2000 and 1999 and the period of February 18,
1997 (date of inception) to July 31, 2000. The interim financial statements
should be read in conjunction with the following explanatory notes. The results
of operations for the periods presented may not be indicative of the results
that may be expected for the full fiscal year.
NOTE A - COMPANY DESCRIPTION
INVU, Inc. (the Company) is a holding company which operates one subsidiary INVU
Plc, which is a holding company for two subsidiaries of its own, INVU Services
(Services) and INVU International Holdings Limited (Holdings). The Company was
incorporated under the laws of the State of Colorado, United States of America,
in February 1997. INVU Plc, Services and Holdings are companies incorporated
under English Law. The Company operates in one industry segment which includes
developing and selling software for electronic management of many types of
information and documents such as forms, correspondence, literature, faxes,
technical drawings and electronic files. Services is the sales, marketing and
trading company and Holdings holds the intellectual property rights to the INVU
software.
On August 31, 1998, Sunburst Acquisitions I Inc. (Sunburst) (a public
development stage enterprise) acquired all of the outstanding shares of INVU Plc
in exchange for restricted shares of common stock of Sunburst (the Exchange)
pursuant to a Share Exchange Agreement between Sunburst and the principal
shareholders of INVU Plc. Sunburst exchanged 26,506,552 shares of common stock
for all of INVU Plc's issued and outstanding shares of common stock. For
accounting purposes, the Exchange was treated as a recapitalization of INVU Plc
where INVU Plc is the accounting acquirer. All periods have been restated to
give effect to the recapitalization. The historic statements from inception up
to the Exchange are those of INVU Plc.
In connection with the Exchange, the directors and officers of INVU Plc became
the directors and officers of Sunburst. Also, Sunburst changed its name to INVU,
Inc. At the time of the Exchange, the Company issued 1,510,344 shares of Common
Stock of the Company to a consultant pursuant to a consulting agreement for
introducing INVU Plc and Sunburst. The shares were estimated to have a value of
$750,000 and have been treated as a transaction cost in connection with the
Exchange. Immediately after the Exchange, INVU Plc's former shareholders owned
approximately 88% of the outstanding common stock of Sunburst.
NOTE B - GOING CONCERN
The Company's liabilities exceed its assets and the Company has incurred losses
from operations primarily as a result of treating virtually all development
expenses since inception as current operating expenses. The Company is not
generating cash from operations. Operations to date have been funded principally
by equity capital and borrowings. The Company plans to continue to fund its
development expenses through additional capital raising activities, including
one or more offerings of equity and/or debt through private placements and/or
public offerings. The Company's ability to continue to develop its
infrastructure depends on its ability to raise other additional capital. The
financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
The Company is still building its operational infrastructure. Additional capital
raised by the Company, if any, will be used for this purpose and to fund its
planned launch of operations within the United Kingdom.
F-6
NOTE C - INVENTORIES
Inventories consist of the following:
July 31, January 31,
2000 2000
unaudited) (audited)
$ $
Licensed goods 19,222 25,110
Goods for resale 38,936 -
---------- -----------
58,158 25,110
========== ===========
Licensed goods represent software licenses purchased by the Company which allow
the Company to manufacture and distribute a separate company's proprietary
software products in conjunction with and as an embedded component of the
Company's proprietary software. Goods for resale represent the finished
consolidated product to be sold to the end user.
NOTE D - short-term credit facility
The Company has a $1,200,000 ((pound)800,000) (January 31, 2000 $486,000
((pound)300,000)) 7.5% (January 31, 2000 10%) short-term credit facility with an
English bank. The credit facility is collateralized by all assets of the Company
and a corporate guarantee given by Vertical Investments Limited, a company in
which a non-executive director of this Company has an interest. The amount drawn
against the facility was $744,050 ((pound)496,033) at July 31, 2000, ($413,247
((pound)255,091) at January 31, 2000). The amount drawn is payable on demand at
the bank's discretion.
F-7
NOTE E - long-term obligations
Long-term obligations at July 31, 2000 and January 31, 2000.
July 31, January 31,
2000 2000
(unaudited) (audited)
$ $
Non-interest bearing, unsecured loans from an individual, no
stated maturity date 840,957 298,009
4% above Libor rate (Libor rate was 6.1875% and 5.75% at
July 31, 2000 and January 31, 2000 respectively) notes
Payable to an English bank , monthly payment aggregating to
(pound)500, maturing in March 2002, collateralized by all assets of the
Company and a limited personal guarantee by a director 10,000 22,107
4% above Libor rate (Libor rate was 6.1875% and 5.75% at
July 31, 2000 and January 31, 2000 respectively) notes
Payable to an English bank, monthly payment aggregating to
(pound)1,333, maturing in June 2004, collateralized by all assets of the
Company and unlimited multilateral guarantees between
subsidiary undertakings; a quarterly loan guarantee premium of
1 1/2% per annum is payable on 85% of the outstanding balance 94,000 114,480
Convertible A Note 1999-2002, with interest at 6%;
Interest due in arrears biannually on January 1 and July 1 (1) 600,000 600,000
Convertible B Note 1999-2002, bearing interest of 8% per
annum for the first six months, 9% per annum for the next six
Months and 10% per annum thereafter; interest due in arrears
biannually on January 1 and July 1 (1) 400,000 400,000
Unsecured loan advance from a potential investor repayable on
demand bearing interest of 3% per annum 100,269 -
Capital leases for vehicles, interest ranging from 10.2% - 16.9%
with maturities through 2004 177,304 165,366
----------- ----------
2,222,530 1,599,962
Less current maturities (1,169,421) (1,074,185)
------------- -----------
1,053,109 525,777
============= ===========
(1) All corporate and individual investors are minority shareholders in the
Company.
F-8
Convertible debentures
The A and B Convertible Notes 1999-2002 are held by individuals who are minority
shareholders in the Company. They are convertible into common shares at the rate
of one common share for every US$0.65 of outstanding principal Note converted
for the A Notes and one common share for every US$0.50 of outstanding principal
Note converted for the B Notes. Conversion will take place:-
i) immediately prior to an Initial Public Offering
ii) at the option of the investors for the B Notes and automatically for the A
Notes, upon new equity capital resulting in proceeds to the Company of at
least $4,000,000
iii) at the option of the investors giving 30 days notice to the Company.
Any outstanding principal not converted or redeemed by the anniversary date will
be redeemed at par plus interest in the year 2002 upon receipt of 30 days
written notice from the Company or the Investors.
In consideration of the Investors advancing an aggregate of $1,000,000, the
Company caused Montague Limited the principal shareholder to transfer, and
register in the name of the Investors, 225,000 shares of Common Stock of no par
value.
In view of the Company's present status with regard to its equity and/or debt
offerings, it is probable that the Convertible A and B notes will be converted
within the next twelve months. Accordingly, the notes have been disclosed as
repayable within current maturities.
Scheduled maturities of long-term obligation are as follows:
Period ending July 31, $
2001 1,169,421
2002 61,090
2003 103,698
2004 47,364
2005 -
Thereafter 840,957
---------
2,222,530
=========
F-9
The Company leases vehicles under non-cancellable capitalized leases.
July 31, January 31,
2000 2000
(unaudited) (audited)
$ $
Vehicles 259,082 226,348
Less accumulated depreciation (54,865) (30,958)
----------- ------------
204,217 195,390
=========== ============
The following is a schedule by periods of future minimum lease payments under
the capital leases together with the present value of the net minimum lease
payments as at July 31, 2000.
Period ending July 31, $
2001 56,723
2002 51,995
2003 90,297
2004 26,532
Thereafter -
-------
225,547
Less amount representing interest (48,243)
-------
Present value of net minimum lease payments 177,304
=======
The scheduled net minimum lease payments to maturity are included in the
long-term obligation table above.
F-10
Item 2. Management's Discussion and Analysis or Plan of Operation
The following description of "Management's Plan of Operation"
constitutes forward-looking statements for purposes of the Securities Act of
1933, as amended (" the Securities Act"), and the Securities Exchange Act of
1934, as amended, and as such involves known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of INVU, Inc., a Colorado corporation (the "Company"), to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. The words "expect", "estimate",
"anticipate", "predict", "believe", "plan", "seek", "objective", and similar
expressions are intended to identify forward-looking statements. Important
factors that could cause the actual results, performance or achievement of the
Company to differ materially from the Company's expectations include the
following: (1) one or more of the assumptions or other cautionary factors
discussed in connection with particular forward-looking statements or elsewhere
in this Form 10-QSB prove not to be accurate; (2) the Company is unsuccessful in
increasing sales through its anticipated marketing efforts; (3) mistakes in cost
estimates and cost overruns; (4) the Company's inability to obtain financing for
general operations including the marketing of the Company's products; (5)
non-acceptance of one or more products of the Company in the marketplace for
whatever reason; (6) the Company's inability to supply any product to meet
market demand; (7) generally unfavorable economic conditions which would
adversely effect purchasing decisions by distributors, resellers or consumers;
(8) development of a similar competing product at a similar price point; (9) the
inability to successfully integrate one or more acquisitions, joint ventures or
new subsidiaries with the Company's operations (including the inability to
successfully integrate businesses which may be diverse as to type, geographic
area, or customer base and the diversion of management's attention among several
acquired businesses) without substantial costs, delays, or other problems; (10)
if the Company experiences labor and or employment problems such as the loss of
key personnel, inability to hire and/or retain competent personnel, etc.; and
(11) if the Company experiences unanticipated problems and/or force majeure
events (including but not limited to accidents, fires, acts of God etc.), or is
adversely affected by problems of its suppliers, shippers, customers or others.
All written or oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by such factors. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Notwithstanding the foregoing, the Company is not entitled to rely on the safe
harbor for forward looking statements under 27A of the Securities Act or 21E of
the Exchange Act as long as the Company's stock is classified as a penny stock
within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is
generally defined to be any equity security that has a market price (as defined
in Rule 3151-1) of less than $5.00 per share, subject to certain exceptions.
The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto.
The Company develops and sells software (under the brand name INVU) for
the electronic management of many types of information and documents, such as
forms, correspondence, literature, faxes, technical drawings, electronic files
and web pages. Management believes that the INVU software is simple, intuitive,
and cost effective, yet powerful.
The Company's objective is to establish itself as a leading supplier of
information and document management software and services in the world. For its
professional range of products, INVU Series 100, Series 200 ViewSafe, and Series
2000 (formerly WEBFAST), the Company is targetting small to medium sized
enterprises ("SMEs") and departmental users in organizations via distributors
and resellers. For its personal user (SOHO - small office / home office
("SOHO")) market, the Company envisages its marketing will mainly target
software retailers for INVU WebServant and FileServant.
Throughout the half year ended July 31, 2000, the Company continued to
develop its software products. The Company's first product, INVU SOLO, was
released to distributors in December 1998 and sales to the SOHO market commenced
in January 1999. Management was satisfied with the initial response to this
product, but in view of comments and advice received from retailers, decided to
re-launch more suitably packaged and targeted products for the personal user
market. Two new products were released to retailers in March 2000. The first,
"WebServant," enables web users to quickly and easily build a personal library
from the internet with a competitive price of less than
1
$50. This product's key features are the simple downloading, storing and
organization of web pages, enabling on or off-line browsing and fast retrieval
of previously stored information. The second product, "FileServant," is a
re-launch of the original INVU SOLO product with additional features including
the aforementioned web technology. Both these products are now on sale in the
retail outlets in the U.K. and two major in-store product promotions have
generated increased sales and, management believes, brand awareness. The
anticipated funding in quarter three will provide the Company with the resources
to add further impetus to its retail marketing strategy.
The first production release of INVU Series 100, Series 200 (formerly
INVU PRO), and ViewSafe (collectively known as "the professional range of
products") was made on October 5, 1999 to an exclusive distributor in the United
Kingdom, and sales to end users were anticipated in October 1999. However, the
exclusive distributor went into administrative receivership in October 1999
before any product orders had been fulfilled. Although no significant financial
loss has accrued to the Company, the closure of this distribution outlet has
meant a change in sales and marketing strategy in the United Kingdom. In
response, management decided to directly recruit resellers while also pursuing
non-exclusive distributors for the products. The number of early resellers
sign-ups has been encouraging with over 30 INVU resellers already recruited. The
adoption of the product by Northampton Chamber of Commerce for distribution to
their member companies and to other Chambers of Commerce throughout the U.K. has
been similarly satisfying. Management expects the impact of sales through the
Chamber of Commerce to be significant. With 1500 member companies in the County
of Northamptonshire alone and 180,000 member enterprises throughout the United
Kingdom, this potentially huge sales opportunity is being very actively pursued.
The Company expects its first orders during quarter three 2000.
Most of the recruited resellers now have a pipeline of end-user
opportunities which they are actively pursuing with the involvement of Company
sales personnel. The level of end user inquiries is constantly growing and these
inquiries are now being converted into sales at a steadily increasing rate. The
Company now has a number of high profile end user sites including Barclays Life
(a pensions subsidiary of a UK bank), Sussex Police (a large law enforcement
agency in the south of U.K.), Williams PLC (a major engineering group) and
Siemens Traffic Controls Systems (a subsidiary of Siemens Group). In addition,
management believes that there are a growing number of SME companies for which
the INVU range of products are ideally suited. The Company's sales team is
targeting these enterprises. Management believes that its direct sales team and
expanding reseller base will continue to generate steadily increasing sales
levels during the second half of year 2000.
The Company has successfully developed a highly sophisticated code free
integration tool for use with the INVU range of products. This allows INVU
products to be linked to any other Windows(TM) based applications. For instance,
an INVU scanned image of a supplier invoice can be retrieved directly from an
accounts application. This is achieved without the need for further software
development, and gives INVU resellers the ability to add considerable value to
the INVU offering without the difficulty of hiring and managing development
programmers. Management believes that this tool gives the Company a significant
competitive advantage. It is anticipated that sales of this product will
commence in quarter three 2000.
INVU Series 2000 (formerly INVU WEBFAST) continues to be developed, and
management now estimates that this product will be released in late 2000 and
predominantly aimed at large corporate users.
Company software engineers have also successfully developed a
prototype information management internet service. This service will allow
advanced internet information management within fully encrypted secure
databases. Individuals and corporations will be able to store their documents on
an INVU web site and access and update them in real time, via password controls,
from anywhere in the world. Development work continues on this project, and
management anticipates a release date early in 2001.
Throughout the current quarter, management has continued to develop
relationships with potential investors. This has resulted in proposals to
provide additional funding as described in "Financing Management's Plan of
Operations."
Results of Operations
The following is a discussion of the results of operations for the
six months ended July 31, 2000, compared
2
with the six months ended July 31, 1999, and changes in financial condition
during the six month period ended July 31, 2000.
The Company (formerly Sunburst Acquisitions I, Inc.) engaged in
no significant operations prior to the Share Exchange Agreement with INVU PLC on
August 31, 1998.
Net sales for the six months ended July 31, 2000 were $54,319 which
compares to $19,813 sales for the six months ended July 31, 1999. In addition,
sales with a value of $66,284 have been deferred to future periods. The
Company's strategy to sell its professional range of products via VARs (value
added resellers) has taken time to sign up the requisite number of dealers.
However, the Company has now registered over 30 resellers throughout the UK and
Ireland, and sales leads are now being generated from a variety of end user
companies. Management is also encouraged by the interest shown in its products
by large multi-national companies with specific requirements for a functionally
rich product at a very competitive price. The net loss for the six months ended
July 31, 2000 was $1,034,556, which exceeds the net loss for the corresponding
period in 1999 of $570,305 due to increases in selling and distribution costs of
$293,146 , administrative costs of $177,648, production costs of $14,725,
interest expense of $30,794, and a decrease in research and development costs of
$17,556.
Selling and distribution expenditures reflect the Company's continued
investment in personnel and sales and marketing activities, including trade
shows, product launch and advertising costs. The position of Sales and Marketing
Director was filled in July with the appointment of Jon Halestrap, a highly
experienced information management professional.
As the Company moves from development stage to an operational stage,
the administrative infrastructure has been expanded to cope with the additional
demands placed on the business. A number of additional support staff have been
employed and the Company moved into larger premises in March 2000. Accompanying
this move was an increase in premises and infrastructure costs. In addition, the
emphasis on fundraising to support the Company's growth strategy has generated
considerable fees from the Company's professional advisors. This significant
expense, however, should be compared to the anticipated inflow of investment in
quarter three 2000.
Further technical support resources have been acquired to ensure
adequate testing of new products, reseller support, and further product
development work. Further additions to technical personnel are planned in
quarter three 2000.
In the six month period ended July 31, 2000, the Company incurred net
interest expense of $58,111 compared with net interest expense of $27,317 for
the six month period ended July 31, 1999. On August 23, 1999, the Company raised
$1,000,000 in a private placement of Convertible Notes that bear interest at
rates between 6% and 10%, as described below. These loans and notes together
with increased bank facilities and loans have, therefore, resulted in greater
interest payments.
The tax rates for the periods in question are zero due to a net loss in
each period.
The total current assets of the Company were $175,841 at July 31, 2000,
an increase of $114,425 compared to $61,416 at January 31, 2000. Working capital
was negative $2,226,246 as of July 31, 2000, compared with negative $1,750,749
as of January 31, 2000. These changes are due to increases in accounts
receivable, inventories and prepaid expenses, and corresponding additions to
accounts payable, short term credit facilities, and current maturities of long
term liabilities.
Total assets of the Company were $482,051 at July 31, 2000, an increase
of $193,876 compared to $288,175 at January 31, 2000. This is attributable to
increases in fixed assets of $79,451 and current assets of $114,425.
The total current liabilities of the Company increased by $589,922 from
$1,812,165 at January 31, 2000 to $2,402,087 at July 31, 2000. The change in
current liabilities is due to increases in accounts payable of $166,697,
short-term credit facilities of $330,803 and current maturities of long-term
obligations of $95,236. This, together with the increase in long-term
obligations less current maturities of $527,332, reflects the Company's efforts
to raise both short-term facilities and long term funding to bridge the
intervening period prior to the expected investments in quarter
3
three 2000. Long-term obligations less current maturities were $1,053,109 at
July 31, 2000 compared to $525,777 at January 31, 2000, mainly due to an
additional non-interest unsecured loan from a private investor of $571,500.
Total stockholders' equity decreased by $923,378 during the six month
period ended July 31, 2000 from a deficit of $2,049,767 at January 31, 2000 to a
deficit of $2,973,145 at July 31, 2000. The Company continues to evaluate
various financing options, including issuing debt and equity to finance future
development and marketing of products during the transitional period from now to
sales maturity.
Financing Management's Plan of Operation
As of February 2, 1999, the Company had agreed to borrow $656,000 at an
annual interest rate of 8% by way of a secured short-term loan. In August 1999,
the Company raised $1,000,000 by way of a private placement, the proceeds of
which were used, among other things, to pay off the short-term loan described
above. This private placement is described in the Company's Annual Report on
Form 10-KSB for the year ended January 31, 2000 under "Item 1. Description of
Business - The First Financing Transaction and The Second Financing
Transaction." In March 2000, the Company received a non-interest unsecured loan
of $571,500 from an individual with no stated maturity date. In addition, the
Company had a $468,000, 10% short-term credit facility with an English bank. On
July 27, 2000, this facility was replaced with a $1,200,000, 7.5% short-term
credit facility with another English bank. The amount drawn against the facility
as of July 31, 2000 was $744,050. This amount is due for review in July 2001 and
is secured by the Company's subsidiaries' cross guarantees and a corporate
guarantee from Vertical Investments Limited, a company in which Daniel Goldman,
a director, has a beneficial interest.
In March 2000, the Company retained a placement agent to advise and
assist the Company in conducting a private placement. It is anticipated that the
placement will occur during the third quarter of this fiscal year and raise
approximately $10,000,000. Any securities offered in such placement will not be
or will not have been registered under the Securities Act, as amended, and thus
may not be offered or sold in the United States absent registration or an
applicable exemption from such registration requirements.
In July 2000, the Company and GEM Global Yield Fund Limited ("GEM") had
reached an agreement to amend and restate a Convertible Debenture Purchase
Agreement to reflect certain changes following discussions with the staff of the
Securities and Exchange Commission (the "SEC"). Prior to finalization of the
amended agreement and the Form S-1 registration statement to be filed with the
SEC pursuant thereto, the Company's was informed by GEM that GEM wanted to
reduce the principal amount of debentures to be purchased pursuant to the
amended agreement to US$750,000 as a result of the Company's then current share
price and the trading volume in the Company's stock. The Company has
communicated to GEM that it considers that such a reduction in GEM's commitment
to be so material as to make it in the best interest of the Company not to
proceed with a financing transaction with GEM at this reduced transaction
amount.
Management estimates that the proceeds from the above transactions, if
consummated, would fulfill the Company's capital requirements for a period of up
to thirty six (36) months. There can, however, be no assurance that the above
transaction will be consummated or that additional debt or equity financing will
be available, if and when needed, or that, if available, such financing could be
completed on commercially favorable terms. Failure to obtain additional
financing, if and when needed, could have a material adverse affect on the
Company's business, results of operations and financial condition. Please refer
to Note B of the Consolidated Financial Statements in conjunction with this
paragraph regarding the Company's ability to continue as a going concern.
4
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There were no legal proceedings for the quarter ended July 31, 2000 but
reference is made to Part II Item 1 of the Company's 10-QSB for the quarter
ending April 30, 2000.
Item 2. Changes in Securities.
None
Item 3. Default Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
In July 2000, Paul O' Sullivan resigned as the Company's Chief Technical
Officer and as a director. Mr. O'Sullivan intends on continuing his relationship
with the Company as a consultant. Jon Halestrap was appointed Vice President of
Sales and Marketing and will serve as a director.
In July 2000, the Company and GEM Global Yield Fund Limited ("GEM") had
reached an agreement to amend and restate a Convertible Debenture Purchase
Agreement to reflect certain changes following discussions with the staff of the
Securities and Exchange Commission (the "SEC"). Prior to finalization of the
amended agreement and the Form S-1 registration statement to be filed with the
SEC pursuant thereto, the Company was informed by GEM that GEM wanted to reduce
the principal amount of debentures to be purchased pursuant to the amended
agreement to US$750,000 as a result of the Company's then current share price
and the trading volume in the Company's stock. The Company has communications to
GEM that it considers that such a reduction in GEM's commitment to be so
material as to make it in the best interest of the Company not to proceed with a
financing transaction with GEM at this reduced transaction amount.
Item 6. Exhibits and Reports on Form 8-K.
None
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-B.
10.1* Overdraft Facility, dated July 19, 2000, by and between the Company
and the Bank of Scotland (Exhibit 10.1).
10.2* Corporate Guarantee, dated July 18, 2000, by and among the Company,
Invu Plc, Invu Services Limited, Invu International Holdings Limited
and the Bank of Scotland (Exhibit 10.2).
10.3* Debenture, dated July 13, 2000, by and between Invu International
Holdings Limited and the Bank of Scotland (Exhibit 10.3).
10.4* Employment Agreement, dated June 30, 1997, by and between the Company
and David Morgan (Exhibit 10.4).
10.5* Employment Agreement, dated June 9, 2000, by and between the Company
and John Halestrap (Exhibit 5).
10.6* Employment Agreement, dated June 10, 1999, by and between the Company
and John Agostini (Exhibit 6).
10.7* Letter Agreement, dated February 22, 2000, by and between David Morgan
and David Andrews (Exhibit 7).
10.8* Letter Agreement, dated February 2, 1999, by and between David Morgan
and Daniel Goldman (Exhibit 10.8).
10.9* Letter Agreement, dated April 27, 1999, by and between David Morgan
and Tom Maxfield (Exhibit 10.9).
10.10 Convertible Debenture Purchase Agreement, dated as of May 1, 2000, by
and among the Company and the Purchasers listed on Schedule 1 thereof
(incorporated by reference to Exhibit 10.17 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.11 Form of 3 Percent Convertible Debenture by and between the Company and
the Purchasers listed on Schedule 1 of the Convertible Debenture
Purchase Agreement (incorporated by reference to Exhibit 10.18 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.12 Form of Warrant by and between the Company and the Purchasers listed
on Schedule 1 of the Convertible Debenture Purchase Agreement
(incorporated by reference to Exhibit 10.19 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.13 Registration Rights Agreement, dated as of May 1, 2000, by and among
the Company, GEM Global Yield Fund Limited and Turbo International
Ltd. (incorporated by reference to Exhibit 10.20 of the Company's
Annual Report on Form 10-KSB for the fiscal year ended January 31,
2000).
10.14 Debenture and Warrant Shares Escrow Agreement, dated as of May 1,
2000, by and among the Company, Kaplan Gottbetter & Levenson, LLP, GEM
Global Yield Fund Ltd. and Turbo International Ltd. (incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on Form
10-KSB for the fiscal year ended January 31, 2000).
10.15 Warrant Purchase Agreement, dated as of May 1, 2000, by and between
the Company and Turbo International, Ltd. (incorporated by reference
to Exhibit 10.22 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended January 31, 2000).
10.16 Schedules to the Convertible Debenture Purchase Agreement, dated as of
May 1, 2000 (incorporated by reference to Exhibit 10.23 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.17 Demand Promissory Note, dated May 1, 2000, by and between the Company
and GEM Advisors, Inc. (incorporated by reference to Exhibit 10.25 of
the Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.18 Amendment Number One to the Convertible Debenture Purchase Agreement,
dated May 22, 2000, by and among the Company, GEM Global Yield Fund,
Ltd. and Turbo International, Ltd. (Incorporated by reference to
Exhibit 10.9 of the Company's Quarterly Report on Form 10-QSB for the
fiscal quarterly period ended April 30, 2000).
27* Financial Data Schedule (Exhibit 27).
*Filed herewith
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Quarterly Report to be signed on
its behalf by the undersigned thereunto duly authorized.
INVU, INC.
(Issuer)
Date: September 19, 2000 By: /s/ David Morgan
----------------------------------
David Morgan, President & Chief
Executive Officer
(Principal Executive Officer)
Date: September 19, 2000 By: /s/ John Agostini
----------------------------------
John Agostini, Vice President-Chief
Financial Officer & Secretary
(Principal Financial Officer)
6
INDEX TO EXHIBITS
(a) Exhibits
Exhibit
Number Description of Exhibit
10.1* Overdraft Facility, dated July 19, 2000, by and between the Company
and the Bank of Scotland (Exhibit 10.1).
10.2* Corporate Guarantee, dated July 18, 2000, by and among the Company,
Invu Plc, Invu Services Limited, Invu International Holdings Limited
and the Bank of Scotland (Exhibit 10.2).
10.3* Debenture, dated July 13, 2000, by and between Invu International
Holdings Limited and the Bank of Scotland (Exhibit 10.3).
10.4* Employment Agreement, dated June 30, 1997, by and between the Company
and David Morgan (Exhibit 10.4).
10.5* Employment Agreement, dated June 9, 2000, by and between the Company
and John Halestrap (Exhibit 5).
10.6* Employment Agreement, dated June 10, 1999, by and between the Company
and John Agostini (Exhibit 6).
10.7* Letter Agreement, dated February 22, 2000, by and between David Morgan
and David Andrews (Exhibit 7).
10.8* Letter Agreement, dated February 2, 1999, by and between David Morgan
and Daniel Goldman (Exhibit 10.8).
10.9* Letter Agreement, dated April 27, 1999, by and between David Morgan
and Tom Maxfield (Exhibit 10.9).
10.10 Convertible Debenture Purchase Agreement, dated as of May 1, 2000, by
and among the Company and the Purchasers listed on Schedule 1 thereof
(incorporated by reference to Exhibit 10.17 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.11 Form of 3 Percent Convertible Debenture by and between the Company and
the Purchasers listed on Schedule 1 of the Convertible Debenture
Purchase Agreement (incorporated by reference to Exhibit 10.18 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.12 Form of Warrant by and between the Company and the Purchasers listed
on Schedule 1 of the Convertible Debenture Purchase Agreement
(incorporated by reference to Exhibit 10.19 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.13 Registration Rights Agreement, dated as of May 1, 2000, by and among
the Company, GEM Global Yield Fund Limited and Turbo International
Ltd. (incorporated by reference to Exhibit 10.20 of the Company's
Annual Report on Form 10-KSB for the fiscal year ended January 31,
2000).
10.14 Debenture and Warrant Shares Escrow Agreement, dated as of May 1,
2000, by and among the Company, Kaplan Gottbetter & Levenson, LLP, GEM
Global Yield Fund Ltd. and Turbo International Ltd. (incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on Form
10-KSB for the fiscal year ended January 31, 2000).
10.15 Warrant Purchase Agreement, dated as of May 1, 2000, by and between
the Company and Turbo International, Ltd. (incorporated by reference
to Exhibit 10.22 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended January 31, 2000).
10.16 Schedules to the Convertible Debenture Purchase Agreement, dated as of
May 1, 2000 (incorporated by reference to Exhibit 10.23 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.17 Demand Promissory Note, dated May 1, 2000, by and between the Company
and GEM Advisors, Inc. (incorporated by reference to Exhibit 10.25 of
the Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.18 Amendment Number One to the Convertible Debenture Purchase Agreement,
dated May 22, 2000, by and among the Company, GEM Global Yield Fund,
Ltd. and Turbo International, Ltd. (Incorporated by reference to
Exhibit 10.9 of the Company's Quarterly Report on Form 10-QSB for the
fiscal quarterly period ended April 30, 2000).
27* Financial Data Schedule (Exhibit 27).
*Filed herewith
7