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 OCTOBER 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM TO .
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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
------ --------
As of December 15, 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.
October 31, 2000
INDEX
Page No.
PART I. FINANCIAL INFORMATION.........................................................................................F-1
Item 1. Financial Statements.................................................................................F-1
Consolidated Balance Sheets as of October 31, 2000...................................................F-1
Consolidated Statements of Operations................................................................F-2
Consolidated Statements of Deficit in Stockholders' Equity...........................................F-4
Consolidated Statements of Cash Flows................................................................F-6
Notes to Financial Statements........................................................................F-7
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.........................................................................5
Item 4. Submission of Matters to a Vote of Security Holders....................................................5
Item 5. Other Information......................................................................................5
Item 6. Exhibits and Reports on Form 8-K.......................................................................6
SIGNATURES.............................................................................................................S-1
EXHIBIT INDEX..........................................................................................................E-1
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
October 31, January 31,
2000 2000
(unaudited) (audited)
$ $
ASSETS
Current assets
Cash - -
Accounts receivable:
Trade, net 200,889 1,916
VAT recoverable and other 119,947 22,000
Inventories 45,623 25,110
Prepaid expenses 70,441 12,390
-------------------------------------
Total current assets 436,900 61,416
Equipment, furniture and fixtures
Computer equipment 73,465 42,450
Vehicles 287,767 226,348
Office furniture and fixtures 101,573 31,096
--------------- --------------
462,805 299,894
Less accumulated depreciation 132,869 73,135
--------------- --------------
329,936 226,759
--------------- --------------
766,836 288,175
=============== ==============
LIABILITIES
Current liabilities
Short-term credit facility 1,295,914 413,247
Current maturities of long-term obligations 1,957,725 1,074,185
Accounts payable 552,617 126,204
Accrued liabilities 217,183 198,529
--------------- --------------
Total current liabilities 4,023,439 1,812,165
Long-term obligations, less current maturities 217,281 525,777
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 - 30,206,896 shares 288,355 288,355
Accumulated other comprehensive income 180,537 6,844
Accumulated deficit during the development stage (3,942,776) (2,344,966)
---------------- --------------
(3,473,884) (2,049,767)
---------------- --------------
766,836 288,175
================ ==============
The accompanying notes are an integral part of these statements.
F-1
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the periods ended
Feb 18, 1997
For the three months ended For the nine months ended (date of inception)
Oct 31, 2000 Oct 31, 1999 Oct 31, 2000 Oct 31, 1999 to Oct 31, 2000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $ $
Revenues 220,524 1,794 274,843 21,607 300,836
Expenses:
Production costs 42,455 1,142 65,590 9,552 280,748
Distribution costs 288,906 58,026 687,245 163,219 1,059,839
Research and development costs 90,731 20,310 213,333 160,468 600,458
Administrative costs 313,173 277,287 799,861 586,327 2,108,792
------------- ------------ ------------ ----------- -----------
------------- ------------ ------------ ----------- -----------
Total operating expenses 735,265 356,765 1,766,029 919,566 4,049,837
Operating loss (514,741) (354,971) (1,491,186) (897,959) (3,749,001)
Other income (expense)
Interest, net (48,513) (23,220) (106,624) (50,537) (196,138)
Other - - - - 2,363
------------- ------------- ------------- ------------ -----------
------------- ------------- ------------- ------------ -----------
Total other income (expense) (48,513) (23,220) (106,624) (50,537) (193,775)
------------- ------------- ------------- ------------ -----------
------------- ------------- ------------- ------------ -----------
Loss before income taxes (563,254) (378,191) (1,597,810) (948,496) (3,942,776)
Income taxes - - - - -
------------- ------------- ------------- ------------ ------------
Net loss (563,254) (378,191) (1,597,810) (948,496) (3,942,776)
============= ============= ============= ============ ============
The accompanying notes are an integral part of these statements.
F-2
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
Feb 18, 1997
For the three months ended For the nine months ended (date of inception)
Oct 31, 2000 Oct 31, 1999 Oct 31, 2000 Oct 31, 1999 to Oct 31, 2000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $ $
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) (0.05) (0.03) (0.13)
============= ============ ============ ============ ===============
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
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)
F-4
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 - - - 173,693 173,693 173,693
(unaudited)
Net loss during the period (unaudited) - - (1,597,810) - (1,597,810) (1,597,810)
-------------
Total comprehensive loss (unaudited) (1,424,117)
---------- --------- ----------- -------------- ----------- =============
Balance at October 31, 2000 (unaudited) 30,206,896 288,355 (3,942,776) 180,537 (3,473,884)
========== ========= =========== ============== ===========
F-5
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the periods ended
Feb 18, 1997
For the nine For the nine (date of
months ended month ended inception) to
Oct 31, 2000 Oct 31, 1999 Oct 31, 2000
(unaudited) (unaudited) (unaudited)
$ $ $
Net cash flows used in operating activities
Net loss during the period (1,597,810) (948,496) (3,942,776)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 70,200 27,012 154,305
Accounts receivable (311,819) (19,274) (335,561)
Inventories (24,106) 1,617 (53,538)
Prepaid expenses (61,807) 9,069 (74,629)
Accounts payable 457,849 121,090 584,711
Accrued liabilities 41,120 22,275 239,991
----------------- ------------- -------------
Net cash used in operating activities (1,426,373) (786,707) (3,427,497)
----------------- ------------- -------------
Cash flows used in investing activities:
Acquisitions of property and equipment (122,488) - (255,741)
Disposals of property and equipment - 20,347 19,356
----------------- ------------- -------------
Net cash (used)/provided in investing activities (122,488) 20,347 (236,385)
----------------- ------------- -------------
Cash flows used in financing activities:
Short-term credit facility 964,351 (42,606) 1,374,917
Borrowings received from notes payable 762,570 1,662,884 3,568,564
Repayment of borrowings (113,175) (811,795) (1,469,531)
Principal payments on capital lease (30,934) (42,123) (64,168)
Proceeds from issuance of stock - - 288,640
----------------- ------------- -------------
Net cash provided by financing activities 1,582,812 766,360 3,698,422
----------------- ------------- -------------
Effect of exchange rate changes on cash (33,951) - (34,540)
----------------- ------------- -------------
Net decrease 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 106,600 50,500 195,800
Income taxes - - -
The accompanying notes are an integral part of these statements.
F-6
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared without
audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These statements
include all adjustments, consisting only of normal recurring
accruals, considered necessary for a fair presentation of financial
position and results of operations. The financial statements included
herein should be read in conjunction with the financial statements
and notes thereto included in the latest annual report on Form
10-KSB. The results of operations for the three and nine month
periods ended October 31, 2000 are not necessarily indicative of the
results to be expected for the full 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.
Although the Company has generated some sales during the period, the
management of the Company continues to devote most of its activities
to establishing the business. Therefore, the Company is still in the
development stage.
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 was 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.
F-7
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-8
NOTE C - INVENTORIES
Inventories consist of the following:
October 31, January 31,
2000 2000
(unaudited) (audited)
$ $
Licensed goods 9,925 25,110
Goods for resale 35,698 -
----------- -----------
45,623 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 $1,160,000 ((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 Company's bank has agreed
to temporary borrowings in excess of the formal facility during the
period to October 31, 2000. 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 $1,295,914 ((pound)893,734) at October 31, 2000, ($413,247
((pound)255,091) at January 31, 2000). The amount drawn is payable on
demand at the bank's discretion.
F-9
note E - long-term obligations
Long-term obligations at October 31, 2000 and January 31, 2000.
October 31, January 31,
2000 2000
(unaudited) (audited)
$ $
Non-interest bearing, unsecured loans from an individual, no
stated maturity date 786,653 298,009
4% above Libor rate (Libor rate was 6.125% and 5.75% at
October 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 8,217 22,107
4% above Libor rate (Libor rate was 6.125% and 5.75% at
October 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 85,066 114,480
Convertible A Note 1999-2002, with interest at 6%;
interest due in arrears biannually on January 1 and July 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 1 400,000 400,000
Unsecured loan advance from a potential investor repayable on
demand bearing interest at 3% per annum until September 21, 2000 and
15% per annum thereafter 100,000 -
Capital leases for vehicles, interest ranging from 10.2% - 16.9%
with maturities through 2004 195,070 165,366
------------------ ------------------
------------------ ------------------
2,175,006 1,599,962
Less current maturities (1,957,725) (1,074,185)
------------------ ------------------
217,281 525,777
================== ==================
F-10
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Scheduled maturities of long-term obligation are as follows:
Period ending October 31, $
2001 1,957,725
2002 83,457
2003 96,607
2004 37,217
------------------
2,175,006
==================
1) Convertible debentures
All corporate and individual investors are minority shareholders in
the Company.
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.
Interest amounting to $82,167 has been accrued to October 31, 2000 in
respect of the A and B Convertible Notes.
Any outstanding principal not converted or redeemed by the anniversary
date, which was August 16, 2000, 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 possible 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.
F-11
2) Capital leases
The Company leases vehicles under non-cancellable capitalized leases.
October 31, January 31,
2000 2000
(unaudited) (audited)
$ $
Vehicles 287,767 226,348
Less accumulated depreciation (70,244) (30,958)
------------------ ------------------
217,523 195,390
================== ==================
Scheduled maturities of minimum lease payments are as follows:
Period ending October 31, $
2001 62,135
2002 76,442
2003 83,689
2004 21,750
Thereafter -
------------------
Total minimum lease payments 244,016
Less amount representing interest (48,946)
------------------
Present value of net minimum lease payments 195,070
------------------
The scheduled net minimum lease payments to maturity are included in
the long-term obligation table above.
NOTE F - RELATED PARTY TRANSACTIONS
Impakt Software Limited, a company in which Mr Paul O'Sullivan, a
minority shareholder of the Company has an interest, provided
consultancy services amounting to $52,510 in the period to October
31, 2000.
NOTE G - SUBSEQUENT EVENTS
The Company has agreed in principle to purchase the business of
'Easi-File' for $145,000 ((pound)100,000) which comprises the sales
and marketing rights of the business. Fully refundable payments on
account for the purchase of $14,500 ((pound)10,000) have been made in
the period to October 31, 2000 and a further $29,000 ((pound)20,000)
has been paid since October 31, 2000. The Company expects to complete
the purchase when sufficient funds are available.
F-12
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 the Company's Form 10-KSB for the fiscal year ending January 31, 2000 or 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 3a51-1) 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 fully scalable 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 targeting small to medium sized
enterprises ("SMEs") and departmental users in larger organizations via
distributors and resellers. For its personal user (SOHO - small office / home
office ("SOHO")) market, the Company targets software retailers for INVU
WebServant and FileServant.
Throughout the nine months ended October 31, 2000, the Company has
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. 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 $50.
This product's key features are the simple downloading, storing and organization
of web pages, thus 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 via retail
outlets, catalogues and e-retailers in the U.K. and a number of major product
promotions have generated increased sales and, management believes, brand
awareness.
1
In November 1999, management decided to adopt a value added reseller
(VAR) model for sales of its professional range in the U.K. The Company is also
pursuing non-exclusive distributors for the products in other territories.
Management is extremely encouraged by the number and quality of the resellers
that have been recruited to date to sell the product. Each VAR is charged an
initial fee of $1800 to become an accredited reseller, with a recurring annual
fee thereafter. Having recruited 31 resellers by July 31,2000, the Company has
now increased the number to 52 at October 31, 2000 and management believes it
will comfortably exceed its target of 72 accredited resellers in the U.K. by
January 31, 2001.
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 continues to grow exponentially
and these inquiries are now being converted into sales at a steadily increasing
rate. Even more satisfying is the increase in average number of users per sale
and the significant reduction in time between first contact and order placement
by end users. Management believes that this reflects the company's brand values
of ease of use, high quality and price performance.
During the quarter ended October 31, 2000, the Company received an
order from Universal Music, a member of the global music, film and leisure
group. The initial order value was $137,750 for a 500 user license of an
enhanced version of INVU's professional Series 200 information and document
management software. INVU's technology integrates with Universal's JD Edwards
system, utilizing INVU's unique code free integration technology. The contract
was won in the face of stiff competition from another potential supplier and was
delivered on time and within budget. Subsequent to the initial requirements,
Phase two of the project has commenced, which management believes will see the
solution extended to 1500 users. Plans to develop the project into a web-based
solution will be developed in 2001.
In addition to Universal, the Company now has a number of high profile
end user sites including Chase Manhattan Fleming Bank, Norweb (a major U.K.
utility company), British Aerospace, Lancashire Fire Service, Barclays Life (a
pensions subsidiary of a U.K. 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's belief that there are a growing number of SME companies for which
the INVU range of products are ideally suited has also been vindicated. The
Company's sales team is targeting these enterprises. Management believes that
its expanding reseller base will continue to generate steadily increasing sales
levels during the final quarter of 2000 and forwards into 2001.
The adoption of the product by the 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. A consortium of VAR's, to work alongside the Chamber, is
being assembled to help co-ordinate and maximise the opportunity.
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) or Windows(TM) emulation 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 and cost of
hiring and managing development programmers. Management believes that this tool
gives the Company a significant competitive advantage. Management believes the
use of this product for the Universal and other projects has significantly
reduced cost and installation timescales. The Company believes that this unique
product provides a significant competitive advantage when compared to other
information and document management technologies.
INVU Series 2000 (formerly INVU WEBFAST) continues to be developed.
This product will form the basis of later developments for Universal and other
potential users. Management now estimates that this product will be released in
early 2001.
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."
2
Results of Operations
The following is a discussion of the results of operations for the nine
months ended October 31, 2000, compared with the nine months ended October 31,
1999, and changes in financial condition during the nine month period ended
October 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 nine months ended October 31, 2000 were $274,843
which compares to $21,607 sales for the nine months ended October 31, 1999. In
addition, sales with a value of $36,331 have been deferred to future periods.
The Company's strategy to sell its professional range of products via VARs
(value added resellers) has proven successful with 52 VAR's contracted by
October 31, 2000. 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, such as Universal Music Group, British
Aerospace, and Chase Manhattan Fleming Bank, with specific requirements for a
functionally rich product at a very competitive price. The net loss for the nine
months ended October 31, 2000 was $1,597,810, which exceeds the net loss for the
corresponding period in 1999 of $948,496 due to increases in selling and
distribution costs of $524,026, administrative costs of $213,534 production
costs of $56,038, research and development costs of $52,865 and interest expense
of $56,087.
The significant increase in selling and distribution expenditures
reflects 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 2000 with the
appointment of Jon Halestrap, a highly experienced information management
professional. Since his appointment, the Company has experienced unprecedented
growth in sales activity in all areas, and projected future revenues are
increasing month to month.
As the Company continues to move from development to 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 four 2000.
Further technical support resources have been acquired to ensure
adequate testing of new products, reseller support, and further product
development work. The Company has also engaged two further senior
programmer/developers to fulfill its development plans for a web based
information management solution and for further bespoke requirements from
existing and potential large corporate end users. Further additions to technical
personnel are planned in quarter one 2001.
In the nine month period ended October 31, 2000, the Company incurred
net interest expense of $106,624 compared with net interest expense of $50,537
for the nine month period ended October 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 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 $436,900 at October 31,
2000, an increase of $375,484 compared to $61,416 at January 31, 2000. Working
capital was negative $3,586,539 as of October 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 $766,836 at October 31, 2000, an
increase of $478,661 compared to $288,175 at January 31, 2000. This is
attributable to increases in fixed assets of $103,177 and current assets of
$375,484.
3
The total current liabilities of the Company increased by $2,211,274
from $1,812,165 at January 31, 2000 to $4,023,439 at October 31, 2000. The
change in current liabilities is mainly due to increases in accounts payable of
$426,413, short-term credit facilities of $882,667 and current maturities of
long-term obligations of $883,540. The Company has been successful in raising
both short-term facilities and long term funding to bridge the intervening
period prior to the expected investments in quarter four 2000. Long-term
obligations less current maturities were $217,281 at October 31, 2000 compared
to $525,777 at January 31, 2000, mainly due to non-interest unsecured loans from
a private investor being classified as current maturities at October 31, 2000.
Total stockholders' equity decreased by $1,424,117 during the nine
month period ended October 31, 2000 from a deficit of $2,049,767 at January 31,
2000 to a deficit of $3,473,884 at October 31, 2000. With sales revenues now
increasing, management anticipates a decline in the growth rate of deficit in
stockholders' equity and both monthly profitability during the second half of
the next fiscal year and an overall profit for the same period. 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 $486,000, 10% short-term credit facility with an English bank. On
October 27, 2000, this facility was replaced with a $1,160,000, 7.5% short-term
credit facility with another English bank. The amount drawn against the facility
as of October 31, 2000 was $1,295,914. a temporary excess having been granted by
the bank in view of the advanced stage of the fundraising process described
here. This amount is due for review in October 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 May 2000, the Company and GEM Global Yield Fund Limited ("GEM")
entered into an agreement (the "GEM Agreement") pursuant to which GEM and an
affiliate would provide $5 million in financing to the Company, subject to the
satisfaction of certain conditions. In connection with the GEM Agreement, GEM
Advisors, Inc. ("GEM Advisors"), an affiliate of GEM, advanced $100,000 to the
Company pursuant to a demand note (the "Note"). The Note bears interest at the
rate of 3% prior to demand and 15% after demand. The Note provides that if the
Note is not paid after demand, GEM Advisors, among other things, may convert the
Note into shares of Company common stock at the conversion rate of (x) the lower
of $3.00 or 125% of the average per share closing prices for Company common
stock for the five (5) trading days immediately prior to the date demand for
payment of the Note is made or (y) seventy-five percent (75%) of the average of
the three (3) lowest per share closing prices for Company common stock during
the thirty (30) day period immediately preceding the conversion date. Demand was
made pursuant to the Note on September 21, 2000.
The Company is in the process of conducting an offering of shares of
Company common stock pursuant to Regulation S promulgated pursuant to the
Securities Act, which is scheduled to close on January 15, 2001. The Company is
seeking to raise approximately $2 million (prior to expenses). Any securities
offered in such placement will not be or will have not have been registered
under the Securities Act, and thus may not be offered or sold in the United
States absent registration or an applicable exemption from such registration
requirements. In connection with this offering, the Company has indicated to
prospective investors of its intent to file a registration statement under the
Securities Act with respect to the resale of the shares of Common Stock sold in
the offering. The Company intends to use a portion of the proceeds from this
offering to fund the remaining $101,500 of the purchase price in connection with
the acquisition of the sales and marketing business of Easi-File. See Part I.
Item I. Note G.
With the current anticipated growth in sales combined with the
continuing control over expenditure, management now estimates that the proceeds
from this offering, if consummated, would fulfill the Company's capital
4
requirements (not including acquisitions) at least until the point at which the
Company believes the Company's revenue will exceed its expenses on a monthly
basis. The Company may need to raise additional capital to fund future
acquisitions. There can, however, be no assurance that this offering 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There were no legal proceedings for the quarter ended October 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 has continued his
relationship with the Company as a consultant, playing a key role in the
development of the Company's product for Universal Music Group. See Part I. Item
2. "Management's Discussion and Analysis or Plan of Operation." Also in July
2000 Jon Halestrap was appointed Vice President of Sales and Marketing and
serves as a director of the Company. His influence has been immediate, and he
has been highly instrumental in the establishment and growth of sales revenues
as reflected in the financial statements.
In May 2000, the Company and GEM Global Yield Fund Limited ("GEM")
entered into an agreement (the "GEM Agreement") pursuant to which GEM and an
affiliate would provide $5 million in financing to the Company, subject to the
satisfaction of certain conditions. In connection with the GEM Agreement, GEM
Advisors, Inc. ("GEM Advisors"), an affiliate of GEM, advanced $100,000 to the
Company pursuant to a demand note (the "Note"). The Note bears interest at the
rate of 3% prior to demand and 15% after demand. The Note provides that if the
Note is not paid after demand, GEM Advisors, among other things, may convert the
Note into shares of Company common stock at the conversion rate of (x) the lower
of $3.00 or 125% of the average per share closing prices for Company common
stock for the five (5) trading days immediately prior to the date demand for
payment of the Note is made or (y) seventy-five percent (75%) of the average of
the three (3) lowest per share closing prices for Company common stock during
the thirty (30) day period immediately preceding the conversion date. Demand was
made pursuant to the Note on September 21, 2000.
Item 6. Exhibits and Reports on Form 8-K.
None
EXHIBITS
10.1 Overdraft Facility, dated October 19, 2000, by and between the Company
and the Bank of Scotland (incorporated by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 2000).
10.2 Corporate Guarantee, dated October 18, 2000, by and among the Company,
Invu Plc, Invu Services Limited, Invu International Holdings Limited
and the Bank of Scotland (incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 2000).
10.3 Debenture, dated October 13, 2000, by and between Invu International
Holdings Limited and the Bank of Scotland (incorporated by reference to
Exhibit 10.3 of the Company's Quarterly Report on Form 10-QSB for the
quarter ended July 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).
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: December 19, 2000 By: /s/ David Morgan
-----------------------------
David Morgan,
President & Chief
Executive Officer
(Principal Executive Officer)
Date: December 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 October 19, 2000, by and between the Company
and the Bank of Scotland (incorporated by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 2000).
10.2 Corporate Guarantee, dated October 18, 2000, by and among the Company,
Invu Plc, Invu Services Limited, Invu International Holdings Limited
and the Bank of Scotland (incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 2000).
10.3 Debenture, dated October 13, 2000, by and between Invu International
Holdings Limited and the Bank of Scotland (incorporated by reference to
Exhibit 10.3 of the Company's Quarterly Report on Form 10-QSB for the
quarter ended July 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).
27* Financial Data Schedule (Exhibit 27).
*Filed herewith