SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------
FOR QUARTER ENDED JULY 31, 1999 COMMISSION FILE NO. 00-22661
INVU, INC.
(Exact name of registrant 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)
Registrant'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 registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
As of September 30, 1999, 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
--- ---
1
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INVU, INC.
July 31, 1999
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION................................................................................F-1
Item 1. Financial Statements.................................................................................F-1
Consolidated Balance Sheets as of July 31, 1999......................................................F-1
Consolidated Statements of Operations................................................................F-2
Consolidated Statements of Deficit in Stockholders' Equity...........................................F-4
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......................................................................................4
Item 1. Legal Proceedings......................................................................................4
Item 2. Changes in Securities..................................................................................4
Item 3. Default Upon Senior Securities.........................................................................4
Item 4. Submission of Matters to a Vote of Security Holders....................................................4
Item 5. Other Information......................................................................................4
Item 6. Exhibits and Reports on Form 8-K.......................................................................4
SIGNATURES
</TABLE>
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INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
JULY 31, JANUARY 31,
1999 1999
(UNAUDITED) (AUDITED)
$ $
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents - -
Accounts receivable:
Trade, net 10,444 615
VAT recoverable and other 19,026 11,331
Inventories 123,533 126,590
Prepaid expenses 16,134 18,942
---------------- ----------------
TOTAL CURRENT ASSETS 169,137 157,478
EQUIPMENT, FURNITURE AND FIXTURES
Computer equipment 37,100 26,217
Vehicles 64,252 65,046
Office furniture and fixtures 30,763 29,938
---------------- ----------------
132,115 121,201
Less accumulated depreciation 56,684 41,440
---------------- ----------------
75,431 79,761
244,568 237,239
================ ================
LIABILITIES
CURRENT LIABILITIES
Short-term credit facility 7,377 66,146
Current maturities of long-term obligations 692,231 209,517
Accounts payable 138,848 74,773
Accrued liabilities 75,981 79,122
---------------- ----------------
TOTAL CURRENT LIABILITIES 914,437 429,558
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES 503,219 422,193
DEFICIT IN STOCKHOLDERS' EQUITY
Preferred stock, no par value
Authorised - 20,000,000, nil shares issued and outstanding - -
Common stock, no par value
Authorised - 100,000,000, issued - 30,206,896 shares 288,355 288,355
Accumulated other comprehensive income 20,824 9,095
Accumulated deficit during the development stage (1,482,267) (911,962)
---------------- ----------------
(1,173,088) (614,512)
244,568 237,239
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
F-1
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INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the periods ended
FOR THE SIX FEB. 18, 1997
FOR THE THREE MONTHS ENDED MONTHS ENDED (DATE OF
INCEPTION)
JUL 31, 1999 JUL 31, 1998 JULY 31, 1999 JULY 31, 1998 TO JUL 31, 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED (UNAUDITED)
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Revenues 897 - 19,813 - 30,052
Expenses:
Production costs 1,676 33,587 8,410 43,243 116,589
Distribution costs 32,437 12,656 105,193 27,248 226,792
Research and development costs 94,033 31,459 140,158 63,019 317,064
Administrative costs 145,969 83,856 309,040 155,565 816,393
--------- -------- -------- -------- ----------
Total operating expenses 274,115 161,558 562,801 289,075 1,476,838
Operating loss (273,218) (161,558) (542,988) (289,075) (1,446,786)
Other income (expense)
Interest, net (13,700) (1,823) (27,317) (2,678) (37,844)
Other - 332 - 680 2,363
--------- -------- -------- -------- ----------
Total other income (expense) (13,700) (1,491) (27,317) (1,998) (35,481)
--------- -------- -------- -------- ----------
Loss before income taxes (286,918) (163,049) (570,305) (291,073) (1,482,267)
--------- -------- -------- -------- ----------
Income taxes - - - - -
--------- -------- -------- -------- ----------
NET LOSS (286,918) (163,049) (570,305) (291,073) (1,482,267)
========= ======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
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INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the periods ended
FOR THE SIX FEB. 18, 1997
FOR THE THREE MONTHS ENDED MONTHS ENDED (DATE OF
INCEPTION)
JUL 31, 1999 JUL 31, 1998 JULY 31, 1999 JULY 31, 1998 TO JUL 31, 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED (UNAUDITED)
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Weighted average shares
outstanding:
Basic and Diluted 30,206,896 30,206,896 30,203,896 30,206,896 30,206,896
=========== =========== ========== ========== ==========
Net loss per common share:
Basic and Diluted (0.01) (0.01) (0.02) (0.01) (0.05)
=========== =========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
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INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY
For the periods ended
ACCUMULATED
OTHER
PREFERRED STOCK COMMON STOCK ACCUMULATED COMPREHENSIVE COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT DEFICIT INCOME TOTAL INCOME
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1998 - - 30,206,896 288,355 (217,153) 440 71,642
Comprehensive income:
Foreign currency translation - - - 8,655 8,655 8,655
adjustment
Net loss during the year - - (694,809) - (694,809) (694,809)
---------
Total comprehensive income (686,154)
------ ------ ---------- ------- ---------- ------ ---------- =========
Balance at January 31, 1999 - - 30,206,896 288,355 (911,962) 9,095 (614,512)
Comprehensive income:
Foreign currency translation - - - 11,729 11,729 11,729
adjustment (unaudited)
Net loss during the period - - (570,305) - (570,305) (570,305)
(unaudited) ---------
Total comprehensive income (558,576)
------ ------ ---------- ------- ---------- ------ ---------- =========
Balance at July 31, 1999 - - 30,206,896 288,355 (1,482,267) 20,824 (1,173,088)
(unaudited)
====== ====== ========== ======= ========== ====== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
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INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the periods ended
FOR THE SIX MONTHS ENDED
FEB 18, 1997
(DATE OF INCEPTION)
TO
JUL 31, 1999 JUL 31, 1998 JUL 31, 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED)
$ $ $
<S> <C> <C> <C>
Net cash flows used in operating activities
Net loss during the period (570,305) (291,073) (1,482,267)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 15,866 11,134 57,685
Accounts receivable (17,800) 31,077 (29,576)
Inventories 1,635 (127,435) (126,499)
Prepaid expenses 2,596 1,060 (16,469)
Accounts payable 65,461 (9,369) 141,185
Accrued liabilities (2,192) 34,890 77,793
-------------------- --------------------- ---------------------
Net cash used in operating activities (504,739) (349,716) (1,378,148)
Net cash flows used in investing activities- (12,484) (1,518) (99,594)
acquisitions of property and equipment
Cash flows used in investing activities:
Short-term credit facility (58,384) - (8,569)
Borrowings received from notes payable 591,300 361,875 1,694,184
Repayment of borrowings (10,794) (17,244) (492,421)
Principal payments on capital lease (4,899) (5,228) (22,276)
Proceeds from issuance of stock - - 288,640
-------------------- --------------------- ---------------------
Net cash provided by financing activities 517,223 339,403 1,476,696
Effect of exchange rate changes on cash - 59 1,046
-------------------- --------------------- ---------------------
Net decrease in cash - (11,772) -
Cash at beginning of period - 44,997 -
-------------------- --------------------- ---------------------
Cash at end of period - 33,225 -
==================== ===================== =====================
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest 26,783 2,600 36,983
Income taxes - - -
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
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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, 1999. 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, 1999 and the results of operations for the
period of February 18, 1997 (date of inception) to July 31, 1999 and for the
three and six month periods ended July 31, 1999 and 1998, and cash flows for the
six month periods ended July 31, 1999 and 1998 and the period of February 18,
1997 (date of inception) to July 31, 1999. The interim financial statements
should be read in conjunction with the following explanatory notes. The results
of operations for the three and six month periods ended July 31, 1999 may not be
indicative of the results that may be expected for the fiscal year ending
January 31, 2000.
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 develops and sells 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. (a public development stage
enterprise) acquired all of the outstanding shares of INVU Plc in exchange for
restricted shares of common stock of Sunburst Acquisitions I, Inc. (the
Exchange) pursuant to a Share Exchange Agreement between Sunburst Acquisitions
I, Inc. and the principal shareholder of INVU Plc. Sunburst Acquisitions I, Inc.
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. Proforma information is not presented as
this combination is not considered to be a business combination. In connection
with the Exchange, the directors and officers of INVU Plc became the directors
and officers of Sunburst Acquisitions I, Inc. Also, Sunburst Acquisitions I,
Inc. changed its name to INVU, Inc. In connection with 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 Acquisitions I,
Inc. The shares were estimated to have a value of $750,000 and have been treated
as a transaction cost in connection with the Exchange. After the Exchange, INVU
Plc's former shareholders owned approximately 88% of the outstanding common
stock of Sunburst Acquisitions I, Inc. In January 1999, the Company's Board
voted to change the Company's fiscal year end to January 31.
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.
F-6
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INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 and the United States.
NOTE C - INVENTORIES
Inventories consist of the following:
JULY 31, JANUARY 31
1999 1999
(UNAUDITED) (AUDITED)
$ $
Licensed goods 108,297 118,080
Goods for resale 15,236 8,510
----------- ---------
123,533 126,590
=========== =========
Licensed goods represent software licences 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 (pound)40,000, 4% over Libor short-term credit facility with
an English bank. The credit facility is collateralized by all assets of the
Company and a limited personal guarantee by a director of the Company. The
amount drawn against the facility was $7,377 ((pound)4,554) at July 31, 1999
($66,146 ((pound)40,000) at January 31, 1999). The amount drawn is payable on
demand at the bank's discretion.
F-7
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INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - LONG -TERM OBLIGATIONS
Long-term obligations at July 31, 1999 and January 31, 1999, consist of
the following:
JULY 31, JANUARY 31
1999 1999
(UNAUDITED) (AUDITED)
$ $
<S> <C> <C>
Non-interest bearing, unsecured loan from an
individual, no stated maturity date 380,579 391,140
8% note payable to corporate investors and
individuals, six monthly installments
commencing August 1999, installments
determined by balance due at August 1999 648,000 190,325
4% above Libor rate (Libor rate was 5.25%
and 5.75% at July 31, 1999 and January 31,
1999, 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 26,503 32,235
4% above Libor rate (Libor rate was 5.25% and
5.75% at July 31, 1999 and January 31, 1999,
respectively) notes payable to an English bank,
monthly payment aggregating to (pound)1,333,
maturing in June 2004, collaterized 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 127,440 -
Capital lease for a vehicle, bearing interest at 16.9%
maturing in 2001 12,928 18,010
-------------- -------------
1,195,450 631,710
Less current maturities 692,231 209,517
-------------- -------------
503,219 422,193
============== =============
</TABLE>
F-8
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INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Scheduled maturities of long term obligations are as follows:
PERIOD ENDING JULY 31, $
2000 692,231
2001 39,750
2002 33,254
2003 25,875
2004 23,761
Thereafter 380,579
----------------
1,195,450
================
The Company leases a vehicle under a noncancellable capitalised lease.
JULY 31, JANUARY 31,
1999 1999
(UNAUDITED) (AUDITED)
$ $
Motor vehicle 34,706 34,706
Less accumulated depreciation 11,201 6,941
--------------- -------------
23,505 27,765
=============== =============
The following is a schedule by periods of future minimum lease payments under
the capital lease together with the present value of the net minimum lease
payments as of July 31, 1999.
PERIOD ENDING JULY 31,
$
2000 10,178
2001 5,118
2002 -
Thereafter -
--------------
Total minimum lease payment 15,296
Less amount representing interest 2,368
--------------
Present value of net minimum lease payments 12,928
==============
The scheduled net minimum lease payments to maturity are included in
the long-term obligation table above.
F-9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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.
The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto.
The Company is developing 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 and electronic files.
Management believes that the INVU software is simple, intuitive to use, and cost
effective, yet powerful.
The Company's objective is to establish itself as a leading supplier of
information and document management software in the world. In order to achieve
this, the Company expects to target its marketing efforts initially in the
United Kingdom and the United States on departmental users in organizations and
distributors and resellers for INVU PRO and retailers for INVU SOLO.
Throughout the quarter ended July 31, 1999, 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 (small
office/home office) market commenced in January 1999. All other INVU products
were released to distributors in September 1999 and sales to end users are
anticipated in October 1999, except INVU WEBFAST, which management estimates
will be released in early 2000.
RESULTS OF OPERATIONS
The following is a discussion of the results of operations for the
six months ended July 31, 1999, compared with the six months ended July 31,
1998, and changes in financial condition during the six month period ended July
31, 1999.
The Company (formerly Sunburst Acquisitions I, Inc.) engaged in no sig-
nificant operations prior to the Share Exchange Agreement with INVU PLC on
August 31, 1998.
Net sales for the six months ended July 31, 1999 were $19,813, which
compares to $0 sales for the six months ended July 31, 1998. The future funding
of the business remains a crucial issue, and management recognized that to
generate demand pull for its retail product, INVU SOLO, would require
substantial marketing funds. The low amount of sales
1
<PAGE>
reflects the continued emphasis on development of the Small/Medium Enterprise
(SME) market products, rather than investment in marketing the retail product.
The net loss for the six months ended July 31, 1999 was $570,305 which exceeds
the net loss for the corresponding period in 1998 of $291,073 due to increased
distribution, development and administrative costs of $562,801. This reflected
the Company's continued investment in product development and administrative
infrastructure. Manpower and cash resources have also been diverted to the
development of a new product, INVU VIEWSAFE, which combines all the features of
INVU PRO with an encrypted relational database produced by Centura Software.
This will provide the Company with a PC based document management solution
including a fully embedded encrypted database.
In the six month period ended July 31, 1999 the Company incurred net
interest expense of $27,317 compared with net interest expense of $2,678 for the
period ended July 31, 1998. During both these periods bank borrowings remained
relatively static, while a loan facility in the principal amount of $656,000 was
made available to the Company on February 2, 1999, at an interest rate of 8% per
annum (the "First Financing Transaction").
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 $169,137 at July 31, 1999,
an increase of $11,659 compared to $157,478 at January 31, 1999. Working capital
was negative $745,300 as of July 31, 1999, compared with negative $272,080 as of
January 31, 1999. These changes are due to the addition of loan finance shown as
current maturities of long-term obligations, following the procurement of
$656,000 in loan funding and diminishing cash resources prior to the next
injection of development funding.
Total assets of the Company were $244,568 at July 31, 1999, an increase
of $7,329 compared to $237,239 at January 31, 1999. The increase is mainly
attributable to an increase in accounts receivables.
The total current liabilities of the Company increased by $484,879 from
$429,558 at January 31, 1999 to $914,437 at July 31, 1999. Long term liabilities
were $503,219 at July 31, 1999 compared to $422,193 at January 31, 1999. The
changes in current and long term liabilities are primarily attributable to
additional loan financing, the repayment of short-term credit facilities and an
increase in accounts payables.
Total stockholders' equity decreased by $558,576 during the six month
period ended July 31, 1999 from a deficit $614,512 at January 31, 1999 to a
deficit of $1,173,088 at July 31, 1999. 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 between
development and operational stages.
FINANCING MANAGEMENT'S PLAN OF OPERATION
As at July 31, 1999, management was considering further funding
opportunities for the business to finance ongoing operations and working
capital. The Company is seeking to conduct a public offering of Common Stock of
the Company ("I.P.O.") during 2000. Pursuant to the Securities Act, the I.P.O.
will be made only by means of a prospectus. The Company has plans to raise
$5,000,000 in a private placement in 1999 with the I.P.O. to be made later in
2000. The Company is consulting with an investment banker in the United Kingdom
with respect to such private placement and the I.P.O. Management estimates that
the proceeds from such a private placement would fulfill the Company's capital
requirements for a period of up to twenty-four (24) months.
On February 2, 1999, the Company borrowed $656,000 in the First
Financing Transaction. On August 23, 1999, the Company raised $1,000,000 in a
private placement, certain of the proceeds of which were used to repay all
amounts outstanding under the First Financing Transaction. This private
placement is described in the Company's Annual Report on Form 10-KSB for the
year ended January 31, 1999 under "Item 1. Description of Business -- The Second
Financing Transaction." There can, however, be no assurance 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.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, many companies' computer systems and/or
software may need to be upgraded or replaced to comply with such "Year 2000"
requirements. Significant uncertainty exists in the software industry concerning
the potential effects associated with such compliance.
2
<PAGE>
The Company has reviewed its own software products and believes that
there will be no adverse impact with the Year 2000 date change. All INVU
products are designed to record, store, and process calendar dates occurring
before and after January 1, 2000 with the same full year accuracy (i.e. four
numeric characters instead of two).
An impact analysis has been completed, that has identified no major
risk of failure within the Company's in-house computer systems, which include
the following:
- The accounting and management information systems
- The document management systems
This risk to the Company's business relates not only to the Company's
computer systems, but also to some degree to those of the Company's suppliers
and customers. The Company has developed a policy designed to ensure that all
key customers, suppliers and strategic partners operate and provide Year 2000
compliant systems and software. The returns of information from third parties
relating to Year 2000 compliance should be complete by Fall 1999. Also, there is
a risk that existing or potential customers may not purchase the Company's
products in the future if the computer systems of such existing or potential
customers are adversely impacted by the Year 2000 date change.
Based on the information to date, the Company anticipates that it will
be able to complete its Year 2000 compliance review and make necessary
modifications prior to the end of 1999. However, the issue is complex, and no
business can guarantee that there will be no Year 2000 problems. Some
commentators have stated that a significant amount of litigation will arise out
of Year 2000 compliance issues, and the Company is aware of a growing number of
lawsuits against other software vendors. Because of the unprecedented nature of
such litigation, it is uncertain to what extent the Company may be affected by
it. In addition, management believes that future purchasing patterns of
customers and potential customers have been affected by Year 2000 issues with
many companies expending significant resources to correct their software systems
for Year 2000 compliance. These expenditures have reduced funds available to
purchase software products such as those offered by the Company.
To date, the Company has not created a separate budget for
investigating and remedying issues related to Year 2000 compliance, whether
involving the Company's own software products or the software or systems used in
its internal operations. There can be no assurances that Company resources spent
on investigating and remedying Year 2000 compliance issues will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
3
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
(a) None
(b) None
(c) None
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-B.
10.1 Distributor Agreement, dated May 11, 1999, by and between INVU Services
Limited and Millenium Three Solutions Ltd. (incorporated by reference to
Exhibit 10.8 to the Company's Annual Report on Form 10-KSB for the fiscal
year ended January 31, 1999).
10.2+Gold Standard Reseller Agreement, dated June 16, 1999, by and between INVU
Services Limited and Computer Associates International, Inc. (incorporated
by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-KSB
for the fiscal year ended January 31, 1999).
10.3 Distributor Agreement, dated July 1, 1999, by and between INVU Services
Limited and CHS UK Holdings Limited Incorporated (incorporated by reference
to Exhibit 10.10 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended January 31, 1999).
27* Financial Data Schedule (Exhibit 27).
*Filed herewith
+Confidential materials deleted and filed separately with the Securities and
Exchange Commission
Form 8-K: None
4
<PAGE>
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.
(Registrant)
Date: October 20, 1999 By: /s/ David Morgan
---------------------------------------------------
David Morgan, President and Chief Executive
Officer (Principal Executive Officer)
Date: October 20, 1999 By: /s/ John Agostini
---------------------------------------------------
John Agostini, Vice President-Chief Financial
Officer and Secretary (Principal Financial Officer)
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Financial Data Schedule for INVU, Inc.
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<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
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