U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[X] Annual report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934 for the fiscal year ended
January 31, 1999
[ ] Transition report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934 for the transition
period from _____________to _____________
Commission File Number 000-22661
-------------
INVU, INC.
(Name of Small Business Issuer in Its Charter)
Colorado 84-1135638
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
The Beren
Blisworth Hill Farm
Stoke Road
Blisworth Northamptonshire NN7 3DB
- - -------------------------- -------
(Address of Principal Executive Offices) (Zip code)
011 44 1604 859 893
-------------------
(Issuer's Telephone Number, Including Area Code.)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
------------------- on Which Registered
NONE ---------------------
N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
--------------------------
(Title of class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 past 90 days.
Yes x No
------- -------
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $8,267
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of May 10, 2000 was approximately
$19,049,617.50. For purposes of this computation, all executive officers,
directors and 10% stockholders were deemed affiliates. Such a determination
should not be construed as an admission that such executive officers, directors
or 10% stockholders are affiliates.
<PAGE>
As of May 10, 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: Yes No x
----- -----
<PAGE>
<TABLE>
<CAPTION>
INVU, Inc.
Page
----
<S> <C> <C>
PART I ............................................................................................... 1
Item 1. Description of Business .............................................................. 1
Item 2. Description of Properties ............................................................ 8
Item 3. Legal Proceedings .................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders .................................. 8
PART II ............................................................................................... 9
Item 5. Market for Common Equity and Related Stockholder Matters ............................. 9
Item 6. Management's Discussion and Analysis or Plan of Operations ........................... 10
Item 7. Financial Statements ................................................................. 13
PART III ............................................................................................... 13
Item 9. Directors, Executive Officers, Promoters and Control Persons ......................... 13
Item 10. Executive Compensation ............................................................... 15
Item 11. Security Ownership of Certain Beneficial Owners and Management ....................... 15
Item 12. Certain Relationships and Related Transations ........................................ 17
Item 13. Exhibits and Reports on Form 8-K ..................................................... 18
FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants ............................................ F-3
Consolidated Balance Sheets as of January 31, 2000 and 1999 ................................... F-4
Consolidated Statements of Operations for the year ended January 31, 2000 and January 31, 1999,
and the period from February 18, 1997 to January 31, 2000 .................................... F-5
Consolidated Statements of Deficit in Stockholders' Equity for the year ended
January 31, 2000 and January 31, 1999, and the periods from February 18, 1997
to January 31, 2000 .......................................................................... F-6
Consolidated Statements of Cash Flows for the year ended January 31, 2000, and the period
from February 18, 1997 to January 31, 2000 ................................................... F-7
Notes to Consolidated Financial Statements .................................................... F-8
SIGNATURES
INDEX TO EXHIBITS ...................................................................................... E-1
</TABLE>
<PAGE>
PART I
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or anticipated results, including those set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in, or incorporated by reference into, this report.
Item 1. Description of Business
Background of Company
INVU, Inc. (the "Company" or "INVU") was incorporated under the name
Sunburst Acquisitions I, Inc. pursuant to the laws of the State of Colorado on
February 25, 1997, as a "shell" company. The Company's business plan at the time
was to seek, investigate, and, if warranted, acquire one or more properties or
businesses, and to pursue other related activities intended to enhance
shareholder value.
After the consummation of the Share Exchange on August 31, 1998, which
is discussed below, the Company entered the business of marketing and selling
software for the electronic management of information and documents.
The structure of the business at this point consists of INVU, Inc. as
the ultimate holding company of three directly or indirectly wholly-owned
subsidiaries: INVU Plc, a UK holding company, and its subsidiaries, INVU
International (Holdings) Ltd., which holds certain intellectual property rights,
and Invu Services Ltd. ("INVU Services"), an operating company.
The Share Exchange
On August 31, 1998, the Company consummated the acquisition of all of
the issued and outstanding capital stock of INVU Plc, a company incorporated
under English law ("INVU Plc"), in exchange for 26,506,552 shares (the "Share
Exchange") of common stock, no par value, of the Company (the "Common Stock"),
pursuant to a Share Exchange Agreement, dated as of May 19, 1998, between the
Company and INVU Plc's majority shareholder Montague Limited ("Montague"), an
Isle of Man company (as amended by a First Amendment to Share Exchange
Agreement, dated as of July 23, 1998 (the "Share Exchange Agreement")). As a
result of the Share Exchange, INVU Plc became a wholly-owned subsidiary of the
Company. As conditions precedent to the consummation of the Share Exchange, (i)
Montague received a power of attorney from Halcyon Enterprises Plc, a minority
shareholder and a company incorporated under English law ("Halcyon"), to
transfer its shares of INVU Plc to the Company, and (ii) all of the outstanding
shares of Series A Convertible Preferred Stock of the Company (the "Preferred
Stock") were converted into Common Stock of the Company at a conversion rate of
two (2) shares of Common Stock for each share of Preferred Stock.
As of August 31, 1998, the Company had a total of 2,190,000 shares of
Common Stock issued and outstanding after the conversion of the Preferred Stock.
Upon consummation of the Share Exchange, Montague and Halcyon (collectively, the
"INVU Plc Shareholders") received in the aggregate 26,506,552 shares of Common
Stock of the Company in exchange for all of the issued and outstanding share
capital of INVU Plc.
The Market and Market Strategy
There has, in the recent past, been a significant increase in the
volume of information available to the public with the advent of inexpensive
computing and the arrival of wide area networks (that provide a conduit to this
information). A significant amount of information (e.g. on-line databases,
documents, graphics, audio, recordings and video) is now available via the
internet to organizations and individuals from sources around the world.
Management believes that the proliferation and consequent accumulation of such
information and accompanying documents over the years has created a problem for
individuals and organizations because they now need to manage large and
disparate sets of data created internally and arriving externally. For example,
personal computers are now shipped with up to
1
<PAGE>
16 Gigabyte hard disks, and these machines are rapidly becoming repositories for
lost files and information. Management believes that this is a global problem
that has resulted in an international market for document management
technologies, which Management expects to grow significantly in the next five
years. Information is now regarded as the key resource for organizations and
individuals. Management believes that accessing and sharing information are two
of the biggest challenges currently facing businesses. Management expects that
those organizations that are able to harness and exploit information will derive
a competitive advantage in their markets.
By contrast, Management estimates that the availability of services
that enable organizations to manage and control this mass of information has
lagged behind the requirement for such services. Therefore, Management believes
that the market for document management services has the potential for rapid
growth in markets throughout the world. Further, the document management market
is applicable to all information users, both organizations and individuals, and
therefore, while difficult to define, is broad in terms of potential in the
estimate of Management.
The Company's goal is to tap into this market potential and it markets
and sells software for the electronic management of many types of information
and documents, such as forms, correspondence, literature, faxes, technical
drawings and electronic files. Because this is a task that for the most part is
inherently clerical in nature, automation of document management control is
effectively dealt with by computer. Management believes there is an increasing
demand for ease of use in relation to document and information management
software and INVU software has been designed specifically to address this need.
Management considers the INVU software simple, intuitive and cost effective, yet
powerful. Geographically, the Company's first target markets are the United
States and the United Kingdom.
INVU serves both the personal computer ("PC") and client server market
segments and is, therefore, firmly placed in what Management believes are the
two principal growth areas. Management believes that the client server segment
(i.e. mid-range network user running open "multi-task software") has in
particular been largely neglected by the Company's competitors, which generally
fall into two categories:
i. Large corporate suppliers that offer proprietar (i.e. such companies
own their software) solutions based on large, often mainframe,
systems; or
ii. Small niche suppliers addressing the needs of small highly specialized
groups (e.g. lawyers or real estate agents).
Management believes that there are trends in the document management
market that its competitors may have neglected. These include:
i. The growth of the Internet has meant that a large amount of varied
data is available to computer users, with only rudimentary systems to
manage such data;
ii. A switch from "all-in-one" hardware and softwar in a single unit (i.e.
proprietary stand alone systems) to open PC based systems, as
evidenced by the PC and packaged systems showing the highest growth of
all market segments;
iii. Increased use of document management systems to control everyday
paperwork and electronic files; and
iv. Increased user requirements in the PC segment to store graphical
images in addition to electronic files.
Management believes that INVU enjoys an advantage over most competing
programs because INVU software exploits these trends and can be sold to single
users, departmental users and company wide. For example, once successfully
installed with a departmental user, INVU intends to encourage resellers to "roll
out" the product to other departments within the same organization using the
first installation as an internal reference site. Management believes that with
this technique there is considerable potential for additional sales to existing
customers. Further, INVU software has been designed for general office
applications, which can be utilized across a wide range of
2
<PAGE>
customers, from small office home office markets ("SOHO") to small to medium
sized enterprises ("SME") to large organizations. Management believes that this
allows INVU to address a wide and varied market.
On-going research is important to INVU and the use of qualitative focus
groups is a technique used by the Company to assess customer needs and
receptivity. In addition, industrial psychology techniques have been employed by
INVU to establish customer perception of value.
The Company's objective is to establish itself as a leading supplier of
information and document management software in the world. For its professional
range of products, which include INVU Series 100, Series 200 and ViewSafe, the
Company expects to target its marketing efforts initially on departmental users
in organizations, distributors and resellers in the United Kingdom and the
United States. For its personal user products, which include INVU WebServant and
FileServent, the Company intends to concentrate its marketing efforts on the
SOHO market and plans on targeting retailers. In addition, INVU intends to
maximize its internet presence for entry level product sales. To that end, in
November 1998, INVU finalized a distribution agreement with Digital River, Inc.
("Digital River") to sell its retail products on-line.
Management believes that, as the market matures, the purchase of
document management systems will become increasingly routine as buyers become
acquainted with both the technology and applications. In order to deal with the
increased demand, the Company intends to increase its number of distributors and
third party value added resellers. In addition, Management intends to make
INVU's retail products available from the Company's web-site. Management
considers both branding and product positioning fundamental to attaining the
market share required to profitably meet its objective of being a leading
supplier of information and document management software.
The Product
INVU's business is the development and sale of document and information
management software programs which operate on stand-alone PCs, networked PCs and
client server systems and allow documents of any size and format, from
correspondence and faxes to technical drawings and electronic files, to be
stored on to computer memory and retrieved instantly. In order to store such
information, INVU software also scans paper and creates files and imports
documents. Lastly, the software provides a mechanism to manage and retrieve the
imported information. Although INVU software has many layers of sophistication,
Management believes it is comparatively simple to use and inexpensive.
The Company's first product, INVU SOLO was released to distributors in
December 1998 and sales to the SOHO market began in January 1999. Management was
satisfied with the initial response to this product, but in view of comments and
advice received from retailers they re-launched a more suitably packaged product
in March 2000 that consists of two products. The first is "WebServant," which
enables web users to quickly and easily build a personal library from the
internet and download, store and organize webpages. WebServant carries a
competitive price of less than $50. The second is "FileServant," which is
similar to INVU SOLO except that it contains the same web technology as
"WebServant." The Company's professional range of products, i.e. INVU Series
100, Series 200 and ViewSafe, were first introduced in October 1999 via an
exclusive distributor who went into administrative receivership before any
product orders had been filled. 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 has decided to directly recruit resellers while at the same time
pursuing non-exclusive distributors for the products.
As a consequence of initial marketing activities associated with the
launch of the Company's professional range of products, many end user inquiries
have been received. These inquiries are now being pursued by our expanding team
of sales personnel. Although the loss of the Company's U.K. distributor has
caused a delay in sales revenues, Management is confident that its direct sales
team and newly recruited resellers will provide positive results during the
second half of year 2000.
Currently, the Company is developing INVU Series 2000 (formerly INVU
WEBFAST), and Management expects that it will be released in late 2000. INVU
software engineers have also successfully developed a prototype information
management internet service. This service will allow advanced internet
information management within
3
<PAGE>
fully encrypted secure databases. Individuals and corporations will be able to
store their documents on an INVU website and access them via password controls
from anywhere in the world. Management anticipates a release date in late 2000.
As of January 31, 2000, research and development costs were approximately
$387,125. None of these sums have been borne directly by customers.
In sum, the Company currently has six products. Each product addresses
different market segments, which include (1) the small office/home office
market, or "SOHO" and (2) the small/medium enterprise market, or "SME," (3) the
internet and (4) large enterprises.
<TABLE>
<CAPTION>
Product Description Market
------- ----------- ------
<S> <C> <C>
INVU WebServant single user e-mail and internet SOHO/Retail
information management
INVU FileServant single user information and SOHO/Retail
document management
INVU Series 100 single user information and SOHO/SME
document management
INVU Series 200 multi-user information and SME/Enterprise
document management system
INVU Series 2000* manage and find documents Enteprise/Internet
through a web browser
<FN>
- - ---------------------
*to be released late 2000
</FN>
</TABLE>
Competition
The market for the Company's products is competitive, subject to rapid
change and significantly affected by new product introduction and other market
activities of industry participants. The Company currently encounters direct
competition from a number of public and private companies such as Altris
Software, Inc., Key File Inc., FileNet Corporation, PC Docs and Caere
Corporation. Virtually all of these direct competitors have significantly
greater financial, technical, marketing and other resources than the Company.
The Company also expects that direct competition will increase as a result of
recent consolidation in the software industry.
The Company will need to rely on a number of systems consulting and
systems integration firms for implementation and other customer support
services, as well as for recommendation of its products to potential purchasers.
Although the Company seeks to maintain close relationships with these service
providers, many of these third parties have similar, and often more established,
relationships with the Company's principal competitors. If the Company is unable
to develop and retain effective, long-term relationships with these third
parties, the Company's competitive position would be materially and adversely
affected. Further, there can be no assurance that these third parties will not
market software products in competition with the Company in the future or will
not otherwise reduce or discontinue their relationship with, or support of, the
Company and its products.
Management believes that its products are targeted at markets where, to
date, few of the Company's larger and more established competitors have secured
significant market penetration. Although the Company believes that it will
compete favorably in these markets, there can be no assurance that the Company
can maintain its competitive position against current and any potential
competitors, especially those with greater financial, marketing, service,
support, technical and other resources than the Company.
4
<PAGE>
Major Contracts
In March 1998, INVU Services entered into (i) a Reseller Agreement (the
"Reseller Agreement") with Computer Associates Plc ("CA Plc"), and (ii) a
Limited Manufacturing Agreement with Centura Software Ltd. These contracts
involve joint marketing, combined press releases, common distribution and the
use of combined technologies. Both Computer Associates Plc and Centura endorse
INVU through their logotypes on INVU materials and shrink-wrap packaging
containing the software. Both agreements include worldwide press announcements
and introductions to direct sales forces and third party distribution.
INVU Services and CA Plc have subsequently executed a memorandum
confirming certain agreements between INVU Services and CA Plc with respect to
the bundling and marketing of INVU Service's products under the Reseller
Agreement. In addition, in 1999, INVU Services and Computer Associates
International, Inc. ("CA Inc.") entered into a Gold Standard Reseller Agreement
pursuant to which INVU Services appointed CA Inc. as an authorized reseller of
INVU Series 100 and INVU Series 200 on a non-exclusive basis for a term of 12
months, renewable upon agreement of both parties and terminable upon 30 days
written notice by either party.
In late 1998 INVU Services entered into a Distribution Agreement with
KOCH Media Limited ("KOCH"). This agreement has since been terminated and
replaced by an agreement with Gem Distribution Limited, as described below.
Also in late 1998, INVU Services and Digital River entered into an
agreement whereby INVU will market its suite of products using Digital River's
e-commerce technology. Under this agreement, Digital River will partner with
INVU to create the INVU Cyber Store, offering a secure environment for customers
to purchase and download INVU software via the World Wide Web. INVU Services has
also entered into an increasing number of "Accredited Reseller Agreements"
whereby resellers are authorised to provide the professional range of products
to end users.
INVU Services and CHS UK Holdings Limited Incorporated ("DNSP")
entered into a Distributor Agreement in July 1999 pursuant to which INVU
Services appointed DNSP the exclusive distributor of INVU Series 100 and INVU
Series 200 and INVU Series 2000 for the territory of England, Scotland and
Wales. This agreement was terminated following the Receivership of DNSP in
October 1999.
In January 2000, INVU Services entered into a Distribution Agreement
with Gem Distribution Limited ("GEM Distribution"). GEM Distribution is a large
retail distributor and is not in any way affiliated with Global Emerging Markets
Inc., an investment banking firm, as described below. The agreement means that
INVU FileServant, WebServant, and Series 100 have access to all the major retail
channels in the United Kingdom.
Employees
As of May 1, 2000, the Company had 14 employees, all of whom were
full-time, and a further seven people who are part-time or serve as consultants.
Patents, Trademarks and Copyright
The Company's success is dependent in part upon proprietary technology.
At this time, the Company has not patented any aspect of its document management
systems technology in the United Kingdom, the United States or internationally.
The Company currently has no plans to file for and obtain patents domestically
or internationally. Even if the Company were to attain patent protection over
certain of its intellectual property, the rapidly changing technology in the
industry makes the Company's success largely dependent on the technical
competence and creative skills of its personnel.
The Company relies on a combination of trade secret, copyright and
non-disclosure agreements to protect its proprietary rights in its software and
technology. There can be no assurance that such measures are or will be adequate
to protect the Company's proprietary technology. Furthermore, there can be no
assurance that the Company's
5
<PAGE>
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology.
The Company's software will be licensed to customers under license
agreements containing provisions prohibiting the unauthorized use, copying and
transfer of the licensed program. Policing unauthorized use of the Company's
products will be difficult, and any significant piracy of its products could
materially and adversely affect the Company's financial condition and results of
operations.
In addition, the Company also relies on certain software that it
licenses from third parties, including software that is integrated with
internally developed software and used in the Company's products to perform key
functions. There can be no assurances that the developers of such software will
remain in business, or that they will otherwise continue to be available to the
Company on commercially reasonable terms. The loss of or inability to maintain
any of these software licenses could result in delays or reductions in product
shipments until equivalent software can be developed, identified, licensed and
integrated, which could adversely affect the Company's business, operating
results and financial condition.
The Company is not aware that any of its software products infringe the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by the Company with respect to its
current or future products. The Company expects that software product developers
will increasingly be subject to infringement claims. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to the Company or at all, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company claims a trademark on all of its products under common law
by using the "TM" symbol. The duration of such trademarks under United Kingdom
common law is the length of time the Company continues to use them. The Company
has filed an application for trademark registration of its "INVU" mark in the
United Kingdom. This application has been opposed by two companies. Management
believes that these oppositions will be favorably resolved. See "Item 3 - Legal
Proceedings."
The First Financing Transaction
As of February 2, 1999, pursuant to a financing transaction (the "First
Financing Transaction") among Montague and Zalcany Limited ("Zalcany"),
Mustardseed Estates Limited ("Mustardseed"), and Tomuro Limited, all companies
incorporated under English law, and Richard Harris and Roy Grainger Williams
(collectively, the "Lenders"), Montague transferred 2,400,000 shares of the
Common Stock to such purchasers in exchange for $1,000 and a loan facility for
the Company in the principal amount of $656,000. Of this amount, $190,325 was
advanced to the Company prior to January 31, 1999 with the balance being
received on February 2, 1999.
The Second Financing Transaction
On August 23, 1999, the Company entered into an Investment Agreement
(the "Initial Investment Agreement"), with David Morgan, John Agostini, and Paul
O'Sullivan, on the one hand, and Alan David Goldman and Vertical Investments
Limited ("Vertical"), a company registered in Jersey and beneficially owned by
Daniel Goldman, on the other hand. The Initial Investment Agreement was
immediately followed by a Supplemental Agreement (the "Supplemental Agreement"
and, together with the Initial Investment Agreement, the "Final Investment
Agreement"), between the Company, David Morgan, John Agostini, Paul O'Sullivan
and INVU Services, on the one hand, and Alan David Goldman, Vertical, and Tom
Maxfield ("Maxfield", together with Alan David Goldman and Vertical,
collectively, the "Investors") on the other hand. Pursuant to the terms of the
Final Investment Agreement, the Investors agreed to advance certain funds to the
Company in the aggregate principal amount of $1,000,000 in shares of $333,334,
$333,333 and approximately $333,333 among Alan David Goldman, Vertical and
Maxfield, respectively. In turn, the Company agreed to (1) pay in full any and
all amounts then outstanding pursuant to the First Financing Transaction and to
terminate such Agreement, (2) cause the Lenders to transfer to Montague 425,000
shares of the Common Stock then held by Lenders pursuant to the terms of the
First Financing Transaction (the "Transferred Shares"), and (3) cause Montague
to transfer 225,000 of such Transferred Shares to the Investors in equal shares
of 75,000 to each Investor.
6
<PAGE>
The loans being made to the Company pursuant to the terms of the Final
Investment Agreement were evidenced by (1) a Loan Stock Instrument, dated as of
August 23, 1999, executed by the Company in favor of the Investors, in the
aggregate principal amount of $600,000 ("Loan Stock Instrument A"), and (2) a
second Loan Stock Instrument, dated as of August 23, 1999, executed by the
Company in favor of the Investors, in the aggregate principal amount of $400,000
("Loan Stock Instrument B" and together with Loan Stock Instrument A,
collectively, the "Loan Stock Instruments"). Until the Loan Stock Instruments
are redeemed pursuant to their terms upon the occurrence of certain events
described therein, the outstanding principal and accrued but unpaid interest (1)
under Loan Stock Instrument A shall, at the option of the Investors, be
converted into one share of the Common Stock for each $.65 of outstanding
principal and accrued but unpaid interest converted, and (2) under the Loan
Stock Instrument B shall, at the option of Investors, be converted into one
share of the Common Stock for each $.50 of outstanding principal and accrued but
unpaid interest converted.
Any amounts outstanding under Loan Stock Instrument A shall bear
interest at a rate of 6% per annum, payable in semi-annual installments in
arrears on January 1 and July 1 of each year accruing from day to day and
calculated monthly. In addition, Loan Stock Instrument A will be automatically
converted in the event that the Company is listed on the NASDAQ National Market
or the Official List of the London Stock Exchange or if the Company raises
additional capital of at least $4,000,000. Any amounts outstanding under Loan
Stock Instrument B shall bear interest at a rate of 8% per annum for the first
six months following the date thereof, 9% per annum for the following six month
period, and 10% per annum thereafter. All accrued but unpaid interest on the
Loan Stock shall be payable in semi-annual installments in arrears on January 1
and July 1 of each year. Loan Stock Instrument B will also be automatically
converted in the event that the Company is listed on the NASDAQ National Market
or the Official List of the London Stock Exchange, however, the Investors have
the option of converting if the Company raises additional capital of at least
$4,000,000. If Loan Stock Instrument B is not so converted, it can be redeemed
at any time for a period of 12 months from August 23, 1999 at the election of
the Company. If the Loan Stock Instruments are not so converted, they may be
redeemed upon 30 days notice by the Company or the Investors on or after August
2002.
Pursuant to the terms of the Investor Agreement, the Investors shall
have the right to nominate one director of the Company, until the amounts
outstanding under the Loan Stock Instruments are redeemed or converted. Daniel
Goldman, the son of Alan David Goldman, is the nominee of the Investors.
The obligations of the Company under the Investor Agreement and the
Loan Stock Instruments have been guaranteed by INVU Services. Pursuant to the
Investment Agreement, the Company covenanted with the Investors to restrict
certain actions while any amounts remain outstanding under the Loan Stock
Instruments without the Investors' consent, which consent may not be
unreasonably withheld, including the following actions: the issuance of
additional Company Common Stock, except pursuant to the exercise of outstanding
warrants and options of the Company; the issuance of any new options to purchase
Company Common Stock; additional borrowings by the Company; capital expenditures
of the Company; paying off liabilities; granting security interests; and
acquiring other entities.
Merrion Capital Appointment
In March 2000, the Company announced the appointment of Merrion
Capital, an Irish corporate advisory firm ("Merrion"), as corporate finance
advisors to the Company. Merrion will advise and assist the Company in
implementing its corporate strategy and, in particular, its plans for a major
corporate fund-raising program.
The Third Financing Transaction
As of May 1, 2000 the Company entered into a Convertible Debenture
Purchase Agreement (the "GEM Agreement") with United Kingdom-based firm Global
Emerging Markets Inc. and related partner ("GEM") pursuant to which the Company,
upon the satisfaction of certain conditions by the Company set forth in the GEM
Agreement, will issue convertible debentures (the "Debentures") in the principal
amount of $5 million and warrants (the "Warrants") to purchase shares of Company
common stock.
7
<PAGE>
Debentures in the principal amount of $2.5 million will be issued to
GEM upon satisfaction by the Company of certain conditions, including, (1)
effectiveness of a registration statement filed by the Company under the United
States Securities Act of 1933 registering the resale of the shares of the
Company's common stock underlying the Debentures and the Warrants within 190
days of the date of the GEM Agreement, and (2) the Company's common stock having
an average closing bid price in excess of $1.00 for 30 trading days immediately
prior to the closing date. A second tranche of Debentures with principal amount
of $2.5 million will be issued to GEM 120 days later. In addition, upon
execution of the GEM Agreement, GEM has agreed to advance $100,000 to the
Company pursuant to a demand note.
The Debentures will have a term of three years and bear interest at the
rate of 3% per annum, payable in cash or securities at the time of conversion.
The Debentures may be converted at any time into shares of the Company's common
stock and will automatically be converted upon maturity at a price equal to the
lesser of (x) the lower of $3.00 or 125% of the average of the closing bid
prices for the Company's common stock for the five trading days immediately
prior to the closing of the transaction, or (y) 75% of the average of the three
lowest closing bid prices for the Company's common stock during the thirty day
period prior to conversion.
The Warrants will also have a term of three years and will entitle the
holders thereof to purchase that number of shares of the Company's common stock
equal to 20% of such principal amount of the Debentures divided by the average
of the closing bid prices for the Company's common stock for the five trading
days immediately prior to the closing date. The exercise price of the Warrants
will be the lower of $3.00 or 125% of the average of the closing bid prices for
the Company's common stock for the five trading days immediately prior to the
closing date. In the event the GEM Agreement is terminated in certain
circumstances, GEM will be paid $100,000 and retain termination warrants to
purchase 500,000 shares of the Company's common stock at an exercise price of
$0.01 per share.
The Company will be unable to sell any securities that would be
integrated with the offer and sale of the Debentures, the Warrants and the
shares the underlying the Debentures and the Warrants and thus require
registration under the Securities Act of 1933, as amended, of the sale of the
Debentures and the Warrants. If an event of default occurs under the GEM
Agreement after the initial closing of the transaction and it is not cured
within the time specified under the GEM Agreement, the Company will be obligated
to pay GEM liquidated damages in an amount equal to double the purchase price of
the debentures and the warrants.
Name Change
On February 22, 1999, the Company's shareholders approved an amendment
to the Company's Articles of Incorporation changing the name of the Company from
"Sunburst Acquisitions I, Inc." to "INVU, Inc."
Change in Fiscal Year
As of January 15, 1999, the Company's Board voted to change the
Company's fiscal year end to January 31.
Item 2. Description of Properties
The Company moved into new executive offices on March 19, 2000. As
previously, these new premises are located in Blisworth, Northamptonshire,
England. The Company leases 3,600 square feet of space in a facility as a
tenant. The term of the lease is through Jan 1, 2003 and the monthly rent is
currently approximately $5,700.
Item 3. Legal Proceedings
In 1998, the Company filed an application for trademark registration of
its "INVU" mark in the United Kingdom. This application was opposed by two
companies, France Cables et Radio ("France Cables") and Sension Limited
("Sension"). Both France Cables and Sension challenge the Company's right to
protect the "INVU" mark and ask for a denial of registration.
8
<PAGE>
The opposition case with France Cables began on September 3, 1998 and
has been assigned case number 48955. France Cables specifically asserts that
there is a likelihood of confusion with its own trade name. The Company contends
that the marks are so dissimilar in sound, connotation and meaning that no
reasonable person would likely be confused by their use on software products.
The case will be heard at the United Kingdom Trademark Registry, however, a
specific date for the hearing has not yet been set.
The opposition case with Sension began on September 1, 1998 and has
been assigned case number 48943. As of April 14, 2000, Sension Limited had yet
to file with the United Kingdom Trademark Registry (the "Trademark Registry")
evidence regarding their opposition of the "INVU" mark or to apply for an
extension of time to do so. In response, the Registrar of the Trademark Registry
issued a letter to their legal representatives stating that the case was ready
for a decision based upon the Company's evidence and statutory declarations.
Sension alleges that they have an earlier trademark right. The Company contends
that it has an earlier first date of use than Sension.
The Company believes it will prevail on both matters.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters for submission to a vote of security holders
during the last fiscal year.
9
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Common Stock is listed on the OTC Electronic Bulletin Board. The
following table indicates the quarterly high and low bid price for the Common
Stock on the OTC Electronic Bulletin Board for the fiscal years ending January
31, 1999 and January 31, 2000 and for the quarter ending April 30, 2000. Prior
to the consummation of the Exchange Agreement on August 31, 1998, there was no
active public trading market for the Common Stock. Such inter-dealer quotations
do not necessarily represent actual transactions, and do not reflect retail
mark-ups, mark- downs or commissions.
<TABLE>
<CAPTION>
OTC ELECTRONIC
BULLETIN BOARD
BID PRICE
HIGH LOW
<S> <C> <C> <C>
Fiscal 1999
1st Quarter $N/A $N/A
2nd Quarter $N/A $N/A
3rd Quarter (Sept. 1 - Oct. 31) $5.00 $0.97
4th Quarter $1.56 $0.375
Fiscal 2000
1st Quarter $3.00 $0.45
2nd Quarter $1.88 $1.38
3rd Quarter $2.50 $1.00
4th Quarter $3.00 $0.875
Fiscal 2001
1st Quarter $3.00 $0.45
</TABLE>
As of May 12, 2000, there were approximately 131 holders of record of
the Common Stock.
The Company has not declared or paid any cash or other dividends on the
Common Stock to date for the last two (2) fiscal years and in any subsequent
period for which financial information is required and has no intention of doing
so in the foreseeable future. The Initial Investment Agreement prohibits the
Company from declaring or distributing any dividend so long as the Investors
hold stock. See "Item 1. Description of Business - The Second Financing
Transaction."
Recent Sales of Unregistered Securities
On August 23, 1999, the Company executed two Loan Stock Instruments in
favor of David Morgan, John Agostini, Paul O'Sullivan, INVU Services, Alan David
Goldman, Vertical Investments Limited and Tom Maxfield. See "Item 1. Description
of Business - The Second Financing Transaction." The first Loan Stock Instrument
("Loan Stock Instrument A") was executed for the aggregate principal amount of
$600,000 and the second ("Loan Stock Instrument B") was executed for the
aggregate principal amount of $400,000. Until the Loan Stock Instruments are
redeemed pursuant to their terms upon the occurrence of certain events described
therein, the outstanding principal and accrued but unpaid interest (1) under
Loan Stock Instrument A shall, at the option of the Investors, be converted into
one share of the Common Stock for each $.65 of outstanding principal and accrued
but unpaid interest converted, and (2) under the Loan Stock Instrument B shall,
at the option of Investors, be converted into one share of the Common Stock for
each $.50 of outstanding principal and accrued but unpaid interest converted. In
addition, both Loan Stock Instruments will be automatically converted in the
event that the Company is listed on the NASDAQ National Market or the Official
List of the London Stock Exchange. If the
10
<PAGE>
Company raises additional capital of at least $4,000,000, Loan Stock Instrument
A will be automatically converted and Loan Stock Instrument B can be converted
at the option of the Investor. If Loan Stock Instrument B is not so converted,
it can be redeemed at any time for a period of 12 months from August 23, 1999 at
the election of the Company. If both Loan Stock Instruments are not so
converted, they may be redeemed upon 30 days notice by the Company or the
Investors on or after August 2002.
Both Loan Stock Instruments were sold pursuant to an exemption provided
by Section 4(2) of the Securities Act of 1933.
Item 6. 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 and
the Exchange Act and as such involves known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
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", "believes", "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-KSB 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 develops, markets and sells software (under the brand name
of 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 expects to target its marketing
efforts initially in the United Kingdom and the United States on departmental
users in organizations, distributors and resellers. For its personal user (SOHO
- - - small office / home office) market the Company envisages its marketing will
mainly target retailers for INVU WebServant and FileServant.
The Company's first product, INVU SOLO, was released to distributors in
December 1998 and sales to the SOHO market commenced in January 1999. The
Directors were satisfied with the initial response to this product, but in view
of comments and advice received from retailers they have decided to re-launch
more suitably packaged and
11
<PAGE>
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 $50. This product's key features are the simple downloading,
storing and organisation of web pages thus enabling on or off line browsing. The
second product, "FileServant," is a re-launch of the original INVU SOLO product
with additional features included including the aforementioned web technology.
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, the Directors have decided to directly recruit resellers whilst also
pursuing non-exclusive distributors for the products. The number of early
resellers sign-ups has been encouraging.
As a consequence of initial marketing activities associated with the
launch of the Company's professional range of products, many end user enquiries
have been received. These enquiries are now being pursued by our expanding team
of sales personnel. Although the loss of the Company's U.K. distributor has
caused a delay in sales revenues, Management is confident that its direct sales
team and newly recruited resellers will provide positive results during the
second half of year 2000.
INVU Series 2000 (formerly INVU WEBFAST), continues to be developed and
Management now estimates that this product will be released in late 2000.
INVU 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 them via password controls from anywhere in the world.
Development work continues on this project and Management anticipates a release
date later in 2000.
Management is delighted with the contribution made over the last year
by its non-executive directors Tom Maxfield and Daniel Goldman. They are also
pleased with the appointment of David Andrews as a further non- executive
director on February 29, 2000. Management expects the ex Irish Foreign Minister
will add significant experience to the board particularly with regard to the
company's global aspirations.
Results of Operations
The following is a discussion of the results of operations for the year
ended January 31, 2000, compared with the year ended January 31, 1999, and
changes in financial condition during the year ended January 31, 2000.
INVU, Inc. (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 fiscal year 2000 were $15,754, which compares to $8,267
sales for fiscal 1999. The low level of sales reflects the continued development
stage of the business and relates to sales of INVU SOLO and initial sales of
INVU Series 100 and Series 200 to end users. The net loss in fiscal 2000 was
($1,433,004), which significantly exceeds the net loss of fiscal 1999 of
($694,809). The fiscal 2000 net loss was due to: increased production,
distribution, research and development, and administrative expenses (including
expenses incurred in complying with U.S. securities laws and other expenses
relating to public company requirements) of $1,369,771, which reflected the
Company's investment in product development, marketing support, and
administrative infrastructure, together with costs associated with the various
financing transactions undertaken during the year. As the Company neared the
completion of its development stage, its attention and resources have been
diverted towards sales and marketing and administrative collateral. An entire
sales team has been hired, including field sales, sales support and technical
support personnel. Management plans to greatly increase marketing expenditure to
create greater brand awareness. New premises have been leased as from March 19,
2000 with additional IT and administrative infrastructure. These additional
resources
12
<PAGE>
have affected operating expenses in the year ended January 31, 2000 but
management expects a considerably greater impact in the year to January 31,
2001.
In fiscal 2000, the Company incurred net interest expense of $78,987
compared with net interest expense of $6,419 for fiscal 1999. This increase in
interest expense was due to increased bank loan borrowings, and interest
associated with the First Financing Transaction and the Second Financing
Transaction. See "Item 1. Description of Business - First Financing Transaction
and Second Financing Transaction."
The tax rates for the years 2000 and 1999 are zero due to a net loss in
each period.
The total current assets of the Company were $61,416 at January 31,
2000, a decrease of $96,062, compared to $157,478 at January 31, 1999. Working
capital was negative $1,750,749 as of January 31, 2000, compared with negative
$272,080 as of January 31, 1999. These changes are due to the addition of
short-term credit facilities in 2000 and an increase of current maturities of
long-term obligations, following the procurement of substantial additional loan
funding.
Total assets of the Company were $288,175 at January 31, 2000, an
increase of $50,936, compared to $237,239 at January 31, 1999. The difference is
mainly attributable to the purchase of fixed assets and reduction in
inventories.
The total current liabilities of the Company increased by $1,382,607
from $429,558 at January 31, 1999 to $1,812,165 at January 31, 2000. Long term
liabilities were $525,777 at January 31, 2000 compared to $422,193 at January
31, 1999. The current and long term liabilities increases are attributable to
debt incurred in order to finance the development of the products and the
infrastructure of the business.
Total stockholders' equity decreased by $1,435,255 during the year
ended January 31, 2000 from defecit $614,512 at January 31, 1999 to a deficit of
$2,049,767 at January 31, 2000 as a result of the net loss for the year. The
Company is evaluating various financing options, including issuing debt and
equity to finance future development, marketing of products, and strategic
acquisitions now that its development stage is ending and it's operational stage
will soon commence.
Financing Management's Plan of Operation
The Company remains committed to raising the necessary funds and is
engaged in or presently pursuing the following financing transactions.
As of January 31, 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. See "Item 1. Description of Business - The First Financing Transaction
and The Second Financing Transaction." In addition, the Company has a $486,000,
10% short-term credit facility with an English bank. The amount drawn against
the facility as of January 31, 2000 was $413,247. This amount is due at the end
of May 2000. Lastly, in March 2000 the Company received a non-interest unsecured
loan of $571,500 from an individual with no stated maturity date.
In March 2000, the Company announced the appointment of Merrion, as
corporate finance advisors to the Company. Merrion will advise and assist the
Company in implementing its corporate strategy and has agreed to use its best
efforts to raise $10,000,000 in a private placement.
As of May 2, 2000, the Company has entered into the GEM Agreement,
pursuant to which the Company, upon the satisfaction of certain conditions, will
raise $5,000,000 by issuing a convertible debenture in the principal amount of
$5,000,000 and warrants to purchase company common stock. See Item 1.
Description of Business - The Third Financing Transaction."
As a result of entering into the above Agreement, Anglo Irish Bank of
Dublin, Ireland has agreed to provide a "Bridge Facility" in the sum of
$1,600,000.
13
<PAGE>
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 C of the Consolidated Financial Statements in conjunction with this
paragraph regarding the Company's ability to continue as a going concern.
14
<PAGE>
Item 7. Financial Statements
Filed herewith beginning on page F-1 are the audited financial
statements of the Company.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Directors, Executive Officers, Promoters and Control Persons
The Board of Directors currently consists of six (6) persons, David
Morgan, Paul O'Sullivan, John Agostini, Daniel Goldman, Tom Maxfield and David
Andrews. The following table sets forth information about all Directors and
executive officers of the Company and all persons nominated or chosen to become
such.
<TABLE>
<CAPTION>
YEAR
NAME AGE OFFICE ELECTED
- - ----- --- ------ -------
<S> <C> <C> <C>
David Morgan 39 President, Chief Executive Officer, and 1998
Chairman of the Board of Directors
Paul O'Sullivan 31 Director and 1998
Chief Technical Officer
John Agostini 41 Director, Chief Finance Officer and 1999
Secretary
Daniel Goldman 30 Non-Executive Director 1999
Thomas Maxfield 51 Non-Executive Director 1999
David Andrews 64 Non-Executive Director 2000
</TABLE>
David Morgan (Chief Executive Officer) - Mr. Morgan is 39 years old and
graduated in 1982 from the University of Warwick with a Bachelor of Laws
degree, with honors. From 1982 to 1986, he was assistant to the Director of the
Industrial & Marine Division of Rolls Royce plc. From 1986 to 1991, he was
Group Commercial Manager of Blackwood Hodge plc, a worldwide distributor of
construction and earthmoving equipment. From 1991 to 1992, he was managing
director of Hunsbury Computer Services Ltd, a systems integrator and subsidiary
of Blackwood Hodge. From 1992 to 1995, he was Managing Director of the UK
subsidiary of Network Imaging Inc., an international software and systems
house. From 1995 to 1996, he was Managing Director of Orchid Ltd, a UK computer
software reseller. From 1997 to the present, he has been a Director of and the
Chief Executive Officer and of INVU Plc. Since the Share Exchange on August 31,
1998, he has been Chairman and Chief Executive Officer of the Company.
Paul O'Sullivan (Chief Technical Officer) - Mr. O'Sullivan is 31 years
old and graduated from the University of Birmingham with a Bsc (Honors) degree
in Computer Sciences in 1992. From September 1992 to January 1994 he was a
software engineer with British Telecom, and from January 1994 to October 1995
was a senior systems analyst with Abbey National plc, a financial institution.
From October 1995 to May 1996 he was a senior system developer with Orchid
Limited, a UK computer software reseller. Between May 1996 and November 1997
Mr. O'Sullivan was a consultant to British Telecom, Royal Bank of Scotland and
Pearl Assurance before joining INVU Plc in June 1998. Since the Share Exchange
on August 31, 1998, he has served as a Director and Chief Technical Officer for
the Company.
John Agostini (Chief Finance Officer) - Mr. Agostini is 41 years old,
and qualified as a chartered accountant with Grant Thornton in 1984. Since 1986
he has worked for various companies within the printing, construction, and
15
<PAGE>
electronics industries, typically as a Finance/Commercial Director. From
December 1993 to October 1996, he held the position of Director of Finance and
Operations of Bizeq Limited, a security alarms distributor. From November 1996
to April 1997, Mr. Agostini served as European Financial Controller for Sunbeam
Europe Limited, a domestic appliance distributor. From April 1997 to February
1999, he served as Finance and Operations Director of the performance textiles
division of Porvair Plc. Mr. Agostini joined INVU in February 1999 as Chief
Finance Officer, Commercial Director and Secretary.
Daniel Goldman (Non Executive Director) - Mr. Goldman is 30 years old,
and works with emerging technology companies raising private equity finance and
also provides corporate finance advice. He has worked with a number of companies
in the fields of software and the internet, smart card technology, medical
devices and other areas of patented technology as a consultant. From January
1997 until June 1997, Mr. Goldman worked with Elderstreet Corporate Finance
Ltd., a venture capital fund specializing in the high-tech sector. From July
1997 through April 1998, Mr. Goldman worked with Alberdale & Co., a venture
capital fund specializing in the high-tech and healthcare sectors. From April
1998 until June 1999, he served as a Corporate Finance Executive with Shore
Capital Group Plc, an investment bank specializing in corporate finance. Mr.
Goldman is currently a non-executive director for a number of technology
companies. These include Boomerang Software Inc., an internet software
publishing company based in Boston. Mr. Goldman joined the Board of INVU Inc. on
May 13, 1999.
Thomas Maxfield (Non Executive Director) - Mr. Maxfield is 51 years
old. He has a B.A. honors degree in modern languages. Between 1984 and 1997 he
was a main board director of The Sage Group plc, a supplier of PC accounting
software. His responsibilities included the development of a national reseller
network, creating and maintaining telesales and field sales operations, and the
creation of the company's retail sales channel. From 1997 to the present, Mr.
Maxfield has served as a director of Seaham Hall Limited, a property development
company. Mr Maxfield joined the Board of INVU Inc. on May 13, 1999.
David Andrews (Non Executive Director) - Mr. Andrews is 64 years old
and has served as a politician in the Irish Parliament for over thirty-five
years. He was appointed as a Minister in 1977 and has held several ministerial
positions, including Justice, Marine, Defense and Foreign Affair. In particular,
Mr. Andrews was appointed the Minister of Foreign Affairs of Ireland in 1992 and
reappointed in 1997. In addition, he has served since 1999 as the Chairman in
Office of the Council of Europe.
The Company is not aware of any "family relationships" (as defined in
Item 401(c) of Regulation S-B promulgated by the Commission) among directors,
executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
Except as set forth above, the Company is not aware of any event (as
listed in Item 401(d) of Regulation S-B promulgated by the Commission) that
occurred during the past five years that are material to an evaluation of the
ability or integrity of any director, person nominated to become a director,
executive officer, promoter or control person of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities (the "10% Stockholders") to file reports of
ownership and changes of ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and 10% Stockholders of the Company are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms so
filed.
The Company believes that, during the last fiscal year, the following
forms required to be filed under Section 16(a) were not filed or were not timely
filed: (i) Daniel Goldman, a director, failed to timely file a Form 3 upon his
appointment as a director; (ii) Thomas Maxfield, a director, failed to timely
file a Form 3 upon his appointment as a director; (iii) Montague, a 10%
stockholder of the Company, failed to file (a) a Form 4 upon the transfer of
2,400,000 shares pursuant to the First Financing Transaction in February 1999;
(b) a Form 4 for the acquisition of 425,000 shares in August 1999 pursuant to
the Second Financing Transaction; (c) a Form 4 for the 225,000 shares of the
425,000 it transferred back out in August 1999 in connection with the Second
Financing Transaction; (iv) the following
16
<PAGE>
Montague beneficiaries, Peter Fraser, Martyn Doherty and David Morgan (who is
also an officer and director of the Company) may have been required to jointly
file Form 4s along with Montague as described in (iii) above; (v) Thomas
Maxfield, a director, failed to file a Form 4 upon his receipt of 75,000 shares
in connection with the Second Financing Transaction; (vi) Daniel Goldman, a
director, failed to file a Form 4 upon Vertical Investments Limited's receipt of
75,000 shares pursuant to the Second Financing Transaction, a company that he
beneficially owns; (vii) Montague, a 10% stockholder, failed to file a Form 4
relating to the transfer of 277,000 shares to consultants of the company; and
(viii) all of the above parties failed to file a Form 5 regarding the above
described failures to file a Form 4.
Item 10. Executive Compensation
The following tables set forth the compensation paid by the Company to
its Executive Officers during the fiscal year ended January 31, 2000. No other
executive officer earned in excess of $100,000.
<TABLE>
<CAPTION>
Annual Compensation
Year Stock
Name/Principal Ending Options Other Annual
Position January 31 Salary Bonus Granted Compensation
-------- ---------- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
David Morgan/Chief 2000 $ 97,964 $ 0 $ 0 $22,279*
Executive Officer 1999 $101,082 $ 0 $ 0 $13,169*
Paul O'Sullivan/Chief 2000 $106,342 $ 0 $ 0 $ 5,478*
Technical Officer
John Agostini/Chief 2000 $ 86,312 $ 0 $ 0 $18,339*
Financial Officer
<FN>
*Other Annual Compensation consists of the use of a company car.
</FN>
</TABLE>
No stock options were granted to any employee during the Company's last fiscal
year.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the close of business on [ ],
2000 information as to the beneficial ownership of shares of the Company Common
Stock for all directors, each of the named executive officers (as defined in
Item 402(a)(2) of Regulation S-B promulgated by the Commission), for all
directors and executive officers as a group, and any person or "group" (as that
term is defined in Item 403 of Regulation S-B promulgated by the Commission) who
or which is known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of Company Common Stock. In addition, except as set forth
below, the Company does not know of any person or group who or which owns
beneficially more than 5% of its outstanding shares of Company Common Stock as
of the close of business on [], 2000.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
Name and Address Amount and Percentage(1)(2)
of Beneficial Owner Nature of ----------------
- - ------------------- Beneficial
Owner
----------
<S> <C> <C>
Montague Limited (3)(7) 24,095,280 79.77%
David Morgan (4)(5) * *
Martyn Doherty (4) * *
Paul O'Sullivan (6) * *
Peter Fraser (4) * *
John Agostini(10) 0 0%
Daniel Goldman(7) 654,359 2.13%
Thomas Maxfield(8) 659,359 2.14%
Roy G. Williams (9) 1,725,920 5.7%
Officers and Directors as a Group (7 persons) 1,313,718 4.19%
<FN>
17
<PAGE>
(1) Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial
ownership of any securities as to which such person, directly or
indirectly, through any contract, arrangement, undertaking, relationship or
otherwise has or shares voting power and/or investment power and as to
which such person has the right to acquire such voting and/or investment
power within 60 days. Percentage of beneficial ownership as to any person
as of a particular date is calculated by dividing the number of shares
beneficially owned by such person by the sum of the number of shares
outstanding as of such date and the number of shares as to which such
person has the right to acquire voting and/or investment power with in 60
days.
(2) Based on [30,206,896] shares of Common Stock outstanding as of [May 31,
2000].???
(3) Montague Limited ("Montague") is a company organized under Isle of Man law
with a business address of 34 Athol Street, Douglas, Isle of Man IM1 1RD
United Kingdom. The directors of Montague are Eammon Harkin and Barry John
Williams. The sole issued and outstanding share capital of Montague is
owned of record by an Isle of Man corporation related to the corporate
trustee of a discretionary trust (the "Trust"), the res of which includes
beneficial ownership of the capital stock of Montague and, therefore,
indirect beneficial ownership of 24,045,280 shares of Company Common Stock
that are held of record by Montague. Includes 232,000 shares of Common
Stock as to which Montague is the record owner, but Montague has agreed to
transfer such shares to certain consultants to the Company and to certain
directors of the Company for services rendered to the Company.
(4) Such person or persons are within a class of beneficiaries of the Trust,
with the exceptions of John Agostini, Daniel Goldman and Tom Maxfield. The
percentage of each such person's beneficial interest in the assets of the
Trust has not been determined at this time. Mr. Fraser's business address
is Caraway Cottage, 1 High Street, Ecton, Northhampton and Mr. Doherty's
business address is Caymanx Trust, 34 Athol Street, Douglas, Isle of Man
IMI 1Rd, United Kingdom.
(5) David Morgan is President and Chief Executive Officer of the Company and is
a member of the Company's Board of Directors. His business address is The
Beren, Blisworth Hill Farm, Stoke Road, Blisworth Northamptonshire NN7 3DB.
(6) Paul O'Sullivan is Vice President - Chief Technical Officer of the Company
and is a member of the Company's Board of Directors. His business address
is The Beren, Blisworth Hill Farm, Stoke Road, Blisworth Northamptonshire
NN7 3DB.
(7) Includes 5,000 shares of Common Stock that Montague has agreed to transfer
to Mr. Goldman in connection with Mr. Goldman becoming a director of the
Company. Also includes shares of Common Stock that Vertical, which is owned
by Mr. Goldman, has the right to acquire upon conversion of Loan Stock
Instrument A and Loan Stock Instrument B (assuming that all accrued
interest has been paid). See "Item 1. Description of Business - The Second
Financing Transaction." Mr. Goldman's business address is 13 Fernville
Road, Newcastle upon Tyne NE3 4HT.
(8) Includes 10,000 shares of Common Stock that Montague has agreed to transfer
to Mr. Maxfield in connection with Mr. Maxfield becoming a director of the
Company. Also includes shares of Common Stock that Mr. Maxfield, has the
right to acquire upon conversion of Loan Stock Instrument A and Loan Stock
Instrument B (assuming that all accrued interest has been paid). See "Item
1. Description of Business - The Second Financing Transaction." Mr.
Maxfield's business address is Marsden Hall, Lizard Lane, MarsdenTyne &
Wear NE34 7AD.
18
<PAGE>
(9) Pursuant to a Schedule 13G filed by Mr. Williams, Mr. Williams has the
following beneficial ownership with respect to shares of Common Stock. Mr.
Williams has sole voting and dispositive power over 659,780 shares of
Common Stock including 261,875 shares of Common Stock owned by Mustardseed
and has sole voting and power over such shares. Zalcany owns 1,066,140
shares of Common Stock. Zalcany is owned 50% by Mr. Williams and 50% by
Richard Harris. Mr. Williams and Mr. Harris share voting and dispositive
power with respect to such shares. Mr. Williams business address is Birkett
House 27, Albemarle Street, London W1X 4LQ.
(10) Mr. Agostini is the Chief Financial Officer and a director of the Company.
His business address is The Beren, Blisworth Hill Farm, Stoke Road,
Blisworth Northamptonshire NN7 3DB.
</FN>
</TABLE>
Item 12. Certain Relationships and Related Transactions
On February 2, 1999, Zalcany, a company affiliated with Roy G. Williams, a
principal stockholder of the Company, and other related parties made a loan to
the Company to fund the Company's current operations. Such loan was made in the
aggregate principal amount of approximately $656,000 and payment is due in six
installments, with the final installment due on August 2, 2000. The loan had an
annual interest rate of 8%. See "Item 1. Description of Business - The First
Financing Transaction." As of August 23, 1999, Daniel Goldman, a director of the
Company and holder of all of the outstanding share capital of Vertical, Alan
David Goldman, the father of Daniel Goldman, and Thomas Maxfield, a director of
the Company, made a loan in the principal amount of $1,000,000 to the Company.
See "Item 1. Description of Business - The Second Financing Transaction." The
First Financing Transaction was repaid with the proceeds of the Second Financing
Transaction.
19
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
- - ------- ----------------------
2.1 Share Exchange Agreement, dated as of May 19, 1998, by and between the
Company and Montague Limited, as amended by that certain First Amendment to
Share Exchange Agreement, dated as of July 23, 1998 (incorporated by
reference from Exhibit 2.1 of the Company's Current Report on Form 8-K
filed June 8, 1998 and Exhibit 99 of the Company's Amendment to Current
Report on Form 8-K/A filed August 6, 1998).
3.1 Articles of Incorporation of the Company filed on February 25, 1997 with
the Secretary of State of the State of Colorado (incorporated by reference
from Exhibit 3.2 of the Company's Registration Statement on Form 10-SB/A
filed August 29, 1997).
3.2 Amendment to the Articles of Incorporation of the Company filed on February
22, 1999, with the Secretary of State of the State of Colorado
(incorporated by reference from Exhibit 3.2 of the Company's Annual Report
on Form 10-KSB filed October 15, 1999).
3.3 Bylaws of the Company (incorporated by referenc from Exhibit 2.2 of the
Company's Registration Statement on Form 10-SB/A filed August 29, 1997).
10.1 Limited Manufacturing Agreement, dated March 25 1998, by and between INVU
Services Limited and Centura Software Corporation (incorporated by
reference from Exhibit 10.3 of the Company's Annual Report on Form 10-KSB
filed October 15, 1999).
10.2** Reseller Agreement, dated March 26, 1998, by and between INVU Services
between INVU Services Limited and Computer Associates Plc and Memorandum
Amendment dated July 17, 1998 (incorporated by reference from Exhibit 10.4
of the Company's Annual Report on Form 10-KSB filed October 15, 1999).
10.3 Electronic Software Distribution Agreement, dated as of November 11, 1998,
by and between INVU Services Limited and Digital River, Inc. (incorporated
by reference from Exhibit 10.5 of the Company's Annual Report on Form
10-KSB filed October 15, 1999).
10.4 Distribution Contract dated as of October 27, 1998, by and between INVU
Services Limited and KOCH Media Limited (incorporated by reference from
Exhibit 10.6 of the Company's Annual Report on Form 10-KSB filed October
15, 1999).
10.5 Gold Standard Reseller Agreement, dated as of March 18, 1999, by and
between INVU Services Limited and Elcom Technical Services (incorporated by
reference from Exhibit 10.7 of the Company's Annual Report on Form 10-KSB
filed October 15, 1999).
10.6 Distributor Agreement, dated May 11, 1999, by and between INVU Services
Limited and Millenium Three Solutions Ltd. (incorporated by reference from
Exhibit 10.8 of the Company's Annual Report on Form 10- KSB filed October
15, 1999).
10.7** Gold Standard Reseller Agreement, date June 16, 1999, by and between INVU
Services Limited and Computer Associates International, Inc. (incorporated
by reference from Exhibit 10.9 of the Company's Annual Report on Form
10-KSB filed October 15, 1999).
10.8 Distributor Agreement, dated July 1, 1999, by and between INVU Services
Limited and CHS UK Holdings Limited Incorporated (incorporated by reference
from Exhibit 10.10 of the Company's Annual Report on Form 10-KSB filed
October 15, 1999).
20
<PAGE>
10.9 Investment Agreement, dated August 23, 1999, among the Company, David
Morgan, John Agostini, Paul O'Sullivan, Alan David Goldman, and Vertical
Investments Limited (incorporated by reference from Exhibit 10.12 of the
Company's Annual Report on Form 10-KSB filed October 15, 1999).
10.10 Loan Stock Instrument, dated as of August 23, 1999, by the Company in
favor of Alan David Goldman and Vertical Investments Limited (incorporated
by reference from Exhibit 10.13 of the Company's Annual Report on Form
10-KSB filed October 15, 1999).
10.11 Loan Stock Instrument, dated as of August 23, 1999, by the Company in
favor of Alan David Goldman and Vertical Investments Limited (incorporated
by reference from Exhibit 10.14 of the Company's Annual Report on Form
10-KSB filed October 15, 1999).
10.12 Supplemental Agreement, dated as of August 23, 1999, among the Company,
Vertical Investments Limited, Alan David Goldman, David Morgan, John
Agostini, Paul O'Sullivan, INVU Services Limited and Tom Maxfield
(incorporated by reference from Exhibit 10.15 of the Company's Annual
Report on Form 10-KSB filed October 15, 1999).
10.13* Distribution Agreement, dated January 29, 2000, by and between INVU
Services and Gem Distribution Limited (Exhibit 10.13).
10.14* Agreement regarding Consulting Services, dated as of May 15, 1998, by and
between the Company and Robert Jeffcock (incorporated by reference from
Exhibit 99 of the Company's Annual Report on Form 10- KSB filed August 13,
1998).
10.15 Consulting Agreement, dated as of December 15, 1998, by and between the
Company and Robert Jeffock (incorporated by reference from Exhibit 10.2 of
the Company's Annual Report on Form 10-KSB filed October 15, 1999).
21 Subsidiaries of the Company (incorporated by reference from Exhibit 21 of
the Company's Annual Report on Form 10-KSB filed October 15, 1999).
27* Financial Data Schedule.
*Filed herewith
** Incorporated by reference, confidential treatment requested.
(b) Reports on Form 8-K
21
<PAGE>
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
22
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
INVU, INC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
January 31, 2000 and 1999
<PAGE>
CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-4
CONSOLIDATED STATEMENTS OF OPERATIONS F-5
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
F-2
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors INVU, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of INVU, Inc. (a
development stage enterprise) and Subsidiaries as of January 31, 2000 and 1999
and the related consolidated statements of operations, deficit in stockholders'
equity and cash flows for the years ended January 31, 2000 and 1999 and for the
period February 18, 1997 (date of inception) to January 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of INVU, Inc. and
Subsidiaries as of January 31, 2000 and 1999 and the consolidated results of
their operations and their consolidated cash flows for the years ended January
31, 2000 and 1999 and for the period February 18, 1997 (date of inception) to
January 31, 2000 in conformity with generally accepted accounting principles in
the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has experienced losses, is not generating cash from operations and
has a deficit in stockholders' equity. These circumstances raise substantial
doubt about the Company's ability to continue as a going concern. The Company's
plans with respect to these matters, including plans to continue funding its
development expenses, are described in Note C. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Grant Thornton
Northampton, England
May 12, 2000
F-3
<PAGE>
<TABLE>
<CAPTION>
January 31, January 31,
2000 1999
$ $
<S> <C> <C>
ASSETS
Current assets
Accounts receivable:
Trade, net 1,916 615
VAT recoverable and other 22,000 11,331
Inventories 25,110 126,590
Prepaid expenses 12,390 18,942
Total current assets 61,416 157,478
Equipment, furniture and fixtures
Computer equipment 42,450 26,217
Vehicles 226,348 65,046
Office furniture and fixtures 31,096 29,938
----------------- ------------------
299,894 121,201
Less accumulated depreciation 73,135 41,440
226,759 79,761
288,175 237,239
================= ==================
LIABILITIES
Current liabilities
Short-term credit facility 413,247 66,146
Current maturities of long-term obligations 1,074,185 209,517
Accounts payable 126,204 74,773
Accrued liabilities 198,529 79,122
----------------- ------------------
Total current liabilities 1,812,165 429,558
Long-term obligations, less current maturities 525,777 422,193
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 6,844 9,095
Accumulated deficit during the development stage (2,344,966) (911,962)
----------------- ------------------
(2,049,767) (614,512)
288,175 237,239
================= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Feb 18, 1997
(date of
inception) to
Jan 31, 2000 Jan 31, 1999 Jan 31, 2000
$ $ $
<S> <C> <C> <C>
Revenues 15,754 8,267 25,993
Expenses:
Production cost 106,979 65,188 215,158
Selling and distribution cost 250,995 81,421 372,594
Research and development cost 210,219 128,959 387,125
Administrative costs 801,578 422,581 1,308,931
----------------- ----------------- -----------------
Total operating expenses 1,369,771 698,149 2,283,808
Operating loss (1,354,017) (689,882) (2,257,815)
Other income (expense)
Interest, net (78,987) (6,419) (89,514)
Other - 1,492 2,363
----------------- ----------------- -----------------
Total other expense (78,987) (4,927) (87,151)
----------------- ----------------- -----------------
Loss before income taxes (1,433,004) (694,809) (2,344,966)
----------------- ----------------- -----------------
Income taxes - - -
----------------- ----------------- -----------------
Net loss (1,433,004) (694,809) (2,344,966)
================= ================= =================
Weighted average shares outstanding:
Basic and Diluted 30,206,896 30,206,896 30,206,896
================= ================= =================
Net loss per common share:
Basic and Diluted (0.05) (0.02) (0.08)
================= ================= =================
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
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>
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 income (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 income (686,154)
------ ------ ---------- -------- ---------- ------ ---------- ==========
Balance at January 31, 1999 - - 30,206,896 288,355 (911,962) 9,095 (614,512)
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 income (1,435,255)
------ ------ ---------- -------- ---------- ------ ---------- ==========
Balance at January 31, 2000 - - 30,206,896 288,355 (2,344,966) 6,844 (2,049,767)
====== ====== ========== ======== ========== ====== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASHFLOWS
Feb 18, 1997
(date of
inception) to
Jan 31, 2000 Jan 31, 1999 Jan 31, 2000
$ $ $
<S> <C> <C> <C> <C>
Net cash flows used in operating activities
Net loss during the period (1,433,004) (694,809) (2,344,966)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 42,286 29,390 84,105
Accounts receivable (11,966) 19,247 (23,892)
Inventories 98,702 (128,134) (28,198)
Prepaid expenses 6,243 (8,342) (12,744)
Accounts payable 51,138 65,953 127,496
Accrued liabilities 118,886 69,878 200,357
---------- -------- ----------
Net cash used in operating activities (1,127,715) (646,817) (1,997,842)
Cash flows used in investing activities:
Acquisitions of property and equipment (46,143) (36,676) (113,897)
Proceeds from sale of vehicles 19,356 - -
---------- -------- ----------
Net cash used in investing activities (26,787) (36,676) (113,897)
Cash flows provided by financing activities:
Short-term credit facility 343,613 66,953 414,518
Borrowings received from notes payable 1,661,472 1,102,884 2,764,356
Repayment of borrowings (833,091) (523,265) (1,323,587)
Principal payments on capital lease (15,857) (8,911) (33,234)
Proceeds from issuance of stock - - 288,640
---------- --------- ----------
Net cash provided by financing activities 1,156,137 637,661 2,110,693
Effect of exchange rate changes on cash (1,635) 835 1,046
Net decrease in cash - (44,997) -
Cash at beginning of period - 44,997 -
---------- --------- ----------
Cash at end of period - - -
========== ========= ==========
Supplemental disclosure of
cash flow information:
Cash paid during the period for:
Interest 79,000 6,100 89,200
Income taxes - - -
</TABLE>
F-7
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASHFLOWS
The accompanying notes are an integral part of these statements.
A summary of significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
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. Proforma information is not presented
since 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. 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 - summary of significant accounting policies
1 Development stage company
The Company (a development stage company) is in the development stage as
defined by Statement of Financial Accounting Standard No. 7, "Accounting
and Reporting by Development Stage Enterprises" (SFAS No. 7).
F-8
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2 Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries INVU Plc, Services and Holdings. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
3 Revenue recognition
The Company recognizes revenue in accordance with the provisions of
Statement of Position 97-2 "Software Revenue Recognition" (SOP 97-2) issued
by the American Institution of Certified Public Accountants ("ACIPA"). Fees
for services and maintenance are generally charged to customers separately
from the license of software. Revenues from license fees are recognized
upon product shipment when fees are fixed, collectability is probable and
the Company has no significant obligations remaining under the licensing
agreement. In instances where a significant vendor obligation exists,
revenue recognition is delayed until such obligation has been satisfied.
For those license agreements which provide the customers the right to
multiple copies in exchange for guaranteed amounts (including non
refundable advance royalties), license revenues are recognized at delivery
of the product master or the first copy. Per copy royalties on sales which
exceed the guarantee are recognized as earned.
Services revenue consists of training and consulting for which revenue is
recognized when the services are performed. Maintenance revenue consists of
ongoing support and maintenance and product updates for which revenue is
deferred and recognized ratably over the term of the contract, normally
twelve months.
In December 1998, the AICPA issued Statement of Position 98-9 "Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions". (SOP 98-9) amends SOP 97-2 to require recognition of revenue
using the residual method for certain multiple-element arrangement
transactions entered into in fiscal years beginning after March 15, 1999.
The Company has assessed the effects of complying with SOP 98-9 and
concluded that there is no significant impact to date on its financial
position or results of operations.
F-9
<PAGE>
4 Software development costs
Software development costs are included in research and development and are
expensed as incurred. Statement of Financial Accounting Standard No. 86
"Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed" (SFAS No. 86) requires the capitalization of certain
software development costs once technological feasibility is established,
which the Company defines as establishment of a working model. The working
model criteria is used because the Company's process of creating software
(including enhancements) does not include a detailed program design. To
date, the period between achieving technological feasibility and the
general availability of such software has been short and software
development costs qualifying for capitalization have been insignificant.
Accordingly, the Company has not capitalized any software development
costs.
5 Equipment, furniture and fixtures Equipment, furniture and fixtures are
stated at cost. Depreciation is provided in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated services
lives. The straight line method of depreciation is followed for financial
reporting purposes. The useful lives are as follows:
Years
Computer equipment 4
Vehicles 4
Office furniture and fixtures 4
Expenditures for repairs and maintenance are charged to expense as incurred
and additions and improvements that significantly extend the lives of
assets are capitalized. Upon sale or retirement of depreciable property,
the cost and accumulated depreciation are removed from the related accounts
and any gain or loss is reflected in the results of operations.
F-10
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6 Cash
For the purpose of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
7 Inventories
Inventories consist of licensed goods and goods for resale and are stated
at the lower of FIFO (first-in, first-out) cost or market.
8 Advertising costs
Advertising costs of $142,707, $46,336 and $206,136 for the years ended
January 31, 2000 and 1999, and for the period February 18, 1997 (date of
inception) to January 31, 2000, respectively, have been charged to expense
as incurred.
9 Income taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse.
An allowance against deferred tax assets is recorded when it is more likely
than not that such tax benefits will not be realized.
10 Use of estimates in financial statements
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-11
<PAGE>
11 Net loss per share
The Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share" (SFAS No. 128).
The Company's basic net loss per share amount has been computed by dividing
net loss by the weighted average number of outstanding common shares. For
the years ended January 31, 2000 and 1999 no common stock equivalents were
included in the computation of diluted net earnings per share. Convertible
debentures excluded from the calculation of loss per share because their
effect is anti-dilutive amounted to 2,000,000 common shares for the year
ended January 31, 2000.
12 Fair Value of Financial Instruments
The Company's financial instruments consists of cash, trade receivables,
borrowings, trade payables and accrued liabilities. The carrying amount of
these instruments approximate the fair values because of their short
maturity. The fair value of non- current financial assets and liabilities
are estimated to approximate carrying value based on considerations of
risk, current interest rates and remaining maturities.
13 Foreign currency translation
The functional currency of the Company and its Subsidiaries is the British
pound sterling. The consolidated financial statements are presented in US
dollars using the principles set out in Statement of Financial Accounting
Standard No. 52 "Foreign Currency Translation" (SFAS No. 52). Assets and
liabilities are translated at the rate of exchange in effect at the close
of the period. Revenues and expenses are translated at the weighted average
of exchange rates in effect during the period. The effects of exchange rate
fluctuations on translating foreign currency assets and liabilities into US
dollars are included as part of the accumulated other comprehensive income
component of stockholders' equity.
F-12
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14 Recently Issued Accounting Standards Statement of Financial Accounting
Standard No. 133 (SFAS 133), as modified by SFAS 137 "Accounting for
Derivative Investments and Hedging Activities - Deferral of the Effective
Date of FASB Statement 133", requires entities to recognize all derivatives
in their financial statements as either assets or liabilities measured at
fair value. SFAS 133 also specifies new methods for accounting for hedging
transactions, prescribes the items and transactions that may be hedged, and
specifies detailed criteria to be met to qualify for hedge accounting. SFAS
133, as modified by SFAS 137, is effective for fiscal years beginning after
June 15, 2000. The Company does not believe that the adoption of SFAS 133
will have a material impact on its financial statements.
NOTE C - 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-13
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - INVENTORIES
Inventories consist of the following:
January 31, January 31,
2000 1999
$ $
Licensed goods 25,110 118,080
Goods for resale - 8,510
------ -------
25,110 126,590
====== =======
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. Licenses amounting to $82,160
have been charged to profits in the year as the Company believes it unlikely to
utilize this proposition of licenses before their expiry in June 2000.
note e - short-term credit facility
The Company has a $486,000 ((pound)300,000) (1999: $65,600 ((pound)40,000)), 10%
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 at January 31,
2000 was $413,247 ((pound)255,091), (1999 $66,146 ((pound)40,333)). The amount
drawn is payable on demand at the bank's discretion.
F-14
<PAGE>
<TABLE>
<CAPTION>
note F - long-term obligations
Long-term obligations at January 31, 2000 and January 31, 1999, consist of the
following:
January 31, January 31,
2000 1999
$ $
<S> <C> <C>
Non-interest bearing, unsecured loan from an individual, no
stated maturity date 298,009 391,140
8% note payable to corporate investors and individuals
payable in six monthly instalments commencing August 1999;
paid in full using proceeds from Convertible Notes described below - 190,325
4% above Libor rate (Libor rate was 5.75% and 5.75% at
January 31, 2000 and 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 22,107 32,235
4% above Libor rate (Libor rate was 5.75% and 5.75% at January
31, 2000 and 1999, respectively) notes payable to an English
bank, monthly payments 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 114,480 -
Convertible A Note 1999-2002, with interest at 6%;
interest due in arrears biannually on January 1 and July 1 600,000 -
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 -
Capital leases for vehicles, interest ranging from 10.2%
- - - 16.9% with maturities through 2004 165,366 18,010
----------------- ------------------
1,599,962 631,710
Less current maturities (1,074,185) (209,517)
----------------- ------------------
525,777 422,193
================= ==================
</TABLE>
F-15
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible debentures
The A and B Convertible Notes 1999-2002 are convertible into common shares at
the rate of one common share for every US$0.50 of outstanding principal Note
converted. Conversion will take place:-
i) immediately prior to an Initial Public Offering
ii) at the option of the investor, upon new equity capital resulting in
proceeds to the Company of at least $4,000,000
iii)at the option of the investor giving 30 days notice to the Company.
The Notes may be redeemed together with accrued interest by the Company at any
time during the 12 months to 16 August 2000. 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 Investor.
In consideration of the Investor advancing an aggregate of $1,000,000, the
Company caused Montague Limited the principal shareholder to transfer, and
register in the name of the Investor, 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:
Year ending January 31,
2001 1,074,185
2002 65,595
2003 91,810
2004 59,563
10,800
298,009
-----------------
1,599,962
=================
F-16
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company leases vehicles under noncancellable capitalized leases.
January 31, January 31,
2000 1999
$ $
Vehicles 226,348 34,706
Less accumulated depreciation (30,958) (6,941)
----------------- -----------------
195,390 27,765
================= =================
The following is a schedule by years of future minimum lease payments under the
capital leases together with the present value of the net minimum lease payments
as of January 31, 2000.
Year ending January 31,
2001 53,250
2002 43,160
2003 75,743
2004 37,365
-
-----------------
209,518
(44,152
-----------------
165,366
=================
The scheduled net minimum lease payments to maturity are included in the
long-term obligation table above.
F-17
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note G - lease commitments
The Company leases office space which expires in 2002. Rent expense totaled
approximately $27,500 and $17,200 at January 31, 2000 and for the year ended
January 31, 1999. The rent expense for the period February 18, 1997 (date of
inception) to January 31, 2000 totaled $57,700. New premises have been leased
effective from February, 2000 at an annual commitment of $67,600.
The future minimum rental commitments as of January 31, 2000 are as follows:
Year ending January 31, $
2001 67,600
2002 67,600
2003 67,600
2004 67,600
405,600
-----------------
676,000
=================
F-18
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note H - income taxes
The Company has adopted the provisions of Statement of Financial Accounting
Standards No 109 "Accounting for Income Taxes". Accordingly, a deferred tax
liability or deferred tax asset (benefit) is computed by applying the current
statutory tax rates to net taxable or deductible temporary differences between
pre-tax financial and taxable income.
Deferred tax benefits are recorded only to the extent that the amount of net
deductible temporary differences or carry forward attributes may be utilized
against current period earnings, offset against taxable temporary differences
reversing in future periods, or utilized to the extent of management's estimate
of future taxable income. Deferred tax liabilities are provided for on
differences between amounts reported for financial and tax basis accounting.
At January 31, 2000, due to the Company's cumulative losses since inception, a
loss carry forward of approximately $2,087,000 may be utilized in the future for
an indefinite period.
Net deferred tax assets resulting from the loss carry forward have been offset
by a valuation allowance of equal amounts at January 31, 2000 and January 31,
1999 due to the uncertainty of realizing the net deferred tax asset through
future operations. The valuation allowances were approximately $417,000 and
$159,000 at January 31, 2000 and January 31, 1999, respectively. The valuation
allowance increased approximately $258,000 and $118,000 at January 31, 2000 and
1999 respectively. The effective tax rate differs from the statutory rate as a
result of the valuation allowance. Gross deferred tax liabilities were
immaterial for all period.
NOTE I - SUBSEQUENT EVENT
On March 10, 2000 the Company received a non-interest bearing unsecured loan of
$571,500 from an individual with no stated maturity date to provide funds for
trading operations.
F-19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this annual report on Form 10-KSB to be
signed on its behalf by the undersigned thereto duly authorized.
INVU, Inc.
(Registrant)
Date: May 15, 2000 By: /s/ David Morgan
---------------------------
David Morgan, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report on Form 10-KSB has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE OFFICE DATE
--------- ------ ----
<S> <C> <C> <C>
/s/ David Morgan President, Chief Executive Officer May 15, 2000
----------------------------- and Chairman of the Board of
David Morgan Directors (Principal Executive
Officer)
/s/ Paul O'Sullivan Director and Chief Technical Officer May 15, 2000
-----------------------------
Paul O'Sullivan
Director May __, 2000
-----------------------------
Daniel Goldman
/s/ John Agostini Director and Chief Finance Officer May 15, 2000
----------------------------- (Principal Financial Officer and
John Agostini Chief Accounting Officer)
/s/ Tom Maxfield Director May 15, 2000
-----------------------------
Tom Maxfield
Director May __, 2000
-----------------------------
David Andrews
</TABLE>
23
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits
Exhibit
Number Description of Exhibit
- - ------- ----------------------
2.1 Share Exchange Agreement, dated as of May 19, 1998, by and between the
Company and Montague Limited, as amended by that certain First Amendment to
Share Exchange Agreement, dated as of July 23, 1998 (incorporated by
reference from Exhibit 2.1 of the Company's Current Report on Form 8-K
filed June 8, 1998 and Exhibit 99 of the Company's Amendment to Current
Report on Form 8- K/A filed August 6, 1998).
3.1 Articles of Incorporation of the Company filed on February 25, 1997 with
the Secretary of State of the State of Colorado (incorporated by reference
from Exhibit 3.2 of the Company's Registration Statement on Form 10-SB/A
filed August 29, 1997).
3.2 Amendment to the Articles of Incorporation of the Company filed on February
22, 1999, with the Secretary of State of the State of Colorado
(incorporated by reference from Exhibit 3.2 of the Company's Annual Report
on Form 10-KSB filed October 15, 1999).
3.3 Bylaws of the Company (incorporated by referenc from Exhibit 2.2 of the
Company's Registration Statement on Form 10-SB/A filed August 29, 1997).
10.1 Limited Manufacturing Agreement, dated March 25 1998, by and between INVU
Services Limited and Centura Software Corporation (incorporated by
reference from Exhibit 10.3 of the Company's Annual Report on Form 10-KSB
filed October 15, 1999).
10.2 ** Reseller Agreement, dated March 26, 1998, by an between INVU Services
Limited and Computer Associates Plc and Memorandum Amendment dated July 17,
1998 (incorporated by reference from Exhibit 10.4 of the Company's Annual
Report on Form 10-KSB filed October 15, 1999).
10.3 Electronic Software Distribution Agreement, dated as of November 11, 1998,
by and between INVU Services Limited and Digital River, Inc. (incorporated
by reference from Exhibit 10.5 of the Company's Annual Report on Form
10-KSB filed October 15, 1999).
10.4 Distribution Contract dated as of October 27, 1998, by and between INVU
Services Limited and KOCH Media Limited (incorporated by reference from
Exhibit 10.6 of the Company's Annual Report on Form 10-KSB filed October
15, 1999).
10.5 Gold Standard Reseller Agreement, dated as of March 18, 1999, by and
between INVU Services Limited and Elcom Technical Services (incorporated by
reference from Exhibit 10.7 of the Company's Annual Report on Form 10-KSB
filed October 15, 1999).
10.6 Distributor Agreement, dated May 11, 1999, by and between INVU Services
Limited and Millenium Three Solutions Ltd. (incorporated by reference from
Exhibit 10.8 of the Company's Annual Report on Form 10-KSB filed October
15, 1999).
10.7** Gold Standard Reseller Agreement, date June 16, 1999, by and between INVU
Services Limited and Computer Associates International, Inc. (incorporated
by reference from Exhibit 10.9 of the Company's Annual Report on Form
10-KSB filed October 15, 1999).
24
<PAGE>
10.8 Distributor Agreement, dated July 1, 1999, by and between INVU Services
Limited and CHS UK Holdings Limited Incorporated (incorporated by refer-
ence from Exhibit 10.10 of the Company's Annual Report on Form 10-KSB
filed October 15, 1999).
10.9 Investment Agreement, dated August 23, 1999, among the Company, David
Morgan, John Agostini, Paul O'Sullivan, Alan David Goldman, and Vertical
Investments Limited (incorporated by reference from Exhibit 10.12 of the
Company's Annual Report on Form 10-KSB filed October 15, 1999).
10.10 Loan Stock Instrument, dated as of August 23, 1999, by the Company in
favor of Alan David Goldman and Vertical Investments Limited (incorporated
by reference from Exhibit 10.13 of the Company's Annual Report on Form
10-KSB filed October 15, 1999).
10.11 Loan Stock Instrument, dated as of August 23, 1999, by the Company in
favor of Alan David Goldman and Vertical Investments Limited (incorporated
by reference from Exhibit 10.14 of the Company's Annual Report on Form
10-KSB filed October 15, 1999).
10.12 Supplemental Agreement, dated as of August 23, 1999, among the Company,
Vertical Investments Limited, Alan David Goldman, David Morgan, John
Agostini, Paul O'Sullivan, INVU Services Limited and Tom Maxfield
(incorporated by reference from Exhibit 10.15 of the Company's Annual
Report on Form 10-KSB filed October 15, 1999).
10.13* Distribution Agreement, dated January 29, 2000, by and between INVU
Services and Gem Distribution Limited (Exhibit 10.13).
10.14* Agreement regarding Consulting Services, dated as of May 15, 1998, by and
between the Company and Robert Jeffcock (incorporated by reference from
Exhibit 99 of the Company's Annual Report on Form 10-KSB filed August 13,
1998).
10.15 Consulting Agreement, dated as of December 15, 1998, by and between the
Company and Robert Jeffock (incorporated by reference from Exhibit 10.2 of
the Company's Annual Report on Form 10- KSB filed October 15, 1999).
21 Subsidiaries of the Company (incorporated by reference from Exhibit 21 of
the Company's Annual Report on Form 10-KSB filed October 15, 1999).
27* Financial Data Schedule.
25
<PAGE>
*Filed herewith
** Incorporated by reference, confidential treatment requested.
26
Exhibit 10.13
Distribution Agreement
----------------------
Between Gem Distribution and Invu Services, Ltd. ("Company").
This agreement dated January 29, 2000 sets forth the terms and conditions under
which Gem Distribution Ltd. ("Gem"), maintaining its principal place of business
at Lovet Road, The Pinnacles, Harlow, Essex CM19 5TB and its registered office
at Shorten Brook Way, Altham Business Park, Altham, Accrington, Lancashire, BB5
5YJ will distribute products Published by Company.
3.1 Company hereby appoints Gem the right to distribute the products produced
by Company.
- - --------------------------------------------------------------------------------
1.1 Sales to Gem. Company agrees to sell Products (the " Products") to GEM and
GEM agrees to purchase Products on the terms and subject to the conditions
of this agreement.
1.2 Sale for Resale. Company sells Products to GEM on condition that they be
sold by GEM to dealers of Products in the UK and EU, and that they not
knowingly be sold to end users.
1.3 Barcodes and Packaging. All products must be supplied shrink-wrapped and
Bar-coded to EAN Standards.
- - --------------------------------------------------------------------------------
2.1 Price. The price paid for products must have been previously agreed by Gem
and must conform to the price stated on any purchase order received by
Company.
3.2 Prices and Payment.
(i) Prices and Price Lists: Unless otherwise agreed, all prices for
Products will be listed Pounds Sterling (pound) (the "Base Prices").
COMPANY will provide a list of the Base Prices for Products (the "Base
Price List"), which must be signed by Gem to be valid.
(ii) VAT and other taxes not included: the Base Prices to not include VAT.
2.3 Payment Terms. Terms of payment will be ___ days from the date of invoice.
2.4 Settlement Discount. A settlement discount of 2.5% will be given for
payment within 15 days of invoice date.
2.5 Negative Balance. Company agrees to pay back any negative balance on the
gem account at request of Gem.
2.6 Rebate. Company agrees to Gem a rebate of 5% o previous quarters net
business as a rebate.
- - --------------------------------------------------------------------------------
3.1 Stock Protection. Gem shall have the right to return 10 of the product
purchased within any preceding Month for full credit.
3.2 Version Protection. In the event of an updated version of a product
becoming available Gem shall have the right to return all previous versions
of products purchased for exchange to the latest products.
- - --------------------------------------------------------------------------------
<PAGE>
4.1 Exceptional SOR. Occasionally Gem is required to offer sale or return on
products to facilitate inclusion into major accounts. Company agrees to
extend this option to Gem where required, after confirmation of acceptance
by Company.
- - --------------------------------------------------------------------------------
5.1 Base Price Increases. COMPANY may increase the Base Price for any of
Company Product(s) upon not less than sixty (60) days written notice. This
cannot be put into effect until signed confirmation has been received from
Gem.
5.2 Base Price Decreases. COMPANY may decrease the Base Prices for any Company
Product upon written notice. The decreased Bast Price(s) shall apply to all
units ordered but not yet shipped on the effective date of the price
decrease (the "Base Price Decrease Effective Date") and orders received
after such date.
5.3 Credits for Base Price Decreases. In the event that COMPANY decreases the
Base Price to be paid by GEM for any Company Product COMPANY agrees to
credit the GEM purchase account with (i) the sum of the difference between
(a) the Base Price for the Company Product immediately prior to the Base
Price Decrease Effective date, and (b) the decreased Base Price for the
Company Product multiplied by (ii) GEM actual inventory balance on the Base
Price Decrease Effective Date of units of the Company Product purchased.
(i.e. (Old Base Price - New Base Price) * (actual inventory balance)).
- - --------------------------------------------------------------------------------
6.1 Freight Charges. All products shall be delivered to the Gem warehouse
located in Altham, Lancashire free of charge.
- - --------------------------------------------------------------------------------
7.1 Faulty Product. All Faulty Products returned by Gem to Company, or where a
product supplied cannot be used for its intended purpose shall receive full
credit.
- - --------------------------------------------------------------------------------
8.1 Marketing Fund. Company agrees to pay a Gem a Marketing Incentive Fund
("MIF") of 5% of the previous months Invoices. This can only be used with
prior approval of Company.
8.2 Launch Costs. An Initial fee of(pound)2,500 will be requ ir for launch of
product through Gem Distribution.
- - --------------------------------------------------------------------------------
9.1 Year 2000 Compliance: All Software provided by company to Gem must have
year 2000 conformity as defined in the British Standards Institution's
document DISC PD 2000. "A Definition of Year 2000 Conformity".
9.2 Year 2000 Indemnity: Company will fully indemnify Gem against any loss,
damage, claim, fine, liability, cost or expense of whatever nature
resulting from any software supplied by you failing to have Year 2000
Conformity.
- - --------------------------------------------------------------------------------
10.1 Termination. Either party can terminate this contract a not less than
ninety (90) days written notice.
<PAGE>
This agreement shall be governed and interpreted in accordance with the laws of
England.
The parties have executed this Agreement as of the date below. All signed copies
of this Agreement shall be deemed originals.
On behalf of Gem Distribution Ltd. On behalf of Company.
By: /s/ By: /s/
Title: Commercial Director Title: President
Dated: 29-1-00 Dated: 28/1/00
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of January 31, 2000 and 1999 and the
Consolidated Statement of Operations for the year ended January 31, 2000
and January 31, 1999, and the periods from February 18, 1997 to January 31,
2000 and is qualified in its entirety be reference to such financial
statements.
</LEGEND>
<CIK> 0001035039
<NAME> INVU, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-31-2000
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1916
<ALLOWANCES> 0
<INVENTORY> 25,110
<CURRENT-ASSETS> 61,416
<PP&E> 299,894
<DEPRECIATION> 73,135
<TOTAL-ASSETS> 288,175
<CURRENT-LIABILITIES> 1,812,165
<BONDS> 0
0
0
<COMMON> 288,355
<OTHER-SE> (2,338,122)
<TOTAL-LIABILITY-AND-EQUITY> 288,175
<SALES> 0
<TOTAL-REVENUES> 15,754
<CGS> 0
<TOTAL-COSTS> 1,369,771
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (78,987)
<INCOME-PRETAX> (1,433,006)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,433,006)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
