SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
------------------
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2000
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______.
Commission File No. 00-22661
INVU, INC.
(Exact name of small business issuer as specified in charter)
Colorado 84-1135638
--------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
The Beren, Blisworth Hill Farm
Stoke Road
Blisworth, Northamptonshire NN7 3DB
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(Address of principal (Postal Code)
executive offices)
Issuer's telephone number, including area code: (01604) 859893
--------------
--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- ----------
As of 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 (check one)
YES NO X
---------- ----------
<PAGE>
<TABLE>
<CAPTION>
INVU, INC.
April 30, 2000
INDEX
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION.........................................................................................F-1
Item 1. Financial Statements.................................................................................F-1
Consolidated Balance Sheets as of April 30, 2000.....................................................F-1
Consolidated Statements of Operations................................................................F-2
Consolidated Statements of Deficit in Stockholders' Equity...........................................F-3
Consolidated Statements of Cash Flows................................................................F-5
Notes to Financial Statements........................................................................F-6
Item 2. Management's Discussion and Analysis or Plan of Operation..............................................1
PART II. OTHER INFORMATION...............................................................................................5
Item 1. Legal Proceedings......................................................................................5
Item 2. Changes in Securities..................................................................................5
Item 3. Default Upon Senior Securities.........................................................................6
Item 4. Submission of Matters to a Vote of Security Holders....................................................6
Item 5. Other Information......................................................................................6
Item 6. Exhibits and Reports on Form 8-K.......................................................................6
SIGNATURES.............................................................................................................S-1
Exhibit Index..........................................................................................................E-1
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
April 30, January 31,
2000 2000
(unaudited) (audited)
$ $
<S> <C> <C> <C>
ASSETS
Current assets
Accounts receivable:
Trade, net 13,672 1,916
VAT recoverable and other 43,346 22,000
Inventories 42,256 25,110
Prepaid expenses 28,383 12,390
----------- -----------
Total current assets 127,657 61,416
Equipment, furniture and fixtures
Computer equipment 49,729 42,450
Vehicles 217,965 226,348
Office furniture and fixtures 101,055 31,096
----------- -----------
368,749 299,894
Less accumulated depreciation 89,994 73,135
----------- -----------
278,755 226,759
----------- -----------
406,412 288,175
=========== ===========
LIABILITIES
Current liabilities
Short-term credit facility 328,035 413,247
Current maturities of long-term obligations 1,068,944 1,074,185
Accounts payable 264,489 126,204
Accrued liabilities 218,571 198,529
----------- -----------
Total current liabilities 1,880,039 1,812,165
Long-term obligations, less current maturities 1,054,104 525,777
Deficit in stockholders' equity
Preferred stock, no par value
Authorised - 20,000,000 shares; nil shares issued and outstanding - -
Common stock, no par value
Authorised - 100,000,000 shares; issued - 30,206,896 shares 288,355 288,355
Accumulated other comprehensive income 52,397 6,844
Accumulated deficit during the development stage (2,868,483) (2,344,966)
----------- -----------
(2,527,731) (2,049,767)
406,412 288,175
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
F-1
<PAGE>
<TABLE>
<CAPTION>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
For the periods ended
Feb 18, 1997
For the three months ended (date of
April 30, April 30, inception) to
2000 1999 April 30, 2000
(unaudited) (unaudited) (unaudited)
$ $ $
<S> <C> <C> <C> <C>
Revenues 12,943 18,916 38,936
Expenses:
Production costs 8,870 6,734 224,028
Selling and distribution costs 192,589 72,756 565,183
Research and development costs 63,132 46,125 450,257
Administrative costs 240,552 163,071 1,549,483
----------- ----------- -----------
Total operating expenses 505,143 288,686 2,788,951
Operating loss (492,200) (269,770) (2,750,015)
Other income (expense)
Interest, net (31,317) (13,617) (120,831)
Other - - 2,363
----------- ----------- -----------
Total other income (expense) (31,317) (13,617) (118,468)
Loss before income taxes (523,517) (283,387) (2,868,483)
Income taxes - - -
----------- ----------- -----------
Net loss (523,517) (283,387) (2,868,483)
=========== =========== ===========
Weighted average shares outstanding:
Basic and Diluted 30,206,896 30,206,896 30,206,896
=========== =========== ===========
Net loss per common share:
Basic and Diluted (0.02) (0.00) (0.09)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY
Accumulated
other
Common stock Accumulated comprehensive Comprehensive
Shares Amount deficit income Total income
$ $ $ $ $
<S> <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)
F-3
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY
Accumulated
other
Common stock Accumulated comprehensive Comprehensive
Shares Amount deficit income Total income
$ $ $ $ $
Comprehensive income:
Foreign currency translation adjustment - - - 45,553 45,553 45,553
(unaudited)
Net loss during the period (unaudited) - - (523,517) - (523,517) (523,517)
----------
Total comprehensive income (477,964)
Balance at April 30, 2000 (unaudited) 30,206,896 288,355 (2,868,483) 52,397 (2,527,731)
========== ======== ========== ====== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASHFLOWS
For the periods ended
Feb 18, 1997
For the three For the three (date of
months ended month ended inception) to
April 30, 2000 April 30, 1999 April 30, 2000
(unaudited) (unaudited) (unaudited)
$ $ $
<S> <C> <C> <C> <C>
Net cash flows used in operating activities
Net loss during the period (523,517) (283,387) (2,868,483)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 19,820 7,822 103,925
Accounts receivable (34,423) (27,313) (58,315)
Inventories (18,307) (1,895) (46,505)
Prepaid expenses (16,663) 2,215 (29,407)
Accounts payable 144,791 63,971 272,287
Accrued liabilities 27,746 (39,026) 228,103
-------- -------- ----------
Net cash used in operating activities (400,553) (277,613) (2,398,395)
Cash flows used in investing activities:
Acquisitions of property and equipment (80,988) (8,549) (214,241)
Disposals of property and equipment - - 19,356
-------- -------- ----------
Net cash used in investment activities (80,988) (8,549) (194,885)
Cash flows provided by financing activities:
Short-term credit facility (70,803) (64,888) 343,715
Borrowings received from notes payable 610,293 458,506 3,374,649
Repayment of borrowings (40,465) (10,103) (1,364,052)
Principal payments on capital lease (10,248) (2,133) (43,482)
Proceeds from issuance of stock - - 288,640
-------- -------- ----------
Net cash provided by financing activities 488,777 381,382 2,599,470
Effect of exchange rate changes on cash (7,236) 77 (6,190)
-------- -------- ----------
Net increase in cash - 95,297 -
Cash at beginning of period - - -
-------- -------- ----------
Cash at end of period - 95,297 -
======== ======== ==========
Supplemental disclosure of
cash flow information:
Cash paid during the period for:
Interest 31,317 13,617 120,517
Income taxes - - -
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The interim financial statements presented herein are unaudited and
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required for complete audited financial
statements. These statements should be read in conjunction with the
audited financial statements and notes thereto included in the
Company's filing on 10-KSB for the year ended January 31, 2000. In
the opinion of management, the accompanying unaudited consolidated
financial statements of INVU, Inc. and Subsidiaries (the Company)
contain all adjustments (consisting of only normal recurring
adjustments) necessary to fairly present the Company's financial
position as of April 30, 2000 and the results of operations for the
period of February 18, 1997 (date of inception) to April 30, 2000 and
for the three month periods ended April 30, 2000 and 1999, and cash
flows for the three month periods ended April 30, 2000 and 1999 and
the period of February 18, 1997 (date of inception) to April 30,
2000. The interim financial statements should be read in conjunction
with the following explanatory notes. The results of operations for
the periods presented may not be indicative of the results that may
be expected for the full fiscal year.
NOTE A - COMPANY DESCRIPTION
INVU, Inc. (the Company) is a holding company which operates one
subsidiary INVU Plc, which is a holding company for two subsidiaries
of its own, INVU Services (Services) and INVU International Holdings
Limited (Holdings). The Company was incorporated under the laws of
the State of Colorado, United States of America, in February 1997.
INVU Plc, Services and Holdings are companies incorporated under
English Law. The Company operates in one industry segment which
includes developing and selling software for electronic management of
many types of information and documents such as forms,
correspondence, literature, faxes, technical drawings and electronic
files. Services is the sales, marketing and trading company and
Holdings holds the intellectual property rights to the INVU software.
On August 31, 1998, Sunburst Acquisitions I Inc. (Sunburst) (a public
development stage enterprise) acquired all of the outstanding shares
of INVU Plc in exchange for restricted shares of common stock of
Sunburst (the Exchange) pursuant to a Share Exchange Agreement
between Sunburst and the principal shareholders of INVU Plc. Sunburst
exchanged 26,506,552 shares of common stock for all of INVU Plc's
issued and outstanding shares of common stock. For accounting
purposes, the Exchange was treated as a recapitalization of INVU Plc
where INVU Plc is the accounting acquirer. All periods have been
restated to give effect to the recapitalization. The historic
statements from inception up to the Exchange are those of INVU Plc.
F-6
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the Exchange, the directors and officers of INVU
Plc became the directors and officers of Sunburst. Also, Sunburst
changed its name to INVU, Inc. At the time of the Exchange, the
Company issued 1,510,344 shares of Common Stock of the Company to a
consultant pursuant to a consulting agreement for introducing INVU
Plc and Sunburst. The shares were estimated to have a value of
$750,000 and have been treated as a transaction cost in connection
with the Exchange. Immediately after the Exchange, INVU Plc's former
shareholders owned approximately 88% of the outstanding common stock
of Sunburst.
NOTE B - GOING CONCERN
The Company's liabilities exceed its assets and the Company has
incurred losses from operations primarily as a result of treating
virtually all development expenses since inception as current
operating expenses. The Company is not generating cash from
operations. Operations to date have been funded principally by equity
capital and borrowings. The Company plans to continue to fund its
development expenses through additional capital raising activities,
including one or more offerings of equity and/or debt through private
placements and/or public offerings. The Company's ability to continue
to develop its infrastructure depends on its ability to raise other
additional capital. The financial statements do not include any
adjustment that might result from the outcome of this uncertainty.
The Company is still building its operational infrastructure.
Additional capital raised by the Company, if any, will be used for
this purpose and to fund its planned launch of operations within the
United Kingdom.
F-7
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - INVENTORIES
Inventories consist of the following:
April 30, January 31,
2000 2000
(unaudited) (audited)
$ $
Licensed goods 23,283 25,110
Goods for resale 18,973 -
------ ------
42,256 25,110
====== ======
Licensed goods represent software licenses purchased by the Company
which allow the Company to manufacture and distribute a separate
company's proprietary software products in conjunction with and as an
embedded component of the Company's proprietary software. Goods for
resale represent the finished consolidated product to be sold to the
end user. Licenses amounting to $82,160 were charged to profits in
the year to January 31, 2000 as the Company believed it was unlikely
to utilize this proposition of licenses before their expiry in June
2000.
NOTE D - SHORT-TERM CREDIT FACILITY
The Company has a $468,000 ((pound)300,000) 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 was
$328,035 ((pound)210,279) at April 30, 2000, ($413,247
((pound)255,091) at January 31, 2000). The amount drawn is payable on
demand at the bank's discretion.
F-8
<PAGE>
NOTE E - LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
Long-term obligations at April 30, 2000 and January 31, 2000.
April 30, January 31,
2000 2000
(unaudited) (audited)
$ $
<S> <C> <C> <C>
Non-interest bearing, unsecured loans from an individual, no
stated maturity date 851,195 298,009
4% above Libor rate (Libor rate was 6.3125% and 5.75% at
April 30, 2000 and January 31, 2000 respectively) notes
payable to an English bank , monthly payment aggregating to
(pound)500, maturing in March 2002, collateralized by all
assets of the Company and a limited personal guarantee by a director 18,730 22,107
4% above Libor rate (Libor rate was 6.3125% and 5.75% at
April 30, 2000 and January 31, 2000 respectively) notes
payable to an English bank, monthly payment aggregating to
(pound) 1,333, maturing in June 2004, collateralized by all
assets of the Company and unlimited multilateral guarantees between
subsidiary undertakings; a quarterly loan guarantee premium of
1 1/2% per annum is payable on 85% of the outstanding balance 104,000 114,480
Convertible A Note 1999-2002, with interest at 6%;
interest due in arrears biannually on January 1 and July 1 600,000 600,000
Convertible B Note 1999-2002, bearing interest of 8% per
annum for the first six months, 9% per annum for the next six
months and 10% per annum thereafter; interest due in arrears
biannually on January 1 and July 1 400,000 400,000
Capital leases for vehicles, interest ranging from 10.2% - 16.9%
with maturities through 2004 149,123 165,366
---------- ----------
2,123,048 1,599,962
Less current maturities (1,068,944) (1,074,185)
---------- ----------
1,054,104 525,777
========== ==========
</TABLE>
F-9
<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 held by individuals who
are minority shareholders in the Company. They are convertible into
common shares at the rate of one common share for every US$0.65 of
outstanding principal Note converted for the A Notes and one common
share for every US$0.50 of outstanding principal Note converted for
the B Notes. Conversion will take place:-
i) immediately prior to an Initial Public Offering
ii) at the option of the investors for the B Notes and
automatically for the A Notes, upon new equity capital
resulting in proceeds to the Company of at least $4,000,000
iii) at the option of the investors giving 30 days notice to the
Company.
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 Investors.
In consideration of the Investors advancing an aggregate of
$1,000,000, the Company caused Montague Limited, the principal
shareholder, to transfer, and register in the name of the Investors,
225,000 shares of Common Stock of no par value.
In view of the Company's present status with regard to its equity
and/or debt offerings, it is probable that the Convertible A and B
Notes will be converted within the next twelve months. Accordingly,
the Notes have been disclosed as repayable within current maturities.
Scheduled maturities of long-term obligation are as follows:
Period ending April 30, $
2001 1,068,944
2002 61,223
2003 83,193
2004 54,333
2005 4,160
Thereafter 851,195
---------
2,123,048
=========
F-10
<PAGE>
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company leases vehicles under non-cancellable capitalized leases.
April 30, January 31,
2000 2000
(unaudited) (audited)
$ $
Vehicles 217,965 226,348
Less accumulated depreciation (43,437) (30,958)
------------------ ------------------
174,528 195,390
================== ==================
The following is a schedule by periods of future minimum lease
payments under the capital leases together with the present value of
the net minimum lease payments as at April 30, 2000.
Period ending April 30, $
2001 48,878
2002 41,522
2003 66,751
2004 31,788
Thereafter -
------------------
188,939
Less amount representing interest (39,816)
------------------
Present value of net minimum lease payments 149,123
==================
The scheduled net minimum lease payments to maturity are included in
the long-term obligation table above.
F-11
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following description of "Management's Plan of Operation"
constitutes forward-looking statements for purposes of the Securities Act of
1933, as amended (" the Securities Act"), and the Securities Exchange Act of
1934, as amended, and as such involves known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of INVU, Inc., a Colorado corporation (the "Company"), to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. The words "expect", "estimate",
"anticipate", "predict", "believe", "plan", "seek", "objective", and similar
expressions are intended to identify forward-looking statements. Important
factors that could cause the actual results, performance or achievement of the
Company to differ materially from the Company's expectations include the
following: (1) one or more of the assumptions or other cautionary factors
discussed in connection with particular forward-looking statements or elsewhere
in this Form 10-QSB prove not to be accurate; (2) the Company is unsuccessful in
increasing sales through its anticipated marketing efforts; (3) mistakes in cost
estimates and cost overruns; (4) the Company's inability to obtain financing for
general operations including the marketing of the Company's products; (5)
non-acceptance of one or more products of the Company in the marketplace for
whatever reason; (6) the Company's inability to supply any product to meet
market demand; (7) generally unfavorable economic conditions which would
adversely effect purchasing decisions by distributors, resellers or consumers;
(8) development of a similar competing product at a similar price point; (9) the
inability to successfully integrate one or more acquisitions, joint ventures or
new subsidiaries with the Company's operations (including the inability to
successfully integrate businesses which may be diverse as to type, geographic
area, or customer base and the diversion of management's attention among several
acquired businesses) without substantial costs, delays, or other problems; (10)
if the Company experiences labor and or employment problems such as the loss of
key personnel, inability to hire and/or retain competent personnel, etc.; and
(11) if the Company experiences unanticipated problems and/or force majeure
events (including but not limited to accidents, fires, acts of God etc.), or is
adversely affected by problems of its suppliers, shippers, customers or others.
All written or oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by such factors. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Notwithstanding the foregoing, the Company is not entitled to rely on the safe
harbor for forward looking statements under 27A or the Securities Act 21E of the
Exchange Act as long as the Company's stock is classified as a penny stock
within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is
generally defined to be any equity security that has a market price (as defined
in Rule 3151-1) of less than $5.00 per share, subject to certain exceptions.
The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto.
The Company develops and sells software (under the brand name INVU) for
the electronic management of many types of information and documents such as
forms, correspondence, literature, faxes, technical drawings, electronic files
and web pages. Management believes that the INVU software is simple, intuitive,
and cost effective, yet powerful.
The Company's objective is to establish itself as a leading supplier of
information and document management software and services in the world. For its
professional range of products, INVU Series 100, Series 200 ViewSafe, and Series
2000 (formerly WEBFAST), the Company 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 software retailers for INVU WebServant and FileServant.
Throughout the quarter ended April 30, 2000, the Company continued to
develop its software products. The Company's first product, INVU SOLO, was
released to distributors in December 1998 and sales to the SOHO market commenced
in January 1999. Management was satisfied with the initial response to this
product, but in view of comments and advice received from retailers they
decideded to re-launch more suitably packaged and targeted products for the
personal user market. Two new products were released to retailers in March 2000.
The first, "WebServant," enables web users to quickly and easily build a
personal library from the internet with a competitive price of less than $50.
This product's key features are the simple downloading, storing and organization
of web pages, enabling on or off line browsing and fast retrieval of previously
stored information. The second product, "FileServant," is a re-launch of the
original INVU SOLO product with additional features including the aforementioned
web technology. Both these products are now on sale in the major retail outlets
in the U.K. and early indications suggest increased sales results will accrue.
1
<PAGE>
The first production release of INVU Series 100, Series 200 (formerly
INVU PRO), and ViewSafe (collectively known as "the professional range of
products") was made on October 5, 1999 to an exclusive distributor in the United
Kingdom, and sales to end users were anticipated in October 1999. However, the
exclusive distributor went into administrative receivership in October 1999
before any product orders had been fulfilled. Although no significant financial
loss has accrued to the Company, the closure of this distribution outlet has
meant a change in sales and marketing strategy in the United Kingdom. In
response, Management has decided to directly recruit resellers while also
pursuing non-exclusive distributors for the products. The number of early
resellers sign-ups has been encouraging, particularly the adoption of the
product by Northampton Chamber of Commerce for distribution to their member
companies and to other Chambers of Commerce throughout the U.K.
As a consequence of initial marketing activities associated with the
launch of the Company's professional range of products, end user inquiries have
been received. These inquiries are now being pursued by our expanding team of
sales personnel and end user sales have been recorded during the current
quarter. The Company now has a number of high profile customers including
Barclays Life (a pensions subsidiary of a UK bank), Sussex Police (a large law
enforcement agency in the south of U.K.), Williams PLC (a major engineering
group) and Siemens Traffic Controls Systems (a subsidiary of Siemens Group).
Management believes that its direct sales team and newly recruited resellers
will generate sales 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 and
predominantly aimed at large corporate users.
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 and update them via password controls from anywhere in the
world. Development work continues on this project, and Management anticipates a
release date later in 2000 or early in 2001.
Throughout the current quarter, Management has continued to develop
relationships with potential investors. This has resulted in agreements to
provide additional funding as described in "financing managements plan of
operations".
Results of Operations
The following is a discussion of the results of operations for the
three months ended April 30, 2000, compared with the three months ended April
30, 1999, and changes in financial condition during the three month period ended
April 30, 2000.
The Company (formerly Sunburst Acquisitions I, Inc.) engaged in no
significant operations prior to the Share Exchange Agreement with INVU PLC on
August 31, 1998.
Net sales for the three months ended April 30, 2000 were $12,943 which
compares to $18,916 sales for the three months ended April 30, 1999. Actual
shipments of FileServant and WebServant to retailers amounted to $48,904 but did
not appear in store until mid April 2000 and sales are only recognised upon sale
to consumers. The Company's strategy to sell its professional range of products
via VARs (value added resellers) will require time to sign up the requisite
number of dealers. However, the Company has already registered a number of
accredited resellers throughout the UK and Ireland, and sales leads have been
generated from a variety of companies. Management is also encouraged by the
interest shown in its products from large multi-national companies, for whom the
Company has given product demonstrations and received inquiries. The net loss
for the three months ended April 30, 2000 was $523,517, which exceeds the net
loss for the corresponding period in 1999 of $283,387 due to increases in
selling and distribution costs of $119,833, administrative costs of $77,481,
research and development costs of $17,007, and production costs of $2,136 .
Selling and distribution expenditures reflect the Company's continued
investment in personnel and sales and marketing activities, including trade
shows, product launch and advertising costs. As the Company moves from
development stage to an operational stage, the administrative infrastructure has
been expanded to cope with the additional demands placed on the business. A
number of additional support staff have been employed and the Company moved into
larger premises in March 2000. Accompanying this move was an increase in rental
costs. Further technical support resources have been acquired to ensure adequate
testing of new products, reseller support, and further product development work.
2
<PAGE>
In the three month period ended April 30, 2000, the Company incurred
net interest expense of $31,317 compared with net interest expense of $13,617
for the three month period ended April 30, 1999. On August 23, 1999, the Company
raised $1,000,000 in a private placement of Convertible Notes that bear interest
at rates between 6% and 10%, as described below. These loans and notes together
with increased bank facilities and loans have therefore resulted in greater
interest payments.
The tax rates for the periods in question are zero due to a net loss in
each period.
The total current assets of the Company were $127,657 at April 30,
2000, an increase of $66,241 compared to $61,416 at January 31, 2000. Working
capital was negative $1,752,382 as of April 30, 2000, compared with negative
$1,750,749 as of January 31, 2000. These changes are due to increases in
accounts receivable, inventories and prepaid expenses, and corresponding
additions to accounts payable and accrued liabilities, with a decrease in short
term credit facilities and current maturities of long term liabilities.
Total assets of the Company were $406,412 at April 30, 2000, an
increase of $118,237 compared to $288,175 at January 31, 2000. This is
attributable to increases in fixed assets of $51,996 and current assets of
$66,241.
The total current liabilities of the Company increased by $67,874 from
$1,812,165 at January 31, 2000 to $1,880,039 at April 30, 2000. The change in
current liabilities is due to an increase in accounts payable and accrued
liabilities of $158,327 and a fall in short-term credit facilities and current
maturities of long-term obligations of $90,453. This, together with the increase
in long-term obligations less current maturities, reflects the replacement of
short-term facilities with long term funding. Long-term obligations less current
maturities were $1,054,104 at April 30, 2000 compared to $525,777 at January 31,
2000, mainly due to additional non-interest unsecured loan from a private
investor of $571,500.
Total stockholders' equity decreased by $477,964 during the three month
period ended April 30, 2000 from a deficit of $2,049,767 at January 31, 2000 to
a deficit of $2,527,731 at April 30, 2000. The Company continues to evaluate
various financing options, including issuing debt and equity to finance future
development and marketing of products during the transitional period between
development and operational stages.
Financing Management's Plan of Operation
As of February 2, 1999, the Company had agreed to borrow $656,000 at an
annual interest rate of 8% by way of a secured short-term loan. In August 1999
the Company raised $1,000,000 by way of a private placement, the proceeds of
which were used, among other things, to pay off the short-term loan described
above. This private placement is described in the Company's Annual Report on
Form 10-KSB for the year ended January 31, 2000 under "Item 1. Description of
Business - The First Financing Transaction and The Second Financing
Transaction." In addition, the Company has a $468,000, 10% short-term credit
facility with an English bank. The amount drawn against the facility as of April
30, 2000 was $328,035. This facility was due on May 31, 2000, however, the bank
has thus far allowed the Company to continue with the facility. 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. This placement is subject
to certain conditions. Subject to compliance with applicable securities laws,
this placement is contemplated to commence in the third quarter of this fiscal
year.
As of May 1, 2000, the Company entered into a Convertible Debenture
Purchase Agreement, as amended as of May 22, 2000 (the "GEM Agreement"),
pursuant to which the Company will raise $5,000,000 by issuing convertible
debentures in the principal amount of $5,000,000 and warrants to purchase
company common stock. The Company must first satisfy certain conditions,
including the effectiveness of a registration statement (the "Registration
Statement") registering the resale of the shares of the Company's common stock
underlying the convertible debentures and warrants. The Registration Statement
will be prepared at the Company's expense. See "Part II - Item 2."
3
<PAGE>
As a result of entering into the GEM Agreement, Anglo Irish Bank of
Dublin, Ireland has indicated to the Company that it may provide a short-term
"bridge facility" in the sum of $790,000. Management believes that this facility
should be available by June 30, 2000 subject to satisfactory review of the GEM
Agreement by Anglo Irish. Management has enetered into a letter of intent to
purchase the business known as "EasiFile" from PeopleDoc Limited. The proposed
purchase covers the sales and marketing rights to the EasiFile product, the
EasiFile trade and domain names, and the Company assuming support for the
EasiFile resellers and customers base. The transaction is subject to several
conditions including the negotiation and execution of the definitive agreements
relating to this transaction. In this regard, Management intends to use part of
the proceeds contemplated to be received from the Anglo Irish Bank of Dublin
bridge facility to fund the transaction, however, as described above, the
receipt of this facility is itself subject to certain conditions, including
conditions related to the GEM Agreement.
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.
4
<PAGE>
PART II. OTHER INFORMATION
Item 1. 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.
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 date of first use than Sension.
The Company believes that it will prevail on both matters.
Item 2. Changes in Securities.
As of May 1, 2000 the Company entered into a Convertible Debenture Purchase
Agreement, as amended as of May 22, 2000 (the "GEM Agreement"), with United
Kingdom-based firm Global Emerging Markets Inc. and related parties ("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.
Upon execution of the GEM Agreement, GEM advanced the Company $100,000
pursuant to a demand note (the "Note"). The Note bears interest at the rate of
3% per annum, which will increase to 15% if payment on demand is not made. In
addition, if payment is not made upon demand, the Note is convertible into
shares of INVU common stock at substantially the same price as the Debentures,
as described below.
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. The Company is required to
complete the registration within a 190-day period as set forth in the GEM
Agreement.
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 $1.875 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
5
<PAGE>
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.
Subject to the above conditions, the Debentures and Warrants will be
sold pursuant to an exemption provided by Section 4(2) of the Securities Act of
1933. The Company believes that it is able to utilize such an exemption because
the transaction is not a public offering. The Debentures and Warrants will be
purchased by and issued to GEM alone, which has represented that it is acquiring
the Debentures and Warrants for investment purposes without a view to
distributing or reselling the Debentures and Warrants except in compliance with
applicable federal and state securities laws.
Item 3. Default Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
Mr. David Andrews was elected as a Non-Executive Director in February,
2000. Mr. Andrews 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 Affairs.
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.
Item 6. Exhibits and Reports on Form 8-K.
None
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-B.
10.1 Convertible Debenture Purchase Agreement, dated as of May 1, 2000, by
and among the Company and the Purchasers listed on Schedule 1 thereof
(incorporated by reference to Exhibit 10.17 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.2 Form of 3 Percent Convertible Debenture by and between the Company and
the Purchasers listed on Schedule 1 of the Convertible Debenture
Purchase Agreement (incorporated by reference to Exhibit 10.18 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
6
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10.3 Form of Warrant by and between the Company and the Purchasers listed on
Schedule 1 of the Convertible Debenture Purchase Agreement
(incorporated by reference to Exhibit 10.19 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.4 Registration Rights Agreement, dated as of May 1, 2000, by and among
the Company, GEM Global Yield Fund Limited and Turbo International Ltd.
(incorporated by reference to Exhibit 10.20 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.5 Debenture and Warrant Shares Escrow Agreement, dated as of May 1, 2000,
by and among the Company, Kaplan Gottbetter & Levenson, LLP, GEM Global
Yield Fund Ltd. and Turbo International Ltd. (incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on Form
10-KSB for the fiscal year ended January 31, 2000).
10.6 Warrant Purchase Agreement, dated as of May 1, 2000, by and between the
Company and Turbo International, Ltd. (incorporated by reference to
Exhibit 10.22 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended January 31, 2000).
10.7 Schedules to the Convertible Debenture Purchase Agreement, dated as of
May 1, 2000 (incorporated by reference to Exhibit 10.23 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.8 Demand Promissory Note, dated May 1, 2000, by and between the Company
and GEM Advisors, Inc. (incorporated by reference to Exhibit 10.25 of
the Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.9* Amendment Number One to the Convertible Debenture Purchase Agreement,
dated May 22, 2000, by and among the Company, GEM Global Yield Fund,
Ltd. and Turbo International, Ltd. (Exhibit 10.9).
27* Financial Data Schedule (Exhibit 27).
*Filed herewith
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Quarterly Report to be signed on
its behalf by the undersigned thereunto duly authorized.
INVU, INC.
(Issuer)
Date: June 19, 2000 By: /s/ David Morgan
---------------------------------------------------
David Morgan, President and Chief Executive Officer
(Principal Executive Officer)
Date: June 19, 2000 By: /s/ John Agostini
---------------------------------------------------
John Agostini, Vice President-Chief Financial
Officer and Secretary (Principal Financial Officer)
S-1
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits
Exhibit
Number Description of Exhibit
------- ----------------------
10.1 Convertible Debenture Purchase Agreement, dated as of May 1, 2000, by
and among the Company and the Purchasers listed on Schedule 1 thereof
(incorporated by reference to Exhibit 10.17 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.2 Form of 3 Percent Convertible Debenture by and between the Company and
the Purchasers listed on Schedule 1 of the Convertible Debenture
Purchase Agreement (incorporated by reference to Exhibit 10.18 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.3 Form of Warrant by and between the Company and the Purchasers listed on
Schedule 1 of the Convertible Debenture Purchase Agreement
(incorporated by reference to Exhibit 10.19 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.4 Registration Rights Agreement, dated as of May 1, 2000, by and among
the Company, GEM Global Yield Fund Limited and Turbo International Ltd.
(incorporated by reference to Exhibit 10.20 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000).
10.5 Debenture and Warrant Shares Escrow Agreement, dated as of May 1, 2000,
by and among the Company, Kaplan Gottbetter & Levenson, LLP, GEM Global
Yield Fund Ltd. and Turbo International Ltd. (incorporated by reference
to Exhibit 10.21 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended January 31, 2000).
10.6 Warrant Purchase Agreement, dated as of May 1, 2000, by and between the
Company and Turbo International, Ltd. (incorporated by reference to
Exhibit 10.22 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended January 31, 2000).
10.7 Schedules to the Convertible Debenture Purchase Agreement, dated as of
May 1, 2000 (incorporated by reference to Exhibit 10.23 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.8 Demand Promissory Note, dated May 1, 2000, by and between the Company
and GEM Advisors, Inc. (incorporated by reference to Exhibit 10.25 of
the Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 2000).
10.9* Amendment Number One to the Convertible Debenture Purchase Agreement,
dated May 22, 2000, by and among the Company, GEM Global Yield Fund,
Ltd. and Turbo International, Ltd. (Exhibit 10.9).
27* Financial Data Schedule (Exhibit 27).
*Filed herewith
E-1
