<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): April 7, 2000
ENVISION DEVELOPMENT CORPORATION
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
FLORIDA
--------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
001-15311
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(Commission File Number)
65-0981457
--------------------------------------------------------------------------------
(I.R.S. Employer Identification No.)
4 Mount Royal Avenue, Marlboro, Massachusetts 01752
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508) 481-8303
<PAGE> 2
Item 5. Other Events.
On April 7, 2000, Envision Development Corporation ("Envision") filed a Current
Report on Form 8-K (the "Envision Initial Report") describing the acquisition of
certain assets and the assumption of certain liabilities of Qui Vive, Inc.
("Qvtech"). This Current Report on Form 8-K/A amends the Envision Initial Report
by including with this Form 8-K/A the financial statements and pro forma
financial information prescribed by Item 7 of Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Qui Vive, Inc. dba QV Tech or Interosa
Report of Independent Certified Public Accountants
Balance Sheets as of December 31, 1999 and 1998
Statements of Operations for the year ended December 31, 1999 and the period
May 12, 1998 (inception) to December 31, 1998
Statements of Stockholders' Equity for the year ended December 31, 1999 and the
period May 12, 1998 (inception) to December 31, 1998
Statements of Cash Flows for the year ended December 31, 1999 and the period
May 12, 1998 (inception) to December 31, 1998
Notes to Financial Statements
(b) Pro Forma Financial Information
<PAGE> 3
Pro Forma Combined Balance Sheet as of January 29, 2000 (Unaudited)
Pro Forma Combined Statement of Earnings for the Fiscal Year Ended
January 29, 2000 (Unaudited)
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1 Amended and Restated Stock Acquisition Agreement, dated as of
March 31, 2000, among Envision, QV Acquisition Corporation, a
Delaware corporation, Sundog Technologies, Inc., a Delaware
corporation, and RockMountain Ventures Fund, LP.
99.1 Press Release, dated April 11, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENVISION DEVELOPMENT CORPORATION
Date: June 21, 2000 By: /s/ William J. Patch
------------------------------------
William J. Patch
Chairman and Chief Executive Officer
<PAGE> 4
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
QUI VIVE, INC. dba QV TECH OR INTEROSA
(a development stage enterprise)
DECEMBER 31, 1999 AND 1998
<PAGE> 5
C O N T E N T S
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
FINANCIAL STATEMENTS
BALANCE SHEETS 4
STATEMENTS OF OPERATIONS 6
STATEMENT OF STOCKHOLDERS' EQUITY 7
STATEMENTS OF CASH FLOWS 9
NOTES TO FINANCIAL STATEMENTS 10
</TABLE>
<PAGE> 6
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Qui Vive, Inc. dba QV Tech or Interosa
We have audited the accompanying balance sheets of Qui Vive, Inc. dba QV Tech or
Interosa, as of December 31, 1999 and 1998, and the related statements of
operations, stockholders' equity, and cash flows for the year ended December 31,
1999 and the period May 12, 1998 (inception) to December 31, 1998. 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. 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 statement 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 financial position of Qui Vive, Inc. dba QV Tech or
Interosa, as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for the year ended December 31, 1999 and the period May 12,
1998 (inception) to December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ GRANT THORNTON LLP
Colorado Springs, Colorado
May 26, 2000
3
<PAGE> 7
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 603,009 $ 152,837
--------- ---------
Total current assets 603,009 152,837
--------- ---------
RESTRICTED CERTIFICATE OF DEPOSIT 35,000 35,000
--------- ---------
PROPERTY AND EQUIPMENT, AT COST
Computers and equipment 196,715 18,224
Software costs 9,438 2,895
Furniture and fixtures 27,952 --
--------- ---------
234,105 21,119
Less accumulated depreciation (48,074) (2,677)
--------- ---------
186,031 18,442
--------- ---------
OTHER ASSETS
Patents 107,798 28,419
--------- ---------
Total assets $ 931,838 $ 234,698
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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4
<PAGE> 8
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 216,145 $ 43,952
Accrued liabilities 98,175 11,944
Advances from related party 81,955 159,899
----------- -----------
Total current liabilities 396,275 215,795
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001 per share; authorized 782,500 shares and
200,000 shares in 1999 and 1998, respectively
Series A preferred stock (aggregate value in liquidation $1,999,930); issued and
outstanding 550,000 shares in 1999 and -0- shares in 1998 550 --
Series B preferred stock (aggregate value in liquidation $1,499,940); issued and
outstanding 180,000 shares in 1999 and -0- shares in 1998 180 --
Common stock, par value $0.001 per share; authorized 1,432,500 shares and 1,000,000 shares
in 1999 and 1998, respectively; issued and outstanding 70,775 shares in 1999 and
110,000 shares in 1998
71 110
Capital in excess of par value 4,218,226 665,295
Unearned compensation (417,459) (231,548)
----------- -----------
3,801,568 433,857
Deficit accumulated during the development stage (3,266,005) (414,954)
----------- -----------
Total stockholders' equity 535,563 18,903
----------- -----------
Total liabilities and stockholders' equity $ 931,838 $ 234,698
=========== ===========
</TABLE>
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5
<PAGE> 9
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
May 12, 1998 May 12, 1998
Year ended (inception) through (inception) through
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Operating expenses
Research and development $ 1,616,282 $ 184,404 $ 1,800,686
Selling and marketing 570,348 41,168 611,516
General and administrative 664,635 191,965 856,600
----------- ----------- -----------
Operating loss 2,851,265 417,537 3,268,802
----------- ----------- -----------
Other Income (Expense)
Interest income 2,961 2,583 5,544
Interest expense (2,747) -- (2,747)
----------- ----------- -----------
214 2,583 2,797
----------- ----------- -----------
Net loss $ 2,851,051 $ 414,954 $ 3,266,005
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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6
<PAGE> 10
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period May 12, 1998 (inception)
through December 31, 1999
<TABLE>
<CAPTION>
Series A
Preferred Stock
----------------------------
Number
of Shares Amount
----------- -----------
<S> <C> <C>
Balance at May 12, 1998 (inception) -- $ --
Issuance of 110,000 shares of common stock for cash at $3.636 per share, net of
issuance costs of $24,875 -- --
Stock options issued -- --
Amortization of stock compensation -- --
Net loss -- --
----------- -----------
Balance at December 31, 1998 -- --
Issuance of 440,000 shares of common stock for cash and conversion of operating
advances at $3.636 per share -- --
Conversion of common stock to Series A preferred stock at 1 to 1 550,000 550
Issuance of 180,000 shares of Series B preferred stock for cash at $8.333 per
share, net of issuance cost of $25,142 -- --
Issuance of 52,500 warrants for Series B preferred stock for cash, issued in
conjunction with issuance of Series B preferred stock -- --
Exercise of stock options
Issuance of 53,000 shares of common stock for cash at $0.01 per share -- --
Issuance of 16,275 shares of common stock for cash at $0.10 per share -- --
Issuance of 1,500 shares of common stock for cash at $1.00 per share -- --
Stock options issued -- --
Amortization of stock compensation -- --
Net loss -- --
----------- -----------
Balance at December 31, 1999 550,000 $ 550
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
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7
<PAGE> 11
<TABLE>
<CAPTION>
Series B Deficit
preferred stock Common Stock accumulated
--------------------------- ----------------------------- Capital in during the
Number Number excess of Unearned development
of Shares Amount of Shares Amount Par Value Compensation stage Total
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
-- $ -- -- $ -- $ -- $ -- $ -- $ --
-- -- 110,000 110 375,015 -- -- 375,125
-- -- -- -- 290,280 (290,280) -- --
-- -- -- -- -- 58,732 -- 58,732
-- -- -- -- -- -- (414,954) (414,954)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
-- -- 110,000 110 665,295 (231,548) (414,954) 18,903
-- -- 440,000 440 1,599,491 -- -- 1,599,931
-- -- (550,000) (550) -- -- -- --
180,000 180 -- -- 1,474,618 -- -- 1,474,798
-- -- -- -- 60 -- -- 60
-- -- 53,000 53 477 -- -- 530
-- -- 16,275 16 1,611 -- -- 1,627
-- -- 1,500 2 1,498 -- -- 1,500
-- -- -- -- 475,176 (475,176) -- --
-- -- -- -- -- 289,265 -- 289,265
-- -- -- -- -- -- (2,851,051) (2,851,051)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
180,000 $ 180 70,775 $ 71 $ 4,218,226 $ (417,459) $(3,266,005) $ 535,563
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
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8
<PAGE> 12
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
May 12, 1998 May 12, 1998
Year ended (inception) through (inception) through
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net loss $(2,851,051) $ (414,954) $(3,266,005)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation 45,397 2,677 48,074
Amortization of stock compensation 289,265 58,732 347,997
Changes in assets and liabilities
Increase in accounts payable 172,193 43,952 216,145
Increase in accrued liabilities 86,231 11,944 98,175
Increase in advances from related party 81,986 159,899 241,885
----------- ----------- -----------
Net cash used in operating activities (2,175,979) (137,750) (2,313,729)
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (212,986) (21,119) (234,105)
Patent costs (79,379) (28,419) (107,798)
Increase in restricted certificate of deposit -- (35,000) (35,000)
----------- ----------- -----------
Net cash used in investing activities (292,365) (84,538) (376,903)
----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of
Series B preferred stock 1,474,798 -- 1,474,798
Net proceeds from issuance of
common stock 1,443,658 375,125 1,818,783
Net proceeds from issuance of warrants 60 -- 60
----------- ----------- -----------
Net cash provided by financing activities 2,918,516 375,125 3,293,641
----------- ----------- -----------
Net increase in cash and cash equivalents 450,172 152,837 603,009
Cash and cash equivalents, beginning of period 152,837 -- --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 603,009 $ 152,837 $ 603,009
=========== =========== ===========
Cash paid during the period for interest $ 792 $ -- $ 792
=========== =========== ===========
NONCASH FINANCING ACTIVITY:
During the year ended December 31, 1999, the Company's then sole stockholder
contributed, to capital in excess of par value, $159,930 of operating advances
previously made to the Company.
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE> 13
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies used in the preparation of
the accompanying financial statements follows:
1. ORGANIZATION
Qui Vive, Inc. dba QV Tech or Interosa, a development stage enterprise, was
incorporated in the State of Delaware on May 12, 1998. The Company is
developing software products that allow senders of e-mail to control and
secure the body of messages by attaching "policies" that govern the
behavior and usability of a message. The Company also plans to develop
software products to enable recipients with rights allowing them to
pre-determine the types of messages they will and will not receive. The
primary targeted customers include internet service providers and corporate
businesses.
2. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided in
amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives. Depreciation is computed under the
straight-line method over three years for computers and equipment and
software costs, and five years for furniture and fixtures, the estimated
useful lives of the assets.
3. PATENTS
The Company is in the process of obtaining patents for certain aspects of
its products. The costs of obtaining patents are capitalized and will be
amortized over fifteen years. Amortization is computed on the straight-line
method. No patents have been issued as of December 31, 1999, therefore no
amortization has been taken.
4. SOFTWARE PRODUCT COSTS
All costs incurred to establish the technological feasibility of the
software products to be sold, leased or otherwise marketed by the Company
are expensed as research and development expenses as incurred. Once
technological feasibility of the Company's software products is
established, costs will be capitalized until the product is available for
general release to customers. Capitalized costs will be amortized on a
product-by-product basis and will be the greater of the amount computed on
either the gross revenue or straight-line (using the remaining established
economic life of the product) methods. No software product costs have been
capitalized by the Company.
--------------------------------------------------------------------------------
10
<PAGE> 14
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
5. REVENUE RECOGNITION
Product sales will be recognized as revenue at the time of the sale except
for any components of the sale which require future services or products,
the value of which will be deferred and recognized as revenue during the
period in which the service and product commitments are satisfied.
6. ADVERTISING COSTS
The Company expenses advertising costs as incurred.
7. INCOME TAXES
The Company was included within the consolidated income tax return of
Sundog Technologies, Inc. (Sundog), the Company's Series A preferred
stockholder (sole common stockholder at December 31, 1998), through March
31, 1999.
The Company reports income taxes under the liability method, whereby
consideration is given to future tax consequences associated with
differences between financial accounting and tax bases of assets and
liabilities. This method gives effect to changes in the income tax laws
upon enactment.
8. STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all
unrestricted highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
9. USE OF ESTIMATES
In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
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11
<PAGE> 15
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE B - RESTRICTED CERTIFICATE OF DEPOSIT
Under terms of a lease agreement for the Company's office space, a letter
of credit in the amount of $35,000 is required as a security deposit. As
security for the letter of credit obtained from a bank, the Company is
required to purchase a certificate of deposit (3-month maturity with
automatic renewal) in the amount of $35,000 for the term of the letter of
credit (expiring on January 1, 2000, and renewed through June 30, 2002).
The certificate of deposit is restricted under the letter of credit
although interest earned may be withdrawn and used by the Company at its
discretion.
NOTE C - ADVANCES FROM RELATED PARTY
The balance at December 31, 1999, of $81,955 represents uncollateralized
notes payable to Sundog due on demand for $80,000, plus accrued interest at
10%. The balance at December 31, 1998, of $159,899 represents operating
costs of the Company paid for by Sundog on the Company's behalf. During
1999, Sundog converted $159,930 of the outstanding balance to capital in
excess of par value.
NOTE D - PREFERRED STOCK
At the Company's inception, authorized preferred stock was 10,000 shares.
The Company amended or restated its certificate of incorporation in
December 1998 and October 1999 to increase authorized preferred stock to
200,000 shares and 782,500 shares, respectively.
The holders of the Series A and Series B preferred stock are, respectively,
entitled to receive, out of any funds legally available, dividends at the
rate of $0.25 and $0.58 per share, per annum. The right to such dividends
on the preferred stock shall not be mandatory or cumulative, and no right
shall accrue to holders of preferred stock by reason of the fact that
dividends on such shares are not declared in any prior year. Holders of
Series A and B preferred stock are entitled, voting as separate classes, to
elect two and one board of director(s), respectively. Preferred
stockholders are also allowed to participate with common stockholders,
voting as a single class, to elect the remaining board members.
In October 1999, the Company effected a plan of recapitalization whereby
its then sole stockholder, Sundog converted its entire common stock holding
(550,000 shares) into Series A preferred stock at a one for one conversion
rate.
In November and December 1999, the Company issued 180,000 shares of Series
B preferred stock at $8.333 per share through a private placement. The
aggregate proceeds of $1,499,940 were offset by $25,142 of issuance costs
directly attributable to the private placement. In conjunction with the
private placement, for consideration of $60, the Company issued the
investor warrants to purchase an aggregate of 52,500 shares of Series B
preferred stock at an exercise price of $10.41625 per share.
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12
<PAGE> 16
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE D - PREFERRED STOCK - Continued
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series A and Series B preferred stock shall, respectively,
be entitled to receive, prior and in preference to any distribution of any
of the assets or surplus funds of the Company to the holders of common
stock, the amount of $3.636 per share and $8.333 per share plus any
declared but unpaid dividends. If funds are not available to pay the full
preferential amount, then the amount of assets and funds legally available
would be distributed to the holders of Series B preferred stock up to
$750,000 with any remaining amounts distributed to the holders of Series A
and Series B preferred stock in proportion to the preferential amount each
holder is otherwise entitled to receive.
Each share of preferred stock shall be convertible, at the option of the
holder thereof, at any time into such number of fully paid and
nonassessable shares of common stock as is determined by the then effective
conversion rate. The initial conversion rate shall be one share of common
stock for each share of preferred stock. The conversion price is subject to
adjustment, primarily for stock splits, reverse stock splits and
recapitalizations, under the provisions of the first restated and amended
certificate of incorporation of the Company. Each share of preferred stock
shall automatically be converted into shares of common stock at the then
effective conversion rate in the event of the effectiveness of a firm
commitment underwritten public offering of common stock to the public at a
price per share of not less than $60 and an aggregate offering price of not
less than $20,000,000 or upon the vote of a majority of the then
outstanding shares of all preferred stock voting as a class.
NOTE E - COMMON STOCK
At the Company's inception, authorized common stock was 50,000 shares. The
Company amended or restated its certificate of incorporation in December
1998 and October 1999 to increase authorized common stock to 1,000,000
shares and 1,432,500 shares, respectively.
Between August 1998 and October 1999, the Company issued 550,000 shares of
common stock to Sundog for $3.636 per share. Sundog used proceeds from a
private placement to fund its investment and, accordingly, it allocated
$24,875 of issuance costs to the Company, which have been offset against
common stock proceeds. These shares were converted into Series A preferred
stock in October 1999 (note D).
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13
<PAGE> 17
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE F - STOCK OPTIONS
The Company has stock option plans that provide for the granting of either
incentive or non-qualified stock options to key employees and directors.
Under the plan, 450,000 of the Company's common shares were initially
reserved for awards, which was increased to 650,000 in October 1999.
Options granted under the plans generally become exercisable in six-month
increments over a period of two and three years from the date of grant and
may be exercised up to a maximum of 5 and 10 years, for the non-qualified
and incentive options, respectively. At December 31, 1999, there were
169,100 shares reserved for issuance under the plans.
The Company has adopted only the disclosure provisions of Statement of
Financial Accounting Standards 123, ACCOUNTING FOR STOCK BASED
COMPENSATION, and applies ABP Opinion 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, to stock options granted under the plans. Accordingly,
compensation cost for stock options is measured as the excess, if any, of
the estimated fair market value of the Company's stock at the date of grant
over the amount an employee must pay to acquire the stock. Since the
Company is privately held, the Company has used historical common stock
issuances ($3.636 per share) as an estimate of the fair market value of its
common stock for all stock options granted after 210,000 options were
issued to the "founding" employees. The initial 210,000 options were issued
with an exercise price of $0.01 per share, which was also estimated to be
the fair market value of the Company's common stock at inception. Unearned
compensation, which is shown as a separate component of stockholders'
equity, as a result of compensatory stock options is being amortized to
expense over the vesting periods of the underlying stock options. The
amount amortized to expense in 1999 and 1998 was $289,265 and $58,732,
respectively. If the Company had elected to recognize compensation under
SFAS 123, which requires options to be recorded at fair value at the grant
date, such expense would have approximated that amount recognized under ABP
Opinion 25.
A summary of the status of the Company's stock option plans as of December
31, 1999 and 1998, and changes during the periods ending on those dates is
presented below.
<TABLE>
<CAPTION>
1999 1998
----------------------------- ----------------------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 292,000 $ .04 -- $ --
Granted 188,900 1.12 292,000 .04
Exercised (70,775) .05 -- --
Forfeited -- -- -- --
-------- -------- -------- --------
Outstanding at end of period 410,125 $ .53 292,000 $ .04
======== ======== ======== ========
Options exercisable at end of period 126,950 $ .11 52,500 $ .01
</TABLE>
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14
<PAGE> 18
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE F - STOCK OPTIONS - Continued
The weighted average fair value per share of options granted in 1999 was
$2.77, all of which were granted with an exercise price below estimated
fair market value at the date of grant. The weighted average fair value per
share of options granted in 1998 was $0.01 for options granted with an
exercise price equal to estimated fair market value at the date of grant,
and $3.55 for options granted with an exercise price below estimated fair
market value at the date of grant. The fair value of these options was
estimated at the date of grant using the Black-Scholes option pricing model
with the following assumptions: no volatility; risk-free interest rates
ranging from 5.5 to 6.00 percent; no dividend yield; and expected lives of
three to five years.
Information on stock options outstanding at December 31, 1999 is summarized
as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- ---------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
------------------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
$0.01 to $0.49 235,225 3.59 $ 0.04 114,700 $ 0.02
$0.50 to $1.49 174,900 8.12 1.20 12,250 1.00
------- -------
410,125 126,950
======= =======
</TABLE>
NOTE G - INCOME TAXES
Under the liability method of computing income taxes, deferred tax assets
or liabilities represent temporary differences, and loss and credit
carryforwards, if any, as of the balance sheet date, multiplied by the
estimated effective tax rate during the period the temporary differences
are expected to reverse. The deferred tax asset and offsetting valuation
allowance as of December 31, 1999 and 1998, is approximately $1,266,563 and
$161,062, respectively. The types of temporary differences that give rise
to the deferred tax asset as of December 31, 1999 and 1998, are primarily
net operating loss carryforwards, stock compensation and accrued vacation.
As of December 31, 1999, the Company had net operating loss carryforwards
of approximately $2,800,000, expiring in 2018 and 2019, available to offset
future taxable income. The use of net operating loss carryforwards may be
limited because of Internal Revenue Service regulations related to the
change in ownership subsequent to year end.
NOTE H - ADVERTISING COSTS
Advertising expense was $1,210 and $-0- in 1999 and 1998, respectively, and
is included in selling and marketing expenses in the statements of
operations.
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15
<PAGE> 19
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE I - DEFINED CONTRIBUTION PENSION PLAN
The Company has a defined contribution pension plan (401(k) plan) for its
employees. Employees become eligible to participate in the plan upon
starting employment and may contribute to the plan up to the maximum amount
allowed by the IRS. The Company may contribute a matching amount at its
discretion up to 6% of the participants compensation. The Company may also
contribute a discretionary amount to the Plan to be allocated to non-highly
compensated employees. Employees are immediately vested in their interest
of employer contributions. Total expense under the plan was $29,527 and
$1,500 in 1999 and 1998, respectively.
NOTE J - LEASE COMMITMENTS
The Company conducts its operations in office space leased under an
operating lease. As of May 2000, the Company signed a new lease, expiring
in August 2003, for different office space in the same building. Minimum
rental commitments under the operating leases are as follows:
Year Ending December 31, Amount
------------------------ -----------
2000 $ 57,631
2001 113,878
2002 121,823
2003 84,747
----------
$ 378,079
==========
Rent expense was $40,181 and $-0- in 1999 and 1998, respectively.
NOTE K - CONCENTRATIONS
The Company maintains cash balances in one financial institution located in
Colorado Springs, Colorado, which exceeded insured limits by $687,895 as of
December 31, 1999. Management has not experienced any losses in such
accounts and believes they are not exposed to any significant credit risk
on cash and cash equivalents.
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16
<PAGE> 20
Qui Vive, Inc. dba QV Tech or Interosa
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE L - SUBSEQUENT EVENTS
In January 2000, the Company amended its restated certificate of
incorporation to increase authorized common stock and preferred stock to
30,000,000 shares and 10,000,000 shares, respectively.
Between February 28, 2000 and April 27, 2000, the Company received loans
from a related party aggregating $1,100,000. The loans are due on demand
beginning two months after the loan dates and are collateralized by
substantially all of the Company's assets. Interest is payable
semi-annually at LIBOR plus 3.5%.
On March 31, 2000, Envision Development Corporation (Envision), a publicly
held company listed on the American Stock Exchange, entered into a stock
acquisition agreement with the Company's preferred stockholders. Envision
will issue 1,482,000 shares of its restricted common stock to Sundog for
Sundog's 550,000 shares of the Company's Series A preferred stock. Envision
will also issue 321,000 shares of its restricted common stock to
RockMountain Ventures Fund, LP (RockMountain) for 107,000 of RockMountain's
shares of the Company's Series B preferred stock. On April 7, 2000,
Envision completed the first stage of acquisition by issuing 1,219,500 and
273,000 shares of its restricted common stock to Sundog and RockMountain,
respectively. Subject to approval of Envision's shareholders, Envision is
obligated to issued the remaining shares within two business days of
receiving shareholder approval.
On May 15, 2000, the Company's board of directors approved a grant of
15,000 shares of the Company's common stock to an officer/director of the
Company in exchange for the license to certain Class B internet addresses.
On May 24, 2000, the Company's board of directors approved a 6 to 1 stock
split of the Company's common stock, subject to stockholder approval.
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17
<PAGE> 21
ENVISION DEVELOPMENT CORPORATION
(SUCCESSOR TO PERFUMANIA.COM, INC.)
PRO FORMA FINANCIAL INFORMATION
(Unaudited)
On April 7, 2000, Envision Development Company ("Envision" or the "Company")
completed the first stage of the acquisition of 80% of Qui Vive, Inc.
("Qvtech"), a developer of proprietary "Interosa" technology which provides
security features to email communications, pursuant to the terms of an Amended
and Restated Stock Acquisition Agreement, dated as of March 31, 2000, among
Envision, QV Acquisition Corporation, a Delaware corporation ("QV Acquisition"),
Sundog Technologies, Inc., a Delaware corporation ("Sundog"), and RockMountain
Ventures Fund, LP ("Rock"). QV Acquisition, a wholly-owned subsidiary of
Envision, acquired shares of Series A Preferred Stock and shares of Series B
Preferred Stock of Qvtech from Sundog and Rock. In consideration therefor,
Envision issued shares of Envision common stock to Sundog and Rock. The total
purchase price is valued at $93,522,470, consisting of 1,813,000 shares of
Envision common stock. Envision issued 1,492,500 shares of its common stock to
Sundog and Rock to complete the first stage of the acquisition. An additional
320,500 shares of Envision common stock will be issued to Sundog and Rock to
complete the second stage of the acquisition following the approval of
Envision's shareholders. The shares issued by the Company in connection with the
Qvtech acquisition are not registered under the Securities Act of 1933 and are
subject to restrictions on transferability for a period of 18 months from the
date of issuance. The value of Envision's shares included in the purchase price
was calculated net of an estimated 15% market value discount to reflect the
restrictions on the transferability. The market value was calculated using the
average of the closing price of the previous ten trading days of Envision common
stock prior to consummation of the transaction. The number of shares of Envision
common stock given in exchange for such shares of Qvtech capital stock was
determined by negotiations among the parties to the Agreement.
The following presents the pro forma financial information (unaudited) of the
Envision Development Corporation (the "Company") as of and for the fiscal year
ended January 29, 2000 as if the acquisition of Qui Vive, Inc. ("Qvtech") had
occurred at the beginning of the period. The historical financial information
for Qvtech is derived from the historical financial statements of the Qvtech as
of and for the year ended December 31, 1999 and is intended only for
presentation of the Company's pro forma financial information. The pro forma
financial information is provided for informational purposes only and should not
be construed to be indicative of the Company's results of operations had the
acquisition been consummated on the dates assumed and does not project the
Company's results of operations for any future period. The pro forma adjustments
are described below.
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18
<PAGE> 22
PRO FORMA COMBINED BALANCE SHEETS AS OF JANUARY 29, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Envision Pro Forma Pro Forma
Historical(7) Qvtech (1) Adjustments Results
------------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 9,208,501 $ 603,009 $ 9,811,510
----------- ---------- ------------ ------------
Total current assets 9,208,501 603,009 9,811,510
Restricted certificate of deposit -- 35,000 35,000
Net assets from discontinued operations 832,208 -- 832,208
Property and equipment, net -- 186,031 186,031
Other assets -- 107,798 107,798
Intangible assets, net -- -- $ 62,750,553 (2) 62,750,553
----------- ---------- ------------ ------------
Total assets $10,040,709 $ 931,838 $ 62,750,553 $ 73,723,100
=========== ========== ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 322,900 $ 216,145 $ 539,045
Accrued liabilities -- 98,175 98,175
Advances from related party -- 81,955 81,995
----------- ---------- ------------ ------------
Total current liabilities 322,900 396,275 719,175
----------- ---------- ------------ ------------
Shareholders' equity (deficit):
Preferred stock - Series A -- 550 $ (550)(3) --
Preferred stock - Series B -- 180 (180)(3) --
Common stock 75,000 71 (71)(3) 93,130
18,130 (3)
Additional paid in capital 15,194,771 4,218,226 (4,218,226)(3) 110,255,492
95,060,721 (3)
Accumulated deficit (5,551,962) (3,266,005) 3,266,005 (3) (36,927,238)
(31,375,276)(5)
Unearned compensation -- (417,459) (417,459)
----------- ---------- ------------ ------------
Total shareholders' equity 9,717,809 535,563 62,750,553 73,003,925
----------- ---------- ------------ ------------
Total liabilities and
shareholders' equity $10,040,709 $ 931,838 $ 62,750,553 $ 73,723,100
=========== ========== ============ ============
</TABLE>
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19
<PAGE> 23
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE FISCAL
YEAR ENDED JANUARY 29, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Envision Pro Forma Pro Forma
Historical (7) Qvtech (4) Adjustments Results
-------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Operating expenses:
General and administrative expense $(1,143,177) (1,616,282) $ (2,759,459)
Selling and marketing expense -- (570,348) (570,348)
Research and development expense -- (664,635) (664,635)
Amortization of intangibles -- -- (31,375,276)(5) (31,375,276)
---------- ---------- ----------- -----------
Loss from continuing operations
before interest (1,143,177) (2,851,265) (31,375,276) (35,369,718)
Interest income 180,886 2,961 183,847
Interest expense to affiliate (176,238) (2,747) (178,985)
---------- ---------- ----------- -----------
Loss from continuing operations (1,138,529) (2,851,051) (31,375,276) (35,364,856)
Basic and diluted loss per
common share:
Loss from continuing operations $ (0.19) $ (4.62)
========== ===========
Weighted average number of common
shares outstanding used in basic
and diluted calculation 5,844,780 -- 1,813,000 (6) 7,657,780
========== ========== =========== ===========
</TABLE>
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20
<PAGE> 24
Notes to Pro Forma Conmbined Financial Statements
The acquisition of Qvtech has been accounted for using the purchase method of
accounting, and, accordingly, the purchase price of the Qvtech acquisition was
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the acquisition date.
The purchase price for the above acquisitions was allocated as follows:
Fair value of net assets acquired (net liabilities assumed):
Prepaid expenses and other assets $ 176,751
Property and equipment, net 232,023
-----------
Total assets acquired 408,774
Accounts payable and accrued expenses (192,809)
Notes payable to stockholder (900,000)
-----------
Total liabilities assumed (1,092,809)
-----------
Net non-cash liabilities assumed (684,035)
Cash acquired 80,676
-----------
Net liabilities assumed $ (603,359)
===========
The following is a reconciliation of the purchase price to the excess of the
estimated fair value of net assets acquired allocated to intangible assets:
Purchase price $93,522,470
Net liabilities assumed 603,359
-----------
Amount allocated to intangible assets $94,125,829
===========
In connection with the acquisition of Qvtech, $93,522,470 was assigned to
intangible assets. The amount assigned to intangible assets is preliminary and
is subject to adjustment upon finalization of the purchase accounting. The
finalization of the purchase accounting and related minority interest allocation
for Qvtech may result in a significant portion of the aggregate purchase price
being identified as in-process research and development, which will be charged
to operations during the second quarter of fiscal year 2001 when the amounts are
determined. Various factors are being considered in determining the amount of
the purchase price to be allocated to in-process research and development such
as, estimating the stage of development of each in-process research and
development project at the date of acquisition, estimating cash flows resulting
from the expected revenues generated from such projects and discounting the net
cash flows, in addition to other assumptions. The estimate of the cash flows
resulting from the expected revenues generated from the projects is dependent
upon a number of risk factors and uncertainties, including the rate of market
acceptance of the projects, rapid technological changes, the financial resources
of our customers and the low barriers to entry for potential competitors, some
of which have access to greater resources than the Company. The remaining
identified intangibles, including the value of purchased technology and other
intangibles, will be amortized on a straight-line basis over a period of three
years.
(1) To add the assets and liabilities of Qvtech as of December 31, 1999
(2) To add goodwill, net of amortization expense, for the year ended
December 31, 1999
(3) To eliminate Qvtech preferred stock, common stock, additional paid in
capital and retained earnings and record the 1,813,000 shares of Envision
common stock issued in the acquisition
(4) To add the expenses of Qvtech for the year ended December 31, 1999
(5) To add pro forma amortization expense for the year ended December 31, 1999
(6) To adjust the weighted average number of shares outstanding for the
consideration of 1,813,000 shares of Envision common stock
(7) perfumania.com DISPOSITION. On May 10, 2000, Envision sold its wholly-owned
subsidiary, perfumania.com, to E Com Ventures, formerly known as Perfumania,
Inc., pursuant to the terms of a Stock Purchase Agreement, dated April 29,
2000, among Envision, ZERO.NET, Inc. ("ZERO.NET") and E Com Ventures.
ZERO.NET is a significant shareholder of Envision. Envision exchanged all of
the common stock of perfumania.com for 400,000 shares of common stock of
Envision held by E Com Ventures. As part of the transaction, ZERO.NET
acquired 100,000 shares of common stock of Envision from E Com Ventures for
$2,500,000. The sales price was determined by negotiation between the
parties. The transaction requires approval by Envision's shareholders.
Management expects to recognize a gain on the disposal of the discontinued
operation in the second fiscal quarter. The disposition of perfumania.com is
accounted for as a discontinued operation, and accordingly, amounts in the
accompanying pro forma financial statements under the heading "Envision
Historical have been restated to reflect discontinued operations accounting.
The investment in discontinued operations is primarily comprised of
inventory, net of liabilities of approximately $552,000 as of January 29,
2000".
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<PAGE> 25
EXHIBIT INDEX
Exhibit
Number Description
--------- ----------------
2.1 Amended and Restated Stock Acquisition Agreement, dated as of
March 31, 2000, among Envision, QV Acquisition Corporation, a
Delaware corporation, Sundog Technologies, Inc., a Delaware
corporation, and RockMountain Ventures Fund, LP.
99.1 Press Release, dated April 11, 2000.
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