U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OF 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT
For the transition period from __________ to __________.
Commission File No. 000-29299
CorVu Corporation
(Exact name of registrant as specified in its charter)
Minnesota 41-1457090
(State of Incorporation) (IRS Employer ID #)
3400 West 66th Street
Edina, Minnesota 55435
(Address of Principal Executive Offices)
952-944-7777
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or 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 No X
State the number of shares outstanding of each of the issuer's
classes of common equity as of the latest practicable date.
Class: Common Stock, par value $.01 per share
Outstanding shares as of November 10, 2000: 19,542,166
<PAGE>
CorVu Corporation
Index to Form 10-QSB
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at September 30, 2000
(unaudited) and June 30, 2000 2
Consolidated Statements of Cash Flows (unaudited) for the
three month periods ended September 30, 2000 and
1999 3
Consolidated Statements of Operations (unaudited) for
the three month periods ended September 30, 2000 and 1999 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Default Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
EXHIBIT INDEX 11
<PAGE>
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2000 (Unaudited) and June 30, 2000
September 30,
2000 June 30,
Assets (Unaudited) 2000
----------------------- ----------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 71,098 46,745
Trade accounts receivable, net of allowance for doubtful
accounts of $287,000 and $305,000, respectively 2,639,518 4,263,681
Prepaid expenses and other 229,007 183,352
----------------------- ----------------------
Total current assets 2,939,623 4,493,778
Property and equipment, net 150,044 168,163
----------------------- ----------------------
$ 3,089,667 4,661,941
======================= ======================
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 2,417,936 2,516,200
Accrued compensation and related costs 2,399,079 2,179,220
Deferred revenue 2,675,933 2,550,192
Accrued interest 52,871 51,211
Other accrued expenses 278,253 350,121
Due to affiliates 121,985 79,440
Notes payable 546,023 599,147
Director advances 319,064 314,384
----------------------- ----------------------
Total current liabilities 8,811,144 8,639,915
----------------------- ----------------------
Stockholders' deficit:
Undesignated, 24,000,000 shares -- --
Series A convertible preferred stock, par value $10 per share;
1,000,000 shares authorized; 200 shares issued and outstanding 2,000 2,000
Common stock, $0.01 par value; 75,000,000 shares authorized;
19,518,097 and 19,509,660 shares issued and outstanding 195,181 195,097
Additional paid-in capital 15,734,449 15,577,033
Accumulated deficit (21,613,233) (19,331,991)
Deferred compensation (433,100) (688,050)
Foreign currency translation adjustment 393,226 267,937
------------------------------------------------
Total stockholders' deficit (5,721,477) (3,977,974)
----------------------- ----------------------
Total liabilities and stockholders' deficit $ 3,089,667 4,661,941
======================= ======================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
Three Month Periods Ended September 30, 2000 and 1999
2000 1999
------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,281,242) (1,163,208)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 12,210 9,030
Warrants and stock options 404,950 300,000
Changes in operating assets and liabilities:
Accounts receivable 1,651,325 (9,767)
Other current assets (3,110) 4,728
Accounts payable (86,624) 38,992
Accrued compensation 231,499 219,863
Deferred revenue 152,901 19,452
Accrued interest 1,660 17,956
Other accrued expenses (71,868) 246,262
------------------- --------------------
Net cash provided by (used in) operating activities 11,701 (316,692)
------------------- --------------------
Cash flows from investing activities:
Capital expenditures -- (10,973)
------------------- --------------------
Net cash used in investing activities -- (10,973)
------------------- --------------------
Cash flows from financing activities:
Proceeds from sale of common stock, net of costs 7,500 25,000
Collection of stock subscription receivable -- 250,000
Borrowings on notes payable-director 54,680 --
Repayment on notes payable-director (50,000) --
------------------- --------------------
Net cash provided by financing activities 12,180 275,000
Effect of exchange rate changes on cash 472 33,386
------------------- --------------------
Net increase (decrease) in cash and cash equivalents 24,353 (19,279)
Cash and cash equivalents at beginning of period 46,745 31,335
------------------- --------------------
Cash and cash equivalents at end of period $ 71,098 12,056
=================== ====================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)
For the Three Month Periods Ended September 30, 2000 and 1999
<S> <C> <C>
2000 1999
----------------- ---------------
Revenues:
Software $ 909,463 1,740,720
Maintenance, consulting, and other 1,537,766 1,219,680
----------------- ---------------
Total revenues 2,447,229 2,960,400
----------------- ---------------
Operating costs and expenses:
Cost of maintenance, consulting, and other 898,776 590,289
Product development 295,376 231,113
Sales and marketing 1,823,687 1,717,929
General and administrative 1,681,978 1,529,165
----------------- ---------------
Total operating expenses 4,699,817 4,068,496
----------------- ---------------
Operating loss (2,252,588) (1,108,096)
Interest expense, net (28,654) (55,112)
----------------- ---------------
Net loss $ (2,281,242) (1,163,208)
================= ===============
Loss per common share--basic and diluted $ (0.12) (0.07)
Weighted average shares--basic and diluted 19,515,621 16,583,805
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
CorVu Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements For the Three Month
Periods Ended September 30, 2000 and 1999
(1) Unaudited Financial Statements
The accompanying unaudited consolidated financial statements of CorVu
Corporation and Subsidiaries have been prepared by the Company in
accordance with accounting principles generally accepted in the United
States of America for interim financial information, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Pursuant to such rules and regulations, certain financial information
and footnote disclosures normally included in the financial statements
have been condensed or omitted. The results for the periods indicated
are unaudited, but reflect all adjustments (consisting only of normal
recurring adjustments) which management considers necessary for a fair
presentation of operating results.
(2) Agreement and Plan of Reorganization
On January 14, 2000, the Company completed a reverse merger transaction
with Minnesota American, Inc. (MNAC). The merger resulted in
shareholders of the Company and MNAC owning approximately 74 percent
and 26 percent, respectively of the outstanding shares of the combined
entity. The shares of MNAC were quoted on the Over-the-Counter Bulletin
Board (OTCBB) of the National Association of Securities Dealers (NASD).
The combined entity changed its name to CorVu Corporation and continues
CorVu's business operations. In addition, the Company received $950,000
in cash from Minnesota American, Inc.
(3) Summary of Significant Accounting Policies
(a) Revenue Recognition
Software license revenue is recognized when all of the following
criteria have been met: there is an executed license agreement,
software has been delivered to the customer, the license fee is fixed
and payable within twelve months, collection is deemed probable and
product returns are reasonably estimable. Revenues related to multiple
element arrangements are allocated to each element of the arrangement
based on the fair values of elements such as license fees, maintenance,
and professional services. Fair value is determined based on vendor
specific objective evidence. Maintenance revenues are recognized
ratably over the term of the maintenance contract, typically 12 to 36
months. Consulting and other revenues are recognized when services are
performed.
Deferred revenue represents payment received or amounts billed in
advance of services to be performed. Billing occurs within 30 days of
scheduled performance of services.
(b) Stockholders' Deficit
Equity accounts have been adjusted to reflect the conversion of shares
in connection with the reverse merger with Minnesota American, Inc.
using a conversion rate of 1.125 to 1. This conversion has also been
reflected in the calculation of weighted average shares and resulting
net loss per share for the three-month periods ended September 30, 2000
and 1999.
(c) Net Loss per Common Share
Basic loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period.
Diluted loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period
assuming the exercise of dilutive stock options and warrants. The
<PAGE>
dilutive effect of stock options and warrants is computed using the
average market price of the Company's stock during each period under
the treasury stock method. In periods where losses have occurred,
options and warrants are considered anti-dilutive and thus have not
been included in the diluted loss per common share calculations.
(d) Reclassifications
Certain 1999 amounts have been reclassified to conform to the 2000
presentation.
(4) Comprehensive Income
Comprehensive income and its components, including all changes in
equity during a period except those resulting from investments by
owners or distributions to owners are as follows:
For the Three For the Three
Months Ended Months Ended
September 30, 2000 September 30, 1999
Net Loss $ (2,281,242) $ (1,163,208)
Other comprehensive loss:
Foreign currency translation
Adjustment 125,289 75,023
-------------- ------------------
Total comprehensive loss $ (2,155,953) $ (1,088,185)
-------------- ------------------
(5) Liquidity
The accompanying interim consolidated financial statements are prepared
assuming the Company will continue as a going concern. During the year
ended June 30, 2000, the Company incurred an operating loss of
$8,146,221 and used $3,868,637 of cash in operating activities.
Subsequently, for the three-month period ended September 30, 2000, the
Company incurred an operating loss of $2,252,588. As of September 30,
2000, the Company had an accumulated deficit of $21,613,233, total
stockholders' deficit of $5,721,477, and negative working capital of
$5,871,521. In addition, as of November 14, 2000, due to inadequate
funds, the Company has not paid the outstanding principal on the note
payable discussed in Note 6, that was due on December 16, 1999 or the
outstanding principal on director advances discussed in Note 7 and, has
not remitted approximately $800,000 of employee and employer payroll
taxes.
Going forward the Company must raise additional cash either through
raising additional capital or through profits from operations. During
the year ended June 30, 2000, the Company raised capital of $4,754,393.
Management anticipates that the impact of the actions listed below will
generate sufficient cash flows to pay past due debts and fund the
Company's future operations.
1. Continue to increase the Company's revenues from software
licenses and other revenue sources.
2. Increase the level of indebtedness.
3. Solicit additional equity investment in the Company.
4. Reduce operating costs, as deemed necessary, in the event the
sales of product licenses and/or additional equity or debt
financing do not generate adequate proceeds.
<PAGE>
(6) Note Payable
In February 1998, the Company entered into a loan agreement in the
amount of approximately $927,000 with a third party lender. During
fiscal 1999, the Company borrowed an additional $480,000. The note is
secured by the assets of the Company. The interest rate on the
outstanding principal balance is based on an index defined in the loan
agreement plus 3%, with interest due monthly. On September 30, 2000 and
June 30, 2000 the interest rates were 6.34% and 6.28%, respectively.
The outstanding principal balance became due on December 15, 1999.
During fiscal 2000, the Company made principal payments totaling
approximately $808,000. The outstanding balance of approximately
$546,000 remains unpaid and the Company continues discussions with the
lender regarding repayment of the remaining balance.
(7) Director Advances
The Company has received interest-bearing and non-interest bearing
advances from certain directors of the Company. Interest rates on
interest-bearing advances vary from 5.0% to 11.5% as of September 30,
2000. These amounts are classified as current liabilities as the
Company anticipates paying the amounts during the year ending June
30, 2001.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations For the Three Month Periods Ended September 30, 2000 and
1999
REVENUES:
Total revenue for the three-month period ended September 30, 2000 decreased
$513,171 (17%) compared to the same period a year ago.
Software and license fee revenues decreased $831,257 (48%) from $1,740,720 for
the three-month period ended September 30, 1999 to $909,463 for the three-month
period ended September 30, 2000. CorVu's management believes several factors are
responsible for this. CorVu continues to refine its sales and marketing
strategy, in order to become a seller of comprehensive business software
offerings. This change in strategy required a retooling and retraining of the
current salesforce and has resulted in extended sales cycles. In addition,
included in the revenue figure for the three-month period ended September 30,
1999 was a significant sale to a European partner in the amount of approximately
$400,000 that was not repeated again in the current fiscal quarter.
Maintenance, consulting and other revenues increased by $318,086 (26%), from
$1,219,680 for the three-month period ended September 30, 1999 to $1,537,766 for
the three-month period ended September 30, 2000. This was due to the employment
of additional service professionals to meet the demands of the increased
customer base for both consulting and training services. In addition, annual
maintenance fees continued to increase in line with the increased customer base.
OPERATING EXPENSES:
Operating expenses increased by $631,321 (16%) for the three-month period ended
September 30, 2000, from the same period last year.
Cost of maintenance, consulting and other expenses increased $308,487 (52%) and
product development costs increased $64,263 (28%) for the three-month period
ended September 30, 2000, from the same period last year. These increases were
primarily caused by the employment of additional professionals in both the
consulting and training services, as well as in the research and development
area.
Sales and marketing expenses increased $105,758 (6%) for the three-month period
ended September 30, 2000, from the same period last year, due to the higher
number of employees working in that sector and other factors such as higher
expenditures for marketing including advertising, production of new marketing
materials to support the change in the sales and marketing strategy, and
participation in trade show activities.
General and administrative expenses increased $152,813 (10%) for the three-month
period ended September 30, 2000, from the same period last year. This increase
was caused by increased professional service fees such as legal, accounting and
other services associated with being a publicly-held company.
INTEREST EXPENSE, NET:
Interest expense, net decreased $26,458 (48%) for the three-month period ended
September 30, 2000, compared to the same period last year. This was due to the
balance on the note payable, which decreased from $1,365,000 as of September 30,
1999 to $546,000 as of September 30, 2000.
<PAGE>
NET LOSSES:
CorVu incurred net losses of $2,281,242 and $1,163,208 for the three-month
periods ended September 30, 2000 and 1999, respectively.
Liquidity and Capital Resources
Total cash and cash equivalents increased by $24,353 during the three-month
period ended September 30, 2000 from $46,745 as of June 30, 2000 to $71,098 as
of September 30, 2000. Net cash provided by operating activities was $11,701 for
the period ended September 30, 2000. This was caused by the collection of
accounts receivable balances existing as of June 30, 2000. Net cash provided by
financing activities was $12,180 for the period ended September 30, 2000.
Proceeds from the sale of common stock were $7,500, representing the exercise of
employee stock options. During the three-month period ended September 30, 2000,
the Company received borrowings from a director of $54,680 and repaid director
loans in the amount of $50,000.
CorVu's management intends to undertake one or several of the following
activities: (1) continue to increase CorVu's revenues from software licenses and
other revenue sources; (2) increase the level of indebtedness; (3) solicit
additional equity investment in the Company; (4) reduce operating costs, as
deemed necessary, in the event the sales of product licenses and / or additional
equity or debt financing do not generate adequate proceeds. Since June 2000,
CorVu has reduced operating expenses to bring them in line with current revenues
by closing non-strategic offices and by a general workforce reduction. CorVu's
management believes that these activities will generate sufficient cash flows to
sustain CorVu's operations for the foreseeable future.
Forward Looking Statements
This Report contains statements, which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and the
Securities Exchange Act of 1934. These statements appear in a number of places
in this Report and include all statements regarding the intent, belief or
current expectations of the Company, its directors or its officers with respect
to, among other things: (i) the Company's financing plans; (ii) trends affecting
the Company's financial condition or results of operations; (iii) the Company's
growth strategy and operating strategy; and (iv) the declaration and payment of
dividends. Investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
During the quarter ended September 30, 2000, the Company made the
following sales of unregistered securities:
<PAGE>
(a) In August 2000, in connection with the exercise of a stock option
by an employee, the Company sold 8,437 shares of Common Stock at a price of
$0.89 per share. The sale of such shares was deemed to be exempt from
registration under the Securities Act of 1933 by virtue of Rule 701 thereunder.
A restrictive securities legend has been placed on the certificate representing
such shares.
(b) In September 2000, in connection with the exercise of a stock
option by an employee, the Company sold 23,625 shares of Common Stock at a price
of $0.89 per share and sold 450 shares of Common Stock at a price of $2.67 per
share. The sale of such shares was deemed to be exempt from registration under
the Securities Act of 1933 by virtue of Rule 701 thereunder. A restrictive
securities legend has been placed on the certificate representing such shares.
Item 3. Default Upon Senior Securities.
The Company is in default on a loan agreement with a third party
lender. For details see Part I, Item 1., footnote 6 to Unaudited Consolidated
Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) See Exhibit Index on page following Signatures.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CORVU CORPORATION
Date: November ____, 2000 By /s/ David C. Carlson
David C. Carlson
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
CORVU CORPORATION
FORM 10-QSB
FOR QUARTER ENDED SEPTEMBER 30, 2000
Exhibit Number Description
27 Financial Data Schedule (filed in electronic format only)
