U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended: March 31, 2000
Commission file no. 000-29201
ELVA, INC.
--------------------------------------------
(Name of small business registrant in its charter)
Florida 65-0790761
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Lakeview Avenue, Suite 415
West Palm Beach, Florida 33401
- - ------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (561) 659-6530
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
None
- ----------------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value
-----------------------------------
(Title of class)
Copies of Communications Sent to:
Donald F. Mintmire, Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696
Fax: (561) 659-5371
<PAGE>
Indicate by Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
As of March 31, 2000, there are 21,500,000 shares of voting stock of the
registrant issued and outstanding.
<PAGE>
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets...............................................F-2
Consolidated Statements of Operations and Comprehensive Income (Loss).....F-3
Consolidated Statements of Stockholders' Equity (Deficiency)..............F-4
Consolidated Statements of Cash Flows.....................................F-5
Notes to Consolidated Financial Statements................................F-6
F-1
<PAGE>
<TABLE>
<CAPTION>
Elva, Inc.
Consolidated Balance Sheets
December 31, March 31,
1999 2000
---------------------- ----------------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 97,476 $ 79,374
Accounts receivable 55,958 6,527
VAT tax receivable 42,251 11,125
---------------------- ----------------------
Total current assets 195,685 97,026
---------------------- ----------------------
PROPERTY AND EQUIPMENT
Computers and equipment 72,036 71,436
Less accumulated depreciation (28,843) (31,801)
---------------------- ----------------------
Net property and equipment 43,193 39,635
---------------------- ----------------------
OTHER ASSETS
Deposits and other assets 16,134 30,256
Income tax credit receivable 111,791 110,226
Patent 313,092 423,148
Less accumulated amortization (43,931) (47,895)
---------------------- ----------------------
Net other assets 397,086 515,735
---------------------- ----------------------
Total Assets $ 635,964 $ 652,396
====================== ======================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 46,006 $ 54,692
Accrued Expenses
Trade 34,919 44,361
Salaries and payroll taxes 126,644 121,629
Current portion of long-term debt 2,450 0
Advances from shareholders 0 185,960
Conditional government subsidy 95,365 77,750
---------------------- ----------------------
Total current liabilities 305,384 484,392
---------------------- ----------------------
LONG-TERM DEBT
Conditional government subsidy 190,729 198,894
Other long-term debt 9,802 8,886
Long-term debt - related party 509,341 570,163
---------------------- ----------------------
Total long-term debt 709,872 777,943
---------------------- ----------------------
Total Liabilities 1,015,256 1,262,335
---------------------- ----------------------
Minority interest in consolidated subsidiary 0 0
---------------------- ----------------------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.0001 par value, authorized 10,000,000 shares;
none issued and outstanding 0 0
Common stock, $0.0001 par value, authorized 50,000,000 shares;
21,500,000 issued and outstanding shares 2,150 2,150
Additional paid-in capital 828,401 828,401
Accumulated comprehensive income (loss) (53,525) (10,284)
Deficit (1,156,318) (1,430,206)
---------------------- ----------------------
Total stockholders' deficiency (379,292) (609,939)
---------------------- ----------------------
Total Liabilities and Stockholders' Deficiency $ 635,964 $ 652,396
====================== ======================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
Elva, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
Three Months Ended March 31,
(unaudited)
2000 1999
------------------------ -------------------------
<S> <C> <C>
REVENUES $ 74,013 $ 62,696
------------------------ -------------------------
OPERATING EXPENSES
Salaries 164,845 120,930
Advertising 2,734 9,373
Royalty expense - related parties 0 24,363
Depreciation and amortization 9,329 5,855
General and administrative 171,085 220,652
Research and development 0 0
------------------------ -------------------------
Total operating expenses 347,993 381,173
------------------------ -------------------------
Operating Loss (273,980) (318,477)
------------------------ -------------------------
OTHER INCOME (EXPENSE):
Interest income 351 5,383
Interest expense (5,985) (1,394)
Foreign currency transaction gain (loss) 3,538 4,749
------------------------ -------------------------
Total other income (expense) (2,096) 8,738
------------------------ -------------------------
Net loss before tax credit and minority interest (276,076) (309,739)
Foreign income tax credit 2,188 0
Minority interest in consolidated subsidiary income (loss) 0 0
------------------------ -------------------------
Net loss (273,888) (309,739)
Other comprehensive income (loss):
Foreign currency translation gain (loss) 43,240 (22,839)
------------------------ -------------------------
Comprehensive loss $ (230,648) $ (332,578)
======================== =========================
Net loss per common share $ (0.01) $ (0.01)
======================== =========================
Weighted average number of common shares outstanding 21,500,000 21,500,000
======================== =========================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
Elva, Inc.
Consolidated Statements of Stockholders' Equity (Deficiency)
Accumulated Total
Additional Comprehensive Stockholders'
Number of Common Paid-in Income Equity
Shares Stock Capital (Loss) Deficit (Deficiency)
-------------- ----------- --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
December 31, 1998 21,500,000 $ 2,150 $ 828,401 $ (52,349) $ (432,606)$ 345,596
Year ended December 31, 1999:
Other comprehensive income (loss) 0 0 0 (1,175) 0 (1,175)
Net loss 0 0 0 0 (723,712) (723,712)
-------------- ----------- --------------- ------------- ------------- ---------------
BALANCE, December 31, 1999 21,500,000 2,150 828,401 (53,524) (1,156,318) (379,291)
Three months ended March 31, 2000:
- ----------------------------------
(unaudited)
Other comprehensive income (loss) 0 0 0 43,240 0 43,240
Net loss 0 0 0 0 (273,888) (273,888)
-------------- ----------- --------------- ------------- ------------- ---------------
BALANCE, March 31, 2000 (unaudited) 21,500,000 $ 2,150 $ 828,401 $ (10,284) $ (1,430,206)$ (609,939)
============== =========== =============== ============= ============= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Elva, Inc.
Consolidated Statements of Cash Flows
Three Months Ended March 31,
(unaudited)
2000 1999
---------------------- ----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (273,888) $ (309,739)
Adjustments to reconcile net loss to net cash used by
operating activities:
Minority interest in consolidated subsidiary income 0 0
Depreciation 4,018 1,656
Amortization 5,311 4,199
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 48,892 (16,834)
(Increase) decrease in VAT receivable 30,548 63,682
(Increase) decrease in deposits and other assets (15,058) (17,578)
(Increase) decrease in income tax credit receivable (2,188) 0
Increase (decrease) in accounts payable 10,487 10,717
Increase (decrease) accrued expense - trade 10,886 8,221
Increase (decrease) salaries and payroll taxes (855) 36,243
---------------------- ----------------------
Net cash provided (used) by operating activities (181,847) (219,433)
---------------------- ----------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,828) (30,236)
(Increase expenditure) decrease application patent (123,708) (6,536)
---------------------- ----------------------
Net cash provided (used) by investing activities (125,536) (36,772)
---------------------- ----------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Shareholder advances 197,640 0
Shareholder advance repayments 0 (7,117)
Receipt of conditional government subsidy 0 4,083
Proceeds of long term debt - related party 97,455 206,005
Debt payments (3,043) (3,422)
---------------------- ----------------------
Net cash provided by financing activities 292,052 199,549
---------------------- ----------------------
Effect of exchange rates on cash (2,771) (20,351)
---------------------- ----------------------
Net increase (decrease) in cash and equivalents (18,102) (77,007)
CASH and equivalents, beginning of period 97,476 293,604
---------------------- ----------------------
CASH and equivalents, end of period $ 79,374 $ 216,597
====================== ======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid in Cash: $ 5,985 $ 1,394
====================== ======================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
Elva, Inc.
Notes to Consolidated Financial Statements
(Information with respect to the three months ended
March 31, 2000 and 1999 is unaudited)
(1) Summary of Significant Accounting Principles
The Company Elva, Inc., (the "Company"), is a Florida chartered
corporation which conducts business from its offices in West Palm
Beach, Florida, Los Angeles, California, Paris, France and Singapore.
The Company was incorporated on August 15, 1997 as Computer Research
Technologies, Inc., and changed its name to Elva, Inc. on January 25,
1999. Prior to the acquisition of ELVA, SA, the Company was
principally seeking financing to allow it to begin its planned
operations. The Company is principally involved in the smart card
technology industry through its French subsidiary, ELVA, SA. The
following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates In preparing the consolidated financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the statements of financial condition, and revenues and
expenses for the year then ended. Actual results may differ
significantly from those estimates.
b) Significant acquisition In December 1998, Elva, Inc. issued
14,160,000 shares of common stock to acquire substantially all the
issued and outstanding shares of the common stock of ELVA, SA, a
French corporation, in a reverse merger, which was accounted for as a
reorganization of ELVA, SA. There remains a four-tenths of one
percent minority interest in ELVA, SA, which is owned by two of the
major stockholders of Elva, Inc. as a result of this acquisition.
This minority interest is required under French corporate law.
c) Principles of consolidation The consolidated financial statements
include the accounts of Elva, Inc. and its wholly owned subsidiary.
Inter-company balances and transactions have been eliminated.
d) Net loss per common share Basic net loss per weighted average
common share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period.
e) Property and equipment All property and equipment are recorded at
cost and depreciated over their estimated useful lives, using the
straight-line method. Upon sale or retirement, the costs and related
accumulated depreciation are eliminated from their respective
accounts, and the resulting gain or loss is included in the results
of operations. Repairs and maintenance charges which do not increase
the useful lives of the assets are charged to operations as incurred.
Depreciation expense was $13,107 and $5,332 for the years ended
December 31, 1999 and 1998, respectively.
f) Cash and equivalents The company considers investments with an
initial maturity of three months or less as cash equivalents.
g) Patents The Company acquired two French patents, Nos. 95-15735 and
96-01872, from the founders of ELVA, SA. The Company is amortizing
the cost of these patents over the remaining life of the patents.
Patents in France have a 20 year life. Amortization expense was
$10,866 and $17,166 for the years ended December 31, 1999 and 1998,
respectively.
h) Revenue recognition The Company's sole source of revenue has been
from licensing its patented technology. The Company records revenue
when earned under its licensing agreement. The Company intends to
license its technology to others as well, rather than to manufacture
the VOCALID cards for sale. The Company believes that it would be
prohibitively expensive for it to establish its own manufacturing
facilities and to do so would distract it from its efforts at getting
its technology accepted as the world standard.
F-6
<PAGE>
Elva, Inc.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles, continued
i) Foreign currency transaction and translation gains(losses) The
principal operating entity of the Company is its subsidiary, ELVA,
SA, which is located in France. The functional currency of ELVA, SA
is the French Franc, (FF). ELVA, SA has only one customer which is
located in the US. ELVA, SA bills this customer in FF and is paid in
US Dollars, (USD). ELVA, SA records a transaction gain or loss at the
time of receipt of payment consisting of the difference between the
amount of FF billed and the amount of FF the USD payment is converted
into. On a consolidated basis the Company's reporting currency is the
US Dollar.
j) Research & development expenses are expensed in the period
incurred.
k) Software development costs The software developed by the Company
is used exclusively by licensors of the Company's technology. As
such, the Company is not selling the software. Costs incurred in
developing the software have been expensed in the period in which
incurred.
l) VAT tax receivable In France, as in many other countries, the
government charges a Value Added Tax, (VAT), that is similar in
nature to sales tax in the US. There are three major differences.
First is that VAT is charged at each point of sale. Second is that
there are no exemptions from the collection of VAT. Finally, each
company files a VAT return with the government monthly reflecting the
gross VAT collected and VAT paid. If the VAT paid is greater than the
amount collected, the Company receives a refund from the government
approximately five months later.
m) Interim financial information The financial statements for the
three months ended March 31, 2000 and 1999 are unaudited and include
all adjustments which in the opinion of management are necessary for
fair presentation, and such adjustments are of a normal and recurring
nature. The results for the three months are not indicative of a full
year results.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.0001 par value common stock and 10,000,000 shares of $0.0001 par
value preferred stock. Rights and privileges of the preferred stock
are to be determined by the Board of Directors prior to issuance. The
Company has 21,500,000, shares of common stock issued and outstanding
at December 31, 1998 and September 30, 1999.
In September 1997, the Company issued 9,000,000 shares to its founder
for services rendered to the Company valued at $9,000. In April 1998,
the Company completed a Regulation D Rule 504 Placement for 1,757,376
shares in exchange for $17,574 cash. In April 1998, a majority
shareholder donated 9,000,000 shares of common stock to the Company.
In June 1998, 9,000,000 shares were issued for $32,500 in cash.
During the third quarter of 1998, the Company issued 2,700,000 shares
of common stock for $54,000 in cash. In December 1998, 9,557,376
shares were donated to the Company. In December 1998, the Company
issued 14,160,000 shares for 26,326 of the 26,336 shares issued and
outstanding of ELVA, SA, a French corporation. Additionally, in
conjunction with this acquisition, the Company issued 3,440,000
shares to a third party in settlement of a $204,550 loan the third
party had made to ELVA, SA. As the common stock of the Company was
not listed at the date of acquisition, the fair value of the stock
issued to settle this debt was not determinable and the Company
elected to use the loan amount outstanding to value this transaction.
(3) Income Taxes Deferred income taxes (benefits) are provided for
certain income and expenses which are recognized in different periods
for tax and financial reporting purposes. The Company had net
operating loss carry- forwards for income tax purposes of
approximately $1,430,000, which expire $68,000 on December 31, 2011,
$132,000 on December 31, 2117, $232,000 on December 31, 2118,
$724,000 on December 31, 2119 and $274,000 on December 31, 2020.
F-7
<PAGE>
Elva, Inc.
Notes to Consolidated Financial Statements
(3) Income Taxes, continued The amount recorded as a deferred tax asset,
cumulative as of March 31, 2000 and 1999 is approximately $572,000
and $297,000, respectively, which represents the amount of tax
benefits of the loss carry-forwards. The Company has established a
valuation allowance for this deferred tax asset of $572,000 and
$297,000, as the Company has no history of profitable operations.
The significant components net deferred tax asset as of March 31,
2000, are:
Net operating losses $ 572,000
Valuation allowance (572,000)
----------------------
Net deferred tax asset $ 0
======================
The Company's subsidiary, ELVA, SA, applied for research and
development income tax credits with the French government for the
years ended December 31, 1999, 1998 and 1997. The credits are applied
for on the Company's annual income tax return in mid-1998, 1999 and
2000. The amounts applied for were approximately $94,800, $15,300 and
$94,400 for 1999, 1998 and 1997, respectively. In the 4th quarter of
1999, ELVA, SA was notified by the French government of the approval
of the application for 1997, and that payment by the government would
occur in late 2000. The Company assigned this receivable to its bank
in exchange for cash in the amount of approximately $94,400. It is
now expected that the government will approve the 1998 and 1999
credits. They are expected to be paid $15,300 in 2001 and $94,800 in
2002. These credits reduce the income tax benefit of its net
operating loss carry-forwards for the French subsidiary on a one for
one basis.
(4) Going Concern As shown in the accompanying consolidated financial
statements, the Company incurred net losses totaling $274,000 for the
three months ended March 31, 2000, and reflects a stockholders'
deficiency of approximately $610,000 as of March 31, 2000. These
conditions raise substantial doubt as to the ability of the Company
to continue as a going concern. The ability of the Company to
continue as a going concern is dependent upon increasing sales and
obtaining additional capital and financing. The Company has retained
a registered broker/dealer to raise additional funds for the Company
in an amount up to $5,000,000. The financial statements do not
include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
(5) Related Party Transactions
(a) Patents The Company acquired two French patents, Nos. 95-15735
and 96-01872, from the founders of ELVA, SA for 21,069 shares of
common stock of ELVA, SA valued at $320,700, based on their
historical cost, and approximately $3,333 per month, for the life of
the patents as royalty payments, beginning in March 1997. These ELVA,
SA shares were part of the original issue shares of ELVA, SA, and
accordingly had no fair market value at that time. After
approximately 8 months, the principals realized that the Company did
not have the cash flow to continue to make the payments to them and
continue to develop the marketing efforts and suspended the payments.
In February 1999, the Company and the founders entered into a new
agreement which called for total additional payment of approximately
$116,700, with an initial payment of approximately $25,000, and
quarterly payments of approximately $11,500, beginning on February 1,
2000. This new agreement also encompassed the international patent
application filed with the World Organization of Intellectual
Property, principally for the US, Canada, Europe and Japan. It also
encompasses the trademark "VOCALID," No. 96-605347, registered at
INPI in January 11, 1996.
(b) Long-term debt In 1998, ELVA, SA received approximately $204,500
from a third party as a loan. In December 1998, as part of the
reverse merger, Elva, Inc. issued 3,440,000 shares of common stock in
settle-
F-8
<PAGE>
Elva, Inc.
Notes to Consolidated Financial Statements
(5) Related Party Transactions (Continued)
b) Long-term debt (continued) ment of this debt. In March, May and
September 1999 and March 2000, ELVA received additional traunches of
this loan from the now related party, in the total amount of
approximately $570,000. This loan is payable in full on January 1,
2002. The Company can, at its option, prepay all or part of this
amount without penalty. The loan agreement does not carry a stated
interest rate, although it references accrued interest. The Company
is accruing interest at a rate of 10%, until it can get documentation
from the lender as to the correct rate. The Company also received a
$16,000 conditional loan from an unrelated company, under which the
Company would not be liable for repayment if the Company hired at
least one former technical employee of the other company. The Company
has not done so and is repaying this loan at a rate of $3,000 per
year. The repayment schedule is per the original agreement.
(6) Commitments The Company is committed under two operating leases, one
for its office space and the other for an automobile. Under the
automobile lease the Company is obligated to pay approximately $4,000
in 2000. The Company is obligated under the lease for its office
space for payments of $33,000 and $16,600 in 2000 and 2001,
respectively. The Company can, at its option, elect to extend this
lease for up to two additional three-year periods. The Company leases
its office space in Los Angeles and Singapore on a month-to-month
basis. The Company's rent expense was approximately $62,250 and
$25,000 for the years ended December 31, 1999 and 1998 respectively.
(7) Concentration of customers The Company's sole source of revenue to
date has been one customer, a US based company. Accordingly, its
revenue and related accounts receivable at all periods presented are
all related to this single source. The Company is endeavoring to
expand its customer base.
(8) Conditional government subsidies The Company has received several
government grants which are conditional as to repayment. The grants
are to be applied as reductions of salaries and employment taxes paid
to new employees. They are intended by the government to induce
increases in employment, as France has experienced high unemployment
over the last few years. To date the Company has been increasing
employment and applying accumulated grants as offsets to salary
expense and at present is not yet obligated to repay any of these
grants. The Company does not expect to have to repay any of the grant
amounts. These grants, if required to be repaid, do not require the
payment of interest. The term for adding the required employees under
these grants is three years. The Company has amortized approximately
$15,500 and $35,000 of the grants against salary expense for the
years ending December 31, 1999 and 1998, respectively.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
12 Month Plan of Operations
The Company's plan of operations for the next twelve (12) months is for it
to further refine its marketing and sales strategy (See Part I, Item 1) and to
develop a web site for its primary VocaliD(R) Smart Card System product. An
average initial funding of $ 400,000 has been committed for such work. The
Company plans to continually refine its strategy for capitalizing on recent
trends within the Smart Card industry and to exploit such trends to its
advantage. The Company plans to develop new and varied VocaliD(R)Smart Card
systems, concepts and ventures in addition to its current VocaliD(R) Smart Card
development plans.
The Company plans believes it can capitalize on the general Internet trend of
increasing consumer usage and increasing levels of e-commerce transactions
through providing the market the Company's VocaliD(R)Smart Card, which the
Company believes will increase levels of person-to- person communication and
which may directly increase levels of advertising and Web site linkage revenues.
The Company believes that it is well positioned to profit from such
opportunities.
The Company's business strategy is to develop its VocaliD(R)Smart Card system to
provide consumers with versatile high quality, easy to use, personal and secure
communications. The Company believes the ease of use and versatility of its
online Smart Card system will differentiate itself among the array of off line
smart card options. The Company believes that this differentiation strategy will
allow it to carve out a profitable market niche. In addition to the primary
revenue stream derived from fees earned through the usage of the Company's
VocaliD(R) Smart Card, the Company believes that its market niche will allow it
to successfully gain consumer "hits" to its VocaliD(R)Smart Card system Web
site; such "hits" are the major factor in determining advertising revenue over
the Internet (through banner ad sales) and will allow the Company to realize an
additional revenue stream through charging advertising fees for banner ad
placements. Therefore, while the Company plans to generate its primary revenue
by charging fees for the use of its VocaliD(R)Smart Card system, it may also
generate significant revenue by attracting interest ("hits") to its
VocaliD(R)Smart Card Web site.
The Company plans to seek out strategic alliances, joint venture partners, and
business partners with other high-technology firms in which shared resources of
such could provide enhanced shareholder value. The Company plans to continually
scan the environment for such partnering opportunities. Particular attention
will be paid to the possibilities of developing international corporate
strategic alliances, partnering with successful U.S. technology start-ups, and
finding merger and acquisition candidates or counter-parties with firms
operating in the U.S. and/or abroad.
<PAGE>
Results of Operations -For the Three Months Ending March 31, 2000
Financial Condition, Capital Resources and Liquidity
For the 1st quarter ended March 31, 1999 and 2000 the Company recorded revenues
of $63,000 and $74,000. The increase of $11,000 is due to increasing licensing
revenue from ATMEL.
For the 1st quarter ended March 31, 1999 and 2000 the Company had salary
expenses of $121,000 and $165,000. This increase of $44,000 was due to an
increase in the number of personnel employed by the Company.
For the 1st quarter ended March 31, 1999 and 2000, the Company had on a
consolidated unaudited basis general and administrative expenses of $221,000 and
$171,000, respectively. The decrease of $ 50,000 is due primarily to a one time
consulting fee related to the Company's reverse merger, paid in 1999.
For the 1st quarter ended March 31, 1999 and 2000, the Company had on a
consolidated unaudited basis total operating expenses of $381,000 and $348,000
of which $44,000 is attributable to an increase in general and administrative
and salaries by the Company, and $50,000 and $24,000 increases due to the one
time fee and eliminating the royalty payments to stockholders.
Net Losses
For the 1st quarter ended March 31, 1999, 2000, the Company reported a net loss
from operations of $381,000 and $274,000 respectively.
The ability of the Company to continue as a going concern is dependent upon its
ability to obtain clients who will utilize the Company's VocaliD(R)product and
whether the Company can attract an adequate number of clients. The Company
believes that in order to be able to expand its initial operations in terms of
sales and marketing, it must rent new offices in USA and abroad, hire staff and
acquire through purchase or lease computer and office equipment to maintain
accurate financial accounting and client data. Further, the Company believes
that the type of equipment necessary for the operation is readily accessible at
competitive rates. The Company is already registered with the Secretary of State
of California to do business and is anticipating the penetration of the North
American market from its Californian office.
To implement such plan, also during this initial phase, the Company intends to
initiate a self- directed private placement under Rule 506 in order to raise the
funds required by its development among which the financial means related to new
staff, equipment and offices. Those needs are currently estimated by the
management staff. The Company expects to accomplish its fund raising objective
before June 1, 2000. No underwriters have been contacted and no known investors
have been contacted with respect to such fund raising. In the event such
placement is successful, the Company believes that it will have sufficient
operating capital to meet the initial expansion goals and operating costs for a
period of one (1) year.
Employees
Next year, ELVA intends to hire new persons in North America, Asia and Europe in
order to widen its marketing worldwide and to ensure the evolution of the
technology.
<PAGE>
As of March 31, 2000, ELVA had a total of 15 employees, of which 6 are employed
in sales and marketing, 6 are employed in product development, 1 is employed in
professional services and customer support, 1 is employed in internal operations
support, and 1 is employed in administration and finance. Our future performance
depends in significant part upon the continued service of our key technical and
management personnel, and our continuing ability to attract and retain highly
qualified and motivated personnel in all areas of our operations. Competition
for such personnel is intense. We provide no assurance that we can retain key
managerial and technical employees or that we can attract, assimilate or retain
other highly qualified personnel in the future.
Our employees are not represented by a labor union. We have not experienced any
work stoppages and consider our employee relations to be good.
The Company will attempt to maintain diversity within its customer and
advertising base in order to decrease its exposure to downturns or volatility in
any particular market segment. As part of this selection strategy, the Company
intends to offer its services to those consumers and strategic partners which
have a reputation for reputable dealings and, eliminating customers and
advertisers that it believes present a higher credit risk. Where feasible, the
Company will evaluate beforehand each customer, supplier, partner, strategic
partner, and advertiser for their creditworthiness.
Research and Development Plans
For the next twelve months there is a plan for funding extensive research and
development efforts. Our goal is to enhance the technology features in terms of
personalization and security. For that purpose, the chip capabilities and the
software environment will both be enlarged and improved in order to supply a
more efficient access to the technology for each end user and for any
application.
Other investments related to the manufacturing process are scheduled, too.
Therefore, the Company foresees significant changes in the number of employees.
Impact of the Year 2000 Issue
The Company did not experience any material impact to its operations as a result
of the Year 2000 calendar change. The Company does not anticipate any material
disruption in its operations as a result of any failure by the Company to be in
compliance.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), finding
suitable merger or acquisition candidates, expansion and growth of the Company's
business and operations, and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of
<PAGE>
historical trends, current conditions and expected future developments as well
as other factors it believes are appropriate in the circumstances. However,
whether actual results or developments will conform with the Company's
expectations and predictions is subject to a number of risks and uncertainties,
general economic market and business conditions; the business opportunities (or
lack thereof) that may be presented to and pursued by the Company; changes in
laws or regulation; and other factors, most of which are beyond the control of
the Company. Consequently, all of the forward-looking statements made in this
Form 10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or operations.
The Company assumes no obligations to update any such forward-looking
statements.
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to which any
of its property is the subject which are pending, threatened or contemplated or
any unsatisfied judgments against the Company.
Item 2. Changes in Securities and Use of Proceeds
Beginning on February 1, 2000 the Company commenced making quarterly royalty
payments of approximately $11,500 to the founders of ELVA, SA for two French
patents, Nos. 95-15735 and 96-0182, which were transferred to the Company.
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending March 31, 2000, covered by
this report to a vote of the Company's shareholders, through the solicitation of
proxies or otherwise.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B, as
described in the following index of exhibits, are incorporated herein by
reference, as follows:
<PAGE>
Exhibit No. Description
- -------------------------------------------------------------------------------
Item 1. Index to Exhibits
- --------- -----------------------
3(i).1 Articles of Incorporation of ELVA, INC. f/k/a/ Computer Research
Technology, Inc., effective August 15, 1997 (1)
3(i).1 Amended Articles of Incorporation of ELVA, INC. f/k/a/ Computer
Research Technology, Inc., filed January 29, 1999. (1)
3(ii).1 Bylaws of ELVA, INC. f/k/a/ Computer Research Technology, Inc (1)
10.1 Letter of Intent dated December 19, 1998 between Computer Research
Technologies, Inc. and ELVA,SA. (1)
27.1* Financial Data Schedule
- --------------
* filed herewith
(1) Incorporated herein by reference to the Registration Statement on Form
10-SB Amendment 1 of ELVA , Inc., filed with the U.S. Securities and
Exchange Commission.
(b) No Reports on Form 8-K were filed during the fiscal year ended December 31,
1999, covered by this Annual Report on Form 10-KSB.
<PAGE>
SIGNATURES
-------------------
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ELVA, INC.
(Registrant)
Date: 14th April, 2000 /s/ Cedric Colnot
---------------------
Cedric Colnot, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: Signature Title
- ------ ------------ -----
May 15, 2000 By: /s/ Cedric Colnot
--------------------------
Cedric Colnot President & Director
May 15, 2000 By: /s/ Patrick Misko
--------------------------
Patrick Misko Vice-President & Director
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