SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter year ended: Commission file number:
October 31, 1998 0-14200
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CompuSonics Video Corporation
(Exact name of Registrant as specified in its charter)
Colorado 84-1001336
- -------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7001 Orchard Lake Road - Suite 424
West Bloomfield, MI 48322-3608
- ---------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(248) 851-5651
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.001 Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and, (2) has been
subject to such filing requirements for the past 90 days:
Yes X No
As of December 1, 1998, a total of 160,006,250 shares of common stock,
$.001 par value, were outstanding.
1
<PAGE>
COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
Form 10-Q Filing for the Quarter Ended October 31, 1998
INDEX
Page
Number
-------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets
October 31, 1998 (Unaudited) and July 31, 1998 3
Consolidated Statements of Operations (Unaudited)
Three months ended October 31, 1998
and 1997 4
Consolidated Statements of Cash Flows (Unaudited)
Three months ended October 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
Signature Page 8
2
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<TABLE>
<CAPTION>
COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
--------------------------------------------
10/31/98 07/31/98
---------------- ----------------
Current Assets
Cash $ 5,167 $ 77
Marketable Equity Securities Available
For Sale 64,069 80,086
---------------- ----------------
$ 69,236 $ 80,163
================ ================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Notes Payable to Related Entities $ 402,440 $ 398,440
Notes Payable - Other 20,100 20,100
Accounts Payable and Accrued Liabilities 47,013 48,010
Accounts Payable - Related Entities 275,410 264,818
---------------- ----------------
744,963 731,368
---------------- ----------------
Stockholders' Deficit
Preferred Stock - Series A Convertible Stock
$.001 Par Value, 75,000,000 Shares
Authorized, -0- Shares Issued and Outstanding -0- -0-
Common Stock $.001 Par Value, 300,000,000
Shares Authorized, 160,006,250 Shares
Issued and Outstanding 160,006 160,006
Additional Paid-In Capital 680,880 680,880
Retained Earnings
Unrealized Gain on Available for Sale Securities 39,033 55,051
Accumulated Deficit (1,555,646) (1,547,141)
---------------- ----------------
Total Stockholders' Deficit (675,727) (651,204)
---------------- ----------------
Total Liabilities and Stockholders' Deficit $ 69,236 $ 80,163
================ ================
See notes to financial statements
3
</TABLE>
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<TABLE>
<CAPTION>
COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<S> <C> <C>
For the three months ended October 31,
------------------------------------------------------
1998 1997
------------------------------------------------------
Consulting Fee Income $ 25,000 $ -0-
----------------------- -----------------------
General and Administrative Expenses
Staff Salary 16,500 -0-
Professional Fees 1,168 735
Management Fees - Related Party 750 300
Patent Fees -0- 2,945
All Other General and Administrative
Expenses 4,114 36
----------------------- -----------------------
22,532 4,016
----------------------- -----------------------
Loss From Operations 2,468 (4,016)
----------------------- -----------------------
Other Income (Expense)
Interest Expense (10,974) (10,694)
----------------------- -----------------------
Net Loss Before Income Taxes (8,506) (14,710)
Income Tax Benefit -0- -0-
----------------------- -----------------------
Net Loss $ (8,506) $ (14,710)
======================= =======================
Weighted Average Number
of Common Shares 160,006,250 160,006,250
======================= =======================
Net Loss Per Common Share $ (0.00) $ (0.00)
======================= =======================
See notes to Financial Statements
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
<S> <C> <C>
For the three months ended October 31,
------------------------------------------------------------
1998 1997
------------------------------------------------------------
Cash Flows From Operating Activities
Net Loss $ (8,506) $ (14,710)
Adjustments to Reconcile Net Loss to Net
Cash Used by Operating Activities
Change in Assets and Liabilities
Increase (Decrease) In:
Accounts Payable and Accrued
Liabilities (996) 4,212
Accounts Payable
Related Entity 10,592 10,462
------------ ----------------
Total Adjustments 9,596 14,674
------------ ----------------
Net Cash (Used For) Operations 1,089 (36)
------------ ----------------
Cash Provided by (Used For) Investing Activities -0- -0-
------------ ----------------
Net Cash Provided by Investing Activities -0- -0-
------------ ----------------
Cash Provided by (Used For) Financing Activities
Proceeds From Notes Payable - Related 4,000 -0-
------------ ----------------
Net Cash Provided by (Used For) Financing Activities 4,000 -0-
------------ ----------------
Increase (Decrease) in Cash 5,089 (36)
Balance at Beginning of Period 77 153
------------ ----------------
Balance at End of Period $ 5,167 $ 117
============ ================
See notes to financial statements
5
</TABLE>
<PAGE>
COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
PART I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
The accompanying consolidated financial statements of CompuSonics
Video Corporation and Subsidiaries have been prepared by the company
without audit. In the opinion of the company's management, the
financial statements reflect all adjustments necessary to present
fairly the results of operations for the three-month period ended
October 31, 1998; the company's financial position at October 31,
1998 and July 31, 1998; and the cash flows for the three-month
period ended October 31, 1998 and 1997. Certain notes and other
information have been condensed or omitted from the interim
financial statements presented in this Quarterly Report on Form
10-Q. Therefore, these financial statements should be read in
conjunction with the company's July 1998 Form 10-K.
The results for the three-month period ended October 31, 1998 are
not necessarily indicative of future financial results.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The net loss from operations for the three-month period ended
October 31, 1998 was $6,204 less than that for the three-month
period ended October 31, 1997. This was due mainly to the increase
in consulting fees of $25,000 offset by the staff salary expense of
$16,500.
Working capital decreased by $24,524 from July 31, 1998 to October
31, 1998, due to the net loss of $8,506 and a decrease in unrealized
gain on investments of $16,018. In the past, the Registrant has
relied on a related company to provide the working funds it has
required but there is no assurance that this will continue in future
years.
The Registrant has the following marketable securities:
Williams Controls, Inc. 28,475 Common Shares
Cost - $25,035
Market Value at 10/31/98 - $64,069
These shares are used as collateral against the notes payable.
6
<PAGE>
On August 14, 1998, the Company signed an offer of employment with
Ethan J. Matyas to be the Company's Director of Professional
Services. Mr. Matyas is currently the Company's only full-time
employee and was previously employed as the president of WebStyles,
LLC, a company engaged in the business of internet website
development and maintenance. Mr. Matyas' responsibilities with the
Company will be to pursue actions against those believed to be
violating the patents of the Company, as well as doing internet
consulting.
At the present time, the Company has a temporary arrangement with
two third party companies, whereby the Registrant provides internet
consulting and is paid a monthly fee from each company for these
services. There is no assurance that this will continue in the
future.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
10.1 Employment Agreement between the Registrant and Ethan
Matyas
(b) Reports on Form 8-K
None
7
<PAGE>
COMPUSONICS VIDEO CORPORATION
Form 10-Q
For the quarter ended October 31, 1998
Signature Page
SIGNATURES
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.
COMPUSONICS VIDEO CORPORATION
(Registrant)
By s\ Robert R. Hebard
------------------------------------------
Robert R. Hebard, Chief Executive Officer
& Chairman of the Board
Date Signed: December 15, 1998
8
<PAGE>
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(Replace this text with the legend)
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<CIK> 0000777844
<NAME> CompuSonics Video Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jul-31-1999
<PERIOD-START> Aug-01-1998
<PERIOD-END> Oct-31-1998
<EXCHANGE-RATE> 1
<CASH> 5,167
<SECURITIES> 64,069
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 69,236
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 69,236
<CURRENT-LIABILITIES> 744,963
<BONDS> 0
0
0
<COMMON> 160,006
<OTHER-SE> (835,733)
<TOTAL-LIABILITY-AND-EQUITY> 69,236
<SALES> 0
<TOTAL-REVENUES> 25,000
<CGS> 0
<TOTAL-COSTS> 22,532
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,974
<INCOME-PRETAX> (8,506)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,506)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
COMPUSONICS VIDEO CORPORATION
August 14, 1998
Mr. Ethan Matyas
2121 West Berteau #1
Chicago, IL 60618-2927
Re: Offer of Employment
Dear Ethan:
We are pleased to extend to you this formal offer of employment to join
Compusonics Video Corporation ("CVC" or the "Company"). The terms and conditions
of this offer and your employment with the Company are set out below.
(1)Position: Reporting directly to me, you will serve in the capacity of
Director of Professional Services, either of the Company, or a newly created,
wholly owned subsidiary or division of the Company.
(2)Location: Initially, you will be based in the Chicago, Illinois area,
and will be allowed to work in you home.
(3)At Will Employment: Your employment at CVC will be "at will", meaning
that either you or the Company can terminate your employment at will at
any time for any reason.
(4)Base Salary: Your base salary shall be $60,000.00 per annum, payable
on a monthly basis.
(5)Bonuses: During your first year of employment, you will be eligible to earn
performance bonuses of $4,000 for each quarter in which you achieve all of a
set of quarterly goals that you and I will mutually agree on advance. Each of
these quarterly bonuses will be paid to you in advance of the quarter, but in
the event that you do not achieve all of the goals for a given quarter, your
future bonus advances will be reduced accordingly. You will also be eligible
to receive bonuses authorized by CVC's management and approved by its Board
of Directors from time-to-time in their sole discretion, based on your
performance, but there is no guarantee that you will receive any such
bonuses.
<PAGE>
(6)Performance Reviews: As Director of Professional Services for CVC,
your performance will be reviewed annually.
(7)Outside Activities: You will be required to devote all of your time to the
activities of CVC; you will not be allowed to devote time to business
interests outside CVC. Any business opportunities that may become available
to you must be referred to the CVC. The above restrictions on your outside
activities are not intended to prevent you from engaging in personal
investments unrelated to the Company's business, providing that such
activities do not diminish your performance with the Company and are
conducted outside the Company's normal business hours.
(8)Other Benefits: You will receive the following certain additional employee
benefits: (I) health insurance (including dental), (ii) annual paid vacation
of two (2) weeks and (iii) a car allowance of $400.00 per month and (iv)
reimbursement for business use of a cell phone and/or pager. In the event
that your employment with the Company terminates for any reason, you will be
permitted to transfer the cell phone/pager service and related telephone
numbers into your name, at your expense, provided however that such numbers
have not become recognized by the Company's customers as a point of contact
with the Company, or are of no material business value to the Company. In
addition to the above mentioned car allownace, the Company will reimburse you
for the actual cost of fuel and tolls for any business trip you may make
outside the metropolitan Chicago area. The Company will reimburse you for the
cost of your exiting health insurance benefits under COBRA until such time as
you become covered by the health insurance provided by the Company. It is
presently the Company's intention to establish some form of retirement
benefit plan in the future; you will be eligible to participate in such plan
when it comes into effect, in accordance with the terms and conditions of
that plan. The foregoing and all other benefits are subject to the terms of
the plans including eligibility and vesting requirements as amended from tiem
to time.
(9)Other Expense Reimbursement: You will be reimbursed for all out-of-pocket
expenses which you incur on Company business that are reasonable and
necessary, in accordance with Company policy established from time-to-time.
Current Company policy requires that you adequately document and justify
these expenses in accordance Company guidelines. We will also reimburse you
for the direct, reasonable and necessary costs of operating an office in you
home, however, all of theses costs must be approved in advance as part of
bugets you submit to and which are approved by CVC's management from
time-to-time.
<PAGE>
(10)Employment Date: The official starting date of your employment will
August 17, 1998.
(11)Employment Application: This offer and your employment with the Company are
subject to your completion of the Company's standard Employment Application,
a review and verification of the information contained therein to the
Company's satisfaction, and your execution of the Company's Employee
Agreement, a copy of which has been previously supplied to you.
We are very excited about the possibility of your joining CVC as our Director of
Professional Services. If you agree with the terms and provisions outlined
above, please sign a copy of this letter in the space provided below and return
it to me as your acknowledgement and acceptance of our offer. This offer of
employment expires on August 17th at 5:00 PM EST.
Sincerely,
/s/ Rick Hebard
- -------------------------
Rick Hebard
President
I accept the foregoing offer and terms of employment
/s/ Ethan Matyas
------------------------------
Ethan Matyas
