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:
April 30, 2000 0-14200
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CompuSonics Video Corporation
(Exact name of Registrant as specified in its charter)
Colorado 84-1001336
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
32751 Middlebelt Road, Suite B
Farmington Hills, MI 48334
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(248) 851-5651
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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
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(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 June 8, 2000, a total of 160,006,250 shares of common stock, $.001 par
value, were outstanding.
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COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
Form 10-Q Filing for the Quarter Ended April 30, 2000
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets
April 30, 2000 (Unaudited) and July 31, 1999 3
Consolidated Statements of Operations (Unaudited)
Three and Nine months ended April 30, 2000
and 1999 4
Consolidated Statements of Cash Flows (Unaudited)
Nine months ended April 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-8
Item 5. Subsequent Events 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signature Page 10
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<CAPTION>
COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
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04/30/2000 07/31/1999
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<S> <C> <C>
Current Assets
Cash $ 3,599 $ 48,563
Accounts Receivable 50,645 30,254
Interest Receivable -0- 1,603
Note Receivable -0- 150,000
Prepaid Expenses 754 614
Marketable Equity Securities Available
For Sale 46,272 88,984
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Total Current Assets 101,270 320,018
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Other Assets
Investments 159,000 -0-
Equipment 45,896 45,896
Less: Accumulated Depreciation (41,290) (39,510)
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Total Other Assets 163,606 6,386
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Total Assets $ 264,876 $ 326,404
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Notes Payable to Related Entities $ 542,490 $ 552,440
Notes Payable - Other 24,000 20,100
Accounts Payable and Accrued Liabilities 38,495 66,807
Accounts Payable - Related Entities 351,379 307,741
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956,363 947,088
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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 21,237 63,949
Accumulated Deficit (1,553,609) (1,525,519)
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Total Stockholders' Deficit (691,487) (620,684)
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Total Liabilities and Stockholders' Deficit $ 264,876 $ 326,404
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See notes to financial statements
3
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COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended April 30, For the nine months ended April 30,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Consulting Fee Income $ 48,250 $ 63,542 $ 147,332 $ 131,250
---------------- --------------- --------------- ----------------
General and Administrative Expenses
Staff Salary 28,475 26,225 98,504 63,725
Professional Fees (7,282) 1,695 2,797 3,743
Management Fees - Related Party 1,250 1,250 4,640 2,750
Patent Fees 6,028 3,360 9,668 6,572
All Other General and Administrative
Expenses 10,283 10,579 23,056 18,893
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38,753 43,108 138,664 95,683
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Income (Loss) From Operations 9,497 20,434 8,668 35,567
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Other Income (Expense)
Interest Income (165) -0- 7,397 -0-
Interest Expense (14,712) (10,608) (44,155) (32,537)
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(14,877) (10,608) (36,758) (32,537)
Net Income (Loss) Before Income Taxes (5,380) 9,825 (28,090) 3,030
Income Tax Benefit -0- -0- -0- -0-
---------------- --------------- --------------- ----------------
Net Income (Loss) $ (5,380) $ 9,825 $ (28,090) $ 3,030
================ =============== =============== ================
Weighted Average Number
of Common Shares 160,006,250 160,006,250 160,006,250 160,006,250
================ =============== =============== ================
Net Loss Per Common Share $ (0) $ 0 $ (0) $ 0
================ =============== =============== ================
See notes to Financial Statements
4
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<CAPTION>
COMPUSONICS VIDEO CORPORATION & SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended April 30,
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2000 1999
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<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ (28,090) $ 3,030
Adjustments to Reconcile Net Loss to Net
Cash Used by Operating Activities
Depreciation 1,780 188
Change in Assets and Liabilities
(Increase) Decrease In:
Accounts Receivable and
Accrued Assets 23,783 (20,981)
Increase (Decrease) In:
Accounts Payable and Accrued
Liabilities (55,609) (222)
Accounts Payable
Related Entity 28,220 30,958
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Total Adjustments (1,825) 9,944
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Net Cash (Used For) Operations (29,916) 12,974
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Cash Provided by (Used For) Investing Activities
Proceeds used for Investments (159,000) -0-
Payments from Notes Receivable 150,000 -0-
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Net Cash Provided by Investing Activities (9,000) -0-
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Cash Provided by (Used For) Financing Activities
Proceeds From Notes Payable 3,900 -0-
Proceeds From Notes Payable - Related (9,950) 4,000
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Net Cash Provided by (Used For) Financing Activities (6,050) 4,000
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Increase (Decrease) in Cash (44,967) 16,974
Balance at Beginning of Period 48,563 77
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Balance at End of Period $ 3,599 $ 17,053
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See notes to financial statements
5
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COMPUSONICS VIDEO CORPORATION & SUBSIDIARIE
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 nine-month period ended
April 30, 2000; the company's financial position at April 30, 2000
and July 31, 1999; and the cash flows for the nine-month period
ended April 30, 2000 and 1999. 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 1999 Form 10-K.
The results for the nine-month period ended April 30, 2000 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 for the three-month period ended April 30, 2000 was
$5,380 compared to net income of $9,825 for the three-month period
ended April 30, 1999. This was due mainly to a decrease in consulting
fee income of 15,292, an increase in staff salaries of $2,200, an
increase in interest expense of $4,104 and a $2,668 increase in patent
fees, which more than offset by a $8,997 decrease in professional fees
compared to the same three month period of 1999.
The net loss for the nine-month period ended April 30, 2000 was
$28,090 compared to net income of $3,030 for the nine-month period
ended April 30, 1999. This was due mainly to an increase in staff
salaries of $34,779 and a $3,096 increase in patent fees and a $11,618
increase in interest expense, that more than offset a $16,082 increase
in consulting fee income compared to the nine month period ended April
30, 1999. The Registrant has decided to discontinue it website
development and maintenance activities due to the reduced prospects
related to its only current client and the inability to obtain new
business. The two employees involved in this activity have resigned
their employment with the Registrant effective May 5, 2000.
<PAGE>
Working capital decreased by $228,023 from July 31, 1999 to April 30,
2000, due to the decrease in unrealized gain on investments of $42,712
net loss of $28,090 and the conversion of the notes receivable from
PGI into an investment of $159,000. 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 4/30/00 - $46,272
These shares are used as collateral against the notes payable.
In the Registrant's fiscal second quarter ended January 31, 2000,
the Registrant began negotiations with its transfer agent, American
Securities Transfer and Trust, Inc. ("AST"), to settle a past due
amount owed to AST by the Registrant for transfer agent services
over the prior several years. On February 15, 2000, the Registrant
and AST agreed to settle this matter and the Registrant is now
current on its ongoing obligations to AST for its services and AST
is providing its transfer agent services to the Registrant and its
stockholders as of the date of this report.
On June 22, 1999, the Registrant had loaned $150,000 to Pro Golf
International, Inc. ("PGI"), a subsidiary of Ajay Sports, Inc.
("Ajay"), partly in the belief that it would have the opportunity to
provide website development services to PGI and another Ajay
subsidiary, ProGolf.com, in the future, for which it would be paid
development fees. The proceeds for making the loan were provided by
a related party. At the time, the Registrant received a promissory
note that was subordinated to PGI's primary lender. On February 29,
2000, the Registrant converted its note receivable from PGI, and the
interest accrued but unpaid on such note receivable, into common
stock of PGI. The conversion was made at the rate of $60 per common
share, the price at which PGI was raising equity capital under a
Confidential Private Placement Memorandum dated February 4, 2000.
The Registrant had held the note from PGI from that June 22, 1999
until the time of this conversion of the note into PGI common stock.
In exchange for converting the $150,000 note, and $9,000 of interest
accrued on the note, the Registrant received 2,650 shares of PGI's
common stock.
<PAGE>
On April 28, 2000, the Registrant announced in a news release that
it would begin to launch a program to attempt to license its patent
portfolio relating to data compression technology. The Registrant's
U.S. and foreign patents cover fundamental techniques for digital
recording and playback of audio and video data. The Registrant
indicated it had completed the preliminary phase of a review to
identify potential target companies that provide services or offer
electronic products that may use data compression technology
believed to be similar to that covered by the patents in which the
Registrant has an interest. The Registrant stated that it has not
yet completed a definitive analysis to determine whether any
infringements have occurred. Coincident with this initial licensing
effort, the Registrant stated it would continue the process of
determining the relationship between the technology covering its
patents and the use of similar technology in today's marketplace, as
it seeks licensing opportunities.
Item 5. Subsequent Events
In August 1998, the Registrant hired a manager experienced in
Internet programming to develop a new business activity for the
Registrant known as website development and maintenance. The
Registrant subsequently began this activity and obtained two
clients, both of whom were related parties, that paid the Registrant
fees for its website development and maintenance services. In the
early part of fiscal year 2000, due to lack of activity with one of
the two clients, the Registrant ceased providing services to that
client, while continuing to provide services to its remaining
client, and seeking additional business from new clients. For that
time through 4/30/00, the Registrant was unable to obtain additional
business for the website development and maintenance activity.
Beginning in Registrant's fiscal 2000 third quarter, the Registrant
began to follow a strategy to more actively focus management's time
and financial resources toward licensing its patent technology
related for data compression to potential licensees. As such, and
due to the lack of additional business received in the Registrant's
website development and maintenance activity, on May 5, 2000, the
manager of the Registrant's website development and maintenance
activity resigned, as did the other employee of the Registrant
involved in this activity, and the Registrant has decided to focus
its time and financial resources on the technology licensing
activity. The former manager has agreed to work on website
development projects on an as-needed consulting basis for the
Registrant, but the Registrant does not expect to put an emphasis on
this activity in the future.
On May 10, 2000, the Registrant announced in a news release that it
had paid the renewal fees required to maintain its data compression
patents in effect in The United Kingdom, France, Germany, Belgium,
Luxembourg and Switzerland. These foreign patents, as well as the
Registrant's Japanese patent, are counterparts of the corresponding
U.S. Patents in which the Registrant holds an interest. The foreign
patents are expected to be offered for license along with the
Registrant's U.S. patents.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
None
(b) Reports on Form 8-K
On May 11, 2000, the Registrant filed a Form 8-K regarding the
extension of the Class A and Class B warrants from May 15,
2000 to July 31, 2000.
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COMPUSONICS VIDEO CORPORATION
Form 10-Q
For the quarter ended April 30, 2000
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
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(Registrant)
By s\ Robert R. Hebard
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Robert R. Hebard, Chief Executive Officer
& Chairman of the Board
Date Signed: June 16, 2000
