FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A to N/A
COMMISSION FILE NUMBER: 33-33136-D
INNOVUS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 87-0461856
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2060 East 2100 South
SALT LAKE CITY, UTAH 84109
(Address of principal executive offices)
(801) 463-8200
(Issuer's telephone number)
Check whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Exchange Act
during the preceding 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
The number of common shares outstanding at March 31, 1996: 4,691,037
<PAGE>
INNOVUS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1996 1995
Current Assets
Cash and cash equivalents $ 855,515 $ 2,362,556
Accounts receivable 86,024 59,766
Inventory 36,114 -
Prepaid expenses 31,982 43,738
--------- ---------
Total Current Assets 1,009,635 2,466,060
--------- ---------
Property and Equipment
Land 374,431 374,431
Building 422,231 422,232
Computer and office equipment 824,974 791,112
Furniture and fixtures 114,538 92,460
--------- ---------
Total Property and Equipment 1,736,174 1,680,235
Less: Accumulated depreciation (358,263) (317,134)
--------- ---------
Net Property and Equipment 1,377,911 1,363,101
--------- ---------
Other Assets
Security deposits 38,092 34,816
Software development costs,
net of accumulated amortization 994,249 886,153
--------- ---------
Net Other Assets 1,032,341 920,969
--------- ---------
Total Assets $ 3,419,887 $ 4,750,130
========= =========
See the accompanying notes to condensed consolidated financial statements.
<PAGE>
INNOVUS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
March 31, December 31,
1996 1995
Current Liabilities
Notes payable - current portion $ 35,797 $ 10,447
Capital lease obligations -
current portion 19,708 18,539
Accounts payable 317,460 167,846
Accrued expenses 294,534 276,628
--------- ---------
Total Current Liabilities 667,499 473,460
--------- ---------
Long-Term Liabilities
Notes payable, net of current portion 678,983 682,096
Capital lease obligations,
net of current portion 40,372 40,689
--------- ---------
Total Long-Term Liabilities 719,355 722,785
--------- ---------
Stockholders' Equity (Deficit)
Preferred stock - $0.001 par value;
1,000,000 shares authorized;
120,000 shares designated as
Series A; no shares issued
or outstanding, - -
Common stock - $0.001 par value;
15,000,000 shares authorized;
4,691,037 shares issued and
outstanding 4,691 4,691
Additional paid-in capital 9,278,792 9,255,355
Deferred compensation (23,437) -
Accumulated deficit (7,227,013) (5,706,161)
--------- ---------
Total Stockholders' Equity (Deficit) 2,033,033 3,553,885
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) $ 3,419,887 $ 4,750,130
========= =========
See the accompanying notes to condensed consolidated financial statements.
<PAGE>
INNOVUS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31,
1996 1995
Sales $ 56,462 $ 20,180
Costs and Expenses
Costs of products and services sold 19,023 20,024
Amortization of software development costs 76,698 -
Product development 364,839 326,904
Selling and marketing 904,512 213,036
General and administrative 206,778 327,104
--------- ---------
Total Costs and Expenses 1,571,850 887,068
--------- ---------
Loss From Operations (1,515,388) (866,888)
--------- ---------
Interest income 17,283 -
Interest expense (22,747) (14,676)
--------- ---------
Net Loss $(1,520,852) $ (881,564)
========= =========
Loss Per Common Share $ (0.32) $ (0.29)
========= =========
Weighted Number of Shares of Common
Stock Used In Per Share Calculation 4,691,037 2,990,987
========= =========
See the accompanying notes to condensed consolidated financial statements.
<PAGE>
INNOVUS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31,
1996 1995
Cash Flows From Operating Activities
Net loss $ (1,520,852) $ (881,564)
Adjustments to reconcile net loss
to net cash used for operating activities:
Depreciation and amortization 117,827 20,502
Change in current assets and liabilities:
Accounts receivable (26,258) (18,728)
Inventory (36,114) 17,782
Accounts payable and
accrued expenses 192,870 155,841
Other 11,756 (8,166)
--------- ---------
Net Cash Used for Operating Activities (1,260,771) (714,333)
--------- ---------
Cash Flows From Investing Activities
Acquisition of property
and equipment (49,893) (105,454)
(Increase) Decrease in security deposits (3,276) 2,328
Increase in software development costs (184,794) (211,416)
--------- ---------
Net Cash Used for Investing Activities (237,963) (314,542)
--------- ---------
Cash Flows From Financing Activities
Payments to reduce notes payable
and capital lease obligations (8,307) (84,365)
Proceed from issuance of preferred
and common stock, net of offering
costs paid - 1,643,740
Collection of receivable from stockholder - 126,113
--------- ---------
Net Cash Provided by Financing Activities (8,307) 1,685,488
--------- ---------
Net Increase (Decrease) in Cash
and Cash Equivalents (1,507,041) 656,613
Cash and Cash Equivalents at
Beginning of Period 2,362,556 341,988
---------- ---------
Cash and Cash Equivalents at
End of Period $ 855,515 $ 998,601
========== =========
See the accompanying notes to condensed consolidated financial statements.
<PAGE>
INNOVUS CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1--INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited
financial statements contain all necessary adjustments,
consisting of normal recurring adjustments except as disclosed
herein. The results of operations of the interim periods
presented are not necessarily indicative of the results to be
expected for the remainder of 1996.
The accompanying unaudited financial statements have been
condensed pursuant to the rules and regulations of the Securities
and Exchange Commission (the SEC). Certain information and
disclosures normally included in financial statements have been
condensed or omitted. These financial statements should be read
in connection with the Company's annual financial statements
included in the Company's annual report on Form 10-K, as of
December 31, 1995.
NOTE 2--SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended March 31, 1996 and 1995, the
Company paid interest of $23,009 and $52,598, respectively.
NOTE 3--STOCK OPTIONS
The Company granted options for 25,000 shares of common stock in
December 1995 and for 75,000 shares in March 1996, all of which
are exercisable at $7.50 per share. The options vest immediately
for those granted in December 1995 with the options granted in
March 1995 vesting over three years. Compensation in the amount
of $50,000 was recognized as an expense in 1995 for the options
granted in December 1995. Compensation relating to the options
granted in March 1996 was $23,437 which was deferred and is being
recognized over the vesting period.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The following discussion should be read in conjunction with the
financial statements and notes thereto found elsewhere herein.
The discussion assumes that the reader is familiar with or has
access to the Company's financial statements for the year ended
December 31, 1995 and the notes thereto found in the Company's
Form 10-K.
Innovus had operated as a value added reseller of multimedia
presentations and kiosks since 1987. Commencing in July, 1993,
Innovus began hiring additional staff and otherwise incurring
additional expense to begin a full scale revision of its
multimedia authoring software for the Windows business software
market. General sales of the commercial release version of the
software began in March, 1996. The substantial increase in
expenses related to software development and marketing as the
software reached commercial release may affect the comparability
of 1996 to prior periods.
Results of Operations
The Company's core software product, INNOVUS Multimedia 2.1, was
released for commercial sale in late March, 1996. During the
quarter ended March 31, 1996, the Company had gross sales of
$56,462, compared to $20,180 for the comparable period of the
prior year. Software accounted for substantially all sales in
1996, while in 1995 sales were generated from the sale of
multimedia presentations and information kiosks. Sales for the
first quarter are not indicative of sales expected for the full
year.
The costs of products and services sold in the quarter ended
March 31, 1996 were $19,023 or 33.7% of sales. During the first
quarter of the prior year, such costs for the presentation and
kiosk business were $20,024 or 99.2% of sales.
Total costs and expenses increased substantially to $1,571,850 in
the quarter ended March 31, 1996 from $887,068 in 1995. The
largest single component of the increase was selling and
marketing expenses which increased to $904,512 in 1996 compared
to $213,036 in 1995. This reflects the completion of the VAR
extended beta release of the software and the commencement of
marketing for the commercial release. Product development also
increased compared to the prior year, to $364,839 from $326,904,
reflecting final completion work on the core software and
development of the initial application templates. In 1996,
$76,698 of capitalized software development expenses were
amortized. General and administrative costs decreased to
$206,778 in 1996 from $327,104 in 1995, primarily a the result of
personnel being reassigned to sales and other software related
operating duties.
The Company incurred losses from operations of $1,515,388 and
$866,888 during the quarters ended March 31, 1996 and 1995,
respectively.
As the Company has expended the proceeds of its August, 1995
public offering, interest income has decreased, and the interest
expenses of the Company's mortgage on its building and other
borrowings now exceeds interest income. Net interest expense for
the quarters ended March 31, 1996 and 1995 were $5,464 and
$14,676, respectively.
The Company sustained a net loss of $1,520,852 for the first
quarter of 1996 compared to a loss of $881,564 for the first
quarter of 1995. On a per share basis, the net loss for 1996 was
$.32 on 4,691,037 average shares outstanding compared to a net
loss of $.29 on 2,990,987 average shares in 1995.
Liquidity and Capital Resources
The Company is dedicating substantially all available funds,
including amounts it is able to borrow, to the software marketing
and support. The Company has limited available resources. The
Company will require additional funding to sustain operations
until such time, if ever, as substantial revenues are received
from software sales.
At March 31, 1996, the Company had total current assets of
$1,009,635 and working capital of $342,136. During the quarter
ended March 31, 1996, the Company incurred a net loss of
$1,520,852 and had negative cash flow from operations of
$1,260,771. Subject to the availability of funding, the Company
anticipates that its administrative expenses and selling and
marketing expenses will not decrease during the remainder of the
year, resulting in additional negative operating cash flow until
such time as software sales increase substantially. The Company
does not anticipate that software sales will produce positive
cash flow until at least the fourth quarter of 1996, and there is
no assurance that the Company will ever be able to obtain
sufficient sales or reduce expenses, to produce a positive cash
flow.
The Company cannot sustain its current rate of negative cash
flows from operations and software development without
substantial additional sources of cash. In the long term, needed
cash must be generated by operations in order for the Company to
sustain itself. Management does not expect cash flow from
operations until the second half of 1996, and there is no
assurance that positive cash flow will be obtained at that time.
Management intends to attempt to obtain capital from the sale of
additional equity or the issuance of debt. There can be no
assurance that the Company will be able to raise the needed
capital or that the terms of any new issuance of equity or debt
will be favorable to the Company. However, based upon the
Company's past experience in the capital markets, management
believes it is likely that the Company will be able to raise
sufficient capital to sustain its operations in the short term if
there are no adverse developments regarding the Company, its
markets or the capital markets generally.
At March 31, 1996, the Company had long term liabilities of
$719,355, consisting primarily of the mortgage on the Company's
building. Although the Company will require substantial
additional funds to sustain operations, the Company did not have
any other significant capital commitments at March 31, 1996.
PART II
No response required.
SIGNATURES
In accordance with 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.
INNOVUS CORPORATION
Date: May 15, 1996 By /s/
------------------------------
David Mock
Chief Executive Officer
By /s/
------------------------------
Gary Wall
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the unaudited financial statements as of March 31, 1996 and
is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 855,515
<SECURITIES> 0
<RECEIVABLES> 86,024
<ALLOWANCES> 0
<INVENTORY> 36,114
<CURRENT-ASSETS> 1,009,635
<PP&E> 1,736,174
<DEPRECIATION> 358,263
<TOTAL-ASSETS> 3,419,887
<CURRENT-LIABILITIES> 667,499
<BONDS> 0
0
0
<COMMON> 9,283,483
<OTHER-SE> 23,437
<TOTAL-LIABILITY-AND-EQUITY> 3,419,887
<SALES> 56,462
<TOTAL-REVENUES> 56,462
<CGS> 19,023
<TOTAL-COSTS> 1,515,388
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,464
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,520,852
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,520,852
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
