UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 0-26790
INNOVUS CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 87-0461856
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
4600 Campus Drive
Newport Beach, CA 92660
(Address of principal executive offices)
(801) 474-9228
(Issuer's telephone number, including area code)
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 No X
The number of common shares outstanding at March 31, 1998: 7,633,135
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<TABLE>
<CAPTION>
INNOVUS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1998 1997
-------------- --------------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents..................................................$ 9,274 $ 91,690
Prepaid expenses........................................................... 21,321 29,159
-------------- --------------
Total Current Assets................................................... 30,595 120,849
-------------- --------------
Property and Equipment, net..................................................... 51,930 57,190
-------------- --------------
Total Assets....................................................................$ 82,525 $ 178,039
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable...........................................................$ 837,159 $ 811,333
Accrued compensation....................................................... 17,095 21,598
Accrued liabilities........................................................ 7,528 3,025
Current maturities of notes payable........................................ 18,962 28,098
Current maturities of capital lease obligations............................ 1,151 1,912
Preferred dividends payable................................................ 399,669 318,528
-------------- --------------
Total Current Liabilities.............................................. 1,281,564 1,184,494
-------------- --------------
Stockholders' Deficit
Preferred stock - $0.001 par value; 1,000,000 shares authorized; 77,358
shares issued and outstanding;
liquidation preference of $3,867,823 at March 31, 1998................... 77 77
Common stock - $0.001 par value; 15,000,000 shares
authorized; 7,633,135 issued and outstanding............................. 7,633 7,633
Additional paid-in capital................................................. 18,245,808 18,245,808
Accumulated deficit........................................................ (19,452,557) (19,259,973)
-------------- --------------
Total Stockholders' Deficit............................................ (1,199,039) (1,006,455)
-------------- --------------
Total Liabilities and Stockholders' Deficit.....................................$ 82,525 $ 178,039
============== ==============
</TABLE>
See the accompanying notes to the condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
INNOVUS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended March 31,
1998 1997
-------------- --------------
<S> <C> <C>
Net Sales.......................................................................$ 24,578 $ 273,474
-------------- --------------
Costs and Operating Expenses
Costs of products and services sold........................................ 1,752 93,578
Amortization of software development costs................................. 5,260 257,120
Selling and marketing...................................................... 40,734 569,329
General and administrative................................................. 86,697 226,780
-------------- --------------
Total Costs and Operating Expenses..................................... 134,443 1,146,807
-------------- --------------
Operating Loss.................................................................. (109,865) (873,333)
-------------- --------------
Other Income (Expense)
Interest income............................................................ -- 8,320
Interest expense .......................................................... (1,579) (384,463)
Other income............................................................... -- 6,642
-------------- --------------
Other Expense, Net..................................................... (1,579) (369,501)
-------------- --------------
Net Loss........................................................................ (111,444) (1,242,834)
Preferred Dividends............................................................. (81,140) (115,242)
--------------- --------------
Loss Applicable to Common Shares................................................$ (192,584) $ (1,358,076)
============== ==============
Basic and Diluted Loss Per Common Share.........................................$ (0.03) $ (0.25)
============== ==============
Weighted number of shares of common
stock used in per share calculation.......................................... 7,633,135 5,479,956
============== ==============
</TABLE>
See the accompanying notes to the condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
INNOVUS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
March 31,
1998 1997
-------------- --------------
Cash Flows from Operating Activities
<S> <C> <C>
Net loss..................................................................$ (111,444) $ (1,242,834)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.......................................... 5,260 306,597
Expenses for issued warrants........................................... -- 349,607
Changes in assets and liabilities:
Accounts receivable............................................... -- (150,382)
Inventories....................................................... -- (62,385)
Accounts payable and accrued expenses............................. 25,826 (403,711)
Other............................................................. 7,839 39,320
-------------- --------------
Net Cash Used in Operating Activities.................................. (72,519) (1,163,788)
-------------- --------------
Cash Flows From Investing Activities
Acquisition of property and equipment...................................... -- (10,978)
Increase in software development costs..................................... -- (430,871)
-------------- --------------
Net Cash Used in Investing Activities.................................. -- (441,849)
-------------- --------------
Cash Flows From Financing Activities
Payments to reduce long-term debt and capital
lease obligations......................................................... (9,897) (101,727)
Net proceeds from issuance of preferred and
common stock.............................................................. -- 1,861,060
-------------- --------------
Net Cash Provided by (Used in) Financing Activities.................... (9,897) 1,759,333
-------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents............................ (82,416) 153,696
Cash and Cash Equivalents at Beginning of Period................................ 91,690 886,122
-------------- --------------
Cash and Cash Equivalents at End of Period.....................................$ 9,274 $ 1,039,818
=============== ==============
</TABLE>
See the accompanying notes to the condensed financial statements.
<PAGE>
INNOVUS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1--CONDENSED 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, for a fair presentation
of financial position and the results of operations. The results of
operations of the interim periods presented are not necessarily indicative
of the results to be expected for the remainder of 1998.
On an ongoing basis, management reviews the amortization and capitalization
of intangible assets and necessary adjustments to carrying values, if any,
are recorded.
The financial statements have been prepared on the basis of the Company
being a going concern. The Company has had continued losses, and currently
has a substantial accumulated deficit and lack of financial resources,
which conditions raise substantial doubt regarding the Company's ability to
continue as a going concern. The financial statements does not include any
adjustments that might result from the outcome of such uncertainty.
The accompanying unaudited financial statements have been condensed
pursuant to the rules and regulations of the Securities and Exchange
Commission. 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-KSB, as of
December 31, 1997.
Certain reclassifications have been made to the 1997 financial statements
to conform to the 1998 presentation. The reclassifications are not
material.
NOTE 2--TERMINATION OF BUSINESS ACTIVITIES
The Company's operations have been as a provider of software development
tools designed for building modifiable media-intensive business information
management systems. These tools provided links for customers to databases
through open data base connectivity, object linking and embedding
technology. During 1997, the Company disposed of substantially all of its
inventory and property and equipment, concluded its software development
activity and fully amortized the remaining cost of capitalized software
products. During 1998, the Company terminated its remaining sales and
marketing activities. As a result, the Company does not have any
significant assets or continuing operations. Management's recent activities
have been to restructure the Company in preparation for completing the
below mentioned merger with Intermark Corporation
NOTE 3 --SUBSEQUENT EVENT - AGREEMENT WITH INTERMARK CORPORATION
On August 5, 1998, the Company finalized an Agreement and Plan of Share
Exchange with Intermark Corporation ("Intermark"). Under the Agreement, as
amended, the shareholders of Intermark exchanged all of the outstanding
capital stock of Intermark for 1,033,670 shares of Common Stock of the
Company and for shares of the Company's newly created Series H Preferred
stock convertible into approximately 44,272,241 shares of Common Stock. In
<PAGE>
INNOVUS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
addition, the Company assumed Intermark options which are now exercisable
to purchase up to 6,316,524 shares of the Company's Common Stock. In
connection with the Agreement, the Board of Directors has approved a
1-for-10 reverse stock split pending shareholder approval.
<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, 1997 found in the Company's Form 10-KSB/A. The
financial statements contained in this amended Form 10-QSB/A have been revised
to conform to changes in the December 31, 1997 financial statements included in
such Form 10-KSB/A.
The financial statements have been prepared on the basis of the Company being a
going concern. The Company has had continued losses, and currently has a
substantial accumulated deficit and lack of financial resources. There may be
substantial doubt regarding the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of such uncertainty.
The Company had been engaged in the sale of multimedia authoring and
presentation software, with related application templates and media packages.
Due to lagging sales and lack of resources, the Company ceased development and
marketing activities in late 1997. In May, 1998, the Company signed an Agreement
and Plan of Share Exchange with Intermark Corporation ("Intermark") whereby
current Intermark shareholders would obtain securities representing 75% of the
Company's voting power. Subsequent to the original filing of this report, the
Intermark Agreement was amended to provide that the Intermark shareholders would
receive 77.5% of the Company's voting power. The Intermark Agreement was closed
in August, 1998.
Results of Operations
During the quarter ended March 31, 1998, sales were negligible. Net sales were
$24,578, compared to $273,474 for the comparable period of the prior year.
Although some sales of INNOVUS Multimedia and related products continued into
the period, the Company did not expect significant sales. Subsequent to March
31, 1998, the Company's principal distributor returned all unsold inventory.
Based upon this and the market shift to web-based software, the Company believes
that further sales of the software without large scale revisions is unlikely.
As described under "Liquidity and Capital Resources" below, if the Company does
not implement a new business plan to generate revenues or raise additional
capital, the Company's viability as a going concern is in question. Other than
the Agreement with Intermark, the Company does not currently have any plans
which it believes are likely to generate significant revenue.
<PAGE>
The costs of products and services sold in the three months ended March 31, 1998
and 1997 were $1,752 and $93,578 respectively. Due to the low amount of net
sales for the current quarter, comparison of the costs of sales between periods
may not be meaningful.
Operating loss for the three months ended March 31, 1998 was $109,865 compared
to an operating loss of $873,333 for the three months ended March 31, 1997. The
reduction in operating loss reflects the substantial reduction in business
activity by the Company. Comparison of the current quarter when the Company was
doing little other than attempting to determine a new business plan to the first
quarter of 1997 when the Company was actively attempting to market its software
is not meaningful. Operating loss for the first quarter of 1998 reflects the
full amortization of software development costs at December 31, 1997.
Accordingly, amortization for the quarter, as reported in this amended report,
consists only of $5,260 in depreciation.
The Company incurred $1,579 and $369,501 in net interest expense during the
three months ended March 31, 1998 and 1997, respectively.
The Company sustained a net loss of $192,584 for the three months ended March
31, 1998 compared to a net loss of $1,358,076 for the three months ended March
31, 1997.
As explained in "Liquidity and Capital Resources" below, the Company does not
have the ability to sustain additional losses, even at the reduced levels of the
first quarter of 1998. There can be no assurance that the Company will be able
to develop or implement a business plan which will allow it to continue as a
going concern. If the Intermark transaction is consummated, there is no
assurance that the combined entity will be profitable or able to attract new
capital. If the Intermark transaction is not consummated, the Company does have
any firm plans to attract additional capital. In order to prepare this filing,
in 1998 the Company privately issued debentures secured by substantially all of
the assets of the Company. Without the Intermark transaction or an alternative
business plan, the Company will not be able to pay the debentures when they come
due.
Forward looking information
Statements regarding the Company's expectations as to future sales of software,
future capital resources and certain other statements presented in this Form
10-Q constitute forward looking information within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from expectations. In addition to matters
affecting the Company's industry generally, factors which could cause actual
results to differ from expectations include, but are not limited to (i) sales of
the Company's software may never rise to the level of profitability; (ii) due to
the rapidly changing and competitive nature of the industry, competitors may
introduce new products with significant competitive advantages over the
<PAGE>
Company's products; and (iii) the Company may not have sufficient resources,
including any future financing it is able to obtain, to sustain marketing and
other operations.
Liquidity and Capital Resources
At March 31, 1998 the Company had $9,274 of cash and cash equivalents and a
deficit in working capital (current liabilities in excess of current assets) of
$1,250,969. The Company has been relying upon short-term borrowings from
affiliates and others, as well as increases in accounts payable owed to vendors
and a second mortgage on the Company's building, to provide the means to
maintain minimal operations. Management's efforts to obtain additional equity
financing have been unsuccessful. The Company does not have any firm commitments
for additional equity financing. Management believes that the market overhang
caused by variable conversion features of certain series of the Company's
preferred stock, coupled with the risks inherent in restructuring the Company's
business, have discouraged new investment. Management does not believe that the
Company will be able to obtain new financing unless the preferred stock
structure is revised and a new business acquired.
The Company estimates that it is currently using approximately $20,000 more cash
each month than is generated by operations. Without additional financing, the
Company does not foresee operations improving significantly enough to eliminate
the negative cash flow.
Subsequent to March 31, 1998, the Company borrowed $75,000 from an officer and
director and two other persons pursuant to convertible debentures. The
debentures are secured by substantially all the assets of the Company.
If the Company cannot obtain additional capital, management will continue to
pursue other means to continue in business. In such event, however, it is
possible that the Company may have little alternative but to sell or liquidate
its business operations or product line to satisfy its creditors.
At March 31, 1998, the Company had no long term liabilities. This reflects the
sale of the Company's building, relieving the Company from the first and second
mortgages, as well as the sale of telephone equipment subject to a lease
obligation. The remaining liabilities which might be considered long term have
been classified as current liabilities due to the Company's financial condition.
There is doubt whether the Company can continue as a going concern. There can be
no assurance that additional financing will be available to the Company or that
operating results will improve as management currently anticipates.
<PAGE>
PART II Item 2 - Changes in Securities
(c) The following securities were issued by the Company during the
quarter ended March 31, 1998 without registration under the Securities Act of
1933 (other than issuances pursuant to Regulation S):
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits.
Those exhibits previously filed with the Securities and Exchange
Commission as required by Item 601 of Regulation S-K, are incorporated
herein by reference in accordance with the provisions of Rule 12b-32.
Exhibit 27 Financial Data Schedule (revised)
(b) Reports on Form 8-K
No report on Form 8-K was filed during the period reported upon.
<PAGE>
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 18, 1998
INNOVUS CORPORATION
By: /s/ David Mock
-----------------------------------
David Mock, Chairman and Principal
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,274
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,595
<PP&E> 51,930
<DEPRECIATION> 0
<TOTAL-ASSETS> 82,525
<CURRENT-LIABILITIES> 1,281,564
<BONDS> 0
0
77
<COMMON> 7,633
<OTHER-SE> 18,245,808
<TOTAL-LIABILITY-AND-EQUITY> 82,525
<SALES> 24,578
<TOTAL-REVENUES> 24,578
<CGS> 1,752
<TOTAL-COSTS> 134,443
<OTHER-EXPENSES> 1,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,579
<INCOME-PRETAX> (192,584)
<INCOME-TAX> 0
<INCOME-CONTINUING> (192,584)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192,584)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
