<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ________, 19__ to ________, 19__.
Commission File Number: 33-35580-D
INSTANT VIDEO TECHNOLOGIES, INC.
--------------------------------
(Exact Name of Small Business Issuer
as Specified in its Charter)
Delaware 84-1141967
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
500 Sansome Street, Suite 503
San Francisco, California 94111
-------------------------------
Address of Principal Executive Offices, Including Zip Code
(415) 391-4455
--------------
(Issuer's Telephone Number, Including Area Code)
N/A
---
(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 Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X YES NO
----- -----
There were 4,900,981 shares of the Issuer's $.00001 par value common stock
outstanding as of September 30, 1997.
<PAGE> 2
INSTANT VIDEO TECHNOLOGIES, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS
Cash & Cash Equivalents $ 19,599 $ 208,613
Accounts Receivable 1,421 1,421
Accrued Revenue -- 136,400
Loans to Officers -- --
Advances -- --
Prepaid Expenses -- 8,648
----------- -----------
Total Current Assets 21,020 355,082
Total Property & Equipment, Net 128,350 72,322
Patent Costs, Net 95,998 121,108
Other 18,242 52,670
----------- -----------
114,240 173,778
TOTAL ASSETS $ 263,610 $ 601,182
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 70,426 $ 128,263
Accrued Expenses -- 152,000
Notes Payable 660,000 90,000
Accrued Interest 42,937 29,813
----------- -----------
Current Liabilities 773,363 400,076
Long Term Liabilities
Long Term Notes Payable 214,210 141,000
----------- -----------
214,210 141,000
Total Liabilities 987,573 541,076
----------- -----------
EQUITY
Paid-In Capital 7,526,978 6,776,983
Preferred Stock - Series E 5 5
Preferred Stock - Series F 19 15
Common Stock 52 50
Accumulated Deficit (8,251,017) (6,716,947)
----------- -----------
Total Equity (723,963) 60,106
TOTAL LIABILITIES & EQUITY $ 263,610 $ 601,182
=========== ===========
</TABLE>
<PAGE> 3
INSTANT VIDEO TECHNOLOGIES, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (1,534,070) (552,968)
Depreciation & Amortization 68,991 34,749
Amortization of Deferred Revenue -- (558,840)
Decrease in A/R -- 605,000
Decrease in Unbilled Revenue 136,400 --
Decrease /(Increase) in Prepaids 8,648 (28,313)
Decrease in Patents, Net 25,111
Decrease /(Increase) in Other Assets 34,428 --
(Increase) in Deferred Costs -- (350,943)
(Decrease) in A/P (57,837) (14,225)
(Decrease) in Accrued Expenses (152,000) (161,778)
(Decrease) /Increase in Accrued Interest 13,124 (17,769)
---------- ----------
Net Cash Used in Operating Activities (1,457,205) (1,045,087)
CASH FLOWS FROM INVESTING ACTIVITIES
Patent Acquisition -- (9,582)
Purchases of Property, Plant & Equipment (125,021) (11,461)
---------- ----------
Net Cash Used in Investing Activities (125,021) (21,043)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Bank LOC 510,000 --
Increase/(Decrease) in Notes Payable 60,000 (406,048)
Increase in Long Term Notes Payable 73,210 --
Proceeds from sale of Preferred Stock 749,996 --
Proceeds from sale of Common Stock -- 1,475,000
Preferred Stock
Series E -- --
Series F 4 --
Common Stock 2 --
---------- ----------
Net Cash Provided by Financing Activities 1,393,212 1,068,952
Increase/(Decrease) in Cash and Cash Equivalents (189,014) 2,822
Cash and Cash Equivalents, Beginning Balance 208,613 4,346
---------- ----------
Cash and Cash Equivalents, Ending Balance 19,599 7,168
========== ==========
</TABLE>
<PAGE> 4
INSTANT VIDEO TECHNOLOGIES, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue (196,750) 520,379 247,879 558,948
-------- ---------- ---------- ----------
Costs and expenses:
Research and development -- 35,700 -- 108,000
Project costs 63,290 210,000 247,460 650,000
Other general and administrative 499,796 109,756 1,480,234 302,604
-------- ---------- ---------- ----------
563,086 355,456 1,727,694 1,060,604
-------- ---------- ---------- ----------
Net Income/(Loss) from Operations (759,836) 164,923 (1,479,815) (501,656)
-------- ---------- ---------- ----------
Other Income/(Expense)
Interest income -- 42 -- 637
Interest expense (24,587) (15,311) (53,455) (50,749)
-------- ---------- ---------- ----------
(24,587) (15,269) (53,455) (50,112)
-------- ---------- ---------- ----------
Net Income/(Loss) before
Income Taxes (784,423) 149,654 (1,533,270) (551,768)
-------- ---------- ---------- ----------
Income taxes -- (800) (800) (1,200)
-------- ---------- ---------- ----------
Net Income/(Loss) (784,423) 148,854 (1,534,070) (552,968)
======== ========== ========== ==========
Net Income/(Loss) per
Common Share $ (0.16) $ 0.04 $ (0.31) $ (0.12)
======== ========== ========== ==========
</TABLE>
<PAGE> 5
INSTANT VIDEO TECHNOLOGIES, INC. AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1997
(1) BASIS OF PREPARATION AND PRESENTATION
-------------------------------------
The condensed consolidated financial statements included herein have been
prepared by Instant Video Technologies, Inc., and its Subsidiary (the Company),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) and include all adjustments which are, in the opinion
of management, necessary for a fair presentation. The condensed consolidated
financial statements include the accounts of the Company. Certain information
and footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to SEC rules and regulations. The Company suggests that
these financial statements be read in conjunction with the historical financial
statements and the notes thereto of Instant Video Technologies, Inc.
The Company will be restating its financials for the quarter ended March
31, 1997. Included in the nine months ended September 30, 1997 figures is a
retroactive prior period adjustment related to the first quarter 1997 in amount
of $165,000, reducing revenue for the write off of contract revenue recorded in
error. This had the impact of reducing the first quarter income from $29,036 to
($142,840), and reducing earning per share from .01 to (.03). The Company will
file an amended 10-QSB to reflect the restatement.
<PAGE> 6
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information in this Report includes forward-looking statements
within the meaning of applicable securities laws that involve substantial risks
and uncertainties including, but not limited to, market acceptance of the
Company's products and new technologies, the sufficiency of financial resources
available to the Company, economic, competitive, governmental and technological
factors affecting the Company's operations, markets, services and prices, and
other factors described in this Report and in prior filings with the Securities
and Exchange Commission. The Company's actual results could differ materially
from those suggested or implied by any forward-looking statements as a result of
such risks.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
During the three month period ending September 30, 1997, the Company
recorded revenue, in the amount of ($196,750), as compared to revenue in the
amount of $520,379 for the period ended September 30, 1996. The decrease in
revenue was due to the Company not meeting its sales objectives, and the
write-off of $201,750 of unbilled revenue associated with a development contract
to provide a customized product accounted for under the percentage-of-completion
method. The contract was cancelled by mutual agreement due to a reorganization
of the customer which resulted in a move to a standardized product instead of a
custom solution.
Costs and expenses during the three month period ending September 30,
1997, totaled $550,173 as compared to $371,525 during the three month period
ending September 30, 1996. The increase was primarily due to development and
marketing costs associated with Burstware(TM) products and applications. During
the nine month period ending September 30, 1997, costs and expenses totaled
$1,248,691 as compared to $1,111,916 during the nine month period ending
September 30, 1996. The increase in expenses during the nine month period ending
September 30, 1997 was the result of increased marketing and administrative
costs associated with Burstware(TM) products and applications and expenses
incurred during due diligence for a proposed private placement.
The Company realized a net loss of ($784,423) during the three month
period ending September 30, 1997, as compared to a net loss of ($552,968) during
the three month period ending September 30, 1996. For the nine month period
ending September 30, 1997 the net loss was ($1,534,070), as compared to a net
loss of ($552,968) during the nine month period ending September 30, 1996.
<PAGE> 7
The Company will be restating its financials for the quarter ended March
31, 1997. Included in the nine months ended September 30, 1997 figures is a
retroactive prior period adjustment related to the first quarter 1997 in the
amount of $165,000, reducing revenue for the write off of contract revenue
recorded in error. This had the impact of reducing the first quarter income from
$29,036 to ($142,840), and reducing earnings per share from .01 to (.03). The
Company will file an amended 10-QSB to reflect the restatement.
Liquidity and Capital Resources
As of September 30, 1997, the Company had a working capital deficit of
($752,343) as compared to a working capital deficit of ($1,022,678) at the same
time in the previous year. The decreased deficit was primarily due to funds
realized through financing and a reduction in operating expenses in September
1997.
Net cash used in operating activities totaled ($1,457,205) during the
nine month period ending September 30, 1997, as compared to net cash used in
operating activities in the amount of ($1,045,087) during the nine month period
ending September 30, 1996. The increase in net cash used was primarily the
result of decreased revenue for the period, and uncollected receivables.
Cash flow provided by financing activities during the nine month period
ending September 30, 1997 totaled $643,210, as compared to $1,068,952 during the
nine month period ending September 30, 1996.
Net cash used in investing activities during the nine month period
ending September 30, 1997 totaled $122,631, as compared to $21,043 during the
nine month period ending September 30, 1996. The increase was due to spending
for capital equipment used in the conversion to a new Windows NT network for
development, operations, and administration.
During the nine month period ending September 30, 1997, the Company
received funding in the amount of $749,996 from the sale of investment units
consisting of Series F Preferred Stock and Warrants to purchase Common Stock of
the Company. As of November 14, 1997, the Company has cash in the amount of
$39,122. The Company believes that this amount, along with the verbal commitment
from a current investor to provide working capital as needed, will allow the
Company to meet in its operating expenses through the end of January 1998. The
Company is seeking additional financing to meet its funding requirements for
1998, and to remain a going concern. There can be no guarantee to the success of
these efforts. If unsuccessful, the Company would need to cease or curtail
operations.
The Company presently has no commitments for material capital expenditures.
<PAGE> 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
During the quarter ended September 30, 1997, the Company raised an
additional $550,000 from the issuance of 550,000 investment units at the price
of $1.00 per unit (each unit consists of 1 share of Series F Stock and a warrant
to purchase one share of Common Stock). Each share of Series F Stock may be
converted into one share of the Company's Common Stock. The exercise price of
the Common Stock Purchase Warrants is $1.00 per share. The document evidencing
this financing includes provisions that, among other matters, give the investors
the right to appoint two directors to the Board of Directors and certain
registration rights.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The majority holders of investment units consisting of one share of
Series F Convertible Preferred Stock and a warrant to purchase one share of
Common Stock, voted to extend the closing date of the original offering in order
to allow for the issuance of the additional units issued in Item 2 herein.
Item 5. Other Information.
The Company is seeking to obtain restitution from the Company's former
Chairman, CEO, and President, Gary Familian, and the Company's former Executive
Vice President, Business Development, Therese Stacy. The Board of Directors
terminated Mr. Familian and Ms. Stacy after serious accounting irregularities
were discovered in an internal audit of their expenses.
As a result of the actions, the Company has established a Note
Receivable in the amount of $350,329 for amounts owed by Gary Familian and
Therese Stacy. In accordance with GAAP the Company has established a reserve of
$350,329 against these amounts. The Company believes that all expenses in
question have been charged to Operating Expenses in the appropriate period and
no restatement of prior period Net Income is required, as a result of these
transactions.
<PAGE> 9
The Company was able to negotiate an extension of its $500,000 bridge
loan with Imperial Bank. The maturity date of the loan is January 31, 1998. In
return for the extension, the Company committed to issue Imperial bank 200,000
investment units consisting of shares of Series F Convertible Preferred Stock
and Warrants to purchase Common Stock. If the Company repays the loan prior to
the maturity date, the number of units will be reduced to 100,000.
The Company continues to maximize its use of available resources in order
to conserve cash. The Company has taken action which has resulted in a
reduction of operating expenses by approximately 30% since September 1997.
The Company is also in the process of developing a standardized version of
its software product that is scheduled to be available during the first quarter
of 1998, and has retained several individuals, with extensive experience in
software licensing, to assist the Company in its technology development, sales
and marketing endeavors.
Item 6. Exhibits and Reports on Form 8-K.
The Company filed a Report on Form 8-K on September 12, 1997.
<PAGE> 10
SIGNATURES
In accordance with the 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.
INSTANT VIDEO TECHNOLOGIES, INC.
Date: November 19, 1997 By: /s/ RICHARD LANG
------------------------------------
Richard Lang, President and
Chief Executive Officer
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 19,599
<SECURITIES> 0
<RECEIVABLES> 1,421
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 371,349
<PP&E> 206,994
<DEPRECIATION> 78,645
<TOTAL-ASSETS> 263,610
<CURRENT-LIABILITIES> 773,692
<BONDS> 214,210
0
24
<COMMON> 52
<OTHER-SE> (724,040)
<TOTAL-LIABILITY-AND-EQUITY> 263,610
<SALES> 247,879
<TOTAL-REVENUES> 247,879
<CGS> 247,460
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,442,315
<LOSS-PROVISION> 37,500
<INTEREST-EXPENSE> 53,455
<INCOME-PRETAX> (1,533,270)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,534,070)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
