UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-18824
CORPORATE VISION, INC.
(Exact name of registrant as specified in its charter)
Oklahoma
(State or other jurisdiction of incorporation)
73-1380820
(I.R.S. Employer Identification No.)
8908 South Yale Avenue, Suite 360
Tulsa, OK 74137
(Address of principal executive offices, including zip code)
(918) 488-0057
(Registrant's telephone number, including area code)
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 (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.
[ X ] Yes [ ] No
As of June 30, 1996, the Registrant had 11,801,708 shares of common
stock, $0.01 par value, (the "Common Stock") issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
When used in this document, the words "anticipate", "expect", "project"
and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties
and assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, expected, estimated
or projected.
<TABLE>
Item 1. Financial Statements
CORPORATE VISION, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
6/30/96 6/30/95 6/30/96 6/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue $241,047 $30,113 $485,115 $90,486
Production expenses
Personnel $80,238 $81,405 $150,089 $154,475
Audio/Visual $23,709 $ 1,984 $ 30,002 $ 4,963
------- ------- -------- --------
$103,947 $83,389 $180,092 $159,438
G&A
Office $37,580 $22,515 $68,406 $39,497
Selling $16,392 $14,778 $48,530 $21,089
Professional $31,495 $13,046 $81,554 $27,090
Other $ 1,367 $ 225 $ 4,339 $ 501
Depr/Amort $40,842 $31,904 $81,683 $51,904
------- ------- ------- -------
$127,676 $82,469 $284,511 $140,082
Income (loss) from
operations $9,424 ($135,745) $20,512 ($209,034)
Interest expense $4,413 $2,990 $10,862 $5,852
Income (loss) before
income taxes $5,011 ($138,735) $9,649 ($214,887)
Provision for income
taxes $0 $0 $0 $0
Net income (loss) $5,011 ($138,735) $9,649 ($214,887)
Earnings (loss)
per share $0.00 ($0.02) $0.00 ($0.03)
Weighted average
common shares 11,559,704 8,446,841 10,810,184 8,212,210
</TABLE>
<PAGE>
<TABLE>
CORPORATE VISION, INC.
BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash $24,165 $40,335
Accounts receivable 87,905 0
Prepaid exp. (related party) 83,334 66,667
Prepaid expenses 112,004 36,469
------- -------
307,408 143,471
------- -------
Property and Equipment
Property and equipment 604,342 535,811
Less: accumulated depr (290,911) (245,773)
------- -------
314,431 290,038
------- -------
Other Assets
Capitalized software 89,107 101,837
Goodwill 96,713 110,529
Other assets 200,525 109,339
Licensing agreements 50,610 55,052
Consulting agreements 445,246 66,953
Marketing and Distr 38,888 44,445
------- -------
921,089 488,155
------- -------
TOTAL ASSETS $1,542,928 $921,664
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $53,038 $ 1,000
Accrued liabilities 16,049 40,238
Notes payable 15,000 160,000
Payable to stockholders
(related party) 55,867 122,512
Current portion long term
debt 19,307 32,966
------- -------
159,261 356,716
------- -------
Long Term Liabilities
Long term debt 31,213 38,712
Deferred income taxes 15,600 15,600
------ ------
46,813 54,312
------ ------
Stockholders Equity
Common stock, $0.01 par value
11,801,708 and 9,491,175
shares issued and
outstanding at June 30,
1996 and December 31, 1995 118,017 94,914
Paid in capital 2,722,804 1,929,340
Accumulated deficit (1,503,967) (1,513,616)
----------- -----------
1,336,854 510,636
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 1,542,928 921,664
----------- -----------
</TABLE>
<PAGE>
<TABLE>
CORPORATE VISION, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
Six months Six months
ended ended
June 30, June 30,
1996 1995
---------- ----------
<S> <C> <C>
Cash Provided By (Used In)
Operating Activities
Net Income (loss) $9,649 ($214,887)
Noncash charges to earnings:
Depreciation/Amortization 81,683 51,904
Consulting service exp 21,000 0
Other 46,142 1,647
Changes in operating assets
and liabilities:
Accounts receivable (87,905) 1,500
Accounts payable 52,038 (4,101)
Other current liabilities (24,189) 41,658
-------- -------
98,418 (122,278)
Cash Provided By (Used In)
Investing Activities
Investment in other assets (91,186) (188,190)
Purchase of equipment (69,531) (24,118)
--------- ---------
(160,717) (212,309)
--------- ---------
Cash Provided By (Used In)
Financing Activities
Loans from stockholders
(related party) 0 40,954
Payment of stockholder
loans (related party) (66,645) 0
Payments of loans from
non-affiliated stock
holders (145,000) 0
Payments of long term debt (21,158) (28,382)
Proceeds from common stock
issuance 278,932 252,841
--------- --------
46,129 265,413
--------- --------
Net change in cash (16,170) (69,174)
Cash at beginning of period 40,335 106,769
--------- --------
Cash at end of period 24,165 37,595
--------- --------
Supplemental Disclosures
Cash paid for interest and
income taxes:
Interest $10,862 $5,852
Income taxes 0 0
Non-cash investing and
financing activities:
Stock issued to Trident 0 5,556
Stock issued for "Final Jihad" 0 12,195
Stock issued to convert note
payable to stockholder 42,644 0
Stock issued for services
in advance (related party) 25,000 0
Stock issued for services
rendered by non-affiliates 466,495 139,593
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Corporate Vision, Inc. ("CVI" or "the Company") is an interactive
multimedia production company that develops and produces custom
CD-ROM, CD-i, On-line, and Internet products for the corporate and
consumer markets. To date, the Company's business has centered on
developing custom CD-ROM and CD-i applications for Fortune 500
companies to use in their training and marketing activities.
As of June 30, 1996, the Company was principally involved in the
development and production of interactive training programs on
CD-ROM for one corporate customer, the Dowell Division of
Schlumberger Technology Corporation, an international well logging,
seismic and service company, under a production agreement dated
January 1, 1995. Payments to the Company for services rendered
under the agreement commenced during 1995 and continued at regular
intervals during the second quarter of 1996.
Growth Strategy
CVI's objective is to acquire companies in the video production and
multimedia development businesses that enhance the Company's
production capabilities and expand its client base. By acquiring
superior production capabilities, and providing the working capital
necessary to develop marketing and distribution strengths, the Company
anticipates it can expand its scope of products and services to the
corporate market as well as develop CD-ROM and Internet products
for the consumer market and broadcast programming for cable, satellite
and interactive television.
The Company has signed non-binding letters of intent with two
acquisition candidates, discussed below, and is actively searching for
others. The Company has engaged the firm of Stanford Keene &
Associates, a mergers and acquisitions consulting firm in Charlotte,
North Carolina, to assist in identifying and evaluating other such
candidates.
Pending Acquisitions
Texas Video & Post
On December 7, 1995, CVI entered into a letter of intent to acquire
100% of the common stock of Texas Video & Post, Inc. (TVP),
a privately-held video and post-production facility, in exchange for
$600,000 in cash and the issuance of a minimum of 2,400,000 shares
of restricted common stock of the Company.
Located in Houston, Texas, TVP is considered to be one of the
premiere video and post-production facilities in the Southwest,
serving an impressive array of clients throughout the United States.
TVP employs 20 people and generates over $3.0 million in annual
revenues by producing corporate communications, original broadcast
programming, television commercials and cable films.
The letter of intent with TVP is non-binding on either party and is
subject to the execution of a definitive agreement. As of June 30,
1996, the Company had not entered into a definitive agreement with
TVP, pending successful completion of the corporate financing for
the cash component of the consideration required under the terms of
the TVP letter of intent. Successful completion of the corporate
financing and the acquisition of TVP may necessarily result in
material expense for CVI and substantial dilution of the interests
of the current CVI shareholders.
InterActive Media
On January 25, 1996, CVI entered into a letter of intent to acquire
100% of the common stock of InterActive Media, Inc. (IAM),
a privately-held producer of custom CD-ROM programs for the
corporate and consumer markets, in exchange for $100,000 cash
and the issuance of a minimum of 2,000,000 shares of restricted
Common Stock of the Company.
Located in San Francisco, California, IAM is a leader in the design
and production of custom interactive multimedia software programs
for major corporations to use in their marketing, advertising, sales
and training programs. Since being established in 1990, IAM has
developed a high quality reputation with major Fortune 500 clients,
expanded its portfolio of programs and applications, and has built
its staff to 21 employees. IAM generates approximately $2.0 million
in annual revenue.
The letter of intent with IAM is non-binding on either party and is
subject to the execution of a definitive agreement. As of June 30, 1996,
the Company had not entered into a definitive agreement with IAM
pending successful completion of the corporate financing for the cash
component of the consideration required under the terms of the IAM
agreement. Successful completion of the corporate financing and the
acquisition of IAM may necessarily result in material expense for CVI
and substantial dilution of the interest of the current shareholders of CVI.
Future Acquisitions
The Company's current growth plan calls for the acquisition of two
companies per year beginning in 1997. The Company believes that it
may increase the profitability of acquired businesses by consolidating
administrative activities, such as purchasing, accounting and finance,
which would allow management of the acquired companies to focus
exclusively on production, sales and marketing activities and by
providing the working capital necessary for the expansion of
revenues and earnings.
CVI intends to acquire companies with existing revenues and earnings,
that (i) increase CVI's interactive CD production capabilities, (ii) expand
CVI's corporate client base, or (iii) have high quality "off the shelf"
corporate training or professional education products that can be
converted to interactive CD and distributed through the acquired
company's existing sales channels.
Liquidity and Capital Resources
For the six months ended June 30, 1996, the Company generated
positive cash flow from its operating activities as a result of the
monthly fees collected from Schlumberger, the Company's only
client. It is anticipated that such monthly fees will extend through
September of 1996. At present, the Company has no other business
backlog beyond September of 1996.
In addition to its positive operating cash flow, the Company has
generated approximately $278,932 in cash from the exercise of
Common Stock options and warrants, the proceeds of which were
used to finance growth and capital needs during the first six months
of 1996.
During the second quarter of 1996 and the six months ended
June 30, 1996, the Company incurred capital expenditures of
$43,472 and $69,531, respectively, which were primarily for
computers and related CD production equipment. Such expenditures
were consistent with those incurred during the second quarter of 1995.
At December 31, 1995, the Company was in default on three notes
payable in the aggregate principal amount of $160,000 together with
accrued interest of $7,111 due to three individuals, one of which was
a beneficial owner of more than 5% of the outstanding Common Stock
of the Company, and two of which were non-affiliates. The notes
were unsecured and accrued interest at a rate of 10% per year, which
increased to 15% upon default. On January 1, 1996, the Company
issued warrants to the three individual note holders to purchase 80,000,
40,000 and 40,000 shares of Common Stock, respectively, at $1.00
per share at any time prior to January 1, 1998. During the first quarter
of 1996, one of the non-affiliated note holders and the Company
mutually agreed to convert the outstanding principal and accrued
interest of $42,644 due under a promissory note to 85,288 shares of
Common Stock of the Company and 85,288 warrants to purchase
additional shares of Common Stock at $0.50 per share on or before
February 21, 1998. At June 30, 1996, the Company was in default
on notes payable in the principal amount of $15,000 together with
accrued interest of $12,272 due to the remaining two individuals.
Subsequent to the end of the second quarter of 1996, the Company
repaid the principal balance and accrued interest of the remaining
unpaid promissory notes..
Looking ahead, management believes that current cash balances
and revenues generated from operating activities will not be
sufficient to meet the Company's short term or long term capital
needs. In order to complete its operating plan for 1996, the
Company intends to raise additional funds through the private
placement of additional equity or convertible debt securities.
The sale of additional equity or convertible debt securities will
result in additional dilution to the Company's stockholders.
There can be no assurance that the Company will be able to
raise such capital when needed or on terms favorable to the
Company.
In order to carry out its plans for additional corporate financing,
the Company, on March 1, 1996, entered into an agreement with
Institutional Investors Consulting Company ("IICC") to provide
exclusive investment advisory, brokerage participation and
other financial services for the purpose of securing a maximum
of $5,000,000 in additional equity and/or debt funding from
investors and/or financial institutions. Under the terms of the
agreement, the Company obligated itself to pay commissions
of varying percentages depending on the nature and amount
of funds secured under the contract. As of June 30, 1996, the
Company had not completed any financing under the terms of
the contract with IICC.
In the event the Company is unsuccessful in raising a minimum
of $3,500,000 in additional funds during 1996 upon acceptable
terms, the business acquisitions planned by the Company in
1996 may, by necessity, be delayed or abandoned and operations
of the Company reduced significantly.
The Company's liquidity will be reduced as amounts are
expended for continuing product development, expansion of
sales and marketing activities and development of its
administrative function. While not currently anticipated,
the Company's liquidity could also be reduced if significant
amounts were expended for additional facilities and equipment
or to license or acquire proprietary technology owned by others
or to legally defend its proprietary technology. Additionally,
depending on market conditions or future business opportunities,
the Company may decide to issue additional equity or debt
securities for cash or to acquire assets or technology of others
as discussed above. The working capital of the Company may
also be used to acquire such assets or technology, reducing the
funds available for alternative use.
Results of Operations
Revenue for the second quarter of 1996 was $241,047, an
increase of 700%, from the second quarter of 1995 primarily
from the Company's contract to produce interactive safety
training on CD-ROM for the Dowell Division of Schlumberger
Technology Corporation. For the six months ended
June 30, 1996, revenue was $485,115, an increase of 436%
from the six months ended June 30, 1995. The increase in
revenue resulted primarily from the successful conclusion
of the initial interactive program and the beginning of
production on the remaining training programs .
Production expenses for both the second quarter of 1996
and the six month ended June 30, 1995 were consistent
with such expenses incurred during the same periods of
1996.
Office expense during the second quarter of 1996 increased by
approximately $14,500, or 85%, compared to the second quarter
of 1995 primarily because of increased postage, printing and
telephone charges related to the Company becoming publicly
traded.
Selling expenses during the second quarter of 1996 and the
six months ended June 30, 1996 increased as a result of
commissions paid on higher revenues generated by the
Schlumberger contract.
Professional fees during the second quarter of 1996 and
the six months ended June 30, 1996 increased primarily
as a result of costs related to the Company's compliance
with various reporting requirements of the SEC and as a
result of costs related to developing the Company's presence
in the public financial market.
Depreciation and amortization expenses during the second
quarter of 1996 and the six months ended June 30, 1996 as a
result of equipment purchases and increases in intangible assets.
The Company has incurred losses since inception and, therefore,
has not been subject to federal income taxes. As of December 31,
1995, the Company had generated net operating loss carryforwards
for financial reporting purposes of approximately $1.5 million
available to reduce future federal income taxes. These carryforwards
will begin to expire in 2007. The Company's ability to utilize the
carryforwards could be limited by a "change in ownership," as such
term is defined by federal income tax laws and regulations.
As a result of the Company's limited operating history, the Company
does not have historical financial data for a significant number of
periods on which to base planned operating expenses. Accordingly,
the Company's expense levels are based in part on its expectations as
to future revenues. However, the Company is currently operating with
no backlog of orders or contracts to develop additional CD-ROM titles.
As a result, quarterly operating results generally depend on the
payments received under pre-existing or new contracts within the
quarter, which are difficult to forecast. The Company may be unable
to adjust spending in a timely manner to compensate for any
unexpected revenues shortfall. Accordingly, any significant
shortfall of demand for the Company's services in relation to the
Company's expectations would have an immediate adverse impact
on the Company's business, operating results and financial condition.
In addition, the Company plans to increase its operating expenses to
fund greater levels of development, increase its sales and marketing
operations, develop new distribution channels and broaden its customer
support capabilities. To the extent that such expenses precede or are not
subsequently followed by increased revenues, the Company's business,
operating results and financial condition will be materially adversely
affected.
The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors,
including demand for the Company's services, introduction or
enhancement of products by the Company and its competitors,
market acceptance of new products, mix of distribution channels
through which products are sold, mix of products and services sold,
and general economic conditions. As a result, the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as any
indication of future performance. Due to all of the foregoing
factors, it is likely that in some future quarter the Company's
operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's
Common Stock would likely be materially adversely affected.
Other
The Company has retained the services of Investor Relations
Corporation ("IRC") of Tulsa, Oklahoma under the terms of a
services agreement dated December 1, 1994 to provide certain
investor relations functions for the Company and to serve as
liaison to the current and potential shareholders of the Company.
The principal owners of IRC are Rhonda R. Vincent, an officer
and director of the Company and Gifford M. Mabie, the spouse
of the founder, President and Chief Executive Officer of the
Company. As compensation to IRC for services rendered under
the contract, the Company issued 500,000 shares of its voting
Common Stock to IRC at a deemed value of $0.20 per share.
IRC is expected to continue to assist the Company through the
initial term of the contract in all aspects of the Company's
communication with its securities holders and potential investors
in the Company, including the preparation of annual and quarterly
reports and the coordination of compliance with state and federal
securities disclosure and reporting requirements. During the quarter
ended June 30, 1996, the Company paid IRC $18,000 in fees and
$15,800 in expense reimbursements related to the services provided
in the contract. In addition, the Company paid $20,000 to IRC for
services rendered in assisting the Company with the pending
acquisitions and proposed funding.
In February, 1996, the Company entered into an agreement with
RDG Investments ("RDG") of Vancouver, British Columbia, to
provide certain consulting services to the Company with an
objective of expanding investor and brokerage firm awareness
and interest in the Company and the Common Stock. Under the
terms of the three year agreement, RDG received 378,000 shares
of restricted Common Stock of the Company, which was valued at
$219,000, or $0.58 per share (the closing price on the date of the
agreement), and was recorded as a prepaid consulting agreement.
During the second quarter of 1996, RDG received an additional
162,000 shares of restricted Common Stock of the Company,
which was valued at $0.58 per share and was recorded as a
prepaid consulting agreement..
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
During the second quarter of 1996, the Company issued 1,512,987
shares of its Common Stock without registration under the Securities
Act of 1933, as amended (the "Securities Act") paramount to claim of
exemption under Section 4(2) of the Act and the regulations thereunder.
Of such shares, 221,000 shares of Common Stock were issued at a
price of $0.50 per share in connection with a private placement,
279,987 shares of Common Stock were issued at a price of $0.50
per share pursuant to the exercise of common stock warrants.
During the second quarter of 1996, the Company issued 1,012,000
shares of its Common Stock through the exercise of stock options
pursuant to the Company's Stock Option Plan (the "Plan"). Shares
issued pursuant to the Plan are covered by an effective Registration
Statement under the Securities Act of 1993, as amended
(the "Securities Act").
Item 3. Defaults Upon Senior Securities
As of June 30, 1996, the Company was in default under the terms of
two promissory notes in the aggregate principal amount of $15,000
together with interest of $12,272,. See Part I-Item 2 "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations." As of the date hereof, the notes payable and accrued
interest were paid in full.
Item 4. Submission of Matters to a Vote of Security Holders
On May 23, 1996, the Company had its Annual Meeting of
Shareholders during which the shareholders voted to re-elect
the present Board of Directors and to retain the Company's
independent accountants. Of the 10,288,721 outstanding shares
eligible to vote, 7,002,786 votes were cast, representing 68% of
the outstanding shares.
The following voting results were tabulated:
For Against Abstain Total
Board of Director 6,994,786 0 8,000 7,002,786
Independent Accountants 6,982,627 8,659 11,500 7,002,786
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second
quarter of 1996.
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.
CORPORATE VISION, INC.
(Registrant)
August 15, 1996
(Date)
/s/ Rhonda R. Vincent
Rhonda R. Vincent, Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 24,165
<SECURITIES> 0
<RECEIVABLES> 87,905
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 307,408
<PP&E> 605,342
<DEPRECIATION> 290,911
<TOTAL-ASSETS> 1,542,928
<CURRENT-LIABILITIES> 159,261
<BONDS> 0
0
<COMMON> 118,017
<OTHER-SE> 1,205,877
<TOTAL-LIABILITY-AND-EQUITY> 1,542,928
<SALES> 485,115
<TOTAL-REVENUES> 485,115
<CGS> 180,092
<TOTAL-COSTS> 180,092
<OTHER-EXPENSES> 284,511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,512
<INCOME-PRETAX> 10,862
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,862
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,862
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
