United States
Securities and Exchange Commision
Form 10-KSB
Commission File Number: 0-18824
Corporate Vision, Inc.
Oklahoma 73-1380820
(State or other Jurisdiction of incorporation) (I.R.S. Employer Identification
No.)
6130 South Memorial Drive
Tulsa, OK 74133
(address of principal executive offices, including zip code)
(918) 748 3603
(Registrant's telephone number, including area code)
Corporate Vision, Inc.
(A Developmental Stage Company)
December 31,1998 and 1997
Contents
Page
Independent Auditors Report 1
Fiancial Statements
Balance Sheets 2
Statements of Operation 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-10
Comments from Management 11
<PAGE>
1
Independent Auditors Report
The Board of Directors and Stockholders
Corporate Vision Inc.
Tulsa, OK
We have audited the balance sheets of Corporate Vision Inc., (a developemental
stage company), as of December 31, 1998 and 1997, and the related statements of
operations, stockholders' equity and cashflows for the years ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with the generally accepted auditing
standards.Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
examining on a test basis evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principals
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Corporate Vision Inc., as of
December 31, 1998 and 1997 and the results of its operations and its cash flows
for the years ended in confrmity with generally accepted accounting principles.
Cross and Robinson
Certified Public Accountants
Tulsa, Oklahoma
March 26, 1999
2
<PAGE>
<TABLE>
<CAPTION>
Corporate Vision Inc.
(A Developmental Stage Company)
Balance Sheets
December 31, 1998 and 1997
Assets
<S> <C> <C>
1998 1997
Current Assets
Cash $ 569 $ 345,237
Accounts receivable ---- 3,326
_____________________
Total Current Assets 569 348,563
Property and Equipment
Property and Equipment 5,387 6,512
Less: Accumulated depreciation (1,244) (326)
______________________
Property and Equipment (Net) 4,143 6,186
______________________
Other Assets
Intangible assets, net ---- ----
Note receivable 461,122 150,000
Accrued interest receivable 31,421 ----
_______________________
Total Other Assets 492,543 150,000
_______________________
Total Assets $ 497,255 504,749
_______________________
</page>
3
Liabilities and Stockholders' Equity
1998 1997
Current Liabilities
Accounts payable $ 44,401 $ 37,218
Accrued liabilities 126,578 92,467
________ ________
Total Current Liabilities 170,979 129,685
________ ________
Long Term Debt
Debentures payable ---- 540,000
________ ________
Total Liabilities 170,979 669,685
________ ________
Shareholders' Equity
Series A non-cumulative convertible
preferred stock $0.10 par value; 1,000,000
shares authorized; 40,021 shares issued and 400 ---
outstanding at December 12, 1998 and 1997
respectively.
Common stock, $.01 par value,
50,000,000 shares authorized; 498,000 4,391 191
outstanding at December 31, 1998.
Addional paid-in capital 5,177,251 4,556,827
Retained Earnings (deficit) (4,722,354) (4,721,954)
Deficit accumulated during the
development stage (133,412) ----
___________ ___________
Total Stockholders' Equity 326,276 (164,936)
___________ ___________
Total Liabilites and
Stockholders' Equity $ 497,255 $ 504,749
___________ __________
<PAGE>
4
Statement of Operations
For the Periods Ended December 31,1998 and 1997
1998 1997
Operating Revenue ---- ----
$_________ $________
Expenses
General and Administrative
Office 10,767
Legal and accounting 14,056
Computer Services 16,100
Consulting 86,767
Bad debt expense 3,326
Other 33,853
_________ __________
Total General and Administrative 164,869
Other Income (Expenses)
Interest Income 32,591
Depeciation and amortization (1,077)
Interest Expense (57)
___________ __________
Loss from Continued Operation $(133,412)
____________ __________
Loss from Discontinued Operation ---- $ (1,687,944)
Loss on Disposal of Assets from
Discontinued Operations ---- (892,867)
Net Loss $ (133,412) (2,580,811)
____________ ___________
Loss per Share $ (.16) $ (28.23)
____________ ____________
<PAGE>
5
Statement of Stockholders Equity
For the Years Ended December 31, 1998 and 1997
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additional retained total
Preferred Stock Common Stock paid-in earnings
shares amount shares amount capital (deficit)
Balance at
December 31 1997 --- --- 12,620,638 $126,206 $2,992,120 $(2,141,143)
977,183
Stock issued for
cash 41,282,480 $412,825 896,735 1,309,560
Stock issued for
services 3,378,049 33,780 91,551 125,331
Stock issued as
Investment in
T.L. Phipps
(note 10) 100,000 1000 2,800
Net loss for 1997 (2,580,811)
(2,580,811)
________________________________________________________________________________
Balance --- $ --- 57,381,167 $573,811 $3,983,206 ($4,721,954)
at December 31 1997 164,937
Stock issued
via debenture
conversion 58,766,056 587,661 (47,661) 540,000
Effect of
reverse common
stock split (116,514,936) (1,165,149) 1,165,149
Preferred Stock
Dividend 40,021 $400 (400)
Stock issued
for cash 11,038 110 24,995 25,106
Stock issued
for services 758,000 7580 9,578 17,158
Stock issued
in legal settlement 17,240 172 25,688 25,860
Stock issued to
Board of Directors 20,518 205 16,295 16,500
Deficit accumulated
during restructuring
of company (133,412) (133,412)
________________________________________________________________________________
Balance at
December 40,021 $ 400 439,083 $ 4390 $5,177,251 $ (4,722,354) $326,275
31,1998
<PAGE>
Statement of Cash Flows
For the year ended December 13, 1998 and 1997
<S> <C> <C> <C>
1998 1997
Cash Flows From operating activities
Cash received from customers $--- $ 32,125
Interest received 1,170 ---
Cash paid for goods and services (57,709) (1,002,822)
Interest paid (57) (405,359)
______________________
Net Cash used by operating activities (56,596) (1,376,056)
Cash Flows From Investing activities
Issuance of common stock as investment in subsidiary --- 3,800
(purchases) Disposition of equipment (2,056) 39,194
Loans to another entity (311,122) (150,000)
________________________
Net Cash provided (used) by investing activities (313,178) (107,006)
Cash flows from financing activities
Sale of convertible debentures --- 540,000
Issuance of common stock 25,106 1,309,561
Repayment of long term debt --- (30,292)
Repayment of shareholder loans --- (43,520)
________________________
Net Cash provided (used) by financing activities 25,106 1,775,749
Net Increase (decrease) in cash (344,668) 292,687
Cash at the beginning of year 345,237 52,550
Cash at the end of year 569 345,237
<PAGE>
1998 1997
Reconcillation of net loss net
cash used by operating activities
net loss $ (133,412) (2,580,811)
adjustments to reconcile net loss
to net cash used by operating activities
Depreciation 1,077 56,192
Amortization of intangible assets --- 88,460
Provision for bad debt 3,326 ---
Stock issued as legal settlement 25,860 ---
Stock issued in exchange for services 33,658 125,331
(gain) loss on disposal of property --- 60,455
Leasehold improvements written off --- 50,359
Fixed Assets exchanged for services 3,022 13,956
(Increase) decrease in accounts receivable --- 1,702
(Increase) decrease in interest receivable (31,421) ---
Write-down of fixed assets --- 45,525
Write-down of prepaid assets --- 183,617
Increase (decrease) in accounts payable 7,183 5,094
Increase (decrease) in accrued liabilities 34,111 41,524
Increase (decrease) in deferred expenses --- (15,600)
________________________
Net Cash Provided (used) by operating activities $(56,596) $(1,376,056)
Supplemental Disclosure and Financing Activities
Noncash Investing and Financing Activities
Common Stock issued in exchange for services $33,658 $ 125,331
Common Stock issued as legal settlement $25,860 ---
Fixed assets exchanged for services $ 3,022 13,956
Preferred stock dividend issued 400 ---
[/S] </C> [/C] [/C]
</TABLE>
<PAGE>
7
Notes to Financial Statements
December 31, 1998 and 1997
Note 1 Summary of Organization and Significant Accounting Policies
Organization and description of Business
Corporate Vision, Inc. ("CVI" or the "the Company") was incorporated in Oklahoma
on November 20,1990 as a video production company. In 1992,the Company began
developing custom CD-ROM and CD-i products for corporate clients.
In December1994, the Company purchased 90% of the outstanding common stock of
Trident Enterprises,Inc. (Trident), a publictly traded Nevada corporation. In
May 1995,the shareholders of CVI and Trident approved a merger of the companies.
As a result, the minority shareholders of Trident received 86,694 common shares
of CVI in exchange for their ownership of Trident common stock. Subsequent to
the merger and share exchange, Trident ceased to exist as a separate entity
and CVI remained as the surviving corporation. In June 1995, CVI's common
stock began trading on the OTC Bulletin Board under the symbol "CVIA."
Prior to 1997, Corporate Vision, Inc. was an interactive multimedia production
company that developed and produced custom CD-ROM, CD-i, On-line, and Internet
products for the corporate and consumer markets. In 1997, the Company
discontinued its primary operations and liquidated the majority of its assets.
In 1998, the Company reentered the development stage after the remaining board
members reactivated the Company and changed its primay business focus to
providing investment and merchant banking services to privately held companies
interested in making an initial public offering.
Liquidity Considerations
Since reactivation, the Company has devoted substantially all of its efforts
to raising capital and acquisition activities. As of December 31,1998, the
Company's principal operations had not commenced and, therefore, no operating
revenues were reported for the year then ended. As of December 31,1998, the
Company's accumulated deficit in the development stage was $133,412, which was
funded primarily from the proceeds of common stock issuances. The Company's
overall accumulated deficit was $4,855,766 at December 31,1998.
<PAGE>
8
Notes to Financial Statements
December 31, 1998 and 1997
Summary of Organization and Significant Accounting Policies (continued)
The Company believes that it will commence its principal operations and begin
generating revenues in the fiscal year ending December 31,1999. Because the
Company is in the development stage, the accompanying financial statements
should not be regarded as typical for normal operating periods.
Method of Accounting
The Company's financial statements for the year ended December 31,1998
were prepared on the accrual basis of accounting in accordance with generally
accepted accounting principals. Consequently, revenues and gains are recognized
when earned,and expenses and losses are recognized when incurred.
The Company's financial statements for the year ended December 31,1997
were prepared on a liquidation basis of accounting which contemplates the
liquidation of the entity and the realization of assets and the settlement
of liabilities and commitments at their net realizable value.
Cash and Cash Equivalents
The Company considers all highly liquid assets with maturities of three months
or less to be cash equivalents.
Fiscal Year End
The Company's fiscal year ends on December 31.
Property and Equipment
Property and equipment is recorded at cost. All material property and
equipment additions are capitalized and depreciated on a straight-line basis
over the estimated useful life of the asset.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE> 9
Notes to Financial Statements
December 31,1998 and 1997
Summary of Organization and Significant Accounting Policies (continued)
Income Taxes
Effective January 1,1991, the Company adopted Statement of Financial Accounting
Standards No. 109,"Accounting for Income Taxes," which requires the
measurement of deferred tax assets for deductible temporary differences and
operating loss carryforwards,and of deferred tax liabilities for taxable tempora
ry differences. Measurement of current and deferred tax liabilities and assets
is based on provisions of enacted tax law. The effects of future changes in tax
laws or rates are not included in the measurement. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable for the period and the
change during the period in deferred tax assets and liabilities.
Earnings(Loss) per Share
In 1997, the Company adopted the provisions of SFAS No. 128,"Earnings per
Share",which requires presentation on the face of the income statement of
both basic and diluted earnings per share. Basic and diluted earnings per
share have replaced the previously presented primary and fully diluted
earnings per share. Basic earnings per share is computed by dividing net
income attributable to common shares by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed based on the assumption that all of the Company's outstanding common
stock warrants and convertible preferred shares are converted into common
shares (see Note 5).
During a loss period, the assumed exercise of outstanding stock warrants
and convertible preferred shares has an antidilutive effect (i.e.,it
increases net loss per share). As a result, these items are not included in
the weighted average shares of 370,565 used in the calculation of loss per
share in Note 6.
<PAGE>
10
Note1- Summary of Organization and Significant Accounting Policies (continued)
Revenue Recognition
Revenue is recognized monthly based upon the terms of the contract. The company
did not recognize any operating revenues for the year ended December 31,1998.
Non-Cash Stock Transactions
Stock issued in exchange for services or other non-cash transactions is
valued at the closing stock price on the day of the transaction.
Note 2 - Purchase of and Merger with Trident Enterprises,Inc.
Effective December 8,1994, the Company purchased from IVS Holdings,Inc.
("IVS") 18,000,000 shares of common stock ($0.001 par value) of Trident
Enterprises, Inc. ("Trident"), a publictly traded Nevada corporation, for
$50,000. As a result, the Company owned 90% of Trident's 20,000,000 issued
and outstanding common stock at December 31,1994.
On May 5,1995, the shareholders of CVI and Trident approved a merger of the
companies and a reincorporation to the state of Oklahoma. In connection with
the merger,the minority shareholders of Trident exchanged their 2,000,000
outstanding common stock of Trident for newly issued stock of CVI at an
exchange ratio of 33 to 1. As a result, the Trident shareholders received a
total of 86,694 shares (including 28,800 shares to cover fractional and
other interests) of CVI's common stock. The exchange ratio was based on the
minority ownership of Trident as compared to the combined net worth of CVI
and Trident at December 31,1994. Subsequent to the merger and share exchange,
Trident ceased to exist as a separate entity and Corporate Vision Inc. remained
as the surviving corporation. CVI is governed by Oklahoma law and by a new
certificate of incorporation and bylaws effected by the reincorporation.
<PAGE>
11
Note 3- Note Receivable
On March 3, 1998 in connection with an acquisition that was never consummated,
the Company accepted a promissory note from an unrelated company, by which said
company borrowed from and agreed to pay Corporate Vision Inc. at maturity on
March 3, 2003, $461,122 plus accrued interest at the rate of 8% per annum.
Note 4- Property and Equipment consists of the following at December 31, 1998:
Estimated
Useful Life 1998 1997
Computers and equipment 5-7 years $5,387 $6,512
Accumulated depreciation (1,244) (326)
Property and Equipment (net) 4,143 6,186
________________
Depreciation expense for the year ended December 31, 1998 and 1997 was $1,077
and $56,192 respectively.
<PAGE>
12
Note 5- Capital Stock and Warrants
Stock Transactions
In 1997, the Company issued 39,975,290 shares of its common stock
through the conversion of debenture agreements. The Company received
proceeds of $1,284,560 from the issuance of the debenture agreements.
During 1997, the Company issued 3,378,049 shares of common stock in
exchange for services rendered. The value of these services was
determined to be $125,331.
In May 1997 the Company issued 850,000 shares of common stock pursuant
to its planned acquisition of T.L. Phipps and Company. (see note 10). Of
these shares 750,000 were subsequently cancelled in December 1997 upon
the dissolution of the Phipps agreement.
In November, 1997, the Company issued 1,307,190 shares of its common
stock at a price of $0.0255 per share for cash to a non-affiliated share
holder.
At December 31, 1997 the Company had issued warrants outstanding to
acquire 590,288 shares of common stock at $0.50 per share and warrants
to acquire 160,000 shares of common stock at $1.00 oer share that
expired on various datesin 1998. None of these warrants were exercised
during 1998.
On June 1,1998 the Company effected a 1 for 300 reverse split of its
common stock. Total shares outstanding were 116,905,223 prior to the
stock split. The Company had 390,287 share of common stock outstanding
immediately following the split. The prior year's outstanding common
stock shares have been restated on the balance sheet to reflect the
stock split.
In 1998 prior to the stock split, the company issued 58,766,056 shares
of common stock through conversion of its December 15, 1997 debenture
agreements. The $485,000 proceeds from the debentures were received in
1997.
On September 1, 1998 the Company issued 40,021 shares of preferred stock
to the shareholders of record in a ratio of one (1) share of preferred
for every ten (10) shares of common stock held on that date.
In October 1998, the Company issued 17,240 shares of common stock to
sharehlders that were parties to a legal action against the Company that
were dismissed during 1998 (see Note 8) These shares were valued at
$25,860 on the date of issuance.
<PAGE>
13
Note 5 -Capital Stock and Warrants (continued)
In November 1998, the Company issued 11,038 shares of restricted common
stock as a result of a private placement offering. The company received
proceeds in the amount of $25,106.
On various dates following the stock split, the Company issued 20,518 shares
of restricted common stock to its board of directors in exchange for services
rendered and as reimbursement for business-related expenses incurred by the
individual board members. Board members are compensated at a rate of $400
worth of common stock per board meeting attended and one dollar of common stock
for each dollar of expense incurred as a result of Company business. The
aggregate value of the stock was determined to be $16,500.
Common Stock Warrants
At December 31,1998, the Company had 390,287 warrants outstanding, each of which
entitle the bearer to purchase one share of common stock at a price of $3.00
until June 1,1999. Of these warrants, 17,736 were converted into common
stock in February 1999.
Preferred Stock
Each outstanding share of the Company's non-cumulative Series A $0.01 par
value preferred stock will automatically convert into ten shares of the
Company's common stock on September 1,2003.
If the company fails to recognize at least $2,000,000 of pre-tax earnings,
exclusive of extraordinary items and non-recurring items, for the twelve
months ended June 30,2002 or if the Company's common stock does
not trade for a minimum of $10.00 per share for ten days between June 30,
2002 and August 15,2003, then the Company will declare a one-fifth share
dividend of Series A preferred stock for each preferred share held at the
declaration date.
<PAGE>
14
The company will declare a similar dividend if the Company's common stock
does not trade above $10.00 per share for twenty consecutive days between
July 15,2003 and August 15,2003 or if the company fails to have pre-tax
earnings of $2,000,000,exclusive of extraordinary and non-recurring items.
Note 6 Loss Per Share
The computations of basic and dilusive loss per share from continuing
operations were as follows:
<TABLE>
<CAPTION>
1998 1997
<C> <C> <C>
Net loss from continuing operations
attributable to common shares $(133,412) $---
Net loss from discontinued operations
attributable to common shares --- $2,580,811
Weighted average common shares outstanding 370,565 91,415
Basic and dilutive loss per share from
continued operations $ (0.36) $(28.23)
[/S] </C> [/C]
</TABLE>
Weighted average common shares outstanding for the year ended December 31, 1997
have been adjusted for the 1 for 300 stock split that occured in 1998.
At December 31, 1998 the Company had 390,287 common stock purchase warrants and
40,021 shares of convertible preferred stock. Each warrant is convertible into
one share of common stock at any time until June 1, 1999 and each share of
preferred stock will automatically convert into ten shares of common stock on
September 1, 2003. The warrants and the preferred shares were not included in
the computation of the dilutive loss per share because the effect of their
inclusion would be antidilutive.
<PAGE>
15
Note 7- Income Taxes
The Company has incurred net operating losses since inception and has a loss
carry forward of approximately $4,855,766, at December 31, 1998, expiring in
years beginning in 2006. Deferred tax assets have not been recorded for future
reduction in income taxes that may result from the net operating loss carry
forward.
Significant components of the Company's deferred tax assets and liabilities as
of June 30, 1998 are as follows.
Deferred tax liabilities:
Tax over book depreciation $ 360
Deferred tax asset:
Net operating loss carry forward 1,942,306
Valuation allowance (1,941,946)
Total deferred tax assets 360
Net deferred tax liabilities $ ---
Deferred taxes reflect a combined federal and state tax rate of approximately
40%.
For financial reporting purposes, a valuation allowance of $1,941,946 has
been established in accordance withthe provisions of FASB Statement No.109
"Accounting for Income Taxes". The Company continually reveiws the adequacy of
the valuation allowance and will recognize these benefits only as assessment
indicates that it is more likely than not the benefits will be realized.
A reconciliation between the amount of federal income taxes, based on a forty
(40%) tax rate, and the effective amount of income taxes based on continued
operations is as follows:
Statutory federal income taxes (refund) $(53,365)
Tax over book depreciation 360
Valuation allowance 53,005
__________
Effective income taxes $ ---
__________
<PAGE>
16
Note 8- Commitment and Contingencies
Litigation
On May 8,1998, a judgement was entered against the Company pertaining to
a contingent liability related to activities in 1996. Pursuant to the judgement,
the plaintiff was to keep 50,000 shares of Corporate Vision stock already
in his possession and the Company was to pay an additional,$43,000 damages.
On March 5, 1999, the Company entered into an agreement with the plaintiff
to settle the judgement for $32,500. Pursuant to the agreement, the Company
paid the plaintiff $10,000 in March 1999 and must pay the balance of the
settlement on or before April 19,1999. Upon payment, the Company will
receive a full release of the judgement and the plaintiff will return all
shares of CVI stock in his possession.
On March 10,1998, the Company and other parties affiliated with T.L. Phipps
& Co.,Inc.(see Note 10), were named as defendants in a lawsuit brought by
Bank of Oklahoma ("BOK"),claiming that T.L. Phipps & Co.,Inc. is indebted
to BOK for a promissory note with an original principal amount of
$429,323.75. This action was subsequently dismissed in 1998 after one of the
defendants repaid the delinquent mortgage and acquired BOK's position in
the lawsuit. The new noteholder has made demand on the Company,asserting
that CVI owes approximately $259,323 relating to the note. The company
has denied this obligation. No legal action against the Company is
currently pending regarding this note and the likelihood of such action
could not be determined.
During 1998, a group of the Company's shareholders brought suit against
the Company to block a proposed merger with an oil and tire distribution
company. The legal action was dismissed during 1998 and the proposed
merger was never consummated. The Company subsequently issued 11,038
shares of its common stock to these shareholders as compensation for
legal expenses incurred by the shareholders and an additional 8,000
shares of stock in March 1999 to the shareholders' attorney to cover
unpaid legal expenses. No further action is currently pending relating
to this lawsuit.
<PAGE>
17
Note 9- Related Party Transactions
During 1997 the Company paid $150,000 to the Mabie Children's Trust for
services relating to stockholder relations and acquisitions. Sheryl Mabie
was the President and CEO of Corporate Vision, Inc. until August 11,1997.
Note 10 - Investment in T.L. Phipps
On May 12,1997, the Company signed an agreement with Terry L. Phipps and
Nancy C. Phipps as shareholders ("Phipps Stockholders") of T.L. Phipps
and Company,Inc.,("TLPC"). TLPC, an Oklahoma corporation, engaged in the
business of audio and video communications. This agreementwas to be
accounted for as a purchase.
In accordance with the term of the agreements,the Company was to acquire
100% of the common stock outstanding of TLPC and 65% of the total
outstanding shares of stock in ProMar,Inc. in exchange for $25,000 at
closing and the issuance of 750,000 shares of common stock of Corporate
Vision Inc. to Terry L. Phipps and Nancy C.Phipps. CVI was to further
acquire all the assets and liabilities of TLPC. The liabilities at that
date included a note to the Bank of Oklahoma in the amount of $452,000,a
mortgage for $477,641 on the TLPC building, and a promissory note
payable to a non-affiliated party in the amount of $85,000. CVI was
further obligated to pay an outstanding loan obligation owed to Amer US
Bank in the amount of $49,450. CVI was also made responsible for certain
credit card obligations amounting to $66,330.
On October 7,1997, an agreement for mutual release was entered into by
TLPC and the Company. The agreement did not release CVI from its
obligation on the principal balance due to Bank of Oklahoma or the
Mortgage on the building,which is TLPC headquarters (see Note 8). Upon
completion of the agreement CVI owned 25% of TLPC and 14% of ProMar, Inc.
The value of the ownership interests in TLPC and ProMar,Inc. at December
31,1998 could not be reasonably determined.
<PAGE>
18
Note 11 - Discontinued Operations
On August 11,1997, Sheryl Mabie and Rhonda Vincent,President and CFO,
respectively, resigned their positions,leaving control to the three
remaining board members (two of who had resigned by early 1998). By
October 31, 1997,CVI had essentially ceased operations. As of December 31,
1997 there were no contracts for revenue and the Board had begun the process
of liquidating the Company's remaining assets.
Prior to discontinuing its operations in 1997, the Company was carrying
a number of intangible assets,relating to prior business activities. The
assets,which are listed below, included certain contract rights, goodwill,
and other costs,which, according to the agreements,had not expired as
of December 31,1998,but were related to prior business ventures in which
the Company is no longer involved. The Company currently has no plans to
exercise these rights,nor do they expect to receive any future bebefit from
the other intangibles. An estimate of the value of these agreements and
rights at December 31,1998 could not be reasonably determined.
Licensing Agreements
On June 28,1995, the Company purchased the CD-ROM rights and a six month
option on the motion picture rights to "The Final Jihad", a novel about
terrorism in the United States. The rights were acquired for future
development of an interactive CD for the consumer market. The rights,
which extend through June 28, 2000, were acquired for 15,000 shares
of CVI common stock.
On November 30, 1994, the Company entered into a licensing agreement
with Interactive Video Systems Inc., a British Columbia corporation,
("IVS") to use certain copyrighted and non-copyrighted original
animations,drawing and other artworks developed and owned by IVS. The
term of the agreement was for a minimum of five (5) years, and
thereafter so long as CVI was activately developing,marketing and
distributing productions utilizing the animation and artworks. The
$50,000 cost was being amortized over the life of the agreement.
The Company wrote off approximately $46,000 of unamortized costs
relating to these licensing agreements during 1997.
<PAGE>
19
Marketing and Distribution Rights
The assets of Trident (see Note2) consisted of marketing and distribution
agreement with Interactive Videosystems,Inc.("IVS") to market an
interactive kiosk developed by IVS. The Company amortized the asset
during 1995 and 1996. The unamortized balance of approximately $33,000
was written-off during the year ended December 31,1997
Consulting Contracts
In February 1996, the Company entered into a three-year 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 its common stock. Under the terms of the agreement, RDG
received 550,000 shares of restricted common stock of the company,
valued at $300,000 or $0.55 per share, and 400,000 stock options at
an exercise price of $0.10 per share. The contract was valued at $340,000
and was recorded as a prepaid consulting contract. During 1996, the
Company expensed $165,000 as services were rendered. The balance of
$208,334 at December 31, 1996 was written-off during 1997.
Deferred Acquisition Costs
During 1995, the Company incurred certain costs related to the acquisition
and financing of Texas Video & Post, a privately held video production
company in Houston, Texas. The acquisition was pending as of December 31,
1996. During 1997, the required additional capital was not obtained
which resulted in the write-off of acquisition costs relating to this
merger.
<PAGE>
20
Goodwill
In connection with the purchase of and subsequent merger with Trident
(see Note 2), the Company incurred various costs in excess of the
book value of Trident's assets. These costs were recorded as goodwill
during 1995 and amortized during 1996. For the year ended December 31,
1997, the Company wrote-off approximately $82,000 of costs associated
with goodwill.
Note 12 - Restatement
Certain errors in the disclosure of related party transactions in the
December 31,1997 financial statements were discovered during 1998.
These errors had no effect on the Company's net income or retained
earnings for 1997. The disclosure has been restated in Note 9.
<PAGE>
21
Management Comments
Corporate Vision Inc. management and Board of Directors, fundementally agrees
with the results found in this audit. We feel through no fault of the auditor
fair market values could not be calculated for our 25% (twenty five percent)
ownership of T.L. Phipps and Company, 88% (eighty eight percent) ownership of
IPOSITE.COM and our 15% (fifteen percent) ownership of ArchivalCD Inc.
Item 1, Business
General
Corporate Vision, Inc., (CVI or "the Company") an Oklahoma
corporation, is an investment bank venture capital firm whose principal market
services small cap companies and assists in small company public offerings.
CVI's strategy includes the internal development, minority ownership and
operational assistance as well as investment in companies in varied
industries. As of Decembr 31, 1998, CVI's portfolio included minority-owned
subsidiaries T.L. Phipps, Iposite.Com, Inc. and ArchivlCD, Inc. The Company's
first underwriting venture, ArchivalCD a Delaware corporation targeting
conventional and internet related genealogical information searches. On
December 31, 1998 CVI held a 15% ownership position in ArchivlCD. On
December 31, 1998 CVI held a 25% ownership position in T.L. Phipps & Company.
Phipps & Company is an interactive and multimedia cd rom and video production c
company. IPOSITE.Com is a developmental investor information clearing house and
internet magazine.
Investment and Development
Currently Corporate Vision is currently developing the Internet site
"IPOSITE.COM" Currently Corporate Vision has invested $25,000 in this project.
Business Strategy
CVI's business strategy is to find and develop private companies with
valuations of less than $15,000,000. Many times these private companies
are seeking expansion funds through initial Public offerings of their stock.
CVI underwrites these IPO's in return for long term ownership of these
companies as payment for CVI services. At the time of the IPO CVI will sell
a small percentage of its holdings in the third-party company in order to
recover expenses related to the IPO offering. Most importantly, CVI has
developed a continued understanding of customers's needs.
With respect to participation of CVI, the company will seek to expand
its participation in the direct ownership of products and services of
its subsidiary companies. Key elements of this strategy include:
Continue to enhance and expand the subsidiary and minority ownership
company's products and services.
Evaluate new opportunities in market sectors and potential endeavors.
Develop stable growth-oriented marketing strategy using innovative
advertising solutions to seek out opportunities to realize significant
shareholder value.
Sales and Marketing
CVI industry does not require large or aggressive advertising campaigns;
although the company has an internet presence to meet the needs of CVI's
potential client base.
Competition
CVI's investment compete in varied market sectors and service arenas which
are comprised of numerous large as well as small companies providing
different products and services. Although CVI believes that the diverse
segments of these markets will provide opportunities to aggressively
increase the value of our investments.
Research and Development
CVI researches and develops small private companies seeking initial
offerings in a variety of market sectors. CVI limits their participation
to those companies showing strong growth, the potential increasing future
earnings and expanding market presence.
Employees - 4
2. Properties
Facilities
The company leases approximately 2,000 square feet of administrative and
operations in Tulsa, Oklahoma.
3. Legal Proceedings
- - None at the time of this report, nor is none expected in the near future.
4. Submission of Matter to Vote of Security Holders
No matters were submitted to a vote of security holders during the 4th
quarter of the fiscal year covered by this report.
5. Market for Restraints Common Equity and Related Stockholder Issues
(a) The Company has never paid cash dividends on its common stock,and
the Company has no intention to pay cash dividends in the foreseeable
future,although the Company does pay dividends in common stock of the
third party companies prior to the initial public offering process.
(b) On September 1,1998, the Company issued 393,712 warrants for common
stock at a strike price of $3.00 per warrant convertible into CVIA's
common shares. These warrants were private and not available for public
trade.
(c) On September 1,1998, the Company issued a dividend of 39,700 preferred
shares to the common shareholders at a 1 to 10 ratio. These preferred
shares are convertible into 10 common shares on September 1, 2003. These
preferred shares are intended for public trade pending FCC and NASD
approval.
6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
In August 1998 a new Board of Directors was formed on the behalf of Corporate
Vision, this board was formed as a judgement and settlement rendered by a
lawsuit filed by a group of 61 shareholders as plaintiff and secondary
shareholders, this group of shareholders represented aproximately 50%
ownership of the Company. The Board of Directors voted Keith A. Anderson as the
President and CEO of the company. The Board decided to allow T.L. Phipps and
company to take over the former Interactive Media operations that Corporate
Vision had formerly conducted. The Board of Directors decided it was in the best
interest and a matter of Corporate survival to change the industry Corporate
Vision was participating in and the mergers, that were proposed at the time.
Since August 1998, Corporate Vision had been focused and executing a plan to
restore the Company to health and executing the business model that was formed
and decided to pursue on the behalf of the Company. The Company will become
debt free by the end of the first quarter 1999.
The Company has entered into a growth stage and will be seekig to add additional
staff and office space through out the next three fiscal quarters of 1999.
7. Financial Statements and supplementary Data
(a) The following consolidated financial statements of the Company and
the independent auditors' report set forth in 1998 annual report to
shareholders are incorporated herein by reference and are filed as
Exhibit E
(1) Consolidated balance sheets as of 12/31/98 and 12/31/97.
(2) Consolidated statements of operations for the three years ended
12-31-98
(3) Consolidated statements of shareholders' equity for the three years
ended 12-31-98.
(4) Consolidated statements of cash flow for the three years ended
12-31-98.
(5) Notes to consolidated financial statements.
(6) Independent auditors' report
(b) Selected quarterly financial data (unaudited) is set forth in Note#---
of the Notes to Consolidated financial statements referred to in this
Item 7 and incorporated herein by reference.
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.
April 1, 1999
Keith A. Anderson
President, CEO
