SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(Mark One):
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2001
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ___________.
Commission File No. 00-22661
INVU, INC.
(Exact name of small business issuer as specified in charter)
Colorado 84-1135638
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
The Beren, Blisworth Hill Farm
Stoke Road
Blisworth, Northamptonshire NN7 3DB
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(Address of principal (Postal Code)
executive offices)
Issuer's telephone number, including area code: (01604) 859893
--------------
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the issuer (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.
YES X NO
------- -------
As of June 5, 2001 there were 30,386,539 shares of the common stock, no par
value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
---------- -------------
INVU, INC.
April 30, 2001
INDEX
Page No.
PART I. FINANCIAL INFORMATION.........................................................................................F-1
Item 1. Financial Statements.................................................................................F-1
Consolidated Balance Sheets as of April 30, 2001.....................................................F-2
Consolidated Statements of Operations................................................................F-3
Consolidated Statements of Deficit in Stockholders' Equity...........................................F-4
Consolidated Statements of Cash Flows................................................................F-6
Notes to Financial Statements........................................................................F-7
Item 2. Management's Discussion and Analysis or Plan of Operation..............................................1
PART II. OTHER INFORMATION...............................................................................................5
Item 1. Legal Proceedings......................................................................................5
Item 2. Changes in Securities..................................................................................5
Item 3. Default Upon Senior Securities.........................................................................5
Item 4. Submission of Matters to a Vote of Security Holders....................................................5
Item 5. Other Information......................................................................................5
Item 6. Exhibits and Reports on Form 8-K.......................................................................6
SIGNATURES.............................................................................................................S-1
EXHIBIT INDEX..........................................................................................................E-1
PART I. FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
APRIL 30, 2001
F-1
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------------------------------
April 30, January 31,
2001 2001
(unaudited)
$ $
ASSETS
Current assets
Accounts receivable:
Trade, net 478,464 310,098
VAT recoverable and other 5,519 5,847
Inventories 35,374 35,150
Prepaid expenses 123,661 105,242
------------ ------------
Total current assets 643,018 456,337
------------ ------------
Equipment, furniture and fixtures
Computer equipment 87,505 82,989
Vehicles 291,285 289,970
Office furniture and fixtures 100,929 102,350
------------ ------------
479,719 475,309
Less accumulated depreciation 163,449 163,364
------------ ------------
316,270 311,945
------------ ------------
959,288 768,282
============ ============
LIABILITIES AND DEFICIT IN STOCKHOLDERS' EQUITY
Current liabilities
Short-term credit facility 1,294,480 1,682,975
Current maturities of long-term obligations 1,075,604 69,624
Accounts payable 352,364 544,524
Accrued liabilities 429,191 415,239
------------ ------------
Total current liabilities 3,151,639 2,712,362
------------ ------------
Long-term obligations, less current maturities 1,947,653 1,962,635
Deficit in stockholders' equity
Preferred stock, no par value
Authorised - 20,000,000 shares; nil shares issued and outstanding - -
Common stock, no par value
Authorised - 100,000,000 shares; issued and outstanding - 30,386,539 1,746,223 1,746,223
Accumulated deficit during the development stage (6,093,315) (5,810,452)
Accumulated other comprehensive income 207,088 157,514
------------ ------------
(4,140,004) (3,906,715)
------------ ------------
959,288 768,282
============ ============
The accompanying notes are an integral part of these financial statements.
F-2
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------------------------------
Feb 18, 1997
For the three months ended (date of
April 30, April 30, inception) to
2001 2000 April 30, 2001
(unaudited) (unaudited) (unaudited)
$ $ $
Revenues 302,016 12,943 830,227
Expenses:
Production cost 25,702 8,870 377,557
Selling and distribution cost 193,046 192,589 1,516,322
Research and development cost 113,459 63,132 814,171
Administrative costs 201,963 240,552 2,559,456
----------- ----------- -----------
Total operating expenses 534,170 505,143 5,267,506
----------- ----------- -----------
Operating loss (232,154) (492,200) (4,437,279)
Other income (expense)
Interest, net (50,709) (31,317) (1,658,399)
Other - - 2,363
----------- ----------- -----------
Total other expense (50,709) (31,317) (1,656,036)
----------- ----------- -----------
Loss before income taxes (282,863) (523,517) (6,093,315)
----------- ----------- -----------
Income taxes - - -
----------- ----------- -----------
Net loss (282,863) (523,517) (6,093,315)
=========== =========== ===========
Weighted average shares outstanding:
Basic and Diluted 30,386,539 30,206,896 30,216,138
=========== =========== ===========
Net loss per common share
Basic and Diluted (0.01) (0.02) (0.20)
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY
---------------------------------------------------------------------------------------------------------------------
Accumulated
other
Common stock Accumulated comprehensive Comprehensive
Shares Amount deficit income Total loss
$ $ $ $ $
Issuance of common stock ($1.64 per share) 176,000 288,640 - - 288,640
Reclassification of $1.64 common stock (176,000) (288,640) - - (288,640)
Issuance of no par common stock in connection
with reverse acquisition 28,696,552 288,355 - - 288,355
Issuance of common stock ($0.50 per share) 1,510,344 750,000 - - 750,000
Reverse acquisition transaction costs - (750,000) - - (750,000)
Comprehensive income:
Foreign currency translation adjustment - - - 440 440 440
Net loss during the period - - (217,153) - (217,153) (217,153)
-----------
Total comprehensive income (216,713)
---------- --------- --------- --------- ---------- ===========
Balance at January 31, 1998 30,206,896 288,355 (217,153) 440 71,642
Comprehensive income:
Foreign currency translation adjustment - - - 8,655 8,655 8,655
Net loss during the period - - (694,809) - (694,809) (694,809)
-----------
Total comprehensive income (686,154)
---------- --------- --------- --------- ---------- ===========
Balance at January 31, 1999 30,206,896 288,355 (911,962) 9,095 (614,512)
Beneficial conversion feature of
convertible debentures - 723,077 - - 723,077
Credit enhancements provided by the
major shareholder - 630,000 - - 630,000
Comprehensive income:
Foreign currency translation adjustment - - - (2,251) (2,251) (2,251)
Net loss during the period - - (2,786,081) - (2,786,081) (2,786,081)
-----------
Total comprehensive income (2,788,332)
---------- --------- --------- --------- ---------- ===========
Balance at January 31, 2000 30,206,896 1,641,432 (3,698,043) 6,844 (2,049,767)
The accompanying notes are an integral part of these financial statements.
F-4
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------------------------
Accumulated
other
Common stock Accumulated comprehensive Comprehensive
Shares Amount deficit income Total loss
$ $ $ $ $
Issuance of no par common stock ($0.58 per share) 179,643 104,791 - - 104,791
Comprehensive income:
Foreign currency translation adjustment - - - 150,670 150,670 150,670
Net loss during the period - - (2,112,409) - (2,112,409) (2,112,409)
---------- --------- ----------- -------- ----------- -------------
Total comprehensive income (1,961,739)
=============
Balance at January 31, 2001 30,386,539 1,746,223 (5,810,452) 157,514 (3,906,715)
Comprehensive income (unaudited):
Foreign currency translation
adjustment (unaudited) - - - 49,574 49,574 49,574
Net loss for the period (unaudited) - - (282,863) - (282,863) (282,863)
---------- --------- ----------- -------- ----------- -------------
Total comprehensive income (unaudited) (233,289)
=============
Balance at April 30, 2001 (unaudited) 30,386,539 1,746,223 (6,093,315) 207,088 (4,140,004)
========== ========= =========== ======== ===========
The accompanying notes are an integral part of these financial statements.
F-5
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------------------------------------
Feb 18, 1997
For the three For the three (date of
months ended months ended inception) to
April 30, 2001 April 30, 2000 April 30, 2001
(unaudited) (unaudited) (unaudited)
$ $ $
Net cash flows used in operating activities
Net loss during the period (282,863) (523,517) (6,093,315)
Interest expense relating to beneficial conversion
feature - - 723,077
Interest expense related to debt discount - - 630,000
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 27,143 19,820 211,244
Loss on disposal of fixed assets 1,044 - 1,044
Accounts receivable (174,687) (34,423) (500,642)
Inventories (953) (18,307) (43,221)
Prepaid expenses (20,614) (16,663) (130,008)
Accounts payable (180,969) 144,791 388,059
Accrued liabilities 22,576 27,746 463,963
------------- ------------- ------------
Net cash used in operating activities (609,323) (400,553) (4,349,799)
------------- ------------- ------------
Cash flows used in investing activities:
Acquisitions of property and equipment (6,942) (80,988) (271,070)
Proceeds from sale of vehicles - - 19,356
------------- ------------- ------------
Net cash used in investing activities (6,942) (80,988) (251,714)
------------- ------------- ------------
Cash flows provided by financing activities:
Short-term credit facility (353,791) (70,803) 1,401,921
Borrowings received from notes payable 1,000,000 610,293 4,619,430
Repayment of borrowings (9,068) (40,465) (1,671,913)
Principal payments on capital lease (10,567) (10,248) (87,042)
Proceeds from issuance of stock - - 393,431
------------- ------------- ------------
Net cash provided by financing activities 626,574 488,777 4,655,827
------------- ------------- ------------
Effect of exchange rate changes on cash (10,309) (7,236) (54,314)
------------- ------------- ------------
Net decrease in cash - - -
Cash at beginning of period - - -
------------- ------------- ------------
Cash at end of period - - -
============= ============= ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest 38,000 31,000 194,000
Income taxes - - -
Major non-cash transactions
The beneficial conversion feature of the Convertible Notes amounting to $723,077
and debt discounts of $630,000 have been included in the Statement of Operations
for the period from February 18, 1997 (date of inception) to April 30, 2001.
The accompanying notes are an integral part of these financial statements.
F-6
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The accompanying financial statements have been prepared without audit pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations. These statements include all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair presentation of
financial position and results of operations. The financial statements included
herein should be read in conjunction with the financial statements and notes
thereto included in the latest annual report on Form 10-KSB. The results of
operations for the three month period ended April 30, 2001 are not necessarily
indicative of the results to be expected for the full year.
NOTE A - COMPANY DESCRIPTION
INVU, Inc. (the Company) is a holding company which operates one subsidiary INVU
Plc, which is a holding company for two subsidiaries of its own, INVU Services
(Services) and INVU International Holdings Limited (Holdings). The Company was
incorporated under the laws of the State of Colorado, United States of America,
in February 1997. INVU Plc, Services and Holdings are companies incorporated
under English Law. The Company operates in one industry segment which includes
developing and selling software for electronic management of many types of
information and documents such as forms, correspondence, literature, faxes,
technical drawings and electronic files. Services is the sales, marketing and
trading company and Holdings holds the intellectual property rights to the INVU
software.
On August 31, 1998, Sunburst Acquisitions I Inc. (Sunburst) (a public
development stage enterprise) acquired all of the outstanding shares of INVU Plc
in exchange for restricted shares of common stock of Sunburst (the Exchange)
pursuant to a Share Exchange Agreement between Sunburst and the principal
shareholders of INVU Plc. Sunburst exchanged 26,506,552 shares of common stock
for all of INVU Plc's issued and outstanding shares of common stock. For
accounting purposes, the Exchange was treated as a recapitalization of INVU Plc
where INVU Plc is the accounting acquirer. All periods have been restated to
give effect to the recapitalization. The historic statements from inception up
to the Exchange are those of INVU Plc.
In connection with the Exchange, the directors and officers of INVU Plc became
the directors and officers of Sunburst. Also, Sunburst changed its name to INVU,
Inc. At the time of the Exchange, the Company issued 1,510,344 shares of Common
Stock of the Company to a consultant pursuant to a consulting agreement for
introducing INVU Plc and Sunburst. The shares were estimated to have a value of
$750,000 and have been treated as a transaction cost in connection with the
Exchange. Immediately after the Exchange, INVU Plc's former shareholders owned
approximately 88% of the outstanding common stock of Sunburst.
F-7
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE B - GOING CONCERN
The financial statements have been prepared on a going concern basis which
assumes that the Company can meet its financial obligations as they fall due in
the ordinary course of business. The Company's liabilities exceeded its assets
by $4,140,004 at April 30, 2001 and the Company had negative cash flows from
operations of $609,323 for the three months to April 30, 2001. The Company is
starting to generate revenues from operations and has obtained additional
financing since January 31, 2001 amounting to $1 million. Operations to date
have been funded principally by equity capital and borrowings. The Company is in
the process of negotiating additional financing to fund its operations. The
Company's ability to continue to develop its operations depends on its ability
to raise further financing. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE C - INVENTORIES
Inventories consist of the following:
April 30, January, 31
2001 2001
(unaudited)
$ $
Licensed goods - -
Goods for resale 35,374 35,150
------------- ------------
35,374 35,150
============= ============
Licensed goods represent software licenses purchased by the Company which allow
the Company to manufacture and distribute a separate company's proprietary
software products in conjunction with and as an embedded component of the
Company's proprietary software. Goods for resale represent the finished
consolidated product to be sold to the end user.
NOTE D - SHORT-TERM CREDIT FACILITY
The Company has a $1,144,640 ((pound)800,000) (January 31, 2001 $1,169,000
((pound)800,000)), 7.5% short-term credit facility with an English bank. The
Company's bank has agreed to a temporary increase in the facility of $286,160
((pound)200,000) until May 25, 2001 on the basis that further investment
additional to the $1 million received in the three months to April 30, 2001 will
be obtained by May 25, 2001. The credit facility is collateralized by all assets
of the Company and a corporate guarantee given by Vertical Investments Limited,
a company in which a non-executive director of this Company has an interest. The
amount drawn against the facility at April 30, 2001 was $1,294,480
((pound)904,725), (January 31, 2001 $1,682,975 ((pound)1,151,855)). The amount
drawn is payable on demand at the bank's discretion. The credit facility is due
for review on July 31, 2001.
F-8
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE E - LONG-TERM OBLIGATIONS
Long-term obligations at April 30, 2001 and January 31, 2001
April 30, January 31,
2001 2001
(unaudited)
$ $
Non-interest bearing, unsecured loan from an individual,
no stated maturity date 739,207 759,245
4% above Libor rate (Libor rate was 5.3125% and 5.72% at April 30, 2001 and
January 31, 2001 respectively) notes payable to an English bank, monthly payment
aggregating to (pound)500, maturing in March 2002, collateralized by all
assets of the Company and a limited personal guarantee by a director 5,723 6,818
4% above Libor rate (Libor rate was 5.3125% and 5.72% at April 30, 2001 and
January 31, 2001 respectively) notes payable to an English bank, monthly payment
aggregating to (pound)1,333, maturing in June 2004, collateralized by all assets
of the Company and unlimited multilateral guarantees between subsidiary
undertakings; a quarterly loan guarantee premium of 1.5% per
annum is payable on 85% of the outstanding balance 76,309 81,821
Convertible A Note 1999-2002, with interest at 6%; interest due in
arrears biannually on January 1 and July 1 600,000 600,000
Convertible B Note 1999-2002, bearing interest of 8% per annum for the first six
months, 9% per annum for the next six months and 10% per annum
thereafter; interest due in arrears biannually on January 1 and July 1 400,000 400,000
Loan advance from a minority shareholder 1,000,000 -
Capital leases for vehicles, interest ranging from 10.2% - 16.9% with
maturities through 2004 202,018 184,375
------------ -----------
3,023,257 2,032,259
Less current maturities (1,075,604) (69,624)
------------ -----------
1,947,653 1,962,635
============ ===========
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Scheduled maturities of long-term obligation are as follows:
Year ending April 30, $
2002 1,075,604
2003 1,096,201
2004 104,614
2005 7,631
2006 739,207
--------------
3,023,257
==============
1) Convertible debentures
All corporate and individual investors are minority shareholders in the Company.
The A and B Convertible Notes 1999-2002 are held by individuals who are minority
shareholders in the Company. They are convertible into common shares at the rate
of one common share for every US$0.65 of outstanding principal Note converted
for the A Notes and one common share for every US$0.50 of outstanding principal
Note converted for the B Notes. Conversion will take place:
i) immediately prior to a Public Offering
ii) at the option of the investors for the B Notes and automatically for
the A Notes, upon new equity capital resulting in proceeds to the
Company of at least $4,000,000
iii) at the option of the investor giving 30 days notice to the Company.
Interest amounting to $115,424 has been accrued to April 30, 2001 (January 31,
2001 $99,241) in respect of the A and B Convertible Notes.
Any outstanding principal not converted or redeemed by the anniversary date,
which was August 16, 2000, will be redeemed at par plus interest in the year
2002 upon receipt of 30 days written notice from the Company or the Investors.
In consideration of the Investors advancing an aggregate of $1,000,000, the
Company caused Montague Limited, the principal shareholder, to transfer and
register in the name of the Investors, 225,000 shares of Common Stock of no par
value.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
2) Capital leases
The Company leases vehicles under noncancellable capitalized leases.
April 30, January 31,
2001 2001
(unaudited)
$ $
Vehicles 291,285 289,970
Less accumulated depreciation (81,459) (88,902)
------------- -----------
209,826 201,068
============= ===========
Scheduled maturities of minimum lease payments are as follows:
Period ending April 30, $
2002 68,483
2003 90,835
2004 87,656
-----------
246,974
Less amount representing interest 44,956
-------------
Present value of net minimum lease payments 202,018
=============
The scheduled net minimum lease payments to maturity are included in the
long-term obligation table above.
F-11
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE F - RELATED PARTY TRANSACTIONS
At April 30, 2001 David Morgan owed $5,518 ((pound)3,857) (January 31, 2001
$5,635 ((pound)3,857)) to the Company. The maximum liability during the period
amounted to $5,635 and the interest charge amounted to $Nil (January 31, 2001
$Nil).
The Company made purchases during the period under normal commercial terms from
Impakt Software Limited, a company owned by Paul O'Sullivan who was a director
of the Company during the year and who is a potential beneficiary of a
discretionary trust, the rest of which includes beneficial ownership of the
Company's common stock. The percentage of Mr. O'Sullivan's interest in the
assets of the trust has not been determined. Total purchases amounted to $27,172
in the three months to April 30, 2001 (Year to January 31, 2001 $85,800) and the
balance owed by the Company at April 30, 2001 was $Nil (January 31, 2001
$2,233).
NOTE G - CONTINGENT LIABILITY
A complaint was filed against the Company on February 23, 2001 relating to a
$100,000 demand promissory note dated May 1, 2000 and payable to the order of
GEM Advisors Inc (GEM). The note bears interest at a rate of 3% per annum and if
payment is not made upon demand, the rate increases to 15% per annum. GEM was
entitled to convert the unpaid balance and interest into shares of the Company's
Common Stock if payment was not made on demand. Demand on the note was made by
GEM on September 21, 2000, subsequently GEM sent the Company a conversion notice
on December 18, 2000 electing to convert the note into 179,643 shares of the
Company's Common Stock. The note was subsequently converted and a share
certificate was delivered to GEM, which GEM returned to the Company contending
that the timeliness of the delivery of the share certificate violated the terms
of the note agreements. Although the Company is unable to predict any outcome of
the litigation, it is the Company's position that GEM made a binding election to
convert unpaid amounts due under the note into shares of the Company's Common
Stock, and that the Company fully satisfied the obligations under the note.
NOTE H - SUBSEQUENT EVENTS
Since April 30, 2001, the Company has received a loan advance of $250,000 from
Vertical Investments Limited and $50,000 from Paysage Investments Limited,
companies in which Daniel Goldman, a non-executive director of this Company, has
an interest.
The Company's bank has agreed to a temporary $143,080 ((pound)100,000) increase
in the Company's short-term credit facility from May 30, 2001 to June 8, 2001.
The temporary increase will be reduced by $35,770 ((pound)25,000) per week until
June 29, 2001 at which time the short-term credit facility will revert to the
formal facility of $1,144,640 ((pound)800,000).
F-12
Item 2. Management's Discussion and Analysis or Plan of Operation
The following description of "Management's Plan of Operation"
constitutes forward-looking statements for purposes of the Securities Act of
1933, as amended (" the Securities Act"), and the Securities Exchange Act of
1934, as amended, and as such involves known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of INVU, Inc., a Colorado corporation (the "Company"), to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. The words "expect", "estimate",
"anticipate", "predict", "believe", "plan", "seek", "objective", and similar
expressions are intended to identify forward-looking statements. Important
factors that could cause the actual results, performance or achievement of the
Company to differ materially from the Company's expectations include the
following: (1) one or more of the assumptions or other cautionary factors
discussed in connection with particular forward-looking statements or elsewhere
in the Company's Form 10-KSB for the fiscal year ending January 31, 2001 or in
this Form 10-QSB prove not to be accurate; (2) the Company is unsuccessful in
increasing sales through its anticipated marketing efforts; (3) mistakes in cost
estimates and cost overruns; (4) the Company's inability to obtain financing for
general operations including the marketing of the Company's products; (5)
non-acceptance of one or more products of the Company in the marketplace for
whatever reason; (6) the Company's inability to supply any product to meet
market demand; (7) generally unfavorable economic conditions which would
adversely effect purchasing decisions by distributors, resellers or consumers;
(8) development of a similar competing product at a similar price point; (9) the
inability to successfully integrate one or more acquisitions, joint ventures or
new subsidiaries with the Company's operations (including the inability to
successfully integrate businesses which may be diverse as to type, geographic
area, or customer base and the diversion of management's attention among several
acquired businesses) without substantial costs, delays, or other problems; (10)
if the Company experiences labor and or employment problems such as the loss of
key personnel, inability to hire and/or retain competent personnel, etc.; and
(11) if the Company experiences unanticipated problems and/or force majeure
events (including but not limited to accidents, fires, acts of God etc.), or is
adversely affected by problems of its suppliers, shippers, customers or others.
All written or oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by such factors. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Notwithstanding the foregoing, the Company is not entitled to rely on the safe
harbor for forward looking statements under 27A of the Securities Act or 21E of
the Exchange Act as long as the Company's stock is classified as a penny stock
within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is
generally defined to be any equity security that has a market price (as defined
in Rule 3a51-1) of less than $5.00 per share, subject to certain exceptions.
The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto.
The Company develops, markets and sells fully scalable software (under
the brand name of INVU) for the electronic management of all types of
information and documents, such as forms, correspondence, literature, faxes,
e-mail, technical drawings, electronic files and web pages. Management believes
that the INVU software is simple, intuitive and cost effective, yet powerful.
The Company's objective is to establish itself as a leading global
supplier of information and document management software and services. For its
professional range of products, INVU Series 100, Series 200, ViewSafe, and
Series 2000 (formerly WEBFAST), the Company expects to target its marketing
efforts initially in the United Kingdom and the United States on departmental
users in organizations, distributors and resellers. INVU's SOHO market products,
"WebServant" and "FileServant," continue to be marketed via retail outlets and
the world-wide web. Management believes that this market has been, and continues
to be, useful for brand awareness, and has received inquiries for its
professional series from this activity. Nevertheless, the majority of the
Company's development and marketing resources are directed to the higher margin
small/medium size enterprise market, or "SME," and corporate professional series
of products.
In November 1999, Management decided to adopt a value added reseller
(VAR) model for sales of its professional range in the U.K. The Company is also
pursuing non-exclusive distributors for its products in other territories.
Management is extremely encouraged by the number and quality of the resellers
that have been recruited to date to sell the product. Each VAR is currently
charged an initial fee of approximately $3000 to become an accredited reseller,
with a recurring annual fee thereafter. Having recruited 82 resellers, the
Company has reviewed its reseller application criteria in order to provide end
users with improved service and support systems. All resellers must meet these
stringent requirements if they are to retain their INVU accreditation.
1
As is typical in a VAR based route to market, some resellers are
swifter to gain early sales success than others. INVU's experience is similar
with a small number of resellers gaining notable success soon after product
adoption. The INVU sales management team has implemented an aggressive marketing
and sales support program with its resellers, including joint seminars, direct
mail and joint telephone blitz weeks.
As a result of this program, many of the recruited resellers now have a
pipeline of end-user opportunities, which they are actively pursuing with the
involvement of Company sales personnel. The level of end user inquiries
continues to grow and these inquiries are now being converted into sales at a
steadily increasing rate. Even more satisfying is the increase in average number
of users per sale and the significant reduction in time between first contact
and order placement by end users. Management believes that this reflects the
Company's brand values of ease of use, high quality and price performance.
Together with the steady increase in adoption of the INVU range by SME
companies, Management is encouraged by the continuing level of interest from
large organizations with actual or anticipated orders being received from
Balfour Beatty (major UK construction group), The Wood Group (part of Tyco
Group), Lancashire Fire Brigade, River Island (Retail Clothing Group), Jules
Verne Travel and East Lancashire National Health Service Trust.
During the quarter ended April 30, 2001, sales were $302,000, which
represents an increase of 33% over the previous quarter. The Company received
further orders from Universal Music Group, a member of the global music, film
and leisure group. The total value of orders received to date from Universal
Music Group now exceeds $200,000 and further orders are anticipated throughout
the remainder of the fiscal year ended January 31, 2002 (the "Current Fiscal
Year"). INVU's technology integrates with Universal Music Group's JD Edwards
system, utilizing INVU's unique code free integration technology. Plans to
develop the project into a web-based solution are currently being developed.
In addition to Universal Music Group, the Company has received a number
of repeat orders from other existing end users. These include Fleming Offshore
Bank, Norweb (a major U.K. utility company), Sussex Police (a large law
enforcement agency in the south of U.K.), Siemens Traffic Controls Systems (a
subsidiary of Siemens Group), Glasgow Primary Care Trust (a major healthcare
provider), Crystal Holidays and YJL Construction. In addition, Management is
encouraged by the growing number of SME companies that are adopting INVU
products. This is seen as further vindication of the Company's overall strategy.
The Company's sales team continues to target these enterprises, and Management
believes that its expanding reseller and customer base will continue to generate
steadily increasing sales levels during the Current Fiscal Year.
Throughout the three months ended April 30, 2001, the Company has
continued to develop its software products.
The Company's professional range of products, INVU Series 100, Series
200 and ViewSafe, were first introduced in beta format in October 1999. Version
5.1 was released to distributors in May 2000, and the latest version 5.1.1 was
released to distributors in March 2001. Each subsequent version has built upon
the original premise of ease of use, functionality and price performance.
Enhancements have been added in the light of customer feedback and due to
technical advances achieved by the Company's development department.
The Company has successfully developed a highly sophisticated code free
integration tool for use with the INVU professional range of products. This
allows INVU products to be linked to any other Windows(TM) or Windows(TM)
emulation-based applications. For instance, an INVU scanned image of a supplier
invoice can be retrieved directly from an accounts software application. This is
achieved without the need for further software development and gives INVU
resellers the ability to add considerable value to the INVU product offering
without the difficulty and cost of hiring and managing development programmers.
Management believes the use of this product for the Universal Music Group
project and other projects has significantly reduced cost and installation
timescales for the Universal Music Group. The Company believes that this unique
product provides a significant competitive advantage when compared to other
information and document management technologies. During the quarter ended April
30, 2001, sales of the "codefree" module have been widespread and Management
expects this trend to continue throughout the Current Fiscal Year.
INVU Series 2000 (formerly INVU WEBFAST) continues to be developed.
This product allows global access to retrieve, view, create or edit, and file
information via the web. Management believes that this product will form the
basis of future developments for many of its existing and future end users. In
view of customer driven demands for various other unique features for the
existing professional range, Management now estimates that this product is
expected to be released to distributors in late 2001 or early 2002. However, a
web browser "view only" product is expected to be released in the third quarter
of the Current Fiscal Year. Management believes this technology will place INVU
in direct competition with
2
the world's most established document management solutions providers, but at a
significantly discounted price level.
Management anticipates the completion of development on a highly
sophisticated content addressable indexing and retrieval system during the
second quarter of the Current Fiscal Year. This development will allow access to
data and documents through intelligent frequency of word and phrase recognition
and semantic networking. Scanned images can be converted into text using
standard Optical Character Recognition technology, and even poor quality scanned
images can yield words and phrases that INVU's technology will retrieve. The
Company expects this product to further enhance filing and retrieval speeds for
organizations with large multiple data storage requirements across networks,
intranets, extranets and the internet.
Company software engineers have also successfully developed a
prototype information management internet service. Management believes that this
service will allow advanced internet information management within fully
encrypted secure databases. Management believes that individuals and
corporations will be able to store their documents on an INVU web site and
access and update them in real time, via password and pin number controls, from
anywhere in the world. Development work continues on this project, and
Management anticipates a beta release date later in 2001. Management will not
release this product publicly until a satisfactory security system can be
embedded.
INVU's development team has produced a prototype module, which allows
speech files to be stored within the INVU central database. As with all records
stored within INVU, these can be attached to other corresponding files. Using
advanced compression techniques, this application is capable of storing 2,800
hours of recorded sound on a standard 40 gigabyte hard disk. With the addition
of a "raid card" attached to a 10 disk storage system, end users can obtain
28,000 hours of storage space for approximately $2,000. Management believes this
application has widespread appeal within many different environments such as
call centers, patient records in hospitals, oral statements for lawyers, police
interviews, etc. The anticipated release date for this product is the second
quarter of this Current Fiscal Year.
In view of the Company's improving financial position and its objective
of reaching a monthly break-even during the third quarter of the Current Fiscal
Year, Management has reviewed its resource requirements for the remainder of the
Current Fiscal Year. Management recognizes that additional technical staff will
be required in order to fulfill the Company's ambitious product development
plans. There is also a requirement for further sales support personnel to deal
with the ever-increasing rate of sales inquiries. Both these personnel issues
have been addressed, and new staff are currently being recruited.
Throughout the quarter ended April 30, 2001, Management has continued
to develop relationships with potential investors. This has resulted in
agreements to provide additional funding as described in "Financing Management's
Plan of Operation."
Results of Operations
The following is a discussion of the results of operations for the
three months ended April 30, 2001, compared with the three months ended April
30, 2000, and changes in financial condition during the three month period ended
April 30, 2001.
Net sales for the three months ended April 30, 2001 were $302,016,
which compares to $12,943 sales for the three months ended April 30, 2000. The
Company's strategy to sell its professional range of products via VARs (value
added resellers) continues to be vindicated with sales increasing by 33% when
compared to the fourth quarter of the fiscal year ended January 31, 2001. The
INVU sales management team has implemented an aggressive marketing and sales
support program with its resellers, including joint seminars, direct mail and
joint telephone blitz weeks. As a result of this program, many of the recruited
resellers now have a pipeline of end-user opportunities, which they are actively
pursuing with the involvement of Company sales personnel. The level of end user
inquiries continues to grow, and these inquiries are now being converted into
sales at a steadily increasing rate.
The net loss for the three months ended April 30, 2001 was $282,863,
which is significantly less than the net loss for the corresponding period in
2000 of $523,517 due to increased sales of $289,073. As compared with the three
months ended April 30, 2000, the Company incurred increased selling and
distribution costs of $457, research and development costs of $50,327, and
production costs of $16,832. However, administrative costs were $38,589 less
than the corresponding period ended April 30, 2000.
Selling and distribution expenditures reflect the Company's continued
investment in personnel and sales and
3
marketing activities, including trade shows, product launch and advertising
costs, but with an emphasis on the Company's professional range of products. The
Company continues to invest heavily in the development of existing and new
products, and, therefore, has increased expenditures in this area over the last
year. The increases in administrative expenditure during the fiscal year ended
July 31, 2001 have evened out, and the Company's administrative infrastructure
is more suitably matched to its scale of operations. Production costs per unit
have also fallen significantly due to economies of scale, mass production
techniques and improved supply terms.
In the three month period ended April 30, 2001, the Company incurred
net interest expense of $50,709 compared with net interest expense of $31,317
for the three month period ended April 30, 2000. This increase is entirely due
to increased bank facilities. Management expects these costs to fall as soon as
additional equity investment funding is secured. Interest costs will also
decrease when net revenues are adequate to generate net cash inflows, which
Management predicts will occur in quarter three of the Current Fiscal Year.
The tax rates for the periods in question are zero due to a net loss in
each period.
The total current assets of the Company were $643,018 at April 30,
2001, an increase of $186,681 compared to $456,337 at January 31, 2001. Working
capital was negative $2,508,621 as of April 30, 2001, compared with negative
$2,256,025 as of January 31, 2001. These changes are mainly due to increases in
accounts receivable and prepaid expenses, and decreases in accounts payable and
short term credit facilities.
Total assets of the Company were $959,288 at April 30, 2001, an
increase of $191,006 compared to $768,282 at January 31, 2001. This is
attributable to increases in fixed assets of $4,325 and current assets of
$186,681.
The total current liabilities of the Company increased by $439,277 from
$2,712,362 at January 31, 2001 to $3,151,639 at April 30, 2001. The change in
current liabilities is due to decreases in accounts payable of $192,160 and
short term credit facilities of $388,495 and increases in current maturities of
long-term obligations of $1,005,980 and accrued liabilities of $13,952. This,
together with the decrease in long-term obligations less current maturities,
reflects the replacement of short-term credit facilities with a short term
unsecured loan from a minority shareholder of the Company of $1,000,000 and the
subsequent repayment of accounts payable. See "Financing Management Plan of
Operation." Long-term obligations less current maturities were $1,947,653 at
April 30, 2001 compared to $1,962,635 at January 31, 2001.
Total stockholders' equity decreased by $233,289 during the three month
period ended April 30, 2001 from a deficit of $3,906,715 at January 31, 2001 to
a deficit of $4,140,004 at April 30, 2001. The Company continues to evaluate
various financing options, including issuing debt and equity to finance future
development and marketing of products during the transitional period between
development and operational stages.
Financing Management's Plan of Operation
The Company remains committed to raising the necessary funds and is
engaged in or presently pursuing the following financing transactions.
As of January 31, 1999, the Company had agreed to borrow $656,000 at an
annual interest rate of 8% by way of a secured short-term loan. In August 1999,
the Company raised $1,000,000 by way of a private placement, the proceeds of
which were used, among other things, to pay off the short-term loan described
above. In March 2000, the Company received a non-interest unsecured loan of
$571,500 from an individual with no stated maturity date. Since April 30, 2001,
the Company has received loan advances of $250,000 from Vertical Investments
Limited and $50,000 from Paysage Investments Limited, both companies in which
Daniel Goldman, a non-executive director of the Company, has an interest. No
stated maturity date or interest rate has been established for the advances. In
addition, the Company has a $1,144,640 short-term credit facility with an annual
interest rate of 7.5% with an English bank. This facility matures on July 31,
2001. The Company believes that at such maturity date the facility will be
extended. The Company's bank has agreed to temporary borrowings of $286,160 in
excess of the formal facility and to reduce this figure by $143,080 on May 30,
2001, with further weekly reductions of $35,770 commencing on June 8, 2001 and
finishing on June 29, 2001 when the facility will revert to $1,144,640.
Management made the initial payment on May 30 and fully expects to comply with
this schedule. The credit facility is collateralized by all assets of the
Company and a corporate guarantee given by Vertical Investments Limited, a
company in which Daniel Goldman, a non-executive director of this Company, has
an interest. The amount drawn against the facility at April 30, 2001 was
$1,294,480.
In February 2001, Goldman Investments Limited, an entity in which
Daniel Goldman, a non-executive director of
4
the Company, has an interest, lent the Company $1,000,000. Although the specific
terms of the loan, including the interest rate and maturity date, have not been
finalized, to the extent that the loan contains a conversion feature, the
Company may be required to recognize an accounting charge equal to the amount by
which the aggregate market value of the Common Stock into which the loan could
be converted exceeds the value of the loan. Approximately $500,000 of the loan
was used to reduce the amount owed by the Company under the short-term credit
facility described above with the remaining $500,000 used for working capital.
The Company is in the process of conducting an offering of shares of
Company Common Stock pursuant to an exemption under the Securities Act. Any
securities offered in such placement will not be or will not have been
registered under the Securities Act, and thus may not be offered or sold in the
United States absent registration or an applicable exemption from registration
requirements.
Goldman Investments Limited may elect to have the $1,000,000 loan
considered as part of the placement and thus counted towards the $2 million
(prior to commissions and other expenses) that the Company is seeking to raise
in the placement.
Management estimates that the placement, if consummated, would fulfill
the Company's capital requirements, including the payment of any loan
obligations described above, for a period up to the point at which net sales
revenues could sustain the Company's day to day operations. Management believes
that, subject to this additional investment, monthly break-even will be achieved
in the third fiscal quarter of the Current Fiscal Year. There can, however, be
no assurance that the above transaction will be consummated, that the Company
will be able to achieve monthly break-even in the third fiscal quarter of the
Current Fiscal Year, or that additional debt or equity financing will be
available, if and when needed, or that, if available, such financing could be
completed on commercially favorable terms. Failure to obtain additional
financing if and when needed, could have a material adverse affect on the
Company's business, results of operations and financial condition. Please refer
to Note B of the Consolidated Financial Statements in conjunction with this
paragraph regarding the Company's ability to continue as a going concern.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In 1998, the Company filed an application for trademark registration of
its "INVU" mark in the United Kingdom. This application was opposed by France
Cables et Radio, who challenged the Company's right to protect the "UNVU" mark
and asked for a denial of registration.
The opposition case with Frances Cable began on September 3, 1998 and
was assigned case number 48955. Frances Cable asserted that there was a
likelihood of confusion with its own tradename. At a hearing on February 20,
2001, the hearing officer determined that the marks of Frances Cable and the
Company are sufficiently different such that there is no likelihood of confusion
between the two. Frances Cable did not appeal the decision.
Please see Part I. Item 3. of the Company's 10-KSB for the fiscal year
ended January 31, 2001 for a discussion of other existing litigation involving
the Company.
Item 2. Changes in Securities.
None
Item 3. Default Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
5
Item 6. Exhibits and Reports on Form 8-K.
None
EXHIBITS
10.1 Overdraft Facility, dated October 19, 2000, by and between the Company
and the Bank of Scotland (incorporated by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 2000).
10.2 Corporate Guarantee, dated October 18, 2000, by and among the Company,
Invu Plc, Invu Services Limited, Invu International Holdings Limited
and the Bank of Scotland (incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 2000).
10.3 Debenture, dated October 13, 2000, by and between Invu International
Holdings Limited and the Bank of Scotland (incorporated by reference to
Exhibit 10.3 of the Company's Quarterly Report on Form 10-QSB for the
quarter ended July 31, 2000).
6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Quarterly Report to be signed on
its behalf by the undersigned thereunto duly authorized.
INVU, INC.
(Issuer)
Date: June 5, 2001 By: /s/ David Morgan
---------------------------------
David Morgan, President &
Chief Executive Officer
(Principal Executive Officer)
Date: June 5, 2001 By: /s/ John Agostini
---------------------------------
John Agostini, Vice President-
Chief Financial Officer &
Secretary
(Principal Financial Officer)
S-1
INDEX TO EXHIBITS
(a) Exhibits
Exhibit
Number Description of Exhibit
10.1 Overdraft Facility, dated October 19, 2000, by and between the Company
and the Bank of Scotland (incorporated by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 2000).
10.2 Corporate Guarantee, dated October 18, 2000, by and among the Company,
Invu Plc, Invu Services Limited, Invu International Holdings Limited
and the Bank of Scotland (incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 2000).
10.3 Debenture, dated October 13, 2000, by and between Invu International
Holdings Limited and the Bank of Scotland (incorporated by reference to
Exhibit 10.3 of the Company's Quarterly Report on Form 10-QSB for the
quarter ended July 31, 2000).
E-1