U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB/A
Amendment No. 2
[x] Annual report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934 for the fiscal year ended January 31, 2000
[ ] Transition report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the transition period from _____________ to
_____________
Commission File Number 000-22661
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INVU, INC.
(Name of Small Business Issuer in Its Charter)
Colorado 84-1135638
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
The Beren
Blisworth Hill Farm
Stoke Road
Blisworth Northamptonshire NN7 3DB
--------------------------- ---------
(Address of Principal Executive Offices) (Zip code)
011 44 1604 859 893
--------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code.)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
------------------- on Which Registered
NONE ---------------------
N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
---------------------------
(Title of class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for past 90 days.
Yes x No
--------------------- -----------------------
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB/A or any amendment to
this Form 10-KSB/A. [ ]
State issuer's revenues for its most recent fiscal year: $15,754
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of May 10, 2000, was approximately
$19,049,617.50. For purposes of this computation, all executive officers,
directors and 10% stockholders were deemed affiliates. Such a determination
should not be construed as an admission that such executive officers, directors
or 10% stockholders are affiliates.
As of May 10, 2000, there were 30,206,896 shares of the common stock, no par
value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format: Yes No x
----------- ----------
Part II Item 6 (except for the material under the heading "Financing
Management's Plan of Operation") is amended as follows:
Item 6. Management's Discussion and Analysis or Plan of Operations
The following description of "Management's Plan of Operation"
constitutes forward-looking statements for purposes of the Securities Act and
the Exchange Act, and as such involves known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of 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", "believes", "plan", "seek",
"objective", "will" 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 this Form 10-KSB/A 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 that 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 that
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 that 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 software (under the brand name
of INVU) for the electronic management of many types of information and
documents such as forms, correspondence, literature, faxes, 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 supplier of
information and document management software and services in the world. 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. For its personal user
(SOHO-small office / home office) market the Company envisages its marketing
will mainly target retailers for INVU WebServant and FileServant.
The Company's first product, INVU SOLO, was released to distributors in
December 1998 and sales to the SOHO market commenced in January 1999. Management
was satisfied with the initial response to this product, but in view of comments
and advice received from retailers they have decided to re-launch more suitably
packaged and targeted products for the personal user market. Two new products
were released to retailers in March 2000. The first, "WebServant," enables web
users to quickly and easily build a personal library from the internet with a
competitive price of less than $50. This product's key features are the simple
downloading, storing and organisation of web pages thus enabling on or off line
browsing. The second product, "FileServant," is a re-launch of the original INVU
SOLO product with additional features included including the aforementioned web
technology.
The first production release of INVU Series 100, Series 200 (formerly
INVU PRO), and ViewSafe (collectively known as "the professional range of
products") was made on October 5, 1999 to an exclusive distributor in the United
Kingdom, and sales to end users were anticipated in October 1999. However, the
exclusive distributor went into administrative receivership in October 1999
before any product orders had been fulfilled. Although no significant financial
loss has accrued to the Company, the closure of this distribution outlet has
meant a change in sales and marketing strategy in the United Kingdom. In
response, Management has decided to directly recruit resellers while also
pursuing non-exclusive distributors for the products. The number of early
resellers sign-ups has been encouraging.
As a consequence of initial marketing activities associated with the
launch of the Company's professional range of products, many end user enquiries
have been received. These enquiries are now being pursued by our expanding team
of sales personnel. Although the loss of the Company's U.K. distributor has
caused a delay in sales revenues, Management is confident that its direct sales
team and newly recruited resellers will provide positive results during the
second half of year 2000.
INVU Series 2000 (formerly INVU WEBFAST), continues to be developed and
Management now estimates that this product will be released in late 2000.
INVU software engineers have also successfully developed a prototype
information management internet service. This service will allow advanced
internet information management within fully encrypted secure databases.
Individuals and corporations will be able to store their documents on an INVU
web site and access them via password controls from anywhere in the world.
Development work continues on this project and Management anticipates a release
date later in 2000.
Management is delighted with the contribution made over the last year
by its non-executive directors Tom Maxfield and Daniel Goldman. They are also
pleased with the appointment of David Andrews as a further non-executive
director on February 29, 2000. Management expects the ex Irish Foreign Minister
will add significant experience to the board particularly with regard to the
company's global aspirations.
Results of Operations
The following is a discussion of the results of operations for the year
ended January 31, 2000, compared with the year ended January 31, 1999, and
changes in financial condition during the year ended January 31, 2000.
INVU, Inc. (formerly Sunburst Acquisitions I, Inc.) engaged in no
significant operations prior to the Share Exchange Agreement with INVU PLC on
August 31, 1998.
The Company has restated its financial statements for the year ended
January 31, 2000 to reflect the beneficial conversion feature for the
convertible debentures issued on August 23, 1999. At that date, the aggregate
market value of the Common Stock into which the debt could be converted exceeded
the value of the debt by $723,077.
The Company has also restated its financial statements for the year
ended January 31, 2000 to reflect the credit enhancements of $630,000 provided
to lenders by a major shareholder during February 1999 and August 1999. The
shareholder transferred 2,400,000 shares of Common Stock to certain lenders to
help obtain for the Company $656,000 of debt in February 1999 and transferred
225,000 shares of Common Stock to the convertible debenture holders in August
1999 to help obtain for the Company the $1 million convertible debentures. A
value of $630,000 was ascribed to the shares based upon the allocation of the
relative fair values of Common Stock. This amount was recorded as a discount to
the debt and was amortized as interest expense over the estimated life of the
debt.
Accordingly, common stock and accumulated deficit during the
development stage have been increased by $1,353,077 on the January 31, 2000
balance sheet and interest, net and net loss have been increased by $1,353,077
and net loss per common share has increased by 4 cents per share on the
Company's Statements of Operations for the year ended January 31, 2000 and for
the period February 18, 1997 (date of inception) to January 31, 2000. These
adjustments have no effect on loss from operations, cash flows or the deficit in
stockholders' equity.
Net sales for fiscal year 2000 were $15,754, which compares to $8,267
sales for fiscal 1999. The low level of sales reflects the continued development
stage of the business and relates to sales of INVU SOLO and initial sales of
INVU Series 100 and Series 200 to end users. The net loss in fiscal 2000 was
($2,786,081), which significantly exceeds the net loss of fiscal 1999 of
($694,809). The fiscal 2000 net loss was due to: increased production,
distribution, research and development, and administrative expenses (including
expenses incurred in complying with U.S. securities laws and other expenses
relating to public company requirements) of $1,369,771, which reflected the
Company's investment in product development, marketing support, and
administrative infrastructure, together with costs associated with the various
financing transactions undertaken during the year. As the Company neared the
completion of its development stage, its attention and resources have been
diverted towards sales and marketing and administrative collateral. An entire
sales team has been hired, including field sales, sales support and technical
support personnel. Management plans to greatly increase marketing expenditure to
create greater brand awareness. New premises have been leased as from March 19,
2000 with additional IT and administrative infrastructure. These additional
resources have affected operating expenses in the year ended January 31, 2000
but Management expects a considerably greater impact in the year to end January
31, 2001.
In fiscal 2000, the Company incurred net interest expense of $1,432,064
compared with net interest expense of $6,419 for fiscal 1999. This increase in
interest expense was due to the beneficial conversion feature for the
convertible debentures issued on August 23, 1999 amounting to $723,077 and the
credit enhancements of $630,000 provided to lenders by a major shareholder
during February 1999 and August 1999. Increased bank and loan interest was also
incurred in fiscal 2000 due to increased bank loan borrowings, and interest
associated with the Second Financing Transaction. See "Item 1. Description of
Business - First Financing Transaction and Second Financing Transaction."
The tax rates for the years 2000 and 1999 are zero due to a net loss in
each period.
The total current assets of the Company were $61,416 at January 31,
2000, a decrease of $96,062, compared to $157,478 at January 31, 1999. Working
capital was negative $1,750,749 as of January 31, 2000, compared with negative
$272,080 as of January 31, 1999. These changes are due to the addition of
short-term credit facilities in 2000 and an increase of current maturities of
long-term obligations, following the procurement of substantial additional loan
funding.
Total assets of the Company were $288,175 at January 31, 2000, an
increase of $50,936, compared to $237,239 at January 31, 1999. The difference is
mainly attributable to the purchase of fixed assets and reduction in
inventories.
The total current liabilities of the Company increased by $1,382,607
from $429,558 at January 31, 1999 to $1,812,165 at January 31, 2000. Long term
liabilities were $525,777 at January 31, 2000 compared to $422,193 at January
31, 1999. The current and long term liabilities increases are attributable to
debt incurred in order to finance the development of the products and the
infrastructure of the business.
Total stockholders' equity decreased by $1,435,255 during the year
ended January 31, 2000 from a deficit of $614,512 at January 31, 1999 to a
deficit of $2,049,767 at January 31, 2000 as a result of the net loss for the
year and an increase of $1,353,077 in the value of common stock as a result of
the beneficial conversion feature of $723,077 for the convertible debentures and
$630,000 for credit enhancements provided to lenders by a major shareholder. The
Company is evaluating various financing options, including issuing debt and
equity to finance future development, marketing of products, and strategic
acquisitions now that its development stage is ending and it's operational stage
will soon commence.
Item 7. Financial Statements
Filed herewith beginning on page F-1 are the audited financial
statements of the Company.
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
INVU, INC
AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
January 31, 2000 and 1999
F-1
CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-4
CONSOLIDATED STATEMENTS OF OPERATIONS F-5
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors INVU, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of INVU, Inc. (a
development stage enterprise) and Subsidiaries as of January 31, 2000 and 1999
and the related consolidated statements of operations, deficit in stockholders'
equity and cash flows for the years ended January 31, 2000 and 1999 and for the
period February 18, 1997 (date of inception) to January 31, 2000. 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 audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit 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 assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements 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 consolidated financial position of INVU, Inc. and
Subsidiaries as of January 31, 2000 and 1999 and the consolidated results of
their operations and their consolidated cash flows for the years ended January
31, 2000 and 1999 and for the period February 18, 1997 (date of inception) to
January 31, 2000 in conformity with generally accepted accounting principles in
the United States of America.
As discussed in Note J, the Company has restated its financial statements for
the year ended January 31, 2000.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has experienced losses, is not generating cash from operations and
has a deficit in stockholders' equity. These circumstances raise substantial
doubt about the Company's ability to continue as a going concern. The Company's
plans with respect to these matters, including plans to continue funding its
development expenses, are described in Note C. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Grant Thornton
Northampton, England
May 12, 2000 (except for Note J as to which the date is May 15, 2001)
F-3
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
January 31, January 31,
2000 1999
As restated
$ $
ASSETS
Current assets
Accounts receivable:
Trade, net 1,916 615
VAT recoverable and other 22,000 11,331
Inventories 25,110 126,590
Prepaid expenses 12,390 18,942
------------------------------------
Total current assets 61,416 157,478
------------------------------------
Equipment, furniture and fixtures
Computer equipment 42,450 26,217
Vehicles 226,348 65,046
Office furniture and fixtures 31,096 29,938
------------------------------------
299,894 121,201
Less accumulated depreciation 73,135 41,440
------------------------------------
226,759 79,761
------------------------------------
288,175 237,239
====================================
LIABILITIES
Current liabilities
Short-term credit facility 413,247 66,146
Current maturities of long-term obligations 1,074,185 209,517
Accounts payable 126,204 74,773
Accrued liabilities 198,529 79,122
------------------------------------
Total current liabilities 1,812,165 429,558
Long-term obligations, less current maturities 525,777 422,193
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
- 30,206,896 shares 1,641,432 288,355
Accumulated other comprehensive income 6,844 9,095
Accumulated deficit during the development stage (3,698,043) (911,962)
------------------------------------
(2,049,767) (614,512)
------------------------------------
288,175 237,239
====================================
The accompanying notes are an integral part of these financial statements.
F-4
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
Feb 18, 1997
(date of
inception) to
Jan 31, 2000 Jan 31, 1999 Jan 31, 2000
As restated As restated
$ $ $
Revenues 15,754 8,267 25,993
---------------- --------------- ------------------
Expenses:
Production cost 106,979 65,188 215,158
Selling and distribution cost 250,995 81,421 372,594
Research and development cost 210,219 128,959 387,125
Administrative costs 801,578 422,581 1,308,931
---------------- --------------- ------------------
Total operating expenses 1,369,771 698,149 2,283,808
---------------- --------------- ------------------
Operating loss (1,354,017) (689,882) (2,257,815)
Other income (expense)
Interest, net (1,432,064) (6,419) (1,442,591)
Other - 1,492 2,363
---------------- --------------- ------------------
Total other expense (1,432,064) (4,927) (1,440,228)
---------------- --------------- ------------------
Loss before income taxes (2,786,081) (694,809) (3,698,043)
---------------- --------------- ------------------
Income taxes - - -
---------------- --------------- ------------------
Net loss (2,786,081) (694,809) (3,698,043)
================ =============== ==================
Weighted average shares outstanding:
Basic and Diluted 30,206,896 30,206,896 30,206,896
================ =============== ==================
Net loss per common share:
Basic and Diluted (0.09) (0.02) (0.12)
================================ ==================
The accompanying notes are an integral part of these statements.
F-5
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY AS RESTATED
Accumulated
other
Preferred stock Common stock Accumulated comprehensive
Shares Amount Shares Amount deficit income
$ $ $ $
Issuance of common stock ($1.64 per - - 176,000 288,640 - -
share)
Reclassification of $1.64 common - - (176,000) (288,640) - -
stock
Issuance of no par common stock in
connection with reverse acquisition - - 28,696,552 288,355 - -
Issuance of common stock ($0.50 per - - 1,510,344 750,000 - -
share)
Reverse acquisition transaction costs - - - (750,000) - -
Comprehensive income:
Foreign currency translation adjustment - - - - - 440
Net loss during the period - - - - (217,153) -
Total comprehensive income
----------------------------------------------------------------------------- ----------------
Balance at January 31, 1998 - - 30,206,896 288,355 (217,153) 440
Comprehensive income:
Foreign currency translation adjustment - - - - - 8,655
Net loss during the year - - - - (694,809) -
Total comprehensive income
----------------------------------------------------------------------------- ---------------
Balance at January 31, 1999 - - 30,206,896 288,355 (911,962) 9,095
Beneficial conversion feature of - - - 723,077 - -
convertible debentures
Credit enhancement provided by the - - - 630,000 - -
major shareholder
Comprehensive income:
Foreign currency translation adjustment - - - - - (2,251)
Net loss during the year as restated - - - - (2,786,081) -
Total comprehensive income as restated
----------------------------------------------------------------------------- --------------
Balance at January 31, 2000 as restated - - 30,206,896 1,641,432 (3,698,043) 6,844
============================================================================= ==============
Table continued on following page.
Table continued from previous page.
Comprehensive
Total income
$ $
Issuance of common stock ($1.64 per 288,640
share)
Reclassification of $1.64 common (288,640)
stock
Issuance of no par common stock in
connection with reverse acquisition 288,355
Issuance of common stock ($0.50 per 750,000
share)
Reverse acquisition transaction costs (750,000)
Comprehensive income:
Foreign currency translation adjustment 440 440
Net loss during the period (217,153) (217,153)
-----------
Total comprehensive income (216,713)
------------- ===========
Balance at January 31, 1998 71,642
Comprehensive income:
Foreign currency translation adjustment 8,655 8,655
Net loss during the year (694,809) (694,809)
------------
Total comprehensive income (686,154)
-------------- ============
Balance at January 31, 1999 (614,512)
Beneficial conversion feature of 723,077
convertible debentures
Credit enhancement provided by the 630,000
major shareholder
Comprehensive income:
Foreign currency translation adjustment (2,251) (2,251)
Net loss during the year as restated (2,786,081) (2,786,081)
-------------
Total comprehensive income as restated (2,788,332)
--------------- =============
Balance at January 31, 2000 as restated (2,049,767)
===============
The accompanying notes are an integral part of these statements.
F-6
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
Feb 18, 1997
(date of
inception) to
Jan 31, 2000 Jan 31, 1999 Jan 31, 2000
As restated As restated
$ $ $
Net cash flows used in operating activities
Net loss during the period (2,786,081) (694,809) (3,698,043)
Interest expense relating to beneficial
conversion feature 723,077 - 723,077
Interest expense relating to debt discount 630,000 - 630,000
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 42,286 29,390 84,105
Accounts receivable (11,966) 19,247 (23,892)
Inventories 98,702 (128,134) (28,198)
Prepaid expenses 6,243 (8,342) (12,744)
Accounts payable 51,138 65,953 127,496
Accrued liabilities 118,886 69,878 200,357
------------------ ---------------- ------------------
Net cash used in operating activities (1,127,715) (646,817) (1,997,842)
------------------ ---------------- ------------------
Cash flows used in investing activities:
Acquisitions of property and equipment (46,143) (36,676) (133,253)
Proceeds from sale of vehicles 19,356 - 19,356
------------------ ---------------- ------------------
Net cash used in investing activities (26,787) (36,676) (113,897)
------------------ ---------------- ------------------
Cash flows provided by financing activities:
Short-term credit facility 343,613 66,953 414,518
Borrowings received from notes payable 1,661,472 1,102,884 2,764,356
Repayment of borrowings (833,091) (523,265) (1,323,587)
Principal payments on capital lease (15,857) (8,911) (33,234)
Proceeds from issuance of stock - - 288,640
------------------ ---------------- ------------------
Net cash provided by financing activities 1,156,137 637,661 2,110,693
------------------ ---------------- ------------------
Effect of exchange rate changes on cash (1,635) 835 1,046
------------------ ---------------- ------------------
Net decrease in cash - (44,997) -
Cash at beginning of period - 44,997 -
------------------ ---------------- ------------------
Cash at end of period - - -
=================== =============== ==================
Supplemental disclosure of
cash flow information:
Cash paid during the period for:
Interest 79,000 6,100 89,200
Income taxes - - -
F-7
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 year ended January 31, 2000 as restated. These items are non-cash
transactions.
The accompanying notes are an integral part of these statements.
F-8
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
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. Proforma information is not presented
since this combination is not considered to be a business combination. 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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1 Development stage company
The Company (a development stage company) is in the development stage
as defined by Statement of Financial Accounting Standard No. 7,
"Accounting and Reporting by Development Stage Enterprises" (SFAS No.
7).
F-9
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2 Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries INVU Plc, Services and Holdings. All
significant intercompany accounts and transactions have been eliminated
in consolidation.
3 Revenue recognition
The Company recognizes revenue in accordance with the provisions of
Statement of Position 97-2 "Software Revenue Recognition" (SOP 97-2)
issued by the American Institution of Certified Public Accountants
("AICPA"). Fees for services and maintenance are generally charged to
customers separately from the license of software. Revenues from
license fees are recognized upon product shipment when fees are fixed,
collectability is probable and the Company has no significant
obligations remaining under the licensing agreement. In instances where
a significant vendor obligation exists, revenue recognition is delayed
until such obligation has been satisfied.
For those license agreements which provide the customers the right to
multiple copies in exchange for guaranteed amounts (including non
refundable advance royalties), license revenues are recognized at
delivery of the product master or the first copy. Per copy royalties on
sales which exceed the guarantee are recognized as earned.
Services revenue consists of training and consulting for which revenue
is recognized when the services are performed. Maintenance revenue
consists of ongoing support and maintenance and product updates for
which revenue is deferred and recognized ratably over the term of the
contract, normally twelve months.
In December 1998, the AICPA issued Statement of Position 98-9
"Modification of SOP 97-2, Software Revenue Recognition, With Respect
to Certain Transactions" (SOP 98-9). SOP 98-9 amends SOP 97-2 to
require recognition of revenue using the residual method for certain
multiple-element arrangement transactions entered into in fiscal years
beginning after March 15, 1999.
The Company has assessed the effects of complying with SOP 98-9 and
concluded that there is no significant impact to date on its financial
position or results of operations.
F-10
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4 Software development costs
Software development costs are included in research and development and
are expensed as incurred. Statement of Financial Accounting Standard
No. 86 "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed" (SFAS No. 86) requires the
capitalization of certain software development costs once technological
feasibility is established, which the Company defines as establishment
of a working model. The working model criteria is used because the
Company's process of creating software (including enhancements) does
not include a detailed program design. To date, the period between
achieving technological feasibility and the general availability of
such software has been short and software development costs qualifying
for capitalization have been insignificant. Accordingly, the Company
has not capitalized any software development costs.
5 Equipment, furniture and fixtures
Equipment, furniture and fixtures are stated at cost. Depreciation is
provided in amounts sufficient to relate the cost of depreciable assets
to operations over their estimated service lives. The straight line
method of depreciation is followed for financial reporting purposes.
The useful lives are as follows:
Years
Computer equipment 4
Vehicles 4
Office furniture and fixtures 4
Expenditures for repairs and maintenance are charged to expense as
incurred and additions and improvements that significantly extend the
lives of assets are capitalized. Upon sale or retirement of depreciable
property, the cost and accumulated depreciation are removed from the
related accounts and any gain or loss is reflected in the results of
operations.
F-11
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6 Cash
For the purpose of the consolidated statements of cash flows, the
Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
7 Inventories
Inventories consist of licensed goods and goods for resale and are
stated at the lower of FIFO (first-in, first-out) cost or market.
8 Advertising costs
Advertising costs of $142,707, $46,336 and $206,136 for the years ended
January 31, 2000 and 1999, and for the period February 18, 1997 (date
of inception) to January 31, 2000, respectively, have been charged to
expense as incurred.
9 Income taxes
The Company utilizes the liability method of accounting for income
taxes. Under the liability method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected
to reverse. An allowance against deferred tax assets is recorded when
it is more likely than not that such tax benefits will not be realized.
10 Use of estimates in financial statements
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-12
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11 Net loss per share
The Company has adopted Statement of Financial Accounting Standard No.
128, "Earnings Per Share" (SFAS No. 128).
The Company's basic net loss per share amount has been computed by
dividing net loss by the weighted average number of outstanding common
shares. For the years ended January 31, 2000 and 1999 no common stock
equivalents were included in the computation of diluted net earnings
per share. Convertible debentures excluded from the calculation of loss
per share because their effect is anti-dilutive amounted to 1,723,077
common shares for the year ended January 31, 2000.
12 Fair Value of Financial Instruments
The Company's financial instruments consists of cash, trade
receivables, borrowings, trade payables and accrued liabilities. The
carrying amount of these instruments approximate the fair values
because of their short maturity. The fair value of non-current
financial assets and liabilities are estimated to approximate carrying
value based on considerations of risk, current interest rates and
remaining maturities.
13 Foreign currency translation
The functional currency of the Company and its Subsidiaries is the
British pound sterling. The consolidated financial statements are
presented in US dollars using the principles set out in Statement of
Financial Accounting Standard No. 52 "Foreign Currency Translation"
(SFAS No. 52). Assets and liabilities are translated at the rate of
exchange in effect at the close of the period. Revenues and expenses
are translated at the weighted average of exchange rates in effect
during the period. The effects of exchange rate fluctuations on
translating foreign currency assets and liabilities into US dollars are
included as part of the accumulated other comprehensive income
component of stockholders' equity.
F-13
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14 Recently Issued Accounting Standards
Statement of Financial Accounting Standard No. 133 (SFAS 133), as
modified by SFAS 137 "Accounting for Derivative Investments and Hedging
Activities - Deferral of the Effective Date of FASB Statement 133,"
requires entities to recognize all derivatives in their financial
statements as either assets or liabilities measured at fair value. SFAS
133 also specifies new methods for accounting for hedging transactions,
prescribes the items and transactions that may be hedged, and specifies
detailed criteria to be met to qualify for hedge accounting. SFAS 133,
as modified by SFAS 137, is effective for fiscal years beginning after
June 15, 2000. The Company does not believe that the adoption of SFAS
133 will have a material impact on its financial statements.
NOTE C - GOING CONCERN
The Company's liabilities exceed its assets and the Company has
incurred losses from operations primarily as a result of treating
virtually all development expenses since inception as current operating
expenses. The Company is not generating cash from operations.
Operations to date have been funded principally by equity capital and
borrowings. The Company plans to continue to fund its development
expenses through additional capital raising activities, including one
or more offerings of equity and/or debt through private placements
and/or public offerings. The Company's ability to continue to develop
its infrastructure depends on its ability to raise other additional
capital. The financial statements do not include any adjustment that
might result from the outcome of this uncertainty.
The Company is still building its operational infrastructure.
Additional capital raised by the Company, if any, will be used for this
purpose and to fund its planned launch of operations within the United
Kingdom.
F-14
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - INVENTORIES
Inventories consist of the following:
January 31, January 31,
2000 1999
$ $
Licensed goods 25,110 118,080
Goods for resale - 8,510
------------ ---------------
25,110 126,590
============ ===============
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. Licenses amounting to $82,160
have been charged to profits in the year as the Company believes it unlikely to
utilize this proposition of licenses before their expiry in June 2000.
NOTE E - SHORT-TERM CREDIT FACILITY
The Company has a $486,000 ((pound)300,000) (1999: $65,600 ((pound)40,000)), 10%
short-term credit facility with an English bank. The credit facility is
collateralized by all assets of the Company and a limited personal guarantee by
a director of the Company. The amount drawn against the facility at January 31,
2000 was $413,247 ((pound)255,091), (1999 $66,146 ((pound)40,333)). The amount
drawn is payable on demand at the bank's discretion.
F-15
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F - LONG-TERM OBLIGATIONS
Long-term obligations at January 31, 2000 and January 31, 1999, consist of the
following:
January 31, January 31,
2000 1999
$ $
Non-interest bearing, unsecured loan from an individual, no
stated maturity date 298,009 391,140
8% note payable to corporate investors and individuals payable in
six monthly instalments commencing August 1999, paid in full using
proceeds from Convertible Notes described below (1) - 190,325
4% above Libor rate (Libor rate was 5.75% and 5.75% at January
31, 2000 and 1999, 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 22,107 32,235
4% above Libor rate (Libor rate was 5.75% and 5.75% at January
31, 2000 and 1999, respectively) notes payable to an English
bank, monthly payments 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 1/2% per
annum is payable on 85% of the outstanding balance 114,480 -
Convertible A Note 1999-2002, with interest at 6%;
interest due in arrears biannually on January 1 and July 1 600,000 -
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 -
Capital leases for vehicles, interest ranging from 10.2%
- 16.9% with maturities through 2004 165,366 18,010
------------------ ------------------
1,599,962 631,710
Less current maturities (1,074,185) (209,517)
------------------ ------------------
525,777 422,193
================== ==================
(1) All corporate and individual investors are minority shareholders in
the Company.
F-16
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible debentures
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 an Initial Public Offering
ii) at the option of the investor 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.
The Notes may be redeemed together with accrued interest by the Company at any
time during the 12 months to 16 August 2000. Any outstanding principal not
converted or redeemed by the anniversary date will be redeemed at par plus
interest in the year 2002 upon receipt of 30 days written notice from the
Company or the Investor.
In consideration of the Investor advancing an aggregate of $1,000,000, the
Company caused Montague Limited, the principal shareholder, to transfer and
register in the name of the Investor, 225,000 shares of Common Stock of no par
value.
In view of the Company's present status with regard to its equity and/or debt
offerings, it is probable that the Convertible A and B notes will be converted
within the next twelve months. Accordingly, the notes have been disclosed as
repayable within current maturities.
Scheduled maturities of long-term obligation are as follows:
Year ending January 31, $
2001 1,074,185
2002 65,595
2003 91,810
2004 59,563
2005 10,800
Thereafter 298,009
------------------
1,599,962
==================
F-17
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company leases vehicles under noncancellable capitalized leases.
January 31, January 31,
2000 1999
$ $
Vehicles 226,348 34,706
Less accumulated depreciation (30,958) (6,941)
-------------- --------------
195,390 27,765
============== ==============
The following is a schedule by years of future minimum lease payments under the
capital leases together with the present value of the net minimum lease payments
as of January 31, 2000.
Year ending January 31, $
2001 53,250
2002 43,160
2003 75,743
2004 37,365
Thereafter minimum lease payments -
-------------
209,518
Less amount representing interest (44,152)
Present value of net minimum lease payments 165,366
=============
The scheduled net minimum lease payments to maturity are included in the
long-term obligation table above.
F-18
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - LEASE COMMITMENTS
The Company leases office space which expires in 2002. Rent expense totaled
approximately $27,500 and $17,200 at January 31, 2000 and for the year ended
January 31, 1999. The rent expense for the period February 18, 1997 (date of
inception) to January 31, 2000 totaled $57,700. New premises have been leased
effective from February, 2000 at an annual commitment of $67,600.
The future minimum rental commitments as of January 31, 2000 are as follows:
Year ending January 31, $
2001 67,600
2002 67,600
2003 67,600
2004 67,600
Thereafter 405,600
------------------
676,000
==================
F-19
INVU, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE H - INCOME TAXES
The Company has adopted the provisions of Statement of Financial Accounting
Standards No 109 "Accounting for Income Taxes". Accordingly, a deferred tax
liability or deferred tax asset (benefit) is computed by applying the current
statutory tax rates to net taxable or deductible temporary differences between
pre-tax financial and taxable income.
Deferred tax benefits are recorded only to the extent that the amount of net
deductible temporary differences or carry forward attributes may be utilized
against current period earnings, offset against taxable temporary differences
reversing in future periods, or utilized to the extent of management's estimate
of future taxable income. Deferred tax liabilities are provided for on
differences between amounts reported for financial and tax basis accounting.
At January 31, 2000, due to the Company's cumulative losses since inception, a
loss carry forward of approximately $2,087,000 may be utilized in the future for
an indefinite period.
Net deferred tax assets resulting from the loss carry forward have been offset
by a valuation allowance of equal amounts at January 31, 2000 and January 31,
1999 due to the uncertainty of realizing the net deferred tax asset through
future operations. The valuation allowances were approximately $417,000 and
$159,000 at January 31, 2000 and January 31, 1999, respectively. The valuation
allowance increased approximately $258,000 and $118,000 at January 31, 2000 and
1999 respectively. The effective tax rate differs from the statutory rate as a
result of the valuation allowance. Gross deferred tax liabilities were
immaterial for all periods.
NOTE I - SUBSEQUENT EVENT
On March 10, 2000 the Company received a non-interest bearing unsecured loan of
$571,500 from an individual with no stated maturity date to provide funds for
trading operations.
F-20
NOTE J - RESTATEMENT OF FINANCIAL INFORMATION
The Company has restated its financial statements for the year ended January 31,
2000 to reflect the beneficial conversion feature for the convertible debentures
issued on August 23,1999. At that date, the aggregate market value of the common
stock into which the debt could be converted exceeded the value of the debt by
$723,077.
The Company has also restated its financial statements for the year ended
January 31, 2000 to reflect the credit enhancements of $630,000 provided to
lenders by a major shareholder during February 1999 and August 1999. The
shareholder transferred 2,400,000 shares to certain lenders to help secure
$656,000 of debt in February 1999 and transferred 225,000 shares to the
convertible debenture holders in August 1999 to secure the $1 million
convertible debentures. A value of $630,000 was ascribed to the shares based
upon the allocation of the relative fair values. This was recorded as a discount
to the debt and was amortized as interest expense over the estimated life of the
debt.
Accordingly, common stock and accumulated deficit during the development stage
have been increased by $1,353,077 on the January 31, 2000 balance sheet and
interest, net and net loss have been increased by $1,353,077 and net loss per
common share has increased by 4 cents per share on the Company's Statements of
Operations for the year ended January 31, 2000 and for the period February 18,
1997 (date of inception) to January 31, 2000. These adjustments have no effect
on loss from operations, cash flows or the deficit in stockholders' equity.
F-21
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Amendment No. 2 on Form 10-KSB/A to
its annual report on Form 10-KSB to be signed on its behalf by the undersigned
thereto duly authorized.
INVU, Inc.
(Registrant)
Date: June 4, 2001 By: /s/ David Morgan
----------------------------------------
David Morgan, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 2 on Form 10-KSB/A to its annual report on Form 10-KSB has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURE OFFICE DATE
--------- ------ ----
/s/ David Morgan President, Chief Executive Officer June 4, 2001
-------------------------------------------- and Chairman of the Board of
David Morgan Directors (Principal Executive
Officer)
/s/ Jan Halestrap Director and Vice President - June 4, 2001
-------------------------------------------- Marketing and Sales
Jon Halestrap
/s/ Daniel Goldman Director June 4, 2001
--------------------------------------------
Daniel Goldman
/s/ J.C. Agostini Director and Chief Finance Officer June 4, 2001
-------------------------------------------- (Principal Financial Officer and
John Agostini Chief Accounting Officer)
Director June ___, 2001
--------------------------------------------
Tom Maxfield
/s/ David Andrews Director June 4, 2001
--------------------------------------------
David Andrews