-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RXLNSVO9ZElBohgoJnsBnBEyWmZ2KTEYr5RLo7Yan4h8RpZLU08EJcNczF+WMbpL tdPRVbYO/O7jIll2y4iIUw== 0000891618-98-004927.txt : 19981116 0000891618-98-004927.hdr.sgml : 19981116 ACCESSION NUMBER: 0000891618-98-004927 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTANT VIDEO TECHNOLOGIES INC CENTRAL INDEX KEY: 0000865753 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 841141967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 033-35580 FILM NUMBER: 98748930 BUSINESS ADDRESS: STREET 1: 500 SANSOME ST STE 503 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4153914455 MAIL ADDRESS: STREET 1: 500 SANSOME ST STREET 2: STE 503 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 FORMER COMPANY: FORMER CONFORMED NAME: CATALINA CAPITAL CORP/DE/ DATE OF NAME CHANGE: 19600201 10QSB 1 FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended SEPTEMBER 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______, 19___ to ______, 19___. Commission File Number: 33-35580-D INSTANT VIDEO TECHNOLOGIES, INC. -------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) DELAWARE 84-1141967 -------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Identi- Incorporation or Organization) fication Number) 500 SANSOME STREET, SUITE 503 SAN FRANCISCO, CALIFORNIA 94111 ------------------------------- Address of Principal Executive Offices, Including Zip Code (415) 391-4455 -------------- (Issuer's Telephone Number, Including Area Code) N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] YES [ ] NO There were 6,954,365 shares of the Issuer's $.00001 par value common stock outstanding as of September 30, 1998. 2 INSTANT VIDEO TECHNOLOGIES, INC. Unaudited Condensed Consolidated Balance Sheets September 30, 1998 and December 31, 1997 ASSETS
SEPTEMBER 30, 1998 DECEMBER 31, 1997 ------------------ ----------------- Current assets: Cash and cash equivalents $100,101 $ 20,551 Prepaid expenses 6,210 31,460 -------- -------- Total current assets 106,311 52,011 -------- -------- Property and equipment, net 115,209 85,611 Other assets 16,812 17,569 -------- -------- $238,332 $155,191 ======== ========
See accompanying notes to unaudited condensed consolidated financial statements. 3 INSTANT VIDEO TECHNOLOGIES, INC. Unaudited Condensed Consolidated Balance Sheets September 30, 1998 and December 31, 1997 LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
SEPTEMBER 30, 1998 DECEMBER 31, 1997 ------------------ ----------------- Current liabilities: Bank line of credit and credit facility $ -- 500,000 Notes payable 1,637,778 451,773 Accounts payable 162,158 34,026 Accrued expenses 56,680 92,782 Accrued interest 38,818 43,044 ------------ ---------- Total current liabilities 1,895,434 1,121,625 ------------ ---------- Notes payable -- 16,833 ------------ ---------- Stockholders' (deficiency) equity: Preferred stock, $.00001 par value, 20,000,000 shares authorized: Series D, 936,000 shares issued, none outstanding -- -- Series E, 500,000 shares issued, none outstanding -- -- Series F, 5,000,000 shares authorized, 2,125,000 shares issued and 22 22 outstanding in 1997 and 1998 Common stock, $.00001 par value, 100,000,000 shares authorized; 6,954,365 and 5,703,553 shares issued and outstanding in 1998 and 1997 70 59 Additional paid in capital 10,470,967 7,795,972 Note payable discount (75,734) -- Accumulated deficit (12,052,427) (8,779,320) ------------ ---------- Stockholders' (deficiency) (1,657,102) (983,267) ------------ ---------- $ 238,332 155,191 ============ ==========
See accompanying notes to unaudited condensed consolidated financial statements. 4 INSTANT VIDEO TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Operations
3 MONTHS ENDED SEPTEMBER 30, 9 MONTHS ENDED SEPTEMBER 30, ----------------------------- ----------------------------- 1998 1997 1998 1997 ------------ ----------- ------------ ----------- Revenue $ -- $ (196,750) $ 15,000 $ 240,983 Cost of revenues -- -- -- -- ------------ ----------- ------------ ----------- -- (196,750) -- 240,983 Costs and expenses: Research and development 196,535 -- 446,493 49,559 Project Costs -- 63,290 -- 303,225 Sales and marketing 208,766 118,780 381,906 341,795 General and administrative 419,431 381,016 1,305,509 1,033,916 ------------ ----------- ------------ ----------- Total costs and expenses 824,732 563,086 2,133,908 1,728,495 ------------ ----------- ------------ ----------- Loss from operations (824,732) (759,836) (2,118,908) (1,487,512) ------------ ----------- ------------ ----------- Other income (expense): Interest, net (582,352) (24,587) (1,153,399) (53,454) ------------ ----------- ------------ ----------- Loss before income taxes (1,407,084) (784,423) (3,272,307) (1,540,966) ------------ ----------- ------------ ----------- Income taxes -- -- (800) -- ------------ ----------- ------------ ----------- Net loss $ (1,407,084) $ (784,423) $ (3,273,107) $(1,540,966) ============ =========== ============ =========== Accumulated deficit, beginning (10,645,343) (7,466,594) (8,779,320) (6,716,947) Accumulated deficit, ending $(12,052,427) $(8,251,017) $(12,052,427) $(8,257,913) ============ =========== ============ =========== Net loss per common share-- Basic $ (0.23) $ (0.16) $ (0.53) $ (0.31) ============ =========== ============ =========== Net loss per common share-- Diluted $ (0.23) $ (0.16) $ (0.53) $ (0.31) ============ =========== ============ =========== Weighted average shares outstanding 6,132,093 4,900,981 6,132,093 4,900,981 Weighted average shares outstanding assuming dilution 6,132,093 4,900,981 6,132,093 4,900,981
See accompanying notes to unaudited condensed consolidated financial statements. 5 INSTANT VIDEO TECHNOLOGIES, INC. Condensed Consolidated Statements of Cash Flows For the Nine Months Ending September 30, 1998 and 1997
1998 1997 ----------- ---------- Cash flows from operating activities: Net loss $(3,273,107) (1,540,966) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 34,828 68,991 Interest expense issued with debt 788,901 -- Amortization of notes payable discount 318,780 -- Stock option compensation 436,108 -- Decrease in unbilled revenue -- 143,296 Decrease in prepaid expenses 25,250 8,648 Decrease in patents, net -- 25,111 Decrease in other assets 757 34,428 Increase (decrease) in accounts payable 128,132 (57,837) (Decrease) in accrued expenses (36,102) (152,000) (Decrease) increase in accrued interest (4,226) 13,124 ----------- ---------- Net cash used in operating activities (1,580,679) (1,457,205) ----------- ---------- Cash flows from investing activities: Purchases of property and equipment, net (71,317) (125,021) Disposal of Fixed Assets Assets 37,423 -- Accumulated depreciation (30,530) -- ----------- ---------- Net cash used in investing activities (64,424) (125,021) ----------- ---------- Cash flows from financing activities: Proceeds from sale of preferred stock -- 750,000 Proceeds from sale of common stock 10,000 -- Conversion of preferred stock to common stock -- 2 Exercise of warrants-- common 750,000 -- Proceeds from debt 1,550,000 570,000 Repayment of debt (585,347) -- Increase in long term notes payable -- 73,210 ----------- ---------- Net cash provided by financing activities 1,724,653 1,393,212 ----------- ---------- Increase (decrease) in cash and cash equivalents 79,550 (189,014) Cash and cash equivalents, beginning of year 20,551 208,613 ----------- ---------- Cash and cash equivalents, end of quarter $ 100,101 19,599 =========== ==========
(Continued) See accompanying notes to unaudited condensed consolidated financial statements. 6 INSTANT VIDEO TECHNOLOGIES, INC. Condensed Consolidated Statements of Cash Flows, Continued For the nine months ending September 30, 1998 and 1997
1998 1997 ------- ------ Supplemental disclosure of cash flow information: Cash paid for income taxes $ 800 -- ======= ====== Cash paid for interest $46,395 22,645 ======= ======
Supplemental schedule of non-cash investing and financing activities: During 1997, the Company financed a prepaid insurance premium of $29,794. During 1997, 500,000 shares of preferred stock were converted into 500,000 shares of common stock. During 1998, $330,000 of convertible debt and $17,812 of accrued interest was converted into 347,812 shares of common stock. During 1998, the Company granted stock options to various consultants and employees, which resulted in $436,108 of compensation expense. See accompanying notes to unaudited condensed consolidated financial statements. 7 INSTANT VIDEO TECHNOLOGIES, INC. Notes to Unaudited Condensed Consolidated Financial Statements (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Instant Video Technologies, Inc. (the Company) licenses burst transmission software for use within commercial, multimedia and interactive environments. The burst technology allows for time compression and burst transmission of video/audio programming that results in time-savings, network efficiency and superior quality products. BASIS OF PRESENTATION The accompanying financial statements include the accounts of Instant Video Technologies, Inc. and its wholly-owned subsidiary, Explore Technology, Inc. All significant intercompany transactions and accounts have been eliminated in consolidation. INTERIM FINANCIAL INFORMATION The accompanying financial statements have been prepared in accordance with Generally Accepted Accounting Principles for interim financial information and the instructions for Form 10-QSB and Article 10 of Regulation S-X. In the Company's opinion, the financial statements include all adjustments, consisting of normal recurring adjustments, which the Company considers necessary to fairly state the Company's financial position and the results of operations and cash flows. The balance sheet at December 31, 1997, has been derived from the audited financial statements at that date but does not include all of the necessary informational disclosures and footnotes as required by Generally Accepted Accounting Principles. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included with the Company's annual reports on Form 10-KSB and other documents filed with the Securities and Exchange Commission. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full fiscal year. (2) NET LOSS PER SHARE The Financial Accounting Standards Board ("FASB") recently issued Statement of Financial Accounting Standard ("SFAS") No. 128, Earnings per Share, which requires the presentation of basic net income per share, and, for companies with complex capital structures, diluted net income per share. Basic and diluted net loss per share is computed using the weighted average number of common shares outstanding. The Company has net losses for all periods presented and there is no difference between previously reported primary loss per share amounts and the amounts currently reported as basic and diluted loss per share. Because their effects would be anti-dilutive, stock options to acquire 1,563,225 shares and a warrant to acquire 1,019,913 shares of common stock at weighted average exercise prices of $1.31 and $1.07, respectively, have been excluded from the computation of basic and diluted earnings per share for the quarter ended September 30, 1998. (3) NEW ACCOUNTING PRONOUNCEMENTS SFAS No. 131 establishes annual and interim reporting standards relating to the disclosure of an enterprise's business segments, products, services, geographic areas, and major customers. Adoption of these standards is not expected to have a material effect on the Company's consolidated financial position or results of operations. The FASB recently issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 addresses the accounting for derivative instruments, including certain derivative instruments embedded in other contracts. Under SFAS No. 133, entities are required to carry all derivative instruments in the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. The Company must adopt SFAS No. 133 by January 1, 2000. The Company has determined that SFAS No. 133 will have no effect on its financial statements. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP No. 98-1 requires that certain costs related to the development or purchase of internal-use software be capitalized and amortized over the estimated useful life of the software. SOP No. 98-1 is effective for financial statements issued for fiscal years beginning after December 15, 1998. The Company does not expect the adoption of SOP No. 98-1 to have a material impact on its results of operations. (4) YEAR 2000 COMPLIANCE The Company is aware of the issues associated with the programming code and embedded technology in existing systems as the year 2000 approaches. The "Year 2000 Issue" arises from the potential for computers to fail or operate incorrectly because their programs incorrectly interpret the two digit date fields "00" as 1900 or some other year, rather than the year 2000. The year 2000 issue creates risk for the Company from unforeseen problems in its own computer systems and from third parties, including customers, vendors and manufacturers, with whom the Company deals. Failures of the Company's and/or third parties' computer systems could result in an interruption in, or a failure of certain normal business activities or operations. Such failures could materially and adversely affect the Company's results of operations, liquidity, and financial condition, though the impact is unknown at this time. To mitigate this risk, the Company has established a formal year 2000 program to oversee and coordinate the assessment, remediation, testing and reporting activities related to this issue. The Company believes that with the completion of the project as scheduled, the possibility of significant interruptions of normal operations should be reduced. The Company is currently in the assessment phase of its year 2000 program. As part of this assessment, the Company's application systems (e.g., financial systems, various custom-developed business applications), technology infrastructure (e.g., networks, servers, desktop equipment), facilities (e.g., security systems, fire alarm systems), vendors/partners and products will be reviewed to determine their state of year 2000 compliance. This review will include the collection of documentation from software and hardware manufacturers, the detailed review of programming code for custom applications, the physical testing of desktop equipment using software designed to test for year 2000 compliance, the examination of key vendors'/partners' year 2000 programs and the ongoing testing of the Company's products as part of normal quality assurance activities. Subsequent to the completion of the Company's assessment phase the Company will implement both a certification testing phase of its program. Testing of the Company's internal software will be accomplished through simulation situations. The Company will simulate January 1, 2000 on its network, servers and desktop equipment to ensure compliance with year 2000 readiness. It is forecast that all important systems (both computer systems and systems dependent on embedded technologies) will be tested by June 30, 1999. All other testing will be done by December 31, 1999. The Company has not made estimates for the costs associated with completing its year 2000 program, but will do so after completion of the assessment phase of the project. There can be no assurance that the Company will not experience serious unanticipated negative consequences and/or additional material costs caused by undetected errors or defects in the technology used in its internal systems, or by failures of its vendors/partners to address their year 2000 issues in a timely and effective manner. Should miscalculations or other operational errors occur as a result of the year 2000 issue, the Company or the parties on which it depends may be unable to produce reliable information or to process routine transactions. Furthermore, in the worst case, the Company or the parties on which it depends may, for an extended period of time, be incapable of conducting critical business activities which include, but are not limited to, the production and delivery of the companies' products invoicing customers and paying vendors. 8 SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS Certain information in this Report includes forward-looking statements within the meaning of applicable securities laws that involve substantial risks and uncertainties including, but not limited to, market acceptance of the Company's products and new technologies, the sufficiency of financial resources available to the Company, economic, competitive, governmental and technological factors affecting the Company's operations, markets, services, and prices, and other factors described in this Report and in prior filings with the Securities and Exchange Commission. The Company's actual results could differ materially from those suggested or implied by any forward-looking statements as a result of such risks. Item 2. Management's Discussion and Analysis or Plan of Operation. Results of Operations During the nine months ended September 30, 1998, the Company had $15,000 revenue as compared to $240,983 during the nine months ended September 30, 1997. The Company is still in development of its Burstware(R) suite of products and has not begun shipping its products to customers. Costs and expenses during the nine months ended September 30, 1998, totaled $2,133,908 as compared to $1,728,495 during the nine months ended September 30, 1997. The increase was due to higher spending for Research & Development and Sales & Marketing. Costs were primarily related to headcount. The Company had a net loss of ($3,273,107) during the nine months ended September 30, 1998, as compared to a net loss of ($1,540,966) during the nine months ended September 30, 1997. The loss resulted from expenditures for operations, product development, and interest expense resulting from increased debt financing and convertible securities. Liquidity and Capital Resources As of September 30, 1998, the Company had a working capital deficit of ($1,789,123) as compared to a working capital deficit of ($1,069,614) at December 31, 1997, which was due to increases in short term notes payable and accounts payable to provide working capital to fund operations. Net cash used in operating activities totaled $1,580,679 during the nine months ended September 30, 1998, as compared to net cash used in operating activities of $1,457,205 during the nine months ended September 30, 1997. Cash flow provided by financing activities during the nine month period ending September 30, 1998 totaled $1,724,653, as compared to $1,393,212 during the nine month period ending September 30, 1997. Net cash used in investing activities during the nine month period ending September 30, 1998 totaled $64,424, as compared to $125,021 during the nine month period ending September 30, 1997. Repayment of Debt during the nine months ended September 30, 1998 equaled $585,347 as compared to none during the nine months ended September 30, 1997. 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings. As previously reported in the Company's Form 10-QSB for the quarter ended June 30, 1998, the Company is in arbitration against its former CEO & President, Gary Familian, and its former EVP of Business Development, Therese Stacy, for their alleged misappropriation of Company assets. The Company estimates that the legal fees to date, and the anticipated costs involved with this arbitration are not material. Item 2. Changes in Securities and Use of Proceeds. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. PRODUCT DEVELOPMENT During the third quarter of 1998, the company released its Burstware(R) Beta Version 1.03. The Beta product has been distributed to several companies for testing including major telecommunications providers, multi-media content aggregators, and Internet content providers. 10 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits.
Exhibit Sequential No. Description Location Page No - --- ----------- -------- ------- 27 Financial Data Schedule Attached
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended September 30, 1998. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INSTANT VIDEO TECHNOLOGIES, INC. Date: November 14, 1998 By: /s/ Richard Lang ------------------------------------- Richard Lang, Chairman, Chief Executive Officer and President By: /s/ Eric J. Hall, CFA ------------------------------------- Eric J. Hall, Chief Financial Officer and Chief Accounting Officer 11 EXHIBIT INDEX
Exhibit # Description - --------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 100,101 0 0 0 0 106,311 153,927 38,718 238,332 1,895,434 0 0 22 70 (1,657,194) 238,332 15,000 15,000 0 0 2,133,908 0 1,153,399 (3,272,307) 800 (3,273,107) 0 0 0 (3,273,107) (.53) (.53)
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