FORM 10-QSB
Securities and Exchange Commission
Washington D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: September 30, 1999
Commission file number: 0-26449
DYNAMIC IMAGING GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0903895
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3418 North Ocean Boulevard
Fort Lauderdale, Florida 33308
(Address of principal executive offices)
(Zip code)
(954) 564-1133
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
----- -----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of November 1, 1999: 3,614,710 shares of common stock, $.001
par value per share.
<PAGE>
DYNAMIC IMAGING GROUP, INC.
FORM 10-QSB
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheet (Unaudited)
September 30, 1999................................................................. 3
Statements of Operations (Unaudited)
For the Nine Months and Three Months Ended September 30, 1999 and 1998............. 4
Statement of Changes in Shareholders' Equity
For the Nine Months Ended September 30, 1999....................................... 5
Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 1999 and 1998.............................. 6
Notes to Financial Statements.................................................................. 7-9
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................................... 10-11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.................................................................... 12
Item 4 - Submission of Matters to a Vote of Security Holders.................................. 12
Item 6 - Exhibits and Reports on Form 8-K..................................................... 12
Signatures.................................................................................... 12
</TABLE>
<PAGE>
DYNAMIC IMAGING GROUP, INC.
BALANCE SHEET
September 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 3,503
Accounts Receivable 57,715
Subscriptions Receivable 115,000
Due from Related Parties 195,190
---------
Total Current Assets 371,408
Property and Equipment, at Cost (Net of Accumulated
Depreciation of $9,560 ) 153,285
Security Deposit 2,590
---------
Total Assets $ 527,283
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note Payable $ 10,000
Accounts Payable and Accrued Expenses 150,929
Accrued Salaries 210,000
Deferred Income Taxes 1,620
Due to Affiliated Company 14,079
Customer Deposits 8,768
---------
Total Liabilities 395,396
---------
STOCKHOLDERS' EQUITY:
Preferred Stock (No Par Value; 5,000,000 Shares
Authorized; No Shares Issued and Outstanding) --
Common Stock ($.001 Par Value; 50,000,000 Shares Authorized;
5,609,710 Shares Issued and Outstanding ) 5,610
Additional Paid-in Capital 965,125
Accumulated Deficit (690,848)
Subscriptions Receivable (148,000)
---------
Total Stockholders' Equity 131,887
---------
Total Liabilities and Stockholders' Equity $ 527,283
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
DYNAMIC IMAGING GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 165,818 $ 15,767 $ 356,089 $ 49,282
COST OF SALES 71,842 13,451 180,285 14,129
----------- ----------- ----------- -----------
GROSS PROFIT 93,976 2,316 175,804 35,153
----------- ----------- ----------- -----------
OPERATING EXPENSES
Advertising 3,104 4,196 12,180 5,776
Auto expense 6,311 -- 37,273 --
Contract Labor 82,988 14,953 163,196 16,904
Depreciation 6,000 -- 9,000 --
Insurance 6,490 -- 17,597 --
Licenses and Permits -- 160 1,274 316
Office Supplies 4,382 615 15,802 615
Other (798) 3,175 17,583 3,173
Postage and Delivery 4,292 3,027 13,864 3,369
Printing and Reproduction 356 3,021 10,661 4,035
Professional Fees 8,076 -- 23,641 5,000
Rent 24,124 8,910 56,002 12,302
Repairs and Maintenance 1,070 342 6,230 342
Salaries 114,551 -- 349,126 --
Telephone 5,414 6,065 23,566 6,977
Travel and Entertainment 17,714 712 55,743 2,668
Utilities 5,608 2,696 12,308 2,696
----------- ----------- ----------- -----------
Total Operating Expenses 289,682 47,872 825,046 64,173
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (195,706) (45,556) (649,242) (29,020)
----------- ----------- ----------- -----------
PROVISION FOR INCOME TAXES:
Current -- -- -- --
Deferred -- -- -- --
----------- ----------- ----------- -----------
-- -- -- --
----------- ----------- ----------- -----------
NET LOSS $ (195,706) $ (45,556) $ (649,242) $ (29,020)
=========== =========== =========== ===========
BASIC AND DILUTED:
Net Loss Per Common Share: $ (0.03) $ (0.01) $ (0.12) $ (0.01)
=========== =========== =========== ===========
Weighted Common Shares Outstanding 5,598,406 5,000,000 5,487,660 5,000,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
DYNAMIC IMAGING, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Common Stock
$.001 Par Value
--------------- Additional
Shares Amount Paid-in Capital
------ ------ ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 5,000,000 $ 5,000 $ 45,000
Shares Issued in Connection with Offerings 545,210 545 746,940
Shares Issued for Services 64,500 65 113,185
Recognition of officers compensation on donated services -- -- 60,000
Net Loss for the Six Months Ended June 30, 1999 -- -- --
--------- --------- ---------
Balance at June 30, 1999 5,609,710 5,610 965,125
========= ========= =========
</TABLE>
[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Total
Accumulated Subscriptions Stockholders'
Deficit Receivable Equity
------- ---------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ (41,606) $ -- $ 8,394
Shares Issued in Connection with Offerings -- (66,750) 680,735
Shares Issued for Services -- (81,250) 32,000
Recognition of officers compensation on donated services -- -- 60,000
Net Loss for the Six Months Ended June 30, 1999 (649,242) -- (649,242)
--------- --------- ---------
Balance at June 30, 1999 (690,848) (148,000) 131,887
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
DYNAMIC IMAGING GROUP, INC.
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(649,242) $ (29,020)
Adjustments to Reconcile Net Loss to Net Cash Flows
Used in Operating Activities:
Depreciation 9,000 --
Common Stock Issued for Services 2,000 --
Recognition of Officers' Compensation on Donated Services 60,000 --
(Increase) Decrease in:
Accounts Receivable (53,208) --
Due from Related Parties (195,190) (23,915)
Security Deposits (1,000) --
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 119,081 50,019
Accrued Salaries 210,000 --
Due to Related Parties (7,408) --
Due to Affiliated Company 14,079 --
Customer Deposits 8,768 --
--------- ---------
Net Cash Flows Used in Operating Activities (483,120) (2,916)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (129,159) (2,084)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Note Payable 10,000 --
Net Proceeds from Issuance of Common Stock 595,735 5,000
--------- ---------
Net Cash Flows Provided by Financial Activities 605,735 5,000
--------- ---------
Net Increase in Cash (6,544) --
Cash - Beginning of Period 10,047 --
--------- ---------
Cash - End of Period $ 3,503 $ --
========= =========
SUPPLEMENTAL INFORMATION:
Cash Paid During Year for:
Interest $ -- $ --
========= =========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of Common Stock for Subscription Receivable $ 263,000 $ --
========= =========
Common Stock Issued for Leasehold Improvements $ 30,000 $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
DYNAMIC IMAGING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). The accompanying financial statements for the interim
periods are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
periods presented. These financial statements should be read in conjunction with
the financial statements for the year ended December 31, 1998 and notes thereto
contained in the Report on Form 10-SB, as amended, of Dynamic Imaging Group,
Inc. (the "Company") as filed with the Securities and Exchange Commission. The
results of operations for the nine months ended September 30, 1999 are not
necessarily indicative of the results for the full fiscal year ending December
31, 1999.
NOTE 2- LOSS PER SHARE
Basic earnings per share is computed by dividing net loss, after adding back
preferred stock dividends accumulated during the period, by weighted average
number of shares of common stock outstanding during each period. Diluted loss
per share is computed by dividing net loss by the weighted average number of
shares of common stock, common stock equivalents and potentially dilutive
securities outstanding during each period.
Diluted loss per common share is not presented because it is anti-dilutive.
NOTE 3 - DUE FROM RELATED PARTIES
The Company advanced funds to certain officers of the Company. The advances are
non-interest bearing and are payable on demand.
NOTE 4 - NOTE PAYABLE
The Company has a note payable to an unaffiliated third party. The note is
non-interest bearing, non-collateralized, and are payable on demand. As of
September 30, 1999, the note payable to this third party amounted to $10,000.
For the nine months ended September 30, 1999, the Company imputed interest on
these notes at an annual rate of 12%.
NOTE 5- STOCKHOLDERS' EQUITY
Preferred Stock
- ---------------
The Company is authorized to issue 5,000,000 shares of Preferred Stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors.
-7-
<PAGE>
DYNAMIC IMAGING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(UNAUDITED)
NOTE 5- STOCKHOLDERS' EQUITY (Continued)
Common Stock
- ------------
During March 1998, the Company issued 5,000,000 shares of its common stock to
founders of the Company for $5,000. In as much these individuals were accredited
or otherwise sophisticated investors, and had access to all information
concerning the Company, the transaction was exempt from registration under the
Securities and Exchange Act of 1933 and the rules and regulations there under.
During March 1998, the Company granted options to three officers to acquire an
aggregate of 4,500,000 restricted shares of common stock at an exercise price of
$.80 per share. The options have been granted to these officers at a price equal
to the market value of the shares at date of grant, become exercisable in five
annual installments of 900,000 shares beginning on February 28, 2000, and expire
not more than seven years after the date of grant. The fair value of the option
grant was estimated on the date of grant using the Black-Scholes option-pricing
model with the following assumptions: dividend yield of 0%; expected volatility
of 100%; risk-free interest rate of 5.5%, and an expected life of 7 years. The
fair value of options granted was minimal.
For the period ended December 31, 1998, the Company recorded officers'
compensation expense of $45,000 relating to services donated to the Company.
During January 1999, the Company issued 250,300 shares of common stock at a
price of $0.50 per share in accordance with Rule 504 under Regulation D
promulgated under the Securities Act of 1933 for net proceeds of $125,150 to be
used for the operations of the Company.
During February and March 1999, the Company issued 299,410 shares of common
stock at a price of $2.50 per share in accordance with Rule 504 under Regulation
D promulgated under the Securities Act of 1933 for net proceeds of $300,335 to
be used for the operations of the Company and leasehold improvements amounting
to $30,000. As of September 30, 1999, the Company had a subscription receivable
amounting to $263,000 of which $115,000 was collected subsequent to the period.
During the nine months ended September 30, 1999, the Company recorded officers'
compensation expense of $60,000 relating to services donated to the Company.
During June 1999, the Company issued 20,000 shares of restricted common stock in
exchange for professional services rendered. These shares were valued at
approximately $.10 per share, the fair values, and charged to operations.
In July 1999, the Company issued 40,000 shares of restricted common stock for
proceeds of $25,000.
Subsequent to the period, the Company issued 5,000 shares of restricted common
stock for net proceeds of $5,000.
-8-
<PAGE>
DYNAMIC IMAGING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(UNAUDITED)
NOTE 6 -COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." This pronouncement sets forth requirements for
disclosure of the Company's comprehensive income and accumulated other
comprehensive items. In general, comprehensive income combines net income and
"other comprehensive items," which represent certain amounts that are reported
as components of stockholders' equity in the accompanying balance sheet,
including foreign currency translation adjustments. For the nine months ending
September 30, 1999, the Company had no comprehensive income.
NOTE 7 - FUTURE EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" was issued in June 1997. This statement changes the way public
companies report information about segments of their business in their annual
financial statements. This statement is effective for the Company's fiscal year
ending December 31, 1999. However, information is not to be presented for
interim financial statements in the first year of implementation. Adoption of
SFAS No. 131 is not expected to have a material effect on the Company's
financial statement disclosure.
-9-
<PAGE>
ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
This report on Form 10-QSB contains forward-looking statements which are made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995 and which are subject to risks and uncertainties which could cause
actual results to differ materially from those discussed in the forward-looking
statements and from historical results of operations. Among the risks and
uncertainties which could cause such a difference are those relating to the
Company's dependence upon certain key personnel, its ability to manage its
growth, the Company's success in implementing its business strategy, the
Company's success in arranging financing where required, and the risk of
economic and market factors affecting the Company or its customers. Many of such
risk factors are beyond the control of the Company and its management.
Nine and three months ended September 30, 1999 compared to nine and three months
ended September 30, 1998, respectively.
Net sales for the nine and three months ended September 30, 1999 were $356,089
and $165,818, respectively, as compared to sales for the nine and three months
ended September 30, 1998 of $49,282 and $15,767, respectively. This increase is
attributable to the fact that the Company only began its operations during March
1998 and had limited sales activity during the period.
Cost of sales was $180,285 or 51% of sales for the nine months ended September
30, 1999 as compared to cost of sales for the nine months ended September 30,
1998 of $14,129 or 29% of sales. This increase is attributable to the fact that
the Company only began its operations during March 1998 and had limited sales
activity during the period. Cost of sales increased as a percentage of net
sales. This is due a greater percentage of graphic sales during the period ended
September 30, 1998 as compared to display sales. The Company recognizes a
greater gross profit margin from graphic sales as compared to display sales.
Operating expenses for the nine and three months ended September 30, 1999, which
substantially consist of contract labor, rent, salaries, travel and
entertainment and auto expense, amounted to $825,046 and $289,682, respectively,
as compared to $64,173 and $47,872 for the nine and three months ended September
30, 1998, respectively. This increase is attributable to the fact that the
Company only began its operations during March 1998 and had limited sales
activity during the first calendar year of operations. Also, during fiscal 1999,
the Company expanded its operational facilities and hired additional employees
and independent contractors to accommodate growth.
As a result of the foregoing factors, the Company incurred losses of
approximately $649,242 or ($.12) per share for the nine months ended September
30, 1999 as compared to a loss of approximately $29,020 or ($.01) per share for
the nine month period ended September 30, 1998.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had stockholders' equity of approximately
$131,887. Since its inception, it has incurred losses of approximately $691,000.
The Company's operations and growth have been funded by a loan from an
unaffiliated third party and the sale of common stock with gross proceeds of
approximately $596,000.
These funds have been used for working capital and capital expenditures.
The Company has no other material commitments for capital expenditures. The
Company believes that it has sufficient liquidity to meet all of its cash
requirements for the next twelve months and that subsequent cost reductions and
increased marketing efforts will provide sufficient cash flows to meet its
operating needs and grow its market share. The Company believes, however, that
additional funding will be necessary to expand the display rental business.
RISK OF YEAR 2000 ISSUES
The Company believes it does not utilize software within its business processes
that may be impacted by the year 2000 issue. The year 2000 issue exists because
many computer systems and applications currently use two digit date fields to
designate a year. Data sensitive systems may recognize the year 2000 as 1900, or
not at all. This inability to properly treat the year 2000 could cause systems
to process critical financial and operational information incorrectly.
-11-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is not involved in any material litigation
Item 4. Submission of Matters to Vote of Security Holders
-------------------------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
(b) Reports on Form 8-K
There were no current reports on Form 8-K filed by the Company during
the nine months ended September 30, 1999.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DYNAMIC IMAGING GROUP, INC.
Dated: November 15, 1999 By: /s/ Gary Morgan
-----------------------------------
Gary Morgan, Chief Executive Officer
Dated: November 15, 1999 By: /s/ Roland Breton
-----------------------------------
Roland Breton, President
-12-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------ ----------- --------
1 Financial Data Schedule *1
- --------
*1 Filed electronically pursuant to Item 401 of Regulation S-T.
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
DYNAMIC IMAGING GROUP, INC.'S FORM 10-QSB FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,1999
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,503
<SECURITIES> 0
<RECEIVABLES> 57,715
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 371,408
<PP&E> 153,285
<DEPRECIATION> (9,560)
<TOTAL-ASSETS> 527,283
<CURRENT-LIABILITIES> 395,396
<BONDS> 0
0
0
<COMMON> 5,610
<OTHER-SE> 126,277
<TOTAL-LIABILITY-AND-EQUITY> 527,283
<SALES> 356,089
<TOTAL-REVENUES> 356,089
<CGS> 180,285
<TOTAL-COSTS> 180,285
<OTHER-EXPENSES> 825,046
<LOSS-PROVISION> (649,242)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (649,242)
<INCOME-TAX> 0
<INCOME-CONTINUING> (649,242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (649,242)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
