U.S. Securities and Exchange Commission
Washington, D.C. 20549
Amendment No. 2 to
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNder Section 12(B) or (G) of the Securities Exchange Act of 1934
DYNAMIC IMAGING GROUP, INC.
---------------------------
(Name of Small Business Issuer in its charter)
FLORIDA 65-0903895
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(State of incorporation) (I.R.S. Employer Identification No.)
3418 NORTH OCEAN BOULEVARD,
FORT LAUDERDALE, FLORIDA 33308
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(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER (954) 564-1133
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SECURITIES TO BE REGISTERED PURSUANT TO 12(B) OF THE ACT: NONE
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Securities to be registered pursuant to 12(g) of the ACT:_______________________
COMMON STOCK $.001 PAR VALUE
----------------------------
(Title of Class)
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
ITEM 1. DESCRIPTION OF BUSINESS
-----------------------
BACKGROUND
Dynamic Imaging Group, Inc. was incorporated under the laws of the
State of Florida in January 1999. Through our wholly-owned subsidiary, Dynamic
Imaging Group, Inc., a Colorado corporation, we are engaged in the sale and
rental of portable show displays, accessories and graphics, all of which are
used in the trade show and trade exhibition industry.
During January 1999, all of the issued and outstanding common stock of
Dynamic Imaging Group, Inc. (Colorado) was exchanged for all of the issued and
outstanding common stock of Dynamic Imaging Group, Inc. (Florida). Dynamic
Imaging Group, Inc. (Colorado) was incorporated under the laws of Colorado in
March 1998. The purpose of the stock exchange was to have the parent company
organized under Florida laws.
THE TRADE SHOW AND EXHIBITION INDUSTRY
Our market analysis shows that during the past decade companies have
realized the importance of displaying their products through trade shows,
conventions and company meetings. As a result, our management believes that the
show and exhibition display industry has substantial growth potential both
domestically and internationally.
The show and exhibition display system and accessory market is a
rapidly growing industry, both domestically and internationally. Between 1980
and 1989, the exhibition industry reportedly grew at a rate of 72%. In 1989
there were a total of 3,289 shows. In 1996, this number increased to 11,000.
Customer base for rental of the show display systems was 5% of the direct
exhibit design dollars spent in 1996. Out of the 11,000 shows, the average show
has 200 exhibitors and 60% or 1,320,000 of the exhibitors rent a show booth size
that conforms to Dynamic Imaging's display. By 2001, the average exhibition is
projected to span 131,900 net square feet of exhibit space, draw 470 exhibiting
firms and 27,560 attendees. This projection includes both business-to-business
and consumer shows. Over 500 new shows are expected to be launched by the end of
2001. Management believes the growth in the trade show and exhibits industry has
created a significant demand for companies to either invest in their own show
display or rent a display through convention centers or local show display
companies.
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<PAGE>
THE SHOW DISPLAY MARKET
Recently, several companies have commenced manufacturing portable show
displays and marketing the displays directly to the end user. Analysis conducted
by our management revealed that the average company would use a show display
only two to three times a year and that in some cases, it was cost prohibitive
to purchase, transport and assemble its own show displays. Also, our analysis
indicated that most companies participated in one trade show lasting three to
four days per year, placing a burden on them as they incurred an initial
purchase cost and additional follow-up storage charges. We also determined that
many companies will pass up the opportunity to participate in smaller regional
shows and exhibitions due to the prohibitive cost of transporting and assembling
the display systems.
Based on these findings, we created a new approach: renting show
displays. We believe we can cater to the trade show participant who does not
want the burden of purchasing, shipping and assembling its own display units.
Our proprietary methods enable us to price our rental units below the current
daily rental market price, which we believe promotes repeated rentals. We
anticipate the favorable pricing based on our ability to locate exhibitors
through our own network of distributors who can secure rentals from other
exhibitors on a periodic basis.
We believe the market for these rental units includes both large and
small companies. For the smaller company, renting a display system should be far
more economical than purchasing a display system, especially if the company
participates in exhibits once or twice a year. For the larger company
experienced in exhibiting in large trade shows, renting a display system
facilitates its participation in small and medium sized trade shows. The smaller
shows may have been uneconomical to participate in due to the size and costs of
shipping and assembling inherent in the company's system, which is typically a
bulky and elaborate system reserved for major shows.
To date, the majority of our revenues have been derived from direct
sales of our display systems, we anticipate that an increasing proportion of our
revenues will be derived from rental revenues. Through November 30, 1999,
approximately 95% of our total revenues was attributable to direct sales and 5%
was attributable to rentals. We expect display revenues from rentals to increase
to 40% of our total revenues due to our increased marketing efforts in this
niche for the 2000 fiscal year.
DYNAMIC IMAGING'S SHOW DISPLAYS AND GRAPHICS
Dynamic Imaging's name brand displays are manufactured for us by Jemco
Displays. Our displays are lightweight and can be easily assembled without tools
in approximately 15 minutes. The display system is an aluminum frame structure
which is designed to expand to an overall width of 100 inches by a height of 89
inches. Our frame includes a self-aligning magnetic set of plastic bars designed
to attach to the frame for handing the center and radius end caps. The three
center panels of our frame are approximately 27" wide and 89" high and are made
of plastic with a fabric covering. The radius end caps are approximately 29"
wide by 89" high. The center panels and end caps are attached to the frame by
plastic panel hooks and magnetic strips. The display's frame also supports
lighting, shelves, signage and various other interchangeable lightweight
products.
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<PAGE>
Dynamic Imaging produces large format photographic imaging on the Durst
Lambda system, a specialized processing system. Our clients include wholesalers,
resellers and advertising agencies. Our photo images are produced not only for
use on our trade show display systems, but are also used for wall advertisements
and lightbox fixtures for permanent usage, as well as book covers and handouts
associated with these displays.
Fabric, photo panels and various graphics, which are also supplied by
us, easily attach to the display's frame by magnetic strips strategically
located on the panels. Our graphics available for use with our displays are
laser generated, true photographic, continuous tone process, which create the
capability to transform a 24" by 24" poster into a 10' X 10' foot mural while
keeping the image sharp and clear. Management believes this process improves on
the inkjet and electrostatic process at a much-reduced cost and turnaround time.
The displays come with molded plastic shipping cases with built-in wheels for
easy transporting. The shipping cases convert to a matching podium table for the
display.
WARRANTIES
Dynamic Imaging warrants to the purchaser, on a no time limit basis, to
repair or replace (at our option), the frame provided. This warranty is provided
only with sales and not with rentals. All electrical parts and components are
covered for a period of one year from the date of purchase. The conditions of
the warranty are that the unit shall have been employed under conditions of
normal use and service, there can be no evidence of tampering and improper
handling and that other relevant information relating to the unit be provided to
Dynamic Imaging. Graphics are excluded from our warranty. Our primary supplier
of frame displays is Jemco Displays, which provides us and our customers with a
comparable product warranty. Other display suppliers provide similar warranties.
In view of the sturdy nature of the materials provided, we do not believe that
full replacement would be necessary for a majority of circumstances as repairs
could be handled by either us, our distribution personnel or Jemco Display or
other suppliers. We intend to have up to five support outlets strategically
located in the United States for quick 24-hour turnaround repair service as
required. To date, we have not received requests for any returns to date or
requests under our warranty.
DISTRIBUTION
We distribute our goods and services through our network of authorized
dealers which have franchise affiliations with Speedy Sign*A*Rama, USA, Inc.,
referred to in this report as SignARama. SignARama has approximately 400
franchised dealers in North America. In April 1998, we entered into a
co-marketing agreement with SignARama which provides that we and SignARama shall
jointly market and promote our exhibit products worldwide. This agreement
provides that SignARama is obligated to encourage its franchisees to lease, sell
and distribute our display systems. Our display systems are exclusively marketed
through SignARama's franchisees to the retail sign industry without any minimum
leasing, selling or distribution requirements placed on the franchisees. The
term of this agreement is for one year, renewable automatically for one year
terms unless 30 days' written notice of termination is received by either party
at least 30 days prior to the expiration of the term.
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<PAGE>
We will jointly participate in trade shows, conventions and other activities and
will co-brand our advertising in various media. We are to bear all costs of
marketing under this agreement. We are also to cooperate with SignARama in the
areas of sales and training. Eight percent (8%) of all gross revenues received
by us for sales to SignARama's franchisees are to be earmarked to fund a
national advertising campaign of SignARama franchises. In addition, SignARama
has affiliations in Australia, New Zealand, Puerto Rico, United Kingdom,
Venezuela, Guam, Canada, Dominican Republic, Portugal, Northern Island, Uruguay
and China.
In addition, we have oral distribution arrangements with independent
distributors for the sale of our products in Argentina, Bolivia and Peru, which
are intended to be exclusive (except where pre-empted by our co-marketing
agreement with SignARama). We will engage solely in direct sales for
international operations outside of North America, and direct sales and leasing
for North America.
Display products to be sold will be either manufactured to order or
shipped from available inventory directly to the dealer. Display products
subject to rental will be supplied from inventory and shipped to the dealer for
the term of the rental. Upon the conclusion of the rental term, the display will
be picked up and returned to inventory.
MARKETING PHILOSOPHY AND STRATEGY
We intend to focus our show display marketing efforts on smaller
companies which participate in major trade shows, conventions, grand openings,
weddings and company meetings. We also will gear our operations to local
companies with display needs and small trade shows that cater to individuals, as
well as to create product awareness to enhance sales and rentals through our
existing distribution network.
We market the sales of our display systems through telemarketing. We
market rentals of our display systems through worldwide retail outlets that
presently cater to the equipment rental, printing and graphics and trade show
markets. Convention centers, hotels and civic centers are also a major source of
rentals for the display systems. Each display system we rent through our
authorized dealers result in a fee or commission paid to the authorized dealer
on a per unit basis.
Dynamic Imaging has its own public relations division that reaches over
21,000 potential clients through mass mailing, telemarketing and direct contact.
Management believes that in-house public relations is a reliable way to market
the Dynamic Imaging brand but will evaluate opportunities to contract with
outside public relation firms.
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<PAGE>
COMPETITION
We estimate that there are approximately 15 major manufactures of
pop-up display systems worldwide. Our leading competitors are Skyline, Nomadic,
Abex and Expo Design, all of which are engaged in direct sales. We believe that
there are presently no nationally organized competitors offering rental service
other than independents in local areas.
Traditionally, the display system industry has been fragmented, largely
because companies within it cater to distinct customer bases with specialized
needs. We believe that Dynamic Imaging is one of the first companies to
standardize its product line so that it can be marketed to a broader customer
base throughout the United States as well as in international markets. We also
believe that Dynamic Imaging is one of the few suppliers of display systems and
accessories which offers a national marketing network to bring products and
related services to the public smaller entities, on the other hand, do not have
this marketing network capability and must rely upon their own, local, limited
marketing methods. We believe that our distribution system provides us with
cost-efficiencies as well as convenience and ease of use for our customers.
Our strengths include our efficient network of dealers and outlets
which makes our products and services available to the consumer in a broad range
of geographic markets. In addition, we believe that departmental arrangements
give us the opportunity to provide a broader range of services as well as
cost-efficiencies to our customers. In our judgment, the greater challenge we
face is the unpredictable fluctuation in demand for rental or direct purchases
of display systems. This unpredictability imposes a strain on our ability to
maintain an adequate inventory to satisfy the needs of the marketplace
especially during peak periods.
EMPLOYEES
Dynamic Imaging currently has 12 employees, eight of whom are involved
in sales and clerical and four of whom are involved in management.
YEAR 2000 DISCLOSURE
Dynamic Imaging has investigated the potential impact the Year 2000
could have on its internal software and operating systems. This potential
problem will result from computers and computer systems' inability to recognize
the year 2000 due to their coding. We believe that Dynamic Imaging's operating
system is Year 2000 compliant. Additional, integral software that will be
purchased will be Year 2000 compliant. Dynamic Imaging has made efforts to
determine its vulnerability should any of its vendors experience Year 2000
difficulties. Should certain vendors become materially unable to meet Dynamic
Imaging's needs, production could be interrupted, which would in turn adversely
affect operations. Dynamic Imaging has identified multiple vendor sources for
product to limit our exposure to vendor's Year 2000 problems. We believe that
the anticipated costs of our Year 2000 initiative will not be material. While we
believe that every effort is being taken to address all Year 2000 concerns, we
cannot guarantee that the systems of other companies will be compliant and will
not have a material adverse effect on Dynamic Imaging.
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<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
-----------------------
Dynamic Imaging maintains its executive office, sales and warehouse
facility at 3418 North Ocean Boulevard, Fort Lauderdale, Florida 33308. Dynamic
Imaging leases its executive offices, sales facility and warehouse facility at
the rate of $3,400 per month, $1,200 per month and $800 per month, respectively.
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND SIGNIFICANT EMPLOYEES
------------------------------------------------------------------
The following table sets forth the names, ages and positions with
Dynamic Imaging and ages of our executive officers and directors. Directors will
be elected at our annual meeting of shareholders and serve for one year or until
their successors are elected and qualify. Officers are elected by the board of
directors and their terms of office are, except to the extent governed by
employment contract, at the discretion of the board of directors.
NAME AGE POSITIONS HELD
---- --- --------------
Gary R. Morgan 55 Chief Executive Officer, Chairman
of the Board and Treasurer
Roland L. Breton 50 President and director
Sharon Hovater 45 Secretary
GARY R. MORGAN has served as Chairman of the Board and Treasurer since
inception in March 1998 and Chief Executive Officer since December 1998. Between
July 1996 and March 1998, Mr. Morgan served as Chief Executive Officer of
Olympus Ventures, Inc., a garment contractor and manufacturing company. Between
March 1994 and July 1996, Mr. Morgan served as President of Horizon
International Associates, Inc., a pre-owned aircraft marketing company.
ROLAND L. BRETON has served as President and director since March 1998.
Between September 1996 and December 1998 Mr. Breton served as Director and
President of Olympus Ventures, Inc. Between November 1995 and September 1996,
Mr. Breton was President of Olympus Mills, Inc., the manufacturing division of
Olympus Ventures, Inc. Between October 1993 and November 1995 he served as
Executive Vice President of Madison Group Associates, Inc., an entertainment and
fitness company.
SHARON HOVATER has served as Secretary since November 1999. From 1995
to the present, Ms. Hovater has served in various managerial positions in the
food and beverage industry in San Francisco, California and south Florida. Ms.
Hovater received her Associate of Art degree from Wichita State University.
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<PAGE>
EMPLOYMENT AGREEMENTS
In February 1998, each of Messrs. Morgan and Breton entered into five year
employment agreements with Dynamic Imaging, which entitled each of them to
receive an annual base salary of $120,000 plus a bonus equal to 2.5% of Dynamic
Imaging's total revenues for each year of the agreement with a maximum of 10% of
gross profit. Each of the employment agreements also provides for the grant of
options to purchase an aggregate of 1,500,000 shares at an exercise price of
$.80 per share in five equal annual installments each year of employment
commencing February 28, 2000 (for an aggregate of 3,000,000 shares). The options
expire seven years from their date of vesting. Each of the employment agreements
also provide for an expense allowance equal to 10% of the base salary. The
agreements further provide for an increase of at least 10% per year in the base
salary amounts, and include non-compete and confidentiality provisions. Each of
the executive officers agreed to waive his salary for the period from February
1998 to January 1999.
In October 1999, Howard Storfer resigned as an executive officer of
Dynamic Imaging. All contractual obligations owed by and to Mr. Storfer
regarding Dynamic Imaging terminated in September 1999. Mr. Storfer is presently
rendering consulting services to Dynamic Imaging.
ITEM 4. EXECUTIVE COMPENSATION
----------------------
The following table sets forth information relating to the compensation
paid by Dynamic Imaging during the past fiscal year (Dynamic Imaging was not in
existence during any other fiscal year) to its Chief Executive Officer and
President. Each of the executives agreed to waive his salary and, consequently,
did not earn any compensation during the fiscal year ended December 31, 1998.
This table includes options to purchase an aggregate of 3,000,000 shares of
Dynamic Imaging's common stock granted under the employment agreements described
above in Item 3.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------- ------- ------------------------------- ----------------------------------- -----------
Annual Compensation Long-Term Compensation
--------- --------- ----------- -------------------------- --------
Awards
------------ ------------- --------
Securities
Other Under-
Annual Restricted Lying All Other
Name and Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- --------------------------- ------- --------- --------- ----------- ------------ ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary Morgan, Chief 1998 -0- -0- -0- -0- 1,500,000 -0- -0-
Executive Officer
and Treasurer
- --------------------------- ------- --------- --------- ----------- ------------ ------------- -------- -----------
Roland Breton, President 1998 -0- -0- -0- -0- 1,500,000 -0- -0-
- --------------------------- ------- --------- --------- ----------- ------------ ------------- -------- -----------
- --------------------------- ------- --------- --------- ----------- ------------ ------------- -------- -----------
- --------------------------- ------- --------- --------- ----------- ------------ ------------- -------- -----------
- --------------------------- ------- --------- --------- ----------- ------------ ------------- -------- -----------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STOCK OPTIONS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------- --------------
Individual Grants Potential Realizable Alternative
Value At To
Assumed Annual Rates Of (f) and (g):
Stock Grant Date
Price Appreciation For Value
Option
Term
- -----------------------------------------------------------------------------
Percent of
Number Of Total
Securities Options/
Underlying SARs Granted Exercise Of Grant Date
Options/SARs To Employees Base Price Expiration Present
Name Granted (#) In Fiscal (S/Sh) Date 5% ($) 10% ($) Value $
(a) (b) Year (d) (e) (f) (g) (h)
(c)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary Morgan 1,500,000 33.33% .80 2005/2010 N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Roland Breton 1,500,000 33.33% .80 2005/2010 N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Each of these individuals were granted options to purchase an aggregate
amount of 1,500,000 shares of Dynamic Imaging's common stock pursuant to
employment agreements. The options are exercisable at $.80 per share, and vest
in five equal annual installments of 300,000 shares beginning on February 28,
2000 and are exercisable for a period of seven years from the date of vesting.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the exercise
of options to purchase shares of common stock during the fiscal year ended
December 31, 1998, of each person named in the summary compensation table and
the unexercised options held as of the end of the 1998 fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
- --------------------------------------------------------------------------------------------------------------------
Number of Value Of
Securities Unexercised
Underlying In-The-Money
Unexercised Options/SARs
Options/SARs At Fiscal Year-
Shares At Fiscal Year-End End
Acquired On Value Exercisable/ Exercisable/
Exercise Realized Unexercisable Unexercisable
Name
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gary Morgan, Chief Executive N/A N/A 0/1,500,000 N/A
Officer and Treasurer
- --------------------------------------------------------------------------------------------------------------------
Roland Breton, President N/A N/A 0/1,500,000 N/A
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
ITEM 5. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth information as of October 31, 1999, with
respect to the beneficial ownership of shares of common stock by (i) each
officer and director, (i) each person or entity known by Dynamic Imaging to be
the owner of more than 5% of the outstanding shares of common stock, or to be
and (iii) all officers and directors as a group. The address of each person is
c/o Dynamic Imaging Group, Inc., 3418 North Ocean Boulevard, Fort Lauderdale,
Florida 33308. There were 5,609,710 shares of Dynamic Imaging's common stock
issued and outstanding as of October 31, 1999.
Approximate
Percentage of
No. of Outstanding Shares
Name Shares Beneficially Owned
- ---- ------ ------------------
Gary R. Morgan 500,000 8.9%
Roland L. Breton 3,000,000 53.5%
Sharon Hovater -0- -0-
Howard Storfer 500,000 8.9%
========= =====
All Officers and Directors 3,500,000 63.61%
as a Group (3 persons)
- -------------------
Gary Morgan is Chief Executive Officer and Chairman of the Board of
Dynamic Imaging. Includes 500,000 shares of common stock held by Horizon
Associates, Inc., a corporation which Mr. Morgan controls. Does not include
options to purchase an aggregate of 1,500,000 shares of common stock,
exercisable at $.80 per share, which vest in five equal annual installments
commencing February 28, 2000 and are exercisable for a period of seven years
from the date of vesting.
Roland Breton is President and director. Includes shares of common
stock held by his spouse and 2,500,000 shares of the Company's common stock held
by A.R. Fortune, a corporation controlled by his spouse. Mr. Breton disclaims
beneficial ownership of the shares owned by his spouse and A.R. Fortune. Does
not include options to purchase an aggregate of 1,500,000 shares of common
stock, exercisable at $.80 per share, which vest in five equal annual
installments commencing February 28, 2000, and are exercisable for a period of
seven years from the date of vesting.
Sharon Hovater is Secretary and holds no common stock or options to
purchase common stock.
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<PAGE>
Howard Storfer's holdings include 500,000 shares of common stock held
by his spouse, but do not include options to purchase an aggregate of 1,500,000
shares of common stock, exercisable at $.80 per share, which vest in five equal
annual installments commencing February 28, 2000 and are exercisable for a
period of seven years from the date of vesting. Mr. Storfer disclaims beneficial
ownership of his spouse's shares.
ITEM 6. INTEREST OF MANAGEMENT AND CERTAIN TRANSACTIONS
-----------------------------------------------
Between March 1998 and January 1999, Horizon Associates, Inc., a
company controlled by Messrs. Morgan and Breton, loaned Dynamic Imaging $7,400.
The loan was non-interest bearing and repaid in June 1999.
Between January 1, 1999, and September 30, 1999, Dynamic Imaging
advanced certain funds aggregating $227,786 to Messrs. Morgan, Breton and
Storfer. The advances are non-interest bearing and are payable upon demand.
ITEM 7. DESCRIPTION OF SECURITIES
-------------------------
Dynamic Imaging is authorized to issue 50,000,000 shares of common
stock, par value $.001 per share, and 5,000,000 shares of preferred stock, par
value $.001 per share. As of October 31, 1999, there were 5,609,710 shares of
common stock issued and outstanding and no shares of preferred stock
outstanding.
COMMON STOCK
The authorized capital stock of Dynamic Imaging currently includes
50,000,000 shares of common stock, par value $.001 per share. The holders of
common stock: have equal ratable rights to dividends from funds legally
available therefor, when, as and if declared by the board of directors of
Dynamic Imaging; are entitled to share ratably in all of the assets of Dynamic
Imaging available for distribution and upon liquidation, dissolution or winding
up of the affairs of Dynamic Imaging. There are no do not have preemptive
subscription or conversion rights or redemption or sinking fund provisions
applicable thereto. Holders of common stock are entitled to one vote per share
on all matters on which stockholders may vote at all meetings of stockholders.
The holders of common stock of Dynamic Imaging do not have cumulative voting
rights, which means that the holders of more than 51% of such outstanding
shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose and in such event, the holders of the remaining
shares will not be able to elect any of the directors.
PREFERRED STOCK
Dynamic Imaging is authorized to issue 5,000,000 shares of preferred
stock with designations, rights and preferences as may be determined from time
to time by the board of directors. Accordingly, the board of directors is
empowered, without shareholder approval, to issue
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<PAGE>
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
common stock. In the event of issuance, the preferred stock could be used, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of Dynamic Imaging.
CERTAIN FLORIDA LEGISLATION
Florida has enacted legislation that may deter or frustrate takeovers
of Florida corporations. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless such voting rights are approved by a majority of a
corporation's disinterested shareholders. The Florida Affiliated Transactions
Act generally requires super majority approval by disinterested shareholders of
certain specified transactions between a public corporation and holders of more
than 10% of the outstanding voting shares of the corporation (or their
affiliates). Florida law and Dynamic Imaging's Articles and Bylaws also
authorize Dynamic Imaging to indemnify Dynamic Imaging's directors, officers,
employees and agents. In addition, Dynamic Imaging's Articles and Florida law
presently limit the personal liability of corporate directors for monetary
damages, except where the directors (i) breach their fiduciary duties; and (ii)
such breach constitutes or includes certain violations of criminal law, a
transaction from which the directors derived an improper personal benefit,
certain unlawful distributions or certain other reckless, wanton or willful acts
or misconduct.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DYNAMIC IMAGING'S ARTICLES OF
INCORPORATION AND BYLAWS
The paragraphs above under the section entitled "Preferred Stock",
could have an anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt, including attempts that might result in a premium
being paid over the market price for the shares held by shareholders. Despite
the belief of Dynamic Imaging as to the benefits to shareholders of these
provisions of our Articles of Incorporation, these provisions may also have the
effect of discouraging a future takeover attempt which would not be approved by
Dynamic Imaging's board, but pursuant to which the shareholders may receive a
substantial premium for their shares over then current market prices. As a
result, shareholders who might desire to participate in such a transaction may
not have any opportunity to do so. These provisions will also render the removal
of Dynamic Imaging's Board of Directors and management more difficult and may
tend to stabilize Dynamic Imaging's stock price, thus limiting gains which might
otherwise be reflected in price increases due to a potential merger or
acquisition. The board of directors, however, has concluded that the potential
benefits of these provisions outweigh the possible disadvantages. Pursuant to
applicable regulations, at any annual or special meeting of its shareholders,
Dynamic Imaging may adopt additional Articles of Incorporation provisions
regarding the acquisition of its equity securities that would be permitted to a
Florida corporation.
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<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON DYNAMIC IMAGING'S COMMON EQUITY AND
--------------------------------------------------------------------
OTHER STOCKHOLDER MATTERS
-------------------------
There is currently no public trading market for Dynamic Imaging's
common stock. As at October 31, 1999, there were 57 holders of record of our
Common Stock.
As at October 31, 1999, we had outstanding options to purchase
4,500,000 shares of our common stock, none of which had vested. We have no
shares currently eligible for sale under Rule 144 and no shares outstanding
which include registration rights. However, we have outstanding 575,660 shares
which were previously issued under Rule 504, and which are able to be traded
currently if a market were to develop for our shares.
Dynamic Imaging expects to engage Corporate Stock Transfer as the
transfer agent for its common stock. Corporate Stock Transfer is located at 370
17th Street, Suite 2350, Denver, Colorado 80202.
Dynamic Imaging has never paid cash dividends on its common stock and
presently intends to retain future earnings, if any, to finance the expansion of
business. Dynamic Imaging does not anticipate that any cash dividends will be
paid in the foreseeable future. The future dividend policy will depend on our
earnings, capital requirements, expansion plans, financial condition and other
relevant factors.
ITEM 2. LEGAL PROCEEDINGS
-----------------
There are no material legal proceedings filed, or to Dynamic Imaging's
knowledge, threatened against it.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------
In March 1998, Dynamic Imaging granted options to purchase an aggregate
of 3,000,000 shares of common stock at a purchase price of $.80 per share to its
officers and directors and options to purchase 1,500,000 shares of common stock
at a purchase price of $.80 per share to an individual who was serving as an
officer and director at that time. The options are exercisable in five equal
annual installments beginning on February 28, 2000 are exercisable for a period
of seven years from the date of vesting. Because these individuals, as officers
and directors, had access to all information pertaining to Dynamic Imaging, the
issuance was exempt from the registration requirements of the Act under Section
4 (2) of the Securities Act of 1933.
-12-
<PAGE>
In March 1998, Dynamic Imaging issued an aggregate of 5,000,000 shares
of common stock to affiliates or family members of the officers and directors of
Dynamic Imaging for aggregate consideration of $5,000. These investors were
founders of Dynamic Imaging, and therefore, had access to all information
pertaining to Dynamic Imaging. As a result, the issuance was exempt from the
registration requirements of the Act under Section 4(2) of the Securities Act of
1933.
In January 1999, Dynamic Imaging issued an aggregate of 250,300 shares
of common stock at $.50 per share to 17 investors in accordance with Rule 504 of
Regulation D under the Securities Act of 1933. Between February and March 1999,
Dynamic Imaging issued an aggregate of 299,410 shares of common stock at $2.50
per share to 37 investors in accordance with Rule 504 of Regulation D under the
Securities Act of 1933. Net proceeds from these two offerings, exclusive of
subscription receivables, were $425,485. As of October 31, 1999, we had still
outstanding subscription receivables of $146,750 from the latter offering.
Approximately two-thirds of the purchasers were friends or relatives of Dynamic
Imaging's executive officers (but not household numbers of the executives) and
the remaining one-third were various business associates of Dynamic Imaging.
In June 1999, Dynamic Imaging issued an aggregate of 20,000 shares of
common stock in exchange for professional services rendered. These shares were
valued at $.10 per share.
In October 1999, Dynamic Imaging issued in a private transaction an
aggregate of 40,000 shares of common stock to an individual, receiving net
proceeds of $25,000. Inasmuch as this individual had access to all information
pertaining to Dynamic Imaging, and is an accredited or otherwise sophisticated
investor, this transaction was exempt from the registration requirements of the
Securities Act of 1933.
ITEM 4. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of Florida corporations. Dynamic
Imaging's Articles of Incorporation and Bylaws provide that Dynamic Imaging
shall indemnify its directors and officers to the fullest extent permitted by
the Corporation Act. Insofar as indemnification for liabilities arising under
the Act may be permitted to directors, officers or persons controlling Dynamic
Imaging pursuant to the foregoing provisions, Dynamic Imaging has been informed
that, in the opinion of the Commission, this indemnification is against public
policy as expressed in the Securities Act of 1933 and is therefore
unenforceable.
PART F/S
The financial statements and supplementary data are included herein.
-13-
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
- ---------------------------------
The following audited Financial Statements for Dynamic Imaging, include
the audited balance sheet at December 31, 1998, and the related audited
statements of operations, changes in capital deficiency and cash flows for each
of the years in the period from March 27, 1998 (inception) to December 31, 1998
and the interim financial statements as of September 30, 1999 (unaudited).
-14-
<PAGE>
DYNAMIC IMAGING GROUP, INC.
FINANCIAL STATEMENTS
For the Period from Inception (March 27, 1998) to December 31, 1998
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING GROUP, INC.
FINANCIAL STATEMENTS
For the Period from Inception (March 27, 1998) to December 31, 1998
CONTENTS
<S> <C>
Report of Independent Certified Public Accountants.......................................................F-2
Financial Statements:
Balance Sheet........................................................................................F-3
Statement of Operations..............................................................................F-4
Statement of Stockholders' Equity....................................................................F-5
Statement of Cash Flows..............................................................................F-6
Notes to Financial Statements.........................................................................F-7-10
Balance Sheet.......................................................................................F-11
Statement of Operations.............................................................................F-12
Statement of Stockholders' Equity...................................................................F-13
Statement of Cash Flows.............................................................................F-14
Notes to Financial Statements........................................................................F-15-17
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
Dynamic Imaging Group, Inc.
Fort Lauderdale, Florida
We have audited the accompanying balance sheet of Dynamic Imaging Group, Inc. as
of December 31, 1998 the related statements of operations, stockholders' equity,
and cash flows for the period from inception (March 27, 1998) to December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dynamic Imaging Group, Inc. as
of December 31, 1998, and the results of its operations and its cash flows for
the period from inception (March 27, 1998) to December 31, 1998, in conformity
with generally accepted accounting principles.
Millward & Co. CPAs
Fort Lauderdale, Florida
February 15, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING GROUP, INC.
BALANCE SHEET
December 31, 1998
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 10,047
Accounts Receivable 4,507
----------
Total Current Assets 14,554
Property and Equipment, at Cost (Net of Accumulated
Depreciation of $560 ) 33,126
Security Deposit 1,590
----------
Total Assets $ 49,270
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 31,848
Deferred Income Taxes 1,620
Due to Affiliated Company 7,408
----------
Total Liabilities 40,876
----------
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;
5,000,000 Shares Issued and Outstanding ) 5,000
Additional Paid-in Capital 300,000
Accumulated Deficit (296,606)
----------
Total Stockholders' Equity 8,394
----------
Total Liabilities and Stockholders' Equity $ 49,270
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING GROUP, INC.
STATEMENT OF OPERATIONS
For the Period from Inception (March 27, 1998) to December 31, 1998
<S> <C>
REVENUES:
Graphic Sales $ 21,626
Display Sales 186,535
Display Rental Income 1,618
-----------
Total Revenues 209,779
COST OF SALES 68,370
-----------
GROSS PROFIT 141,409
-----------
OPERATING EXPENSES:
Advertising 19,446
Bank Charges 6,344
Depreciation 560
Dues and Subscriptions 402
Licenses and Permits 316
Office Supplies 6,581
Other 485
Postage and Delivery 5,479
Printing and Reproduction 7,294
Professional Fees 34,378
Rent 25,465
Repairs and Maintenance 1,701
Salaries 300,000
Telephone 11,272
Travel and Entertainment 11,613
Utilities 5,059
-----------
Total Operating Expenses 436,395
-----------
LOSS BEFORE PROVISION FOR INCOME TAXES (294,986)
-----------
PROVISION FOR INCOME TAXES:
Current --
Deferred 1,620
-----------
1,620
-----------
NET LOSS $ (296,606)
===========
BASIC AND DILUTED:
Net Loss Per Common Share $ (0.06)
===========
Weighted Common Shares Outstanding 5,000,000
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception (March 27, 1998) to December 31, 1998
Common Stock Total
Preferred Stock $.001 Par Value Additional Accumulated Stockholders'
Shares Amount Shares Amount Paid-in Capital Deficit Equity
------ ------ ------ ------ --------------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares Issued to Shareholders at Inception -- $ -- 5,000,000 $ 5,000 $ -- $ -- $ 5,000
Recognition of Officers Compensation on
Donated Services 300,000 300,000
Net Loss for the Period from Inception
(March 27, 1998) to
December 31, 1998 -- -- -- -- -- (296,606) (296,606)
------ --------- --------- --------- --------- --------- ---------
Balance at December 31, 1998 -- $ -- 5,000,000 $ 5,000 $ 300,000 $(296,606) $ 8,394
====== ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING GROUP, INC.
STATEMENT OF CASH FLOWS
For the Period from Inception (March 27, 1998) to December 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net Loss $(296,606)
Adjustments to Reconcile Net Loss to Net Cash Flows
Provided by Operating Activities:
Depreciation 560
Recognition of Officers Compensation on Donated Services 300,000
(Increase) Decrease in:
Accounts Receivable (4,507)
Security Deposits (1,590)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 31,848
Deferred Income Taxes 1,620
Due to Affiliated Company 7,408
---------
Net Cash Flows Provided by Operating Activities 38,733
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (33,686)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock 5,000
---------
Net Increase in Cash 10,047
Cash - Beginning of Period --
---------
Cash - End of Period $ 10,047
=========
SUPPLEMENTAL INFORMATION:
Cash Paid During Year for:
Interest $ --
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
DYNAMIC IMAGING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Dynamic Imaging Group, Inc. (Colorado) (the "Colorado Company") was incorporated
on March 27, 1998 under the laws of the State of Colorado. The Colorado Company
is authorized to issue 5,000,000 shares of its no par common stock
Dynamic Imaging Group, Inc. (Florida) (The "Florida Company") was organized
under the law of the State of Florida during January 1999. The Florida Company's
articles of incorporation provide for the issuance of 5,000,000 shares of its
$.001 par value common stock and 5,000,000 shares of its no par value preferred
stock.
During January 1999, all of the issued and outstanding stock of the Colorado
Company was exchanged for all of the shares of the issued and outstanding common
stock of the Florida Company. The accompanying financial statements give
retroactive effect to the exchange of common stock. The Colorado Company and the
Florida Company are hereinafter referred to collectively as the Company.
The Company is engaged in the sale, marketing and rental of portable show
displays, accessories and graphics through an independent network of outlets
though out the United States. The Company maintains its principal business
operations in Fort Lauderdale, Florida.
Revenue Recognition
Revenues from display sales are recognized upon shipment to the customer.
Revenues from graphic sales are recognized upon job completion. The Company
records revenues from display rentals when the rentals are completed and billed.
Fair Market Value of Financial Instruments
The carrying amount reported in the balance sheet for cash, other receivables,
accounts payable, and accrued liabilities approximates fair market value due to
the immediate or short-term maturity of these financial instruments.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period to prepare these consolidated financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates and assumptions.
Property and Equipment
Property and equipment are stated on the basis of cost less accumulated
depreciation and amortization. The Company provides for depreciation on a
straight-line basis over the following estimated useful lives: equipment,
furniture and fixtures, 5 to 7 years.
When assets are retired or otherwise disposed of, the costs and accumulated
depreciation are removed from the respective accounts and any related gain or
loss is recognized. Maintenance and repair costs are charged to expense as
incurred, and renewals and improvements that extend the useful lives of assets
are capitalized.
F-7
<PAGE>
DYNAMIC IMAGING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
For the purpose of the balance sheet and statement of cash flows, the Company
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
Stock- Based Compensation
The Company uses SFAS No. 123, "Stock-Based Compensation," which permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant.
Income Taxes
The Company utilizes the asset and liability method of accounting for deferred
income taxes. Under this method, deferred tax assets and liabilities are
established based on the differences between financial statement and income tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
The Company provides a valuation allowance against deferred tax assets if, based
on the weight of available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment and related accumulated depreciation consisted of the
following:
Furniture and fixtures $ 4,000
Machinery and Equipment 8,212
Displays 20,819
Leasehold Improvements 655
----------
33,686
Less: Accumulated depreciation (560)
----------
Total $ 33,126
==========
For the period from inception (March 27, 1998) to December 31, 1998,
depreciation expense amounted to $560.
NOTE 3 - INCOME TAXES
Income taxes are computed at statutory rates on pretax income. Deferred taxes
are recorded based on differences in financial statements and taxable income.
The tax effect of the temporary difference that gives rise to the deferred tax
liability at December 31 related to depreciation and amounted to $1,620.
F-8
<PAGE>
DYNAMIC IMAGING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE 4 - RELATED PARTY TRANSACTIONS
A company related through common ownership advanced funds to Company for
operations. These amounts are non-interest bearing, non-collateralized, and are
payable on demand. As of December 31, 1998, amounts due to this related company
amounted to $7,408.
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.
Common Stock
During March 1998, the Company issued 5,000,000 shares of its $.001 par value
common shares for $5,000.
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 live 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 $300,000 relating to services donated to the Company.
NOTE 6 - COMMITMENTS
Employment Agreements
During February 1998, the Company entered into five (5) year employment
agreements with three officers of the Company. The agreements provide for (i) an
annual base salary of $120,000, plus a discretionary expense account equal to
10% of the base pay and (ii) a bonus equal to 2.5% of the Company's gross
receipts for each year of the agreement, to a maximum of 10% of the gross
profits. The base salary shall increase not less than 10% of the previous years
base salary. The officers agreed to waive their respective salaries until
February 27, 1999. Additionally, these officers were granted options to acquire
300,000 shares of common stock of the Company per calendar year in each year of
employment at an exercise price of $.80 per share (See Note 5).
F-9
<PAGE>
DYNAMIC IMAGING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE 6 - COMMITMENTS (Continued)
Operating Lease
The Company leases office space in Fort Lauderdale, Florida pursuant to
operating leases. The leases generally provide for fixed monthly rental payments
aggregating approximately $4,800 plus sales tax through July 2001. The Company
has the option of renewing these leases for up to three years. For the period
from inception (March 27, 1998) to December 31, 1998, rent expense amounted to
$25,465.
At December 31, 1998, the future minimum annual rental payment under the
non-cancelable operating lease is as follows:
Year
----
1999 $ 56,100
2000 39,600
2001 21,450
--------------
$ 117,150
==============
NOTE 7 - SUBSEQUENT EVENT
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 $120,000 to be
used for the operations of the Company.
During February 1999, the Company issued 25,950 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 $61,631 to be
used for the operations of the Company.
F-10
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING GROUP, INC.
BALANCE SHEET
September 30, 1999
ASSETS
CURRENT ASSETS:
<S> <C>
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 1,220,125
Accumulated Deficit (945,848)
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.
F-11
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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.
F-12
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1999
Common Stock Total
$.001 Par Value Additional Accumulated Subscriptions Stockholders'
Shares Amount Paid-in Capital Deficit Receivable Equity
------ ------ --------------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 5,000,000 $ 5,000 $ 300,000 $ (296,606) $ -- $ 8,394
Shares Issued in Connection with Offerings 545,210 545 746,940 -- (66,750) 680,735
Shares Issued for Services 64,500 65 113,185 -- (81,250) 32,000
Recognition of officers compensation on
donated services -- -- 60,000 -- 60,000
Net Loss for the Six Months Ended June 30, 1999 -- -- -- (649,242) -- (649,242)
----------- --------- ----------- ----------- ----------- -----------
Balance at June 30, 1999 5,609,710 5,610 1,220,125 (945,848) (148,000) 131,887
=========== ========= =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC IMAGING GROUP, INC.
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
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.
F-14
<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 and notes for the year ended December 31, 1998.
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.
F-15
<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 $300,000 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.
Also, during the period ended June 30, 1999, the Company accrued officers
salaries amounting to $210,000.
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.
F-16
<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.
F-17
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBITS DESCRIPTION OF DOCUMENT
- -------- -----------------------
3.1 Articles of Incorporation of Dynamic Imaging Group, Inc.*
3.2 Bylaws of Dynamic Imaging Group, Inc.*
10.1 Employment Agreement between Dynamic Imaging Group, Inc. and Gary
Morgan dated March 2, 1998.*
10.2 Employment Agreement between Dynamic Imaging Group, Inc. and Roland
Breton dated March 2, 1998.*
10.3 Agreement between Dynamic Imaging Group, Inc. and Howard Storfer
dated March 2, 1998.*
10.4 Lease Agreement between Dynamic Imaging Group, Inc. and Patricia
Cheris dated June 1998.*
10.5 Lease Agreement between Dynamic Imaging Group, Inc. and
Luisa Certain and Maria Certain dated November 19, 1998.*
10.6 Lease Agreement between Dynamic Imaging Group, Inc. and Luisa
Certain and Maria Certain dated May 1, 1998.*
10.7 Co-Marketing Agreement with Sign*A*Rama USA, Inc.*
23. Subsidiaries.*
27. Financial Data Schedule.
* Previously filed.
-15-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
Dynamic Imaging Group, Inc. caused this amendment to its registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
DYNAMIC IMAGING GROUP, INC.
Date: November 15, 1999 By: /s/ Gary R. Morgan
----------------------------
Gary R. Morgan
Date: November 15, 1999 By: /s/ Roland L. Breton
----------------------------
Roland L. Breton
-16-
<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>
