<PAGE>
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: March 31, 2000
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 X No
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of April 30, 2000: 5,962,085 shares of common stock, $.001 par
value per share.
<PAGE>
DYNAMIC IMAGING GROUP, INC.
FORM 10-QSB
QUARTERLY PERIOD ENDED March 31, 2000
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheet (Unaudited)
March 31, 2000 .......................................... 3
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended March 31, 2000 and 1999 ...... 4
Consolidated Statement of Changes in Shareholders' Equity
For the Three Months Ended March 31, 2000 ............... 5
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2000 and 1999 ...... 6
Notes to Consolidated Financial Statements .......................... 7-9
Item 2 - Management's Discussion and Analysis or Plan
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 .......................................................... 13
<PAGE>
DYNAMIC IMAGING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash .......................................................... $ 5,885
Marketable Equity Securities .................................. 24,000
Accounts Receivable ........................................... 82,269
Subscription Receivable ....................................... 7,500
Inventories ................................................... 10,869
-----------
Total Current Assets ........................................ 130,523
PROPERTY AND EQUIPMENT - Net .................................... 131,552
DUE FROM RELATED PARTIES ........................................ 48,148
SECURITY DEPOSITS ............................................... 2,990
-----------
Total Assets ................................................ $ 313,213
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Note Payable .................................................. $ 50,000
Accounts Payable and Accrued Expenses ......................... 320,182
Accrued Salaries .............................................. 113,851
Customer Deposits ............................................. 16,749
Deposit on Stock Purchase ..................................... 104,800
-----------
Total Current Liabilities ................................... 605,582
-----------
STOCKHOLDERS' DEFICIT:
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;
5,962,085 Shares Issued and Outstanding ) ................. 5,962
Additional Paid-in Capital .................................... 1,495,138
Accumulated Deficit ........................................... (1,793,469)
-----------
Total Stockholders' Deficit ................................. (292,369)
-----------
Total Liabilities and Stockholders' Deficit ................. $ 313,213
===========
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE>
DYNAMIC IMAGING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended
March 31,
-----------------------------
2000 1999
---------- ---------------
(Unaudited) (Unaudited)
NET SALES ................................... $ 217,809 $ 45,879
COST OF SALES ............................... 95,175 12,475
----------- -----------
GROSS PROFIT ................................ 122,634 33,404
----------- -----------
OPERATING EXPENSES:
Consulting Fees ......................... 74,610 --
Contract Labor .......................... 61,908 35,769
Depreciation ............................ 5,000 1,000
Professional Fees ....................... 17,788 6,415
Rent .................................... 27,607 15,264
Salaries ................................ 117,517 109,875
Other Selling, General and Administrative 121,620 112,003
----------- -----------
Total Operating Expenses ............ 426,050 280,326
----------- -----------
LOSS FROM OPERATIONS ........................ (303,416) (246,922)
OTHER EXPENSES:
Interest Expense ....................... -- --
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES ...... (303,416) (246,922)
----------- -----------
PROVISION FOR INCOME TAXES:
Current ................................ -- --
Deferred ............................... -- --
----------- -----------
----------- -----------
----------- -----------
NET LOSS .................................... $ (303,416) $ (246,922)
=========== ===========
BASIC AND DILUTED:
Net Loss Per Common Share ............. $ (0.05) $ (0.05)
=========== ===========
Weighted Common Shares Outstanding .... 5,902,446 5,253,032
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
<PAGE>
DYNAMIC IMAGING GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
March 31,
-----------------------------
2000 1999
---------- ---------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ...................................... $(303,416) $(246,922)
Adjustments to Reconcile Net Loss
to Net Cash Flows
Used in Operating Activities:
Depreciation ........................... 5,000 1,000
Recognition of Officers Compensation
on Donated Services .................... -- 60,000
Common Stock Issued for Services ....... 77,500 --
(Increase) Decrease in:
Accounts Receivable .................. (54,483) (493)
Inventories .......................... (5,406) --
Due from Related Parties ............. 40,993 (60,016)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 20,851 54,575
Accrued Salaries .................... 41,351 7,000
Customer Deposits ................... (690) --
Due to Related Party ................ -- (7,408)
--------- ---------
Net Cash Flows Used in Operating Activities ....... (178,300) (192,264)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash from Acquisition ......................... 1,276 --
Acquisition of Property and Equipment ......... (5,741) (87,359)
--------- ---------
Net Cash Flows Used in Investing Activities ....... (4,465) (87,359)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in Subscriptions Receivable ......... 30,500 --
Proceeds from Deposit on Stock Purchase ...... 104,800 --
Proceeds from Issuance of Common Stock ....... 50,000 270,050
--------- ---------
Net Cash Flows Provided by Financing Activities ... 185,300 270,050
--------- ---------
Net Increase (Decrease ) in Cash .................. 2,535 (9,573)
Cash - Beginning of Period ........................ 3,350 10,047
--------- ---------
Cash - End of Period .............................. $ 5,885 $ 474
========= =========
SUPPLEMENTAL INFORMATION:
Cash Paid During Year for:
Interest and Taxes ......................... $ -- $ --
========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of Common Stock
for Subscription Receivable ...................... $ -- $ 550,000
========= =========
Issuance of Common Stock
for Marketable Equity Securities ................. $ 24,000 $ --
========= =========
Details of Acquisition:
Fair value of assets ........................... $ 26,777 $ --
Liabilities ................................... (377) --
Common stock issued ........................... (26,400) --
--------- ---------
Net cash paid for acquisition .................. $ -- $ --
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
-5-
<PAGE>
DYNAMIC IMAGING GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated 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 consolidated
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. The consolidated
financial statements include the accounts of the Company and its subsidiary. All
significant intercompany accounts and transactions have been eliminated. These
consolidated financial statements should be read in conjunction with the
financial statements for the year ended December 31, 1999 and notes thereto
contained in the Report on Form 10-KSB of Dynamic Imaging Group, Inc. (the
"Company") as filed with the Securities and Exchange Commission. The results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of the results for the full fiscal year ending December 31, 2000.
NOTE 2- LOSS PER SHARE
Basic earnings per share is computed by dividing net loss 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 a certain officer of the Company. The advances are
non-interest bearing and are payable on demand. At March 31 2000, advances to
this officer amounted to $1,698.
The Company advanced funds to a company affiliated through common officers. The
advances are non-interest bearing and are payable on demand. At March 31, 2000,
advances to this company amounted to $46,450.
NOTE 4 - ACQUISITION
During January 2000, the Company acquired 100% of the outstanding stock of Digi
of Fort Lauderdale, Inc. in exchange for 33,000 shares of Company stock with a
fair value of $26,400. The Company is accounting for this acquisition using the
purchase method of accounting. The purchase price equaled the fair value of net
liabilities assumed. The results of operations of Digi of Fort Lauderdale, Inc.
are included in the accompanying financial statements from January 1, 2000
(effective date of acquisition) to March 31, 2000. Digi of Fort Lauderdale, Inc.
commenced operations subsequent to March 31, 1999. Therefore, unaudited pro
forma consolidated results of operations have not been presented.
-7-
<PAGE>
DYNAMIC IMAGING GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(UNAUDITED)
NOTE 5 - MARKETABLE EQUITY SECURITIES
Marketable equity securities are classified into one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities are
acquired and held principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities that the Company has the
ability and intent to hold to maturity. All other securities not included in the
trading and held-to-maturity categories are available-for-sale securities.
Management determines the appropriate classifications of marketable equity
securities at the time they are acquired and evaluates the continuing
appropriateness of the classification at each balance sheet date. At March 31,
2000, the Company held only available-for-sale securities, which are reported at
fair value with unrealized gains and losses excluded from earnings and reported
as a separate component of stockholders' deficit.
NOTE 6- STOCKHOLDERS' EQUITY (DEFICIT)
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 the three month period ended March 31, 2000, the Company issued 82,000
shares of common stock in exchange for professional services rendered. These
shares were valued at $.80 to $2.50 per share, the fair values, and charged to
operations.
During January 2000, the Company issued 33,000 shares of restricted common stock
at a fair value price of $.80 in exchange for 100% of the outstanding shares of
Digi of Fort Lauderdale, Inc.
During January 2000, the Company issued 80,000 shares of restricted common stock
for $40,000 in cash and marketable equity securities with a fair market value of
$24,000.
During January 2000, the Company authorized the issuance of 300,000 shares of
common stock to a third party at a fair value price of $.50 per share. As of
March 31, 2000, the shares had not been issued although the Company collected
funds toward the purchase of these shares amounting to $104,800. The funds are
shown on the accompanying balance sheet as a deposit on stock purchase
During March 2000, the Company issued 10,000 shares of restricted common stock
for proceeds of $10,000.
<PAGE>
-8-
DYNAMIC IMAGING GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(UNAUDITED)
NOTE 7 -COMPREHENSIVE INCOME
The Company uses 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 three months ending
March 31, 2000, the Company had no comprehensive income.
NOTE 8 - FUTURE EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133), which establishes accounting and reporting standards
for all derivative instruments. SFAS 133 was to be effective for fiscal years
beginning after June 15, 1999. In June 1999, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 137 as an amendment
to SFAS 133 and deferred the effective date of SFAS 133 to fiscal years
beginning after June 15, 2000. The Company currently has no derivative
instruments and, therefore, the adoption of SFAS 133 is not expected to have an
impact on the Company's financial position or results of operations.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
This report on Form 10-QSB contains certain forward-looking statements, 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.
Three months ended March 31, 2000 compared to three months ended March 31, 1999.
Net sales for the three months ended March 31, 2000 were $217,809 as compared to
net sales for the three months ended March 31, 1999 of $45,879. This increase is
principally due to volume and rate increases in our existing markets, as well as
revenues associated with new store operations in Miami and Fort Lauderdale,
Florida.
Cost of sales were $95,175 or 44% of sales for the three months ended March 31,
2000 as compared to cost of sales for the three months ended March 31, 1999 of
$12,475 or 28% of sales. Cost of sales increased as a percentage of net sales.
The Company recognizes a greater gross profit margin from graphic sales as
compared to display sales. Net sales and gross profits depend in part on the
volume and mix of display sales, graphic sales and rental sales. Graphic
products have a higher gross margin with a relatively lower sales transaction
amount per customer, while display sales have a comparably lower gross profit
margin with a relatively higher sales transaction amount per customer. During
the three months ended March 31, 2000, displays sales accounted for
approximately 69% of net sales as compared to approximately 50% of net sales for
the three months ended March 31, 1999.
Consulting fees were $74,610 for the three months ended March 31, 2000. The
increase is primarily attributable to investment banking and other fees incurred
in connection with the Company's stock sales.
Contract labor expenses include costs and commissions related to the Company's
sales force that is comprised of both direct employees of the Company (included
in salaries) and independent sales representatives. Contract labor also includes
costs of certain individuals related to administration and purchasing who are
engaged on a contractual basis. The increase in contract labor is attributable
to Company's growth and need to support the existing products and service
business of the Company as well as to provide the infrastructure for future
growth.
Professional fees were $17,788 for the three months ended March 31, 2000 as
compared to $6,415 for the three months ended March 31, 1999. The increase is
attributable to an increase in accounting and auditing fees, and legal fees
primarily attributable to the Company's private placement and SEC filings.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Results of Operations (Continued)
Rent expense was $27,607 for the three months ended March 31, 2000 as compared
to $15,264 for the three months ended March 31, 1999. The increase was directly
attributable to the acquisition of its wholly owned subsidiary, Digi of Fort
Lauderdale, Inc.
Salaries were $117,517 for the three months ended March 31, 2000 as compared to
$109,875 for the three months ended March 31, 1999. The increase was directly
attributable to the Company's head count growth and need to support the existing
product.
Other selling, general and administrative expenses, which include travel and
entertainment, insurance, auto, telephone and other expenses, were $121,620 for
the three months ended March 31, 2000 as compared to $112,003 for the three
months ended March 31, 1999. The increase is primarily attributable to increased
sale and marketing efforts.
As a result of the foregoing factors, the Company incurred losses of
approximately $303,416 or ($.05) per share for the three months ended March 31,
2000 as compared to a loss of approximately $246,922 or ($.05) per share for the
three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had a stockholders' deficiency of approximately
$292,369. Since its inception, it has incurred losses of approximately
$1,793,000. The Company's operations and growth have been funded by the sale of
common stock with gross proceeds of approximately $880,000 and working capital
borrowings amounting to $50,000. These funds were 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 through cost reductions and increased
marketing efforts together with additional proceeds from common stock sales. A
key element of the Company's strategy is to continue to expand its sales force
and to evaluate opportunities to expand through acquisition of companies engaged
in similar and related complementary businesses. Any such acquisitions will
require additional capital, although there can be no assurances that any
acquisitions will be completed. Also the Company believes that additional
funding will be necessary to expand its market share.
Net cash used in operations during the three months ended March 31, 2000 was
$178,300 compared to cash used in operations of $192,264 in the 1999 period. The
difference is primarily due to net cash received from related parties.
Net cash used in investing activities during the three months ended March 31,
2000 was $4,465 compared to net cash used in investing activities of $87,359
during the three months ended March 31, 1999. This difference was attributable
to the acquisitions of trade show displays to be used in the Company's display
rental business during 1999. Net cash provided by financing activities during
the three months ended March 31, 2000 was $185,300 as compared to net cash
provided by financing activities of $270,050 during the three months ended March
31, 1999. The difference was attributable to less sales of common stock in the
current period.
-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
(a) Exhibits
(27) Financial Data Schedule
(b) There were no current reports on Form 8-K filed by the Company
during the three months ended March 31, 2000.
.
-12-
<PAGE>
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: May 15, 2000 By: /s/Gary Morgan
------------------------------
Gary Morgan, Chief Executive Officer
Dated: May 15, 2000 By: /s/ Roland Breton
-----------------------------
Roland Breton, President
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001079250
<NAME> DYNAMIC IMAGING GROUP, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 5,885
<SECURITIES> 24,000
<RECEIVABLES> 82,269
<ALLOWANCES> 0
<INVENTORY> 10,869
<CURRENT-ASSETS> 130,523
<PP&E> 154,627
<DEPRECIATION> 23,075
<TOTAL-ASSETS> 313,213
<CURRENT-LIABILITIES> 605,582
<BONDS> 0
0
0
<COMMON> 5,962
<OTHER-SE> (298,331)
<TOTAL-LIABILITY-AND-EQUITY> 313,213
<SALES> 217,809
<TOTAL-REVENUES> 217,809
<CGS> 95,175
<TOTAL-COSTS> 95,175
<OTHER-EXPENSES> 426,050
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (303,416)
<INCOME-TAX> 0
<INCOME-CONTINUING> (303,416)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (303,416)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
