U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required)
Commission File No. 0-26351
iVIDEONOW, Inc.
(Formerly DIGS, Inc.)
--------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Delaware 95-4603237
----------------------------------- ------------------------
(State or other jurisdiction of (I.R.S Employer
incorporation of organization) Identification No.)
17327 Ventura Boulevard, Suite 200, Encino, California 91316
---------------------------------------------------------------
Address of principal executive office
(818) 995 - 3650
-----------------------------
Issuer's telephone number
Check whether the issuer has (1) filed all reports required by Section 12 or
15(d) of the Exchange Act during the past 12 months, and (2) been subject to
such filing requirements for the past ninety (90) days. Yes ( X ) No ( )
As of September 30, 2000, 6,658,631 shares of the registrant's common stock
were outstanding.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of November 13, 2000 was $2,064,175.
<PAGE>1
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
INDEX
<TABLE>
<S> <C>
Pages
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PART I: FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Independent Accountants' Report 2
Condensed Consolidated Balance Sheet (Unaudited) as of September 30, 2000 3
Condensed Consolidated Statements of Operations (Unaudited)
For the Quarters and Year-to-Date Periods Ended September 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Year-to-Date Periods Ended September 30, 2000 and 1999 5
Selected Information - Substantially All Disclosures Required by Generally
Accepted Accounting Principles are Not Included 6 - 10
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 12
</TABLE>
<PAGE>2
INDEPENDENT ACCOUNTANTS' REPORT
November 9, 2000
To The Board of Directors and Stockholders of
iVideoNow, Inc. and Subsidiaries
Encino, California
We have reviewed the accompanying condensed consolidated balance sheet of
iVideoNow, Inc. and Subsidiaries as of September 30, 2000, the related condensed
consolidated statements of operations for the quarter and year-to-date periods
ended September 30, 2000 and 1999, and the condensed consolidated statements of
cash flows for the year-to-date periods ended September 30, 2000 and 1999. These
financial statements are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
The financial statements for the quarter and year-to-date periods ended
September 30, 1999 have not been reviewed by us, and accordingly, we express no
opinion or other form of assurance on them.
/s/ CALDWELL, BECKER, DERVIN, PETRICK & CO., L.L.P.
Woodland Hills, California
<PAGE>3
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,029,171
Accounts receivable - trade 100,296
Investments 1,250
------------------
Total Current Assets 1,130,717
------------------
PROPERTY AND EQUIPMENT,
net of accumulated depreciation 208,440
PROGRAM DEVELOPMENT COSTS,
net of accumulated amortization 191,851
OTHER ASSETS
Officer loans 71,709
Deposits 1,082
------------------
Total Other Assets 72,791
------------------
Total Assets $ 1,603,799
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 83,927
Other liabilities 2,400
------------------
Total Current Liabilities 86,327
------------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; 20,000,000
shares authorized, 2,500 shares issued and outstanding 25
Common stock, par value $.001 per share; 80,000,000
shares authorized, 6,658,631 shares issued and
outstanding 6,659
Additional paid-in capital 3,712,569
Accumulated other comprehensive (loss) (118,372)
Retained (deficit) (2,083,409)
------------------
Total Stockholders' Equity 1,517,472
------------------
Total Liabilities and Stockholders' Equity $ 1,603,799
==================
</TABLE>
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
<PAGE>3
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
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For the Quarter Ended For The Year-To-Date Periods
September 30, Ended September 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ------------- ------------
REVENUE $ 92,575 $ 245,165 $ 426,480 $ 559,319
COST OF SALES 66,943 28,813 156,315 114,847
------------ ------------ ------------- ------------
Gross Profit/(Loss) 25,632 216,352 270,165 444,472
------------ ------------ ------------- ------------
OPERATING EXPENSES
Accounting 4,921 0 41,100 0
Legal 32,964 0 85,719 0
Marketing 4,790 19,295 90,150 83,413
Outside services 9,500 30,098 20,800 88,655
Payroll expenses 167,564 100,808 460,685 254,210
Rent 23,613 18,872 67,451 57,201
Other 137,090 100,709 305,579 230,069
------------ ------------ ------------- ------------
Total Operating Expenses 380,442 269,782 1,071,484 713,548
------------ ------------ ------------- ------------
Income/(Loss) from Operations (354,810) (53,430) (801,319) (269,076)
OTHER INCOME/(EXPENSE)
Rental income 4,240 3,000 10,240 20,300
Interest income 19,905 0 33,296 0
Other expense (53) 0 (3,728) 0
Realized (loss) on sale of securities 0 0 0 (7,850)
------------ ------------ ------------- ------------
Income/(Loss) Before Taxes (330,718) (50,430) (761,511) (256,626)
(PROVISION) FOR INCOME TAX 0 0 (2,400) (800)
------------ ------------ ------------- ------------
Net Income/(Loss) (330,718) (50,430) (763,911) (257,426)
OTHER COMPREHENSIVE INCOME, net of tax
Unrealized holding gain/(loss) on investments (78,750) 0 (115,625) 0
Reclassification of loss included in net income 0 0 0 7,850
------------ ------------ ------------- ------------
Comprehensive Income/(Loss) $ (409,468) $ (50,430) $ (879,536) $ (249,576)
============ ============ ============= ============
(Loss) per share and common share equivalents $ (.06) $ (.01) $ (.13) $ (.05)
============ ============ ============= ============
Weighted average common shares outstanding 6,649,864 5,272,280 6,649,864 5,272,280
============ ============ ============= ============
</TABLE>
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
<PAGE>5
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR-TO-DATE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
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2000 1999
------------ ------------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net (loss) $ (763,911) $ (257,426)
Adjustments to reconcile net (loss) to net cash provided
(used) by operating activities:
Amortization and depreciation 42,754 27,216
(Increase) in accounts receivable (32,601) (223,361)
Increase in current liabilities and accrued expenses 4,853 12,767
(Increase) in receivables from employees 0 (1,000)
(Decrease) in deferred rent credit (11,667) (15,002)
Realized (loss) on sale of marketable equity securities 0 (7,850)
(Increase) in deposits (922) (1,500)
------------ ------------
Net Cash Flows (Used) by Operating Activities (761,494) (466,156)
------------ ------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Acquisition of property and equipment (118,152) (35,383)
(Increase) in program development cost (86,127) (47,000)
(Increase) in loan receivable - officer (41,151) (25,000)
Decrease in marketable securities 0 9,000
------------ ------------
Net Cash Flows (Used) by Investing Activities (245,430) (98,383)
------------ ------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Issuance of convertible preferred stock 2,230,000 0
Proceeds from short term loan 150,000 0
Proceeds from short term loan - officer 30,000 60,000
Principal payment of short term loan - officer (30,000) 0
Principal payment of short term debt (450,000) 0
------------ ------------
Net Cash Flows Provided by Financing Activities 1,930,000 60,000
------------ ------------
NET INCREASE (DECREASE) IN CASH 923,076 (504,539)
CASH AT THE BEGINNING OF THE PERIODS 106,095 515,920
------------ ------------
CASH AT THE END OF THE YEAR $ 1,029,171 $ 11,381
============ ============
ADDITIONAL DISCLOSURES:
Interest paid $ 6,147 $ 0
=========== ===========
Income taxes paid $ 2,400 $ 800
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
<PAGE>6
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
SELECTED INFORMATION
Substantially All Disclosures Required By Generally Accepted Accounting
Principles are Not Included
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 - MANAGEMENT'S STATEMENT
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (all of which are normal and recurring in
nature) necessary to present fairly the financial position of iVideoNow, Inc.
and Subsidiaries (the Company) at September 30, 2000, and the results of
operations and the cash flows for the quarter and year-to-date periods ended
September 30, 2000 and 1999.
The notes to the Condensed Consolidated Financial Statements, which are
incorporated by reference into the 1999 Form 10-SB, should be read in
conjunction with these financial statements.
NOTE 2 - USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 3 - SHAREHOLDERS' EQUITY
Common Stock
In connection with the March 14, 2000 private placement of convertible
preferred stock, the Company issued 100,000 warrants to the buyers and 200,000
warrants to the underwriters. Each warrant may be converted into one share of
new common stock at an exercise price equal to 110% of the closing bid price of
the common stock on March 14, 2000. The warrants expire on May 13, 2003. As of
September 30, 2000, all 300,000 warrants remained outstanding.
Preferred Stock
In connection with the March 14, 2000 private placement of convertible
preferred stock, the Company has 2,500 shares of Series "A" Convertible
Preferred Stock, par value of $0.01 outstanding as of September 30, 2000. The
preferred shares are convertible, in whole or in part, at the option of the
holders thereof, into non-assessable shares of common stock. Upon conversion,
the number of common stock received for each preferred share will be calculated
by dividing the conversion amount by the conversion price. The conversion amount
is the sum of any accrued and unpaid dividends and the stated value of $1,000
per preferred share. The conversion price would be either 125% of the closing
bid price on the issuance date, or the average of 75% of the lowest closing bid
prices of the common stock during any three (3) trading days during the twenty
(20) consecutive trading days ending on and including any date of determination,
whichever is lower.
Holders of the preferred shares are entitled to receive cumulative cash
dividends at the annual rate of 6% when the shares are converted. At the option
of the holders, dividends may be paid in shares of common stock or in cash. The
preferred shares mature on May 13, 2003.
Holders of the preferred shares have no voting rights, except as required
by law, including but not limited to the General Corporation Law of the State of
Delaware. All preferred shares rank senior to the common stock. The preferred
shares have liquidation preferences that equal the sum of the stated value and
any accrued and unpaid dividends. The preferred shares are redeemable, at the
option of the Company, for consideration equal to 120% of the liquidation
preference.
<PAGE>7
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
SELECTED INFORMATION
Substantially All Disclosures Required By Generally Accepted Accounting
Principles are Not Included
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 3 - STOCKHOLDERS' EQUITY (Continued)
As of September 30, 2000, none of the convertible preferred shares relating
to the March 14, 2000 private placement have been converted to common stock. The
following is an analysis of activities in the Stockholders' Equity for the nine
months ended September 30, 2000:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comp-
Preferred Common Stock Additional rehensive
-------------- ------------------ Paid-In Income Retained
Shares Amount Shares Amount Capital (Loss) (Deficit) Balance
------ ------ --------- ------- ------------- ---------- ------------ ------------
Balance at 12/31/99 -- -- 6,658,631 $6,659 $ 1,482,594 $ (2,747) $(1,319,498) $ 167,008
March 14, 2000
Preferred stock issued 2,500 $ 25 -- -- 2,229,975 -- -- 2,230,000
September 30, 2000
Unrealized holding (loss) -- -- -- -- -- (115,625) -- (115,625)
Net (loss) -- -- -- -- -- -- (763,911) (763,911)
------ ------ --------- ------- ------------- ---------- ------------ ------------
Balance at 9/30/00 2,500 $ 25 6,658,631 $6,659 $ 3,712,569 $(118,372) $(2,083,409) $ 1,517,472
====== ====== ========= ======= ============= ========== ============ ============
</TABLE>
NOTE 4 - STOCK OPTION PLANS
The Company has elected to follow Accounting Principles Board Opinion
(APBO) No. 25, "Accounting for Stock Issued to Employees," and to provide the
disclosures required under Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation." In electing to follow APBO
No. 25, the Company does not recognize any compensation expense related to the
granting of any stock options, as no options are granted at a price below the
market price on the day of grant.
The Company's 1999 stock option plan provides incentive stock options and
nonqualified stock options to purchase common stock. The options may be granted
to directors, officers, key employees, consultants and subsidiaries. The
exercise price can be up to 110% of market price at the date of grant.
Generally, options are exercisable in equal installments over three years from
the date of grant, and expire five to ten years from the date of grant. As of
September 30, 2000, 750,000 shares were approved to be issued under the plan, of
which 85,000 shares were available for future plans.
Presented below is a summary of stock option plan activity for the periods
shown:
<TABLE>
<S> <C> <C>
Weighted Average
Stock Options Exercise Price
--------------- -----------------
Outstanding at December 31, 1999 295,000 $ 5.17
Granted 370,000 $ 1.87
Exercised -- --
Forfeited -- --
Expired -- --
--------------- -----------------
Outstanding at September 30, 2000 665,000 $ 3.39
=============== =================
Shares exercisable at September 30, 2000 96,333 $ 5.17
=============== =================
</TABLE>
NOTE 4 - STOCK OPTIONS (Continued)
Exercise prices for options outstanding as of September 30, 2000 range from
$0.50 to $5.50. The following table summarizes information for options
<PAGE>8
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
SELECTED INFORMATION
Substantially All Disclosures Required By Generally Accepted Accounting
Principles are Not Included
SEPTEMBER 30, 2000
(UNAUDITED)
outstanding and exercisable at September 30, 2000:
<TABLE>
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
------------------------------------------------- ------------------------------
Weighted Weighted
Average Average Stock Weighted-
Exercise Stock Options Exercise Remaining Options Average
Prices Outstanding Price Contractual Life Exercisable Exercise Price
---------------- ----------------------------- ------------------- ------------- ----------------
$5.00 300,000 $5.00 2.5 66,000 $5.00
$5.50 100,000 $5.50 2.0 33,333 $5.50
$0.50 265,000 $0.50 3.0 0 $0.50
--------------- -------------
665,000 99,333
=============== =============
</TABLE>
In electing to continue to follow APBO No. 25 for expense recognition
purposes, the Company is obligated to provide the expanded disclosures required
under SFAS No. 123 for stock-based compensation granted in 2000. This includes
materially different information from reported results, such as proforma net
income and earnings per share, had compensation expense relating to the period
ended September 30, 2000 grants measured under the fair value recognition
provisions of SFAS No. 123.
Because the weighted average fair values at date of grant were the same
as the market values during the period ended September 30, 2000, the Company's
net income and earnings per share will be the same as the proforma net income
and earnings per share. Therefore, the Company's proforma information has not
been presented.
The weighted average fair value at date of grant for options granted during
the period ended September 30, 2000 was $3.39 and was estimated using the
Black-Scholes option valuation model with the following weighted-average
assumptions:
2000
-------------
Expected life in years 5
Interest Rate 5.0%
Volatility 33.0%
Dividend Yield 0%
NOTE 5 - SEGMENT INFORMATION
Prior to August 1999, the Company operated in one business segment, the
production of custom CD-ROM's, through its wholly owned subsidiary Digital
Corporate Profiles (DCP). In August 1999, the Company began to provide graphic
design services to its clients through its wholly owned subsidiary DXF Design
(DXF). Inter-company transactions between the two entities are immaterial.
<PAGE>9
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
SELECTED INFORMATION
Substantially All Disclosures Required By Generally Accepted Accounting
Principles are Not Included
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 5 - SEGMENT INFORMATION (Continued)
Information concerning operations in different lines of business for the quarter
and nine months ended September 30, 2000 is presented below.
Segment Results for the Quarter Ended September 30, 2000:
<TABLE>
<S> <C> <C> <C>
CD-ROM
Design and Graphic
For the Quarter Ended September 30, 2000 Development Design Consolidated
---------------------------------------------------- ---------------- --------------- ----------------
Net Operating Revenues $ 20,225 $ 72,350 $ 92,575
Operating Income/(Loss) (341,164) (13,646) (354,810)
Identifiable Operating Assets 1,296,437 117,410 1,413,847
Depreciation and Amortization $ 71,177 $ 3,513 $ 74,690
Segment Results for the year-to-date ended September 30, 2000:
CD-ROM
Design and Graphic
For the Year-to-Date Ended September 30, 2000 Development Design Consolidated
---------------------------------------------------- ---------------- --------------- ----------------
Net Operating Revenues $ 104,900 $ 321,580 $ 426,480
Operating Income/(Loss) (843,407) 42,089 (801,319)
Identifiable Operating Assets 1,296,437 117,410 1,413,847
Depreciation and Amortization $ 71,177 $ 3,513 $ 74,690
</TABLE>
Identifiable operating assets include cash, available-for-sale securities,
trade accounts receivable, and fixed assets. For the nine months ended September
30, 2000, 100% of the revenue generated by Digital Corporate Profiles was from
one customer.
NOTE 6 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash balances at several financial institutions
located in Southern California. The Federal Deposit Insurance Corporation
insures balances up to $100,000. At September 30, 2000, the Company's uninsured
cash balance totaled $768,856.
NOTE 7 - MARKETING DISCOUNTS
The Company has recognized $40,000 in marketing discounts during the period
ended September 30, 2000. These marketing discounts relate to the completion of
CD-ROM production contracts. Marketing discounts are applied to the gross
contract amounts, the net of which is normally paid in cash by the client. The
gross contract amounts are booked as revenue by the Company, and any marketing
discounts are recognized as marketing expenses during the same period. The
Company bases the value of the marketing discounts on its historical costs to
expose and distribute the CD-ROM products to prospective clients. Each CD-ROM
product bears the Company's subsidiary name Digital Corporate Profiles and
provides the end-user contact information. Many of the CD-ROM products created
by DCP are distributed at trade shows or in mailers, providing the Company with
exposure to many prospective clients.
<PAGE>10
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
SELECTED INFORMATION
Substantially All Disclosures Required By Generally Accepted Accounting
Principles are Not Included
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 8 - EARNINGS PER SHARE
Fully diluted per share data is not presented, as the effects would be
antidilutive.
This Form 10-QSB includes "forward-looking" statements about future
financial results, future business changes and other events that have not yet
occurred. For example, statements like we "expect," we "anticipate" or we
"believe" are forward-looking statements. Investors should be aware actual
results may differ materially from our expressed expectations because of risks
and uncertainties about the future. We do not undertake to update the
information in this Form 10-QSB if any forward-looking statements later turn out
to be inaccurate. Details about risks affecting various aspects of our business
are discussed throughout this Form 10-QSB. Investors should take these risks
into consideration.
FINANCIAL CONDITION
The overall financial condition of the Company remains stable at September
30, 2000. Cash reserves and other current assets of approximately $1.1 million
will provide the Company with the necessary resources to continue developing new
Internet multi-media technologies as well as refining current products for the
remainder of the fiscal year and into the upcoming fiscal year. The Company
continues to operate without accumulating any debt other than normal operating
liabilities.
RESULTS OF OPERATIONS
Operations for the quarter ended September 30, 2000 resulted in a loss of
$354,810 and a year-to-date loss of $801,319. Operating losses for the
comparable periods ended September 30, 1999 were $53,430 and $269,076
respectively. The comprehensive loss for the quarter ended September 30, 2000
was $409,468. The comprehensive loss amount includes the impact of an unrealized
holding loss of $78,750 related to the decline in value of securities and
investments held by the Company.
Revenues
For the quarter ended September 30, 2000 and the year-to-date period ended
September 30, 2000, consolidated revenues were $92,575 and $426,480
respectively. Revenues for the third quarter 2000 decreased approximately 60%
when compared to the same quarter of 1999. Revenues decreased approximately 20%
when comparing the nine months ended results of September 30, 2000 to the same
period in 1999. One reason the Company has experienced these drops in revenue is
due to a decrease in the number of CD-ROM's produced by the Company's
subsidiary, DCP. During the quarter ended September 30, 2000, DCP completed work
on one custom CD-ROM while it researched new production techniques. During the
same quarter ended September 30, 1999, DCP completed or was in the process of
completing work on approximately four custom CD-ROM's. It cannot be determined
if this quarterly decrease in CD-ROM production indicates a trend or a result of
seasonal production changes.
Revenue generated by graphic design services provided through DXF remained
relatively flat when compared to the previous quarter. Revenues generated by DXF
are generally lower during the second and third quarters due to normal
entertainment industry cycles. As television production in the entertainment
industry slows, the amount of design services provided to entertainment industry
clients decreases. DXF expects design services to its entertainment industry
clients to increase in the fourth quarter as the new television production and
rating season begins.
Cost of Sales and Operating Expenses
Consolidated cost of sales, as a percent of revenue, was approximately 72%
during the three months ended September 30, 2000. This compares to 27% for the
six months ended June 30, 2000. The increased cost of sales was a result of
production changes implemented by both DCP and DXF. DCP's direct costs increased
as its Internet service delivery system for the iVideoNow! player was improved.
The capacity increases required to stabilize the player resulted in additional
monthly service provider fees. These additional direct costs will be offset in
the future by revenues generated by the player. DXF's direct costs increased as
a result of retaining independent artists and designers to complete specific
projects.
<PAGE>11
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
SELECTED INFORMATION
Substantially All Disclosures Required By Generally Accepted Accounting
Principles are Not Included
SEPTEMBER 30, 2000
(UNAUDITED)
RESULTS OF OPERATIONS (Continued)
Cost of Sales and Operating Expenses (Continued)
By utilizing independent artists, DXF's primary designer can focus on
expanding DXF's client base without jeopardizing the integrity and reputation of
its design services.
Operating expenses during the three months ended September 30, 2000
increased to $380,422 as compared to $269,782 for the same quarter ended
September 30, 1999. Year-to-date amounts increased to $1,071,483 for the nine
months ended September 30, 2000 as compared to $713,548 during the same period
in 1999. The most significant increase is for payroll. During the first nine
months of 2000 the Company expanded its sales, design and administrative
personnel in preparation of launching and marketing the iVideoNow! player. The
Company believes it will be able to effectively operate at its current staff
level and does not anticipate any significant personnel additions for the
remainder of the year. The increase in payroll costs is offset by a steady
decrease in outside service costs. The Company has become less reliant on
outside consultants and professionals as it develops and refines its own
in-house expertise. Increases in legal and accounting expenses are a result of
changes and increases in mandatory filing and security registration requirements
related to a publicly traded entity.
Liquidity and Sources of Capital
During the nine months ended September 30, 2000 cash used by operations was
$761,494, and cash for investing activities was $245,430. Cash used by
operations is primarily a result of a net operating loss of $763,911 during the
nine-month period. In addition, both accounts receivable and current liabilities
have increased during the same nine-month period. Cash used for investing
activities during the nine months ended September 30, 2000 consists of $118,152
for property and equipment, $86,127 in program and development costs and $41,151
in advances. Property and equipment expenditures are related to the expansion of
the corporate offices and additional furniture to accommodate the Company's
growing personnel requirements. Program and development costs relate to
continued efforts to refine the iVideoNow! player and its delivery system.
Development costs during the fourth quarter are expected to remain consistent
with the levels experienced during the first nine months of the year. Cash
proceeds from financing activities of $1,930,000 is a result of the private
placement of 2,500 shares of convertible preferred stock as well as the payment
of all short-term debt.
OUTLOOK
The Company concentrates on providing complete multi-media and Internet
communication solutions customized to meet the specific needs of each of its
corporate clients. The iVideoNow! player has completed the majority of its beta
testing and will be ready for a full public launch shortly. During this past
quarter, European testing partners began using the iVideoNow! player as a
marketing and promotional tool. The Company believes it is positioned to offer
client's effective communication solutions through the combination of its
iVideoNow! player, custom designed CD-ROM's and graphic design services. The
Company's cash reserves should allow for continued operations into 2001.
PART II. OTHER INFORMATION
Item 5. Other Information
As of June 15, 2000, the Company formerly changed its name to "iVideoNow,
Inc." to more accurately reflect the Company's emphasis on Internet based
production services.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
<PAGE>12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
iVideoNow, Inc.
Dated: November 14, 2000 By: /s/ PETER B. Dunn
----------------------------
Peter B. Dunn, President
