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 June 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 June 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 August 9, 2000 was $5,393,491.
<PAGE>1
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
INDEX
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Pages
------
PART I: FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Independent Accountants' Report 2
Condensed Consolidated Balance Sheet (Unaudited) as of June 30, 2000 3
Condensed Consolidated Statements of Operations (Unaudited)
For the Quarters and Year-To-Date Periods Ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Year-To-Date Periods Ended June 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 - 13
</TABLE>
<PAGE>2
INDEPENDENT ACCOUNTANTS' REPORT
August 8, 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 June 30, 2000, the related condensed
consolidated statements of operations for the quarter and year-to-date periods
ended June 30, 2000, and the condensed consolidated statement of cash flows for
the year-to-date period ended June 30, 2000. 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 June 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
JUNE 30, 2000
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 1,412,283
Accounts receivable - trade 55,000
Investments 80,000
------------------
Total Current Assets 1,547,283
------------------
PROPERTY AND EQUIPMENT,
net of accumulated depreciation 202,804
PROGRAM DEVELOPMENT COSTS,
net of accumulated amortization 182,428
OTHER ASSETS
Officer Loans 54,159
Deposits 1,082
------------------
Total Other Assets 55,241
------------------
Total Assets $ 1,987,756
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 55,149
Other liabilities 4,067
------------------
Total Current Liabilities 59,216
------------------
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 a outstanding 6,659
Additional paid-in capital 3,712,569
Accumulated other comprehensive (loss) (See Note 4) (39,622)
Retained (deficit) (1,751,091)
------------------
Total Stockholders' Equity 1,928,540
------------------
Total Liabilities and Stockholders' Equity $ 1,987,756
==================
See The Accompanying Selected Information to Unaudited Consolidated Financial
Statements.
<PAGE>4
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 JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
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For the Quarter Ended For The Year-To-Date Periods
June 30, Ended June 30,
------------------------------- -------------------------------
2000 1999 2000 1999
-------------- ------------- ------------- --------------
REVENUE $ 119,625 $ 22,190 $ 333,905 $ 314,154
COST OF SALES 18,259 60,025 89,372 86,034
-------------- -------------- ------------- -------------
Gross Profit/(Loss) 101,366 (37,835) 244,533 228,120
-------------- -------------- ------------- -------------
OPERATING EXPENSES
Accounting 9,176 119 36,180 10,797
Legal 21,366 420 52,756 455
Marketing 47,652 18,330 56,029 80,019
Outside services 12,340 28,057 40,630 58,557
Payroll expenses 169,235 87,252 293,121 153,402
Rent 25,150 19,207 43,839 38,330
Other 108,329 50,546 165,286 102,207
-------------- -------------- ------------- -------------
Total Operating Expenses 393,248 203,931 687,841 443,767
-------------- -------------- ------------- -------------
Income/(Loss) from Operations (291,882) (241,766) (443,308) (215,647)
OTHER INCOME/(EXPENSE)
Rental income 3,000 7,500 6,000 17,300
Interest income 13,391 0 13,391 0
Other expense (1,475) 0 (5,276) 0
Realized (loss) on sale of securities 0 0 0 (7,850)
-------------- -------------- ------------- -------------
Income/(Loss) Before Taxes (276,966) (234,266) (429,193) (206,197)
(PROVISION) FOR INCOME TAX (1,600) 0 (2,400) (800)
-------------- -------------- ------------- -------------
Net Income/(Loss) (278,566) (234,266) (431,593) (206,997)
OTHER COMPREHENSIVE INCOME (net of tax)
Unrealized holding gain/(loss) on investments (60,000) 0 (36,875) 0
Reclassification of loss included in net income 0 0 0 7,850
-------------- -------------- ------------- -------------
Comprehensive Income/(Loss) $ (338,566) $ (234,266) $ (468,468) $ (199,147)
============== ============== ============= =============
(Loss) per share and common share equivalents $ (.05) $ (.04) $ (.07) $ (.04)
============== ============== ============= =============
Weighted average common shares outstanding 6,649,864 5,272,280 6,649,864 5,272,280
============== ============== ============= =============
</TABLE>
See The Accompanying Selected Information to Unaudited 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 JUNE 30, 2000 AND 1999
(UNAUDITED)
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2000 1999
------------------ ---------------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net (loss) $ (431,593) $ (206,997)
Adjustments to reconcile net (loss) to net cash provided
(used) by operating activities:
Amortization and depreciation 28,211 16,254
(Increase) decrease in accounts receivable 12,695 (60,195)
(Decrease) in current liabilities and accrued expenses (23,925) (17,043)
(Increase) in receivables from employees 0 (4,000)
(Decrease) in deferred rent credit (10,000) (10,002)
(Increase) in deposits (922) 0
---------------- ---------------
Net Cash Flows (Used) by Operating Activities (425,534) (281,983)
---------------- ---------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Acquisition of property and equipment (105,550) (10,049)
(Increase) in program development cost (69,127) (15,000)
(Increase) in loan receivable - officer (23,601) 0
Decrease in marketable securities 0 9,000
---------------- ---------------
Net Cash Flows (Used ) by Investing Activities (198,278) (16,049)
---------------- ---------------
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 0
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 0
---------------- ---------------
NET INCREASE (DECREASE) IN CASH 1,306,188 (298,032)
CASH AT THE BEGINNING OF THE PERIODS 106,095 515,920
---------------- ---------------
CASH AT THE END OF THE YEAR $ 1,412,283 $ 217,888
================= ===============
ADDITIONAL DISCLOSURES:
Interest paid $ 6,147 $ 0
================ ===============
Income taxes paid $ 2,400 $ 800
================ ===============
</TABLE>
See The Accompanying Selected Information to Unaudited 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
JUNE 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 June 30, 2000, and the results of operations
and the cash flows for the quarter and year-to-date periods ended June 30, 2000
and 1999.
The notes to the Consolidated Financial Statements which are incorporated
by reference into the 1999 Form 10-SK should be read in conjunction with these
Consolidated 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 - CORPORATE NAME CHANGE
On June 15, 2000, the Company officially changed its corporate name from
DIGS, Inc. to iVideoNow, Inc. In addition, the Company's stock began trading on
the NASDAQ OTC Bulletin Board under its new symbol "vnow". The name change was
approved on April 27, 2000 by shareholders with a majority voting interest. The
name change to iVideoNow, Inc. is more descriptive of the Company's business and
aligns the name of the Company more closely with the technical, Internet and
media industries in which it operates.
NOTE 4 - 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
June 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 June 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.
NOTE 4 - SHAREHOLDERS' EQUITY (CONTINUED)
Holders of the preferred shares are entitled to receive cumulative cash
<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
JUNE 30, 2000
(UNAUDITED)
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.
As of June 30, 2000, none of the convertible preferred shares relating to
the March 14, 2000 private placement, has been converted to common stock. The
following is an analysis of activities in the Stockholders' Equity for the six
months ended June 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
June 30, 2000
Unrealized -- -- -- -- -- (36,875) -- (36,875)
holding (loss)
Net (loss) -- -- -- -- -- -- (431,593) (431,593)
------ -------- --------- ------- ------------- ------------ ------------- ------------
Balance at 6/30/00 2,500 $ 25 6,658,631 $ 6,659 $ 3,712,569 $ (39,622) $(1,751,091) $ 1,928,540
====== ======== ========= ======== ============= ============ ============= ============
</TABLE>
NOTE 5 - 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
June 30, 2000, the maximum of 750,000 shares were approved to be issued under
the plan, of which 350,000 shares were available for future plans.
<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
JUNE 30, 2000
(UNAUDITED)
NOTE 5 - STOCK OPTION PLANS (CONTINUED)
Presented below is a summary of stock option plan activity for the period
shown:
<TABLE>
<S> <C> <C>
Weighted Average Exercise
Stock Options Price
---------------- -------------------------
Outstanding at December 31, 1999 295,000 $5.17
Granted 105,000 $5.00
Exercised -- --
Forfeited -- --
Expired -- --
---------------- -------------------------
Outstanding at June 30, 2000 400,000 $5.13
================ =========================
Shares exercisable at June 30, 2000 96,333 $5.17
================ =========================
</TABLE>
Exercise prices for options outstanding as of June 30, 2000 range from
$5.00 to $5.50. The following table summarizes information for options
outstanding and exercisable at June 30, 2000:
<TABLE>
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
------------------------------------------- ---------------------------
Weighted
Weighted- Average Weighted-
Stock Average Remaining Stock Average
Exercise Options Exercise Contractual Options Exercise
Prices Outstanding Price Life Exercisable 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
------------- -------------
400,000 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 pro forma net
income and earnings per share, had compensation expense relating to the year
period ended June 30, 2000 grants measured under the fair value recognition
provisions of SFAS No. 123.
Because the weighted-average fair values at date of granted were the same as the
market values during the period ended June 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.
<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
JUNE 30, 2000
(UNAUDITED)
NOTE 5 - STOCK OPTION PLANS (CONTINUED)
The weighted-average fair value at date of grant for options granted during
the period ended June 30, 2000 was $5.00 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 6 - SEGMENT INFORMATION
Information concerning operations in different lines of business for the
quarter and six months ended June 30, 2000 is presented below. 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. In
August 1999, the Company began to provide graphic design services to its clients
through its wholly owned subsidiary DXF, Design.
Intercompany transactions between the two entities are immaterial.
Segment Results for the Quarter Ended June 30, 2000:
<TABLE>
<S> <C> <C> <C>
CD-ROM
Design and Graphic
For the Quarter Ended June 30, 2000 Development Design Consolidated
------------------------------------------------------ --------------- -------------- ---------------
Net Operating Revenues $ 78,125 $ 41,500 $ 119,625
Operating Income/(Loss) (267,075) (26,406) (291,882)
Identifiable Operating Assets 1,705,323 112,487 1,817,810
Depreciation and Amortization $ 13,515 $ 653 $ 14,168
Segment Results for the year-to-date ended June 30, 2000:
CD-ROM
Design and Graphic
For the Year-to-Date Ended June 30, 2000 Development Design Consolidated
------------------------------------------------------ --------------- -------------- ---------------
Net Operating Revenues $ 84,675 $ 249,230 $ 333,905
Operating Income/(Loss) (507,293) 62,284 (443,308)
Identifiable Operating Assets 1,705,323 112,487 1,817,810
Depreciation and Amortization $ 27,031 $ 1,180 $ 28,211
</TABLE>
Identifiable operating assets include cash, available-for-sale securities,
trade accounts receivable, and fixed assets. For the six months ended June 30,
2000, 100% of the revenue generated by Digital Corporate Profiles was from one
customer.
<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
JUNE 30, 2000
(UNAUDITED)
NOTE 7 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash balances at several financial institutions
located in Southern California. The Federal Deposit Insurance Corporation
insures the balances up to $100,000. At June 30, 2000, the Company's uninsured
cash balance totaled $1,237,291.
NOTE 8 - MARKETING DISCOUNTS
The Company has recognized $40,000 in marketing discounts during the
quarter ended June 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 Digital Corporate Profiles are distributed at trade shows or in mailers,
providing the Company with exposure to many prospective clients.
NOTE 9 - SUBSEQUENT EVENT
On July 1, 2000, the Company granted an additional 240,000 qualified stock
options to all employees, with the exception of its CEO and President, at the
July 1, 2000 closing price of $0.50 per share. These options are in addition to
previously granted options and can be exercised in equal installments over three
years from the grant date. The granted options will expire if not exercised
within ten years from the grant date. In addition, on July 1, 2000, the Company
granted 25,000 nonqualified stock options at the July 1, 2000 closing price of
$0.50 per share to unrelated parties that have performed professional services
for the Company. The unqualified options have the same exercise and expiration
terms as the qualified options. The Company now has issued 665,000 qualified and
unqualified stock options and has 85,000 shares under its 1999 stock option plan
available for future issuances. No compensation expense will be recognized by
the Company as no options were granted below the market price of its stock on
the date of grant.
NOTE 10 - EARNINGS PER SHARE
Fully diluted per share data is not presented, as the effects would be
antidilutive.
<PAGE>11
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 financial condition of the Company remains strong as of the quarter
ended June 30, 2000. The Company's cash reserves of over $1.4 million will allow
growth without the accumulation of debt for the remainder of the current fiscal
year. As of June 30, 2000, the Company has no outstanding loan balances or any
other form of financing debt. The Company paid all prior loans or financing
debts from the cash received from the private placement of convertible preferred
stock during the first quarter of the year.
RESULTS OF OPERATIONS
The Company's operations during the quarter ended June 30, 2000 resulted in
a loss of $276,966 and a year-to-date loss of $429,193. This can be compared to
operating losses of $234,266 and $206,197 during the quarter ended June 30, 1999
and year-to-date June 30, 1999, respectively. The comprehensive loss for the
quarter ended June 30, 2000 was $338,566, which includes the impact of an
unrealized holding loss of $60,000 on securities held by the Company.
Revenues
Consolidated revenues for the quarter ended June 30, 2000 were $119,625 and
for the year-to-date was $333,905. Second quarter consolidated revenues
increased over 400% in comparison to the same quarter ended June 30, 1999. This
quarterly increase results in a year-to-date revenue increase of approximately
6%. The second quarter revenue increase recovered the decrease in revenue
experienced by the Company during the first quarter of the year. The quarterly
revenue increase is the result of increased CD-ROM production by the Company's
subsidiary, Digital Corporate Profiles (DCP). CD-ROM revenue increased from
$6,550 to $78,124 for the quarters ended March 31, 2000 and June 30, 2000,
respectively. The Company anticipates growth in CD-ROM production; however, it
cannot be determined if this growth rate represents a trend that will continue
for the remainder of the year.
Sales from graphic services provided by DXF Design (DXF) decreased during
the quarter ended June 30, 2000, as compared to the first quarter of the year.
This quarterly decrease experienced by DXF Design is a result of normal trends
related to work and services provided to the television industry.
Cost of Sales and Operating Expenses
Cost of sales, as a percent of revenue, was approximately 27% during the
six months ended June 30, 2000. This is consistent with cost of sales
experienced during the six months ended June 30, 1999. For the quarter ended
June 30, 2000, cost of sales, as a percent of revenue, improved to approximately
15%. The improvement is a result of production efficiencies experienced by both
the Company's subsidiaries DCP and DXF. Gross profit increased from $228,120 to
$244,533 for the six-month periods ended June 30, 1999 and June 30, 2000,
respectively.
<PAGE>12
iVIDEONOW, INC. AND SUBSIDIARIES
(Formerly Known as DIGS, Inc.)
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Operating expenses for the six months ended June 30, 2000 increased to
$687,841 as compared to $443,767 during the same period ended 1999. Operating
expenses for the quarter ended June 30, 2000 also increased to $393,248 compared
with $203,931, for the same quarter in 1999. The most significant operating
expense increase is for payroll. The Company is continuing to expand its staff
of programmers, designers and administrators to develop and market its products
and services. Increased legal and accounting costs are a result of additional
fees related to filing requirements and security registration requirements of
the Company. Outside services provided to the Company by computer consultants
and other professionals has continued to decrease as the Company continues to
develop its own expertise.
Liquidity and Sources of Capital
During the six months ended June 30, 2000, cash used for operating
activities was $425,534, and cash used for investing activities was $198,278.
The cash used for operations is a result of a net operating loss and an increase
and decrease in accounts receivable and accounts payable. Cash used for
investing activities consisted of $105,550 for property and equipment, $69,127
in program development costs and $23,601 in advances. The Company expanded its
corporate office to accommodate its growing staff and continued efforts to
develop and refine the iVideoNow! player. The Company anticipates cash
expenditures for property and equipment will decrease during the second half of
the year as the office expansion is complete and only minor equipment purchases
should be necessary. Development costs related to the iVideoNow! player should
remain at the levels consistent with those experienced during the first half of
the year. Net cash proceeds from financing activities was $1,930,000 and is a
result of the sale of 2,500 shares of convertible preferred stock as well as the
payment of all short-term debt.
OUTLOOK
The emphasis of the Company is to provide its corporate clients with
solutions to their multi-media and Internet communication needs. Product
development, such as the iVideoNow! player, targets the Internet
business-to-business market while complementing the Company's current CD-ROM
products and Graphic Design services. The Company's strong balance sheet should
allow for the execution of the planned growth and expansion of its marketing and
development efforts during the remainder of the year, without having to secure
outside financing.
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>13
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: August 10, 2000 By: /s/ PETER B. DUNN
--------------------------
Peter B. Dunn, President
