UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2000
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Commission File Number 0-30652
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VIDEOPROPULSION, INC.
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(Exact name of small business issuer as specified in its charter)
Wisconsin 39-1976286
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
251 Info Highway, Slinger, Wisconsin 53086
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(Address of principal executive offices)
(262) 644-1000
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
State the number of shares outstanding of each of the issuers' classes of
common stock as of the latest practicable date.
18,534,448 Shares, Common Stock, $.01 Par Value
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Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
VIDEOPROPULSION, INC.
FORM 10-QSB
For Quarter Ended September 30, 2000
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Balance Sheets 3 - 4
Statements of Operations 5
Condensed Statements of Cash Flows 6 - 7
Notes to Unaudited Financial Statements 8 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 13
PART II - OTHER INFORMATION
Item 2 - Changes in Securities 14
Signature 14
Exhibit Index
27.0 Financial Data Schedule - Three months ended September 30, 2000
28.0 Financial Data Schedule - Three months ended September 30, 1999
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
VIDEOPROPULSION, INC.
CONDENSED BALANCE SHEETS
ASSETS (Unaudited) (Audited)
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September 30, December 31,
2000 1999
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CURRENT ASSETS:
Cash and Cash Equivalents $24,572 $9,947
Accounts Receivable - Trade, net of allowances
of $0 at September 30, 2000 and
December 31, 1999 75,533 11,990
Inventories 47,860 61,706
Prepaid Expenses 12,712 -
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Total Current Assets 160,677 83,643
PROPERTY AND EQUIPMENT, at cost
Machinery and Equipment 12,511 -
Less - Accumulated Depreciation (1,058) -
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Net Property, Plant and Equipment 11,453 -
Other Assets 26,852 -
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Total Assets $198,982 $83,643
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VIDEOPROPULSION, INC.
CONDENSED BALANCE SHEETS
(Unaudited) (Audited)
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September 30, December 31,
2000 1999
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts Payable - Trade $ 34,627 $ -
Accounts Payable - GENROCO, Inc. 142,715 -
Accrued Payroll and Payroll Taxes 24,265 12,807
Other Accrued Liabilities 88,864 7,953
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Total current liabilities 290,471 20,760
SHAREHOLDERS' INVESTMENT:
Common Stock, $.01 par value, 24,900,000
Shares authorized, 18,534,448 issued and
Outstanding on September 30, 2000 and on
December 31, 1999 185,344 185,344
Additional paid-in capital 287,820 ( 12,090)
Retained Deficit (564,653) (110,371)
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Total shareholders' investment (91,489) 62,883
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Total liabilities and shareholders'
Investment $198,982 $ 83,643
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See accompanying notes.
VIDEOPROPULSION, INC.
STATEMENTS OF OPERATIONS
<TABLE>
(Unaudited) (Unaudited)
------------------------- -------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
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2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 176,293 $ 193,505 $ 547,071 $ 532,547
COST OF GOODS SOLD 25,722 39,286 104,202 117,558
---------- ---------- ---------- ----------
Gross Profit 150,571 154,219 442,869 414,989
OPERATING EXPENSES:
Engineering 169,809 63,574 385,967 206,866
Selling and Administrative 120,079 59,981 503,187 146,022
---------- ---------- ---------- ----------
289,888 123,555 889,154 352,888
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(Loss)Income from Operations (139,317) 30,664 (446,285) 62,101
Interest Expense - - 4,502 -
Interest Income 394 - 1,500 -
Other Non-Operating Expenses 408 - 5,085 -
---------- ---------- ---------- ----------
(LOSS) INCOME BEFORE TAXES (139,331) 30,664 (454,372) 62,101
Benefit (Provision)-Income Taxes - - - -
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NET (LOSS) INCOME $ (139,331) $ 30,664 $ (454,372) $ 62,101
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BASIC AND FULLY DILUTED
(LOSS) EARNINGS PER SHARE $ (.01) $ .00 $ (.02) $ .00
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Average number of
shares outstanding 18,534,448 18,534,448 18,534,448 18,534,448
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average number of
shares - Assuming dilution 18,534,448 18,534,448 18,534,448 18,534,448
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
VIDEOPROPULSION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
(Unaudited)
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Nine Months Ended September 30,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income from continuing operations $(454,372) $ 62,101
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,058 -
Compensation expense due to foregiveness of notes receivable
related to sale of GENROCO stock to employees 203,244 -
Change in assets and liabilities:
Current assets, other than cash (89,261) (61,023)
Accounts payable to GENROCO, Inc. 142,715 -
Current liabilities, other than notes payable (76,248) (1,078)
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Net cash used in operating activities (272,864) -
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net of retirements (12,511) -
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Net cash used in investing activities (12,511) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contribution From GENROCO, Inc. 300,000 -
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Net cash provided by financing activities 300,000 -
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Net increase (decrease) in cash and cash equivalents 14,625 -
Cash and cash equivalents at beginning of period 9,947 -
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Cash and cash equivalents at end of period $ 24,572 $ -
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</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(Unaudited)
September 30,
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2000 1999
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Cash paid during year for:
Interest $4,502 $ -
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Income taxes $ - $ -
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See accompanying notes.
VIDEOPROPULSION, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. GENERAL INFORMATION ABOUT THE COMPANY
The consolidated condensed financial statements include the accounts of
VideoPropulsion Inc. ("VDOP"), Inc. and have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission.
The historical share data in this report has been adjusted to reflect the effect
of the 4-for-1 stock split on July 3, 2000.
Certain information and footnote disclosures normally included in financial
statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations, and as such, the Company believes that the disclosures are adequate
to make the information presented not misleading. The results for the quarter
ended September 30, 2000 may not be indicative of the results for the entire
year. It is suggested these statements be read in conjunction with the
financial statements and the notes thereto included in the Company's Form 10-
SB/A for the Company's fiscal year ended December 31, 1999.
In August of 1999, the board of directors of GENROCO,Inc. (VDOP's parent
corporation) began contemplating the spin-off and distribution of the Company's
Digital Video Broadcast (DVB) business as a separate company to be named
VideoPropulsion, Inc. The Company executed the distribution on July 10, 2000 by
issuing one new share of VideoPropulsion Inc. stock, for each share of Company
stock held by GENROCO shareholders of record, as of the close of business on
June 30, 2000.
Complete details are available in the amended SEC Form 10SB/A for
VideoPropulsion, which was filed with the SEC on June 19, 2000 and mailed to
each shareholder, as an information statement, on June 20, 2000.
For additional information, see GENROCO Inc.'s SEC Form 10-QSB for the six
months ended June 30, 2000, as filed with the SEC on August 14, 2000.
Cost of the Company's inventory is determined using the average cost first-in,
first-out (FIFO) inventory valuation method. The distribution between major
classes of inventories is as follows:
(Unaudited) (Audited)
September 30, 2000 December 31,1999
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Raw Material Work-in-Progress $ - $38,350
Finished Goods 47,860 23,356
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$47,860 $61,706
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3. STOCK SPLIT
In July 2000, VideoPropulsion declared a 4-for-1 stock split as of July 3, 2000
with a distribution date of July 13 2000. As a result, shareholders of record
as of July 3, 2000 received 13,900,836 new shares to bring the total outstanding
amount to 18,534,448.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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RESULTS OF OPERATIONS
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Net sales for the Company for the three months ended September 30, 2000
("2000"), were $176,293 compared to $193,505 for the three months ended
September 30, 1999 ("1999"). Net sales for the Company for the nine months ended
September 30, 2000 were $549,071 compared to $532,547 for the nine months ended
September 30, 1999. Revenue has remained flat over the year in that most orders
continue to be for products being used in development, beta test, and initial
trials of interactive television.
While traditional television has grown to serve over 100 million US households
during the past fifty years, digital TV has only begun to be deployed. As cable,
satellite, and terrestrial providers begin the shift to digital broadcasting,
volumes of enabling technology products can be expected to ramp up dramatically.
Management is confident that the Company has placed its hardware and software
products into a sufficient number of key players in this emerging marketplace in
order to garner significant future sales as the rollout unfolds.
In addition, interactive TV is expected to combine the established force of
television with the budding success of the Internet. This evolution is referred
to as the convergence, and it will define new markets and shape the future of
broadcasting. Management believes that the Company's existing products and
current developments will allow VideoPropulsion to achieve sales growth via in
this emerging opportunity.
Cost of goods sold for the three months ended September 30, 2000 was $25,722,
compared to $39,286 for the three months ended September 30, 1999. Cost of
goods sold for the nine months ended September 30, 2000 was $104,202, compared
to $117,558 for the nine months ended September 30, 1999. This expense, which
was comprised of parts, labor and overhead associated with production and
testing of circuit boards shipped to customers, increased as sales increased.
Gross profit for the three months ended September 30, 2000 was $150,571 compared
to $154,219 for the three months ended September 30, 1999. Gross profit for the
nine months ended September 30, 2000 was $442,869 compared to $414,989 for the
nine months ended September 30, 1999.
The resulting gross margin percentages were 85.4% and 79.7% for the three months
ended September 30, 2000 and September 30, 1999, respectively. The resulting
gross margin percentages were 81.0% and 78.0% for the nine months ended
September 30, 2000 and September 30, 1999, respectively. These gross margin
percentages may not be indicative of future performance because as sources of
revenue begin to shift from the current research and development type of
customer base to a more mainstream application based customer base, revenues are
expected to increase significantly, but at the expense of lower gross margin
percentages.
Engineering expenses for the three months ended September 30, 2000 were $169,809
compared to $63,574 for the three months ended September 30, 1999, or 96.3% and
32.9% of net sales for 2000 and 1999 respectively. Engineering expenses for the
nine months ended September 30, 2000 were $385,967 compared to $206,866 for the
nine months ended September 30, 1999, or 70.6% and 38.9% of net sales for 2000
and 1990 respectively. The increases are primarily associated with additional
personnel costs. As of September 30, 2000, the Company had eight employees,
five of whom were involved with the Company's engineering effort.
Selling and administrative expenses for the three months ended September 30,
2000 were $120,079 compared to $59,981 for the three months ended September 30,
1999 or 68.1% and 31.0% of net sales for 2000 and 1999, respectively. Selling
and administrative expenses for the nine months ended September 30,2000 were
$503,187 compared to $146,022 for the nine months ended September 30, 1999 or
92.0% and 27.4% of net sales for 2000 and 1999, respectively. The increases are
primarily associated with additional personnel costs related to the areas of
sales and marketing. As of September 30, 2000, the Company had eight employees,
three of whom were involved with the Company's sales, marketing and
administrative efforts.
The Company's provision for income tax expense was zero in 2000 and 1999.
Net Loss for the three months ended September 30, 2000 was $139,331 ($.01 per
share) compared to a gain of $30,664 ($.00 per share) for the three months ended
September 30, 1999. Net loss for the nine months ended September 30, 2000 was
$454,372 ($.02 per share) compared to income of $62,101 ($.00 per share) for the
nine months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at September 30, 2000 was $24,572, an increase from
$9,947 at December 31, 1999.
During the nine months ended September 30, 2000, net cash used in operating
activities was $272,864 versus $0 for the nine months ended September 30, 1999.
Cash flows from investing activities for the nine months ended September 30,
2000 was $12,511 relating to the acquisition of equipment versus $0 for the
nine months ended September 30, 1999.
Cash flows from financing activities for the nine months ended September 30,
2000 were $300,000 in the form of a capital contribution from the parent
(GENROCO, Inc.), versus $0 for the nine months ended September 30, 1999.
Stockholders' equity decreased by $154,372 to $(91,489) at September 30, 2000
from $62,883 at December 31, 1999. The decrease is the result of a net loss
totaling $454,372 offset by a $300,000 capital contribution by the parent.
The Company's ratio of current assets to current liabilities (current ratio) was
.55 to 1 at September 30, 2000 versus 4.03 to 1 at December 31, 1999.
At December 31, 1999 and September 30, 2000, the Company had no bank line and is
dependent upon favorable business terms from GENROCO, Inc. for sources of
working capital.
The Company continues to generate negative cash flows from operations. Current
forecasts indicate that the Company may not be unable to fund current plans
beyond the fourth quarter of fiscal 2000 unless it is able to raise additional
capital.
The Company is seeking to engage an investment advisor, on a best efforts basis,
to advise the Company in its efforts to raise additional working capital in the
form of private placement equity during the next few months. The Company is
also continuing to discuss long-term financing arrangements with strategic
partners, institutional investors and venture capital companies in an effort to
do a secondary equity offering during fiscal 2001. These discussions are in the
preliminary phase, and the Company has no firm commitments from any potential
investor to invest additional capital in the Company. There can be no
assurances that additional capital will be raised, either through a private
placement or by other means. In the event that the Company is not successful in
its efforts to raise additional working capital, as contemplated above, it will
be forced to cut back on general overhead and product development expenses,
which will serve to delay the release of new products.
If the Company is not successful in raising additional capital, the Company will
not be able to continue its current operations and there is substantial doubt as
to the Company's ability to continue as a going concern. There can be no
assurance that the Company will be successful in raising such capital at all or
on terms commercially acceptable to the Company or the current shareholders. In
addition, the sale of equitable securities could result in the dilution to the
percentage ownership interests of existing shareholders and could also adversely
affect the market price of the Company's common stock.
No events requiring that the Company file an SEC Form 8-K have occurred.
CAUTIONARY STATEMENT
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With the exception of historical facts, the statements contained in Item 2. of
this Form 10-Q may be forward looking statements. Statements in the future
tense and statements including the words "anticipate," "believe," continue,"
"estimate," "expect," "goal," "objective," "outlook," and other similar
expressions are intended to identify forward looking statements. The forward
looking statements in this 10-Q involve certain assumptions, risks and
uncertainties, many of which are beyond the Company's control, that could cause
our actual results and performance to differ. These factors are not limited to,
but certainly include: 1) cyclical downturns affecting the markets for capital
goods; 2) substantial increases in interest rates that impact the cost of the
Company's outstanding debt; 3) the success of management in increasing sales and
maintaining or improving the operating margins of its businesses; 4) the
availability of or material increases in the costs of select raw materials or
parts; and 5) actions taken by competitors. Investors are directed to the
Company's documents, such as its initial filing on Form 10-SB/A filed with the
Securities and Exchange Commission.
PART II - OTHER INFORMATION
Item 2 - Change in Securities
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4,633,612 common shares of stock were issued as a result of the spin-off to
shareholders of record on September 30, 2000. On July 3, 2000, the board of
directors of the Company declared a 4-for-1 forward split, which resulted in
18,543,448 shares outstanding on a post-split basis. The articles of
Incorporation have been amended and authorized shares now consist of 24,900,000
common shares and 100,000 preferred shares.
SIGNATURE
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.
VIDEOPROPULSION, INC.
(Small Business Issuer)
/s/ Carl A. Pick
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Carl A. Pick
Chairman and Director
/s/ Barbara R. Pick
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Barbara R. Pick
CEO and Director
/S/ Keith E. Brue
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Keith E. Brue
Secretary and Director
(Principal Accounting and Financial Officer)
DATE: November 14, 2000
