SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10 - QSB
QUARTERLY REPORT UNDER REGULATION SB OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number:
September 30, 2000 2-96976-D
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DCI TELECOMMUNICATIONS, INC.
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(Exact Name of Registrant as specified in its charter)
COLORADO 84-1155041
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(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
611 Access Road, Stratford, Connecticut 06615
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(Address and zip code of principal executive offices)
(203) 380-0910
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required by Regulation SB 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 the filing requirements for at least the past 90 days.
YES __X__ NO_____
Indicate the number of shares outstanding of each of the issuer/s
classes of common stock, as of the last practicable date:
Number of Shares Outstanding Class Date
---------------------------- ------- ----------
30,775,644 Common Stock, September 30, 2000
$.0001 par value
1
<PAGE>
DCI TELECOMMUNICATIONS, INC.
Index
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheet September 30, 2000 3
Statements of Operations 5
Three Months Ended September 30, 2000 and 1999
Statements of Cash Flow 7
Three Months Ended September 30, 2000 and 1999
Notes to Unaudited Financial Statements
September 30, 2000 9
ITEM 2.
Management's Discussion and Analysis or
Plan of Operations 10
PART II
Other Information 15
Signatures 15
2
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DCI Telecommunications, Inc.
Consolidated Balance Sheet
(unaudited)
September 30,
2000
--------
ASSETS
Current assets:
Cash $ 1,300,830
Accounts receivable, net 1,636,352
Other current assets 48,419
---------
Total Current Assets 2,985,601
Fixed Assets 669,398
Less: Accumulated depreciation (240,659)
---------
Net Fixed Assets 428,739
Accounts receivable-long term 1,970,886
Deposits 15,356
Cost in excess of assets acquired:
Muller Media 1,634,436
Less: Accumulated amortization: (188,405)
----------
Net cost in excess of assets acquired 1,446,031
-----------
Total Assets $ 6,846 613
==========
(continued)
3
See accompanying notes to consolidated financial statements.
<PAGE>
September 30
2000
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses $ 7,794,002
Preferred stock dividend 353,119
Due to shareholders 47,081
Current portion of long term debt 71,661
Deferred revenue 45,750
Short term note payable 80,000
----------
Total Current Liabilities 8,391,613
Long-term debt 1,150,448
Accounts payable 1,221,926
Redeemable, convertible preferred stock,
$1,000 par and redemption
value, 2,000,000 shares authorized,
275 shares issued & outstanding 275,000
----------
Total Liabilities 11,038,987
----------
Common stock, $.0001 par value,
500,000,000 shares authorized,
30,775,644 shares issued and outstanding 3,077
Paid-in capital 37,422,367
Treasury stock (1,356,547 shares at cost) (1,127,439)
Accumulated deficit subsequent to 12/31/95,
date of quasi-reorganization (total
deficit eliminated $4,578,587) (40,490,379)
-----------
Total Shareholders' Deficit (4,192,374)
-----------
Total Liabilities and Shareholders' Deficit $ 6,846,613
===========
See accompanying notes to consolidated financial statements.
4
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DCI Telecommunications, Inc.
Consolidated Statement of Operations
(unaudited)
Three Months Ended Six Months Ended
September 30 September 30
2000 1999 2000 1999
--------- --------- --------- ---------
Net sales $1,361,175 $1,009,080 $2,327,364 $ 1,756,170
Cost of sales 975,006 722,283 1,623,188 1,147,824
---------- -------- --------- ----------
Gross profit 386,169 286,797 704,176 608,346
Selling, general and
Administr expenses 116,117 138,883 264,698 349,315
Salaries and compens 169,334 301,387 394,694 606,511
Professional fees 112,970 584,066 238,677 769,243
Amortiz; and deprec; 51,306 50,126 108,130 100,150
---------- -------- ---------- ----------
449,727 1,074,462 1,006,199 1,825,219
Loss before other income and
Expense ( 63,558)( 787,665) (302,023 ) (1,216,873)
Other income and (expense):
Investment income 79,324 72,700 178,595 151,629
Interest expense ( 4,517)(1,406,407) (10,439) (1,408,934)
---------- ---------- ---------- ---------
74,807 (1,333,707) 168,156 (1,257,305)
(continued)
5
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Gain (loss)from continuing
Operations 11,249 (2,121,372) (133,867) (2,474,178)
Loss on Master Service
Agreement ---- (13,321,093) ----- (13,321,093)
Loss from discontinued
Operations ---- (439,928) (96,981) (3,034,532)
-------- ------------ ---------- ------------
Net Gain (Loss) before
dividends on preferred
stock 11,249 (15,882,393) (230,848) (18,829,803)
Dividends on preferred
Stock ---- ( 44,070) ( 31,000) ( 90,120)
-------- ----------- --------- -------------
Net gain (loss) applicable
to common shareholders 11,249 (15,926,463) (261,848) (18,919,923)
========= =========== ========= ============
Basic and diluted net loss per common shares:
Loss from continuing
operations $ 0.00 $ (0.07) $ (0.01) $ (0.08)
Loss from discontinued
operations $ (0.46) $ $ (0.55)
------- ------- -------- ----------
Net loss per common
share - basic and $ 0.00 $ (0.53) $ (0.01) $ (0.63)
diluted ======== ========= ======== ==========
Weighted average common
shares outstanding -
basic and diluted 30,775,644 29,870,015 30,775,644 29,870,015
See Accompanying Notes to Consolidated Financial Statements
6
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DCI Telecommunications, Inc
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended
September 30,
2000 1999
---- ----
Reconciliation of net loss to net
cash used in operating activities:
Net loss from continuing operations $ (133,867) $(2,474,178)
Adjustments to reconcile net loss from
continuing operations to net cash
used in operating activities:
Amortization and depreciation 108,130 100,150
Discontinued operations (96,981) (2,721,900)
Accrued Interest converted to Note 1,348,605
Changes in assets and liabilities:
(Increase) Decrease in:
Accounts receivable (454,406) (2,806,153)
Inventory - ( 115,030)
Deposits - 51,242
Other current assets 13,360 162,528
Increase (Decrease):
Accounts payable & accrued expenses 584,877 5,837,599
Deferred revenue (61,466) (91,993)
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Net Cash used in operating activities (40,353) (709,130)
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Cash flows from investing activities:
Sale of Fixed Assets 31,803 ----
(Increase)Decrease in long term Assets 109,611 (213,653)
----------- -----------
Net cash from (used in) investing
activities 141,414 (213,653)
7
(continued)
<PAGE>
Cash flows from financing activities:
Proceeds from Issuance of Notes 872,500
Payment of Notes (300,000)
Proceeds from stock
options exercised - 51,275
Proceeds from line of credit 80,000 -
Net (payments)/advances to shareholders (35,056) (17,252)
Payment of long-term debt - (38,654)
--------- ----------
Net cash from financing activities 44,944 567,869
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Net (decrease) increase in cash 146,005 (354,914)
Cash, beginning of period 1,154,825 1,631,186
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Cash, end of period $ 1,300,830 $1,276,272
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8
See accompanying notes to consolidated financial statements.
<PAGE>
DCI Telecommunications, Inc.
Notes to Unaudited Financial Statements Septmenber 30, 2000
NOTE 1.
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The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the provisions of Regulation SB.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Certain
restatements of prior year numbers have been made to conform to the
current years presentations and to account for discontinued
operations.
The consolidated financial statements include the accounts of the
Company and its wholly and majority owned subsidiaries. Material
inter-company balances and transactions have been eliminated in
consolidation.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full
year. The accompanying financial statements should be read in
conjunction with the Company's form 10-KSB filed for the year
ended March 31, 2000.
Loss per share was computed using the weighted average number of
common shares outstanding.
NOTE 2. Sale of Fone.com
-----------------------------------
Effective May 31, 2000, (closing date June 2, 2000) The Company sold
all of the Common stock of Fone to Corzon, Inc., formerly Tanners
Restaurant Group, Inc. ("Corzon") in exchange for 40,000,000 shares
of Corzon and the assumption by Corzon of $3,453,652 of debt of the
Company. The debt assumed was a $ 1,348,605 note, $1,905,047 of
redeemable convertible preferred stock and $ 200,000 of notes
payable to Triton Private Equities Fund, Ltd. After the transaction
DCI owned 62.67% of the outstanding shares of Corzon. DCI has been
informed that the SB2 registration statement filed by Corzon became
effective in November, 2000.
NOTE 3. Bankruptcy
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On July 27, 2000, EDGE and Coast to Coast, were placed in Bankruptcy
under Chapter 7. In October 2000, a hearing was held by the Trustee
in Maryland. DCI is presently awaiting official documentation from
the Trustee. As soon as that is received, $ 1.4 million in net
liabilities presently reflected on the balance sheet will be adjusted
accordingly.
<PAGE>
Note 4. Other
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Travel Source Impairment
------------------------
Due to the intense competition from airline carriers and internet
travel service, as well as a loss of key employees, the Company has
determined that the remaining goodwill was impaired and wrote off the
remaining $ 78,586 in the quarter ended September 30, 2000.
Market Maker
-------------
On September 26, 2000, DCI was informed by Herzog, Heine, Geduld
Inc. that they filed a 15C2-11 with the NASDQ requesting that they
become a marker maker for DCI common stock, and that it was returned
with a deficiency. On October 13, 2000, DCI's attorney, Greenburg,
Traurig responded to the deficiency.
<PAGE>
Management's Discussion and Analysis or
Plan of Operations
Overview
--------
The following discussion and analysis provides information that
management believes is relevant to an assessment and
understanding of DCI Telecommunications, Inc. and its
subsidiaries (collectively, the Company), consolidated results of
operations and financial condition for the six months ended September
30, 2000. The discussion should be read in conjunction with the
Company's consolidated financial statements and accompanying notes.
The Company currently operates predominantly in the motion picture
distribution Industry. The Company's services also include a travel
agency.
Recent Dispositions
---------------------
Fone.Com
------------------
Effective May 31, 2000, (closing date June 2, 2000) the Company sold
all of the common stock of Fone to Corzon, Inc formerly Tanners
Restaurant Group, Inc. ("Corzon") in exchange for 40,000,000 shares
of Corzon and the assumption by Corzon of $3,453,652 of debt of the
Company. The debt assumed was a $1,348,605 note, $1,905,047 of
redeemable convertible preferred stock, and $200,000 of notes
payable to Triton Private Equities Fund, Ltd. After the transaction
DCI owned 62.67% of the outstanding shares of Corzon. DCI has been
informed that the SB2 registration statement filed by Corzon became
effective on November 14 ,2000.
10
<PAGE>
Liquidity and Capital Resources
-------------------------------
At September 30, 2000 the Company had unrestricted cash of
approximately $1,300,000. Net cash increased $ 146,000 during the
last three months. Cash used in operating activities was about
$40,000. The Company has negative working capital of approximately
$5,500,000 at September 30, 2000. The ability of the Company to
finance all new and existing operations will be heavily dependent
on external sources. No assurance can be given that additional
financing will be available or, if available, that it will be on
acceptable terms.
11
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Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
--------------------------------------------------------------------
This report contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Where any such forward-looking
statement includes a statement of the assumptions or bases underlying
such forward-looking statement, the Company cautions that assumed
facts or bases almost always vary from the actual results, and
the differences between assumed facts or bases and actual results
can be material, depending upon the circumstances. Where, in any
forward-looking statement, the Company or its management
expresses an expectation or belief as to future results, there
can be no assurance that the statement of expectation or belief
will result or be achieved or accomplished. The words "believe",
"expect", "estimate", "anticipate", "project" and similar
expressions may identify forward-looking statements.
Consolidated Results of Operations
----------------------------------
Six months Ended
September 30
2000 1999
---- ----
Net Sales $ 2,327,364 $ 1,756,170
--------
Net Sales from continuing operations increased approximately $
571,000 in the six months ending September 30, 2000, compared to the
same period a year ago. Sales increased $ 1,048,000 at Muller due to
the implementation of more movie contracts. Travel sales are down
approximately $ 477,000 in the six months due to less agent time
and more direct competition from the airlines and internet services.
2000 1999
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Cost of Sales $ 1,623,188 $ 1,147,824
-------------
Cost of Sales increased $ 475,000 in the first six months compared
to a year ago. Cost of Sales for Muller rose $ 918,000,
corresponding to their sales growth, while Travel costs fell
$424,000 due to their drop in sales.
12
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2000 1999
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Selling, General & Administration
Expense $264,698 $ 349,315
Selling, General & Administration declined $ 85,000 in the
current period compared to last year six months period principally
as a result of the higher activity and more employees at the
corporate level in the 1999 quarter.
2000 1999
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Salaries and Compensation $ 394,694 $ 606,511
-------------------------
Salaries declined $ 212,000 in the current period compared to
last year six months period principally as a result of fewer
employees at the corporate level
2000 1999
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Professional and Consulting Fees $ 238,677 $ 769,243
--------------------------------
Professional fees declined $ 531,000 in the first six months
principally since last year included heavy professional fees as a
result of the SEC investigation.
2000 1999
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Amortization and Depreciation $ 108,130 $ 100,150
-----------------------------
Amortization and depreciation increased $ 8,000 over the prior year
six months period due an increase of depreciation expense
related to the purchase of furniture and computers, during the
prior year.
13
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2000 1999
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Investment Income $ ( 178,595) $ (151,629)
Interest Expense $ 10,439 $ 1,408,934
-----------------
The entire investment income in both periods is from Muller Media
which earned $ 27,000 more in the current period on higher
investments at higher yields. Interest expense fell approximately
$ 1,400,000 due to the fact that 1999 results included interest and
penalties associated with Series F convertible preferred stock of
approximately $ 1,379,000
14
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2.- CHANGES IN SECURITIES
Not applicable.
ITEM 3.- DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<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.
DCI TELECOMMUNICATIONS, INC.
(Registrant)
Dated: November 20, 2000 By: /s/John J. Adams
--------------------
John J. Adams
President
15
