SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amended
Form 10-QSB/A-1
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number: 0-15224
ADVANCE DISPLAY TECHNOLOGIES, INC.
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(Exact name of small business issuer as
specified in its charter)
COLORADO 84-0969445
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(State of incorporation) (IRS Employer ID number)
1251 South Huron, Unit C, Denver, Colorado 80223
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(Address of principle executive offices) (Zip Code)
(303) 733-5339
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(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
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As of December 31, 1995, 3,834,055 common shares, $.001 par value per share were
outstanding.
Transitional Small Business Disclosure Format (check one):
YES NO X
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ADVANCE DISPLAY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB and do not
include all 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 accruals) considered
necessary for a fair presentation have been included. The results of operations
for any interim period are not necessarily indicative of results for the entire
fiscal year. These statements should be read in conjunction with the financial
statements and related notes included in the Company's Form 10-KSB for the year
ended June 30, 1995.
Note 2.
The consolidated financial statements include the accounts of Video View,
Inc., a subsidiary which the Company owns 100 percent of the voting stock. Video
View, Inc. has been inactive since 1991.
Note 3.
In December 1993, the Company organized a limited partnership, Display
Optics, Ltd. (the "Partnership" or "DOL"), to obtain capital to continue
development of the fiber optic video technology and other related screen
technology. The Company acts as a general partner and the Partnership is managed
by Display Group, LLC. The Company conducts substantially all of its business
through the Partnership. The Company accounts for its relationship with DOL as a
research and development partnership which requires the Company to record
certain expenses incurred by DOL as expenses of the Company and a liability to
the investors.
Note 4.
The Company has restated net loss for the quarter and six months ended
December 31, 1994, deficit accumulated during the development stage, investment
in DOL, common stock and additional paid-in capital as a result of certain
transactions and adjustments described in the notes to the financial statements
contained in the Company's annual report on Form 10-KSB for the fiscal year
ended June 30, 1995.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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General
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In December 1993, the Company organized a limited partnership, Display
Optics, Ltd. (the "Partnership"), to obtain capital to continue development of
the fiber optic video technology and related display screen technology and to
manufacture and market the display screen products world-wide. The Company acts
as a general partner and the Partnership is managed by Display Group, LLC. The
Company conducts substantially all of its business through the Partnership. For
accounting purposes, the Company accounts for its relationship with the
Partnership as a research and development partnership. The investors are
entitled to preferential payment from available cash flows from the Partnership
which would reduce the research and development liability of the Company.
In February 1995, the Partnership agreed to borrow $275,000 from the
managing partner and secured by the assets of the Partnership, for working
capital. In conjunction with the loans the Company entered into certain
agreements with the investors. At December 31, 1995, the Partnership had
borrowed $273,127 under the agreement and had additional borrowings of
approximately $312,250 from the managing partner and affiliates. The loans are
convertible to partnership units which may then be converted into common shares
of the Company.
The patents and technology formerly owned by the Company and transferred to
the Partnership in connection with the initial capitalization are subject to a
security interest in favor of a commercial lender and another entity. Management
believes that a security interest arose while the patents and technology were
owned by the third party. The assets of the commercial lender were subsequently
acquired by the Resolution Trust Corporation (RTC) as receiver, resulting in the
RTC maintaining the security interest in these patents and technology together
with the debt which the technology secured. Management does not believe any
action was ever commenced to foreclose or otherwise enforce the security
interest. In December, 1995, the managing partner of the Partnership acquired
the security interest in these patents and technology as collateral for a
debenture securing the underlying note which was also acquired from the RTC. The
Company believes such security interest will ultimately be contributed to the
Partnership for additional consideration. The patents and technology continued
to serve as collateral to the debenture in the principal amount of $2,175,000,
which debenture and underlying note were in default.
The Company has restated net loss for the quarter and six months ended
December 31, 1994, deficit accumulated during the development stage, investment
in the DOL, common stock and additional paid-in capital as a result of certain
transactions and adjustments described in the notes to the financial statements
contained in the Company's annual report on Form 10-KSB for the fiscal year
ended June 30, 1995.
Results of Operations
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For the quarter and six months ended December 31, 1995, the Company
reported net loss of $223,810 and $401,346, respectively, as compared to net
loss of $125,667 and $284,781, respectively, for the same fiscal periods of
1994. There were no sales of the Company's products to report for the fiscal
periods of either year. Management believes the lack of sales of products has
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been attributed to the inadequacies or cost inefficiencies of projection
systems. In addition, the Company's abilities to adequately develop and market
its products has been severely limited over the past several years due to the
lack of adequate operating capital. As a result of the formation of the
Partnership, significant engineering developments have been accomplished which
the Company believes will substantially improve the projection aspect of the
system, as well as refine the fiber optic screen and other display screen
technologies. The Company hopes that additional capital will be raised from the
sale of partnership units for continued development and aggressive marketing of
its products through the Partnership.
The increase in net loss for the quarter and six months ended December 31,
1995 from the same periods of the prior fiscal year is primarily due to an
increase in R&D and G&A expenses partially offset by a reduction in interest
income and royalty fees. R&D expenses for the quarter and six months ended
increased by $50,972 and $28,486, respectively, from 1994 to 1995, for continued
development of the Company's products and the addition of one employee. G&A
expenses for the quarter and six months ended increased by $41,756 and $76,234,
respectively, relating primarily to: 1) increased interest expense on
outstanding debt, 2) increased rent and utilities for additional space, 3)
increased salaries, consulting, accounting and legal expenses for day to day
operations, completing the Company's filings required by regulatory agencies and
preserving and protecting the Company's technology. The Company reported a
reduction in royalty revenues and interest income for the quarter and six months
ended December 31, 1995 from the same periods of the prior fiscal year of $4,429
and $8,859, respectively, and $986 and $2,986, respectively. The Company
continued development of its technologies through the partnership during the
first fiscal quarter of 1996. Approximately $89,000 and $148,000 was expended by
the partnership on research and development during the quarter and six months,
respectively.
Management of the Company is presently unable to predict with any degree of
certainty when, if ever, the Company might obtain revenues from the commercial
sale of products through the Partnership. Such revenue is dependent upon
continued refinement of the display screen technologies and raising additional
working capital. The Partnership hopes to finalize the prototype and begin to
manufacturing the product for sale, initially to the large display screen
markets, in 1996.
Liquidity and Capital Resources
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The Company has been totally dependent on the ability of the Partnership to
obtain capital to fund operations for nearly two years and expects to continue
to be in the foreseeable future. At September 30, 1995, the Company reported
negative net worth of $458,068 and negative working capital of $124,376.
Additional capital will be required for administrative expenses, continued
development of the product, including completion of a prototype, manufacturing
start up costs and marketing the product. The Partnership hopes to obtain
additional capital from the sale of Partnership units under the Partnership
Agreement or additional loans from the managing partner or limited partners.
Management of the Company believes the partners continued willingness to fund
the Partnership is dependent upon acceptance of: completed prototype stages;
continued development schedules; a marketing plan; and, other factors.
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The Company's continued existence is dependent upon its ability to: perfect
the Partnership's interest in the technology and develop the technology into a
commercially viable product; successfully assist the Partnership to market the
product; obtain additional sources of funding through outside financing or
equity investments; and achieve and maintain profitable operations. The
Company's efforts will continue to be focused on further development of the
projection system and screen, and on raising additional capital. Although
management believes it will be able to achieve these objectives, there can be no
assurance that the Company of the Partnership will be able to obtain additional
capital or sell its products on terms and conditions satisfactory to the Company
and the Partnership.
In conjunction with formation of the Partnership, the Company sold an
aggregate of 2,991,474 shares of Series B preferred stock. Qualified investors
executed an agreement to acquire the Series B preferred stock for aggregate
consideration of $350,000, or $.117 per share. As of December 31, 1995, all
amounts due the Company under the Agreement had been received. Proceeds from the
issuance of the Series B preferred stock were advanced to and disbursed by the
Partnership. These funds have been used for organizational and administrative
costs of the Partnership, preparation and filing of the Company's annual and
quarterly reports and other general and administrative expenses of the Company,
and on continued research and development of the fiber optic screen, projection
and other related display screen technologies. Amounts paid by the Partnership
for Company expenses reduce advances due the Company by the Partnership. At
December 31, 1995, the balance of advances due the Company by the Partnership
was approximately $228,000. For financial reporting purposes, the advances due
the Company by the Partnership are offset by the liability due the Partnership
under the research and development arrangement.
Cash flows from financing activities for the quarters and six months ended
December 31, 1995 and 1994 consisted entirely of the increase in the research
and development liability of $189,487 and $334,047, respectively, for 1995 and
$103,584 and $242,075, respectively, for 1994. Total cash flows from financing
activities for both 1995 and 1994 were used completely for operating activities.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report on Form 10-QSB/A-1 to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCE DISPLAY TECHNOLOGIES, INC.
(Registrant)
Date: May 19, 1997 /S/ Darrell D. Avey
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Darrell D. Avey
Chairman of the Board
Corporate Secretary
Acting Chief Financial Officer
