SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996
[ ] 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.
--------------------------------------
(Exact name of small business issuer as
specified in its charter)
COLORADO 84-0969445
---------------------- ----------------------
(State of incorporation) (IRS Employer ID number)
1251 South Huron, Unit C, Denver, Colorado 80223
------------------------------------------------
(Address of principle executive offices) (Zip Code)
(303) 733-5339
----------------------------------------------
(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
----- -----
As of September 30, 1996, 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.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets -
September 30, 1996 and June 30,1996.................. 3
Consolidated Statements of Operations -
Three months ended September 30, 1996 and
September 30, 1995 and for the period from
October 7, 1983, inception, to September 30, 1996..... 4
Consolidated Statements of Cash Flows -
Three months September 30, 1996 and
September 30, 1995 and for the period from
October 7, 1983, inception, to September 30, 1996..... 5-6
Notes to Consolidated Financial Statements............. 7
Item 2. Managements' Discussion and Analysis of
Results of Operations and Financial Condition.......... 8-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 11
Item 2. Changes in Securities...................................... 11
Item 3. Defaults on Senior Securities.............................. 11
Item 4. Submission of Matters to a Vote of Security Holders........ 11
Item 5. Other Information.......................................... 11
Item 6. Exhibits and Reports on Form 8-K........................... 11
Signatures................................................. 12
2
<PAGE>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1996 1996
------------ -----------
ASSETS
Property, and Equipment $ 124,203 $ 124,203
Less: Accumulated depreciation (124,203) (124,203)
------------ ------------
Net Property and Equipment -- --
------------ ------------
Investment in DOL 389,556 403,619
------------ ------------
Total Assets $ 389,556 $ 403,619
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued expenses $ 92,748 $ 92,748
Due to affiliated parties 32,324 32,324
------------ ------------
Total Current Liabilities 125,072 125,072
Research and Development Liability 1,614,330 1,311,914
------------ ------------
Total Liabilities 1,739,402 1,436,986
Shareholders' Equity:
Preferred stock, $.001 par value 2,991 2,991
Common stock, $.001 par value 3,834 3,834
Additional paid-in capital 11,450,062 11,450,062
Accumulated deficit (12,806,733) (12,490,254)
------------ ------------
Total Shareholders' Equity (1,349,846) (1,033,367)
------------ ------------
Total Liabilities and
Shareholders' Equity $ 389,556 $ 403,619
============ ============
(See accompanying notes to financial statements)
3
<PAGE>
<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended October 7, 1983
September 30, (Inception) through
------------------------------------- September 30,
1996 1995 1996
------------ ------------ ------------
Revenue:
<S> <C> <C> <C>
Licensing and exclusivity fees $ -- $ -- $ 2,500,000
Royalty fees -- -- 320,047
Product and equipment sales -- -- 1,243,935
Consulting -- -- 60,000
Other -- -- 1,037,971
------------ ------------ ------------
Total Revenue -- -- 5,161,953
Costs and Expenses:
Cost of Goods Sold -- -- 1,004,614
Marketing -- -- 741,463
Research and development 62,091 58,289 3,819,936
General and administrative 257,067 122,990 11,693,246
------------ ------------ ------------
Total Expenses 319,158 181,279 17,259,259
------------ ------------ ------------
Operating (Loss) (319,158) (181,279) (12,097,306)
Other Income (Expenses):
Other income -- -- 696,799
Interest income 2,679 3,743 296,146
Loss on assets disposed -- -- (1,002,838)
Interest expense -- -- (699,534)
------------ ------------ ------------
Total Other Income (Expense) 2,679 3,743 (709,427)
------------ ------------ ------------
Net Loss $ (316,479) $ (177,536) $(12,806,733)
============ ============ ============
Net Loss per Common Share $ ( .08) $ ( .05)
============ ============
Weighted Average Number of Common
Shares Outstanding 3,834,055 3,834,055
============ ============
(See accompanying notes to financial statements)
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended October 7, 1983
September 30 (Inception) through
------------------------------------- September 30,
1996 1995 1996
------------ ------------ ------------
Cash Flows from Operating Activities:
<S> <C> <C> <C>
Net loss $ (316,479) $ (177,536) $(12,806,733)
Adjustments to reconcile net loss
to net cash (used in)
operating activities:
Depreciation and amortization 14,063 14,063 3,266,217
Deferred revenue -- -- (315,004)
Stock issued for services -- -- 2,133,727
Loss on disposal of assets -- -- 1,002,838
(Increase) decrease in:
Due from affiliates and other 836 18,913 (224,182)
Increase (decrease) in:
Accounts payable -- -- 349,811
Accrued expenses -- -- 568,360
Due to officers, stockholders
and affiliated parties -- -- (7,639)
------------ ------------ ------------
Net cash used in
operating activities (301,580) (144,560) (6,032,605)
------------ ------------ ------------
Cash Flows from Investing Activities:
Additions to property and equipment -- -- (3,692,226)
Other assets -- -- (677,675)
Acquisition of subsidiary -- -- (85,524)
Cash from disposal of assets -- -- 273,417
------------ ------------ ------------
Net Cash used in
investing activities -- -- (4,182,008)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from affiliates -- -- 39,960
Issuance of common stock -- -- 6,774,027
Increase in treasury stock -- -- (22,280)
Increase in notes payable -- -- 2,862,760
Sale leaseback proceeds,
net of certificate
of deposit ($550,000),
loan fees ($30,000) -- -- 180,000
Payments of principal on
notes payable and capital
lease obligations -- -- (1,882,780)
Deferred loan costs -- -- (55,556)
Royalty fees received in advance -- -- 315,000
Settlement of capital lease -- -- (163,199)
Issuance of preferred stock -- -- 349,999
Research and development liability 301,580 144,560 1,816,682
------------ ------------ ------------
Net Cash provided by
financing activities 301,580 144,560 10,214,613
------------ ------------ ------------
(See accompanying notes to financial statements)
(Continued)
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Three Months Ended October 7, 1983
September 30, (Inception) through
--------------------------------- September 30,
1996 1995 1996
------------ ------------ ----------
<S> <C> <C> <C>
Increase (decrease) in cash -- -- --
Cash and cash equivalents
at beginning of period -- -- --
------------- ------------- ----------
Cash and cash equivalents at end
of period $ -- $ -- $ --
============= ============= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ -- $ -- $ 718,515
============= ============= ==========
Taxes $ -- $ -- $ --
============= ============= ==========
Property and equipment through
capital leases $ -- $ -- $1,332,376
============= ============= ==========
Assets acquired for liabilities assumed in
purchase of Video View, Inc. $ -- $ -- $ 297,130
============= ============= ==========
Acquisition of certain assets (including
patents) for common stock and
assumption of liabilities $ -- $ -- $ 200,000
============= ============= ==========
Settlement of trade payables and accrued
salaries through issuance of common
stock $ -- $ -- $ 599,803
============= ============= ==========
(See accompanying notes to financial statements)
6
</TABLE>
<PAGE>
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, 1996, as the notes to these interim financial statements omit
certain information required for complete financial statements.
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 display 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.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
-----------------------------------------------
General
- -------
During December 1993, Advance Display Technologies, Inc. ("ADTI") and other
individual investors organized a limited partnership, Display Optics, Ltd. (the
"Partnership"), to obtain capital and to continue development of the fiber optic
and other related video technology. ADTI acts as a general partner and the
Partnership is managed by Display Group, LLC (the "Managing General Partner").
ADTI conducts substantially all of its business through the Partnership.
Accordingly, all references to "the Company" and its operations since December
1993 in this report refer to the Partnership unless specifically stated
otherwise.
Following the organization of the Partnership the Company was able to
increase its research and development efforts on the product as well as
administrative activities, including raising additional capital, developing and
demonstrating the technology and taking steps necessary to preserve and protect
the technology. Based on an analysis of the Partnership Agreement and generally
accepted accounting principles, the transaction is being recorded as a research
and development arrangement which requires ADTI to record the expenses incurred
by the Partnership as a liability.
Results of Operations
- ---------------------
For the fiscal quarter ended September 30, 1996, ADTI and the Partnership
reported net loss of ($316,479) as compared to ($177,536) for the same fiscal
period of 1995. There were no sales of the Company's products during either
period. Management believes the lack of sales of products has been attributable
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. The Company seeks to raise additional capital for continued
development and marketing of its products.
During 1996, projection technology took a major leap in terms of brightness
and resolution capabilities. At the same time, prices of projectors have gone
down and continue to decline. This enabled the Company to sell one screen,
subsequent to the end of the fiscal quarter. The Company manufactured the screen
internally and installed the 9' x 12' fiber optic screen at the National Western
Event Center in Denver, Colorado in January 1997. This installation represents
the first sale of the Company's product since the late 1980's. The Company plans
to use this installation for continued marketing of its products.
ADTI reported general and administrative expenses of $257,067 and $122,990
for the quarters ended September 30, 1996 and 1995, respectively. The increase
in 1996 from amounts reported in 1995 was due to several factors: 1) increased
interest expense on outstanding debt of approximately $18,500, 2) an increase in
salaries and related expenses of approximately $14,100, 3) an increase in legal
and professional fees of approximately $89,500 due to administrative issues of
8
<PAGE>
the Partnership, ongoing litigation and auditing fees. ADTI reported research
and development expenses of $62,091 and $58,289 for the fiscal quarters ended
September 30, 1996 and 1995, respectively. The Company continued development on
projection technologies during the first quarter of fiscal 1997.
Interest income decreased from $3,743 for the fiscal quarter ended
September 30, 1995 to $2,679 for the same fiscal period of 1996 due to the
reduction of the amount due ADTI from the Partnership. Amounts receivable for
funds previously advanced from ADTI to the Partnership are reduced as debts of
ADTI are accrued and ultimately paid by the Partnership. At September 30, 1996,
the balance due ADTI by the Partnership was approximately $202,350, including
interest.
Liquidity and Capital Resources
- -------------------------------
ADTI has been totally dependent on the ability of the Partnership to obtain
capital to fund operations for more than three years and expects to continue to
be dependent, in total or in part, for the foreseeable future. During the fiscal
quarter ended September 30, 1996, the Company was funded entirely by the
issuance of convertible debt. Borrowings of the Company totaled $1,670,046 at
March 31, 1997.
At September 30, 1996, ADTI reported negative net worth of $1,349,846 and
negative working capital of $125,072. The Company will require additional
capital for administrative expenses, continued development of the product,
manufacturing start up costs and marketing the product. The Company hopes to
obtain additional funding to support working capital requirements. Management
anticipates continuing to manufacture the product for sale, initially to the
large display screen markets, in 1997. Management believes that the Company's
continued existence is dependent upon its ability to: 1) successfully market the
product; 2) obtain additional sources of funding through outside financing or
equity investments; and 3) achieve and maintain profitable operations. Although
Management believes it will be able to achieve these objectives, there can be no
assurance that the Company will be able to obtain additional capital or sell its
products on terms and conditions satisfactory to the Company.
Due to significant costs associated with development and marketing of the
Company's technology, ADTI and the Company have experienced a continuing need
for working capital since inception. This need became particularly acute
beginning in 1989, following protracted litigation over the Company's
technology. To alleviate this situation, ADTI formed the Partnership in fiscal
1994 to obtain capital to continue development of its technology. (See General,
above)
ADTI reported a working capital deficit position at September 30, 1996 and
September 30, 1995. ADTI's sole asset at September 30, 1996 and September 30,
1995 was its investment in the Partnership. Therefor, the working capital
deficit position at September 30, 1996 and September 30, 1995 was the amount of
the current liabilities reported of $125,072 and 124,376, respectively.
9
<PAGE>
Cash flows from financing activities for the fiscal quarters ended
September 30, 1996 and 1995 consisted entirely of the increase in the research
and development liability of $305,180 and $144,560, respectively. Total cash
flows from financing activities for both 1996 and 1995 were used completely for
operating activities.
The Company's efforts will continue to be focused on further development of
the projection system and screen, and on raising additional capital through debt
or equity investments. There can be no assurances that the Company will be
successful obtaining additional capital needed to sustain operations.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- ---------------------------
None.
ITEM 2. CHANGES IN SECURITIES.
- -------------------------------
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES.
- ---------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------
None.
ITEM 5. OTHER INFORMATION.
- ---------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------------------------------------------
None.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report on Form 10-QSB 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
----------- ----------------------------------
Darrell D. Avey
Chairman of the Board
Corporate Secretary
Acting Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 124,203
<DEPRECIATION> 124,203
<TOTAL-ASSETS> 389,556
<CURRENT-LIABILITIES> 125,072
<BONDS> 0
0
2,991
<COMMON> 3,834
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 389,556
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 319,158
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (316,479)
<INCOME-TAX> 0
<INCOME-CONTINUING> (316,479)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (316,479)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
