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 March 31, 2000
[ ] 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)
7334 South Alton Way, Building 14, Suite F, Englewood, Colorado 80112
---------------------------------------------------------------------
(Address of principle executive offices) (Zip Code)
(303) 267-0111
-----------------------------------------------
(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 April 30, 2000, 23,774,275 shares of Common Stock, $.001 par value per
share were outstanding.
Transitional Small Business Disclosure Format (check one):
YES NO X
------- -------
<PAGE>
ADVANCE DISPLAY TECHNOLOGIES, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Balance Sheets (unaudited) -
March 31, 2000 and June 30, 1999................................3
Statements of Operations (unaudited) -
Three months and nine months ended March 31, 2000
and 1999 and for the period from March 15, 1995,
inception, to March 31, 2000....................................4
Statements of Cash Flows (unaudited) -
Three months and nine months ended
March 31, 2000 and 1999 and for
the period from March 15, 1995, inception,
to March 31, 2000...............................................5
Notes to Financial Statements (unaudited).......................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................8-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................12
Item 2. Changes in Securities..............................................12
Item 3. Defaults on Senior Securities......................................12
Item 4. Submission of Matters to a Vote of
Security Holders.................................................12
Item 5. Other Information..................................................12
Item 6. Exhibits and Reports on Form 8-K...................................12
Signatures.........................................................12
2
<PAGE>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
March 31, June 30,
2000 1999
------------ -----------
ASSETS
------
CURRENT ASSETS:
Cash $ 107,220 $ 80,352
Other current assets 11,307 4,311
----------- -----------
Total current assets 118,527 84,663
PROPERTY AND EQUIPMENT 139,816 135,624
Less: Accumulated depreciation (109,236) (83,747)
----------- -----------
Net Property and Equipment 30,580 51,877
----------- -----------
TOTAL ASSETS $ 149,107 $ 136,540
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Convertible, redeemable notes payable
to shareholders $ 1,913,967 $ --
Accounts payable 341,550 340,775
Other accrued liabilities 407,559 265,346
----------- -----------
Total current liabilities 2,663,076 606,121
CONVERTIBLE, REDEEMABLE NOTES
PAYABLE TO SHAREHOLDERS 230,900 1,573,967
SHAREHOLDERS' DEFICIT:
Preferred stock, $.001 par value,
100,000,000 shares authorized1,843,900
shares issued and outstanding (liquidation
preference of $2,765,850) 1,844 1,844
Common stock, $.001 par value, 100,000,000
shares authorized, 23,774,275 shares
issued and outstanding 23,775 23,775
Additional paid-in capital 4,358,830 4,229,130
Deficit accumulated during the
development stage (7,129,318) (6,298,297)
----------- -----------
Total Shareholders' Deficit (2,744,869) (2,043,548)
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $ 149,107 $ 136,540
=========== ===========
(See accompanying notes to unaudited financial statements)
3
<PAGE>
<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
March 15, 1995
(Inception)
Three Months Ended Nine Months Ended Through
March 31, March 31, March 31,
2000 1999 2000 1999 2000
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Consulting Revenue $ -- $ -- $ -- $ -- $ 30,200
Other Income:
Related party interest income -- -- -- -- 162,761
Other interest income 307 196 1,529 976 5,119
Settlement income -- -- -- 175,000 175,000
Other $ -- $ -- $ -- $ 550 $ 550
------------ ------------ ------------ ------------ ------------
Total revenue and other income 307 196 1,529 176,526 373,630
COSTS AND EXPENSES:
General and administrative 88,653 118,439 329,320 335,847 2,041,677
Research and development 81,091 19,626 234,011 114,618 3,306,157
Impairment of intangible -- -- -- -- 451,492
Interest expense - related party 50,825 32,228 269,226 87,775 1,703,620
------------ ------------ ------------ ------------ ------------
Total costs and expenses 220,569 170,293 832,557 538,240 7,502,946
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (220,262) $ (170,097) $ (831,028) $ (361,714) $ (7,129,316)
============ ============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE $ (.01) $ (.01) $ (.03) $ (.02)
============ ============ ============ ============
(Basic and diluted)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 23,774,275 23,774,275 23,774,275 24,034,560
============ ============ ============ ============
(See accompanying notes to unaudited consolidated financial statements)
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
March 15,
1995
(Inception)
Three Months Ended Nine Months Ended Through
March 31, March 31, March 31,
-------------------------- -------------------------- -----------
2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Loss $ (220,262) $ (170,097) $ (831,028) $ (361,714) $(7,129,316)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Acquired research and development -- -- -- -- 2,536,494
expense
Impairment of intangible asset -- -- -- -- 451,492
Depreciation and amortization 8,921 11,561 26,542 36,027 242,291
Stock option compensation expense -- -- -- -- 214,125
Interest expense related to debt 750 -- 129,700 -- 1,143,633
discount
(Gain) loss on disposal of assets 291 205 291 (470) 2,491
(Increase)decrease in:
Inventory -- -- -- -- 6,048
Other current assets (50) (16,960) (6,996) (24,569) (142,792)
(Decrease) increase in:
Interest payable to shareholders 50,075 32,228 139,526 87,775 525,538
Accounts payable (6,671) (30,960) 783 (174,423) (104,301)
Other accrued liabilities 4,581 (2,781) 3,586 21,690 (32,423)
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities (162,365) (176,804) (537,596) (415,684) (2,286,720)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,726) (1,874) (5,536) (5,015) (104,251)
Proceeds from sale of assets -- -- -- 5,150 17,030
Advances to affiliates -- -- -- -- (932,925)
Purchase of notes receivable and
security interest -- -- -- -- (225,000)
Cash received in acquisition -- -- -- -- 303,812
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities (1,726) (1,874) (5,536) 135 (941,334)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions -- -- -- -- 103,127
Proceeds from convertible notes
payable to shareholders 230,000 215,000 570,000 405,000 2,932,642
Proceeds from line-of-credit -- -- -- -- 299,505
----------- ----------- ----------- ----------- -----------
Net Cash provided by
financing activities 230,000 215,000 570,000 405,000 3,335,274
----------- ----------- ----------- ----------- -----------
Increase (decrease) in cash 65,909 36,322 26,868 (10,549) 107,220
Cash & cash equivalents at
beginning of period 41,311 30,593 80,352 77,464 --
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end
of period $ 107,220 $ 66,915 $ 107,220 $ 66,915 $ 107,220
=========== =========== =========== =========== ===========
(See accompanying notes to unaudited consolidated financial statements)
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
March 15, 1995
(Inception)
Three Months Ended Nine Months Ended Through
March 31, March 31, March 31,
--------------------------- ---------------------------- ----------
2000 1999 2000 1999 2000
------------ ------------ ------------ ------------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<S> <C> <C> <C> <C> <C>
Cash paid for:
Interest $ -- $ -- $ -- $ -- $ 26,570
============ ============ ============ ============ ==========
Taxes $ -- $ -- $ -- $ -- $ --
============ ============ ============ ============ ==========
Issuance of common Stock for acquisition
of Display Group, LLC and Display
Optics, Ltd. and conversion of
Convertible debt $ -- $ -- $ -- $ -- $2,199,026
============ ============ ============ ============ ==========
Conversion of notes payable to
shareholders to common stock $ -- $ -- $ -- $ -- $ 550,000
============ ============ ============ ============ ==========
Conversion of short term notes and
accrued interest into Convertible,
Redeemable Promissory Notes $ 80,900 $ -- $ 80,900 $ -- $ 264,475
============ ============ ============ ============ ==========
(See accompanying notes to unaudited consolidated financial statements)
6
</TABLE>
<PAGE>
ADVANCE DISPLAY TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1.
Unaudited Financial Statements
- ------------------------------
The accompanying unaudited interim 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 Form 10-KSB for Advance Display Technologies, Inc.
("ADTI" or the "Company")for the year ended June 30, 1999, as the notes to these
interim financial statements omit certain information required for complete
financial statements.
Note 2.
Subsequent Events
- -----------------
Subsequent to the fiscal quarter ended March 31, 2000, the Company issued
10% Convertible, Redeemable Promissory notes in the aggregate face amount of
$150,000 to related parties. These Convertible, Redeemable Promissory Notes
carry similar terms as the Company's other Convertible, Redeemable Promissory
Notes outstanding.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward Looking Statements
Certain statements contained herein constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward looking statements include, without limitation, statements regarding
Advance Display Technologies, Inc.'s ("ADTI" or the "Company") anticipated
marketing and production, need for working capital, future revenues and results
of operations. Factors that could cause actual results to differ materially
include, among others, the following: future economic conditions, the ability of
the Company to obtain sufficient capital, to further develop and improve the
manufacturing process for its product, to manufacture its product at a cost that
would result in profitable sales, to sell a sufficient number of screens at a
sufficient price to result in positive operating margins, to attract and retain
qualified management and other personnel, and generally to successfully execute
a business plan that will take the Company from a development stage entity to a
profitable operating company. Many of these factors are outside the control of
the Company. Investors are cautioned not to put undue reliance on forward
looking statements. Except as otherwise required by rules of the Securities and
Exchange Commission, the Company disclaims any intent or obligation to update
publicly these forward looking statements, whether as a result of new
information, future events or otherwise.
Statements in this Report are qualified in their entirety by reference to
contracts, agreements, and other exhibits filed or incorporated with the
Company's Form 10-KSB for the fiscal year ended June 30, 1999.
Results of Operations
In the past, the Company conducted research and development activities for
full color image projection applications primarily for the large video display
screen market. Due to various factors, the Company has not yet achieved the
desired results in the development of the screen and projection system for these
applications. Accordingly, the Company has explored alternate image projection
and manufacturing technologies which, in the future, may provide desirable
results for certain applications. As of the date of this report, the Company
remains in a development stage as it has not received significant revenues from
operations.
During the nine months ended March 31, 2000, the Company directed its
efforts toward alternative applications and markets which may utilize various
image projection technologies in conjunction with its Screen technologies. The
Company completed a first generation prototype for use in technology
demonstrations and preliminary testing programs with positive results. The
Company completed a second generation prototype that further demonstrated the
feasibility of the product design for various applications. Currently, the
Company is executing a development plan which intends to design and produce a
8
<PAGE>
third generation prototype for further testing and demonstrations, as well as
design an automated process for volume manufacturing of the units.
For the fiscal quarter and nine months ended March 31, 2000, the Company
reported net losses of ($220,262) and ($831,028), respectively, as compared to
net losses of ($170,097) and ($361,714) for the same periods in 1999. The
differences in net losses for the periods ended 2000 as compared to 1999 are
primarily due to: 1) other income of $0 and $175,550 received during the quarter
and nine months ended March 31, 1999, respectively, primarily in settlement of
previously pending litigation, 2)an increase in research and development
("R&D")costs for the quarter and nine months ended March 31, 2000 of
approximately $61,465 and $119,393, respectively from the same periods of the
prior year, and, 3) an increase in interest expense of $18,597 and $181,451 for
the quarter and nine months ended March 31, 2000 over amounts reported for the
same periods of the prior fiscal year. These increases were partially offset by
a decrease in general and administrative ("G&A") expenses for the quarter and
nine months ended March 31, 2000 of approximately $29,786 and $6,527,
respectively, from amounts reported in 1999.
The Company reported total revenue and other income of $1,529 for the nine
months ended March 31, 2000 which consisted entirely of interest income. In
comparison, the Company reported total revenue and other income of $176,526 for
the nine months ended March 31, 1999 which consisted of settlement fees from
prior litigation of $175,000, interest income of $976 and other income of $550.
There were no sales of the Company's products to report for either fiscal
period.
The Company reported G&A expenses of $329,320 for the nine months ended
March 31, 2000, compared to $335,847 for the same period in 1999. Depreciation
decreased by approximately $7,700 in 2000 from 1999 due to certain assets being
fully depreciated. Legal and other professional fees decreased approximately
$7,100 for the nine month period in 2000 from 1999. The Company experienced a
reduction in patent filings and maintenance fees and less complicated SEC and
other legal matters. Other consulting fees also decreased approximately $9,800
in the nine months ended March 31, 2000 from the prior fiscal year in connection
with the Company's investigation of alternative applications and markets for its
display screen systems. Management has taken a more direct role in this process
reducing the use of consultants. Due to these same efforts, together with the
associated prototype development, travel expenses increased by approximately
$23,600 for the nine months ended March 31, 2000 from the same period of the
prior fiscal year. The Company also restructured its workforce in 1999 resulting
in a net decrease in contract services, salaries and employee related expenses
of approximately $14,100 for the nine month period ended March 31, 2000 from the
same period of 1999.
On June 1, 1999, the Company moved its offices to a facility approximately
one third the size of its previous facility resulting in a decrease in rent
expense of approximately $18,200 for the nine months ended March 31, 2000 from
the nine months ended March 31, 1999. Also, during the nine months ended March
31, 1999, the Company negotiated an approximate $20,300 reduction in legal fees
previously recorded in connection with the settlement of prior litigation.
9
<PAGE>
G&A expenses for the nine months ended March 31, 2000 included: 1)
depreciation of approximately $25,100; 2) general office expense of
approximately $80,300; 3) employee salaries and expenses of approximately
$128,900; 4) travel related expenses of approximately $42,100, and 5)
professional fees of approximately $52,900 (including legal fees incurred for
patent work and general corporate matters, and, accounting fees in connection
with the audit of the Company's financial statements for the fiscal year ended
June 30, 1999).
The Company reported R&D expenses of $234,011 and $114,618 for the nine
months ended March 31, 2000 and 1999, respectively. The increase in 2000 over
1999 is the result of the Company's efforts to investigate and construct various
prototypes for demonstration in alternative applications and markets.
Interest expense increased from $87,775 for the nine months ended March 31,
1999 to $269,226 for the nine months ended March 31, 2000. This increase is due
to: 1) $51,751 increase due to an increase in long term debt outstanding; and,
2) $129,700 which related to immediately convertible debt that was issued at a
conversion price below the quoted price of the Company's common stock. However,
the Company believes that the conversion price more closely reflected the actual
fair market value of the Company's common stock on the dates of issuance.
Liquidity and Capital Resources
- -------------------------------
The Company has been totally dependent on financing from outside sources to
fund operations for more than five years. At March 31, 2000, the Company
reported negative net worth of $2,744,869 and negative working capital of
$2,544,549. Effective October 15, 1999, the Company's outstanding convertible,
redeemable promissory notes totaling $1,913,967 became due within one year of
that date and therefore were included in current liabilities. Management of the
Company is currently negotiating an extended term for these notes with the note
holders. If the convertible, redeemable promissory notes were extended beyond
March 31, 2001, the negative working capital reported at March 31, 2000 would
have been $630,582. However, there is no assurance that such extensions can be
obtained.
The Company will continue to require additional capital for administrative
expenses, continued development of the display system, further design and
development of an automated manufacturing process and marketing costs.
Management estimates that the Company has sufficient funding to last until the
first quarter of the next fiscal year. Management believes that the Company's
continued existence beyond that time is dependent upon its ability to: 1)
develop or acquire an adequately bright projector at an acceptable cost, or
other light source; 2) complete the design and development of an automated
manufacturing process; 3) successfully market the product; 4) obtain additional
sources of funding through outside sources; and 5) achieve and maintain
profitable operations. There can be no assurance that the Company will be able
to achieve its research and development goals, obtain sufficient additional
capital or manufacture or sell its products on terms and conditions satisfactory
to the Company.
10
<PAGE>
Cash flows from financing activities for the nine months ended March 31,
2000 consisted entirely of the issuance of 10% convertible, redeemable
promissory notes ("Notes")to principal shareholders totaling $570,000. No
commission was paid in connection with this offering. Of these Notes, $340,000
are due October 15, 2000 and are convertible, at the option of the note holder,
into shares of the Company's Common Stock at a conversion rate of $.05 per
share. The remaining $230,000 in Notes are due October 15, 2002 and convertible,
into shares of the Company's Common Stock at a conversion rate of $.30 per
share. All of these Notes are unsecured. The Company has the right to call these
Notes after one year and the note holders have 30 days in which to convert if
these notes are called by the Company. The Company may elect to pay interest on
any of these notes converted in cash or by issuance of additional shares of the
Company's Common Stock. All of the notes were sold pursuant to Section 4(2) of
the Securities Act of 1933.
Cash flows for the nine months ended March 31, 2000 were used for ongoing
product and manufacturing process development, alternative application and
market analysis, operating expenses and investment in capital equipment.
Subsequent to March 31, 2000, the Company issued an additional Note in the
face amount of $150,000 to a related party. This Note is due October 15, 2002
and is convertible into shares of the Company's Common Stock at a conversion
rate of $.30 per share. All other terms are consistent with the Company's other
Convertible Redeemable Promissory notes currently outstanding.
During the nine month period ended March 31, 1999, the Company received a
payment of $175,000 in settlement of previously outstanding litigation which
reduced cash used in operations. Similar to the current year, cash flows from
financing activities for the nine months ended March 31, 1999, consisted
entirely of proceeds from the issuance of convertible, redeemable promissory
notes in the aggregate amount of $405,000, due and payable October 15, 2000 and
with substantially the same terms as the Company's other convertible, redeemable
promissory notes then outstanding. Proceeds from the settlement and financing
activities received during the nine months ended March 31, 1999 were primarily
used for ongoing research and development and operating expenses.
Pending a favorable outcome of the development plan described above, the
Company will continue efforts on further design and development of the fiber
optic screen system and related manufacturing process. In addition, the Company
will continue efforts on raising additional capital through private placements
or other sources. There can be no assurances that management will be able to
acquire the capital needed or be successful in achieving these objectives. If
these efforts are not successful, the Company may be forced to discontinue
operations.
11
<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.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has 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 11, 2000 /S/ Matthew W. Shankle
-----------------------------------
Matthew W. Shankle
President
(Chief Executive and Financial Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from March 31,
2000 Form 10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 107,220
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 118,527
<PP&E> 139,816
<DEPRECIATION> 109,236
<TOTAL-ASSETS> 149,107
<CURRENT-LIABILITIES> 2,663,076
<BONDS> 0
0
1,844
<COMMON> 23,775
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 149,107
<SALES> 0
<TOTAL-REVENUES> 1,529
<CGS> 0
<TOTAL-COSTS> 832,557
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 269,226
<INCOME-PRETAX> (831,028)
<INCOME-TAX> 0
<INCOME-CONTINUING> (831,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (831,028)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
