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, 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.
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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)
7334 South Alton Way, Building 14, Suite F, Englewood, CO 80112
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(Address of principle executive offices) (Zip Code)
(303) 267-0111
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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 November 10, 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
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ADVANCE DISPLAY TECHNOLOGIES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Balance Sheets (unaudited) -
September 30, 2000 and June 30, 2000...........................3
Statements of Operations (unaudited) -
Three months ended September 30, 2000 and 1999 and for the
period from March 15, 1995, inception, to
September 30, 2000............................................4
Statements of Cash Flows (unaudited) -
Three months ended September 30, 2000 and 1999 and for the
period from March 15, 1995, inception, to
September 30, 2000.............................................5
Notes to Financial Statements (unaudited)........................6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition................7-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................9
Item 2. Changes in Securities.............................................. 9
Item 3. Defaults on Senior Securities...................................... 9
Item 4. Submission of Matters to a Vote of
Security Holders.............................................. 9
Item 5. Other Information.................................................. 9
Item 6. Exhibits and Reports on Form 8-K................................... 9
Signatures.....................................................10
2
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<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
September 30, June 30,
2000 2000
------------- -------------
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 161,272 $ 18,010
Other current assets 10,994 4,657
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Total current assets 172,266 22,667
PROPERTY AND EQUIPMENT 153,979 140,140
Less: Accumulated depreciation (122,676) (117,664)
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Net Property and Equipment 31,303 22,476
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TOTAL ASSETS $ 203,569 $ 45,143
============= =============
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 154,426 $ 143,907
Other accrued liabilities 66,838 65,122
------------- -------------
Total current liabilities 221,264 209,029
CONVERTIBLE, REDEEMABLE NOTES PAYABLE TO SHAREHOLDERS 2,764,867 2,294,867
ACCRUED INTEREST ON CONVERTIBLE, REDEEMABLE NOTES
PAYABLE TO SHAREHOLDERS 427,418 361,523
SHAREHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 100,000,000
shares authorized, 1,843,900 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 issued and
outstanding 23,775 23,775
Additional paid-in capital 4,368,770 4,368,770
Deficit accumulated during the development
stage (7,604,369) (7,214,665)
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Total Shareholders' Deficit (3,209,980) (2,820,276)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 203,569 $ 45,143
============= =============
(See accompanying notes to unaudited financial statements)
3
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<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
March 15, 1995
(Inception)
Three Months Ended Through
September 30, September 30,
2000 1999 2000
------------ ------------ ------------
<S> <C> <C> <C>
CONSULTING REVENUE $ -- $ -- $ 30,200
OTHER INCOME:
Related party interest income -- -- 162,761
Other interest income 1,313 286 7,267
Settlement income -- -- 175,000
Other -- -- 550
------------ ------------ ------------
Total revenue and other income 1,313 286 375,778
COSTS AND EXPENSES:
General and administrative 107,283 123,661 2,253,262
Research and development 217,838 39,238 3,708,291
Impairment of intangible assets -- -- 451,492
Interest expense - related party 65,896 151,180 1,837,936
------------ ------------ ------------
Total costs and expenses 391,017 314,079 (8,250,981)
------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY GAIN $ (389,704) $ (313,793) $ (7,875,203)
------------ ------------ ------------
EXTRAORDINARY GAIN DUE TO
FORGIVENESS OF DEBT -- -- 270,834
------------ ------------ ------------
NET LOSS $ (389,704) $ (313,793) $ (7,604,369)
============ ============ ============
NET LOSS PER COMMON SHARE $ (.02) $ (.01)
============ ============
(BASIC AND DILUTIVE):
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 23,774,275 23,774,275
============ ============
(See accompanying notes to unaudited financial statements)
4
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<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
March 15,1995
(Inception)
Three Months Ended Through
September 30, September 30,
2000 1999 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income (Loss) $ (389,704) $ (313,793) $(7,604,369)
Adjustments to reconcile net (loss)
to net cash used in operating activities:
Acquired research and development expense -- -- 2,536,494
Impairment of intangible asset -- -- 451,492
Depreciation and amortization 5,012 8,773 256,018
Stock option compensation expense -- -- 214,125
Interest expense related to debt discount -- 109,685 1,153,573
Loss on disposal of assets -- -- 5,445
(Increase) decrease in:
Inventory -- -- 6,048
Other current assets (6,337) (4,653) (142,479)
(Decrease) increase in:
Accrued interest payable to members 65,896 41,494 612,622
Accounts payable 10,519 (7,775) (291,424)
Other accrued liabilities 1,715 (3,572) (33,708)
----------- ----------- -----------
Net cash used in operating activities (312,899) (169,841) (2,836,163)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (13,839) (2,308) (121,656)
Proceeds from sale of assets -- -- 17,030
Advances to affiliates -- -- (932,925)
Purchase of notes receivable and
security interest -- -- (225,000)
Cash received in acquisition -- -- 303,812
----------- ----------- -----------
Net Cash used in investing activities (13,839) (2,308) (958,739)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions -- -- 103,127
Proceeds from convertible, redeemable notes
payable to shareholders 470,000 100,000 3,553,542
Proceeds from line-of-credit -- -- 299,505
----------- ----------- -----------
Net Cash provided by
financing activities 470,000 100,000 3,956,174
----------- ----------- -----------
Increase (decrease) in cash 143,262 (72,149) 161,272
Cash & cash equivalents
at beginning of period 18,010 80,352 --
----------- ----------- -----------
Cash and cash equivalents at end
of period $ 161,272 $ 8,203 $ 161,272
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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 stockholders
to common stock $ -- $ -- $ 550,000
=========== =========== ===========
(See accompanying notes to unaudited financial statements)
5
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ADVANCE DISPLAY TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
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, 2000, as the notes to these
interim financial statements omit certain information required for complete
financial statements.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
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, 2000.
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 did not achieve the desired
results in the development of the screen system for those particular
applications. Accordingly, the Company embarked on a program to re-engineer
itself and develop new markets utilizing substantially improved product designs
and methods of manufacture. As of the date of this report, the Company remains
in a development stage as it has not received significant revenues from
operations.
For the fiscal quarter ended September 30, 2000, the Company reported net
loss of ($389,704) compared to ($313,793) for the fiscal quarter ended September
30, 1999. The difference in net loss for the quarters presented is primarily due
to an increase in research and development ("R&D")costs of approximately 450% in
2000 from 1999. This increase was partially offset by a reduction in general and
administrative ("G&A") costs of approximately 13% and a decrease in interest
expense of approximately 56% in 2000 from 1999.
The Company reported total revenue and other income of $1,313 and $286 for
the quarters ended September 30, 2000 and 1999, respectively, which consisted
entirely of interest income. There were no sales of the Company's products to
report for either fiscal quarter.
The Company reported G&A expenses of $107,283 and $123,661 for the quarters
ended September 30, 2000 and 1999, respectively. Depreciation decreased by
approximately $3,800 in 2000 from 1999 due to certain assets being fully
depreciated. Legal and other professional fees decreased approximately $12,800
in 2000 from 1999 primarily due to a decrease in: 1) consulting fees related to
market research and analysis, 2) accounting fees for the annual audit, and, 3) a
reduction in legal fees in connection with SEC and intellectual property
matters. Travel expenses decreased by approximately $8,500 in 2000 from 1999 due
to travel in 1999 related to the market research and analysis. Employee benefits
increased approximately $5,400 primarily due to rising health care costs and the
addition of certain manufacturing/R&D employees for the fiscal quarter ended
September 30, 2000. Other G&A expenses fluctuated slightly resulting in a net
increase of the combined remaining G&A expenses of approximately $3,300.
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G&A expenses for the fiscal quarter ended September 30, 2000 included: 1)
depreciation of approximately $4,200; 2) general office expense of approximately
$26,600; 3) employee salaries and expenses of approximately $46,200; 4) travel
related expenses of approximately $11,400; and 5) professional fees of
approximately $18,900 (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, 2000).
Management efforts during the fiscal year ended June 30, 2000 were directed
toward raising additional capital for operations with a primary focus on
redesigning the Screen systems and their method of manufacture. In an effort to
eliminate certain image display deficiencies of the former Screen products and
improve the overall quality of the new Screen systems, the Company embarked on a
program of concurrent engineering involving substantial changes in overall
product design, assembly processes, quality control procedures and various
alternative manufacturing technologies.
As a result of the re-engineering program, the Company contracted optical,
electrical and mechanical engineering specialists to design and build
application specific Screen prototypes. These efforts resulted in an increase in
research and development expenses from $39,238 for the fiscal quarter ended
September 30, 1999 to $217,838 for the quarter ended September 30, 2000.
Interest expense decreased from $151,180 for the fiscal quarter ended
September 30, 1999 to $65,896 for the quarter ended September 30, 2000. This
decrease is primarily due to a non-cash charge to interest expense in the
quarter ended September 30, 1999 of $109,685 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. Without the charge in 1999, interest
expense would have increased by $24,401 due to an increase in long term debt
outstanding.
Liquidity and Capital Resources
-------------------------------
The Auditor's Opinion Letter included in the Financial Statement Exhibits
of the Company's annual report Form 10-KSB for the fiscal year ended June 30,
2000 includes an explanatory paragraph regarding the Company's ability to
continue as a going concern. The Company is in the development stage, as it has
not yet commenced principal operations and has not yet realized significant
revenues from its planned operations. Since inception, the Company has devoted
most of its efforts toward raising capital and research and development efforts.
The Company has been totally dependent on financing from outside sources to
fund operations. At September 30, 2000, the Company reported negative net worth
of $3,209,981 and negative working capital of $38,998. The Company will require
additional capital for administrative expenses, continued development of the
display system, capture of intellectual property, further design and development
of an automated manufacturing process and marketing costs. Management believes
that the Company's continued existence is dependent upon its ability to: 1)
develop the Screen technologies for specific applications; 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.
Cash flows from financing activities for the fiscal quarter ended September
30, 2000 consisted entirely of the issuance of 10% convertible, redeemable
promissory notes to shareholders totaling $470,000. Substantially all of this
financing was used for operations. These notes are due October 15, 2002 and are
convertible, at the option of the note holder, into shares of the Company's
Common Stock. One note totaling $150,000 is convertible at a conversion rate of
$.30 per share and two notes totaling $320,000 are convertible at a conversion
rate of $.20 per share. 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
8
<PAGE>
interest on any of these notes converted in cash or by issuance of additional
shares of the Company's Common Stock.
Cash flows from financing activities for the fiscal quarters ended
September 30, 1999 consisted entirely of the issuance of 10% convertible,
redeemable promissory notes to shareholders totaling $100,000, due and payable
October 15, 2002 and with substantially the same terms as the Company's other
convertible, redeemable promissory notes then outstanding. Proceeds from
financing activities received during the fiscal quarter ended September 30, 1999
were used for operations.
ADTI reported a working capital deficit position at September 30, 2000.
Current liabilities exceeded current assets by $36,998. At September 30, 2000,
current liabilities consisted of trade payables and accrued expenses which were
incurred primarily for product design, development and operating costs.
Management hopes to negotiate settlement on approximately $113,700 of very old
payables and accrued expenses by payment of a reduced amount in cash or by
issuance of shares of the Company's Common Stock.
Accrued interest on notes payable due to stockholders totaled approximately
$427,400 and will become due October 15, 2002 unless extended by the note
holders. The Company intends to satisfy payment of accrued interest with cash
from future operations or funding, or by issuance of common stock.
In the future, the Company will continue efforts toward the successful
design and development of the Screens for application specific markets, as well
as continue to research and develop cost effective and quality enhancing
manufacturing processes. 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.
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.
9
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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: November 10, 2000 By: /s/ Matthew W. Shankle
---------------------- ----------------------------------
Matthew W. Shankle
President
(Chief Executive and
Financial Officer)
10
