UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended December 31, 1995
Commission file Number 33-9868-A
Shepherd Surveillance Solutions, Inc.
(Exact name of registrant as specified in its charter.)
Nevada, U.S.A. 88-0212471
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 Perimeter Road, Suite 4, Manchester, NH 03103
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(603) 622-8668
InVision Technology, Inc., 230 Carswell Avenue, Holly Hill, FL 32117
(Former name, former address, former fiscal year, if changed since last report)
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
preceding 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
At December 31, 1995, 4,293,822 shares of common stock, $.001 par value
per share were outstanding.
<PAGE>
<TABLE>
Shepherd Surveillance Solutions, Inc.
Balance Sheet
<CAPTION>
December 31, 1995
<unaudited> September 30, 1995
__________________ __________________
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 44,861 $ 18,215
Accounts receivable 40,857 126,934
Inventories, net 280,521 255,348
Prepaid expenses 8,714 12,849
_________ _______
Total current assets 374,953 413,346
_________ _______
Property and equipment:
Furniture and equipment 47,903 47,619
Software and hardware 70,296 70,296
Leasehold improvements -0- 35,000
_________ _______
118,199 152,915
Accumulated depreciation and amortization 69,159 64,565
_________ _______
Property and equipment, net 49,040 88,350
Other assets 5,278 1,689
_________ _______
Total assets $ 429,271 $503,385
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Shepherd Surveillance Solutions, Inc.
Balance Sheet (Continued)
<CAPTION>
December 31, 1995
<unaudited> September 30, 1995
_________________ __________________
<S> <C> <C>
Liabilities and shareholders' deficit
Current liabilities:
Accounts payable $ 3,880 $ 136,443
Accrued loss on open contracts 48,257 48,257
Deferred revenue 265,993 265,993
Deferred revenue on shipments
to distributor 125,420 125,420
Accrued officers' salaries -0- 456,384
Loan from shareholder 1,278,500 925,000
Due to officer -0- 110,577
Due to shareholder 45,223 19,036
__________ _________
Total current liabilities 1,767,273 2,087,110
__________ _________
Commitments
Shareholders' deficit
Common stock, $.001 par value:
Authorized shares - 50,000,000
Issued and outstanding shares -
4,293,822 4,294 5,753
Additional paid-in capital 6,226,715 5,768,871
Accumulated deficit <7,569,011> <7,358,349>
__________ ___________
Total shareholders' deficit <1,338,002> <1,583,725>
__________ ___________
Total liabilities and shareholders'
deficit $ 429,271 $ 503,385
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Shepherd Surveillance Solutions, Inc.
Statements of Operations and Accumulated Deficit
<unaudited>
<CAPTION>
Three Months Ended December 31,
1995 1994
______________________________
<S> <C> <C>
Revenues $ 20,104 $ 8,459
Cost of revenues earned 3,236 7,100
__________________________
16,868 1,359
__________________________
Costs and other operating expenses:
Selling and promotion 98,519 156,525
General and administrative 87,303 132,955
Research and development 12,076 23,780
Depreciation and amortization 3,447 24,392
__________________________
Total costs and operating expenses 201,345 337,652
__________________________
Loss from operations <184,477> <336,293>
Other income <expenses>:
Other income -0- 3,000
Interest income 2 418
Interest expense < 26,187> < 54,493>
___________________________
Total other income <expense> < 26,185> < 51,075>
___________________________
Net loss $ <210,662> $ <387,368>
Loss per share $ < .05 > $ < .13 >
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Shepherd Surveillance Solutions, Inc.
Statement of Shareholders' Deficit
For The Three Months Ended December 31, 1995
<unaudited>
<CAPTION>
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
______________________________________________
<S> <C> <C> <C> <C>
Balance at September 30, 1995 $ 5,753 $5,768,871 $<7,358,349> $<1,583,725>
Stock retired <1,459> 1,459 - -
Contributed capital - 456,385 - 456,385
Net loss - - < 210,662> < 210,662>
______________________________________________
Balance at December 31, 1995 $ 4,294 $6,226,715 $<7,569,011> $<1,338,002>
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Shepherd Surveillance Solutions, Inc.
Condensed Statements of Cash Flows
<unaudited>
<CAPTION>
Three Months Ended December 31,
1995 1994
____________________________________
<S> <C> <C>
Operating activities
Net cash used by operating activities $<363,248> $<375,801>
____________________________
Investing activities
Capital expenditures <net> 34,714 < 29,166>
____________________________
Net cash provided by <used in> investing activities 34,714 < 29,166>
____________________________
Financing activities
Loan from shareholder 353,500 575,000
____________________________
Net cash provided by financing activities 353,500 575,000
____________________________
Net decrease in cash and cash equivalents 26,646 170,033
Cash and cash equivalents at beginning of period 18,215 44,316
____________________________
Cash and cash equivalents at end of period $ 44,861 $ 214,349
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ - $ -
Supplemental schedule of noncash investing and
financing activities
Release of liability for accrued officers'
salaries (Note 6> $ 456,384 $ -
Retirement of 1,459,190 shares of common stock
conveyed to the Company <Note 6> $ 1,459 $ -
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Shepherd Surveillance Solutions, Inc.
Notes to Financial Statements
December 31, 1995 and September 30, 1995
1. Basis of Presentation
The accompanying condensed financial statements have been prepared in compliance
with Rule 10-01 of Regulation S-X and generally accepted accounting principles
but do not include all of the information and footnotes required for complete
financial statements. The statements should be read in conjunction with the
financial statements and notes thereto included in the Company's latest annual
report on Form 10-KSB. In the opinion of management, the statements include all
adjustments necessary to present fairly the results of the reported interim
periods. All such adjustments are of a normal recurring nature.
2. Inventory
Inventory consists of the following:
December 31, 1995 September 30, 1995
_________________ __________________
Work in progress $ 272,555 $ 247,382
Components 7,966 7,966
___________ __________
$ 280,521 $ 255,348
3. Stock Options
Outstanding options at December 31, 1995 are summarized as follows:
Options
_______
Outstanding September 30, 1995 1,264,893
Options conveyed to the Company <Note 6> <1,264,893>
_________
Outstanding December 31, 1995 -
4. Related Party Transactions
Accrued salaries
The former CEO elected to partially defer $456,384 as of September 30, 1995
During the three month period ended December 31, 1995, the Company was
released of its obligation to pay this liability, as described in Note 6.
During the three month period ended December 31, 1995, the Company entered
into an agreement releasing it of any commitments under an executive
agreement with its former President, as described in Notes 5 and 6. In
consideration of the release, the Company incurred a loss totaling $110,577,
which is accrued in the financial statements as of September 30, 1995. During
the three month period ended December 31, 1995, this obligation was paid.
<PAGE>
5. Commitments
At September 30, 1995, the Company had an executive agreement with its former
CEO for a renewal term beginning June 21, 1993, and continuing to July 21, 1998.
The original agreement dated December 1, 1989, set the executive's salary at
$120,000 per annum with 15% increases per annum. Bonuses were also provided
based on 2% of the total annual gross sales payable when the annual gross sales
exceeded one million dollars. The executive could be terminated for cause after
3 months written notice with salary and any earned bonus or other employee
benefits due to the termination date. During the three month period ended
December 31, 1995, the Company was released of any commitments under the
agreement, as described in Note 6.
At September 30, 1995, the Company had an executive agreement with its former
President for a term beginning June 1, 1994, and continuing to September 30,
1996. The agreement set the executive's salary at $115,000 per annum. Bonuses
were 2% of the total annual net sales payable annually. In addition to the
salary, bonuses and benefits, the Company had granted the Executive a series of
options to purchase common stock of the Company. The options were exercisable
at a price of $1.00 per share and scheduled to expire three years after
issuance. An option to acquire 65,000 shares of stock was issued to the
Executive upon the successful completion of the additional financing
following the commencement of his employment. An additional option to
acquire 30,000 shares was to be granted upon the successful completion of the
first year of employment, contingent upon the successful conversion of the
outstanding debt to equity investment and the infusion of an additional $2.5-$4
million of equity investment.
An additional option to acquire 30,000 shares was to be granted upon the
successful completion of the second year of employment, also contingent upon
successful conversion of the outstanding debt to equity investment and the
infusion of an additional $2.5-$4 million of equity investment. If the
contract was renewed for an additional year, an additional option to acquire
30,000 shares was to be granted upon the successful completion of the third
year of employment. During the three month period ended December 31, 1995,
the Company was released of any commitments under the agreement, as described
in Note 6.
6. Litigation and Settlement Agreement
On October 1, 1994, the ownership of the issued and outstanding common stock of
the Company was as follows:
Shares Percentage
_________ __________
The former Chief Executive Officer and
Treasurer (the former CEO) and his wife 1,459,083 48%
Dominion Capital, Inc. 663,309 22
Others 926,020 30
_________ __________
3,048,412 100%
On January 13, 1995, Dominion Capital, Inc. exercised warrants to purchase
2,650,000 shares of the Company's common stock and accepted 54,493 shares of
the Company's common stock in lieu of a cash payment for interest due to them,
resulting in the ownership of the issued and outstanding stock on that date as
follows:
Shares Percentage
_________ __________
The former CEO and his wife 1,459,083 25%
Dominion Capital, Inc. 3,367,802 59%
Others 926,020 16%
_________ __________
5,752,905 100%
<PAGE>
6. Litigation and Settlement Agreement, continued
On January 27, 1995, the Board of Directors elected a new Chief Executive
Officer and Treasurer.
On February 2, 1995, litigation was instituted by the former CEO and his wife
against the Company, Dominion Capital, Inc. and three of the members of the
Board of Directors of the Company.
On June 30, 1995, Dominion Capital, Inc. agreed to transfer the shares it owned
in the Company to Trilon Dominion Partners, LLC.
On September 5, 1995, the Company, in cooperation with the former CEO and his
wife, concluded negotiations with the lessor of the building housing its
administrative offices and operating facilities, resulting in the lease becoming
a month-to-month lease.
On October 17, 1995, the Company and its former President released one another
from all commitments arising out of the Company's executive employment agreement
with its former President (Note 10). In exchange for the Company terminating
the agreement, the former President agreed to convey to the Company his 107
shares of the Company's common stock and 64,893 outstanding options. The
release resulted in a loss to the Company of $110,577. Accordingly, a provision
for the loss of $110,577 has been charged to operations in the accompanying
financial statements for the year ended September 30, 1995.
On October 17, 1995, the terms of a settlement agreement dated September 5,
1995, between the former CEO and his wife, the Company, Dominion Capital, Inc.,
and three of the members of the Board of Directors of the Company were
satisfied, resulting in the following:
(1) Dismissal of the litigation and mutual releases in favor of all of the
parties.
(2) Resignation by the former CEO and his wife as officers and members of
the Board of Directors of the Company.
(3) Cessation of employment by the former CEO and his wife.
(4) Conveyance to the Company by the former CEO and his wife of 1,459,083
shares of the Company's common stock.
(5) Cancellation of options held by the former CEO to purchase 1,200,000
shares of the Company's common stock.
(6) Release by the Company to the former CEO of a term life insurance
policy on his life in the face amount of $1,000,000. The Company has
no future liability for premium payments on the policy.
(7) Release by the former CEO and his wife of any claim for deferred
salary, recorded by the Company at September 30, 1995.
On November 1, 1995, Dominion Capital, Inc. conveyed to Trilon Dominion
Partners, LLC its grid promissory note dated September 18, 1995, providing the
Company a line of credit of $900,000 ($825,000 of which was outstanding at
September 30, 1995), and its grid promissory note for $100,000, all of which
was outstanding at September 30, 1995.
As of November 1, 1995, the ownership of the issued and outstanding common stock
of the Company is as follows:
<PAGE>
6. Litigation and Settlement Agreement, continued
Shares
______
Shares outstanding prior to conveyance by
the former President and CEO and his wife 5,753,012
Shares conveyed to the Company 1,459,190
_________
4,293,822
Percentage
__________
Owned by:
Trilon Dominion Partners, LLC 3,367,802 78%
Others 926,020 22
_________ __________
4,293,822 100%
7. Subsequent Event
Effective in March 1996, the Company changed its name to InVision Technology,
Inc.
Effective in May 1996, the Company changed its name to Shepherd Surveillance
Solutions, Inc.
Part I. Financial Information.
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Liquidity and capital resources
Management believes that the working capital ratio and the ratio of current
assets to current liabilities reflects its lack of liquidity. Continual losses
from operations and the settlement of litigation have eroded the Company's
liquidity. In the absence of a marked increase in the volume of the Company's
sales activities, or an infusion of additional funds from outside sources, the
Company will be unable to continue its operations beyond the next fiscal year.
The possibility of multiple concurrent larger projects exists. The Company has
bids pending on several projects which have not yet been awarded. However, if
orders were to be received by the Company, the Company will need to obtain
additional capital or financing in order to meet bonding requirements and fund
the production process.
The Company's capital resources are primarily proprietary software and hardware
development. Because of its ongoing research and development, the Company does
not anticipate any material changes to such resources. Management believes that
the results from continuing research and development will enhance productivity,
reduce costs and create a stronger market.
In order to make up for the shortcomings of the Company's capital resources,
Trilon Dominion Partners, LLC has verbally agreed to provide to the Company
advances of up to an additional $340,000 for working capital purposes, on terms
which as of the date of this filing have yet to be finalized.
<PAGE>
Results of operations
Contract revenues increased as a result of the timing of completion of jobs.
Operating expenses decreased due to administrative infrastructure and a decrease
in staffing. Accounts receivable decreased as a result of the completion of
certain jobs and billing for those jobs and the receipt of payments. Accrued
officers' salaries decreased as a result of the settlement and was recognized as
contributed capital.
Part II. Other information.
Item 1. Legal proceedings.
Information is disclosed in the financial information in Part I, Item 1, Note 6
and is incorporated herein.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other information.
Item 6. Exhibits and reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which this report
is filed.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Shepherd Surveillance Solutions, Inc.
(Registrant)
Date: September 3, 1996 /s/ M. Thomas Makmann
M. Thomas Makmann
President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 44,861
<SECURITIES> 0
<RECEIVABLES> 40,857
<ALLOWANCES> 0
<INVENTORY> 280,521
<CURRENT-ASSETS> 374,953
<PP&E> 118,199
<DEPRECIATION> 69,159
<TOTAL-ASSETS> 429,271
<CURRENT-LIABILITIES> 1,767,273
<BONDS> 0
<COMMON> 4,294
0
0
<OTHER-SE> (1,338,002)
<TOTAL-LIABILITY-AND-EQUITY> 429,271
<SALES> 20,104
<TOTAL-REVENUES> 20,104
<CGS> 3,236
<TOTAL-COSTS> 201,345
<OTHER-EXPENSES> (26,185)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (26,187)
<INCOME-PRETAX> (210,662)
<INCOME-TAX> 0
<INCOME-CONTINUING> (210,662)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210,662)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
