<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------------------------------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ---------------------
Commission file number 1-10196
------------------------------------------------------
Dimensional Visions Group, Ltd.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 23-2517953
- ------------------------------------------- ------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
718 Arch Street, Suite 202N, Philadelphia, PA 19106
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(215)440-7791
- -------------------------------------------------------------------------------
(Issuer's telephone number)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 November 13, 1995, the number of shares of Common Stock issued
and outstanding was 17,601,098.
<PAGE> 2
DIMENSIONAL VISIONS GROUP, LTD.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - September 30, 1995
and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Condensed Statements of Operations - For the three
months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Cash Flows - For the three
months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . 3
Notes to Consolidated Condensed Financial Statements . . . . . . . . 4
Item 2. Management's Discussion and analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . N/A
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . N/A
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . N/A
Item 4. Submission of Matters to a Vote of Security Holders . . . . . N/A
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . N/A
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 12
.
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER JUNE 30,
30, 1995 1995
-------- ----
(UNAUDITED)
<S> <C> <C>
Current assets
Cash and cash equivalents $948,547 $227,972
Accounts receivable, trade 233,539 18,690
Inventory 136,685 26,453
Prepaid supplies and expenses 8,743 43,361
----------- -----------
Total current assets 1,327,511 316,476
----------- -----------
Equipment and leasehold
improvements
Equipment 1,862,830 1,628,028
Furniture and fixtures 136,932 134,938
Leasehold improvements 109,446 109,446
----------- -----------
2,109,208 1,872,412
Less accumulated depreciation
and amortization 1,998,336 1,791,049
----------- ---------
Net equipment and leasehold improvement
110,872 81,363
----------- -----------
Other assets
Goodwill, net of accumulated -
amortization of $21,986 2,616,446
Deferred compensation and 510,889 -
consulting costs 81,869 53,398
Patent rights, and other assets
----------- -----------
Total other assets 3,209,204 53,398
----------- -----------
Total assets $4,647,587 $ 451,237
=========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
SEPTEMBER JUNE 30,
30, 1995 1995
-------- ----
(UNAUDITED)
<S> <C> <C>
Current liabilities
Note payable $ - $50,000
Current portion of long-term debt 470,000
Accounts payable, accrued expenses and other liabilities 779,466 404,489
----------- ----------
Total current liabilities 1,249,466 454,489
--------- -----------
Long term debt
Secured notes 1,512,000 1,837,000
Accrued interest 162,135 210,741
--------- -----------
1,674,135 2,047,741
----------- ------------
Commitments and contingencies - -
----------- ------------
Stockholders' equity (deficiency)
Preferred stock - $.001 par value, authorized -
2,000,000 shares; issued and outstanding -
641,581 shares at September 30, 1995, and
77,250 shares at June 30, 1995
Discount on preferred stock 11,937,620 772,500
( 7,950,125) -
----------- ----------
3,987,495 772,500
Common stock - $.001 par value, authorized - 20,000,000
shares issued and outstanding - 17,601,098 shares at
September 30, 1995; 16,936,098 shares at June 30, 1995
17,601 16,936
Additional paid-in capital 12,812,412 11,881,927
Deficit (15,093,522) (14,722,356)
----------- ----------
Total stockholders' equity (deficiency) 1,723,986 ( 2,050,993)
----------- ------------
Total liabilities and stockholders equity $4,647,587 $ 451,237
=========== ============
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Operating revenue $213,036 $14,124
Cost of Sales 159,416 17,599
---------- ----------
Gross profit (loss) 53,620 ( 3,475)
Operating expenses
Engineering and development costs 59,538 107,725
Marketing expenses 54,707 34,021
General and administrative expenses 242,451 108,779
----------- ------------
Total operating expenses 356,696 250,525
----------- ------------
Loss before other income
(expenses) (303,076) (254,000)
----------- -----------
Other income (expenses)
Interest expense (50,615) (30,001)
Interest income 2,512 338
Gain on sale or abandonment of equipment 2,000 2,411
Amortization of Goodwill (21,987) -
----------- -----------
(68,090) (27,252)
----------- -----------
Net loss ($371,166) ($281,252)
========== ==========
Net loss per share of common stock ($.02) ($.02)
====== ======
Weighted average shares of common stock outstanding 16,955,609 16,361,098
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss ($371,166) ($281,252)
----------
Total adjustments to reconcile net loss to net cash used in
operating activities 47,405 102,687
---------- ------------
Net cash used in operating activities ( 323,761) ( 178,565)
----------- -----------
Cash flows from investing activities
Cash acquired in acquisition 275,632
Proceeds from sale of equipment 2,000 3,108
Property and equipment and progress payments on equipment
under construction ( 4,096) ( 531)
--------- ---------
Net cash provided by investing activities 273,536 2,577
---------- ----------
Cash flows from financing activities
Proceeds from long term borrowings 145,000 112,000
Sale of common stock, net of offering cost of $75,000 675,000 -
Exercise of warrants to purchase common stock 800 -
Payment of note ( 50,000) -
--------- ----------
Net cash provided by financing activities 770,800 112,000
--------- ----------
Net increase (decrease) in cash and cash equivalents 720,575 (63,988)
Cash and cash equivalents, beginning 227,972 118,034
--------- ---------
Cash and cash equivalents, ending $948,547 $54,046
======= =======
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest paid $ - $ -
========== ===========
</TABLE>
Supplemental disclosure of non-cash investing and financing activities
800,000 shares of the Company's Common Stock was issued as a result of the
conversion of 20,000 shares of Series A Convertible Preferred Stock valued
at $200,000.
The Company acquired all of the outstanding Common Stock of InfoPak, Inc.
in exchange for 500,000 shares of Series P Convertible Preferred Stock
valued at $2,750,000, the cancellation of debt to certain shareholders of
InfoPak, Inc. in exchange for 34,681 Series P Convertible Preferred shares
valued at $190,745. The Company acquired assets valued at $442,769,
(including cash of $275,632), and the assumption of liabilities of
$103,590. In addition, certain employees under contract and a consultant
received 17,500 share of Series P Convertible Preferred Stock valued at
$96,250 as a signing bonus.
In connection with the sale of 3,000,000 shares of the Company's Common
Stock, certain stockholders, consisting mainly of officers and directors,
surrendered 3,215,000 of the Company's common stock in exchange for 32,150
shares of Series S Preferred Stock.
The Company issued 1,000,000 warrants to the Chief Executive Officer and
500,000 warrants to the financial consultant to the company to purchase the
Company's Common Stock. These warrants were valued at $405,000, and will
be amortized as compensation over the terms of their contracts. In
addition, in connection with the sale of the 3,000,000 shares of the
Company's Common Stock for $675,000 net of commissions, an additional
1,250,000 of warrants to purchase the Company's Common Stock was issued and
valued at $337,500.
See notes to condensed consolidated financial statements.
3
<PAGE> 6
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 1 BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-Q. The June 30, 1995
balance sheet data were derived from audited financial statements
but does not include all disclosures required by generally
accepted accounting principles. The interim financial statements
and notes thereto should be read in conjunction with the financial
statements and notes included in the Company's annual report on
Form 10-KSB/A for the fiscal years ended June 30, 1995. In the
opinion of management, the interim financial statements reflect
all adjustments of a normal recurring nature necessary for a fair
statement of the results for the interim periods presented. The
current period results of operations are not necessarily
indicative of results which ultimately will be reported for the
full year ending June 30, 1996.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS, FINANCING AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
Dimensional Visions Group, Ltd. (the "Company") was incorporated
in Delaware on May 12, 1988. The Company, was a development stage
company through June 30, 1994 and had accumulated a deficit during
the development stage of $13,530,024. The Company produces and
markets lithographically printed stereoscopic prints commonly
referred to as three-dimensional prints. The prints may be viewed
without the use of special glasses or viewing apparatus.
The Company has financed its development through the sale of its
securities, loans and sale of surplus equipment and by certain
employees and consultants deferring their compensation. The
Company has had limited sales of its product since July of 1994 .
On September 12, 1995, the Company, through a wholly-owned
subsidiary, acquired all the outstanding capital stock of InfoPak,
Inc. ("InfoPak"), located in Phoenix, Arizona, manufactures and
markets hardware and software information and audio playback
systems and method products and programs. References herein to
the "Company" include Dimensional Visions Group, Ltd. and its
wholly-owned subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Company had working capital of
$78,045, compared with a working capital deficiency of $138,013 on
June 30, 1995. During the period ended September 30, 1995, the
Company raised $145,000 through the sale of its promissory notes,
$675,000 in a private placement of its Common Stock net of
offering costs of $75,000 and the issuance of 1,250,000 warrants
to purchase the Company's Common Stock valued at $337,500, and the
exercise of 80,000 warrants to purchase the Company's Common Stock
at $.01 per share ($800). The Company's selling and marketing
efforts have been limited due to inadequate funding.
4
<PAGE> 7
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company has incurred losses since inception of $15,093,522.
Unless the Company can (1) successfully market its products, (2)
obtain such capital contributions or financing as may be required
to sustain its current operations and to fulfill its sales and
marketing activities, (3) achieve a level of sales adequate to
support the Company's cost structure, and (4) ultimately operate
profitably, the Company may be unable to continue as a going
concern. Management's plan to address these issues includes (a)
increased sales and marketing efforts of the Company's DV3D(TM)
and InfoPak products, (b) exercise tight cost controls to conserve
cash, (c) raise additional funds through the issuance of either
debt or equity, private placements, and (d) evaluate possible
additional merger or acquisition opportunities.
If operations are maintained at the current level, the cash
anticipated to be generated by operations and the funds currently
on deposition, should, in management's opinion, be sufficient to
meet the Company's cash needs for the remainder of fiscal year
ending June 30, 1996. However, the Company is continuing to seek
additional outside financing.
There is, of course, no assurance that management's actions will
continue to generate sufficient cash at a level necessary to
sustain the Company's operations. Unless the Company can achieve
its plan as indicated above, the continuence of the business cannot
be assured.
The consolidated financial statements have been prepared on the
basis that the Company is a going concern and do not reflect any
adjustments that might result from the outcome of the uncertainties
described above.
CONSOLIDATION POLICY
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, InfoPak, Inc., DVG
Plastics, Inc., Digital Dimensions, Inc. and DV3D Images, Inc.
The latter three subsidiaries are inactive companies. All
significant inter company balances and transactions have been
eliminated in consolidation.
INVENTORY
Inventory is stated at the lower of cost or market. Cost is
determined by the first in first out method.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS AND DEPRECIATION AND
AMORTIZATION
Equipment and leasehold improvements are stated at cost.
Depreciation and amortization are provided by the use of the
straight-line method over the estimated useful lives of the assets
as follows:
Equipment 5-7 years
Furniture and fixtures 5 years
Leasehold improvements Term of the initial operating lease
(5 years)
5
<PAGE> 8
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
PATENT RIGHTS AND OTHER ASSETS
Patent Rights
Costs incurred to acquire patent rights and the related technology
are amortized over the shorter of the estimated useful life or the
remaining term of the patent rights. In the event that the costs
of patent rights and/or acquired technology are abandoned, the
write off will be charged to expense in the period the
determination is made to abandon them.
GOODWILL
Goodwill of $2,638,178 was incurred by the Company as a result
of its acquisition of InfoPak on September 12, 1995 and is being
amortized on a straight-line basis over 5 years.
ENGINEERING AND DEVELOPMENT COSTS
The Company charges to Engineering and Development Costs all items
of a non-capital nature related to bringing a "significant"
improvement to its product. Such costs include salaries and
expenses of employees and consultants, the conceptual formulation,
design, and testing of the products and prototypes.
INCOME TAXES
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." This statement supersedes Accounting Principles Board
Opinion No. 11, "Accounting for Income Taxes." Deferred income
taxes reflect the net tax effect of (a) temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss carryforwards.
NET LOSS PER SHARE OF COMMON STOCK
Net loss per share of common stock is based on the weighted
average of shares of common stock outstanding. Outstanding
warrants or options are not considered in the calculation of net
loss per share of common stock, as they would have an anti-dilute
effect.
NOTE 3 ACQUISITION
On September 12, 1995, the Company acquired all the outstanding
common stock of InfoPak, Inc. in exchange for 500,000 shares of
Series P Convertible Preferred stock valued at $2,750,000. The
Company has accounted for this transaction as a purchase and
accordingly, the acquisition resulted is the Company recording
goodwill of $2,638,432, which will be amortized over five years.
The fair value of the assets acquired was $442,769, which included
$275,632 of cash, and the assumption of liabilities of $103,590.
In addition, certain employees under contract and a consultant
received 17,500 shares of Series P Convertible Preferred Stock
valued at $96,250 as a signing bonus. The bonus will be amortized
over the terms of the employment and consulting contract.
6
<PAGE> 9
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 3 ACQUISITION (Continued)
Notes payable and related accrued interest to certain shareholders
of InfoPak, Inc. were cancelled and the Company issued 34,681
shares of Series P Convertible Preferred stock valued at $190,745,
in exchange for the cancellation of debt. Each share of Series P
Convertible Preferred Stock is convertible into 10 shares of
common stock (5,521,810 shares of common stock) .
NOTE 4 LONG-TERM DEBT
As of September 30, 1995, the principal amount of outstanding long
term 10% Secured Notes was $1,982,000. As of June 30, 1995 the
amount was $1,837,000. The 10% Secured Notes are due beginning in
fiscal year 1996 and interest at 10% will be paid semi-annually,
with the first interest payment not due to be paid until twelve
months after the date of each of the 10% Secured Notes. The
Company is permitted to prepay the 10% Secured Notes after twelve
months from the date of the 10% Secured Notes with no penalty. As
collateral for the 10% Secured Notes, the Company has given a
security interest in all of the Company's assets, tangible and
intangible, including all patents and proprietary technology,
which was evidenced by a Uniform Commercial Code filing on March
24, 1994 .
On April 25, 1995, substantially all of the long term 10% Secured
Note holders agreed to defer all interest payments until the 10%
Secured Notes mature beginning in fiscal year 1996 or, upon the
consummation of long term financing and/or a strategic partner
relationship, to convert the 10% Secured Notes into 8% Series "B"
Preferred stock through the exercise of the Series B Redeemable
warrants and to convert accrued interest into Series C Preferred
Stock. The consummation of this financing and a strategic partner
relationship occurred on September 12, 1995 (see Note 7).
The annual maturity on long term debt is as follows:
<TABLE>
<CAPTION>
Year Ending June 30, Amount
-------------------- ------
<S> <C>
1996 $470,000
1997 635,000
1998 732,000
1999 145,000
---------
$1,982,000
=========
</TABLE>
NOTE 5 COMMON STOCK
As of September 30, 1995, there are approximately 17,965,522 of
non-public warrants and 3,807,655 public warrants to purchase the
Company's Common Stock. The number of public warrants outstanding,
which expire on December 8, 1995, increased by 1,994,486, and the
exercise price was reduced to $2.14 per share after adjustments
were made in accordance with the warrant agreement dated
November 15, 1988.
As of September 30, 1995, there are 641,581 shares of
Convertible Preferred Stock outstanding which can be converted to
11,026,810 shares of common stock (see notes 6 and 8).
As of September 30, 1995, there are 198,200 Series B Warrants
outstanding to purchase Series B Convertible Preferred Stock which
can be converted into 19,820,000 shares of the Company's Common
Stock (see notes 6 and 8).
The Company may not have available sufficient common stock for
those who elect to exercise their warrants or convert preferred
stock to common stock.
NOTE 6 PREFERRED STOCK
The Company has authorized 2,000,000 shares of Preferred stock, of
which the following were issued and outstanding:
<TABLE>
<CAPTION>
Outstanding
-------------------------------------
Authorized September 30, 1995 June 30, 1995
----------- ------------------ -------------
<S> <C> <C> <C>
Series A Preferred 100,000 57,250 77,250
Series B Preferred 200,000 -- --
Series C Preferred 1,000,000 -- --
Series P Preferred 600,000 552,181 --
Series S Preferred 50,000 32,150 --
---------- --------- -----------
Total Preferred Stock 1,950,000 641,581 77,250
========== ========= ===========
</TABLE>
7
<PAGE> 10
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 6 PREFERRED STOCK (Continued)
The Company's Series A Convertible 5% Preferred Stock ("Series A
Preferred"), at $10 par value per share, 100,000 shares
authorized, is convertible into common stock at the rate of 40
shares of common stock for each share of the Series A Preferred.
Dividends from date of issue, are payable from retained earnings,
have been accumulated on June 30 each year but have not been
declared (See Note 6).
The Company's Series B Convertible 8% Preferred Stock ("Series B
Preferred"), at a $10 par value per share, is convertible at the
rate of 100 shares of common stock for each share of Series B
Preferred. Dividends from date of issue are payable on June 30
from retained earnings at the rate of 8% per annum.
The Company's Series C Convertible Preferred Stock ("Series C
Preferred"), at $10 par value per share, is convertible at a rate
of 10 shares of common stock per share of Series C Preferred. Such
shares were authorized during October 1995.
The Company's Series P Convertible Preferred Stock ("Series P
Preferred"), at $10 par value per share, is convertible at a rate
of 10 shares of common stock for each share of Series P Preferred.
The Company's Series S Convertible Preferred Stock ("Series S
Preferred"), at a $10 par value per share, is convertible at the
rate of 100 shares of common stock for each share of Series S
Preferred.
The Company's Series A Preferred and Series B Preferred stock were
issued in connection with private placements for the purpose of
increasing the capital or debt of the Company. The Series C
Preferred will be issued to certain holders of the Company's 10%
Secured Notes in lieu of accrued interest (See Note 7) and also
held for future investment purposes. The Series S Preferred was
issued to certain stockholders consisting mainly of officers and
directors of the Company in exchange for such stockholders' shares
of common stock. Such common stock was then sold on September 5,
1995 for the purpose of raising additional capital. The Series P
Preferred was issued on September 12, 1995 to InfoPak shareholders
in exchange for (1) all of the outstanding capital stock of
InfoPak, (2) as signing bonuses for certain employees and a
consultant of InfoPak, and (3) to satisfy InfoPak's outstanding
debt obligations to certain of its shareholders.
The Company may not have available sufficient common stock for
those who elect to convert their preferred stock to common stock.
NOTE 7 COMMITMENTS
The Company leases its corporate offices, studio and lab
facilities in Philadelphia, Pennsylvania under a five year
operating lease through February 28, 1999 at an annual rental of
approximately $44,100 through June 1995 and adjusted on March 1,
of each year through 1998 by approximately $1,371 each year
thereafter. In addition, the Company is responsible for its
proportionate share of excess operating expenses and real estate
taxes. The Company has a conditional option to terminate the
lease 30 days prior to ground breaking date on the proposed new
building site adjacent to where the Company leases space.
8
<PAGE> 11
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 7 COMMITMENTS (Continued)
<TABLE>
<CAPTION>
Year Ending June 30 Annual Rental Amount
------------------- --------------------
<S> <C>
1996 $42,900 (remaining rent for fiscal 1995)
1997 60,800
1998 62,200
1999 42,100
--------
$209,650
========
</TABLE>
Rent expense was approximately $31,922 and $22,000 for the 3
months ended September 30, 1995 and 1994, respectively.
The Company has not declared dividends on its Series A Preferred
stock. The cumulative dividend in arrears through June 30, 1995
is $151,750, and through September 30, 1995, is $111,750 as a
result of the conversion to common stock of 20,000 shares of
Series A Preferred stock on August 24, 1995.
Dimensional Visions Group, Ltd. has outstanding employment and
consulting contracts that expire through June 30, 1999, as follows:
<TABLE>
<CAPTION>
Year Ending June 30 Amount
------------------- ---------
<S> <C>
1996 $103,000 (remaining for fiscal year 1996)
1997 244,000
1998 144,000
1999 144,000
-------
$635,000
========
</TABLE>
As a result of the acquisition of InfoPak, Inc., the Company
entered into employment and consulting contracts that expire
through September 1997 and 1998. The annual compensation is
approximately $365,000 on these contracts.
In connection with a consulting contract with Avonwood Capital
Corporation ("Avonwood") which provides for among other things,
assisting the Company with arranging for additional capital and
evaluating merger opportunities. For each dollar of capital
raised, a maximum of 1,600,000 warrants will be issued to purchase
the Company's common stock at $.15 per share, of which 250,000
warrants were issued during May 1995 and exercised during June
1995 and 750,000 was issued in September 1995. The warrants will
be exercisable over a five year period at $.15 per share. The
warrants issued in May 1995 were valued at $30,000 ($.12 per
warrant), and will be recognized as additional consulting fees
over the two-year term of the consulting contract. In addition,
the contract provides for a fee of 5% on capital raised.
NOTE 8 SUBSEQUENT EVENTS
On October 1, 1995, the holders of $1,757,000 of the $1,982,000 of
principal amount of the outstanding 10% Secured Notes used their
notes to exercise their Series B Preferred warrants to purchase
175,700 shares of Series B Preferred stock. In addition these
same holders converted $228,760 of the $263,185 interest due on
the 10% Secured Notes into 22,876 shares of Series C Preferred
stock.
9
<PAGE> 12
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 8 SUBSEQUENT EVENTS (Continued)
A director of the Company who holds $150,000 of the 10%
Secured Notes agreed to release his security interest granted per
the terms of the 10% Secured Notes, to reduce interest rate on
these Unsecured Notes to 8% effective October 1, 1995, and to use
the principal of these notes to convert Series B warrants into
15,000 shares of Series B Preferred prior to February 28, 1996.
The exchange for the 10% Secured Notes for the Series B
Preferred, and the exchange of the Series C Preferred for accrued
interest, would have the following effect on the Company's
Liabilities and Stockholders Equity; if the exchange had occurred
as of September 30, 1995.
<TABLE>
<CAPTION>
September 30, 1995
---------------------------------
Actual Pro forma
---------- ------------
<S> <C> <C>
Current liabilities
Accounts payable, accrued
expenses and other liabilities $779,466 $712,712
Current portion long term debt 470,000 -
Long term debt
Secured notes payable 1,512,000 75,000
Unsecured notes payable - 150,000
Accrued interest 162,135 -
-------- ---------
Total liabilities 2,923,601 937,712
---------- ---------
Preferred stock 11,937,620 13,923,380
Discount in preferred stock (7,950,125) (7,950,125)
Common stock 17,601 17,601
Additional paid-in capital 12,812,412 12,812,412
Deficit (15,093,522) (15,093,522)
----------- -----------
Total stockholders equity 1,723,986 3,709,746
---------- -----------
Total liabilities and
stockholders equity $ 4,647,586 $ 4,647,586
========= =========
</TABLE>
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the three months ended September 30, 1995 the net loss was
$371,166 compared to a net loss of $281,252 for the three months
ended September 30, 1994. During the three month period ended
September 30, 1995, the Company had revenues of $213,036 and gross
profit of $53,620, compared to revenues of $14,124 and a gross
loss of ($3,475) for the comparable period.
InfoPak, from September 12, the date of acquisition, to September
30, 1995, accounted for $198,376 of the Company's revenues and
$85,401 of the gross profit for the period ended September 30,
1995. InfoPak was not included with the Company's results for the
quarter ended September 30, 1994.
In the third quarter of fiscal year 1995, the Company delivered to
a major producer of graphic arts consumer products, a variety of
DV3D(TM) print products for test marketing. The tests were
completed in the first quarter of fiscal year 1996, and the
Company has subsequently received two commercial orders for these
DV3D(TM) print products. The first order of $13,940 was delivered
in September 1995. The second order of approximately $225,000 is
being delivered in November 1995. The Company anticipates further
orders from this customer.
During October 1995, the Company successfully completed production
of its new lenticular print material, which the Company believes
enhances the quality of DV3D(TM) print product.
During fiscal year 1995, the Company had under development a new
master lens which is designed to improve the quality of its
DV3D(TM) master transparency. Management believes this new master
lens, which is currently in the prototype stage, will be available
for use in commercial production during the third quarter of
fiscal year 1996.
Operating expenses were $356,696 for the three months ended
September 30, 1995 compared to $250,525 for the three months ended
September 30, 1994. InfoPak's operating expense was $40,230 for
the September 30, 1995 period. Engineering and development,
marketing and general administrative costs were $59,538, $54,707,
and $242,451, respectively for the quarter ended September 30,
1995, compared to $107,725, $34,021, and $108,779 for the quarter
ended September 30, 1994. The $48,187 decline (45%) in
engineering and development is primarily a result of the
Company having substantially completed the engineering of its
DV3D(TM) print product. Marketing costs increased $9,370
(27.5%) as a result of the Company's increased efforts supporting
its DV3D(TM) print product. General administration expense
increased 123% due primarily to professional fees including (i)
approximatley $39,000 to Avonwood, (ii) approximately $35,000 for
legal and audit fees, (iii) approximately $28,500 in increased
administrative salaries and expenses, and (iv) approximately $7,500
of increased accounting costs incurred during the period.
Interest expense increased due to the $145,000 of additional
outstanding 10% Secured Notes, while interest income increased
with the short-term investments of the proceeds of the $675,000
sale of common stock. Amortization of the goodwill incurred in
the acquisition of InfoPak was $21,987 for the quarter ended
September 30, 1995.
InfoPak, which was acquired by the Company on September 12, 1995,
was founded in 1992. InfoPak has developed a system that allows
those who use large and cumbersome printed data material an
electronic alternative which is easier to use and instantly
updateable. The InfoPak(TM) Information System (The InfoPak
System(TM)) was designed to manage voluminous databases that
change often and to distribute information to remote locations.
InfoPak currently produces and markets the InfoPak System(TM) to
the residential real estate agent marketplace as the InfoPak
Portable MLS(TM). The Portable MLS(TM) is currently the only
product being sold. The Portable MLS(TM) product is being marketed
through four distributors. The MLS product has not generated
revenues as expected by InfoPak, nor does InfoPak have any
backorders for its product at this time. InfoPak has been unable
to successfully renegotiate its present distribution/marketing
agreement with its major distributor. InfoPak's revenue for the
nine months ended September 30, 1995 was approximately $775,000,
of which approximately $577,000 was to that distributor. InfoPak
anticipates only minimal sales for the remainder of fiscal year
1996 through that distributor. A third party is presently
negotiating to acquire a less significant distributor which, if
successfully concluded should lead to increased sales for InfoPak,
which is anticipated to offset, to some extent, the loss of sales
to its major distributor. However, no assurances can be given that
the above negotiations will be successfully completed, nor that the
anticipated revenues will be achieved.
InfoPak has under development a number of other products. During
November 1995, research and development was completed for Small
Talk(TM), a computer chip that allows for the recording of voice,
as well as a voice chip player, both of which would be produced by
a yet to be identified third party. The viability and
marketability of the product have not yet been determined.
In October 1995, InfoPak entered into a Letter of Intent with a
division of Spectrum Media, Inc. to form a joint venture for a
number of newly developed products, including replacement systems
for printed directories and delivery systems. The proposed joint
venture is subject to due diligence by both companies, the
negotiation of a definitive agreement and provisions for the
initial funding. No assurance can be given that the transaction
will be consummated.
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1995, the Company had working capital of $78,045,
compared to a working capital deficiency of $138,013 on June 30,
1995. During the three month period ended September 30, 1995, the
Company raised $675,000 in net proceeds through the sale of common
stock to foreign investors, $145,000 through the sale of its
promissory notes in a private placement and $800 from the exercise
of warrants to purchase common stock. Operating revenues for the
three months ended September 30, 1995, totaled $213,036, compared
to $14,124 for the three months ended September 30, 1994.
On October 1, 1995, the Company converted $1,757,000 of its
secured debt and $228,760 of related accrued interest into
unsecured convertible preferred stock.
The Company's current financial position continues to be
precarious even though the Company was successful in the recent
raising of $675,000. The Company will need additional funding in
order to maintain operations and in order to extend its product
line and increase the production capacity for its print products.
The Company has been funding its operations by selling its
securities in private placements, short-term borrowing, sales, and
accruing compensation to certain employees and consultants. The
Company is currently in discussion with third parties on raising
additional funds. The amount of third party funding will depend
to some extent on the Company's revenues and cash flow from
operations. No assurance can be given that the Company will be
able to obtain the additional funds necessary to maintain its
existing operations. In the event the Company is not able to
secure sufficient funds on a timely basis necessary to maintain
its current operations, it may cease all or part of its existing
operations or may seek protection under the federal bankruptcy
laws.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On September 27, 1995, the Company filed a current report on Form
8-K to report on event under Item 2 regarding the Company's
acquisition of all the issued and outstanding capital stock of
InfoPak, Inc.
12
<PAGE> 15
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.
DIMENSIONAL VISIONS GROUP, LTD.
Date: November 17, 1995 /s/ George S. Smith
------------------------------------
George S. Smith, Chairman
(Chief Executive Officer and
Chief Financial Officer
For the period ending September 12, 1995)
/s/ Steven M. Peck
----------------------------------
Steven M. Peck, President and
Chief Executive Officer
From September 13, 1995 forward
13
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<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 948,547
<SECURITIES> 0
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