<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(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 Conditions
and Results of Operations................................................................. 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 16
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.......................................................... 17
SIGNATURES................................................................................................... 18
</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 30, June 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 $8,550 1,017,584 -
Deferred compensation and
consulting costs 68,090 -
Patent rights, and other assets 53,519 53,398
---------- ----------
Total other assets 1,139,193 53,398
---------- ----------
Total assets $2,577,576 $ 451,237
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
September 30, June 30,
1995 1995
----------- -----------
(Unaudited)
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 - 638,279 shares
at September 30, 1995, and
77,250 shares at June 30, 1995 638 77
Additional paid in capital 2,374,558 772,423
----------- -----------
2,375,197 772,500
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 12,426,552 11,881,927
Deficit (15,165,375) (14,722,356)
----------- -----------
Total stockholders' equity
(deficiency) (346,025) (2,050,993)
----------- -----------
Total liabilities and
stockholders' equity $ 2,577,576 $ 451,237
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT 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 327,740 107,779
---------- ----------
Total operating expenses 441,985 108,779
---------- ----------
Loss before other income (expenses) (388,365) (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 (8,550) -
---------- ----------
(54,653) (27,252)
---------- ----------
Net loss $(443,018) $(281,252)
---------- ----------
Net loss per share of common stock ($.03) ($.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 CONSOLIDATE STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $ (443,018) $ (281,252)
Total adjustments to reconcile net loss to net cash
used in operating activities 119,257 102,687
------------ ------------
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 borrowing 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 $1,250,000, the cancellation of debt to certain shareholders of
InfoPak, Inc. in exchange for 31,379 Series P Convertible Preferred shares
valued at $78,448. 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 shares of Series P Convertible Preferred Stock valued at
$43,750 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 at $0.25 and $0.15, respectively. The warrants
issued to the financial consultant were valued at $100,000, and was
expensed. 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
($750,000 at $0.15 and $500,000 at $0.50).
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-QSB. 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-1 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. InfoPak manufactures and
markets hardware and software information 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, at $.15 per share (750,000 shares) and $.50 per share
(500,000 shares), 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.
The Company has incurred losses since inception of $15,165,375.
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.
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)
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
intercompany 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:
<TABLE>
<S> <C>
Equipment 5-7 years
Furniture and fixtures 5 years
Leasehold improvements Term of the initial operating lease (5 years)
</TABLE>
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
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 (CONTINUED)
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 $1,026,134 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 $1,250,000. The Company has
accounted for this transaction as a purchase and accordingly, the
acquisition resulted is the Company recording goodwill of $1,026,134,
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 $43,750 as a signing
bonus. The bonus will be amortized over the two year term of the
contracts.
Notes payable and related accrued interest to certain shareholders of
InfoPak, Inc. were cancelled and the Company issued 31,379 shares of
Series P Convertible Preferred stock valued at $78,448, in exchange
for the cancellation of debt. Each share of Series P Convertible
Preferred Stock is convertible into 10 shares of common stock
(5,488,790 shares of common stock) .
6
<PAGE> 9
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
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 8).
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 638,279 shares of Convertible
Preferred Stock outstanding which can be converted to 10,993,790
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.
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
The Company has authorized 2,000,000 shares of $.001 par value per
share 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 600,000 548,879 --
Series S Preferred 50,000 32,150 --
--------- ------- ------
Total Preferred Stock 1,950,000 638,279 77,250
========= ======= ======
</TABLE>
The Company's Series A Convertible 5% Preferred Stock ("Series A
Preferred"), 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"), 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"), 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"), is convertible at a rate of 10 shares of common stock for
each share of Series P Preferred. The fair market value of the
548,879 shares of Series P Preferred Stock issued relating to the
merger, debt cancellation and signing bonuses to certain employees and
a consultant, was valued at $1,372,198 ($2.50 per share) based upon
the price at which the Company was able to sell 3,000,000 shares of
its Common Stock on September 5, 1995 through a Regulation S offering
which was $0.25 per share.
The Company's Series S Convertible Preferred Stock ("Series S
Preferred"), 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
8
<PAGE> 11
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
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.
<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 dividends are payable based on the total cash paid for the
Series A Preferred Stock at 5%. The cumulative dividend in arrears on
the paid-in amount 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.
9
<PAGE> 12
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 7 COMMITMENTS (continued)
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.
The Company's major distributor of its DV3D(TM) product, under the
terms of its distribution agreements which expire on February 1, 1996
and January 14, 1997, is to receive up to 2,000,000 warrants to
purchase the company's Common Stock based on a percentage of the
distributor's purchase price of DV3D(TM) product. The warrants, with
a two year term from their vesting date, are to be priced at the
market value of the Company's Common Stock on the date of vesting. As
of September 30, 1995, warrant for 2,646 shares have been earned but
not vested.
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 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.
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 $ 712,841
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 2,923,601 937,841
----------- ---------
Preferred stock 638 837
Additional paid-in capital 2,374,559 4,360,120
----------- ---------
2,375,197 4,360,957
Common stock 17,601 17,601
Additional paid-in capital 12,454,902 12,454,902
Deficit (15,165,375) (15,165,375)
----------- -----------
Total stockholders equity (deficiency) (317,675) 1,668,085
----------- -----------
Total liabilities and stockholders
equity (deficiency) $ 2,605,926 $ 2,605,926
=========== ===========
</TABLE>
10
<PAGE> 13
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
NOTE 9. AMENDED FINANCIAL STATEMENTS
The Company has re-evaluated the fair value of the Series P Preferred
Stock issued relating to the merger, debt cancellation and signing
bonuses (see Note 6). Accordingly, upon further evaluation the
Company determined the fair value of the shares issued should be based
upon the price at which the Company was able to sell a block of
3,000,000 shares of common stock on September 5, 1995, through a
Regulation S Offering which was $.25 per share of Common Stock. In
addition, certain warrants issued during the quarter ended September
30, 1995 were also re-valued based upon a $.25 per share fair value.
The impact on the September 30, 1995 financial statements are as
follows:
<TABLE>
<CAPTION>
September 30, 1995
----------------------------------------------
As originally reported Restated
---------------------- ----------
<S> <C> <C>
Balance Sheet
-------------
Goodwill $ 2,638,432 $ 1,026,134
Accumulated amortization of goodwill (21,986) (8,550)
Deferred compensation and
consulting costs 510,889 68,090
Patent rights, and other assets 81,869 53,519
Total assets 4,647,587 2,577,576
Preferred stock 3,987,495 2,375,197
Additional paid-in capital 12,812,412 12,426,552
Deficit (15,093,522) (15,165,375)
Total stockholders' equity (deficiency) 1,723,986 (346,025)
Statement of operations
-----------------------
General and administrative expenses 242,451 327,740
Amortization of goodwill 21,986 8,550
Net loss 371,166 443,018
Net loss per share of common stock ($.02) ($.03)
</TABLE>
11
<PAGE> 14
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
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
$443,018 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 through its major distributer two commercial
orders for these DV3D(TM) print products. The first orders totalling
$14,660 were delivered in September 1995, and accounted for all of
DV3D(TM) sales in the three months ended September 30, 1995. The
second order of approximately $225,000 was delivered in November 1995.
The Company anticipates further orders from this distributor.
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 $441,985 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 $327,740, 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 201%
due primarily to professional fees including (i) approximately
$139,000 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 $8,850 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 ("InfoPak System"(TM)) was designed to
manage voluminous databases that change often and to distribute
information to remote locations.
12
<PAGE> 15
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
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 was 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,
and has provided 30 day notice on December 19, 1995, to the major
distributor of termination of their Distribution Agreements for
failure to comply with its terms. The distributor has brought a legal
action seeking a preliminary injunction against InfoPak (see "Legal
Proceedings"). InfoPak's revenues for the nine months ended September
30, 1995 was approximately $775,000, of which approximately $577,000
was to that distributor. A third party has acquired one of the less
significant distributors which, should lead to increased sales for
InfoPak. These sales are anticipated to offset, substantially, the
loss of sales to the major distributor. However, no assurances can be
given 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.
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 the 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
13
<PAGE> 16
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (Continued)
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 1. LEGAL PROCEEDINGS
In December 1995, the Company's wholly-owned subsidiary, InfoPak,
Inc., was named as a defendant in a legal proceeding.
The action was brought by First Portland Corporation in the Superior
Court of Arizona, Maricopa County. The action sought a temporary
restraining order to restrain InfoPak, Inc. from distributing its
products in markets where the plaintiff claims to maintain
distribution rights pursuant to certain agreements. The order was
granted ex parte on December 7, 1995 and lifted on December 11, 1995.
A preliminary injunction hearing has been scheduled for April, 1996.
The parties are trying to resolve their differences through
negotiations, however, no assurance can be given that such
negotiations will product an amicable solution.
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.
On November 22, 1995, the Company filed an amended Form 8-K which
included the required financial statements in support of the Form 8-K
filed on September 27, 1995.
14
<PAGE> 17
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: February 6, 1996 /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
