<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 December 31, 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 January 30, 1996, the number of shares of Common Stock issued and
outstanding was 17,966,098.
<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 - December 31, 1995
and June 30, 1995............................................................................ 1
Consolidated Condensed Statements of Operations - For the three and six
months ended December 31, 1995 and 1994 ..................................................... 2
Consolidated Condensed Statements of Cash Flows - For the six
months ended December 31, 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..................................................................... 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................... 15
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.................................................... N/A
SIGNATURES.................................................................................... 16
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
December 31, June 30, December 31, June 30,
1995 1995 1995 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current assets Current liabilities
Cash and cash equivalents $ 490,947 $ 227,972 Note payable $ 35,264 $ 50,000
Accounts receivable, trade 37,339 18,690 Accounts payable, accrued expenses and other
liabilities 528,215 404,489
------- -------
Inventory 124,765 26,453 Total current liabilities 563,479 454,489
Prepaid supplies and
expenses 25,634 43,361 Long term debt
-------- -----------
Total current assets 678,685 316,476 Secured notes 75,000 1,837,000
------- -------
Unsecured notes 150,000 -
Equipment and leasehold Accrued interest - 210,741
improvements ---------- -------
Equipment 1,883,024 1,628,028 Total liabilities 788,479 2,502,230
---------- ---------
Furniture and fixtures 142,450 134,938 Commitments and contingencies - -
Leasehold improvements 109,446 109,446 Stockholders' equity (deficiency)
------- ----------
2,134,920 1,872,412 Preferred stock - $001 par value, authorized
- 2,000,000 shares; issued and outstanding -
836,855 shares at December 31, 1995, and
2,019,057 1,791,049 77,250 shares at June 30, 1995 837 77
--------- ---------
Less accumulated
depreciation and
amortization
Net equipment and leasehold 115,863 81,363 Additional paid-in capital 4,307,621 772,423
improvement ------- ----------- --------- ---------
4,308,458 772,500
Other assets Common stock - $001 par value, authorized
- 20,000,000 shares issued and outstanding -
Goodwill, net of accumulated 966,277 - 17,701,098 shares at December 31, 1995;
amortization of $59,604 16,936,098 shares at June 30, 1995 17,701 16,936
Deferred compensation and 67,081 668,161 Additional paid-in capital 12,487,462 11,881,927
consulting costs
Patent right, and other assets 45,860 53,398 Deficit (15,728,334) (14,722,356)
------ -------- ------------ ------------
Total other assets 1,079,218 53,398 Total stockholders' equity (deficiency) 1,085,287 (2,050,993)
--------- ------ --------- -----------
Total assets $1,873,766 $451,237 Total liabilities and stockholders' equity $1,873,766 $ 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 December 31, Six Months Ended December 31,
------------------------------- -----------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C>
Operating revenue $309,389 $48,521 $522,425 $62,645
Cost of Sales 226,824 63,990 386,285 81,589
------- ------ ------- ------
Gross profit (loss) 82,565 (15,469) 136,140 (18,944)
Operating expenses
Engineering and development costs 116,319 62,044 175,857 169,769
Marketing expenses 68,780 27,116 123,487 61,137
General and administrative expenses 409,763 94,135 737,503 202,914
------- ------ ------- -------
Total operating expenses 594,862 183,295 1,036,847 433,820
------- ------- --------- -------
Loss before other income (expenses) (512,342) (198,764) (900,707) (452,764)
--------- --------- --------- ---------
Other income (expenses)
Interest expense (4,469) (33,679) (55,084) (63,680)
Interest income 5,159 379 7,671 735
Gain on sale or abandonment of - - 2,000 2,411
equipment
Amoritization of Goodwill (51,308) - (59,858) -
-------- ---------- -------- ----------
(50,618) (33,300) (105,271) (60,534)
-------- -------- --------- --------
Net loss ($562,915) ($232,064) ($1,005,978) ($513,298)
---------- ---------- ------------ ----------
Net loss per share of common stock ($.03) ($.01) ($.06) ($.03)
====== ====== ------ ------
Weighted average shares of common 17,629,098 16,361,098 17,290,853 16,361,098
stock outstanding ========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATE STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended December 31,
-----------------------------
Cash flows from operating activities 1995 1994
---- ----
<S> <C> <C>
Net loss ($ 1,005,978) ($ 513,298)
Total adjustments to reconcile net loss to net cash
used in operating activities 250,243 192,871
------------- -------------
Net cash used in operating activities (755,735) (320,427)
------------ ------------
Cash flows from investing activities
Cash acquired in acquisition 275,632
Proceeds from sale of equipment 2,000 3,108
Advances to employees - (2,400)
Property and equipment and progress payments (30,722) (1,844)
on equipment under construction ------------- -------------
Net cash provided by investing activities 246,910 (1,136)
------------ -------------
Cash flows from financing activities
Proceeds from long-term borrowing 145,000 347,000
Sale of common stock, net of offering cost of
$75,000 675,000 -
Exercise of warrants to purchase common stock 1,800 -
Payment of note (50,000) -
----------- -------------
Net cash provided by financing activities 771,800 347,000
---------- ----------
Net increase in cash and cash equivalents 262,975 25,437
Cash and cash equivalents, beginning 227,972 118,034
---------- ---------
Cash and cash equivalents, ending $ 490,947 $ 143,471
============ =============
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. 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.
The Company acquired all of the outstanding Common Stock of InfoPak, Inc.
for 500,000 shares of Series P Convertible Preferred Stock ("Series P
Preferred") valued at $1,250,000, the cancellation of debt to certain
shareholders of InfoPak in exchange for 31,379 shares of Series P Preferred
valued at $78,448. 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. InfoPak's assets were valued at $442,769,
(including cash of $275,632), and shares of liabilities equaled $103,590.
The Company issued 500,000 common stock warrants to a financial consultant
to the Company which were valued at $100,000 and expensed.
See notes to condensed consolidated financial statements.
3
<PAGE> 6
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 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.
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.
The Company has financed its operations through the sale of
its securities, loans and by certain employees and consultants
deferring their compensation as well as the limited sales of
its products.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company had working capital of
$115,206, compared with a working capital of $78,045 as of
September 30, 1995 and a working capital deficiency of
($138,013) on June 30, 1995. During the period ended December
31, 1995, the Company raised $145,000 through the sale of its
promissory notes, $675,000 in net proceeds from a private
placement of its Common Stock and $1,800 through the exercise
of 180,000 warrants to purchase the Company's Common Stock.
The Company also converted $1,757,000 of its secured 10% notes
to Series B Convertible Preferred Stock and $228,760 of
interest due on its secured 10% notes to Series C Convertible
Preferred Stock. However, the Company's selling and marketing
efforts have continued to be limited due to inadequate
funding.
4
<PAGE> 7
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company has continued to incur losses since inception of
$15,728,334 including losses for the six months ended
December 31, 1995 of $1,005,978. 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 continuing 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 and reduce cost of goods, (c) raise
additional funds through the issuance of either debt or equity
through private placements, (d) evaluate possible additional
merger, acquisition and/or joint venture opportunities, and
(e) evaluate possible divestitures and/or sales of assets.
There is, of course, no assurance that management's actions
will generate sufficient cash at a level necessary to sustain
the Company's operations. Unless the Company can achieve its
plan as indicated above, the continence of the business cannot
be assured.
If operations are maintained at only the current level, the
cash anticipated to be generated by such operations and the
funds currently on deposit, may not be sufficient to meet the
Company's cash needs for the remainder of fiscal year ending
June 30, 1996.
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
5
<PAGE> 8
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
EQUIPMENT AND LEASEHOLD IMPROVEMENTS AND DEPRECIATION AND
AMORTIZATION (Continued)
follows:
Equipment 5-7 years
Furniture and fixtures 5 years
Leasehold improvements Term of the initial operating
lease (5 years)
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 $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 carry forwards.
6
<PAGE> 9
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 in exchange for 500,000
shares of Series P Convertible Preferred stock ("Series P
Preferred") valued at $1,250,000. The Company has accounted
for this transaction as a purchase and accordingly, the
acquisition resulted in 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 Preferred
valued at $43,750 as a signing bonus. The bonuses are being
amortized over the term of the contracts.
Notes payable and related accrued interest to certain
shareholders of InfoPak were canceled and the Company issued
31,379 shares of Series P Preferred valued at $28,448, in
exchange for the cancellation of debt.
The total of 548,879 shares Series P Preferred Stock is each
convertible into 10 shares of common stock.
NOTE 4 LONG-TERM DEBT
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 the
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.
As of December 31, 1995, after the conversion of $1,757,000 of
the Company's 10% Secured Notes to preferred stock, and the
exchange of $150,000 of such notes to unsecured 8% notes, the
principal amount of 10% Secured Notes was $75,000. 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.
7
<PAGE> 10
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
NOTE 4 LONG-TERM DEBT (Continued)
The annual maturity on long term debt is as follows:
<TABLE>
<CAPTION>
Year Ending June 30, Amount
-------------------- ------
<S> <C>
1996 $ 0
1997 150,000
1998 75,000
-------
$225,000
=======
</TABLE>
NOTE 5 COMMON STOCK
As of December 31, 1995, there are approximately 17,853,564 of
non-public warrants to purchase the Company's Common Stock.
Public warrants, totaling 3,807,655, expired on December 8,
1995.
As of December 31, 1995, there are 836,855 shares of
Convertible Preferred Stock outstanding which can be converted
to 28,792,550 shares of common stock (see note 6).
As of December 31, 1995, there are 22,500 Series B Warrants
outstanding to purchase Series B Convertible Preferred Stock
which can be converted into 2,250,000 shares of the Company's
Common Stock (see note 6).
The Company does not have available sufficient authorized
common stock to satisfy the full exercise of all warrants or
full conversion of its preferred stock into common stock.
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 December 31, 1995 June 30, 1995
<S> <C> <C> <C>
Series A Preferred 100,000 57,250 77,250
Series B Preferred 200,000 175,700 --
Series C Preferred 1,000,000 22,876 --
Series P Preferred 600,000 548,879 --
Series S Preferred 50,000 32,150 --
--------- ------- ------
Total Preferred Stock 1,950,000 836,855 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 7).
8
<PAGE> 11
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
NOTE 6 PREFERRED STOCK (continued)
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 mainly of officers and directors of the Company in
exchange for such stockholders' shares of common stock. After
this exchange, common stock was sold on September 5, 1995
through a Regulation S offering 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 175,700 shares of Series B Preferred were issued on
October 1, 1995 to holders of warrants to purchase such
preferred. The funding for the exercise of these warrants was
the exchange of $1,757,000 of principal amount of 10% secured
notes.
The 22,876 shares of Series C Preferred were also issued in
October 1, 1995 in exchange for $228,760 of interest due under
the 10% secured notes.
9
<PAGE> 12
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
NOTE 6 PREFERRED STOCK (continued)
The Company does not have available sufficient authorized
common stock to satisfy the full conversion of all of the
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 $59,000 through February 1996 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,
real estate taxes, and utility costs.
<TABLE>
<CAPTION>
Year Ending June 30 Annual Rental Amount
------------------- --------------------
<S> <C>
1996 $29,000 (remaining rent for fiscal 1995)
1997 60,800
1998 62,200
1999 42,100
--------
$194,100
========
</TABLE>
Rent expense was approximately $29,482 and $18,325 for the 6
months ended December 31, 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 December 31, 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. and its subsidiaries have
outstanding employment contracts that expire through May 1,
1999, as follows:
<TABLE>
<CAPTION>
Year Ending June 30 Amount
------------------- --------
<S> <C>
1996 $284,500 (remaining for fiscal year 1996)
1997 569,000
1998 569,000
1999 245,500
-------
$1,668,000
===========
</TABLE>
10
<PAGE> 13
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
NOTE 7 COMMITMENTS (continued)
In connection with a consulting contract with an affiliate of
the Company, which provides for among other things, assisting
the Company with arranging for additional capital and
evaluating merger opportunities is to receive a fee of
$100,000 per year, accrued quarterly and payable only out of
positive cash flow of the Company, for the period May 1995
through April 1997. $25,000 of the consulting fee was paid in
September 1995. In addition, 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. The contract also 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 expires on
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 December 31, 1995, warrants for
28,041 shares have been earned but not vested.
NOTE 8 AMENDED FINANCIAL STATEMENTS FOR QUARTER ENDED SEPTEMBER 30, 1995
The Company amended its Form 10-QSB for the quarter ended
September 30, 1995 based on a re-evaluation of the fair value
of the Series P Preferred Stock issued for the merger, debt
cancellation and signing bonuses related to the InfoPak
acquisition (see Note 3). 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 share 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 the $.25 per share fair value. The impact on the
September 30, 1995 financial statements is as follows:
11
<PAGE> 14
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1995
NOTE 8 AMENDED FINANCIAL STATEMENTS FOR QUARTER ENDED SEPTEMBER 30, 1995
(Continued)
<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>
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the three months ended December 31, 1995 the net loss
was ($562,915) compared to a net loss of ($232,046) for the
three months ended December 31, 1994. During the three month
period ended December 31, 1995, the Company had revenues of
$309,389 and gross profit of $82,520, compared to revenues of
$48,521 and a gross loss of ($15,469) for the comparable
period in 1994. The 1995 results include the operations of
InfoPak which was acquired on September 12, 1995.
InfoPak accounted for $69,171 of the Company's revenues and
$36,465 of the gross profit for the three month period ended
December 31, 1995.
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 three commercial orders for
these DV3D(TM) print products. The second order totaling
approximately $225,000 was delivered in November 1995. The
Company has received a third order from this distributor
totaling approximately $ 240,000 for delivery in February and
anticipates further orders from this distributor.
The Company is attempting to continue to lower the costs of
producing its product. The main areas for this effort are
with the Company's third party suppliers of lenticular
material and printing for its DV3D(TM) print products.
Operating expense was $594,862 for the three months ended
December 31, 1995 compared to $183,295 for the three months
ended December 31, 1994. InfoPak's operating expenses were
$200,152 for the three months ended December 31, 1995.
Engineering and development, marketing and general
administrative costs for DVG were $71,114, $30,359, and
$293,237, respectively for the quarter ended December 31,
1995, compared to $62,004, $27,116, and $94,135 for the
quarter ended December 31, 1994. The $199,100 increase in the
Company's general administrative expense was primarily due to
approximate increases in consulting costs of $80,000, legal
fees $8,500, accounting costs of $40,400, compensation of
$39,500, and $15,000 for stockholder communications.
Interest expense decreased $29,210 due to the conversion of
$1,752,000 of 10% Secured Notes to preferred stock, while
interest income increased with the short-term investments of
the proceeds of the $675,000 net sale of common stock on
September 5,1995. Amortization of the goodwill incurred in
the acquisition of InfoPak was $51,308 for the quarter ended
December 31, 1995.
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 back orders for its product at this time. InfoPak
was unable to make any sales during the three months ended
December 31, 1995 through its primary distributor due to legal
negotiations over the terms of their distribution agreement.
InfoPak's revenues during the quarter totaled $69,171 compared
to $239,432, in the corresponding quarter in 1994. On
February 8, 1996, negotiations with InfoPak's primary
distributor were successfully concluded in an out of court
agreement, whereby, InfoPak and the distributor entered into a
new distribution
13
<PAGE> 16
agreement with more favorable terms for InfoPak. In addition,
a third party has acquired one of the less significant
distributors which, should lead to increased sales for
InfoPak. These sales are anticipated to commence in Feburary
1996.
In October 1995, InfoPak entered into a Letter of Intent with
a division of Spectrum Media, Inc. to form a joint venture.
Negotiations are continuing between the parties and no
assurance can be given that a definitive agreement can be
reached.
During the six months ended December 31, 1995 the net loss was
($1,005,978) compared to a net loss of ($513,298) for the six
months ended December 31, 1994. During the six month period
ended December 31, 1995, the Company had revenues of $522,425
and gross profit of $136,140, compared to revenues of $62,645
and a gross loss of ($18,944) for the comparable period in
1994. The 1995 results includes the operations of InfoPak
which was acquired on September 12, 1995.
Operating expense was $1,036,847 for the six months ended
December 31, 1995, compared to $433,820 for the six months
ended December 31, 1994. InfoPak's operating expenses were
$239,610 for the December 31, 1995 period. Engineering and
development, marketing and general administrative costs for
DVG were $116,158, $73,970, and $607,112, respectively for
the six month ended December 31, 1995, compared to $169,769,
$61,137, and $202,914 for the six months ended December 31,
1994. The $53,600 reduction in development resulted primarily
from the completion of the initial development of the
DV3D(TM) print product. The Company anticipates continued
efforts to refine and improve its DV3D(TM) product. The
$404,000 approximate increase in general administrative cost
was due primarily to consulting expenses of $213,700
(including $100,000 value of warrants issued to an affiliate),
additional increased legal fees of $30,200, accounting costs
of $45,800, audit fees of $24,600, compensation costs of
$54,700, prior rent settlement costs of $20,000, and $15,000
for stockholder communications.
Interest expense decreased $8,596 due to the conversion of
$1,752,000 of 10% Secured Notes to preferred stock, while
interest income increased primarily due to the short-term
investments of the proceeds of the $675,000 net sale of common
stock on September 5,1995. Amortization of the goodwill
incurred in the acquisition of InfoPak was $59,858 for the six
months ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 1995, the Company had working capital of
$115,206, compared to a working capital deficiency of
($138,013) on June 30, 1995. During the three month period
ended September 30, 1995, the Company converted $1,757,000
principle amount of its 10% secured notes to 8% Series B
Convertible Preferred Stock and also converted $228,760 of
interest due on its 10% secured notes to Series P Convertible
Preferred Stock. Operating revenues for the three months
ended December 31, 1995, totaled $309,389, compared to
$213,036 for the three months ended September 30, 1995, and
compared to $48,521 for the three months ended December 31,
1994.
The Company's current financial position continues to be
precarious. The Company will need additional funding in
order to maintain current operations, extend its product
lines, and to enter into any merger, acquisition or joint
venture. 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 continues to discuss
with third parties the raising of additional funds. The
amount of third party funding, if any, will depend to some
extent on the Company's revenues and cash
14
<PAGE> 17
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 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 claim
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 was scheduled for April, 1996.
On February 8, 1996, the parties reached an out-of-court
settlement of their differences and entered into a new
distribution agreement.
15
<PAGE> 18
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 13, 1996 /s/ Steven M. Peck
-------------------------------
Steven M. Peck, President and
Chief Executive Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 490,947
<SECURITIES> 0
<RECEIVABLES> 37,339
<ALLOWANCES> 0
<INVENTORY> 124,765
<CURRENT-ASSETS> 678,685
<PP&E> 2,134,920
<DEPRECIATION> 2,019,057
<TOTAL-ASSETS> 1,873,766
<CURRENT-LIABILITIES> 563,479
<BONDS> 225,000
0
837
<COMMON> 17,701
<OTHER-SE> 1,066,749
<TOTAL-LIABILITY-AND-EQUITY> 1,873,766
<SALES> 522,425
<TOTAL-REVENUES> 0
<CGS> 386,285
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,036,847
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,084
<INCOME-PRETAX> (1,005,978)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,000,978)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
