<PAGE>
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, 1996
------------------
[ ]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.)
8855 N. Black Canyon Hwy., Suite 2000, Phoenix, Arizona, 85021
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(602) 997 - 1990
- -------------------------------------------------------------------------------
(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 September 30, 1996, the number of shares of Common Stock issued and
outstanding was 30,695,013.
<PAGE>
Dimensional Visions Group, Ltd. And Subsidiaries
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - September 30, 1996
and June 30, 1996 ........................................................... 1
Consolidated Condensed Statements of Operations - For the three
months ended September 30, 1996 and 1995 .................................... 2
Consolidated Condensed Statements of Cash Flows - For the three
months ended September 30, 1996 and 1995..................................... 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................................................. 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.................................. 15
.
SIGNATURES................................................................... 15
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1996 1996
------------- ----------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 203,486 $ 203,073
Accounts receivable, trade net of
allowances for bad debts of
$205,743 28,890 32,608
Inventory 79,355 89,458
Prepaid supplies and expenses 18,433 32,447
---------- ----------
Total current assets 330,164 357,586
---------- ----------
Equipment and leasehold improvements
Equipment 1,897,723 1,891,703
Furniture and fixtures 144,460 143,408
Leasehold improvements 109,446 109,446
---------- ----------
2,151,629 2,144,557
Less accumulated depreciation and
amortization 2,019,970 2,007,317
---------- ----------
131,659 137,240
---------- ----------
Other assets
Goodwill, net of accumulated
amortization of $201,039 at
September 30,1996; 152,790 at June
30, 1996 763,920 812,199
Deferred compensation costs 41,128 50,389
Patent right, and other assets 50,487 51,505
---------- ----------
855,535 914,093
---------- ----------
Total assets $1,317,358 $1,408,919
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
1996 1996
------------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities
Current portion of Long term debt $ 250,000 $ --
Accounts payable, accrued expenses and other liabilities 358,488 348,058
------------ ------------
Total current liabilities 608,488 348,058
Long term debt, net of current portion 75,000 325,000
------------ ------------
Total liabilities 683,488 673,058
------------ ------------
Commitments and contingencies -- --
Stockholders' equity
Preferred stock - $001 par value, authorized -
10,000,000 shares; issued and outstanding - 603,390
shares at September 30, 1996, 632,207 shares at June
30, 1996 603 632
Additional paid-in capital 3,356,147 3,503,161
------------ ------------
3,356,750 3,503,793
Common stock - $001 par value, authorized -
100,000,000 shares issued and outstanding - 30,695,013
shares at September 30, 1996, 26,711,657 shares at
June 30, 1996 30,695 26,712
Additional paid-in capital 14,402,839 13,963,359
Deficit (17,156,414) (16,758,003)
------------ ------------
Total stockholders' equity 633,870 735,861
------------ ------------
Total liabilities and stockholders' equity $ 1,317,358 $ 1,408,919
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
------------------------------------
1996 1995
---- ----
<S> <C> <C>
Operating revenue $ 124,872 $ 213,036
Cost of Sales 55,927 159,416
------------ ------------
Gross profit 68,945 53,620
------------ ------------
Operating expenses
Engineering and development costs 92,902 59,538
Marketing expenses 94,731 54,707
General and administrative expenses 227,132 325,740
------------ ------------
Total operating expenses 414,765 439,985
------------ ------------
Loss before other income (expenses) (345,820) (386,365)
------------ ------------
Other income (expenses)
Interest expense (6,345) (50,615)
Interest income 2,003 2,512
Amortization of Goodwill (48,249) (8,550)
------------ ------------
(52,591) (56,653)
------------ ------------
Net loss ($ 398,411) ($ 443,018)
============ ------------
Net loss per share of common stock ($ .01) ($ .03)
============ ============
Weighted average shares of common stock outstanding 28,196,737 16,955,609
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss ($398,411) ($443,018)
Total adjustments to reconcile net loss to net cash
used in operating activities 156,896 121,257
--------- ---------
Net cash used in operating activities (241,515) (321,761)
--------- ---------
Cash flows from investing activities
Cash acquired in acquisition -- 275,632
Property and equipment and progress payments
on equipment under construction (7,072) (4,096)
--------- ---------
Net cash provided used in investing activities (7,072) 273,536
--------- ---------
Cash flows from financing activities
Proceeds from long-term borrowing 150,000 145,000
Sale of common stock, net of offering cost of 99,000 675,000
$75,000 in 1995
Exercise of warrants to purchase common stock -- 800
Payment of note -- (50,000)
--------- ---------
Net cash provided by financing activities 249,000 770,800
--------- ---------
Net increase in cash and cash equivalents 413 720,575
Cash and cash equivalents, beginning 203,073 227,972
--------- ---------
Cash and cash equivalents, ending $ 203,486 $ 948,547
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest -- --
========= =========
Issuance of common stock in connection with
Compensation $ 2,120 $ --
========= =========
Consulting services $ 30,300 $ --
========= =========
Payment of an advance from Individual $ 15,000 $ --
========= =========
</TABLE>
3
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATE STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Supplemental disclosure of non-cash investing and financing activities for three
months ended September 30, 1996:
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 August, 1995 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.
In September, 1995 the Company issued 1,000,000 warrants to the then Chief
Executive Officer and 500,000 warrants to the then financial consultant to
the Company to purchase the Company's Common Stock at $.25 and $.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 $.15 and 500,000 at $.50).
See notes to condensed consolidated financial statements.
4
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
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, 1996 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 for the fiscal year
ended June 30, 1996. 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, 1997.
Note 2 Summary of Significant Accounting Policies
Description of Business, Financing and Basis of Financial Statement
Presentation
Dimensional Visions Group, Ltd. (the "Company" or "DVGL") was
incorporated in Delaware on May 12, 1988. The Company produces and
markets lithographically printed stereoscopic prints commonly referred
to as three-dimensional prints which the Company has termed DV3D(R),
and lithographically printed animation which the Company has termed
Animotion.TM
The Company, on September 12, 1995 completed the acquisition of
InfoPak, Inc. which manufacturers and markets hardware and software
information and audio playback systems and method products and
programs.
The Company has financed its development through the sale of its
securities, loans and by certain employees deferring their compensation
and through the sale of products. The Company has had limited sales of
its products during the year ended June 30, 1996 and the three months
ended September 30, 1996. Even though the sales have significantly
increased over the prior years the volume of business is not sufficient
to support the Company's cost structure.
Liquidity and Capital Resources
The Company has incurred losses since inception of $17,156,144, and has
a working capital deficiency of $ 278,324 as of September 30, 1996. The
future of the Company as an operating business will depend on (1) its
ability to successfully market its product, (2) obtain sufficient
capital contributions or financing as may be required to sustain its
current operations and to fulfill its sales and marketing activities,
(3) achieving a level of sales adequate to support the Company's cost
structure, and (4) to ultimately achieve a level of profitability.
Management's plan to address these issues includes (a) substantially
increasing marketing efforts of the Company's products and increasing
sales results, (b) exercise tight cost controls to conserve cash, (c)
raise additional long term financing, (d) evaluate possible merger or
acquisition opportunities, and (e) alliances or joint venture agreement
opportunities.
5
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Note 2 Summary of Significant Accounting Policies (Continued)
Liquidity and Capital Resources (Continued)
The consolidated financial statements have been prepared on a going
concern basis which contemplates the realization and settlement of
liabilities and commitments in the normal course of business. The
Company expects to incur expenditures to further expand the
lithographic market. The Company's limited revenue will not be
sufficient to satisfy the present cost structure. Management recognizes
that the Company must generate additional resources or substantially
modify its operating costs to enable it to continue operations with
available resources. Management plans include the sale of additional
equity securities, establishing alliance or other joint venture
arrangements with entities interested in and resources to support the
Company's current products, or other business transactions which will
generate sufficient resources to assure continuation of the Company's
operations.
Further, there can be no assurances, assuming the Company successfully
raises additional funds or enters into a business alliance, that the
Company will achieve profitability or positive cash flow. If the
Company is unable to obtain adequate additional financing or enter into
such business alliance, management will be required to sharply curtail
the Company's lithographic product and curtail its overall operations.
Consolidation Policy
The consolidated financial statements include the accounts of DVGL and
its wholly-owned subsidiaries, InfoPak, Inc. (acquired September 12,
1995) DVG Plastics, Inc., Digital Dimensions, Inc. and DV3D Images,
Inc. As of June 30, 1996, all of the wholly-owned subsidiaries are
inactive, except for InfoPak, Inc. 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)
6
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Note 2 Summary of Significant Accounting Policies (Continued)
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 expenses in the period the determination is made to
abandon them.
Goodwill
The excess of the cost over the net assets acquired relates to the
acquisition of InfoPak, Inc. The goodwill is being amortized over five
years.
Engineering and Development Costs
The Company charges to engineering and development costs all items of a
non-capital nature related to bringing "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 creation of prototypes. All such costs of a capital nature
are capitalized.
Income Taxes
Deferred income taxes reflect the net 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.
Employer's Accounting for Post Employment Benefits
Employers Accounting for Post Employment Benefits Statement of
Financial Accounting Standards No. 112, Employers Accounting for Post
Employment Benefits (SFAS No. 112), establishes accounting standards
for post employment benefits and requires either the accrual of the
obligation or disclosure, depending upon the circumstances, for the
cost of benefits provided to former or inactive employees after
employment or before retirement. The Company adopted SFAS No. 112
during the first quarter of 1995. Such adoption had no effect on the
Company's operations or financial position, since the Company does not
have any post-retirement benefits.
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-dilutive effect.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could differ
from those estimates.
7
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
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 fair value of the
InfoPak assets acquired was $503,944 (originally reported in previously
filed quarterly financial statements at $442,769 and subsequently
adjusted at year end by $61,175), which included $275,632 of cash, and
the liabilities assumed equaled $103,590. The Company also issued
31,379 shares of Series P Convertible Preferred Stock valued at
$78,448, in exchange for the cancellation of certain Series P
Convertible Preferred Stock valued at $78,448, in exchange for the
cancellation of certain notes payable, including related accrued
interest, due to certain shareholders of InfoPak. The Company has
accounted for this transaction as a purchase and, accordingly, resulted
in the Company recording goodwill of $964,989, which will be amortized
over five years.
In addition, certain employees under contract and a consultant received
17,500 shares of Series P Convertible Preferred Stock valued at $43,750
as signing bonuses, which are being amortized over the term of the
contracts.
Note 4 Accounts Payable, Accrued Expenses and Other Liabilities
September 30, 1996 June 30,1996
------------------ ------------
Accounts payable $114,107 $118,525
Accrued expenses
Interest 3,684 3,684
Salaries 141,545 111,449
Consulting fees 88,000 88,000
Payroll Taxes Payable 11,152 --
Customer deposit -- 26,400
-------- --------
Total $358,488 $348,058
======== ========
Note 5 Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
September 30,1996 June 30, 1996
----------------- --------------
<S> <C> <C> <C>
5% convertible debenture due August 1, 1997 250,000 250,000(1)
10% secured notes due in January and February, 1998 75,000(2) 75,000(2)
-------- --------
325,000 325,000
Less current portion 250,000 --
-------- --------
Long term portion $ 75,000 $325,000
======== ========
</TABLE>
The long-term debt, as of June 30, 1996, is classified as long term
since the entire obligation becomes due during fiscal year ending in
June 30, 1998.
8
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Note 5 Long-Term Debt ( Continued )
(1) During July through September 30, 1996, $150,000 of the debenture
was converted to 2,063,186 shares of the Company's common stock at an
average per share price of $.07. This debt is convertible into the
Company's common stock at 50% of the price of the Company's stock on
the day prior to conversion, but at no time shall the conversion price
be greater than $.31 a share. During September 1996, an additional
debenture for $ 150,000 was issued. This debt is convertible into the
Company's common stock at 50% of the price of the Company's stock on
the day prior to conversion, but at no time shall the conversion price
be greater than $ .145 a share
(2) In 1994 and 1995, the Company gave a security interest in all of
the Company's tangible and intangible assets, including all patents and
proprietary technologies as collateral for $ 1,982,000 of 10% secured
notes, which was evidenced by a Uniform Commercial Code of filing on
March 24, 1994.
On October 1, 1995, $1,757,000 of the outstanding secured note holders
exercised their warrant to convert the secured notes to Series B
Convertible Preferred Stock except for the above secured note holders
and a director who subsequently, in February 1996, exercised his right
to convert a $150,000 secured note to Series B Convertible Preferred
Stock. In addition, the note holders also agreed to convert $262,750 of
interest due on the 10% secured notes into Series C Convertible
Preferred Stock. As of September 30, 1996 there remained outstanding $
75,000 of the 10% secured notes.
Note 6 Commitments and Contingencies
The Company leases its studio and production facilities in
Philadelphia, Pennsylvania under a five year operating lease through
February 28, 1999 at an annual rental of approximately $60,000 through
June 1996 and adjusted on March 1, of each year through 1998 by $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 (see Note
9, Subsequent Events) 30 days prior to the ground breaking date on the
proposed new building site adjacent to where the Company leases space.
<TABLE>
<CAPTION>
Years Ending June 30, Annual Rental Amount
--------------------- --------------------
<S> <C> <C>
1997 $ 45,600 (remaining rent for fiscal 1997 )
1998 62,200
1999 42,100
----------
$149,900
==========
</TABLE>
Rent expense was approximately $26,300 and $31,922 for the three months
ended September 30, 1996 and 1995, respectively.
The Company has outstanding employment and consulting contracts that
expire through June 30, 1999 as follows:
<TABLE>
<CAPTION>
Years Ending June 30, Amount
--------------------- ------
<S> <C> <C>
1997 $ 401,000 (remaining for fiscal 1997)
1998 534,000
1999 185,000
-----------
$1,120,000
===========
</TABLE>
9
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Note 6 Commitments and Contingencies (Continued)
The Company's former principal distributor of its print products
refused to pay a certain sales invoice for goods shipped to, accepted
and paid for by the distributor's customer. The Company had demanded
payment and the distributor has refused to pay the invoice for
$213,522. The Company filed for judgment on the $213,522 invoice
together with interest, costs and such other relief the court will deem
just and proper. The distributor has filed a counterclaim. Management
feels this matter will be resolved favorably and will not have a
material adverse effect on its financial position.
As of June 30, 1996, the Company has provided an allowance for possible
bad debts for the full amount of this sales transaction.
There are no other legal proceedings which the Company believes will
have a material adverse effect on its financial position.
The Company has not declared dividends on Series A or B Convertible
Preferred Stock. The cumulative dividends in arrears through June 30,
1996 was $245,800.
Note 7 Common Stock
As of September 30, 1996, there are outstanding 15,478,910 of
non-public warrants to purchase the Company's common stock at prices
ranging from $.10 to $.75 with a weighted average price of $.21 per
share. The Company has also agreed to issue up to 2,650,000 warrants to
purchase the Company's common stock, at prices ranging from $.15 to
$.20 with a weighted average price of $.19 per share, to certain
employees. The issuance of these warrants is subject to the individuals
meeting certain predetermined performance goals, which if obtained
would improve the Company's DV3DTM print products and the sales of such
products.
As of September 30, 1996, there were 603,390 shares of Convertible
Preferred Stock outstanding which can be converted to 28,797,570 shares
of common stock (see Note 8).
As of September 30, 1996, there are 7,500 Series B Warrants outstanding
to purchase Series B Convertible Preferred Stock which can be converted
into 750,000 shares of the Company's common stock ( see Note 7 ).
As of September 30, 1996 there was a $ 250,000 5% Convertible Debenture
which can be converted into a minimum of 2,714,127 shares of the
Company's common stock depending upon the price of the Company's common
stock the day preceding the conversion
The total number of shares of the Company's common stock that would
have been issuable upon conversion of the outstanding debt, warrants
and preferred stock equaled 50,390,607 shares as of September 30, 1996,
and would be in addition to the 30,695,013 shares of common stock
outstanding as of September 30, 1996.
10
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Note 7 Common Stock (Continued)
During the three months ended September 30, 1996, 3,833,356 shares of
the Company's common stock were issued as follows:
Conversion of 10,000 shares of Series A convertible Preferred
stock valued at $100,000 into 400,000 shares of the Company's
common stock.
Conversion of 18,817 shares of Series P Convertible Preferred
stock valued at $47,043 into 188,170 shares of the Company's
common stock.
Conversion of $150,000 of convertible debentures to 2,063,186
shares of the Company's common stock under Regulation S Securities
Subchapter Agreement.
Conversion of a $15,000 advance to 150,000 shares of the Company's
common stock valued at $ .10 per share.
Issuance of 180,000 shares of the Company's common stock to
consultants for service valued at $30,200.
Issuance of 12,000 shares of the Company's common stock to an
employee for compensation valued at $2,120.
The Company sold through private placement 990,000 shares of the
Company's common stock value at $ .10 per share.
Note 8 Preferred Stock
The Company has authorized 10,000,000 shares of $.001 par value per
share Preferred Stock, of which the following were issued and
outstanding:
<TABLE>
<CAPTION>
Outstanding Outstanding
Allocated September 30, 1996 June 30, 1996
--------- ------------------ -------------
<S> <C> <C> <C>
Series A Preferred 100,000 30,500 40,500
Series B Preferred 200,000 190,700 190,700
Series C Preferred 1,000,000 23,420 23,420
Series P Preferred 600,000 355,620 374,437
Series S Preferred 50,000 3,150 3,150
--------- -------- ---------
Total Preferred Stock 1,950,000 603,390 632,207
========= ======== =========
</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, and have been accumulated on June 30 each year, but
have not been declared or paid (see Note 6).
11
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Note 8 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
and have not been declared or paid (see Note 6).
The Company filed with the Securities and Exchange Commission form SC
13E4 on August 19, 1996 an offer to all holders of Series B Preferred
Stock to exchange each of their shares for 120 shares of the Company's
common stock. Substantially all of the shares, ninety-six percent
(96%), have been tendered (see Subsequent Events).
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.
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 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 $.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 were issued for
the purpose of increasing the capital of the Company. The Series C
Preferred was issued to certain holders of the Company's 10% Secured
Notes in lieu of accrued interest and also will be 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 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 shareholders.
The 190,700 shares of Series B Preferred were issued to holders of
warrants to purchase such preferred stock. The funding for the exercise
of these warrants was the exchange of $1,907,000 of principal amount of
secured and unsecured notes.
The 26,275 shares of Series C Preferred were also issued in exchange
for $262,750 of interest due under the secured and unsecured note
holders of 2,855 shares of Series C Preferred Stock have subsequently
converted their shares into the Company's common stock.
12
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Note 9 Events Subsequent to September 30, 1996
During October, 1996, the Company received $ 450,000 from the sale of
its securities, $350,000 from the sale of common stock at $.14 per
share and $ 100,000 from a sale of a convertible debenture with a
maximum conversion price of $.145 per share.
On October 23, 1996 the Company's offer to exchange Series B Preferred
Stock for common stock (see Note 8, Preferred Stock) was extended to
December 2.
On October 30, 1996 the Company, in accordance with its planned
consolidation of all facilities of the Company and Subsidiaries to the
Phoenix, Arizona headquarters, gave notice to it's Philadelphia
landlord of its intent to vacate premises in the month of December.
13
<PAGE>
PART II - OTHER INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
As of September 30, 1996 the Company had working capital deficiency of
$278,324 compared with a working capital of $78,045 as of September
30,1995. During the quarter ended September 30, 1996, the Company
raised a total of $269,000 through the sale of its equity securities
and debt in various offshore transactions and a private placement and a
$20,000 advance from an individual. Holders of other debt financing
representing $ 150,000 converted their debt into shares of Common Stock
during the quarter.
The Company expects to receive approximately $ 250,000 to $ 300,000
during fiscal 1997 from monthly licensing fees for the InfoPak Portable
MLS product. As of September 30, 1996, InfoPak has billed $42,962 of
this amount and will continue to invoice its distributors on a monthly
basis. The majority of the fees will begin in January 1997 pursuant to
existing distribution agreements. The actual amount of such fees will
be determined by the number of MLS InfoReaders in service during the
year.
As of September 30, 1996 (as described above) the Company raised
$249,000 through private placement of its securities. The Company needs
additional funding (see Subsequent Events) in order to maintain current
operations and extend its product lines. The Company is still not to
the point of generating sufficient revenues from operations to cover
its cost structure. The Company has been funding its operations by
selling its securities in private placements, offshore transactions,
short-term borrowing, accruing compensation to certain employees, and
sale of its products. The Company continues to discuss with outside
shareholders and other third parties the raising of additional funds.
The amount of third party funding, depends 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 additional funds in the
long term necessary to maintain its existing operations. In the event
the Company is not able to secure sufficient funds in a timely basis
necessary to maintain its current operations, it may cease all or part
of its existing operations.
Results of Operations
The net loss for the period ending September 30, 1996 was $398,411
compared with a net loss of $443,018 for the period ended September 30,
1995. The decrease in the loss was caused primarily by a decrease in
compensation expenses such as consulting fees, professional fees and
salaries. The Company's cost of producing its DV3D(R) print products
continued to be high during the early part of the period resulting in
marginal gross profits for this product. During the later part of the
period, the Company, through arrangements with new suppliers and
negotiations with existing suppliers, has been able to substantially
reduce the cost of producing its DV3D(R) print products with a
resultant increase in its gross operating margins.
Revenues for the quarter ended September 30, 1996 were $124,872
compared to revenues of approximately $213,036 for the quarter ended
September 30, 1995. The decrease in revenues was the result of the
Company restructuring operations for its DV3D(R) print products and
focusing on the addition of the Animotion(TM) line. Revenues for
InfoPak for the quarter were $97,272. During the quarter, to increase
present and future revenues, InfoPak changed its distribution program
by changing its distributor base.
The Company expects to incur operating losses through the quarter
ending December 31, 1996. However, the Company continues to implement a
program for reducing its operating expenses and controlling its
internal costs. The Company has consolidated its corporate offices in
Phoenix, Arizona, and anticipates that the production facilities will
also be consolidated (see Events Subsequent to September 30, 1996) in
Phoenix by the end of the second fiscal quarter. It has placed its
various engineering functions under a single engineering officer and
14
<PAGE>
Results of Operations (Continued)
its administrative and operations functions under a single
administrative officer. The Company has decreased its use of
consultants and continues to lower other non-operating expenses. The
Company continues to reduce its outside production costs for its
DV3D(R) print products. The Company has introduced two new products,
the Animotion(TM) print product and the AutoPakTM electronic automotive
pricing guidebook product. The Company continues to rely on third party
vendors for the production of its products and any disruption could
have a material adverse effect on the Company's operations.
Events Subsequent to September 30, 1996
During October, 1996, the Company received $ 450,000 from the sale of
its securities, $350,000 from the sale of common stock at $.14 per
share and $ 100,000 from a sale of a convertible debenture with a
maximum conversion price of $.145 per share.
On October 23, 1996 the Company's offer to exchange Series B Preferred
Stock for common stock (see Note 8, Preferred Stock) was extended to
December 2.
On October 30, 1996 the Company, in accordance with its planned
consolidation of all facilities of the Company and Subsidiaries to the
Phoenix, Arizona headquarters, gave notice to it's Philadelphia
landlord of its intent to vacate premises in the month of December.
Item 6. Exhibits and Reports on Form 8-K
The following documents are filed as part of this report:
1. The following Exhibits are filed herein: 27.0 Financial Data
Schedule:
2. Reports on Form 8-K filed: None
Signatures
In accordance with the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, duly authorized.
DIMENSIONAL VISIONS GROUP, LTD.
DATED: November 8, 1996 By: /s/ George S. Smith
----------------------------------------
George S. Smith, Chairman, President and
Chief Executive Officer
15
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<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 203,486
<SECURITIES> 0
<RECEIVABLES> 234,633
<ALLOWANCES> (205,743)
<INVENTORY> 79,355
<CURRENT-ASSETS> 330,164
<PP&E> 2,151,629
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<CURRENT-LIABILITIES> 608,488
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3,356,750
<COMMON> 30,695
<OTHER-SE> (2,753,575)
<TOTAL-LIABILITY-AND-EQUITY> 1,317,358
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