<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
or
[ ] 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.
-------------------------------
(Name of Small Business Issuer as specific in its Charter)
Delaware 23-2517953
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8855 N. Black Canyon Hwy., Suite 2000 85021
Phoenix, Arizona (Zip Code)
(Address of Principal Executive Offices)
Issuer's telephone number, including area code: (602) 997-1990
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained
herein, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. Yes _X_ No ___
For the fiscal year ended June 30, 1997, the Company's revenues were
$551,517.
As of October 14, 1997, the number of shares of Common Stock outstanding
was 71,318,720. The aggregate market value of the Company's Common Stock held
by non-affiliates of the registrant as of October 14, 1997, was approximately
$3,173,015(based upon 63,460,290 shares at $.05 per share).
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Certain exhibits are incorporated by reference to the Company's
Registration Statements on Form S-1 and Form S-8, Form 10-KSB and Form 8-K as
listed in response to Item 13(a)(3) of Part III
(2)
<PAGE>
PART I
ITEM 1. BUSINESS
The Company
Dimensional Visions Group, Ltd. (The "Company") was organized in 1988. The
Company produces and markets lithographically printed stereoscopic prints
commonly referred to as three-dimensional prints as well as lithographically
printed animation prints which the Company has termed Animotion(TM). The
stereoscopic prints may be viewed without the use of special glasses or other
viewing apparatus. The Company has been issued a trademark for its
three-dimensional products as the DV3D(R) image and has applied for a
trademark for the Animotion(TM) name. The DV3D(R) and Animotion(TM) product
lines are determined by the technical specifications of the polymer based
lenticular material on which the image is printed. The print products may be
produced in varying sizes for specified customer applications.
The Company, through a wholly-owned subsidiary InfoPak, Inc., has developed
a data delivery system that provides end users with specific industry printed
material by way of a portable hand-held reader. Data is acquired
electronically from the data providers mainframe systems and distributed
through a computer network to all subscribers. In September 1997, InfoPak,
Inc. sold its data delivery system for the real estate multiple listing
service. This product line accounted for substantially all of InfoPak's
revenue. The Company, for the most part, intends to direct its resources to
its DV3D(R) and Animotion(TM) product lines.
References herein to the Company includes Dimensional Visions Group, Ltd.
and its wholly-owned subsidiary unless the context denotes otherwise.
The Company has been dependent upon the proceeds of the sale of its
securities, loans and revenues from operations to conduct its business. Since
its inception, the Company has continuously sustained significant losses and
such losses are continuing. There can be no assurance that the Company will
generate sufficient revenues from the sale of its products or be able to
continue to raise funds from other sources necessary to maintain its business.
Marketing
The Company is marketing commercial and promotional applications of its
print products to all users of graphic arts. Some of the applications of print
products are packaging, book and magazine covers and inserts, CD covers,
trading cards, games, and greeting cards. Other proposed markets include
point-of-sale materials and displays, direct mail, specialty advertising,
premium incentives, trade show exhibits, and special events promotion.
The Company uses its own employees and independent sales agents in
marketing its products. The independent sales agents are paid on a commission
basis for orders shipped, accepted and for which payment has been received.
The Company also sells its products to independent marketing organizations as
well as end users.
Production
The Company controls or supervises all phases of the production of its
print products from the image development and computerized enhancement through
the color separation and printing.
Images are provided to the Company in many formats including digitally in
graphic file formats and photographically in pictures or transparencies.
Photographic images are scanned into the computer to be modified and enhanced.
Through a proprietary process, several images are composited together to
generate a final image that will appear as a three-dimensional and/or
animation image when viewed through a lenticular material. Lenticular is a
plastic optical material that allows the three-dimensional and/or animation
image to be viewed without the use of any viewing apparatus such as glasses or
hoods. The final computer image is sent to a commercial separator where films
are made. These films are forwarded to a commercial printer where, through the
lithographic process, the images are printed on a polymer based lenticular
material which focuses the multi-dimensional or animation images. The Company
produces the DV3D(R) and Animotion(TM)
(3)
<PAGE>
images for the final image at its facilities in Phoenix, Arizona. Color
separation and printing are done under the supervision of the Company with
third-party vendors.
The polymer based lenticular material on which the DV3D(R) and
Animotion(TM) images are printed is supplied by producers in the petrochemical
and plastic fabricating industries. The Company has established working
arrangements with third-party separators and a printer on a per order basis.
The Company has no formal agreements with its third party vendors. Should the
Company arrangements with its third party vendors be disrupted or materially
changed for any reason, such events could have a material adverse effect on
the Company print product business.
Patents, Trademarks and Proprietary Protection
The Company owns the rights to two U.S. patents, "Method and Apparatus For
Stereoscopic Photography." and "Electronic (digitalized) Method and Apparatus
For Stereoscopic Photography". The Company uses a portion of the technology
covered by these patents in the multiple-image compositing process. The
Company also owns U.S. patents "System and Method for Providing Data and
Program Code to a Card for Use by a Reader" and "Electronic Telephone
Directory with Interchangeable Listings" which relate to its data delivery
system.
The Company enters into confidentiality agreements with all persons and
entities who or which may have access to its technology. However, no assurance
can be given that such agreements, the patents or any additional patents which
may be issued to the Company will prevent third parties from developing
similar or competitive technology. There can be no assurance that the patents
will provide the Company with any significant competitive advantages, or that
challenges will not be instituted against the validity or enforceability of
its patents, or if instituted that any such challenges will not be successful.
The cost of litigation to uphold the validity and prevent infringement can be
substantial. In addition, no assurance can be given that the Company will have
sufficient resources to either institute or defend any action, suit or other
proceeding by or against the Company with respect to any claimed infringement
of patent or other proprietary rights. In the event that the Company should
lose, in the near future, the protection afforded by the patents and any
future patents, such event could have a material adverse effect on the
Company's operations. Furthermore, there can be no assurance that the
Company's technology will not infringe patent or other rights owned by others
or licenses to which may not be available to the Company.
The Company has registered the DV3D(R) trademark and has applied to
register the Animotion(TM) mark with the United States Patent and Trademark
office.
Competition
Other processes currently are available which allow a viewer to perceive an
image in three-dimension, including those which employ stereoglasses and
viewing hoods and other processes, such as holograms and other
three-dimensional image systems, which do not require the use of viewing
apparatus. The Company is aware of at least three companies, Optigraphics,
Inc., Optical Security Group, Inc. and National Graphics, which compete with
the Company's print products all of whom have substantially greater financial
and other resources than the Company. Further, the Company's products are more
expensive than conventional, high quality, two-dimensional prints and for this
reason, high quality, conventional processes and methods may be favored for
many, if not most, illustration and advertising contexts.
Employees
The Company has 7 employees.
(4)
<PAGE>
Consolidated Selected Financial Data
Set forth below is selected financial data derived from the Company's
consolidated financial statements, some of which appear elsewhere in this
report. This data should be read in conjunction with the consolidated
financial statements, some of which are included elsewhere in this report.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1997 June 30, 1996 June 30, 1995 June 30, 1994 June 30, 1993
------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operation revenue $551,517 $1,083,897 $134,028 $ -0- $ -0-
------------ ------------ ------------ ------------ ------------
Net Loss ($2,162,134) ($2,035,647) ($1,192,332) ($1,069,642) ($1,327,258)
------------ ------------ ------------ ------------ ------------
Net Loss per share of common
stock ($.04) ($.12) ($.07) ($.07) ($.10)
------------ ------------ ------------ ------------ ------------
Balance Sheet Data:
Working Capital (deficit) ($107,952) $9,528 ($138,013) ($85,149) ($305,014)
------------ ------------ ------------ ------------ ------------
Total Assets $529,520 $1,408,919 $451,237 $449,725 $636,133
------------ ------------ ------------ ------------ ------------
Total Liabilities $613,947 $673,058 $2,502,230 $1,464,861 $692,027
------------ ------------ ------------ ------------ ------------
Stockholders' equity
(deficiency) ($84,427) $735,861 ($2,050,993) ($1,015,136) ($55,894)
============ ============ ============ ============ ============
</TABLE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company rents approximately 1,800 square feet of office space in
Phoenix, Arizona. The monthly rent is $1,227 on a month to month basis which
includes electricity. The Company has been informed by the landlord that it
will have to vacate the space at the end of 1997.
ITEM 3. LEGAL PROCEEDINGS.
In July 1996, the Company filed a complaint in the United States District
Court for the Eastern District of Pennsylvania (No. 96-CV-5259). The defendant
is Dimensional Graphic Sales, Inc. ("DGS"). In the complaint the Company
alleges that it delivered an order to DGS and properly invoiced DGS pursuant
to a sales and marketing agreement. DGS attempted to pay the invoice in full
by tendering a check for an amount less than the full amount of the invoice
and placing a restrictive endorsement on the check which purported to
constitute payment in full for the invoice. The Company crossed out the
restrictive endorsement and attempted to deposit the check only to
subsequently learn that DGS had stopped payment on the check. In its complaint
the Company is seeking $213,521.70 the full amount of the invoice together
with interest costs and such other relief as the court deems just and proper.
The matter has moved to a deferred status while the parties engage in
settlement negotiation.
The Company is a defendant in a lawsuit filed by Mr. Douglas J. Wright a
former officer and employee of the Company. The complaint was filed on March
12, 1997 in the United States District Court for the Eastern District of
Pennsylvania (No. CIV-97-1383-PHX). In the complaint Mr. Wright alleged that
he was damaged by the Company's refusal to register warrants to purchase
common stock of the Company. The amount of the damages was alleged to be
$1,549,375. The Company moved to dismiss the complaint for improper venue or
in the alternative to transfer it to the District of Arizona. The court
granted the Company's motion to transfer. On July 17, 1997 the Company filed
its answer, affirmative defenses and counterclaim. Mr. Wright did not answer
the complaint in a timely fashion and the court entered a default judgement on
September 9, 1997. The Company is presently gathering evidence to support its
claim for damages.
(5)
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
fiscal quarter of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The principal market for the Company's Common Stock is the National
Association of Securities Dealers, Inc. over-the-counter market, on the
Electronic Bulletin Board. The trading symbol for the Common Stock is
"DVGL.U".
Set forth below are the high and low bid prices for the Company's Common
Stock by the Company's fiscal quarters beginning July 1, 1996 as quoted by the
National Quotation Bureau. The prices represent prices between dealers, do not
include retail mark-ups, mark-downs or commissions and may not represent
actual transactions.
Fiscal 1996 High Low
----------- ----- ----
First Quarter $2.76 $ .75
Second Quarter $1.87 $ .50
Third Quarter $1.00 $ .32
Fourth Quarter $ .75 $ .20
Fiscal 1997 High Low
----------- ----- ----
First Quarter $ .32 $ .11
Second Quarter $ .23 $ .13
Third Quarter $ .18 $ .055
Fourth Quarter $ .12 $ .052
Fiscal 1998 High Low
----------- ----- ----
First Quarter $ .095 $ .045
Holders
As of October 14, 1997, the number of stockholders of record was 454, not
including beneficial owners whose shares are held by banks, brokers and other
nominees. The Company estimates that it has approximately 3,000 stockholders
in total.
Dividends
The company has paid no dividends since its inception and does not
anticipate or contemplate paying cash dividends in the foreseeable future.
Pursuant to the terms of the Company's Series A Convertible Preferred
Stock, a 5% annual dividend is due and owing. Pursuant to the terms of the
Company Series B Convertible Preferred stock, a 8% annual dividend is due and
owing. As of June 30, 1997, the Company has not declared dividends on Series A
or B preferred stock. The unpaid cumulative dividends totaled approximately
$68,000. See Note 7 of Notes to Consolidated Financial Statements.
(6)
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal Years 1995 and 1996
Liquidity and Capital Resources
As of June 30, 1996, the Company had working capital of $9,528, compared
with a working capital deficiency of $138,013 in 1995. During the period ended
June 30, 1996, the Company raised $1,425,000 through the sale of its equity
securities and debt in various offshore transactions and a private placement.
Holders of such debt financing representing $425,000 converted their debt into
shares of Common Stock during the period. Also during the period ended June
30, 1996, holders of $1,907,000 in principal amount of secured notes converted
such notes into 190,700 shares of the Company's 8% Series B Convertible
Preferred Stock. Interest on such secured notes totaling $262,750 was
converted into 26,275 shares of the Company's Series C Convertible Preferred
Stock. The Company's selling and marketing efforts had been limited until
adequate funding was obtained. During the period the Company was taking
selected orders based upon availability of inventory used in the production
process.
On April 25, 1995, substantially all of the long term note holders agreed
to defer all interest payments on the notes until the notes mature beginning
in fiscal year 1997, or upon the consummation of long term financing and/or
strategic partner relationship, to convert the notes and accrued interest into
8% Series B Convertible Preferred stock through the exercise of the Series B
Redeemable Warrants.
Results of Operation
During the fiscal year ended June 30, 1996, the Company began limited
production of its print products. The net loss for the period was $2,035,647
compared with a net loss of $1,192,332 for the fiscal year ended June 30,
1995.
Revenues for the period ended June 30, 1996 were approximately $1,083,897
compared to revenues of $134,028 for the period ended June 30, 1995.
Fiscal Years 1996 and 1997
Liquidity and Capital Resources
As of June 30, 1997, the Company had a working capital deficiency of
$107,952 compared with a working capital of $9,528 as of June 30, 1996. The
decrease in working capital was a result of the Company not generating
sufficient revenues from operations or securing funds from other sources
sufficient to cover its cost structure. During the period ended June 30, 1997,
the Company raised a total of $944,000 through the sale of its equity
securities and debt in various offshore transactions, private placements and
the exercise of warrants.
As of June 30, 1997, the Company's financial position was precarious. The
Company needs funding in order to maintain current operations. 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 and sale of its products. The Company has also had
certain employees and consultants defer a portion of their compensation. As
discussed below, the Company has entered into a letter agreement for funding.
However, the funding is based on a "best efforts" basis. Therefore, no
assurance can be given that the Company will be able to obtain 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
and/or seek protection under the bankruptcy laws.
The Company's independent auditors report contains an explanatory paragraph
regarding the ability of the Company to continue as a going concern.
(7)
<PAGE>
Results of Operations
The net loss for the period ending June 30, 1997 was $2,162,134 compared
with a net loss of $2,035,647 for the period ended June 30, 1996. The increase
in the loss was caused primarily by the write down of goodwill of $619,172.
The write down was associated with the sale of the Company's real estate data
delivery system product line and the Company redirecting its marketing efforts
to its print products. The Company continued during the period to decrease
expenses by reducing consulting fees, professional fees and salaries. For the
period ending June 30, 1997, administrative costs were approximately $850,000
of which salaries were approximately $244,000. Engineering and Development
costs were approximately $397,400, of which approximately $197,500 was
salaries. Marketing costs for the period were $328,792 of which approximately,
$187,000 was salaries. Legal and accounting fees for the period totaled
approximately $110,500.
Revenues for the period ended June 30, 1997 were $551,517 compared to revenues
of $1,083,897 for the fiscal year ended June 30, 1996. Approximately $98,800
of total revenues for the period ending June 30, 1997 was from print products.
The balance of the revenues was substantially all derived from the real estate
multiple listing data delivery system, which system was sold in October 1997.
The decrease in revenues was the result of the Company not being able to sell
its DV3D(R) print products and not being able to increase sales of its data
delivery system products. In November 1996, management determined to convert
the imaging compositing process used in its print products from a photographic
base to a computer software base. This process was not complete until March
1997. During the period of the conversion there were no new sales of print
products The Company currently has no backlog of orders for its print
products. However, during the three months ended September 30,1997, the
Company did have sales for its print products of approximately $60,000. The
Company intends to devote most if not all of its efforts and resources to
generating sales for its print products for the foreseeable future. Management
believes that with the new imaging compositing process in place that it will
be able to consistently offer a commercially acceptable product that is
competitively priced, something that was not possible in the past. Of course,
future events such as internal technological problems, vendor problems,
competing technologies or an increase in pricing either internally or from
vendors could materially adversely affect the Company's ability to generate
sufficient revenues to maintain its cost structure.
The Company expects to incur operating losses through the quarter ending
December 31, 1997. In the event the Company is not able to generate
significant revenues from its print products during the fiscal year it will
continue to incur substantial operating losses.
Events Subsequent to June 30, 1997
In July 1997, the Company issued 1,818,182 shares of its Common Stock as a
result of a conversion of $50,000 of its debentures. Also, in July the Company
sold 1,100,00 shares of its Common Stock in a private placement for $55,000.
In September 1997, the Company sold its real estate multiple listing data
delivery system. The purchase price was $450,000 plus the assumption of
$59,427 in liabilities. The purchase price was payable $40,000 at closing and
the balance to be paid ratably over a thirty-six month period or $13,229.55
per month. In connection with the sale the Company agreed to provide
consulting services for a period of one hundred and twenty days at no cost and
thereafter at certain prescribed rates.
In October 1997, the Company sold 1,666,666 shares of its common stock in
an off shore transaction. The purchase price was $75,000.
On October 14, 1997, the Company entered into a letter agreement with
Capital West Investment Group, Inc. ("CWIG"). Pursuant to the terms of the
agreement CWIG will use its "best efforts" to raise funds amounting to
$1,000,000 in net proceeds less expenses and commissions within six months of
the date of the letter. In exchange for CWIG's agreement to raise funds for
the Company, the Board of Directors has agreed to recommend to the
stockholders for approval a 25 to 1 reverse stock split on all outstanding
classes of stock and issuance of certain derivative securities to key
employees, members of the Board and consultants. In the interim CWIG will
provide $100,000 to $200,000 in short term financing. The actual terms may
change as the transaction progresses and no assurances can be given that the
funding will be completed as proposed.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements required to be filed pursuant to this
Item 7 begins on page F-1 of this report.
(8)
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. Non applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
George S. Smith (1) 63 Director, Chairman of the Board of
Directors, Chief Executive Officer and
Chief Financial Officer
Robert L. Morris 46 Director, President
Roy D. Pringle 29 Senior Executive Vice President, Chief
Operating Officer
Bruce D. Sandig 37 Executive Vice President, Research
and Development
Sean F. Lee (1) 57 Director
Steven L. Flint, Ph.D. (2)(3)(4) 47 Director
Hans J. Kaemmlein (2)(3)(4) 52 Director
</TABLE>
- --------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Mr. George S. Smith was appointed Chairman of the Board in April 1992.
From April 1992 until September 12, 1995, Mr. Smith served as the Chief
Executive Officer of the Company. Mr Smith was reappointed Chief Executive
Officer in June 1996. From 1980 to 1988, Mr. Smith was a Senior Vice-President
at Drexel Burnham Lambert. From 1988 to 1990 he was a senior Vice President at
Shearson Leahman Brothers. From September 1990 until April 1992, Mr. Smith was
on sabbatical for corrective back surgery. Mr. Smith is an honors graduate in
economics with a minor in engineering from San Jose State University. Mr.
Smith maintains his residence in Provo, Utah; and since June 1997, due to a
subsequent back injury and on instructions from his attending physician to
limit his travel, has primarily worked from his home office.
Mr. Lee was appointed a Director in September 1995. Mr. Lee has served as
InfoPak's President from January 1992 until December 1996. In January 1997 Mr.
Lee left the Company and founded Soy Environmental Products, Inc. (cleaning
products). In April 1994, Mr. Lee co-founded and became Chairman of the Board
of Directors of Auto X-ray, Inc., a privately
(9)
<PAGE>
held company (diagnostic system for American automobiles). Since January,
1997, Mr. Lee has served as Chairman for New Directions, a furniture
manufacture.
Dr. Flint was appointed as a Director in June 1996. Dr. Flint is a Senior
Vice President, Chief Financial Officer and member of the Board of Directors
of The Alexander Group, Inc., a national marketing and sales consulting firm
whose clients are typically Fortune 1000 companies. Dr. Flint has been
employed with The Alexander Group, Inc. since 1991. Additionally, Dr. Flint
holds a Ph.D. in finance from the graduate school of business at Stanford
University, has previously held the position of Chief Financial Officer and
Board member of a high tech firm and has been a professor of finance. Dr.
Flint is currently engaged in a number of volunteer and service organizations
including sitting on the Board of The Arizona Shakespeare Festival.
Mr. Kaemmlein was appointed as a Director in June of 1996. Mr. Kaemmlein
is the Chairman, President and Chief Executive Officer of Advanced Media which
specializes in the development and marketing of interactive multimedia
solutions and technologies. Mr. Kaemmlein has held these positions since 1993.
Previously, Mr. Kaemmlein spent over 25 years as an executive with Mercedes
- -Benz and more recently has served as a management consultant and venture
capitalist for several start- up and public companies. Mr. Kaemmlein completed
his business management education in Europe.
Mr. Morris joined the Company in September 1993 and was appointed
President in January 1997. Prior to his employment with the Company Mr. Morris
was Vice-President, Sales and Marketing for Paro, Inc. Mr. Morris has over
twenty years experience in sales and marketing. Mr. Morris maintains his
residence and his office in New York, New York.
Mr. Pringle was appointed to his position in May 1997. Mr. Pringle has
worked for InfoPak, Inc. for more than the past five years. Mr. Pringle holds
a Master's degree from the American Graduate School of International
Management.
Mr. Sandig was appointed to his position in May 1997. Mr. Sandig was a
co-founder of InfoPak, Inc. in 1992.
Directors serve until the next annual meeting or until their successors are
qualified and elected. Officers serve at the discretion of the Board of
Directors.
As of the June 13, 1996 Board of Directors meeting, it was resolved that
each outside director of the Company (one not receiving a salary or consulting
fee) be awarded, warrants or options for each year he serves as such to
purchase 100,000 shares of the Common Stock of the Company at a price equal to
its then fair market value, such options or warrants to vest 25,000 shares per
quarterly period after the date of grant, and to expire three years after the
date of grant.
The Delaware General Corporation Law permits a corporation through its
Certificate of Incorporation to eliminate or limit its directors' personal
liability to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as directors with certain exceptions. The exceptions
include a breach of the director's duty of loyalty, acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of
law, improper declarations of dividend, and transactions from which the
directors derived an improper personal benefit. The Company's Certificate of
Incorporation limits its directors' liability to the extent permitted by this
statutory provision. The limitation of liability provision does not eliminate
a stockholder's right to seek non-monetary, equitable remedies such as
injunction or rescission to redress an action taken by directors. However, as
a practical matter, equitable remedies may not be available in all situations
and there may be instances in which no effective remedy is available.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors and certain officers of the Company, as well as persons who own more
than 10% of a registered class of the Company's equity securities ("Reporting
Persons") to file reports of ownership and changes in ownership of Forms 3, 4
and 5 with the Securities and Exchange Commission. The Company believes that,
except as set forth below, all Reporting Persons have complied on a timely
basis with all filing requirements applicable to them.
Messrs. Roy D. Pringle and Bruce D. Sandig were appointed executive
officers in May 1997 and inadvertently filed their Form 3's late.
(10)
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation earned by or paid to
the named executive officers by the Company for the fiscal year ended June 30,
1997.
<TABLE>
<CAPTION>
=====================================================================================================
LONG TERM COMPENSATION
- -----------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION Awards Payouts
- -----------------------------------------------------------------------------------------------------
Restricted Securities LTIP All Other
Other Annual Stock Underlying Payouts Compens-
Year Salary($) Bonus($) Compensation Awards ($) Options/SARs ($) ation ($)
($) (#)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George S. Smith 1997 $120,000(1) $0 $0 $0 -- $0 $0
CEO
=====================================================================================================
</TABLE>
1. Represents $62,500 in compensation, $57,500 in deferred compensation and
excludes approximately $25,000 of travel and living expenses and $20,000 of
accrued consulting fees which were paid during the year.
<TABLE>
<CAPTION>
==========================================================================================
OPTIONS/SAR GRANTS IN THE FISCAL YEAR 1997
- ------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to
Option/SARs Employees in Exercise or Base Expiration
Name Year Granted (#) Fiscal Year Price ($/Share) Date
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
George S. Smith 1997 0.00 0% $0 --
CEO
==========================================================================================
AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 1997 AND FY-END
OPTION/SAR VALUES
- --------------------------------------------------------------------------------
Number of Securities
Shares Underlying Exercised Value of
Acquired Options/ SARs at FY Unexercised In-
on End (#) the-Money
Exercise Value Exercisable/ Options/SARs at
Name Year (#) Realized Unexercisable FY-End ($)
- --------------------------------------------------------------------------------
George S. Smith 1997 ____ 0.00 2,600,000 (E)/O(U) $0
CEO
================================================================================
</TABLE>
(11)
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially 5% or more
of the outstanding shares of the Company's Common Stock, each director, and
all executive officers and directors of the Company as a group, as of October
14, 1997 and their percentage ownership of Common Stock and their percentage
voting power.
================================================================================
Name and Address of Beneficial Owners Amount and Nature of Percent
Beneficial Ownership(1) Ownership
- --------------------------------------------------------------------------------
George S. Smith (2) 6,478,550 7.9
3688 N. Littlerock Drive
Provo, UT 84604
- --------------------------------------------------------------------------------
H. Thomas Ferstl (3) 4,635,920 6.1
8761 State Street
Millington, MI 48746
- --------------------------------------------------------------------------------
Sean F. Lee (4) 1,854,850 2.5
InfoPak, Inc.
8855 N. Black Canyon Highway, Suite 2000
Phoenix, AZ 85021
- --------------------------------------------------------------------------------
Robert L. Morris (5) 1,278,000 1.8
305 2nd Avenue, #318
New York, NY 10003
- --------------------------------------------------------------------------------
Steven L. Flint - 0 - - 0 -
946 N. Williams
Mesa, AZ 85203
- --------------------------------------------------------------------------------
Hans J. Kaemmlein (6) 2,181,120 2.8
80 Orville Drive
Bohemia, NY 11716
- --------------------------------------------------------------------------------
All executive officers and directors as a
group (7 persons)(7) 7,858,230 11.0
================================================================================
(1) Except as otherwise indicated, all of the shares are owned
beneficially and of record. Beneficial ownership has been
determined in accordance with Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended.
(2) Mr. Smith, owns 3,873,110 shares of the Company's Common Stock.
Also included in the amount are common stock purchase warrants to
purchase 2,600,000 shares of the Company's Common Stock, and 544
shares of Series C Convertible Preferred Stock , convertible at 10
to 1 into common stock.
(3) Mr. Ferstl owns 3,600,000 shares of the Company's Common Stock
and common stock purchase warrants to purchase 1,000,000 shares
of the Company's Common Stock and 3,592 shares of Series C
Convertible Preferred Stock
(4) Includes 1,528,410 shares of the Company's Common Stock which is
owned by the Lee Family Partnership of which Mr. Lee is the general
partner. Also included in the amount are 26,440 shares of the
Company's Common Stock and common stock purchase warrants to
purchase 300,000 shares of the Company's common stock.
(5) Mr. Morris owns 28,000 shares of Common Stock, common stock
purchase warrants to purchase 1,100,000 shares of the Company's
Common Stock and 1,500 Series S Convertible Preferred stock which
is convertible at 100 to 1 into Common Stock.
(6) Mr. Kaemmlein owns 1,981,120 shares of the Company's Common Stock
and common stock purchase warrants to purchase 200,000 shares of
the Company's Common Stock
(7) Does not include common stock purchase warrants to purchase in the
aggregate 4,400,000 shares of the Company's Common Stock, and 544
shares of the Company's Series C Convertible Preferred Stock which
would be convertible into 5,440 shares of the Company's Common
Stock and 1,500 shares of Series S Convertible Preferred Stock
(12)
<PAGE>
convertible into 150,000 shares of Common Stock and 3,500 Series P Convertible
Preferred Stock convertible into 35,000 shares of Common Stock.
Stock Option Plan
The Company has adopted a stock option plan (the "Plan") covering 500,000
shares of the Company's Common Stock, $.001 par value, pursuant to which
officers, directors, key employees and consultants of the Company are eligible
to receive incentive as well as non-qualified stock options and Stock
Appreciation Rights ("SAR'S"). The Plan, which expires in September 1998, is
administered by the Board of Directors. Incentive stock options granted under
the Plan are exercisable for a period of up to 10 years from the date of grant
and at an exercise price which is not less than the fair market value of the
Common Stock on the date of the grant, except that the term of an incentive
stock option granted under the Plan to a stockholder owning more than 10% of
the outstanding Common Stock may not exceed five years and the exercise price
of an incentive stock option granted to such a stockholder may not be less
than 110% of the fair market value of the Common Stock on the date of the
grant. Non-qualified stock options may be granted on terms determined by the
Board of Directors. SAR's which give the holder the privilege of surrendering
such rights for the appreciation in the Company's Common Stock between the
time of grant and the surrender, may be granted on any terms determined by the
Board of Directors. No SAR's have been granted.
As of October 15, 1997, no options were in effect.
1996 Equity Incentive Plan
The Company, in June 1996. adopted the 1996 Equity Incentive Plan (the
"1996 Plan") covering 10,000,000 shares of the Company's Common Stock pursuant
to which employees, consultants and other persons or entities who are in a
position to make a significant contribution to the success of the Company are
eligible to receive awards in the form of incentive or non-incentive options,
stock appreciation rights, restricted stock or deferred stock. The 1996 Plan
will terminate ten (10) years after the effective date of the 1996 Plan. The
1996 Plan was deeded effective June 12, 1996. The 1996 Plan is administered by
the Compensation Committee of the Board of Directors. In its discretion, the
Board of Directors may elect to administer the 1996 Plan. Restricted stock
entitles the recipients to receive shares of the Company's Common Stock
subject to such restriction and condition as the Compensation Committee may
determine for no consideration or such considerations as determined by the
Compensation Committee. Deferred stock entitles the recipients to receive
shares of the Company's Common Stock in the future.
As of October 15, 1997, 2,859,290 shares have been issued pursuant to this
plan.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
George S. Smith has an employment agreement with Dimensional Visions
Group, Ltd. The term of the agreement is two years ending in August 1998. Mr.
Smith's base compensation is $120,000 per year less $5,000 deferred monthly
pending attainment of specific goals. The agreement automatically renews each
anniversary date (August 1) for two years without any further action by either
the Company or Mr. Smith. The agreement may be terminated by the Company for
cause. Mr. Smith currently defers one-half of his monthly compensation. The
Company pays Mr. Smith's travel and living expenses in connection with his
commuting from his home to the Company's office in Phoenix, Arizona.
Roy D. Pringle has an employment agreement with InfoPak, Inc. The term of
the agreement is three years ending in September 1998. Mr. Pringle's base
compensation is $50,000 per year. Mr. Pringle is also entitled to participate
in InfoPak's Bonus Plan.
Bruce D. Sandig has an employment agreement with InfoPak, Inc. The term of
the agreement is three years ending in September 1998. Mr. Sandig's base
compensation is $65,000 per year. Mr. Sandig is deferring $5,000 per year in
compensation. Mr. Sandig is also entitled to participate in InfoPak's Bonus
Plan.
Robert L. Morris is paid at an annual rate of $96,000.
(13)
<PAGE>
ITEM 13. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
A. The following documents are filed as part of this report:
1. The consolidated financial statements filed as part of this
report are listed under the caption "Index to Financial
Statements and Schedules", appearing elsewhere in this report.
2. The consolidated financial schedules of the Company are filed as part of
this report:
Schedule IV - Property and Equipment
Schedule V - Accumulated Depreciation and Amortization of Property
and Equipment
3. The following Exhibits are filed herein:
Exhibit
Number Description
3.1(a) Certificate of Incorporation and By Laws
3.2(b) Form of Certificate of Designation - Series A
Convertible Preferred Stock
3.4(b) Form of Certificate of Designation - Series B
Convertible Preferred Stock
3.4a(c) Form of Certificate of Designation - Series P
Convertible Preferred Stock
3.4b(d) Form of Certificate of Designation - Series S
Convertible Preferred Stock
3.4c(d) Form of Certificate of Designation - Series C
Convertible Preferred Stock
4.1(a) Warrant Agreement (including form of warrant)
10.3(b) Stock Option Plan
10.4(d) 1996 Equity Incentive Plan
10.5(e) Agreement dated September 25, 1997 by and between
InfoPak, Inc. and DataNet Enterprises, LLC and David
and Staci Noles
21.0 Subsidiaries of the registrant
27.0 Financial Data Schedule
B. Reports on Form 8-K(I), the registrant filed a current report on
Form 8-K on October 10,1997 to report and event pursuant to Item
9, sale of securities pursuant to Regulation S, (ii) registrant
filed a current report on Form 8-K on October 21, 1997 to report
an event pursuant to Item 2, acquisition or disposition of assets
in connection with the sale of the real estate data delivery
system.
- --------------------------------
(a) Incorporated by reference from the registrants registration
statement on Form S-1 (No. 33-24554)
(14)
<PAGE>
(b) Incorporated by reference from the registrants' Annual
Report on Form 10-KSB for the fiscal years ended June 30,
1992, 1993, 1994 and 1995
(c) Incorporated by reference from registrants' Current Report
on Form 8-K dated September 27, 1995.
(d) Incorporated by reference from registrant registration
statement on Form S8 (No. 333-06679).
(e) Incorporated by reference from registrant's current report
on Form 8-K dated October 21, 1997.
(15)
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
YEARS ENDED JUNE 30, 1997 AND 1996
Index to Consolidated Financial Statements and Schedules
--------------------------------------------------------
Page
----
Independent Auditors' Report F-2
Consolidated Financial Statements
Balance Sheet F-4
Statements of Operations F-5
Statements of Stockholders' Equity (Deficiency) F-6
Statements of Cash Flows F-11
Notes to Consolidated Financial Statements F-16
Schedules
Independent Auditors' Report F-32
Schedule IV - Property and Equipment F-33
Schedule V - Accumulated Depreciation and
Amortization of Property and Equipment F-34
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Dimensional Visions Group, Ltd. and Subsidiaries
Phoenix, Arizona
We have audited the accompanying consolidated balance sheet of Dimensional
Visions Group, Ltd. and Subsidiaries (the "Company") as of June 30, 1997, and
the related consolidated statements of operations, stockholders' equity
(deficiency), and cash flows for each of the two years in the period ended
June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Dimensional Visions Group, Ltd.
and Subsidiaries at June 30, 1997 and the results of their operations and
their cash flows for each of the two years in the period ended June 30, 1997
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has incurred
losses since inception of $18,300,965 and has a working capital deficiency of
$107,952 as of June 30, 1997. The Company has financed its operations
primarily through the sale of its securities. As described in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has limited sales of its products, which raises
substantial doubt about the Company's ability to continue as a going concern.
The future of the Company as an operating business will depend on (1) its
F-2
<PAGE>
To the Board of Directors and Stockholders
Dimensional Visions Group, Ltd. and Subsidiaries
ability to successfully market its products, (2) obtain sufficient capital
contributions and/or financing as may be required to sustain its current
operations and 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 concerning
these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
GITOMER & BERENHOLZ, P.C.
Jenkintown, Pennsylvania
August 29, 1997, except
Note 13, as to which the
date is October 14, 1997
F-3
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
ASSETS
------
Current assets
Cash and cash equivalents $ 109,566
Accounts receivable, trade, net of allowance for
bad debts of $215,743 82,301
Inventory 179,127
Prepaid supplies and expenses 10,001
------------
Total current assets 380,995
------------
Equipment
Equipment 1,527,776
Furniture and fixtures 125,035
------------
1,652,811
Less accumulated depreciation and amortization 1,562,421
------------
90,390
------------
Other assets
Patent rights and other assets 40,889
Deferred costs 17,246
------------
58,135
------------
Total assets $ 529,520
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current liabilities
Current portion of long-term debt $ 75,000
Accounts payable, accrued expenses and other
liabilities 413,947
------------
Total current liabilities 488,947
Long-term debt, net of current portion 125,000
------------
Total liabilities 613,947
------------
Commitments and contingencies -
Stockholders' deficiency
Preferred stock - $.001 par value, authorized
10,000,000 shares; issued and outstanding
219,378 shares 219
Additional paid-in capital 923,209
------------
923,428
Common stock - $.001 par value, authorized
100,000,000 shares; issued and outstanding
68,137,872 shares 68,138
Additional paid-in capital 17,844,144
Deficit (18,920,137)
------------
Total stockholders' deficiency (84,427)
------------
Total liabilities and stockholders'
deficiency $ 529,520
============
See notes to consolidated financial statements.
F-4
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
Operating revenue $ 551,517 $ 1,083,897
Cost of sales 306,190 841,805
----------- -----------
Gross profit 245,327 242,092
----------- -----------
Operating expenses
Engineering and development costs 397,387 366,650
Marketing expenses 328,792 246,704
General and administrative expenses 850,016 1,569,688
----------- -----------
Total operating expenses 1,576,195 2,183,042
----------- -----------
Loss before other income (expenses) (1,330,868) (1,940,950)
----------- -----------
Other income (expenses)
Interest expense (25,048) (111,446)
Interest income 7,102 13,539
Loss on abandonment of leasehold
improvements and equipment (1,150) -
Write-off of customer deposits - 156,000
Amortization of goodwill (192,998) (152,790)
Goodwill writedown (619,172) -
----------- -----------
(831,266) (94,697)
----------- -----------
Net loss $(2,162,134) $(2,035,647)
=========== ===========
Loss per share of common stock
Net loss $ (.04) $ (.12)
=========== ===========
Weighted average shares of common stock
outstanding 48,766,048 17,069,442
=========== ===========
See notes to consolidated financial statements.
F-5
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
($.001 Par Value) Additional ($.001 Par Value) Additional
----------------- Paid-in ----------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1995 77,250 $ 77 $772,423 16,936,098 $16,936 $11,881,927 $(14,722,356) $(2,050,993)
Conversion of 36,750
shares of Series A
convertible preferred
stock to 1,470,000
shares of the Company's
common stock (36,750) (37) (367,463) 1,470,000 1,470 366,030 -- --
Surrender of 3,215,000
shares of the Company's
common stock in
exchange for 32,150 shares
of Series S convertible
preferred stock by
mainly officers and
directors 32,150 32 377,968 (3,215,000) (3,215) (374,785) -- --
Sale of common stock
net of offering cost of
$75,000 -- -- -- 3,000,000 3,000 672,000 -- 675,000
Issuance of 2,750,000
warrants; in connection
with the sale of
3,000,000 shares of the
Company's common stock
(1,250,000 warrants) to
a financial consultant
(500,000 warrants) and
to the chief executive
officer (1,000,000
warrants) to purchase
the Company's common
stock (750,000 shares
at $.15 per share,
500,000 shares at $.50
per share, 500,000
shares at $.15 per
share and 1,000,000
shares at $.25 per
share) for a five year
period commencing
September, 1995 -- -- -- -- -- 100,000 -- 100,000
Exercise of 310,000
warrants to purchase
310,000 shares of the
Company's common stock
at $.01 per share -- -- -- 310,000 310 2,790 -- 3,100
Issuance of Series P
convertible preferred
stock in connection
with the merger of
InfoPak, debt cancellation
and signing bonuses to
certain employees and
consultant of Info
Pak, Inc. 548,879 549 1,371,649 -- -- -- -- 1,372,198
Issuance of 105,000
warrants to purchase
105,000 shares of the
Company's Series B
preferred stock at $10
per share for a three
year period commencing
in August and
September, 1995 -- -- -- -- -- -- -- --
</TABLE>
F-6
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
($.001 Par Value) Additional ($.001 Par Value) Additional
----------------- Paid-in ----------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of 14,500
warrants to purchase
14,500 shares of the
Company's common stock
at $.01 per share for a
one year period
commencing in August
and September, 1995
-- -- -- -- -- -- -- --
Issuance of 150,000
warrants to a director
to purchase 150,000
shares of the Company's
common stock at $.15
per share for a five
year period commencing
October, 1995 -- -- -- -- -- 7,500 -- 7,500
Secured noteholders
exercised their Series
B warrants to purchase
190,700 shares of
Series B convertible
preferred stock
(175,700 on October 1,
1995 and 15,000 on
February 22,
1996 by a director) 190,700 191 1,906,809 -- -- -- -- 1,907,000
Secured noteholders
converted $262,750 of
interest due on the
notes into 26,275
shares of Series C
convertible
preferred stock 26,275 26 262,724 -- -- -- -- 262,750
Conversion of 29,000
shares of Series S
convertible preferred
stock to 2,900,000
shares of the Company's
common stock (29,000) (29) (356,471) 2,900,000 2,900 353,600 -- --
Conversion of 174,442
shares of Series P
convertible preferred
stock to 1,744,420
shares of the Company's
common stock (174,442) (174) (435,931) 1,744,420 1,745 434,360 -- --
Conversion of 2,855
shares of Series C
convertible preferred
stock to 28,500 shares
of the Company's
common stock (2,855) (3) (28,547) 28,550 29 28,521 -- --
Issuance of 100,000
warrants to purchase
the Company's common
stock at $.50 per share
for a five year period
commencing March, 1996,
for services in
connection with
debenture financing -- -- -- -- -- -- -- --
</TABLE>
F-7
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
($.001 Par Value) Additional ($.001 Par Value) Additional
----------------- Paid-in ----------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of 390,000
warrants to purchase
the Company's common
stock at $.15 per share
(290,000 warrants) and
$.50 per share (100,000
warrants) for a five
year period commencing
May, 1996 for financial
consulting services -- -- -- -- -- 54,600 -- 54,600
Issuance of 500,000
warrants to purchase
the Company's common
stock at $.31 per share
for a three year period
commencing June, 1996
in connection with the
debenture financing -- -- -- -- -- -- -- --
Conversion of the
debenture financing to
3,495,239 shares of the
Company's common stock -- -- -- 3,495,239 3,495 423,947 -- 427,442
Issuance of 20,000
warrants to purchase
the Company's common
stock at $.50 per share
for a four year period
commencing June, 1996,
for consulting services
to the Company -- -- -- -- -- 1,900 -- 1,900
Issuance of 42,350
shares of the Company's
common stock at $.26
per share for
consulting services
to the Company -- -- -- 42,350 42 10,969 -- 11,011
Net loss -- -- -- -- -- -- (2,035,647) (2,035,647)
------- ------ ---------- ---------- ------- ----------- ------------ -----------
Balance, June 30, 1996 632,207 $ 632 $3,503,161 26,711,657 $26,712 $13,963,359 $(16,758,003) $ 735,861
======= ====== ========== ========== ======= =========== ============ ===========
</TABLE>
F-8
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
($.001 Par Value) Additional ($.001 Par Value) Additional
----------------- Paid-in ----------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1996 632,207 $ 632 $3,503,161 26,711,657 $26,712 $13,963,359 $(16,758,003) $735,861
Conversion of 15,000
shares of Series A
convertible preferred
stock valued at
$150,000 into 600,000
shares of the Company's
common stock (15,000) (15) (149,985) 600,000 600 149,400 -- --
Conversion of 185,700
shares Series B
convertible preferred
stock valued at
$1,857,000 into
22,284,000 shares of
the Company's
common stock (185,700) (186) (1,856,814) 22,284,000 22,284 1,834,716 -- --
Conversion of 4,739
shares Series C
convertible preferred
stock valued at $47,390
into 47,390 shares of
the Company's
common stock (4,739) (5) (47,385) 47,390 47 47,343 -- --
Conversion of 206,390
shares Series P
convertible preferred
stock valued at
$515,975 into 2,063,900
shares of the Company's
common stock (206,390) (206) (515,769) 2,063,900 2,064 513,911 -- --
Conversion of 1,000
shares Series S
convertible preferred
stock valued at $10,000
into 100,000 shares of
the Company's
common stock (1,000) (1) (9,999) 100,000 100 9,900 -- --
Conversion of $375,000
of convertible
debentures to 6,853,335
shares of the Company's
common stock issued
pursuant to a
Regulation S
offering -- -- -- 6,853,335 6,853 368,147 -- 375,000
Exercise of 1,000,000
warrants to purchase
the Company's
common stock -- -- -- 1,000,000 1,000 99,000 -- 100,000
Conversion of a $15,000
advance to 150,000
shares of the Company's
common stock -- -- -- 150,000 150 14,850 -- 15,000
Issuance of 1,625,700
shares of the Company's
common stock to
consultants for
services valued at
$144,247 -- -- -- 1,625,700 1,626 142,621 -- 144,247
</TABLE>
F-9
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
($.001 Par Value) Additional ($.001 Par Value) Additional
----------------- Paid-in ----------------- Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of 427,940
shares of the Company's
common stock to
employees for
compensation valued at
$63,599 including
accrued compensation of
$36,100 -- -- -- 427,940 428 63,171 -- 63,599
Conversion of $50,000
of accrued consulting
fees to 312,500 shares
of the Company's common
stock valued at $.16
per share -- -- -- 312,500 313 49,687 -- 50,000
The Company sold
through two private
placements 1,390,000
shares of the Company's
common stock valued at
$.10 per share and
2,100,000 shares of the
Company's common stock
valued at $.05 per
share -- -- -- 3,490,000 3,490 240,510 -- 244,000
The Company sold
through an offshore
placement 2,500,000
shares of the Company's
common stock valued at
$.14 per share and
issued 350,000 warrants
to purchase the
Company's common stock
at $.14 and 250,000
warrants to purchase
the Company's common
stock at $.15 for three
years commencing
October 1996. -- -- -- 2,500,00 2,500 347,500 -- 350,000
450,800 shares of the
Company's restricted
stock was exchanged for
450,800 shares from the
Company's 1996 Equity
Incentive Plan -- -- -- -- -- -- -- --
28,550 shares of the
Company's common stock
was surrendered by the
Chairman of the
Board/Chief
Executive Officer -- -- -- (28,550) (29) 29 -- --
Net loss -- -- -- -- -- -- (2,162,134) (2,162,134)
------- -------- -------- ---------- ------- ----------- ------------- ---------
219,378 $ 219 $923,209 68,137,872 $68,138 $17,844,144 $ (18,920,137) $ (84,427)
======= ======== ======== ========== ======= =========== ============= =========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
Operating activities
Net loss $(2,162,134) $(2,035,647)
Adjustments to reconcile net loss to
net cash used in operating activities
Goodwill writedown 619,172 -
Compensation paid to officers/
employees through issuance of
warrants and common stock 27,499 7,500
Consulting service paid through
issuance of warrants and common
stock 144,247 167,511
Depreciation and amortization of
property and equipment 50,366 87,491
Amortization of other assets and
deferred costs 37,246 20,762
Amortization of goodwill 192,998 152,790
Loss on abandonment of leasehold
improvements and equipment 1,150 -
Changes in assets and liabilities
which provided (used) cash
Accounts receivable, trade (49,693) (5,051)
Inventory (89,669) 51,378
Prepaid supplies and expenses 22,446 10,914
Other assets 6,542 -
Accounts payable, accrued
expenses and other liabilities 166,989 (108,012)
----------- -----------
Net cash used in operating activities (1,032,841) (1,650,364)
----------- -----------
Investing activities
Cash acquired in acquisition - 275,632
Purchase of equipment (4,666) (40,360)
Capitalized legal fees related to
acquisition - (36,866)
Deposits - (1,041)
----------- -----------
Net cash provided by (used in) investing
activities (4,666) 197,365
----------- -----------
F-11
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
Financing activities
Proceeds from
Sale of common stock net of offering
costs $75,000 in 1996 594,000 675,000
Issuance of common stock in
connection with the exercise of warrants 100,000 3,100
Borrowings net of deferred costs $20,000
in 1996 and payment of note $50,000
in 1996 250,000 750,000
----------- -----------
Net cash provided by financing activities 944,000 1,428,100
----------- -----------
Net decrease in cash and cash equivalents (93,507) (24,899)
Cash and cash equivalents, beginning of
year 203,073 227,972
----------- -----------
Cash and cash equivalents, end of year $ 109,566 $ 203,073
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $ 7,500
=========== ===========
Issuance of common stock in connection
with
Accrued compensation settled for
common stock in lieu of cash payment $ 36,100 $ --
=========== ===========
Accrued consulting fee settled for
common stock in lieu of cash
payment $ 50,000 $ --
=========== ===========
Advance settled for common stock in
lieu of cash payment $ 15,000 $ --
=========== ===========
Consulting services $ 144,247 $ --
=========== ===========
Officers/employees compensation $ 27,499 $ --
=========== ===========
Supplemental disclosure of non-cash investing and financing activities for
fiscal year 1997:
The Company issued 6,853,335 shares of the Company's common stock in
connection with the conversion of $375,000 of convertible debentures to
common stock under a Regulation S Securities Subscription Agreement.
Issuance of warrants in connection with
Consulting service $ - $ 167,511
=========== ===========
Compensation $ - $ 7,500
=========== ===========
F-12
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Supplemental disclosure of non-cash investing and financing activities for
fiscal year 1997: (Continued)
The Company issued 25,095,290 shares of the Company's common stock in
connection with the conversion of convertible preferred stock valued at
$2,580,365 as follows:
Converted to
Value Common Stock
----- ------------
Series A Convertible Preferred Stock $ 150,000 600,000
Series B Convertible Preferred Stock 1,857,000 22,284,000
Series C Convertible Preferred Stock 47,390 47,390
Series P Convertible Preferred Stock 515,975 2,063,900
Series S Convertible Preferred Stock 10,000 100,000
----------- ----------
$ 2,580,365 25,095,290
=========== ==========
The Company issued 1,625,700 shares of the Company's common stock to
consultants for services valued at $144,247.
The Company issued 427,940 shares of the Company's common stock to
employees valued at $63,599 for compensation and/or accrued compensation.
The Company issued 462,500 shares of the Company's common stock valued at
$65,000 in connection with certain liabilities settled in lieu of a cash
payment for accrued consulting fee of $50,000 and an advance of $15,000.
F-13
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Supplemental disclosure of non-cash investing and financing activities for
fiscal year 1996:
1,470,000 shares of the Company's common stock was issued as a result of
the conversion of 36,750 shares of Series A Convertible Preferred Stock
valued at $367,500.
In August, 1995 in connection with the sale of 3,000,000 shares of the
Company's common stock to third parties, 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
valued at $378,000. In March, 1996, after the stockholders approved an
increase in the number of authorized common stock shares, 29,000 shares of
Series S Preferred Stock was converted back to 2,900,000 shares of the
Company's common stock valued at $356,500.
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. At the date of acquisition, InfoPak's
assets were valued at $503,944, (including cash of $275,632), and its
liabilities at $103,590. The Company also issued 31,379 shares of Series P
Preferred valued at $78,448 in exchange for the cancellation of debt of
certain shareholders of InfoPak. The Company accounted for this transaction
as a purchase and, accordingly, recorded goodwill of $964,989.
Certain InfoPak employees under contract and a consultant also received
17,500 shares of Series P Convertible Preferred Stock from the Company
(valued at $43,750) as a signing bonus. The Company also issued 150,000 of
warrants, to purchase the Company's common stock at $.15 per share, to an
officer of InfoPak, which were valued at $7,500 and expensed.
The Company issued 500,000 common stock warrants to a financial consultant
which were valued at $100,000 and expensed.
The Company issued 3,495,239 shares of the Company's common stock in
connection with the conversion of approximately $425,000 of convertible
debentures to common stock under a Regulation S Securities Subscription
Agreement.
F-14
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Supplemental disclosure of non-cash investing and financing activities for
fiscal year 1996: (Continued)
1,744,420 shares of the Company's common stock was issued as a result of
the conversion of 174,442 shares of Series P Convertible Preferred Stock
valued at $436,105.
190,700 shares of Series B Convertible Preferred Stock was issued as a
result of conversion of $1,907,000 of secured notes and 26,275 shares of
Series C Convertible Preferred Stock was issued as payment for $262,750 of
accrued interest on secured notes.
28,550 shares of the Company's common stock was issued as a result of
conversion of 2,855 shares of Series C Convertible Stock valued at $28,550.
42,350 shares of the Company's common stock was issued to consultants for
services valued at $11,011.
The Company issued 410,000 common stock warrants for consulting services
provided to the Company which were valued at $56,500 and expensed.
See notes to consolidated financial statements.
F-15
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1997 AND 1996
Note 1: 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 and animation print
products.
The Company, on September 12, 1995 completed the acquisition of
InfoPak, Inc. which has developed a data delivery system that
provides end users with specific industry printed materials by way
of a portable hand-held reader. Data is acquired electronically
from the data provided by mainframe systems and distributed through
a computer network to all subscribers.
The Company has financed its operations primarily through the sale
of its securities. The Company has had limited sales of its
products during the years ended June 30, 1997 and 1996. Even though
the sales during the past two years have significantly increased
over the prior years, the volume of business is not nearly
sufficient to support the Company's cost structure.
Liquidity and Capital Resources
The Company has incurred losses since inception of $18,300,965 and
has a working capital deficiency of $107,952 as of June 30, 1997.
The future of the Company as an operating business will depend on
(1) its ability to successfully market and sell its products, (2)
obtain sufficient capital contributions and/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) redirecting its marketing efforts of the
Company's products and substantially increasing sales results, (b)
continued exercise of tight cost controls to conserve cash, and (c)
raise additional long term financing.
F-16
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 1: 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
available funds at June 30, 1997, plus the limited revenue is not
sufficient to satisfy the present cost structure. Management
recognizes that the Company must generate additional resources to
enable it to continue operations. Management plans include the
continued expansion of the sale of its products and the sale of
additional securities.
Further, there can be no assurances, assuming the Company
successfully raises additional funds that the Company will achieve
profitability or positive cash flow from the sale of its products.
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 and/or seek protection
under the bankruptcy laws.
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, 1997, all of the wholly-owned
subsidiaries are inactive, except for InfoPak, Inc. 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. Inventory consists of
raw materials of $41,222 and finished goods of $137,905.
F-17
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 1: Summary of Significant Accounting Policies (Continued)
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)
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.
As of June 30, 1997, the Company recorded a goodwill writedown of
$619,172. This writedown eliminates all the remaining goodwill of
the Company. The asset of goodwill was determined to have been
impaired because of the current financial condition of the Company
and the Company's inability to generate future operating income
without substantial sales volume increases, which are uncertain. In
addition, anticipated future cash flows of the Company indicate
that the recoverability of the asset is not reasonably assured.
F-18
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 1: Summary of Significant Accounting Policies (Continued)
Goodwill (Continued)
Prior to June 30, 1997, goodwill was amortized using the
straight-line method over five years.
The Company is required to analyze the value of its recorded
intangible assets on an ongoing basis to determine that the
recorded amounts are reasonable and are not impaired. The Company's
management considers the Company's financial condition and expected
future operating income in determining if goodwill is impaired at
the balance sheet date. Upon determination that goodwill was
impaired at June 30, 1997, the amount of impairment was calculated
by determining that portion of the goodwill which would not be
expected to be recovered against operating income during the
remaining amortization period.
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 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-dilutive effect.
F-19
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 1: Summary of Significant Accounting Policies (Continued)
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.
Concentration of Credit Risk
The Company is subject to credit risk through trade receivables.
The Company relies on a limited number of customers for its sales.
The Company is in the process of building a customer base for its
products and, therefore, the degree of risk is substantially higher
until the base grows.
The Company also relies on several key vendors to supply plastics
and printing services. Although there are a limited number of
vendors capable of fulfilling the Company's needs, the Company
believes that other vendors could provide for the Company's needs
on comparable terms. Abrupt changes could, however, cause a delay
in processing and a possible inability to meet sales commitments on
schedule, or a possible loss of sales, which would affect operating
results adversely.
Note 2: Cash and Cash Equivalents
The Company considers all highly liquid investments, with an
original maturity of three months or less when purchased, to be
cash equivalents.
Cash and cash equivalents as of June 30, 1997 are summarized as
follows:
Cash on hand $ 84
Cash in bank 58,259
Money market account 51,223
--------
$109,566
========
F-20
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 2: Cash and Cash Equivalents (Continued)
The Company maintains its cash in banks located in Arizona and
California. The total cash balances are insured by the FDIC up to
$100,000 per financial institution. As of June 30, 1997, there were
no uninsured balances.
Note 3: Patent Rights and Other Assets
Patent rights $ 58,426
Organization costs 2,000
Deposits 1,140
Trademark 225
--------
61,791
Less accumulated amortization 20,902
--------
Total $ 40,889
========
Note 4: Deferred Costs
Deferred compensation relating to
signing bonuses to certain
employees and consultant of $ 15,755
InfoPak, Inc.
Deferred debt cost 1,491
--------
$ 17,246
========
Note 5: Accounts Payable, Accrued Expenses and Other Liabilities
Accounts payable $260,942
Accrued expenses
Interest 11,184
Salaries 117,943
Consulting fees 18,000
Payroll taxes payable 5,878
--------
Total $413,947
========
F-21
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 6: Long-Term Debt
As of June 30, 1997, long-term debt consisted of the following:
5% convertible debentures due
August 1, 1998 $125,000(1)
10% secured notes due in January
and February, 1998 75,000(2)(3)
--------
200,000
Less current portion 75,000
--------
$125,000
========
(1)During the year ended June 30, 1997, $375,000 of the
outstanding debentures were converted to 6,853,335 shares of
the Company's common stock at an average per share price of
$.05. 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.
During July 1997, $50,000 of the outstanding debentures were
converted to 1,818,182 shares of the Company's common stock
at an average price of $.0275 per share.
The debentures were due on August 1, 1997, and the debenture
holder on October 8, 1997 extended the due date to August 1,
1998.
(2)As collateral for the secured notes, the Company has given a
security interest in all of the Company's tangible and
intangible assets, including all patents and proprietary
technology, which was evidenced by a uniform commercial code
of living on March 24, 1994.
(3)The Company has accrued interest on this obligation, but has
not paid interest to the noteholders since January 1996. No
demand for interest has been made by the noteholders, but the
notes are in technical default by failure to pay the accrued
interest.
F-22
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 7: Commitments and Contingencies
Effective January 24, 1997, the Company vacated its studio and
production facilities in Philadelphia, Pennsylvania. There are
several disputed invoices outstanding that amount to less than
$2,000 that management expects to resolve in its favor. There are
no long-term lease obligations outstanding as of June 30, 1997.
Total rent expense on all operating leases amounted to
approximately $57,600 and $83,000 for the years ended June 30, 1997
and 1996, respectively.
The Company has outstanding employment and consulting contracts
that expire through June 30, 1999 as follows:
Years Ending June 30, Amount
--------------------- ------
1998 $235,000
1999 69,000
--------
$304,000
========
During 1996, 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. In July 1996, 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. During 1997, this matter has
moved to a deferred status while the parties engage in settlement
negotiations.
During 1996, the Company 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, 1997 was approximately $68,000.
F-23
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 8: Common Stock
As of June 30, 1997, there are outstanding 12,446,370 of non-public
warrants to purchase the Company's common stock at prices ranging
from $.09 to $.50 with a weighted average price of $.16 per share.
As of June 30, 1997, there were 219,378 shares of various classes
of Convertible Preferred Stock outstanding which can be converted
to 3,602,280 shares of common stock (see Note 10).
As of June 30, 1997, 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 6).
As of June 30, 1997, there was a $125,000 5% Convertible Debenture
which can be converted into a minimum of 2,335,423 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 19,134,073 shares as of June
30, 1997, and would be in addition to the 68,137,872 shares of
common stock outstanding as of June 30, 1997.
During the year ended June 30, 1997, 3,490,000 shares of the
Company's common stock was sold to third parties in two private
placements for $244,000 (at an average price per share of $.07).
On October 16, 1996, the Company sold 2,500,000 shares of the
Company's common stock to a third party for $350,000 under a
Regulation S offering.
On December 12, 1996, the Company issued 1,000,000 shares of the
Company's common stock in connection with the exercise of 1,000,000
warrants at $.10 per share.
The Company issued 6,835,335 shares of the Company's common stock
in connection with the conversion of $375,000 of convertible
debentures to common stock under a Regulation S offering.
F-24
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 8: Common Stock (Continued)
The Company issued 1,625,700 shares of the Company's common stock
to consultants for services valued at $144,247 (average price per
share $.09).
The Company issued 427,940 shares of the Company's common stock to
employees for compensation and/or accrued compensation valued at
$63,599 (average price per share $.15).
On January 14, 1997, the Company issued 1,000,000 shares of the
Company's common stock to a former consultant which consisted of
the issuance of 236,700 shares of the Company's common stock to the
former consultant in full release under a letter agreement dated
March 15, 1996, valued at $37,872 (price per share $.16), issuance
of 312,500 shares of the Company's common stock in settlement of
the outstanding accrued consulting fee of $50,000 (price per share
$.16) and exchange of 450,800 shares of restricted stock for
450,800 shares of free trading from the 1996 equity incentive plan.
The Company issued 150,000 shares of the Company's common stock in
order to pay a $15,000 advance ($.10 per share).
The Chairman of the Board/Chief Executive Officer surrendered to
the Company 28,550 shares of the Company's common stock.
Note 9: Preferred Stock
The Company has authorized 10,000,000 shares of $.001 par value per
share Preferred Stock, which has been allocated to the following
Series and is outstanding as of June 30, 1997, as follows:
Allocated Outstanding
--------- -----------
Series A Preferred 100,000 25,500
Series B Preferred 200,000 5,000
Series C Preferred 1,000,000 18,681
Series P Preferred 600,000 168,047
Series S Preferred 50,000 2,150
--------- -------
Total Preferred
Stock 1,950,000 219,378
========= =======
F-25
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 9: Preferred Stock (Continued)
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 7).
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 7).
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 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 raising operating funds. 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.
F-26
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 9: Preferred Stock (Continued)
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. On December 3,
1996, 185,700 shares of Series B Preferred were exchanged for
22,284,000 shares of the Company's common stock.
The 26,275 shares of Series C Preferred were also issued in
exchange for $262,750 of interest due under the secured and
unsecured noteholders of 7,594 shares of Series C Preferred Stock
have subsequently converted their shares into the Company's common
stock.
Note 10: Stock Option Plan and Equity Incentive Plan
The Company has adopted a stock option plan (the "Plan") covering
500,000 shares of the Company's common stock $.001 par value,
pursuant to which officers, directors, key employees and
consultants of the Company are eligible to receive incentive, as
well as non-qualified stock options and Stock Appreciation Rights
("SAR's"). The Plan, which expires in September, 1998, will be
administered by the Board of Directors or a committee chosen
therefrom. Incentive stock options granted under the Plan are
exercisable for a period of up to 10 years from the date of grant
at an exercise price, which is not less than the fair market value
of the common stock on the date of the grant, except that the terms
of an incentive stock option granted under the Plan to a
stockholder owning more than 10% of the outstanding common stock
may not exceed five years and the exercise price of an incentive
stock option granted to such a stockholder may not be less than
110% of the fair market value of common stock on the date of the
grant. Non-qualified stock options may be granted on terms
determined by the Board of
F-27
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 10: Stock Option Plan and Equity Incentive Plan (Continued)
Directors or a committee designated by the Board of Directors.
SAR's which give the holder the privilege of surrendering such
rights for the appreciation in the Company's common stock between
the time of grant and the surrender, may be granted on any terms
determined by the Board of Directors or committee designated by the
Board of Directors. No SAR's have been granted.
A summary of transactions under this Plan is as follows:
Option Price Total
Per Share, Option
Shares As Adjusted Price
------ ----------- -----
Options outstanding
July 1, 1995 161,000 $.48 $ 77,280
Cancelled (141,000) .48 (67,680)
--------- --------
Options outstanding
June 30, 1996 20,000 .48 9,600
Cancelled (20,000) .48 (9,600)
--------- --------
Options outstanding
June 30, 1997 - $ -
========= ========
The Company on June 13, 1996 has adopted the 1996 Equity Incentive
Plan (the "Plan") covering 10,000,000 shares of the Company's
common stock $.001 par value, pursuant to which officers,
directors, key employees and consultants of the Company are
eligible to receive incentive, as well as non-qualified stock
options, SAR's, and Restricted Stock and Deferred Stock. The Plan,
which expires in June, 2006, will be administered by the
Compensation Committee of the Board of Directors. Incentive stock
options granted under the Plan are exercisable for a period of up
to 10 years from the date of grant at an exercise price, which is
not less than the fair market value of the common stock on the date
of the grant, except that the terms of an incentive stock option
granted under the Plan to a stockholder owning more than 10% of the
outstanding common stock may not exceed five years and the exercise
price of an incentive stock option granted to such a stockholder
may not be less than 110% of the fair market value of common stock
on the date of the grant. Non-qualified stock options may be
granted on terms
F-28
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 10: Stock Option Plan and Equity Incentive Plan (Continued)
determined by the Compensation Committee of the Board of Directors.
SAR's which give the holder the privilege of surrendering such
rights for the appreciation in the Company's common stock between
the time of grant and the surrender, may be granted on any terms
determined by the Compensation Committee of the Board of Directors.
Restricted stock awards entitle the recipient to acquire shares for
no cash consideration or for consideration determined by the
Compensation Committee. The award may be subject to restrictions,
conditions and forfeiture as the Committee may determine. Deferred
stock award entitles recipient to receive shares in the future. As
of June 30, 1997, 2,859,290 shares of common stock has been issued
under this plan at prices ranging from $.09 to $.26 per share,
except for 450,800 shares that were issued at zero value in
exchange for restricted shares that were cancelled (see Note 8,
paragraph 12). In addition, as of June 30, 1997, no options or
SAR's have been granted.
Note 11: Income Taxes
The tax effects of significant items comprising the Company's net
deferred taxes as of June 30, 1997 were as follows:
Deferred tax assets:
Goodwill $ 367,000
Net operating loss carryforwards 5,661,000
----------
6,028,000
----------
Deferred tax liabilities
Equipment 6,000
Patent rights 6,000
----------
12,000
----------
Net deferred tax asset 6,016,000
Valuation allowance (6,016,000)
----------
Net deferred tax asset reported $ -
==========
The change in valuation allowance for the year ended June 30, 1997
was increased by approximately $342,000.
F-29
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 11: Income Taxes (Continued)
There was no provision for current income taxes for the years ended
June 30, 1997 and 1996.
The federal net operating loss carryforwards of approximately
$16,469,000 expire in varying amounts through 2012.
The Company has had numerous transactions in its common stock. Such
transactions may have resulted in a change in the Company's
ownership, as defined in the Internal Revenue Code Section 382.
Such change may result in an annual limitation on the amount of the
Company's taxable income which may be offset with its net operating
loss carryforwards. The Company has not evaluated the impact of
Section 382, if any, on its ability to utilize its net operating
loss carryforwards in future years.
Note 12: Segment of Business Reporting
The operations of the Company are divided into the following
business segments for financial reporting purposes.
o Lithographically printed stereoscopic prints commonly referred
to as three-dimensional prints and lithographically printed
animation.
o Hardware and software information and audio playback systems and
method products and programs.
There are no intersegment or foreign sales. Three customers that
account for approximately 65% of the lithographic sales and four
customers account for approximately 91% of the hardware and
software information and playback systems.
Financial information by business segments is as follows:
Hardware
and
Lithographic Software Consolidated
------------ -------- ------------
Net customer sales $ 98,592 $ 452,925 $ 551,517
Operating loss (1,155,884) (174,984) (1,330,868)
Identifiable assets 269,591 259,929 529,520
Depreciation 17,226 33,140 50,366
Capital expenditures 3,628 1,038 4,666
F-30
<PAGE>
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
Note 13: Subsequent Events
During July 1997, 50,000 of the outstanding debentures were
converted to 1,818,182 shares of the Company's common stock at an
average price of $.0275 per share.
The Company sold, through a private placement, 1,100,000 shares of
the Company's common stock (restricted shares) during July through
October 1997 for $55,000 ($.05 per share).
In September 1997, the Company sold its real estate multiple
listing data delivery system. The purchase price was $450,000 plus
the assumption of $59,247 in liabilities.
On October 2, 1997, the Company sold 1,666,666 shares of its common
stock in an offshore transaction for $75,000 ($.045 per share).
The 5% convertible debentures were due on August 1, 1997, and the
debenture holder on October 8, 1997, extended the due date to
August 1, 1998.
On October 14, 1997, the Company entered into a letter agreement
with Capital West Investment Group, Inc. ("CWIG"). Pursuant to the
terms of the agreement CWIG will use its "best efforts" to raise
funds amounting to $1,000,000 in net proceeds less expenses and
commissions within six months of the date of the letter. In
exchange for CWIG's agreement to raise funds for the Company,
the Board of Directors has agreed to recommend to the stockholders
for approval a 25 to 1 reverse stock split on all outstanding
classes of stock and issuance of certain derivative securities to
key employees, members of the Board and consultants. In the
interim, CWIG will provide $100,000 to $200,000 in short-term
financing. The actual terms may change as the transaction
progresses and no assurances can be given that the funding will be
completed as proposed.
F-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Dimensional Visions Group, Ltd. and Subsidiaries
Phoenix, Arizona
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of DIMENSIONAL VISIONS GROUP, LTD. AND
SUBSIDIARIES included in this annual report on Form 10-KSB and have issued our
report thereon dated August 29, 1997, except Note 13, as to which the date is
October 14, 1997. Our audit was made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. The schedules
listed in the preceding index are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic consolidated
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
consolidated financial data required to be set forth in relation to the basic
consolidated financial statements taken as a whole.
GITOMER & BERENHOLZ, P.C.
Jenkintown, Pennsylvania
August 29, 1997
F-32
<PAGE>
Exhibit IV
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
SCHEDULE IV - PROPERTY AND EQUIPMENT(1)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- -------------------------------------------------------------------------------------------------
Balance at Other
Beginning Changes -
of Additions Add Balance at
Classification Period at Cost Retirements(2) (Deduct)(3) End of Period
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended
June 30, 1997
- -------------
Equipment $1,891,703 $ 3,614 $ 367,541 $ -- $1,527,776
Furniture and
fixtures 143,408 1,052 19,425 -- 125,035
Leasehold
improvements 109,446 -- 109,446 -- --
---------- ---------- ---------- ---------- ----------
$2,144,557 $ 4,666 $ 496,412 $ -- $1,652,811
========== ========== ========== ========== ==========
Year Ended
June 30, 1996
- -------------
Equipment $1,628,028 $ 33,884 $ -- $ 229,791 $1,891,703
Furniture and
fixtures 134,938 6,476 -- 1,994 143,408
Leasehold
improvements 109,446 -- -- -- 109,446
---------- ---------- ---------- ---------- ----------
$1,872,412 $ 40,360 $ -- $ 231,785 $2,144,557
========== ========== ========== ========== ==========
</TABLE>
(1) Depreciation and amortization is computed by the straight-line method
over the estimated useful lives of the related assets as follows:
Equipment 5 - 7 years
Furniture and fixtures 5 years
Leasehold improvements Term of the initial operating lease (5 years)
(2) Represents equipment and leasehold improvements abandoned.
(3) Represents equipment acquired through acquisition.
F-33
<PAGE>
Exhibit V
DIMENSIONAL VISIONS GROUP, LTD. AND SUBSIDIARIES
SCHEDULE V - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- -------------------------------------------------------------------------------------------------
Balance at Other
Beginning Changes -
of Additions Add Balance at
Classification Period at Cost Retirements(1) (Deduct)(2) End of Period
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended
June 30, 1997
- -------------
Equipment $1,767,977 $ 46,084 $ 366,833 $ -- $1,447,228
Furniture and
fixtures 130,188 4,092 19,087 -- 115,193
Leasehold
improvements 109,152 190 109,342 -- --
---------- ---------- ---------- -------- ----------
$2,007,317 $ 50,366 $ 495,262 $ -- $1,562,421
========== ========== ========== ======== ==========
Year Ended
June 30, 1996
- -------------
Equipment $1,559,730 $ 81,417 $ -- $126,830 $1,767,977
Furniture and
fixtures 122,433 5,808 -- 1,947 130,188
Leasehold
improvements 108,886 266 -- -- 109,152
---------- ---------- ---------- -------- ----------
$1,791,049 $ 87,491 $ -- $128,777 $2,007,317
========== ========== ========== ======== ==========
</TABLE>
(1) Represents accumulated depreciation and amortization written off as a
result of abandonment.
(2) Represents accumulated depreciation acquired through acquisition.
F-34
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, duly
authorized.
DIMENSIONAL VISIONS GROUP, LTD.
DATED: October 30, 1997 By: /s/ George S. Smith
------------------------------
George S. Smith, Chairman and
Chief Executive Officer
In accordance with Section 13 or 15(d) of the Exchange Act, this report has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ George S. Smith Chairman, Chief Executive October 30, 1997
- -------------------- Officer (Principal Executive
George S. Smith Officer and Principal Financial
Officer, and principal accounting
officer) and Director
/s/Robert L. Morris President and Director October 30, 1997
- -----------------------
Robert L. Morris
/s/ Sean F. Lee Director October 30, 1997
- -------------------
Sean F. Lee
/s/ Steven L. Flint Director October 30, 1997
- -------------------
Steven L. Flint
/s/Hans J. Kaemmlein Director October 30, 1997
- --------------------
Hans J. Kaemmlein
<PAGE>
Exhibit 21.0 Subsidiaries of the Registrant
Name State of Incorporation
---- ----------------------
InfoPak, Inc. Delaware
DVG Plastics, Inc. Delaware
Digital Dimension, Inc. Delaware
DV3D Images, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000836809
<NAME> DIMENSIONAL VISIONS GROUP, LTD.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.0000
<CASH> 109,566
<SECURITIES> 0
<RECEIVABLES> 298,044
<ALLOWANCES> 215,743
<INVENTORY> 179,127
<CURRENT-ASSETS> 380,995
<PP&E> 1,652,811
<DEPRECIATION> 1,562,421
<TOTAL-ASSETS> 529,520
<CURRENT-LIABILITIES> 488,947
<BONDS> 0
0
923,428
<COMMON> 68,138
<OTHER-SE> (1,075,993)
<TOTAL-LIABILITY-AND-EQUITY> 529,520
<SALES> 551,517
<TOTAL-REVENUES> 551,517
<CGS> 306,190
<TOTAL-COSTS> 306,190
<OTHER-EXPENSES> 1,576,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,048
<INCOME-PRETAX> (2,162,134)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,162,134)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
