U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
--------------------------------------
[ ] 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 INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 23-2517953
- ------------------------------ -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2301 W. DUNLAP, SUITE 207, PHOENIX, ARIZONA, 85021
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(602) 997 - 1990
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
As of September 30, 1998, the number of shares of Common Stock issued and
outstanding was 3,612,228.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 1998
and June 30, 1998 1
Condensed Consolidated Statements of Operations - For the three
months ended September 30, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows - For the three
months ended September 30, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 9
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIMENSIONAL VISIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, June 30,
1998 1998
---- ----
(Unaudited)
Current assets
Cash $ 32,091 $ 15,910
Current portion of notes receivable 145,350 119,461
Accounts receivable, trade, net of
allowance for bad debts of $215,743 77,436 144,620
Inventory 59,043 69,364
Prepaid expenses 70,397 25,678
------------ ------------
Total current assets 384,317 375,033
------------ ------------
Equipment
Equipment 402,879 370,344
Furniture and fixtures 50,440 24,217
------------ ------------
453,319 394,561
Less accumulated depreciation 248,581 233,509
------------ ------------
204,738 161,052
------------ ------------
Other assets
Notes receivable net of current portion 307,655 342,377
Deferred costs 33,700 --
Patent rights and other assets 38,812 42,379
------------ ------------
380,167 384,756
------------ ------------
Total assets $ 969,222 $ 920,841
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ -- $ 79,500
Current portion of long-term debt -- 75,000
Current portion of obligations under
capital leases 17,779 16,476
Accounts payable, accrued expenses and
other liabilities 354,087 439,977
------------ ------------
Total current liabilities 371,866 610,953
Long-term debt, net of current portion 475,000 --
Obligations under capital leases 97,814 102,586
------------ ------------
Total liabilities 944,680 713,539
------------ ------------
Commitments and contingencies -- --
Stockholders equity
Preferred stock - $.001 par value, authorized
10,000,000 shares; issued and outstanding -
133,003 shares at September 30, 1998, and
133,321 shares at June 30, 1998 133 133
Additional paid-in capital 680,097 683,278
------------ ------------
680,230 683,411
Common stock - $.001 par value, authorized
100,000,000 shares; issued and outstanding
3,612,228 shares at September 30, 1998, and
3,612,101 shares at June 30, 1998 3,612 3,612
Additional paid-in capital 18,865,256 18,862,075
Deficit (19,524,556) (19,341,796)
------------ ------------
Total stockholders' equity 24,542 207,302
------------ ------------
Total liabilities and stockholders' equity $ 969,222 $ 920,841
============ ============
See notes to condensed consolidated financial statements.
(1)
<PAGE>
DIMENSIONAL VISIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1998 1997
----------- -----------
Operating revenue $ 191,089 $ 113,554
Cost of sales 132,007 106,112
----------- -----------
Gross profit 59,082 7,442
----------- -----------
Operating expenses
Engineering and development costs 56,955 59,825
Marketing expenses 59,819 57,292
General and administrative expenses 123,493 158,761
----------- -----------
Total operating expenses 240,267 275,878
----------- -----------
Loss before other income (expenses) (181,185) (268,436)
----------- -----------
Other income (expenses)
Interest expense (12,346) (3,365)
Interest income 10,771 204
Gain on sale of product line -- 410,000
----------- -----------
(1,575) 406,839
----------- -----------
Net income (loss) $ (182,760) $ 138,403
=========== ===========
Net income (loss) per share of
common stock (.05) $ .05
=========== ===========
Weighted average shares of common
stock outstanding 3,612,129 2,834,528
=========== ===========
See notes to condensed consolidated financial statements.
(2)
<PAGE>
DIMENSIONAL VISIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1998 1997
--------- ---------
Cash flows from operating activities
Net income (loss) ($182,760) $ 138,403
Total adjustments to reconcile net income (loss) (33,724) (276,305)
--------- ---------
to net cash used in operating activities
Net cash used in operating activities (216,484) (137,632)
--------- ---------
Cash flows from investing activities
Proceeds from payments on notes receivable 8,092
Purchase of furniture and equipment (58,758) --
--------- ---------
Net cash used in investing activities (50,666) --
--------- ---------
Cash flows from financing activities
Payment of obligations under capital lease (3,469)
Payment of debt obligations (75,000) --
Proceeds from issuance of debt net of
deferred financing 441,300 --
costs of $33,700
Repayment of short-term borrowing (79,500) --
Sale of common stock -- 135,000
--------- ---------
Net cash provided by financing activities 283,331 135,000
--------- ---------
Net increase (decrease) in cash 16,181 (2,632)
Cash, beginning 15,910 109,566
--------- ---------
Cash, ending $ 32,091 $ 106,934
========= =========
Supplemental disclosure of cash
flow information:
Cash paid during the period for interest $ 22,974 --
Supplemental disclosure of non-cash investing and financing activities:
During the three months ended September 30, 1998, 127 shares of the Company's
Common Stock were issued as a result of the conversion of 318 shares of Series C
Convertible Preferred Stock valued at $3,180.
See notes to condensed consolidated financial statements.
(3)
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. The June 30, 1998, balance
sheet data were derived from audited financial statements but does not
include all disclosures required by generally accepted accounting
principles. The interim financial statements and notes thereto should be
read in conjunction with the financial statements and notes included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998. In the opinion of management, the interim financial
statements reflect all adjustments of a normal recurring nature
necessary for a fair statement of the results for the interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full
year ending June 30, 1999.
NOTE 2 ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES
September 30, 1998 June 30,1998
------------------ ------------
Accounts payable $289,530 $370,633
Accrued expenses
Interest 9,946 20,886
Salaries 47,483 43,587
Payroll Taxes Payable 7,128 4,871
-------- --------
Total $354,087 $439,977
======== ========
NOTE 3 LONG-TERM DEBT
Long-term debt consisted of the following:
SEPTEMBER 30, 1998 JUNE 30, 1998
------------------ -------------
12% secured debentures due
July 31, 2001 $475,000(1) $ --
10% secured notes due in
January and February 1998 -- 75,000
-------- --------
475,000 75,000
Less current portion -- 75,000
-------- --------
Long term portion $475,000 $ --
-------- --------
(1) Interest is calculated at 12% per annum and is payable yearly on
July 31, beginning July 31, 1999. The Company borrowed $475,000 net of
financing costs of $33,700. The Series A 12% Convertible Secured
Debentures include warrants to purchase 475,000 shares of the Company's
common stock at $0.50 per share. The warrants are exercisable through
January 15, 2001. The notes are secured by all the assets of the
Company, except for the Company's accounts receivable and assets
acquired pursuant to purchase-money financing transactions. The notes
are convertible into one share for each $1.00 of outstanding debt and
unpaid interest is also convertible to common stock at the rate of one
share for each $1.00 of unpaid interest.
(4)
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 4 COMMITMENTS AND CONTINGENCIES
On January 1, 1998, the Company relocated its offices and entered into a
three year lease at a minimum rental of $44,950 per year.
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.
In July 1996, the Company filed a complaint in the United States
District Court for the Eastern District of Pennsylvania (No. 96-CV-5259)
against 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 $213,522 the full amount
of the invoice together with interest costs and such other relief as the
court deems just and proper. DGS filed a counterclaim against the
Company for an unspecified amount in excess of $100,000. The matter has
moved to a deferred status while the parties engage in settlement
negotiation.
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 September
30, 1998 was approximately $78,300.
NOTE 5 COMMON STOCK
As of September 30, 1998, there are outstanding 4,000,819 of non-public
warrants to purchase the Company's common stock at prices ranging from
$0.50 to $12.50 with a weighted average price of $0.99 per share.
As of September 30, 1998, there were 133,003 shares of various classes
of Convertible Preferred Stock outstanding which can be converted to
98,801 shares of common stock.
As of September 30, 1998, there were $475,000 of secured debentures
which can be converted into 475,000 shares of the Company's common
stock.
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 4,574,620 shares as of September 30, 1998, and
would be in addition to the 3,612,228 shares of common stock outstanding
as of September 30, 1998.
The Company issued on September 10, 1998, 127 shares of its common stock
as a result of a conversion of 318 shares of Series C convertible
Preferred Stock.
(5)
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 6 PREFERRED STOCK
The Company has authorized 10,000,000 shares of $.001 par value per
share Preferred Stock, of which the following were issued and
outstanding:
Allocated Outstanding
--------- -----------
September 30, 1998 June 30, 1998
------------------ -------------
Series A Preferred 100,000 23,000 23,000
Series B Preferred 200,000 5,000 5,000
Series C Preferred 1,000,000 18,363 18,681
Series P Preferred 600,000 86,640 86,640
--------- --------- ---------
Total Preferred Stock 1,950,000 133,003 133,321
========= ======= =======
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 1.6 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.
The Company's Series B Convertible 8% Preferred Stock ("Series B
Preferred"), is convertible at the rate of 4 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.
The Company's Series C Convertible Preferred Stock ("Series C
Preferred"), is convertible at a rate of 0.4 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 0.4 shares of common stock for
each share of Series P 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 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 891,360 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 notes. Holders
of 7,912 shares of Series C Preferred Stock have subsequently converted
their shares into the Company's common stock.
(6)
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 7 INCOME TAXES
There was no provision for current income taxes for the three months
ended September 30, 1998 and 1997.
The federal net operating loss carry forwards of approximately
$16,539,000 expire in varying amounts through 2018.
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 carry forwards.
The Company has not evaluated the impact of Section 382, if any, on its
ability to utilize its net operating loss carry forwards in future
years.
NOTE 8 EVENTS SUBSEQUENT TO SEPTEMBER 30, 1998
On October 6, 1998, the Company received additional long-term financing
of $10,000 in the form of its Series A 12% Convertible Secured
Debentures.
(7)
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had a working capital surplus of
$12,451, compared with a working capital deficiency of $84,789 as of
September 30, 1997. During the three months ended September 30, 1998,
the Company raised $475,000 through the placement of its Series A 12%
Convertible Secured Debentures (see Note 3).
The Company expects to require additional working capital by December
1998. The Company anticipates raising this capital through either a
private placement of preferred stock or through the financing of
accounts receivable. There can be no assurances that the Company can
obtain funds from either of these sources.
The Company is focusing most of its resources and efforts towards
marketing its print products. It has, therefore, decided to offer its
subsidiary, InfoPak, Inc., for sale. Additionally, a substantial portion
of the Company's cash and personnel resources were dedicated toward
exhibiting at a trade show in October 1998. Included in prepaid expenses
is approximately $14,000 which were costs in connection with this show.
RESULTS OF OPERATIONS
The net loss for the quarter ended September 30, 1998, was $182,760
compared to a net income of $138,403 for the quarter ended September 30,
1997. The net income for the quarter ended September 30, 1997, was the
result of a one time sale of InfoPak's real estate data delivery system
for $410,000. The loss before other income and expenses for the quarter
ended September 30, 1998, was $181,185 compared to a loss before other
income and expenses for the quarter ended September 30, 1997, of
$268,436.
Revenues for the quarter ended September 30, 1998, were $191,089
compared to revenues of $113,554 for the quarter ended September 30,
1997. The increase in revenues was the result of substantial increases
in the sales of the Company's print products. For the quarter ended
September 30, 1998, the Company recorded sales totaling approximately
$126,000 of its DV3D(R) AnimotionTM print products compared to sales of
approximately $22,900 for the quarter ended September 30, 1997.
(8)
<PAGE>
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
1.The following Exhibits are filed herein: 27.0 Financial Data Schedule
2. Reports on Form 8-K filed: None
SIGNATURES
In accordance with the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, duly authorized.
DIMENSIONAL VISIONS INCORPORATED
DATED: November 9, 1998 By: /S/ John D. McPhilimy
----------------------------------------
John D. McPhilimy, Chairman, President and
Chief Executive Officer
(10)
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