10QSB 1 e-6773.txt QUARTERLY REPORT FOR THE QTR ENDED 3/31/01 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 March 31, 2001 [ ] 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 West Dunlap Avenue, Suite 207, Phoenix, Arizona, 85021 (Address of principal executive offices) (602) 997-1990 (Issuer's telephone number) (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of March 31, 2001, the number of shares of Common Stock issued and outstanding was 10,289,873. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY INDEX Page Number ------ PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 2001 and June 30, 2000 1 Condensed Consolidated Statement of Operations - For the three and nine months ended March 31, 2001 and 2000 2 Condensed Consolidated Statement of Cash Flows - For the nine months ended March 31, 2001 and 2000 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings 8 Item 2. Changes in Securities 8 Item 3. Defaults Upon Senior Securities 8 Item 4. Submission of Matters to a Vote of Security Holders 8 Item 5. Other Information 8 Item 6. Exhibits and Reports on Form 8-K 8 SIGNATURES 8 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DIMENSIONAL VISIONS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
March 31, June 30, 2001 2000 ------------ ------------ (Unaudited) Current assets Cash $ 20,411 $ 276,333 Notes receivable, net of allowance for bad debts of $443,669 -- -- Notes receivable, officers 12,529 -- Accounts receivable, trade, 69,604 350,493 Prepaid expenses 6,593 9,227 ------------ ------------ Total current assets 109,137 636,053 ------------ ------------ Equipment Equipment 479,972 479,372 Furniture and fixtures 49,329 46,944 ------------ ------------ 529,301 526,316 Less accumulated depreciation 346,986 308,963 ------------ ------------ 182,315 217,353 ------------ ------------ Other assets Patent rights and other assets 28,571 31,627 ------------ ------------ Total assets $ 320,023 $ 885,033 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities Short-term borrowings $ 250,000 $ -- Current portion of obligations under capital leases 58,013 50,962 Accounts payable, accrued expenses and other liabilities 287,122 379,807 ------------ ------------ Total current liabilities 595,135 430,769 Obligations under capital leases, net of current portion 43,907 88,343 ------------ ------------ Total liabilities 639,042 519,112 ------------ ------------ Commitments and contingencies -- -- Stockholders' deficiency Preferred stock - $.001 par value, authorized 10,000,000 shares; issued and outstanding - 574,044 shares at March 31, 2001, and 1,146,044 shares at June 30, 2000 574 1,146 Additional paid-in capital 953,844 1,474,295 ------------ ------------ 954,418 1,475,441 Common stock - $.001 par value, authorized 100,000,000 shares; issued and outstanding 10,289,873 shares at March 31, 2001 and 8,934,916 shares at June 30, 2000 10,290 8,935 Additional paid-in capital 21,509,562 20,885,581 Deficit (22,726,622) (21,828,753) ------------ ------------ Total stockholders' equity (deficiency) before deferred consulting contracts (252,352) 541,204 Deferred consulting contracts (66,667) (175,283) ------------ ------------ Total stockholders' deficiency (319,019) 365,921 ------------ ------------ Total liabilities and stockholders' deficiency $ 320,023 $ 885,033 ============ ============
See notes to condensed consolidated financial statements. 1 DIMENSIONAL VISIONS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended March 31, March 31, ---------------------------- ---------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Operating revenue $ 56,712 $ 325,208 219,708 $ 625,626 Cost of sales 44,980 212,281 151,455 405,542 ------------ ------------ ------------ ------------ Gross profit 11,732 112,927 68,253 220,084 ------------ ------------ ------------ ------------ Operating expenses Engineering and development costs 47,087 62,151 181,649 139,735 Marketing expenses 97,811 27,816 217,927 53,497 General and administrative expenses 157,107 250,468 549,860 602,100 ------------ ------------ ------------ ------------ Total operating expenses 302,005 340,435 949,436 795,332 ------------ ------------ ------------ ------------ Loss before other income (expenses) (290,273) (227,508) (881,183) (575,248) ------------ ------------ ------------ ------------ Other income (expenses) Interest expense (9,007) (49,320) (19,634) (169,517) Interest income 190 5,082 2,948 10,166 (8,817) (44,238) (16,686) (159,351) ------------ ------------ ------------ ------------ Net loss $ (299,090) $ (271,746) $ (897,869) $ (734,598) ============ ============ ============ ============ Dividends in arrears on preferred stock (74,225) (88,050) (74,225) (88,050) ------------ ------------ ------------ ------------ Net loss available to common shareholders $ (373,315) $ (359,796) $ (972,094) $ (822,648) ============ ============ ============ ============ Net loss per share Basic and diluted loss per common shares $ (.04) $ (.06) $ (.10) $ (.14) ============ ============ ============ ============ Weighted average shares of common stock outstanding 10,288,540 6,125,877 9,853,254 5,880,938 ============ ============ ============ ============
See notes to condensed consolidated financial statements. 2 DIMENSIONAL VISIONS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Nine Months Ended March 31, -------------------------- 2001 2000 ----------- ----------- Cash flows from operating activities Net loss $ (897,869) $ (734,598) Total adjustments to reconcile net loss to net cash used in operating activities 328,005 156,132 ----------- ----------- Net cash used in operating activities (569,864) (578,466) ----------- ----------- Cash flows from investing activities Purchase of furniture and equipment (2,985) (1,071) ----------- ----------- Net cash used in investing activities (2,985) (1,071) ----------- ----------- Cash flows from financing activities Payment of obligations under capital lease (37,385) (38,277) Payment of debt obligations -- -- Stock issuance costs (6,563) -- Short-term borrowing 250,000 -- Proceeds from exercise of warrants 110,875 42,500 Sale of preferred stock, net of offering costs of $94,500 -- 955,500 Reduction in deferred consulting fee -- 30,000 Offering commissions paid by stock -- 20,000 ----------- ----------- Net cash provided by financing activities 316,927 1,009,723 ----------- ----------- Net increase in cash (255,922) 430,186 Cash, beginning 276,333 20,019 ----------- ----------- Cash, ending $ 20,411 $ 450,205 =========== =========== Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 19,634 $ 7,152 =========== ===========
Supplemental disclosure of non-cash investing and financing activities: During the nine months ended March 31, 2001, 344,000 shares of the Company's Common Stock were issued as a result of the conversion of 172,000 shares of Series D Convertible Preferred Stock valued at $154,800. During the nine months ended March 31, 2001, 400,000 shares of the Company's Common Stock were issued as a result of the conversion of 400,000 shares of Series E Convertible Preferred Stock valued at $366,222. See notes to condensed consolidated financial statements. 3 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED MARCH 31, 2001 (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, 2000, 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, 2000. 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 financial statements as of and for the period ended March 31, 2001 and 2000 are unaudited. The financial statements for the period ended March 31, 2001 have been reviewed by an independent public accountant pursuant to rule 10-01(d) of regulation S-X and following applicable standards for conducting such reviews, and the report of the accountant is included as part of this filing. The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full year ending June 30, 2001. NOTE 2 ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES March 31, 2001 June 30,2000 -------------- ------------ Accounts payable $265,104 $353,927 Accrued expenses Salaries 15,215 18,523 Payroll Taxes Payable 6,803 7,357 -------- -------- Total $287,122 $379,807 ======== ======== NOTE 3 SHORT-TERM BORROWINGS On January 12, 2001, the Company secured a $500,000 line of credit through Merrill Lynch that was obtained by an investor group of existing shareholders as guarantors of the line of credit. During the quarter ended March 31, 2001, the outstanding debt was $250,000. The terms of the line of credit are for one year with an interest rate of the 3-month LIBOR rate, plus 2.5%. Interest payments are calculated and due monthly, and the principal balance is due on January 13, 2002. The outstanding debt may also be assumed by the shareholders at a rate of three shares of Dimensional Visions' common stock for every dollar assumed. NOTE 4 COMMITMENTS AND CONTINGENCIES There are no 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 March 31, 2001, were approximately $74,225. NOTE 5 COMMON STOCK As of March 31, 2001, there are outstanding 10,843,805 of non-public warrants to purchase the Company's common stock at prices ranging from $0.10 to $12.50 with a weighted average price of $0.23 per share. As of March 31, 2001, there were 574,044 shares of various classes of Convertible Preferred Stock outstanding which can be converted to 713,818 shares of common stock. 4 NOTE 5 COMMON STOCK (CONTINUED) During the nine months ended March 31, 2001, the Company issued 344,000 shares of its common stock as a result of the conversion of 172,000 shares of Series D Convertible Preferred Stock. During the nine months ended March 31, 2001, the Company issued 400,000 shares of its common stock as a result of the conversion of 400,000 shares of Series E Convertible Preferred Stock. During the nine months ended March 31, 2001, the Company issued 610,957 shares of its common stock in connection with the exercise of warrants. The total number of shares of the Company's common stock that would have been issuable upon the assumption of the outstanding debt, warrants and preferred stock equaled 12,307,623 shares as of March 31, 2001, and would be in addition to the 10,289,873 shares of common stock outstanding as of March 31, 2001. 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: Outstanding ----------------------------- Allocated March 31, 2001 June 30, 2000 --------- ----------------------------- Series A Preferred 100,000 15,500 15,500 Series B Preferred 200,000 3,500 3,500 Series C Preferred 1,000,000 13,404 13,404 Series D Preferred 375,000 180,000 352,000 Series E Preferred 1,000,000 275,000 675,000 Series P Preferred 600,000 86,640 86,640 --------- --------- --------- Total Preferred Stock 3,325,000 574,044 1,146,044 ========= ========= ========= 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 D Convertible Preferred Stock ("Series D Preferred") is convertible at a rate of 2 shares of common stock per share of Series D Preferred. The Company's Series E Convertible Preferred Stock ("Series E Preferred") is convertible at a rate of 1 share of common stock per share of Series E 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, Series D Preferred and Series E 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. 5 NOTE 6 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. NOTE 7 INCOME TAXES There was no provision for current income taxes for the nine months ended March 31, 2001 and 2000. The federal net operating loss carry forwards of approximately $19,070,000 expire in varying amounts through 2020. In addition the Company has state carryforwards of approximately $3,175,000. 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. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2001 AND 2000 RESULTS OF OPERATIONS The net loss for the quarter ended March 31, 2001 was $299,090 compared to a net loss of $271,746 for the quarter ended March 31, 2000. General and administrative expenses for the three months ended March 31, 2001, decreased by approximately $93,000 over the similar period a year earlier. This decrease is attributed to the decrease in rent expense of approximately $10,000, salary expense of $10,000, stock related expenses of $28,000 and the amortization of consulting fees of $31,000. The Company's marketing expenses increased for the quarter ended March 31, 2001, by $70,000 over the similar period last year. We attribute $50,000 of this increase to engaging a creative firm and the remaining $20,000 to the addition of the salesman along with his travel expenses. Revenue for the quarter ended March 31, 2001, was $56,712 compared to revenue of $325,208 for the quarter ended March 31, 2000. Management attributes this decline in sales to the Company's change in marketing and sales efforts. During the quarters ended December 31, 2000 and March 31, 2001, our salesman made approximately forty presentations to the top advertising agencies in Los Angeles, Phoenix and San Francisco. Based up the responses from the presentations, we have decided to focus all of our marketing and sales efforts on the advertising market and reduce our reliance on the children's market that made up approximately $175,000 of the sales for the quarter ended March 31, 2000. LIQUIDITY AND CAPITAL RESOURCES The Company had a working capital deficiency of $485,998 as of March 31, 2001, compared to a working capital deficiency of $2,051 as of March 31, 2000. During the quarter ended March 31, 2001, the Company collected approximately $103,000 of accounts receivable. The cash received was used to pay current operating expenses. As of March 31, 2001 the Company's financial position is precarious. The Company needs funding in order to maintain current operations and to support growth and sales. The Company has secured a $500,000 line of credit on January 12, 2001 through Merrill Lynch that was obtained by an investor group of existing shareholders as guarantors of the line of credit. Additionally, the Company finalized an equity line with Swartz Private Equity, LLC to provide funding through the sale of the Company's common stock, subject to SEC registration which is pending. The Company has the right at its sole discretion to put common stock to Swartz, subject to certain limitations and conditions based upon trading volume of the Company's common stock. However, due to the current limited trading volume of the Company's common stock, the Company would not be able to raise significant funding from this arrangement. Based upon 30 consecutive trading days beginning March 12, 2001 and subject to the volume limitations, the Company would be able to raise in any 20 day put period approximately $19,400. At these current levels, the Company would be unable to raise sufficient capital to fund operations; therefore, the Company is attempting to increase interest in our Company which would help increase daily trading volumes while utilizing our current line of credit through Merrill Lynch. Our ability to put stock to Swartz is based upon trading volume and cannot exceed 15% of the volume per trade day. The Company is also looking for additional funding arrangements to help maintain current operations until sales and the funding from Swartz become sufficient enough to support operations and implement our marketing and sales campaign. NINE MONTHS ENDED MARCH 31, 2001 AND 2000 RESULTS OF OPERATIONS The net loss for the nine months ended March 31, 2001 was $897,869, compared to a net loss of $734,598 for the nine months ended March 31, 2000. The Company's marketing expenses for the nine months ended March 31, 2001 increased by approximately $164,000 over the nine months ended March 31, 2000. Approximately $87,000 of this increase is due to the addition of two salesmen along with their travel expenses. The Company also engaged a creative firm to help implement our new marketing and sales campaign that accounted for approximately $55,000. An additional $15,000 of this increase was related to general marketing expenses. The Company's engineering expenses for the nine months ended March 31, 2001, increased by approximately $42,000 over the same period last year. This increase was attributed to the increase in the Company's design staff. The Company decreased their general and administrative expenses for the nine months 7 ended March 31, 2001 by $52,000 over the six months ended March 31, 2000. The Company attributes this decrease to salary expense of approximately $15,000, stock related expenses of $62,000 and rent expense of $6,100. In addition the Company incurred expenses of approximately $40,000 from an arbitration settlement of disputed invoices for commissions. Revenue for the nine months ended March 31, 2001 was $219,708 compared to revenue of $625,626 for the nine months ended March 31, 2000. Revenue for the nine months ended March 31, 2000 was boosted by approximately $200,000 through the sale of Pokemon products that are no longer being ordered. Generally, the sales volume for the nine months ended March 31, 2001 without Pokemon was down approximately $200,000. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended December 31, 2000, the Company collected approximately $487,000 of accounts receivable. Substantially all the cash received and cash on hand was used to support operations. The Company is currently utilizing the secured line of credit from Merrill Lynch to sustain operations and may require additional funding until its sales will support the Company's operations and growth. The Company is continually focusing on expanding its customer base through its marketing and sales campaign. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 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: May 14, 2001 By: /s/ John D. McPhilimy ------------------------------------ John D. McPhilimy, Chairman, President and Chief Executive Officer 8