-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bm3L1uBvmBDU67FilmiFbTEQiHkoyyqYpfDrpxg2pOoudgJVRMZ516uCGUWmvxJs FyHQCrbgEhZ0qaEHngVzEg== 0000950147-01-501936.txt : 20020411 0000950147-01-501936.hdr.sgml : 20020411 ACCESSION NUMBER: 0000950147-01-501936 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIMENSIONAL VISIONS INC/ DE CENTRAL INDEX KEY: 0000836809 STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL PRINTING [2750] IRS NUMBER: 232517953 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-10196 FILM NUMBER: 1795368 BUSINESS ADDRESS: STREET 1: 2301 WEST DUNLAP STREET 2: SUITE 207 CITY: PHOENIX STATE: AZ ZIP: 85021 BUSINESS PHONE: 6029971990 MAIL ADDRESS: STREET 1: 8855 N. BLACK CANYON HWY STREET 2: STE 2000 CITY: PHOENIX STATE: AZ ZIP: 85021 10QSB 1 e-7792.txt QUARTERLY REPORT FOR THE QTR ENDED 09/30/2001 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, 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 _________ 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 September 30, 2001, the number of shares of Common Stock issued and outstanding was 11,955,635. 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 (unaudited) Condensed Consolidated Balance Sheets - September 30, 2001 and June 30, 2001 1 Condensed Consolidated Statement of Operations - For the three months ended September 30, 2001 and 2000 2 Condensed Consolidated Statement of Cash Flows - For the three months ended September 30, 2001 and 2000 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 9 Item 2. Changes in Securities 9 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 9 i PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DIMENSIONAL VISIONS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, June 30, 2001 2001 ------------ ------------ (Unaudited) ASSETS Current assets Cash $ 14,894 $ 1,627 Accounts receivable, trade 13,399 8,614 Prepaid expenses 105,949 4,224 ------------ ------------ Total current assets 134,242 14,465 ------------ ------------ Equipment Equipment 480,112 480,112 Furniture and fixtures 49,329 49,329 ------------ ------------ 529,441 529,441 Less accumulated depreciation 372,259 359,864 ------------ ------------ 157,182 169,577 ------------ ------------ Other assets Patent rights and other assets 26,534 27,552 ------------ ------------ Total assets $ 317,958 $ 211,594 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings 413,182 339,138 Current portion of obligations under capital leases 81,349 59,834 Accounts payable, accrued expenses and other liabilities 359,415 158,375 ------------ ------------ Total current liabilities 853,946 557,347 ------------ ------------ Long term debt Note payable 25,000 -- Obligations under capital leases, net of current portion 18,306 39,821 ------------ ------------ 43,306 39,821 Total liabilities 897,252 597,168 ------------ ------------ Commitments and contingencies -- -- Stockholders' equity Preferred stock - $.001 par value, authorized 10,000,000 shares; issued and outstanding - 524,044 shares at September 30, 2001, and 561,544 shares at June 30, 2001 524 562 Additional paid-in capital 908,893 942,606 ------------ ------------ 909,417 943,168 Common stock - $.001 par value, authorized 100,000,000 shares; issued and outstanding 11,955,635 shares at September 30, 2001 and 10,392,635 shares at June 30, 2001 11,956 10,392 Additional paid-in capital 21,802,649 21,603,561 Deficit (23,221,649) (22,888,528) ------------ ------------ Total stockholders' equity before deferred consulting contracts (497,627) (331,407) Deferred consulting contracts (81,667) (54,167) ------------ ------------ Total stockholders' equity (579,294) (385,574) ------------ ------------ Total liabilities and stockholders' equity $ 317,958 $ 211,594 ============ ============
See notes to condensed consolidated financial statements. 1 DIMENSIONAL VISIONS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Three Months Ended September 30, ---------------------------- 2001 2000 ------------ ------------ Operating revenue $ 43,299 $ 71,191 Cost of sales 22,561 53,023 ------------ ------------ Gross profit 20,738 18,168 ------------ ------------ Operating expenses Engineering and development costs 43,195 62,724 Marketing expenses 132,137 70,688 General and administrative expenses 144,132 206,133 ------------ ------------ Total operating expenses 319,464 339,545 ------------ ------------ Loss before other income (expenses) (288,726) (321,377) ------------ ------------ Other income (expenses) Interest expense (34,394) (6,584) Interest income -- 1,929 ------------ ------------ (34,394) (4,655) ------------ ------------ Net loss $ (333,120) $ (326,032) ============ ============ Net loss per share of common stock $ (.03) $ (.04) ============ ============ Weighted average shares of common stock outstanding 11,240,439 9,180,840 ============ ============ See notes to condensed consolidated financial statements. 2 DIMENSIONAL VISIONS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Three Months Ended September 30, --------- --------- 2001 2000 --------- --------- Cash flows from operating activities Net loss ($333,120) ($326,032) Total adjustments to reconcile net loss to net cash used in operating activities 268,387 122,943 --------- --------- Net cash used in operating activities (64,733) (203,089) --------- --------- Cash flows from investing activities Purchase of furniture and equipment -- (2,685) --------- --------- Net cash used in investing activities -- (2,685) --------- --------- Cash flows from financing activities Short term borrowings 53,000 -- Long term borrowings 25,000 Payment of obligations under capital lease -- (11,928) Proceeds from exercise of warrants -- 8,500 --------- --------- Net cash (used in) provided by financing activities 78,000 (3,428) --------- --------- Net increase (decrease) in cash 13,267 (209,202) Cash, beginning 1,627 276,333 --------- --------- Cash, ending $ 14,894 $ 67,131 ========= ========= Supplemental disclosure of cash flow information: Cash paid during the period for interest $ -- $ 6,584 ========= ========= Supplemental disclosure of non-cash investing and financing activities: During the quarter ended September 30, 2001, 75,000 shares of the Company's Common Stock were issued as a result of the conversion of 37,500 shares of Series D Convertible Preferred Stock valued at $33,713. The Company recorded additional paid-in capital of $901 with the issuance of 8,000 warrants to purchase shares of the Company's common stock at $.1275 in connection with the line of credit and guarantees by the investor group. See notes to condensed consolidated financial statements. 3 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 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, 2001, 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, 2001. 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 September 30, 2001 and 2000 are unaudited. The financial statements for the period ended September 30, 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. The Company has incurred losses since inception of $23,221,649 and has a working capital deficiency of $744,704 as of September 30, 2001. The future of the Company as an operating business will depend on its ability to (1) 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) achieve a level of sales adequate to support the Company's cost structure, and (4) 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) raising additional long term financing. 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 September 30, 2001, 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. NOTE 2. PREPAID EXPENSES Prepaid expenses included $101,725 for a marketing and advertising campaign that has not yet been implemented. NOTE 3. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES September 30, June 30, 2001 2001 ------------- -------- Accounts payable $295,065 $139,609 Salaries 60,371 18,766 Payroll Taxes Payable 3,979 7,357 -------- -------- Total $359,415 $379,807 ======== ======== 4 NOTE 4. SHORT-TERM BORROWINGS The Company received $25,000 on a 14% convertible debenture from a stockholder. Principal and interest payment are due on October 13, 2001. This debenture is convertible, in whole or part, at the option of the holder, into shares of the Company's common stock at a rate of $.125 per share. As of November 16, 2001, the Company has not repaid the debenture and the holder has not converted. The Company received $20,000 on a 12% convertible debenture on August 3, 2001. Payment of principal and interest is due on February 3, 2002. This debenture is convertible, in whole or part, at the option of the holder, into shares of the Company's common stock at a rate of $.125 per share. The Company secured a $500,000 line of credit through Merrill Lynch that was obtained by an investor group of existing stockholders as guarantors of the line of credit. The outstanding debt as of June 30, 2001 and September 30, 2001 was $385,000 and $393,000, respectively. The terms of the line of credit are for one year with an interest rate of the 3-month LIBOR rate, plus 2.5% [as of June 30, 2001and September 30, 2001 was 6.23% and 5.10%, respectively]. 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 stockholders at a rate of three shares of Dimensional Visions' common stock for every dollar assumed. As a result of market conditions, the line of credit was limited to $393,000 which represents the amount of securities securing the line of credit by the investor group. In connection with the guarantee by the investor group, the Company issued 39,300 restricted shares of its common stock, valued at $7,958, 196,500 commitment warrants at fair market value [$.266 per share] and 393,000 usage warrants at 75% of fair market value (ranging from $.1275 to $.218 per share). The warrants were valued using Black Scholes option pricing model at $71,948. Accordingly, the line of credit was discounted for the value allocated to the stock and warrants. As of June 30, 2001and September 30, 2001, the additional interest expense of $33,143 and $55,088 was recorded and the unamortized discount was $45,862 and $24,818, respectively. As of June 30, 2001 and September 30, 2001, the discounted value of the line of credit was $339,138 and $368,182. NOTE 5. LONG-TERM BORROWINGS On September 28, 2001, the Company received $25,000 in advances on a 12% secured note that is due on October 2, 2004. From October 1, 2001 through October 19, 2001, the Company received $125,000 in advances on the 12% secured note. The note requires no principal or interest payments until the maturity date of the note. The assets of the Company are pledged as collateral for the loan. NOTE 6. COMMITMENTS AND CONTINGENCIES There are no legal proceedings that 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, 2001, was approximately $84,775. NOTE 7. COMMON STOCK As of September 30, 2001, there are outstanding 9,791,243 of non-public warrants to purchase the Company's common stock at prices ranging from $0.01 to $2.00 with a weighted average price of $0.21 per share. 5 During the three months ended September 30, 2001, the Company issued 75,000 shares its Common Stock as a result of the conversion of 37,500 shares of Series D Convertible Preferred Stock. During August 2001, the Company issued 1,488,000 shares of the Company's common stock for consulting services valued at $194,512. The Company entered into an investment agreement with Swartz Private Equity, LLC. The investment agreement provides for the Company to issue and sell up to $20 million of the Company's common stock to Swartz, subject to a formula based on stock price and trading volume for a three year period beginning on July 10, 2001, the effective date of our registration statement. For each share of common stock put to Swartz, the Company will receive the lessor of 91% of the market or the market price less $.075. NOTE 8. PREFERRED STOCK The Company has authorized 10,000,000 shares of $.001 par value per share Preferred Stock, of which the following were issued and outstanding: Allocated Outstanding --------- ------------------------- September 30, June 30, 2001 2001 ------------- -------- 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 375,000 130,000 167,500 Series E Preferred 1,000,000 275,000 275,000 Series P Preferred 600,000 86,640 86,640 --------- -------- -------- Total Preferred Stock 3,325,000 524,044 561,544 ========= ======== ======== 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, 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. 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. 6 NOTE 9. INCOME TAXES There was no provision for current income taxes for the three months ended September 30, 2001 and 2000. The federal net operating loss carry forwards of approximately $19,769,000 expire in varying amounts through 2021. In addition the Company has state carryforwards of approximately $4,998,000. 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. NOTE 10. SUBSEQUENT EVENTS During the month following the quarter ended September 30, 2001, the Company received $125,000 in advances on a 12% secured note that is due October 2, 2004. The note requires no principal or interest payments until the maturity date of the note. The assets of the Company are pledged as collateral for the loan. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion and financial statements contained herein are for the three months ended September 30, 2001 and 2000. The following discussion regarding the financial statements of the Company should be read in conjunction with the financial statements of the Company included herewith. THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 RESULTS OF OPERATIONS The net loss for the quarter ended September 30, 2001, was $333,120 compared to a net loss of $326,032 for the quarter ended September 30, 2000. The loss before other income and expenses for the quarter ended September 30, 2001 was $288,726 compared to a loss before other income and expenses for the quarter ended September 30, 2000, of $321,377. The Company's marketing expenses for the three months ended September 30, 2001 increased by approximately $61,500 over the same period last year. Marketing expenses increased by approximately $110,000 due to the hiring of a creative firm to help create and plan the execution of our marketing and sales campaign. In addition, salary expense decrease by $20,000 and general marketing expenses also decreased by $20,000. The Company's engineering and development expenses decreased in the three months ended September 30, 2001 by approximately $20,000 over the three months ended September 30, 2000. This decrease was due to the reduction of salary expenses. The Company's general and administrative expenses decreases by approximately $62,000 in the three months ended September 30, 2001 over the same period last year. The Company's amortization of consulting fees decreased by $29,000, salary and benefits decreased by approximately $14,000 and rent expense by approximately $6,000. Revenue for the quarter ended September 30, 2001, was $43,299 compared to revenue of $71,191 for the quarter ended September 30, 2000. Management primarily attributes the low revenue for these quarters to the seasonality of revenue that normally occurs towards the last half of the Company's fiscal year. The gross profit for the three months ended September 30, 2001 was 47.9% compared to a gross profit of 25.5% for the three months ended September 30, 2000. This increase is attributed to the commissions on sales from jobs generated by the Company's printers. LIQUIDITY AND CAPITAL RESOURCES During the quarter ended September 30, 2001, the Company collected approximately $44,000 of accounts receivable. The cash received plus approximately $78,000 in funding was used to reduce accounts payable and pay current period expenses. The Company's financial position is precarious. The Company needs funding in order to maintain current operations and to support growth and sales. In the month following the quarter ended September 30, 2001, the Company received approximately $125,000 from an investor on a 12% note with principal and interest payments due October 2, 2004. Additionally, the Company finalized an equity line with Swartz Private Equity, LLC to provide funding through the sale of the Company's common stock. The Company has the right at its sole discretion to put common stock to Swartz, subject to certain limitations and conditions based upon tracing 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. The Company is 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. Unless we are able to generate sufficient revenue or acquire additional debt or equity financing to cover our present and ongoing operation costs and liabilities, we may not be able to continue as a going concern. 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS To the best knowledge of management, there is no litigation pending or threatend against the Company. 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 (a) Exhibits 10.1 14% Convertible Debenture dated July 13, 2001. 10.2 12% Convertible Debenture dated August 3, 2001. (b) 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: November 16, 2001 By: /s/ John D. McPhilimy -------------------------------------- John D. McPhilimy, Chairman, President and Chief Executive Officer 9 EX-10.1 3 ex10-1.txt 14% CONVERTIBLE DEBENTURE DATED 07/13/2001 Exhibit 10.1 THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (II) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY DEBENTURE ISSUED IN EXCHANGE FOR THIS DEBENTURE. DIMENSIONAL VISIONS INCORPORATED 14% Convertible Debenture $25,000.00 July 13, 2001 FOR VALUE RECEIVED, Dimensional Visions Incorporated, a Delaware corporation (the "Company") with its principal executive office at 2301 West Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, promises to pay to the order of Glen Crotts, 6209 North 22nd Avenue, Phoenix, Arizona 85015 (the "Payee" or the "Holder of this Debenture") or registered assigns on or before October 13, 2001 (the "Maturity Date"), the principal sum of Twenty-Five Thousand Dollars ($25,000.00) (the "Principal Amount"), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, together with interest thereon at the rate of fourteen (14%) percent per annum (the "Stated Rate"), payable as hereinafter set forth in cash, or at the option of the Holder of this Debenture, in the Company's Common Stock as provided in SECTION 4 hereof. Payment of the Principal Amount and interest shall be made at the address designated above or at such other place as the Payee shall have notified the Company in writing at least five (5) days before such payment is due. Payment by the Company pursuant to this Debenture shall be made without setoff or counterclaim and in immediately available funds. The amount of all repayments of principal, interest rates applicable thereto and interest accrued thereon shall be recorded on the records of the Payee and, prior to any transfer of, or any action to collect, this Debenture shall be endorsed on this Debenture. Any such recordation or endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded or endorsed, but the failure to record any such amount or rate shall not limit or otherwise affect the obligations of the Company hereunder to make payments of principal or interest when due. All payments by the Company hereunder shall be applied first to pay any interest which is due, but unpaid ("Accrued Interest"), then to reduce the Principal Amount. The Company (i) waives presentment, demand, protest, or notice of any kind in connection with this Debenture and (ii) agrees, in the event of an Event of Default (as defined in Section 2 hereof), to pay to the Holder of this Debenture, on demand, all costs and expenses (including reasonable legal fees) incurred in connection with the enforcement and collection of this Debenture. If the date for any payment due hereunder would otherwise fall on a day which is not a Business Day, such payment or expiration date shall be extended to the next following Business Day with interest payable at the applicable rate specified herein during such extension. "Business Day" shall mean any day other than a Saturday, Sunday, or any day which shall be in the State of Arizona a legal holiday or a day on which banking institutions are authorized by law to close. 1. CONVERSION OF DEBENTURE. A. CONVERSION. This Debenture is convertible, in whole or in part, at the option of the Holder, into shares of the Company's common stock, par value $.001 (the "Common Stock") at any time prior to the repayment of this Debenture at the rate of $0.125 per share (the "Conversion Price") (i.e., one share of Common Stock for each $0.125 of principal amount converted) subject to adjustment as hereinafter provided. B. ADJUSTMENT BASED UPON STOCK DIVIDENDS, COMBINATION OF SHARES OR RECAPITALIZATION. In the event that the Company shall at any time (i) pay a stock dividend, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock any other special capital stock of the Company, the Holder, upon surrender of this Debenture for conversion, shall be entitled to receive the number of shares of Common Stock or other capital stock of the Company which he 1 would have owned or have been entitled to receive after the happening of any of the events described above had this Debenture been converted immediately prior to the happening of such event. C. ADJUSTMENT BASED UPON MERGER OR CONSOLIDATION. In case of any consolidation or merger to which the Company is a party (other than a merger in which the Company is the surviving entity and which does not result in any reclassification of or change in the outstanding Common Stock of the Company), or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Holder shall have the right to convert this Debenture into the kind and amount of securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock into which such Debenture might have been converted immediately prior thereto. D. EXERCISE OF CONVERSION PRIVILEGE. The conversion privilege provided for herein shall be exercisable in whole or in part by the Holder by written notice to the Company and the surrender of this Debenture in exchange for up to the number of shares of Common Stock into which this Debenture is convertible based upon the Conversion Price. If the entire amount of this Debenture is not so exercised, the Company shall issue a new Debenture representing the remaining outstanding Principal Amount. E. CORPORATE STATUS OF SHARES TO BE ISSUED.. All shares of the Company's Common Stock which may be issued upon the conversion of this Debenture shall, upon issuance, be fully paid and non-assessable. F. ISSUANCE OF STOCK CERTIFICATE. Upon the conversion of this Debenture, the Company shall in due course issue to the Holder a certificate or certificates representing the number of shares of its Common Stock to which the conversion relates. G. STAMP TAXES, ETC. The Company shall pay all documentary, stamp or other transactional taxes attributable to the issuance or delivery of the Common Stock upon conversion of this Debenture; PROVIDED, HOWEVER, that the Company shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such Common Stock in a name other than that of the Holder of this Debenture and the Company shall not be required to issue or deliver any such certificate unless and until the person requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the Company's satisfaction that such tax has been paid. 2. EVENTS OF DEFAULT A. The term "Event of Default" shall mean any of the events set forth in this SECTION 2A: (a) NON-PAYMENT OF OBLIGATIONS.. The Company shall default in the payment of the principal or accrued interest of this Debenture as and when the same shall become due and payable, including the aforementioned 90-day extension, whether by acceleration or otherwise. (b) BANKRUPTCY, INSOLVENCY, ETC. The Company shall: (i) become insolvent or generally fail or be unable to pay, or admit in writing its inability to pay, its debts as they become due; (ii) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company or any of its property, or make a general assignment for the benefit of creditors; (iii) in the absence of such application, consent or acquiesce in, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Company or for any part of its property; (iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of 2 the Company, and, if such case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented to or acquiesced in by the Company or shall result in the entry of an order for relief; or (v) take any corporate or other action authorizing, or in furtherance of, any of the foregoing. (c) JUDGMENTS. A judgment which, with other such outstanding judgments against the Company and its subsidiaries (in each case to the extent not covered by insurance), exceeds an aggregate of One Hundred Thousand Dollars($100,000), shall be rendered against the Company or any subsidiary and, within fifteen (15) days after entry thereof, such judgment shall not have been discharged or execution thereof stayed pending appeal, or, within fifteen (15) days after the expiration of any such stay, such judgment shall not have been discharged. B. ACTION IF BANKRUPTCY. If any Event of Default described in clauses (b)(i) through (v) of Section 2A shall occur, the outstanding principal amount of this Debenture and all other obligations hereunder shall automatically be and become immediately due and payable, without notice or demand. C. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default (other than any Event of Default described in clauses (b)(i) through (v) of Section 2A) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Holder of this Debenture may, upon notice to the Company, declare all or any portion of the outstanding principal amount of this Debenture together with interest accrued thereon to be due and payable and any or all other obligations hereunder to be due and payable, whereupon the full unpaid principal amount hereof, such accrued interest, and any and all other such obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand, or presentment. D. REMEDIES. Subject to the provisions of Section 2C and 3A hereof, in case any Event of Default shall occur and be continuing, the Holder of this Debenture may proceed to protect and enforce its rights by a proceeding seeking the specific performance of any covenant or agreement contained in this Debenture or the Security Agreement, or in aid of the exercise of any power granted in this Debenture or may proceed to enforce the payment of this Debenture or to enforce any other legal or equitable rights as such Holder. 3. AMENDMENTS AND WAIVERS. A. WAIVERS, AMENDMENTS, ETC. (a) The provisions of this Debenture may from time to time be amended, modified or waived, if such amendment, modification, or waiver is in writing and consented to by the Company and the holders of not less than 50% in principal amount of the Debentures (the "Required Holders"); PROVIDED, HOWEVER, that no such amendment, modification or waiver: (i) which would modify this Section 3A, change the definition of "Required Holders", extend the Maturity Date, or subject the Payee under each Debenture to any additional obligations shall be made without the consent of the Payee of each Debenture, or (ii) which would reduce the amount of any payment or prepayment of principal of or interest on any principal amount payable hereunder (or reduce the principal amount of or rate of interest payable hereunder) shall be made without the consent of the Holder of each Debenture so affected. (b) No failure or delay on the part of the Payee in exercising any power or right under this Debenture shall not operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Company in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Payee shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. 3 (c) To the extent that the Company makes a payment or payments to the Payee, and such payment or payments or any part thereof are subsequently for any reason invalidated, set aside, and/or required to be repaid to a trustee, receiver, or any other party under any bankruptcy law, state or federal law, common law, or equitable cause, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. (d) After any waiver, amendment, or supplement under this section becomes effective, the Company shall mail to the Holders of the Debentures a copy thereof. 4. COMMON STOCK IN LIEU OF INTEREST. At the sole discretion of the Holder, the Holder may elect to receive one share of Common Stock for each $0.125 of interest due to Holder on any Interest Payment Date (i.e., Common Stock at the rate of $0.125 per share) partially or entirely in lieu of cash payment of interest, by notifying the Company of its election to receive the Common Stock at least five (5) days prior to any Interest Payment Date. The number of shares of Common Stock so issued shall be subject to adjustment in accordance with SECTION 1B AND 1C hereof. 5. MISCELLANEOUS. A. PARTIES IN INTEREST. All covenants, agreements, and undertakings in this Debenture binding upon the Company or the Payee shall bind and inure to the benefit of the successors and permitted assigns of the Company and the Payee, respectively, whether so expressed or not. (a) REGISTERED HOLDER. The Company may consider and treat the person in whose name this Debenture shall be registered as the absolute owner thereof for all purposes whatsoever (whether or not this Debenture shall be overdue) and the Company shall not be affected by any notice to the contrary. In case of transfer of this Debenture by operation of law, the transferee agrees to notify the Company of such transfer and of its address, and to submit appropriate evidence regarding such transfer so that this Debenture may be registered in the name of the transferee. This Debenture is transferable only on the books of the Company by the Holder hereof, in person or by attorney, on the surrender hereof, duly endorsed. Communications sent to any registered owner shall be effective as against all Holders or transferees of the Debenture not registered at the time of sending the communication. B. GOVERNING LAW. This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware without regard to any conflict provisions therein. C. NOTICES. Unless otherwise provided, all notices required or permitted under this Debenture shall be in writing and shall be deemed effectively given (i) upon personal delivery to the party to be notified, (ii) upon confirmed delivery by Federal Express or other nationally recognized courier service providing next-business-day delivery, or (iii) three (3) business days after deposit with the United States Postal Service, by registered or certified mail, postage prepaid and addressed to the party to be notified, in each case at the address set forth below, or at such other address as such party may designate by written notice to the other party (provided that notice of change of address shall be effective upon receipt by the party to whom such notice is addressed). If sent to Payee, notices shall be sent to the following address: Glen Crotts 6209 North 22nd Avenue Phoenix, Arizona 85015 4 If sent to the Company, notices shall be sent to the following address: Dimensional Visions Incorporated 2301 West Dunlap Avenue Suite 207 Phoenix, Arizona 85201 John D. McPhilimy, President D. WAIVER OF JURY TRIAL. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS DEBENTURE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S EXTENDING CREDIT PURSUANT TO THIS DEBENTURE. IN WITNESS WHEREOF, this Debenture has been executed and delivered on the date specified above by the duly authorized representative of the Company. DIMENSIONAL VISIONS INCORPORATED By: /s/ John D. Mcphilimy ------------------------------------ John D. McPhilimy President 5 EX-10.2 4 ex10-2.txt 12% CONVERTIBLE DEBENTURE DATED 08/03/2001 Exhibt 10.2 THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (II) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY DEBENTURE ISSUED IN EXCHANGE FOR THIS DEBENTURE. DIMENSIONAL VISIONS INCORPORATED 12% Convertible Debenture $20,000.00 August 3, 2001 FOR VALUE RECEIVED, Dimensional Visions Incorporated, a Delaware corporation (the "Company") with its principal executive office at 2301 West Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, promises to pay to the order of J.B. Diversified Financial, 4331 E. Calle Redondo, Phoenix, Arizona 85018 (the "Payee" or the "Holder of this Debenture") or registered assigns on or before February 3, 2002 (the "Maturity Date"), the principal sum of Twenty Thousand Dollars ($20,000.00) (the "Principal Amount"), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, together with interest thereon at the rate of twelve (12%) percent per annum (the "Stated Rate"), payable as hereinafter set forth in cash, or at the option of the Holder of this Debenture, in the Company's Common Stock as provided in SECTION 4 hereof. Payment of the Principal Amount and interest shall be made at the address designated above or at such other place as the Payee shall have notified the Company in writing at least five (5) days before such payment is due. Payment by the Company pursuant to this Debenture shall be made without setoff or counterclaim and in immediately available funds. The amount of all repayments of principal, interest rates applicable thereto and interest accrued thereon shall be recorded on the records of the Payee and, prior to any transfer of, or any action to collect, this Debenture shall be endorsed on this Debenture. Any such recordation or endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded or endorsed, but the failure to record any such amount or rate shall not limit or otherwise affect the obligations of the Company hereunder to make payments of principal or interest when due. All payments by the Company hereunder shall be applied first to pay any interest which is due, but unpaid ("Accrued Interest"), then to reduce the Principal Amount. The Company (i) waives presentment, demand, protest, or notice of any kind in connection with this Debenture and (ii) agrees, in the event of an Event of Default (as defined in Section 2 hereof), to pay to the Holder of this Debenture, on demand, all costs and expenses (including reasonable legal fees) incurred in connection with the enforcement and collection of this Debenture. If the date for any payment due hereunder would otherwise fall on a day which is not a Business Day, such payment or expiration date shall be extended to the next following Business Day with interest payable at the applicable rate specified herein during such extension. "Business Day" shall mean any day other than a Saturday, Sunday, or any day which shall be in the State of Arizona a legal holiday or a day on which banking institutions are authorized by law to close. 1. CONVERSION OF DEBENTURE. A. CONVERSION. This Debenture is convertible, in whole or in part, at the option of the Holder, into shares of the Company's common stock, par value $.001 (the "Common Stock") at any time prior to the repayment of this Debenture at the rate of $0.125 per share (the "Conversion Price") (i.e., one share of Common Stock for each $0.125 of principal amount converted) subject to adjustment as hereinafter provided. B. ADJUSTMENT BASED UPON STOCK DIVIDENDS, COMBINATION OF SHARES OR RECAPITALIZATION. In the event that the Company shall at any time (i) pay a stock dividend, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock any other special capital stock of the Company, the Holder, upon surrender of this Debenture for conversion, shall be entitled to receive the 1 number of shares of Common Stock or other capital stock of the Company which he would have owned or have been entitled to receive after the happening of any of the events described above had this Debenture been converted immediately prior to the happening of such event. C. ADJUSTMENT BASED UPON MERGER OR CONSOLIDATION. In case of any consolidation or merger to which the Company is a party (other than a merger in which the Company is the surviving entity and which does not result in any reclassification of or change in the outstanding Common Stock of the Company), or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Holder shall have the right to convert this Debenture into the kind and amount of securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock into which such Debenture might have been converted immediately prior thereto. D. EXERCISE OF CONVERSION PRIVILEGE. The conversion privilege provided for herein shall be exercisable in whole or in part by the Holder by written notice to the Company and the surrender of this Debenture in exchange for up to the number of shares of Common Stock into which this Debenture is convertible based upon the Conversion Price. If the entire amount of this Debenture is not so exercised, the Company shall issue a new Debenture representing the remaining outstanding Principal Amount. E. CORPORATE STATUS OF SHARES TO BE ISSUED. All shares of the Company's Common Stock which may be issued upon the conversion of this Debenture shall, upon issuance, be fully paid and non-assessable. F. ISSUANCE OF STOCK CERTIFICATE. Upon the conversion of this Debenture, the Company shall in due course issue to the Holder a certificate or certificates representing the number of shares of its Common Stock to which the conversion relates. G. STAMP TAXES, ETC. The Company shall pay all documentary, stamp or other transactional taxes attributable to the issuance or delivery of the Common Stock upon conversion of this Debenture; PROVIDED, however, that the Company shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such Common Stock in a name other than that of the Holder of this Debenture and the Company shall not be required to issue or deliver any such certificate unless and until the person requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the Company's satisfaction that such tax has been paid. 2. EVENTS OF DEFAULT A. The term "Event of Default" shall mean any of the events set forth in this SECTION 2A: (a) NON-PAYMENT OF OBLIGATIONS. The Company shall default in the payment of the principal or accrued interest of this Debenture as and when the same shall become due and payable, including the aforementioned 90-day extension, whether by acceleration or otherwise. (b) BANKRUPTCY, INSOLVENCY, ETC. The Company shall: (i) become insolvent or generally fail or be unable to pay, or admit in writing its inability to pay, its debts as they become due; (ii) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company or any of its property, or make a general assignment for the benefit of creditors; (iii) in the absence of such application, consent or acquiesce in, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Company or for any part of its property; (iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, 2 winding up or liquidation proceeding, in respect of the Company, and, if such case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented to or acquiesced in by the Company or shall result in the entry of an order for relief; or (v) take any corporate or other action authorizing, or in furtherance of, any of the foregoing. (c) JUDGMENTS. A judgment which, with other such outstanding judgments against the Company and its subsidiaries (in each case to the extent not covered by insurance), exceeds an aggregate of One Hundred Thousand Dollars($100,000), shall be rendered against the Company or any subsidiary and, within fifteen (15) days after entry thereof, such judgment shall not have been discharged or execution thereof stayed pending appeal, or, within fifteen (15) days after the expiration of any such stay, such judgment shall not have been discharged. B. ACTION IF BANKRUPTCY. If any Event of Default described in clauses (b)(i) through (v) of Section 2A shall occur, the outstanding principal amount of this Debenture and all other obligations hereunder shall automatically be and become immediately due and payable, without notice or demand. C. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default (other than any Event of Default described in clauses (b)(i) through (v) of Section 2A) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Holder of this Debenture may, upon notice to the Company, declare all or any portion of the outstanding principal amount of this Debenture together with interest accrued thereon to be due and payable and any or all other obligations hereunder to be due and payable, whereupon the full unpaid principal amount hereof, such accrued interest, and any and all other such obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand, or presentment. D. REMEDIES. Subject to the provisions of Section 2C and 3A hereof, in case any Event of Default shall occur and be continuing, the Holder of this Debenture may proceed to protect and enforce its rights by a proceeding seeking the specific performance of any covenant or agreement contained in this Debenture or the Security Agreement, or in aid of the exercise of any power granted in this Debenture or may proceed to enforce the payment of this Debenture or to enforce any other legal or equitable rights as such Holder. 3. AMENDMENTS AND WAIVERS. A. WAIVERS, AMENDMENTS, ETC. (a) The provisions of this Debenture may from time to time be amended, modified or waived, if such amendment, modification, or waiver is in writing and consented to by the Company and the holders of not less than 50% in principal amount of the Debentures (the "Required Holders"); PROVIDED, HOWEVER, that no such amendment, modification or waiver: (i) which would modify this Section 3A, change the definition of "Required Holders", extend the Maturity Date, or subject the Payee under each Debenture to any additional obligations shall be made without the consent of the Payee of each Debenture, or (ii) which would reduce the amount of any payment or prepayment of principal of or interest on any principal amount payable hereunder (or reduce the principal amount of or rate of interest payable hereunder) shall be made without the consent of the Holder of each Debenture so affected. (b) No failure or delay on the part of the Payee in exercising any power or right under this Debenture shall not operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Company in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Payee shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. 3 (c) To the extent that the Company makes a payment or payments to the Payee, and such payment or payments or any part thereof are subsequently for any reason invalidated, set aside, and/or required to be repaid to a trustee, receiver, or any other party under any bankruptcy law, state or federal law, common law, or equitable cause, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. (d) After any waiver, amendment, or supplement under this section becomes effective, the Company shall mail to the Holders of the Debentures a copy thereof. 4. COMMON STOCK IN LIEU OF INTEREST. At the sole discretion of the Holder, the Holder may elect to receive one share of Common Stock for each $0.125 of interest due to Holder on any Interest Payment Date (i.e., Common Stock at the rate of $0.125 per share) partially or entirely in lieu of cash payment of interest, by notifying the Company of its election to receive the Common Stock at least five (5) days prior to any Interest Payment Date. The number of shares of Common Stock so issued shall be subject to adjustment in accordance with SECTION 1B AND 1C hereof. 5. MISCELLANEOUS. A. PARTIES IN INTEREST. All covenants, agreements, and undertakings in this Debenture binding upon the Company or the Payee shall bind and inure to the benefit of the successors and permitted assigns of the Company and the Payee, respectively, whether so expressed or not. (a) REGISTERED HOLDER. The Company may consider and treat the person in whose name this Debenture shall be registered as the absolute owner thereof for all purposes whatsoever (whether or not this Debenture shall be overdue) and the Company shall not be affected by any notice to the contrary. In case of transfer of this Debenture by operation of law, the transferee agrees to notify the Company of such transfer and of its address, and to submit appropriate evidence regarding such transfer so that this Debenture may be registered in the name of the transferee. This Debenture is transferable only on the books of the Company by the Holder hereof, in person or by attorney, on the surrender hereof, duly endorsed. Communications sent to any registered owner shall be effective as against all Holders or transferees of the Debenture not registered at the time of sending the communication. B. GOVERNING LAW. This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware without regard to any conflict provisions therein. C. NOTICES. Unless otherwise provided, all notices required or permitted under this Debenture shall be in writing and shall be deemed effectively given (i) upon personal delivery to the party to be notified, (ii) upon confirmed delivery by Federal Express or other nationally recognized courier service providing next-business-day delivery, or (iii) three (3) business days after deposit with the United States Postal Service, by registered or certified mail, postage prepaid and addressed to the party to be notified, in each case at the address set forth below, or at such other address as such party may designate by written notice to the other party (provided that notice of change of address shall be effective upon receipt by the party to whom such notice is addressed). If sent to Payee, notices shall be sent to the following address: J.B. Diversified Financial 4331 E. Calle Redondo Phoenix, Arizona 85018 EIN: 86-1030840 4 If sent to the Company, notices shall be sent to the following address: Dimensional Visions Incorporated 2301 West Dunlap Avenue Suite 207 Phoenix, Arizona 85201 John D. McPhilimy, President D. WAIVER OF JURY TRIAL. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS DEBENTURE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S EXTENDING CREDIT PURSUANT TO THIS DEBENTURE. IN WITNESS WHEREOF, this Debenture has been executed and delivered on the date specified above by the duly authorized representative of the Company. DIMENSIONAL VISIONS INCORPORATED By: /s/ John D. Mcphilimy ------------------------------------ John D. McPhilimy President 5 -----END PRIVACY-ENHANCED MESSAGE-----