SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________________
Commission file number
DIMENSIONAL VISIONS INCORPORATED
(Name of Small Business Issuer as specific in its Charter)
Delaware 23-2517953
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2301 W. Dunlap Avenue, Suite 207, Phoenix, Arizona 85021
(Address of Principal Executive Offices) (Zip Code)
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Issuer's telephone number, including area code: (602) 997-1990
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained herein, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. Yes [X] No [ ]
For the fiscal year ended June 30, 2001, the Company's revenue was $235,197.
As of October 25, 2001, the number of shares of Common Stock outstanding was 11,955,631. The aggregate market value of the Company's Common Stock held by non-affiliates of the registrant as of October 25, 2001, was approximately $956,450 (based upon 11,955,631 shares at $.08 per share).
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference: (i) Registration Statement on Form SB-2 dated June 19, 2000 (Registration No. 333-30368); and (ii) Registration Statement on Form SB-2 dated July 10, 2001 (Registration No. 333-56804) are incorporated in Part III, Item 13(a).
TABLE OF CONTENTS
PAGE
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ITEM 1. DESCRIPTION OF BUSINESS. ......................................... 1
GENERAL ............................................................... 1
COMPANY HISTORY ....................................................... 1
FISCAL YEARS 1988-1994 .............................................. 1
FISCAL YEARS 1995-1997 .............................................. 1
FISCAL YEARS 1998-2001 .............................................. 2
STRATEGY .............................................................. 2
MARKET & PENETRATION ................................................ 2
PRODUCTION ............................................................ 3
COMPETITION ........................................................... 3
PATENTS, TRADEMARKS AND PROPRIETARY PROTECTION ........................ 3
EMPLOYEES ............................................................. 4
SELECTED CONSOLIDATED FINANCIAL DATA .................................. 4
ITEM 2. DESCRIPTION OF PROPERTY. ......................................... 4
ITEM 3. LEGAL PROCEEDINGS. ............................................... 4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ............. 4
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. ............................................. 5
HOLDERS ............................................................... 5
DIVIDENDS ............................................................. 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. ....................................... 7
FISCAL YEARS 2000 AND 2001 ............................................ 7
RESULTS OF OPERATIONS ............................................... 7
LIQUIDITY AND CAPITAL RESOURCES ..................................... 7
ITEM 7. FINANCIAL STATEMENTS. ............................................ 8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. ........................................ 8
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. ............... 8
INDEMNIFICATION OF DIRECTORS AND OFFICERS ............................. 9
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ..................... 9
ITEM 10. EXECUTIVE COMPENSATION. ......................................... 10
SUMMARY COMPENSATION TABLE ............................................ 10
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 11
1996 EQUITY INCENTIVE PLAN ............................................ 13
1999 STOCK OPTION PLAN ................................................ 13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ................. 13
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K ................................ 14
SIGNATURES ............................................................... 15
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Dimensional Visions creates and delivers3D/animated graphics for products, packaging and marketing communications.
Our graphics are multi-dimensional (commonly known as "3-D") and/or animated visual effects. These effects may be produced in varying sizes to specified customer applications for companies who want to differentiate their products from the competition. The visual effects are created by viewing multiple images through a series of lenses incorporated into a plastic sheet called lenticular. These lenses work as a viewer which self adjusts to whatever distance the viewer is from the image. Viewed in one direction, the lenses allow the individual to see multiple views of an image simultaneously. These multiple views are seen as being in three dimensions. Alternatively, viewed in the other direction, the lenses restrict the view to a particular image that changes as the piece is moved, thus creating an animation effect (i.e., the picture appears to be moving).
Our objective is to become a dominant marketer, developer and producer of 3D/animated graphics in the United States and internationally.
Our 3D/animated graphics offer multi-dimensional and/or animated images for the promotion marketing industry, advertising and graphic design industry and original equipment manufacturers throughout the United States.
InfoPak, Inc. is our one active subsidiary company. InfoPak manufactures and markets a hardware/software PACKAGED product line called the "InfoPakSystem(TM)." This system was designed to handle substantial offline information and databases that may require frequent updating.
We have decided to focus all of our resources on our 3D/animated graphics product line. During Fiscal Year 2001, the activity in InfoPak was minimal. We had retained Chapman Associates, an investment banking firm, to assist us in the sale of our InfoPak, Inc. subsidiary. To date, we have not found a buyer and Chapman Associates is no longer activity pursuing a buyer. We will continue to support the operations of InfoPak until it is sold or our Board of Directors decides to discontinue its operations.
Dimensional Visions' office and principal place of business is located at 2301 West Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, and its telephone number is (602) 997-1990.
COMPANY HISTORY
FISCAL YEARS 1988-1994
In 1988, Dimensional Visions Group, Ltd. was incorporated in the state of Delaware. Dimensional Visions was headquartered in Philadelphia, Pennsylvania. At that time, Dimensional Visions created its three-dimensional effects by building model sets and photographing these sets using a robotic controlled camera. These photographed images were then prepared for lithographic printing. The process utilized during this timeframe was very expensive and extremely difficult to consistently reproduce quality images. Throughout this period Dimensional Visions tried unsuccessfully to perfect the robotic camera process.
FISCAL YEARS 1995-1997
In 1995, Dimensional Visions acquired InfoPak, Inc. of Phoenix, Arizona ("InfoPak") which is currently our wholly owned subsidiary. InfoPak manufactures and markets a hardware/software package called the "InfoPakSystem(TM)". This system takes existing databases and prepares them for use on a palm-top computer manufactured by InfoPak. It is particularly useful to individuals who need
access to information while away from a computer terminal. Therefore, it is marketed to mobile business professionals in the automobile appraisal and real-estate businesses. Automobile appraisal guides are available on the palm-top unit for access at automobile auctions or at car dealership lots. Multiple listing data is similarly available for real estate agents for field access to the home listings.
From 1995 to 1997, Dimensional Visions utilized the software development resources of InfoPak to develop the patent-pending software and systematic digital process for its Living Image(TM) Solutions.
FISCAL YEARS 1998-2001
In January 1998, we established our current headquarters in Phoenix, Arizona. Under the leadership of a new executive management team, Dimensional Visions was completely restructured including changing our corporate name to Dimensional Visions Incorporated and changing our stock trading symbol from DVGL to DVUI. At the end of 1997, the Company needed to complete private placements of debt and equity to continue operations. As a prerequisite, our investment banking firm, Capital West Investment Group, required the Company to replace the upper level management and effect a 1 for 25 reverse stock split. During the fiscal year 2001, 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 trading volume of the Company's common stock. The Company also utilized $385,000 from a line of credit from Merrill Lynch to sustain operations.
During this timeframe we sold all of the original robotic photographic equipment to concentrate on the new 3D/animated graphics (utilizing very high-end Intel based graphic design computers). Our management team believes that the new process is much more cost effective, reproducable, and has a shorter production cycle than the photographic process formerly used by the Company. We also believe that it better meets the demands of today's market which requires quick turn around of products from inception to delivery.
STRATEGY
MARKET & PENETRATION
Multi-dimensional and/or animated images are being utilized today by Dimensional Visions' clients. The images are used because they combine depth and movement to attract the consumer's attention and potentially increase their sales.
Our 3D/animated graphics have and will be (a) integrated onto products (for example: affixed to yearbooks, children's portfolio covers, etc.), (b) integrated onto product packaging (for example: affixed to cereal boxes, CD packages, etc.), and (c) integrated onto marketing communications for products and services (for example: affixed to annual reports, etc.). We define the market for our 3D/animated graphics as the following major markets in the United States:
* Specially selected Original Equipment Manufacturers
* Specially selected Promotional Marketing Firms
* Specially selected Advertising & Graphics Design Firms (excluding
radio and TV)
Dimensional Visions believes that the market for 3D/animated graphics is in its infancy particularly with the advent of new high-end Intel based graphic design computers and improved lenticular plastic extrusion capabilities. With these advances, coupled with the best-integrated software methodology and marketing strategy, we believe Dimensional Visions can be a market leader.
Dimensional Visions estimates that the market universe for its 3D/animated graphics is as follows:
* ORIGINAL EQUIPMENT MANUFACTURERS: Our revenues for the fiscal year ended June 30, 2001, from the original manufacturers were approximately 54% of our total revenue. Cookie Inc. made up 19% of our revenues for the fiscal year June 30, 2001, while Phoenix Display was also approximately 19%.
* PROMOTION MARKETING INDUSTRY: Dimensional Visions believes that the Premium/Incentives, Point of Purchase, Specialty Printing, and Agencies Net Revenues categories are potential users of our 3D/animated graphics. Our revenues for the fiscal year ended June 30, 2001 from this market were approximately 46% of our total revenue. Big3d.com made up 13% of our revenues for the fiscal year ended June 30, 2001, while Promotion Productions and Thelen Pollick made up 9% and 10%, respectively, of our total revenues.
* ADVERTISING INDUSTRY: We believe that newspapers, magazines, direct mail, business papers, and miscellaneous other advertising methods are potential users of 3D/animated graphics solutions. Although this industry has not yet brought in revenues to our Company, these categories make up over $116.4 billion or 62% of total advertising revenues in the U.S.
PRODUCTION
Dimensional Visions controls or supervises all phases of the production of its 3D/animated graphics from the image development and computerized enhancement phases through the color separation and printing phases. Images are provided to us by our clients in many formats including digitally in graphic file formats and photographically in pictures or transparencies. Photographic images are scanned into the computer to be modified and enhanced. Through a proprietary process, several images are composited together to generate a final image that will appear as a three-dimensional and/or animation image when viewed through a lenticular material. "Lenticular" is a plastic optical material that allows the three-dimensional and/or animation image to be viewed without the use of any viewing apparatus such as glasses or hoods. The digital files are forwarded to Travel Tags, our primary printer, or other commercial printer, where, through the lithographic process, the images are printed on a polymer based lenticular material which focuses the multi-dimensional or animation images. Printing is done under the supervision of Dimensional Visions. The lenticular material is supplied by producers in the petrochemical and plastic fabricating industries directly to our printer. Dimensional Visions has no long-term contracts with its printers.
COMPETITION
Other processes currently are available which allow a viewer to perceive an image in three-dimensions, including those which employ stereoscopic glasses and viewing hoods and other processes, and holograms and other three-dimensional image systems which do not require the use of viewing apparatus. Dimensional Visions is aware of at least two companies, Optigraphics, Inc. and National Graphics, Inc., which compete with our products. Our products may be more expensive than conventional, high quality, two-dimensional prints and for this reason, high quality, conventional processes and methods may be favored for many, if not most, illustration and promotion contexts. Color lenticular images are less expensive than other forms of three-dimensional prints.
PATENTS, TRADEMARKS AND PROPRIETARY PROTECTION
The Company filed a patent application on February 15, 1999 for its 3D/animated graphics software and print system. The Company believes that the patent will issue by December 31, 2001.
Dimensional Visions has received trademark registration of DV3D(R).
Dimensional Visions enters into confidentiality agreements with all persons and entities who or which may have access to our technology. However, no assurance can be given that such agreements, the patents, or any additional patents that may be issued to Dimensional Visions will prevent third parties from developing similar or competitive technology. There can be no assurance that the patents will provide us with any significant competitive advantages, or that challenges will not be instituted against the validity or enforceability of its patents, or if instituted that any such challenges will not be successful. The cost of litigation to uphold the validity and prevent infringement can be substantial.
In addition, no assurance can be given that we will have sufficient resources to either institute or defend any action, suit or other proceeding by or against our Company with respect to any claimed infringement of patent or other proprietary rights. In the event that we should lose, in the near future, the protection afforded by the patents and any future patents, such event could have a material adverse effect on our operations. Furthermore, there can be no assurance that our own technology will not infringe patent or other rights owned by others or licenses to which may not be available to us.
EMPLOYEES
Dimensional Visions has four employees, one of whom is involved in manufacturing and research and development, one in marketing and sales, one in operations, and one in finance. Dimensional Visions is not a party to any collective bargaining agreements. Dimensional Visions considers its relations with employees to be good.
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below is selected financial data derived from the Company's Consolidated Financial statements, some of which appear elsewhere in this Report. This data should be read in conjunction with the Consolidated Financial statements, included elsewhere in this Report.
Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 2001 June 30, 2000 June 30, 1999 June 30, 1998 June 30, 1997
------------- ------------- ------------- ------------- -------------
Operation revenue $ 234,347 $ 1,008,862 $ 741,901 $ 609,392 $ 551,517
Net loss $(1,059,775) $(1,021,144) $(1,465,812) $ (421,659) $(2,162,134)
Net loss per share of
common stock $ (.11) $ (.18) $ (.39) $ (.14) $ (1.14)
Balance Sheet Data:
Working capital (deficit) $ (542,882) $ 205,284 $ (603,946) $ (235,920) $ (107,952)
Total assets $ 211,594 $ 885,033 $ 530,973 $ 920,841 $ 529,520
Total liabilities $ 597,168 $ 519,112 $ 1,118,740 $ 713,539 $ 613,947
Stockholders' equity
(deficiency) $ (385,574) $ 365,921 $ (721,555) $ 207,302 $ (84,427)
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ITEM 2. DESCRIPTION OF PROPERTY.
We lease approximately 3,100 square feet of office space at 2301 W. Dunlap Avenue, Suites 207 in Phoenix, Arizona. This location serves as our principal executive offices and our current design and production facilities. The lease covering this property terminates on December 31, 2003. The total lease payments for the first six months of fiscal year 2002 will be approximately $25,000. The lease also requires us to pay all taxes and insurance for this property.
ITEM 3. LEGAL PROCEEDINGS.
To the best knowledge of our management, there are no material litigation matters pending or threatened against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock has been quoted on the OTC Bulletin Board (the "Bulletin Board") under the symbol "DVUI" since January 12, 1998. Prior to January 12, 1998, the Company's Common Stock traded under the symbol "DVGL." The following table sets forth the quarterly high and low bid prices of the Company's Common Stock for the periods indicated, after adjusting such prices for the Company's 1-for-25 reverse Common Stock split which was effective January 15, 1998. Bid quotations represent interdealer prices without adjustment for retail markup, markdown and/or commissions and may not necessarily represent actual transactions.
HIGH LOW
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FISCAL 2000
First Quarter......................................... 2 3/16 3/8
Second Quarter........................................ 1 23/32 27/32
Third Quarter......................................... 2 3/32 13/16
Fourth Quarter........................................ 2 9/32 3/8
FISCAL 2001
First Quarter......................................... 17/32 17/64
Second Quarter........................................ 7/16 1/8
Third Quarter......................................... 5/16 1/8
Fourth Quarter........................................ 7/20 9/64
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HOLDERS
As of October 25, 2001, the number of stockholders of record was 481, not including beneficial owners whose shares are held by banks, brokers and other nominees. The Company estimates that it has approximately 3,000 stockholders in total.
DIVIDENDS
The Company has paid no dividends on its Common Stock since its inception and does not anticipate or contemplate paying cash dividends in the foreseeable future.
Pursuant to the terms of the Company's Series A Convertible Preferred Stock, a 5% annual dividend is due and owing. Pursuant to the terms of the Company Series B Convertible Preferred stock, an 8% annual dividend is due and owing. As of June 30, 2001, the Company has not declared dividends on Series A or B preferred stock. The unpaid cumulative dividends totaled approximately $84,775. See Note 8 of Notes to Consolidated Financial Statements.
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES FOR FISCAL YEARS 2001 AND 2000
FISCAL YEAR 2001
The Company issued 369,000 shares of the Company's common stock in connection with the conversion of Series D Convertible Preferred Stock valued at $166,050.
The Company issued 400,000 shares of the Company's common stock in connection with the conversion of Series E Convertible Preferred Stock valued at $366,222.
The Company issued 39,300 shares of common stock in connection with the line of credit and guarantees of the investor group valued at $7,958.
The Company recorded additional paid-in capital of $71,048 with the issuance of 581,500 warrants to purchase shares of the Company's common stock ranging from $.135 and $.266 in connection with the line of credit and guarantees by the investor group.
FISCAL YEAR 2000
The Company recorded capital lease obligations of $86,422 relating to the acquisition of equipment.
The Company issued 12,000 shares of the Company's common stock in connection with the conversion of Series A Convertible Preferred Stock valued at $75,000.
The Company issued 40,000 shares of its common stock as payment of a $20,000 commission owed from the sale of Series D Preferred Stock offering in lieu of a cash payment.
The Company issued 1,707 shares of the Company's common stock in connection with the conversion of Series C Convertible Preferred Stock valued at $42,660.
The Company issued 46,000 shares of the Company's common stock in connection with the conversion of Series D Convertible Preferred Stock valued at $20,700.
The Company issued 544,000 of the Company's common stock to consultants for services valued at $341,250.
The Company issued 166,730 of the Company's common stock, in lieu of cash to settle $62,398 of accounts payable.
The Company issued 2,434,291 shares of the Company's common stock in connection with the conversion of $720,000 in debt and related accrued interest of $111,037.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FISCAL YEARS 2000 AND 2001
RESULTS OF OPERATIONS
The net loss for the fiscal year ended June 30, 2001, was $1,059,775 compared with a net loss of $1,021,145 for the fiscal year ended June 30, 2000. General and administrative expenses decreased in the fiscal year ended June 30, 2001 by approximately $163,000 over the fiscal year ended June 30, 2000. This decrease was due to approximately $29,000 in administrative salaries, $11,500 in rent, approximately $90,000 in consulting fees and $71,000 in stock related expenses. In addition, the Company incurred expenses from an arbitration settlement of disputed invoices for commissions of approximately $40,000. Marketing expenses increased from $129,520 in fiscal year 2000, to $271,514 in fiscal year 2001. Marketing salary increased by approximately $66,000 as a result of the hiring of two salesmen at the beginning of the fiscal year. Consulting fees for the hiring of a design firm also increased by $75,000. The Company's engineering expenses for the fiscal year ended June 30, 2201 increased by approximately $33,000 over the same period last year. This increase was attributed to the hiring of additional designers of approximately $26,000 and repairs and maintenance on our equipment of $9,500.
Revenue for the fiscal year ended June 30, 2001, was $234,347 compared to revenue of $1,008,862 for the fiscal year ended June 30, 2000. Revenue for the fiscal year ended June 30, 2000 was boosted by approximately $375,000 through the sale of Pokemon products that are no longer being ordered. Generally, the sales volume for the fiscal year ended June 30, 2001 without Pokemon was down approximately $400,000
As a result of the decline in revenue, the Company has reduced its fixed overhead costs by reducing the number of personnel. By December 31, 2000, the Company's work force was reduced by six employees which resulted in a savings of approximately $100,000 through June 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company collected approximately $570,000 in accounts receivable and approximately $115,000 from theexercise of warrants during the fiscal year ended June 30, 2001. Substantially all the cash received and on hand was used to support operations. The Company also utilized $385,000 from a line of credit from Merrill Lynch to sustain operations. 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 stockholders as guarantors of the line of credit. The outstanding debt as of June 30, 2001 was $385,000. The terms of the line of credit are for one year with an interest rate of the 3-month LIBOR rate, plus 2.5% [6.23% as of June 30, 2001]. 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. However, we will require additional funding until our sales will support our operations. The Company is continually focusing on expanding its customer base through its 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.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 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 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. 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. Through October 19, 2001, the Company has received limited funding of approximately $195,000 and is continuing to search for additional funding. The Company received $25,000 of the $195,000 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 also received $20,000 of the $195,000 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 remaining $150,000 was received between September 28, 2001 and October 19, 2001. The Company received $150,000 in advances on a 12% secured note that is due on 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.
ITEM 7. FINANCIAL STATEMENTS.
The consolidated financial statements required to be filed pursuant to this Item 7 begin on page F-1 of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
During the Company's two most recent fiscal years and any subsequent interim period preceding such registration, declination, or dismissal, there were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. There is nothing to report under Item 304(a)(1)(v)(A) through (D).
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
John D. McPhilimy 57 Director, Chairman of the Board of Directors and
Chief Executive Officer
Bruce D. Sandig 41 Senior Vice President and Director
Susan A. Perlow 50 Director
Lisa R. McPhilimy 27 Chief Financial Officer, Secretary and Director
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MR. JOHN MCPHILIMY was appointed as a Director, President, and Chief Executive Officer of the Company in November 1997. In January 1998, he was appointed Chairman of the Board. From January 1995 until November 1997, Mr. McPhilimy served as President of Selah Information Systems, Inc., Mesa, Arizona, a company involved in information systems. From March 1992 to December 1995, Mr. McPhilimy served as President of Travel Teller, Inc. Mr. McPhilimy has over 30 years of executive and marketing experience in high-technology industries such as aerospace, air transportation, and electronic telecommunication networks with Bell Helicopter Textron, Aerospatiale, Executive Jet Aviation, Travel Teller Inc., Marketing Works, and Selah Information Systems. Over the last 15 years he has been responsible for implementing marketing strategies of NetJets and Travel Teller, which created the new industries of "nationwide fractional ownership of business jets" and "electronic ticket delivery networks," respectively.
MR. BRUCE D. SANDIG was appointed as a Director of the Company in January 1998 and as Senior-Vice President of Creative Design and Production Engineering of the Company in November 1997 and provides overall development and integration of the DV3D(R) and Animotion(TM) Multi-Dimensional Images systems. Mr. Sandig was a co-founder of InfoPak in 1992. Mr. Sandig has over 15 years experience in electro-mechanical and software engineering/design with such companies as Universal Propulsion Company, Kroy, Inc., Dial Manufacturing, and Softie, Inc., where he also created several proprietary software games for Nintendo.
MS. SUSAN A. PERLOW has served as Director of the Company since January 1998. Since January 1998 she has served as Managing Principal Consultant for Oracle, Inc. She served as Director of Business Processing from March 1995 to December 1997 for AmKor Electronics.
MRS. LISA R. MCPHILIMY, daughter-in-law of John McPhilimy, CEO, was appointed as a Director of the Company in May 2001 and as Chief Financial Officer and Secretary provides overall integrated financial management and reporting for the Company. She is a Certified Public Accountant and a graduate of Ohio University. She has over 5 years experience in financial management and is responsible for the Securities & Exchange Commission reporting required as a publicly held company.
Directors serve until the next annual meeting or until their successors are qualified and elected. Officers serve at the discretion of the Board of Directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation and Bylaws of Dimensional Visions provide that Dimensional Visions will indemnify and advance expenses, to the fullest extent permitted by the Delaware General Corporation Law, to each person who is or was a director, officer or agent of Dimensional Visions, or who serves or served any other enterprise or organization at the request of Dimensional Visions (an "Indemnitee"). Under Delaware law, to the extent that an Indemnitee is successful on the merits of a suit or proceeding brought against him or her by reason of the fact that he or she was a director, officer or agent of Dimensional Visions, or serves or served any other enterprise or organization at the request of Dimensional Visions, Dimensional Visions will indemnify him or her against expenses (including attorneys' fees) actually and reasonably incurred in connection with such action. If unsuccessful in defense of a third-party civil suit or a criminal suit, or if such a suit is settled, an Indemnitee may be indemnified under Delaware law against both (i) expenses, including attorneys' fees, and (ii) judgments, fines and amounts paid in settlement if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of Dimensional Visions, and, with respect to any criminal action, had no reasonable cause to believe his other conduct was unlawful. If unsuccessful in defense of a suit brought by or in the right of Dimensional Visions, where the suit is settled, an Indemnitee may be indemnified under Delaware law only against expenses (including attorneys' fees) actually and reasonably incurred in the defense or settlement of the suit if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of Dimensional Visions except that if the Indemnitee is adjudged to be liable for negligence or misconduct in the performance of his or her duty to Dimensional Visions, he or she cannot be made whole even for expenses unless a court determines that he or she is fully and reasonably entitled to indemnification for such expenses. Also under Delaware law, expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by Dimensional Visions in advance of the final disposition of the suit, action or proceeding upon receipt of an undertaking by or on behalf of the officer or director to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified by Dimensional Visions. Dimensional Visions may also advance expenses incurred by other employees and agents of Dimensional Visions upon such terms and conditions, if any, that the Board of Directors of Dimensional Visions deems appropriate. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers or persons controlling Dimensional Visions pursuant to the foregoing provisions, in the opinion of the Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires directors and certain officers of the Company, as well as persons who own more than 10% of a registered class of the Company's equity securities, ("Reporting Persons") to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. The Company believes that all Reporting Persons have complied on a timely basis with all filing requirements applicable to them.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation earned by or paid to the Company's Chief Executive Officer for the last two fiscal years. No officer of the Company earned more than $100,000 in the last two fiscal years.
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------ ---------------------------------
Awards Payouts
----------------------- -------
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Year Salary($) Bonus($) Compensation($) Awards($) SARs(#) Payouts($) Compensation($)
---- --------- -------- --------------- --------- ------- ---------- ---------------
John D. McPhilimy 2000 $90,000 $7,500 $0 $0 -- $0 $0
2001 $93,000 $5,000 $0 $0 2,000,000 $0 $0
|
OPTIONS/SAR GRANTS IN THE FISCAL YEAR 2001
INDIVIDUAL GRANTS
Number of
Securities % of Total
Underlying Options/SARs Granted
Option/SARs to Employees in Exercise or Base Expiration
Name Year Granted (#) Fiscal Year Price ($/Share) Date
---- ---- ----------- ----------- --------------- ----
John D. McPhilimy 2001 2,000,000 40.8 .125 1/1/08
|
AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 2001
AND FY-END OPTION/SAR VALUES
Value of
Number of Securities Unexercised
Shares Underlying Exercised In-the-Money
Acquired on Value Options/SARs at FY-End(#) Options/SARs at
Name Year Exercise(#) Realized Exercisable/Unexercisable FY-End($)
---- ---- ----------- -------- ------------------------- ---------
John D. McPhilimy 2001 -- 0 2,385,000(E)/0(U) $90,000
|
EMPLOYMENT AND RELATED AGREEMENTS
John D. McPhilimy has an employment agreement with Dimensional Visions dated January 1, 2001and commencing on July 1, 2001. The term of the agreement is three years ending in June 2004. Mr. McPhilimy's base compensation is $96,000. The agreement renews by mutual written consent on the thirtieth month of its term for a two year period without further action by either party. There are no provisions for severance in the agreement. The agreement may be terminated by Dimensional Visions for cause.
Bruce D. Sandig has an employee agreement with Dimensional Visions. The term of the agreement is three years ending June 2004. Mr. Sandig's base compensation is $90,000 per year. The agreement renews by mutual written consent on the thirtieth month of its term for a two year period without further action by either party. There are no provisions for severance in the agreement. The agreement may be terminated by Dimensional Visions for cause.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the shares of the
Company's outstanding Common Stock beneficially owned as of October 25, 2001 by
(i) each of the Company's directors and executive officers, (ii) all directors
and executive officers as a group, and (iii) each other person who is known by
the Company to own beneficially more than 5% of the Company's Common Stock.
Name and Address of Amount and Nature of Percent Beneficial Owners(1) Beneficial Ownership(2) Ownership(2) -------------------- ----------------------- ------------ John D. McPhilimy (3) 1,297,000 9.79 127 W. Fellars Drive Phoenix, AZ 85023 Bruce D. Sandig (4) 5801 N. 14th Street Phoenix, AZ 85014 1,700,000 12.46 Lisa R. McPhilimy (5) 2906 East Leland Street Mesa, AZ 85213 550,000 4.40 Susan A. Perlow (6) 26210 S. Lime Drive Queen Creek, AZ 85242 75,000 0.62 All executive officers and directors as a group (4 persons) 3,622,000 23.27 Roy D. Pringle (7) 4915 W. Marco Polo Road Glendale, AZ 85308 1,506,047 11.19 Swartz Private Equity (8) 300 Colonial Center Parkway, Ste 300 Roswell, GA 30076 1,309,000 9.87 Dale Riker (9) 10040 E. Happy Valley Road Scottsdale, AZ 85255 1,420,861 11.07 Russell Ritchie (10) 4700 S. McClintock Dr, #120 Tempe, AZ 85282 959,250 7.44 ---------- |
(1) Each person named in the table has sole voting and investment power with respect to all Common Stock beneficially owned by him or her, subject to applicable community property law, except as otherwise indicated. Except as otherwise indicated, each of such persons may be reached through the Company at 2301 W. Dunlap Avenue, Suite 207, Phoenix, Arizona 85021.
(2) The percentages shown are calculated based upon the 11,955,631 shares of Common Stock outstanding on October 25, 2001. The numbers and percentages shown include the shares of Common Stock actually owned as of October 25, 2001 and the shares of Common Stock that the identified person or group had the right to acquire within 60 days of such date. In calculating the percentage of ownership, all shares of Common Stock that the identified person or group had the right to acquire within 60 days of October 25, 2001 upon the exercise of options and warrants, or the conversion of Preferred Stock, are deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stock owned by such person or group, but are not deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stock owned by any other person.
(3) Mr. McPhilimy has warrants to purchase 385,000 shares of Dimensional Visions' common stock at an exercise price of $.20 until October 28, 2003. He also has warrants to purchase 912,000 shares of common stock at an exercise price of $.125 until January 1, 2008.
(4) Mr. Sandig owns 10,000 shares of Dimensional Visions' common stock. Also included in the amount are common stock purchase warrants to purchase 230,000 shares of Dimensional Visions' common stock at an exercise price of $.20 until October 28, 2003 and warrants to purchase 460,000 shares of common stock at an exercise price of $.25 until January 27, 2005. He also has warrants to purchase 1,000,000 shares of common stock at an exercise price of $.125 until January 1, 2008.
(5) Ms. McPhilimy has warrants to purchase 18,334 shares of Dimensional Visions' common stock at an exercise price of $.20 until October 28, 2003 and warrants to purchase 31,666 shares of common stock at an exercise price of $.25 until January 27, 2005. She also has warrants to purchase 500,000 shares of common stock at an exercise price of $.125 until January 1, 2008.
(6) Ms. Perlow has warrants to purchase 40,000 shares of Dimensional Visions' common stock at an exercise price of $.50 until October 28, 2003 and warrants to purchase 35,000 shares of common stock at an exercise price of $.25 until January 27, 2005.
(7) Mr. Pringle owns 6,047 shares of Dimensional Visions' common stock. Also included in the amount are common stock purchase warrants to purchase 210,000 shares of Dimensional Visions' common stock at an exercise price of $.20 until October 28, 2003 and warrants to purchase 290,000 shares of common stock at an exercise price of $.25 until January 27, 2005. He also has warrants to purchase 1,000,000 shares of common stock at an exercise price of $.125 until January 1, 2008.
(8) Swartz Private Equity has warrants to purchase 1,309,000 shares of common stock issuable upon the exercise of outstanding warrants which are currently exercisable, which represents approximately 9.87% of our issued and outstanding common stock as of the date of this prospectus. Exercise of these warrants is limited to the extent that Swartz may not exercise the warrants to the extent that such exercise would result in Swartz's beneficial ownership of more than 4.99% of our issued and outstanding common stock at any time.
(9) Mr. Riker owns 541,961 shares of Dimensional Visions' common stock. Also included in the amount are warrants to purchase 98,250 shares of the Dimensional Visions' stock at an exercise price of $.2656 until January 11, 2006, warrants to purchase 50,000 shares of common stock at an exercise price of $.20 until January 11, 2004, warrants to purchase 75,000 shares of common stock at an exercise price of $.1406 until January 31, 2004, warrants to purchase 37,500 shares of common stock at an exercise price of $.1406 until April 1, 2004, warrants to purchase 15,000 shares of common stock at an exercise price of $.2175 until April 15, 2004, warrants to purchase 15,000 shares of common stock at an exercise price of $.135 until June 6, 2004 and warrants to purchase 4,000 shares of common stock at an exercise price of $.1275 until July 1, 2004. He may also acquire up to 589,500 shares of common stock by the assumption of the debt associated with the Company's line of credit.
(10) Mr. Ritchie owns 19,650 shares of Dimensional Visions' common stock. Also included in the amount are warrants to purchase 50,000 shares of Dimensional Visions' common stock at an exercise price of $.10 until January 24, 2002, warrants to purchase 125,000 shares of common stock at an exercise price of $.2656 until January 11, 2006, warrants to purchase 50,000 shares of common stock at an exercise price of $.20 until January 11, 2004, warrants to purchase 75,000 shares of common stock at an exercise price of $.1406 until January 31, 2004, warrants to purchase 37,500 shares of common stock at an exercise price of $.1406 until April 1, 2004, warrants to purchase 15,000 shares of common stock at an exercise price of $.2175 until April 15, 2004, warrants to purchase 15,000 shares of common stock at an exercise price of $.135 until June 6, 2004 and warrants to purchase 4,000 shares of common stock at an exercise price of $.1275 until July 1, 2004. He may also acquire up to 589,500 shares of common stock by the assumption of the debt associated with the Company's line of credit.
1996 EQUITY INCENTIVE PLAN
The Company, in June 1996, adopted the 1996 Equity Incentive Plan (the "1996 Plan") covering 10,000,000 shares of the Company's Common Stock pursuant to which employees, consultants and other persons or entities who are in a position to make a significant contribution to the success of the Company are eligible to receive awards in the form of incentive or non-incentive options, stock appreciation rights, restricted stock or deferred stock. The 1996 Plan will terminate ten (10) years after June 12, 1996, the effective date of the 1996 Plan. The 1996 Plan is administered by the Board of Directors. In its discretion, the Board of Directors may elect to administer the 1996 Plan. Restricted stock entitles the recipients to receive shares of the Company's Common Stock subject to such restriction and condition as the Compensation Committee may determine for no consideration or such considerations as determined by the Compensation Committee. Deferred stock entitles the recipients to receive shares of the Company's Common Stock in the future.
As of June 30, 2001, 5,002,978 shares had been issued pursuant to this plan.
1999 STOCK OPTION PLAN
On November 15, 1999, the Board of Directors of Dimensional Visions adopted the 1999 Stock Option Plan (the "1999 Plan"). This plan was approved by a majority of our stockholders at our January 28, 2000, stockholders' meeting. The purpose of the 1999 Plan is to advance the interests of the Company by encouraging and enabling acquisition of a financial interest in the Company by its officers and other key individuals. The 1999 Plan is intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company. A maximum of 1,500,000 shares of the Company's common stock are available to be issued under the 1999 Plan. The option exercise price will be 100% of the fair market value of the Company's common stock on the date the option is granted and will be exercisable for a period not to exceed 10 years from the date of grant.
As of June 30, 2001, no shares had been issued pursuant to this plan.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On January 12, 2001, the Company issued 4,900,000 employee incentive warrants to purchase shares of common stock of the Company at an exercise price of $0.125 over the next two fiscal years of the Company. These warrants vest 25% for every quarter in which the Company is profitable. The warrants will also vest to the employees if there is a change in control of the Company or upon discretion of the Board. The plan includes all current employees (4).
John D. McPhilimy, Chairman of the Board and Chief Executive Officer, was issued 2,000,000 warrants. Mr. McPhilimy assigned 888,000 and 200,000 of his warrants to Group Baronet and Action Stocks, respectively, on behalf of the Company in lieu of cash payments owed to these two groups by the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1(a) Articles of Incorporation, dated May 12, 1988
3.2(a) Bylaws
4.1(a) Certificate of Designation of Series A Convertible Preferred Stock,
dated December 12, 1992
4.2(a) Certificate of Designation of Series B Convertible Preferred Stock,
dated December 22, 1993
4.3(a) Certificate of Designation of Series P Convertible Preferred Stock,
dated September 11, 1995
4.4(a) Certificate of Designation of Series S Convertible Preferred Stock,
dated August 28, 1995
4.5(a) Certificate of Designation of Series C Convertible Preferred Stock,
dated November 2, 1995
4.6(a) Certificate of Designation of Series D and Series E Convertible
Preferred Stock dated August 25, 1999
4.7(a) Form of Warrant Agreement to debt holders, dated January 15, 1998
4.8(a) Form of Warrant Agreement to debt holders, dated April 8, 1998
4.9(a) Form of Warrant Agreement to participants in Private Placement
dated April 8, 1998
4.10(b) Pledge Agreement dated January 11, 2001 with Dale Riker and Russ
Ritchie
4.11(b) Investment Agreement dated December 13, 2000, with Swartz Private
Equity, LLC
4.12(b) Merrill Lynch Portfolio Reserve Loan and Collateral Account
Agreement
10.1(a) 1996 Equity Incentive Plan
10.2(a) 1999 Stock Option Plan
10.3(a) Agreement dated September 25, 1997 by and between InfoPak, Inc.,
DataNet Enterprises, LLC, and David and Staci Noles
10.4(a) Lease Agreement, dated October 27, 1997
10.5 Employment Agreement dated January 1, 2001, with John D. McPhilimy
10.6 Employment Agreement dated July 1, 2001, with Bruce D. Sandig
21.1(b) Subsidiaries of the Registrant
----------
|
(a) Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 dated June 19, 2000 (Registration No. 333-30368).
(b) Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 dated July 10, 2001 (Registration No. 333-56804).
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, duly authorized.
DIMENSIONAL VISIONS INCORPORATED
DATED: February 20, 2002 By: /s/ John D. McPhilimy
-------------------------------------------
John D. McPhilimy, Chairman and
Chief Executive Officer
DATED: February 20, 2002 By: /s/ Lisa R. McPhilimy
-------------------------------------------
Lisa R. McPhilimy, Chief Financial Officer,
Secretary and Director
|
In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ John D. McPhilimy Chairman, Chief Executive February 20, 2002
---------------------------- Officer
John D. McPhilimy
/s/ Bruce D. Sandig Vice President, Director February 20, 2002
----------------------------
Bruce D. Sandig
/s/ Lisa R. McPhilimy Chief Financial February 20, 2002
---------------------------- Officer, Secretary, Director
Lisa R. McPhilimy
|
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
YEARS ENDED JUNE 30, 2001 AND 2000
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Independent Auditors' Report F-2
Consolidated Financial Statements
Balance Sheet F-4
Statements of Operations F-5
Statements of Stockholders'Equity (Deficiency) F-6
Statements of Cash Flows F-10
Notes to Consolidated Financial Statements F-13
|
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders Dimensional Visions Incorporated and Subsidiary Phoenix, Arizona
We have audited the accompanying consolidated balance sheet of Dimensional Visions Incorporated and Subsidiary (the "Company") as of June 30, 2001, and the related consolidated statements of operations, stockholders' equity (deficiency), and cash flows for each of the two years in the period ended June 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dimensional Visions Incorporated and Subsidiary as of June 30, 2001 and the results of their operations and their cash flows for each of the two years in the period ended June 30, 2001 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has financed its operations primarily through the sale of its securities. As described in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has limited sales of its products, which raises substantial doubt about the Company's ability to continue as a going concern. The future of the Company as an operating business will depend on its
To the Board of Directors and Stockholders Dimensional Visions Incorporated and Subsidiary
ability to (1) successfully market its products, (2) obtain sufficient capital contributions and/or financing as may be required to sustain its current operations and fulfill its sales and marketing activities, (3) achieve a level of sales adequate to support the Company's cost structure, and (4) ultimately achieve a level of profitability. Management's plan concerning these matters is also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Kopple & Gottlieb, LLP KOPPLE & GOTTLIEB, LLP Jenkintown, Pennsylvania October 31, 2001 |
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 2001
ASSETS
Current assets
Cash $ 1,627
Accounts receivable, trade 8,614
Prepaid expenses 4,224
------------
Total current assets 14,465
------------
Equipment
Equipment 480,112
Furniture and fixtures 49,329
------------
529,441
Less accumulated depreciation 359,864
------------
169,577
------------
Other assets
Patent rights and other assets 27,552
------------
Total assets $ 211,594
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Short-term borrowings 339,138
Current portion of obligations under capital leases $ 59,834
Accounts payable, accrued expenses and other liabilities 158,375
------------
Total current liabilities 557,347
------------
Obligations under capital leases, net of current portion 39,821
------------
Total liabilities 597,168
------------
Commitments and contingencies --
Stockholders' deficiency
Preferred stock - $.001 par value, authorized 10,000,000 shares;
issued and outstanding 561,544 shares 562
Additional paid-in capital 942,606
------------
943,168
Common stock - $.001 par value, authorized 100,000,000 shares;
issued and outstanding 10,392,635 10,392
Additional paid-in capital 21,603,561
Deficit (22,888,528)
------------
Total stockholders' deficiency before deferred consulting
contracts (331,407)
Deferred consulting contracts (54,167)
------------
Total stockholders' deficiency (385,574)
------------
Total liabilities and stockholders' deficiency $ 211,594
============
|
See notes to consolidated financial statements.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 2001 AND 2000
2001 2000
----------- -----------
(Reclassified)
Operating revenue $ 234,347 $ 1,008,862
Cost of sales 162,132 662,021
----------- -----------
Gross profit 72,215 346,841
Operating expenses
Engineering and development costs 243,451 206,041
Marketing expenses 275,885 129,520
General and administrative expenses 542,531 815,994
----------- -----------
Total operating expenses 1,061,867 1,151,555
----------- -----------
Loss before other income (expenses) (989,652) (804,714)
----------- -----------
Other income (expenses)
Interest expense (72,544) (173,878)
Interest income 2,421 14,779
Bad debt expense on notes receivable -- (57,332)
----------- -----------
(70,123) (216,431)
----------- -----------
Net loss (1,059,775) (1,021,145)
Dividends in arrears on preferred stock (84,775) (74,225)
----------- -----------
Net Loss available to common shareholders $(1,144,550) $(1,095,370)
=========== ===========
Loss per share
Basic and diluted loss per common share $ (.11) $ (.18)
=========== ===========
Shares used in computing net loss per share 9,986,077 6,052,835
=========== ===========
|
See notes to consolidated financial statements.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED JUNE 30, 2001 AND 2000
Preferred Stock Common Stock
----------------- Additional ------------------ Additional
($.001 Par Value) Paid-in ($.001 Par Value) Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
Balance, July 1, 1999 130,810 $131 $658,170 5,138,192 $5,138 $19,556,402 $(20,807,608) $(587,767)
Conversion of 4,266 shares
Series C convertible
preferred stock valued at
$42,660 into 1,703 shares
of the Company's common
stock (4,266) (4) (42,656) 1,703 2 42,658 -- --
Exercise of 135,000
warrants to purchase
135,000 shares of the
Company's common stock at
$.20 per share -- -- -- 135,000 135 26,865 -- 27,000
Exercise of 355,000
warrants to purchase
355,000 shares of the
Company's common stock at
$.10 per share -- -- -- 355,000 355 35,145 -- 35,500
Exercise of 30,000 warrants
to purchase 30,000 shares
of the Company's common
stock at $.50 per share -- -- -- 30,000 30 14,970 -- 15,000
Exercise of 32,000 warrants
to purchase 32,000 shares
of the Company's common
stock at $.25 per share -- -- -- 32,000 32 7,968 -- 8,000
Issuance of 166,730 shares
of the Company's common
stock to settle accounts
payable valued at $62,398 -- -- -- 166,730 167 62,231 -- 62,398
Issuance of 544,000 shares
of the Company's common
stock to consultants for
services valued at $341,250 -- -- -- 544,000 544 340,706 -- 341,250
Issuance of 375,000 shares
of the Company's Series D
Preferred Stock 375,000 375 337,125 -- -- -- -- 337,500
Issuance of 675,000 shares
of the Company's Series E
Preferred Stock 675,000 675 617,325 -- -- -- -- 618,000
Conversion of 7,500 shares
Series A convertible
preferred stock valued at
$75,000 into 12,000 shares
of the Company's common
stock (7,500) (8) (74,992) 12,000 12 74,988 -- --
Conversion of 23,000 shares
Series D convertible
preferred stock valued at
$20,700 into 46,000 shares
of the Company's common
stock (23,000) (23) (20,677) 46,000 46 20,654 -- --
|
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Preferred Stock Common Stock
----------------- Additional ------------------ Additional
($.001 Par Value) Paid-in ($.001 Par Value) Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
Issuance of 40,000 shares
of Company's common stock
as payment of a $20,000
commission owed from the
sale of Series D Preferred
Stock in lieu of a cash
payment -- -- -- 40,000 40 19,960 -- 20,000
Conversion of debt of
$570,000 and related
interest of $97,387 at
$.375 pursuant to SB-2
registration statement -- -- -- 1,779,691 1,779 665,608 -- 667,387
Conversion of debt of
$150,000 and related
interest of $13,650 at $.25
pursuant to SB-2
registration statement -- -- -- 654,600 655 162,995 -- 163,650
Professional fees incurred
in connection with SB-2
registration statement -- -- -- -- -- (15,698) -- (15,698)
Adjustment for long term
debt discount of which debt
was converted into equity
with the SB-2 registration -- -- -- -- -- (116,622) -- (116,622)
Adjustment for deferred
offering costs associated
with the SB-2 registration -- -- -- -- -- (13,249) -- (13,249)
Issuance of 323,293
warrants to purchase the
Company's common stock at
$.10 per share commencing
January 2001 in connection
with the issuance of
convertible debentures -- -- -- -- -- -- -- --
Issuance of 395,000
warrants to purchase the
Company's common stock at
$.25 per share commencing
October 2000 in connection
with private placement of
the Company's securities -- -- -- -- -- -- -- --
Issuance of 1,397,500
warrants to purchase the
Company's common stock at
$.25 per share commencing
December 2000 through
February 2005 for employee
incentives and consultants -- -- -- -- -- -- -- --
|
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Preferred Stock Common Stock
----------------- Additional ------------------ Additional
($.001 Par Value) Paid-in ($.001 Par Value) Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
Issuance of 917,500
warrants to purchase the
Company's common stock at
$.50 per share commencing
October 2000 through
January 2003 in connection
with private placement of
the Company's securities -- -- -- -- -- -- -- --
Issuance of 57,000 warrants
to purchase the Company's
common stock at $1.20 per
share commencing October
2000 in connection with
private placement
commissions -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- (1,021,145) (1,021,145)
--------- ------ ---------- --------- ------ ----------- ------------ ----------
Balance, June 30, 2000 1,146,044 $1,146 $1,474,295 8,934,916 $8,935 $20,885,581 $(21,828,753) $ 541,204
========= ====== ========== ========= ====== =========== ============ ==========
Balance, July 1, 2000 1,146,044 $1,146 $1,474,295 8,934,916 $8,935 $20,885,581 $(21,828,753) $ 541,204
Exercise of 153,462
warrants to purchase
153,462 shares of the
Company's common stock at
$.10 per share
-- -- -- 153,462 153 15,193 -- 15,346
Exercise of 73,750 warrants
to purchase 73,750 shares
of the Company's common
stock at $.50 per share
along with 112,375
additional shares of the
Company's common stock per
the inducement to exercise
offer -- -- -- 186,125 186 30,470 -- 36,875
Exercise of 250,000
warrants to purchase
250,000 shares of the
Company's common stock at
$.25 per share along with
59,832 additional shares of
the Company's common stock
per the inducement to
exercise offer -- -- -- 309,832 310 61,847 -- 55,937
Conversion of 184,500
shares Series D convertible
preferred stock valued at
$166,050 into 369,000
shares of the Company's
common stock (184,500) (184) (165,867) 369,000 369 165,681 -- --
|
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Preferred Stock Common Stock
----------------- Additional ------------------ Additional
($.001 Par Value) Paid-in ($.001 Par Value) Paid-in
Shares Amount Capital Shares Amount Capital Deficit Total
------ ------ ------- ------ ------ ------- ------- -----
Conversion of 400,000
shares Series E convertible
preferred stock valued at
$366,222 into 400,000
shares of the Company's
common stock (400,000) (400) (365,822) 400,000 400 365,822 -- --
Issuance of 39,300 shares
of the Company's common
stock in connection with
the guarantee of the line
of credit -- -- -- 39,300 39 7,919 -- 7,958
Issuance of 581,500
warrants to purchase
581,500 shares of the
Company's common stock at
prices ranging from$.135 to
$.2656 per share for a
three year period in
connection with the line of
credit due January 12,
2002. Black Scholes option
pricing model was used to
value the warrants -- -- -- -- -- 71,048 -- 71,048
Issuance of 4,900,000
warrants to purchase the
Company's common stock at
$.125 per share commencing
January 2008 to the offices
and employees of the
Company -- -- -- -- -- -- -- --
Issuance of 1,190,000
warrants to purchase the
Company's common stock at
$.15 per share commencing
October 2007 in connection
with the Swartz Private
Equity investment agreement -- -- -- -- -- -- -- --
Issuance of 119,000
warrants to purchase the
Company's common stock at
$.125 per share commencing
March 2008 in connection
with the Swartz Private
Equity investment agreement -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- (1,059,775) (1,059,775)
-------- ------ -------- ---------- ------ ----------- ------------ ----------
Balance, June 30, 2001 561,544 $562 $942,606 10,392,635 10,392 $21,603,561 $(22,888,528) $ (331,407)
======== ====== ======== ========== ====== =========== ============ ==========
|
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2001 AND 2000
2001 2000
----------- -----------
Operating activities
Net loss $(1,059,775) $(1,021,145)
Adjustments to reconcile net loss to net
cash used in operating activities
Allowance for bad debts on notes receivable -- 41,663
Consulting service paid through issuance of warrants
and common stock -- 22,500
Depreciation and amortization of property and equipment 51,361 42,299
Amortization of debt discount 33,143 121,396
Amortization of other assets and deferred costs 125,192 262,858
Interest expense paid through issuance of common stock -- 50,400
Changes in assets and liabilities which provided (used) cash
Accounts receivable, trade 341,879 (272,425)
Inventory -- 4,822
Prepaid supplies and expenses 5,002 10,748
Accounts payable, accrued expenses and other liabilities (221,432) (31,332)
----------- -----------
Net cash used in operating activities (724,630) (768,216)
----------- -----------
Investing activities
Payment of obligations under capital lease (39,651) (49,702)
Purchase of equipment (3,585) (1,071)
Proceeds from payments on notes receivable -- --
----------- -----------
Net cash used in investing activities (43,236) (50,773)
----------- -----------
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DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
2001 2000
----------- -----------
Financing activities
Proceeds from exercise of warrants, net of conversion costs
of $6,562 108,160 85,500
Sale of preferred stock net of offering costs of $74,500 -- 975,000
Reduction in deferred consulting fee contract originally paid in
common stock -- 30,000
Professional fees incurred in connection with SB-2 registration
statement -- (15,697)
Short term borrowings 385,000 --
----------- -----------
Net cash provided by financing activities 493,160 1,075,303
----------- -----------
Net increase (decrease) in cash and cash equivalents (274,706) 256,314
Cash and cash equivalents, beginning of year 276,333 20,019
----------- -----------
Cash, end of year $ 1,627 $ 276,333
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 24,436 $ 24,677
=========== ===========
Issuance of common stock in connection
with consulting services $ -- $ 341,250
=========== ===========
|
Supplemental disclosure of non-cash investing and financing activities for fiscal year 2001:
The Company issued 369,000 shares of the Company's common stock in connection with the conversion of Series D Convertible Preferred Stock valued at $166,050.
The Company issued 400,000 shares of the Company's common stock in connection with the conversion of Series E Convertible Preferred Stock valued at $366,222.
The Company issued 39,300 shares of common stock in connection with the line of credit and guarantees of the investor group valued at $7,958.
Supplemental disclosure of non-cash investing and financing activities for fiscal year 2001: (continued)
The Company recorded additional paid-in capital of $71,048 with the issuance of 581,500 warrants to purchase shares of the Company's common stock ranging from $.135 and $.266 in connection with the line of credit and guarantees by the investor group.
Supplemental disclosure of non-cash investing and financing activities for fiscal year 2000:
The Company recorded capital lease obligations of $86,422 relating to the acquisition of equipment.
The Company issued 12,000 shares of the Company's common stock in connection with the conversion of Series A Convertible Preferred Stock valued at $75,000.
The Company issued 40,000 shares of its common stock as payment of a $20,000 commission owed from the sale of Series D Preferred Stock offering in lieu of a cash payment.
The Company issued 1,707 shares of the Company's common stock in connection with the conversion of Series C Convertible Preferred Stock valued at $42,660.
The Company issued 46,000 shares of the Company's common stock in connection with the conversion of Series D Convertible Preferred Stock valued at $20,700.
The Company issued 544,000 of the Company's common stock to consultants for services valued at $341,250.
The Company issued 166,730 of the Company's common stock, in lieu of cash to settle $62,398 of accounts payable.
The Company issued 2,434,291 shares of the Company's common stock in connection with the conversion of $720,000 in debt and related accrued interest of $111,037.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2001 AND 2000
Note 1: Summary of Significant Accounting Policies
DESCRIPTION OF BUSINESS, FINANCING AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
Dimensional Visions Incorporated (the "Company" or "DVI") was incorporated in Delaware on May 12, 1988. The Company produces and markets lithographically printed stereoscopic and animation print products.
The Company, through a wholly-owned subsidiary of InfoPak, Inc. has developed a data delivery system that provides end users with specific industry printed materials by way of a portable hand-held reader. Data is acquired electronically from the data provided by mainframe systems and distributed through a computer network to all subscribers.
The Company has financed its operations primarily through the sale of its securities. The Company has had limited sales of its products during the years ended June 30, 2001 and 2000. The volume of business is not nearly sufficient to support the Company's cost structure.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred losses since inception of $22,888,941 and has a working capital deficiency of $542,882 as of June 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 June 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. Unless the Company is able to generate sufficient revenue or acquire additional debt or equity financing to cover present and ongoing operation costs and liabilities, it may not be able to continue as a going concern.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 1: Summary of Significant Accounting Policies (continued)
Further, there can be no assurances, assuming the Company successfully raises additional funds, that the Company will achieve profitability or positive cash flow from the sale of its products. In the event the Company is not able to secure sufficient funds on a timely basis necessary to maintain its current operations, it may cease all or part of its existing operations and/or seek protection under the bankruptcy laws.
CONSOLIDATION POLICY
The consolidated financial statements include the accounts of DVI and its wholly-owned subsidiary, InfoPak, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
EQUIPMENT, DEPRECIATION AND AMORTIZATION
Equipment is stated at cost. Depreciation, which includes amortization of assets under capital lease is provided by the use of the straight-line method over the estimated useful lives of the assets as follows:
Equipment 5-7 years Furniture and fixtures 5 years
PATENT RIGHTS
Costs incurred to acquire patent rights and the related technology are amortized over the shorter of the estimated useful life or the remaining term of the patent rights. In the event that the costs of patent rights and/or acquired technology are abandoned, the write-off will be charged to expenses in the period the determination is made to abandon them.
ENGINEERING AND DEVELOPMENT COSTS
The Company charges to engineering and development costs all items of a non-capital nature related to bringing "significant" improvement to its product. Such costs include salaries and expenses of employees and consultants, the conceptual formulation, design, and testing of the products and creation of prototypes. All such costs of a capital nature are capitalized.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 1: Summary of Significant Accounting Policies (Continued)
INCOME TAXES
The Company accounts for income taxes under the liability method.Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
LOSS PER SHARE
The Company adopted Statement of Financial Accounting Standards Statement No. 128, "Earnings Per Share" (FAS 128"), which is effective for fiscal years ending after December 15, 1997. FAS 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Dilutive earnings per share is very similar to the previously reported fully diluted earnings per share.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company is subject to credit risk through trade receivables. The Company relies on a limited number of customers for its sales. The Company is in the process of building a customer base for its products and, therefore, the degree of risk is substantially higher until the base grows.
The Company also relies on several key vendors to supply plastics and printing services. Although there are a limited number of vendors capable of fulfilling the Company's needs, the Company believes that other vendors could provide for the Company's needs on comparable terms. Abrupt changes could, however, cause a delay in processing and a possible inability to meet sales commitments on schedule, or a possible loss of sales, which would affect operating results adversely.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 1: Summary of Significant Accounting Policies (Continued)
STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25") and has adopted the disclosure-only alternative of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123").
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statements to conform to the classifications used in the current year.
Note 2: Cash
The Company considers all highly liquid investments, with an original maturity of three months or less when purchased, to be cash equivalents.
The Company maintains its cash in banks located in Arizona. The total cash balances are insured by the FDIC up to $100,000 per financial institution.
Note 3: Deferred Costs
Deferred costs as of June 30, 2001 consist of one consulting contract totaling $54,167. This cost is accounted for in the equity section as a contra equity account.
On August 10, 1999, the Company entered into a contract with a consultant. The fee for services for 36 months is $169,216 ($4,700 per month), or upon signing of the contract, the Company will issue $150,000 of the Company's common stock. The market value of the common stock on August 10, 1999 was $.50 per share and 300,000 shares of registered common stock was issued (registered under Form S-8). In accordance with the terms of the agreement either party may terminate or change the terms of this agreement with 30 days written notice. In accordance with the terms of the agreement either party may terminate or change the terms of this agreement with 30 days written notice.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 4: Patent Rights and Other Assets
Patent rights $58,426
Deposits 4,100
Trademark 225
-------
62,751
Less accumulated amortization 35,199
-------
Total $27,522
=======
|
Note 5: Accounts Payable, Accrued Expenses and Other Liabilities
Accounts payable $139,609
Accrued expense
Salaries 18,766
--------
Total $158,375
========
|
Note 6: 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 stockholders as guarantors of the line of credit. The outstanding debt as of June 30, 2001 was $385,000. The terms of the line of credit are for one year with an interest rate of the 3-month LIBOR rate, plus 2.5% [6.23% as of June 30, 2001]. 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 385,000 usage warrants at 75% of fair market value (ranging from $.135 to $.218 per share). The warrants were valued using Black Scholes option pricing model at $71,047.
Accordingly, the line of credit was discounted for the value allocated to the stock and warrants. As of June 30, 2001, the additional interest expense of $33,143 was recorded and the unamortized discount was $45,862.
As of June 30, 2001 the discounted value of the line of credit was $339,138.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 7: Leases
The Company leases certain equipment under a master lease agreement, which are classified as capital leases. The equipment leases have a five year term with an option to acquire the equipment for $1 at the end of the lease term. Leased capital assets included in equipment as of June 30, 2001, was as follows:
Equipment $225,334
Less accumulated amortization 84,221
--------
$141,113
========
|
Future minimum payments, by year and in the aggregate, under noncancellable capital leases and operating leases with terms of one year or more consist of the following as of June 30, 2001:
Years Ending Capital Operating
June 30, Leases Leases
-------- ------ ------
2002 $ 77,974 $ 48,822
2003 47,000 50,376
2004 -- 27,738
-------- --------
124,974 $126,936
========
Amounts representing interest 25,319
--------
Present value of net minimum payments 99,655
Current portion 59,834
--------
Long-term portion $ 39,821
========
The Company's rental expense for operating leases was approximately
|
$60,615 and $74,948 for the years ended approximately June 30, 2001 and 2000, respectively.
Note 8: 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 June 30, 2001 was approximately $84,775.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 9: Common Stock
As of June 30, 2001, there are outstanding 10,871,243 of non-public warrants and options to purchase the Company's common stock at prices ranging from $.10 to $2.00 with a weighted average price of $.22 per share.
As of June 30, 2001, there were 561,544 shares of various classes of Convertible Preferred Stock outstanding which can be converted to 688,818 shares of common stock (see Note 10).
During the year ended June 30, 2001 the Company issued 495,957 shares of its common stock in connection with the exercise of warrants.
The Company issued during July 2000, August 2000, September 2000, October 2000 and April 2001, 369,000 shares of its common stock as a result of the conversion of 184,500 shares of Series D Convertible Preferred stock.
The Company issued during August 2000, September 2000 and November 2000, 400,000 shares of its common stock as a result of the conversion of 400,000 shares of Series D Convertible Preferred stock.
On December 13, 2000, 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 the date that the registration statement is declared effective (July 10, 2001, See Note 16). For each common stock stare put to Swartz, the Company will receive the lessor of 91% of the market or the market price less $.075.
On January 12, 2001 the Company issued 39,300 shares of its commons stock as a result of the guarantee by an investor group on the line of credit (See Note 6).
The total number of shares of the Company's common stock that would have been issuable upon conversion of the outstanding warrants, options and preferred stock equaled 11,560,061 shares as of June 30, 2001, and would be in addition to the 10,392,635 shares of common stock outstanding as of June 30, 2001.
The Company issued during August 1999, September 1999, and February 2000, 1,707 shares of its common stock as a result of the conversion of 4,266 shares of Series C Convertible Preferred Stock.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 9: Common Stock (continued)
During February 2000, the Company issued 12,000 shares of its common stock as a result of the conversion of 7,500 shares of Series A Convertible Preferred Stock.
During the year ended June 30, 2000, the Company issued 40,000 shares of its common stock as payment of a $20,000 commission owed from the sale of Series D Preferred Stock in lieu of a cash payment.
During the year ended June 30, 2000, the Company issued 544,000 shares of its common stock to consultants for services valued at $341,250.
During August 1999, the Company issued 166,730 shares of its common stock in lieu of cash to settle $62,398 of accounts payable.
During the year ended June 30, 2000, the Company issued 552,000 shares of its common stock in connection with the exercise of warrants.
Note 10: Preferred Stock
The Company has authorized 10,000,000 shares of $.001 par value per share Preferred Stock, of which the following were issued outstanding:
Allocated Outstanding
--------- -----------
Series A Preferred 100,000 15,500
Series B Preferred 200,000 3,500
Series C Preferred 1,000,000 13,404
Series D Preferred 375,000 167,500
Series E Preferred 1,000,000 275,000
Series P Preferred 600,000 86,640
--------- ---------
Total Preferred Stock 1,900,000 561,544
========= =========
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 (see Note 8).
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 (see Note 8).
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 10: Preferred Stock (Continued)
The Company's Series C Convertible Preferred Stock ("Series C Preferred") is convertible at a rate of .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 2 shares 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 .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 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 13: Stock Option Plan and Equity Incentive Plan
On November 15, 1999, the Board of Directors of Dimensional Visions adopted the 1999 Stock Option Plan (the "1999 Plan"). This plan was approved by a majority of our stockholders at our January 28, 2000, stockholders' meeting. The purpose of the 1999 Plan is to advance the interests of the Company by encouraging and enabling acquisition of a financial interest in the Company by its officers and other key individuals. The 1999 Plan is intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company. A maximum of 1,500,000 shares of the Company's common stock are available to be issued under the 1999 Plan. The option exercise price will be 100% of the fair market value of the Company's common stock on the date the option is granted and will be exercisable for a period not to exceed 10 years from the date of grant.
As of June 30, 2001, no stock options have been granted under this plan.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 13: Stock Option Plan and Equity Incentive Plan (continued)
The Company on June 13, 1996 adopted the 1996 Equity Incentive Plan (the "Plan") covering 10,000,000 shares of the Company's common stock $.001 par value, pursuant to which officers, directors, key employees and consultants of the Company are eligible to receive incentive, as well as non-qualified stock options, SAR's, and Restricted Stock and Deferred Stock. The Plan, which expires in June 2006, will be administered by the Compensation Committee of the Board of Directors. Incentive stock options granted under the Plan are exercisable for a period of up to 10 years from the date of grant at an exercise price, which is not less than the fair market value of the common stock on the date of the grant, except that the terms of an incentive stock option granted under the Plan to a stockholder owning more than 10% of the outstanding common stock may not exceed five years and the exercise price of an incentive stock option granted to such a stockholder may not be less than 110% of the fair market value of common stock on the date of the grant. Non-qualified stock options may be granted on terms determined by the Compensation Committee of the Board of Directors. SAR's which give the holder the privilege of surrendering such rights for the appreciation in the Company's common stock between the time of grant and the surrender, may be granted on any terms determined by the Compensation Committee of the Board of Directors.
Restricted stock awards entitle the recipient to acquire shares for no cash consideration or for consideration determined by the Compensation Committee. The award may be subject to restrictions, conditions and forfeiture as the Committee may determine. Deferred stock award entitles recipient to receive shares in the future. Since inception of this plan in 1996 through June 30, 2000, 5,102,978 shares of common stock have been issued. For the year ended June 30, 2000, 544,000 shares of common stock have been issued at prices ranging from $.37 to $.625 per share. In addition, as of June 30, 2001, no options or SAR's have been granted.
If the Company had elected to recognize compensation expense based on the fair value of stock plans as prescribed by FAS No. 123, the Company's net loss and net loss per share would have been increased to the pro forma amounts indicated below:
2001 2000
---- ----
Net Loss available to common shareholders $(1,144,550) $(1,095,370)
Net Loss - pro forma $(1,852,969) $(1,261,573)
Net Loss per share - as reported $ (.11) $ (.18)
Net Loss per share - pro forma $ (.19) $ (.21)
|
The weighted-average fair value at the date of grant for options granted in 2001 and 2000 was $.13 and $.25, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes Option Pricing Model. The following weighted average assumptions were used: no dividends; expected volatility factor of 133% for 2001 and 140% for 2000; risk-free interest of 5%; and an expected life of five years. The compensation expense and pro forma net loss may not be indicative of amounts to be included in future periods.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Note 14: Income Taxes
The tax effects of significant items comprising the Company's net deferred taxes as of June 30, 2001 were as follows:
Deferred tax assets:
Goodwill $ 256,000
Net operating loss carryforwards 7,171,000
-----------
7,427,000
-----------
Deferred tax liabilities
Equipment 52,000
Patent rights 3,000
-----------
55,000
-----------
Net deferred tax asset 7,372,000
Valuation allowance (7,372,000)
-----------
Net deferred tax asset reported $ --
===========
|
The change in valuation allowance for the year ended June 30, 2001 was increased by approximately $539,000.
There was no provision for current income taxes for the years ended June 30, 2001 and 2000.
The federal net operating loss carryforwards of approximately $19,769,000 expires in various years 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 carryforwards. The Company has not evaluated the impact of Section 382, if any, on its ability to utilize its net operating loss carryforwards in future years.
Note 15: Segment of Business Reporting
The operations of the Company are divided into the following business segments for financial reporting purposes.
* Lithographically printed stereoscopic prints commonly referred to as three-dimensional prints and lithographically printed animation.
* Hardware and software information and audio playback systems and method products and programs.
There are no intersegment or foreign sales. Four customers account for approximately 70% of the lithographic sales and one customer accounts for approximately 100% of the hardware and software information and playback systems.
DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 2001 AND 2000
Financial information by business segments is as follows:
Hardware
and
Lithographic Software Consolidated
------------ -------- ------------
Net customer sales $ 231,200 $ 3,147 $ 234,347
Interest income 2,421 -- 2,421
Interest expense 72,544 -- 72,544
Operating profit/loss (990,257) 605 (989,652)
Segment assets 210,926 668 211,594
Depreciation and amortization 151,979 207,885 359,864
Note 16: Subsequent Events
|
On July 10, 2001, an SB-2 Registration Statement was declared effective and accordingly, the Swartz investment agreement commenced for a three year period ending on July 10, 2004.
During the period of September 28, 2001 through October 19, 2001, the Company received $150,000 in advances on a 12% secured note that is due on 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.
The Company also received $45,000 in advances from two stockholders with interest ranging from 12% to 14%.
Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of January, 2001, by and between JOHN D. MCPHILIMY, an adult individual (hereinafter referred to as "Employee"), and DIMENSIONAL VISIONS, INC., a Delaware corporation, with a principal place of business located at 2301 W. Dunlap, Suite 201, Phoenix, Arizona 85021 (hereinafter referred to as "Company");
W I T N E S S E T H:
WHEREAS, the Company and Employee desire to enter into an Agreement that sets forth the terms and conditions of Employee's services to the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT TERM, DUTIES AND ACCEPTANCE.
A. Company hereby retains Employee as the Company's President and Chief Executive Officer for a period of three (3) years (the "Employment Period"), commencing July 1, 2001.(the "Employment Period"), earlier terminations as hereinafter provided, to render his full time services to the Company upon the terms and conditions herein contained, in such capacity. In such capacity Employee shall report and be responsible to the Company's Board of Directors.
B. Employee hereby accepts the foregoing employment and agrees to devote, on a full-time basis, his best efforts, energy and skill to such employment.
C. During the term of this Agreement, Employee shall not, except as may be permitted by the Board of Directors, be employed by, work for, or be associated with, directly or indirectly, as an officer, consultant, employee, or in any other capacity, any other business operation whether or not same is competitive with the business of the Company.
2. COMPENSATION AND EXPENSE REIMBURSEMENT.
A. As base compensation for Employee duly rendering his services pursuant to the terms of this Agreement, Company agrees to pay and Employee agrees to accept a base salary of Ninety-Six Thousand Dollars ($96,000) per annum payable in equal installments, twice monthly, less such deductions or amounts as shall be required to be withheld by applicable law or regulation, and paid in accordance with the Company's payroll practices. Such base salary shall be subject to increase by the Board of Directors upon annual review. Employee shall be eligible for bonus payments in accordance with the Bonus Plan as approved by the Board of Directors.
B. Company shall pay or reimburse Employee for travel and other expenses reasonably incurred by Employee in the performance of his services under this Agreement during the Employment Period, upon presentation of expense statements, vouchers or such other supporting documentation as may reasonably be required.
3. FRINGE BENEFITS. Employee shall be entitled (subject to the terms and conditions of particular plans and programs), to all fringe benefits afforded to other employees of the Company, including, but not by way of limitation, the right to participate in any pension, stock option, retirement, major medical, group health, disability, accident and life insurance, relocation reimbursement, and other employee benefit programs made generally available, from time to time, by the Company except to the extent that Employee, pursuant to the terms of this Agreement is already receiving such benefits from the Company.
4. VACATIONS. Employee shall be entitled, during each employment year, to four (4) weeks vacation, per annum, non-cumulative.
5. RENEWAL AND TERMINATION BY COMPANY.
A. This employment Agreement shall renew by mutual written consent on the thirtieth month of its term for a two year period without further action by either party, or until terminated, as provided herein.
B. Notwithstanding the stated term of employment, this Agreement and the term of employment may be sooner terminated by the Company for cause or for any of the following reasons:
(i) In the event Employee, in the reasonable opinion of the Company, as determined by the Board of Directors, is unable by reason of physical or mental disability to continue the proper performance of his duties hereunder for a period of three (3) consecutive months, the Company may terminate Employee's employment on a date thirty (30) days after the date on which the Company shall have mailed written notice of such termination to Employee's last known address;
(ii) The Employee's death;
(iii) Employee has committed an act of dishonesty, theft, substance abuse, intoxication, unethical business conduct, a material breach of the Employment Agreement, or has been convicted of a felony; all of the foregoing shall be separately and collectively, known as "cause" for termination.
(iv) The gross negligence, or Employee's intentional act or failure to act (collectively) and separately hereinafter called "act"), which act materially and adversely affects the business or affairs of the Company.
(v) The willful failure, refusal, or inability of Employee to perform his duties as may, from time to time, be delegated to him by the Company, through the Board of Directors.
6. NOTICE OF TERMINATION. Any purported termination by the Company shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 18 hereof (except if the event given rise to termination is Employee's death). For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated.
7. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
A. During any period that the Employee fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, the Employee shall continue to receive his full base salary at the rate then in effect and all other compensation, until the Employee's employment is terminated by the Company pursuant to Section 5 hereof, and for a three month period thereafter (the three month period shall commence on the date the Company notifies Employee of the Company's election to terminate Employee's employment, pursuant to the provisions of Section 5(B) hereof).
B. If the Employee's employment shall be terminated for cause, except as herein specifically provided to the contrary in the event the cause for termination is death or disability, the Company shall pay the Employee his full base salary through the date of termination at the rate in effect at the time the Notice of Termination is given and the Company shall have no further obligations to the Employee under this Agreement.
C. If the Employee's employment by the Company shall be terminated without cause, then the Employee shall be entitled to the benefits provided below:
(i) The Company shall pay the Employee an amount equal to one-half of Employee's annual base salary at the rate in effect at the time Notice of Termination is given, said payments to be made at the same time and in the same manner, over a six month period, as if Emplyee had remained in the employ of the Company; plus
(ii) Any bonus to which the Employee would otherwise be entitled, pro rated to the effective date of termination; plus
(iii) All other amounts payable to the Employee and all benefits payable to him under any other plan or agreement relating to retirement benefits or to compensation previously earned and deferred, in accordance with the respective terms of such plans or agreements, pro rated to a date three (3) months following the date of termination.
8. TRADE SECRETS.
A. Employee acknowledges that his employment by the Company, which is in the business of three-dimensional imaging, will enable him to obtain confidential information concerning the Company, its subsidiaries and affiliates, and information about the trade secrets the Company employs in its business, including but not limited to the following: research, experiments, inventions, discoveries and improvements conceived, developed or worked on by the Company, whether or not related to Company's business as it now exists; data and information about costs, profit, markets, sales, key personnel, pricing policies; technical, scientific, patent and proprietary information and/or processes; operational methods and other business affairs and methods, including plans for future developments, now known or available to Employee or the public (all of which is hereinafter collectively referred to as the "Confidential Information"). Confidential Information shall also mean the same as trade secrets under the 2nd Restatement of Torts. Employee and the Company further acknowledge that the services to be performed under this Agreement are of a special, unique, unusual and extraordinary character; the Company's products and services will be marketed and licensed throughout the United States and abroad, and that the Company will be competing with other organizations which are or could be located in any part of the United States or abroad. Accordingly, Employee agrees that he shall not use for himself or divulge any of the Confidential Information to anyone outside of the Company's business and then only with the prior written consent of the Company's Board of Directors. Employee further acknowledges that he is not now and has not in the past been engaged in any business related to that of the Company (three dimensional imaging). Accordingly, Employee agrees that upon the termination of expiration of this Agreement, and for a period of two (2) years thereafter, Employee will not, directly or indirectly, alone or as a member or a partnership, or as an officer, employee, director, stockholder or consultant, of or to any person, firm or corporation engage in any business, directly or indirectly, the same as or similar to and/or competitive with that of the Company as now constituted or as may hereafter be constituted during the term of this Agreement (including its successors or assigns) and during the two (2) year restrictive covenant period set fourth above.
B. As a condition to the employment of the Employee, Employee further agrees to execute the Company's standard Confidentiality and EDAC Agreements and such other Confidentiality Agreements as may, during the term of Employee's employment, be required by the Company of all employees in the Company's employ. It is specifically understood that the consideration supportive of such latter execution by Employee will be the continued employment of Employee, it being specifically understood that the failure or refusal of Employee to execute such latter documents (provided same is required of all employees of the Company) would constitute cause for termination by the Company of Employee's employment hereunder.
C. The provisions of this Section 8 shall survive the termination or expiration of this Agreement.
9. INJUNCTIVE RELIEF.
A. Employee acknowledges that his services to the Company are unique and that the confidential information which will be divulged to the Employee will be of such nature that the divulging of same by Employee to any other person, firm or corporation or the utilization thereof by Employee, in breach of his undertakings thereunder, could cause the Company irreparable harm or damage for which the Company cannot be entirely compensated by an award of money damages. It is therefore agreed that in addition to any other relief or remedy which may be available to the Company in the event of the breach by Employee of his confidential undertaking, the Company may seek as against the Employee injunctive relief, and the Employee agrees that in the event such an action is commenced by the Company against Employee which alleges, in whole or in part, a breach or threatened breach by Employee of his confidential undertaking, to consent, and he does hereby consent, to the issuance by the Court to a preliminary injunction in favor of the Company restraining the Employee from breaching his confidential undertaking as set fourth herein pending a final determination of such judicial proceeding. The provisions hereof shall survive the termination or expiration of this Agreement.
10. RETURN OF CONFIDENTIAL INFORMATION.Upon the termination or expiration of this Agreement, Employee shall return to the Company all material in Employee's possession or control which is of a confidential matter relating to the Company's business. The provisions of this Section 10 shall survive the termination or expiration of this Agreement.
11. Employee shall be indemnified by the Company against any liability incurred in connection with any proceeding in which Employee may be involved by reason of his service as an officer, director or employee of the Company except where such liability results from willful misconduct or recklessness or where such indemnification is prohibited by applicable law.
12. SEVERABILITY. The invalidity or unenforceability of any term of this Agreement shall not affect the validity or enforceability of this Agreement or any of its other terms; and this Agreement and such other terms shall be construed as though the invalid or unenforceable term(s) were not included herein, unless the effect would be to vitiate the parties' fundamental purpose in entering into the Agreement.
13. REMEDIES CUMULATIVE. Except as otherwise expressly provided herein, each of the rights and remedies of the parties set forth in this Agreement shall be cumulative with all other such rights and remedies, as well as with all rights and remedies of the parties otherwise available at law or in equity.
14. WAIVER. The failure of either party at any time or times to require performance of any provisions hereof shall in no manner effect the right at a later time to enforce the same. To be effective, any waiver must be contained in a written instrument signed by the party waiving compliance by the other party of the term or covenant as specified. The waiver by either party of the breach of any term or covenant contained herein, whether by conduct or otherwise in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.
15. GOVERNING LAW. Employee agrees that this Agreement shall be governed by the laws of the State of Arizona as applied by the courts of Arizona.
16. CAPTIONS. Captions of articles and paragraphs of this Agreement are included for convenient reference only, shall not be construed as part of this Agreement and shall not be used to define, limit, extend or interpret the terms hereof.
17. WARRANTIES. Employee represents, warrants, covenants and agrees that he has a right to enter into this Agreement, that he is not a party to any agreement or understanding whether or not written which would prohibit or restrict his performance of his obligations under this Agreement and that he will not use in the performance of his obligations hereunder any proprietary information of any other party which he is legally prohibited from using.
18. NOTICE. Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and sent by registered mail, to the parties at the following addresses:
To the Employer: Dimensional Visions Group, Ltd.
Attn: Board of Directors
2301 W. Dunlap, Suite 201
Phoenix, AZ 85021
To the Employee: Mr. John D. McPhilimy 27 W. Fellars Dr.
Phoenix, AZ 85021
19. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, it being specifically agreed and understood that in the event that the Company engages in a so-called "bulk sale" of its assets, this Agreement may, at the Company's option, for all purposes be deemed an asset of the Company.
20. DEFINITION. For purposes of this Agreement, the term "Company" shall mean the Company, its subsidiaries, its successors or assignees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
DIMENSIONAL VISIONS, INC.
By /s/ Lisa R. McPhilimy --------------------------------------------- Lisa R. McPhilimy Chief Financial Officer, Secretary & Director By: /s/ John D. McPhilimy --------------------------------------------- John D. McPhilimy, Individual |
Exhibit 10.6
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of July, 2001, by and between BRUCE D. SANDIG, an adult individual (hereinafter referred to as "Employee"), and DIMENSIONAL VISIONS, INC., a Delaware corporation, with a principal place of business located at 2301 W. Dunlap, Suite 201, Phoenix, Arizona 85021 (hereinafter referred to as "Company");
W I T N E S S E T H:
WHEREAS, the Company and Employee desire to enter into an Agreement that sets forth the terms and conditions of Employee's services to the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT TERM, DUTIES AND ACCEPTANCE.
A. Company hereby retains Employee as the Company's Executive Vice-Prisdent and Chief Technology Officer for a period of three (3) years (the "Employment Period"), commencing ON July 1, 2001(the "Employment Period"), earlier terminations as hereinafter provided, to render his full time services to the Company upon the terms and conditions herein contained, in such capacity. In such capacity Employee shall report and be responsible to the Company's Board of Directors.
B. Employee hereby accepts the foregoing employment and agrees to devote, on a full-time basis, his best efforts, energy and skill to such employment.
C. During the term of this Agreement, Employee shall not, except as may be permitted by the Board of Directors, be employed by, work for, or be associated with, directly or indirectly, as an officer, consultant, employee, or in any other capacity, any other business operation whether or not same is competitive with the business of the Company.
2. COMPENSATION AND EXPENSE REIMBURSEMENT.
A. As base compensation for Employee duly rendering his services pursuant to the terms of this Agreement, Company agrees to pay and Employee agrees to accept a base salary of Ninety Thousand Dollars ($90,000) per annum payable in equal installments, twice monthly, less such deductions or amounts as shall be required to be withheld by applicable law or regulation, and paid in accordance with the Company's payroll practices. Such base salary shall be subject to increase by the Board of Directors upon annual review. Employee shall be eligible for bonus payments in accordance with the Bonus Plan as approved by the Board of Directors.
B. Company shall pay or reimburse Employee for travel and other expenses reasonably incurred by Employee in the performance of his services under this Agreement during the Employment Period, upon presentation of expense statements, vouchers or such other supporting documentation as may reasonably be required.
3. FRINGE BENEFITS. Employee shall be entitled (subject to the terms and conditions of particular plans and programs), to all fringe benefits afforded to other employees of the Company, including, but not by way of limitation, the right to participate in any pension, stock option, retirement, major medical, group health, disability, accident and life insurance, relocation reimbursement, and other employee benefit programs made generally available, from time to time, by the Company except to the extent that Employee, pursuant to the terms of this Agreement is already receiving such benefits from the Company.
4. VACATIONS. Employee shall be entitled, during each employment year, to four (4) weeks vacation, per annum, non-cumulative.
5. RENEWAL AND TERMINATION BY COMPANY.
A. This employment Agreement shall renew by mutual written consent on the thirtieth month of its term for a two year period without further action by either party, or until terminated, as provided herein.
B. Notwithstanding the stated term of employment, this Agreement and the term of employment may be sooner terminated by the Company for cause or for any of the following reasons:
(i) In the event Employee, in the reasonable opinion of the Company, as determined by the Board of Directors, is unable by reason of physical or mental disability to continue the proper performance of his duties hereunder for a period of three (3) consecutive months, the Company may terminate Employee's employment on a date thirty (30) days after the date on which the Company shall have mailed written notice of such termination to Employee's last known address;
(ii) The Employee's death;
(iii) Employee has committed an act of dishonesty, theft, substance abuse, intoxication, unethical business conduct, a material breach of the Employment Agreement, or has been convicted of a felony; all of the foregoing shall be separately and collectively, known as "cause" for termination.
(iv) The gross negligence, or Employee's intentional act or failure to act (collectively) and separately hereinafter called "act"), which act materially and adversely affects the business or affairs of the Company.
(v) The willful failure, refusal, or inability of Employee to perform his duties as may, from time to time, be delegated to him by the Company, through the Board of Directors.
6. NOTICE OF TERMINATION. Any purported termination by the Company shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 18 hereof (except if the event given rise to termination is Employee's death). For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated.
7. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
A. During any period that the Employee fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, the Employee shall continue to receive his full base salary at the rate then in effect and all other compensation, until the Employee's employment is terminated by the Company pursuant to Section 5 hereof, and for a three month period thereafter (the three month period shall commence on the date the Company notifies Employee of the Company's election to terminate Employee's employment, pursuant to the provisions of Section 5(B) hereof).
B. If the Employee's employment shall be terminated for cause, except as herein specifically provided to the contrary in the event the cause for termination is death or disability, the Company shall pay the Employee his full base salary through the date of termination at the rate in effect at the time the Notice of Termination is given and the Company shall have no further obligations to the Employee under this Agreement.
C. If the Employee's employment by the Company shall be terminated without cause, then the Employee shall be entitled to the benefits provided below:
(i) The Company shall pay the Employee an amount equal to one-half of Employee's annual base salary at the rate in effect at the time Notice of Termination is given, said payments to be made at the same time and in the same manner, over a six month period, as if Emplyee had remained in the employ of the Company; plus
(ii) Any bonus to which the Employee would otherwise be entitled, pro rated to the effective date of termination; plus
(iii) All other amounts payable to the Employee and all benefits payable to him under any other plan or agreement relating to retirement benefits or to compensation previously earned and deferred, in accordance with the respective terms of such plans or agreements, pro rated to a date three (3) months following the date of termination.
8. TRADE SECRETS.
A. Employee acknowledges that his employment by the Company, which is in the business of three-dimensional imaging, will enable him to obtain confidential information concerning the Company, its subsidiaries and affiliates, and information about the trade secrets the Company employs in its business, including but not limited to the following: research, experiments, inventions, discoveries and improvements conceived, developed or worked on by the Company, whether or not related to Company's business as it now exists; data and information about costs, profit, markets, sales, key personnel, pricing policies; technical, scientific, patent and proprietary information and/or processes; operational methods and other business affairs and methods, including plans for future developments, now known or available to Employee or the public (all of which is hereinafter collectively referred to as the "Confidential Information"). Confidential Information shall also mean the same as trade secrets under the 2nd Restatement of Torts. Employee and the Company further acknowledge that the services to be performed under this Agreement are of a special, unique, unusual and extraordinary character; the Company's products and services will be marketed and licensed throughout the United States and abroad, and that the Company will be competing with other organizations which are or could be located in any part of the United States or abroad. Accordingly, Employee agrees that he shall not use for himself or divulge any of the Confidential Information to anyone outside of the Company's business and then only with the prior written consent of the Company's Board of Directors. Employee further acknowledges that he is not now and has not in the past been engaged in any business related to that of the Company (three dimensional imaging). Accordingly, Employee agrees that upon the termination of expiration of this Agreement, and for a period of two (2) years thereafter, Employee will not, directly or indirectly, alone or as a member or a partnership, or as an officer, employee, director, stockholder or consultant, of or to any person, firm or corporation engage in any business, directly or indirectly, the same as or similar to and/or competitive with that of the Company as now constituted or as may hereafter be constituted during the term of this Agreement (including its successors or assigns) and during the two (2) year restrictive covenant period set fourth above.
B. As a condition to the employment of the Employee, Employee further agrees to execute the Company's standard Confidentiality and EDAC Agreements and such other Confidentiality Agreements as may, during the term of Employee's employment, be required by the Company of all employees in the Company's employ. It is specifically understood that the consideration supportive of such latter execution by Employee will be the continued employment of Employee, it being specifically understood that the failure or refusal of Employee to execute such latter documents (provided same is required of all employees of the Company) would constitute cause for termination by the Company of Employee's employment hereunder.
C. The provisions of this Section 8 shall survive the termination or expiration of this Agreement.
9. INJUNCTIVE RELIEF.
A. Employee acknowledges that his services to the Company are unique and that the confidential information which will be divulged to the Employee will be of such nature that the divulging of same by Employee to any other person, firm or corporation or the utilization thereof by Employee, in breach of his undertakings thereunder, could cause the Company irreparable harm or damage for which the Company cannot be entirely compensated by an award of money damages. It is therefore agreed that in addition to any other relief or remedy which may be available to the Company in the event of the breach by Employee of his confidential undertaking, the Company may seek as against the Employee injunctive relief, and the Employee agrees that in the event such an action is commenced by the Company against Employee which alleges, in whole or in part, a breach or threatened breach by Employee of his confidential undertaking, to consent, and he does hereby consent, to the issuance by the Court to a preliminary injunction in favor of the Company restraining the Employee from breaching his confidential undertaking as set fourth herein pending a final determination of such judicial proceeding. The provisions hereof shall survive the termination or expiration of this Agreement.
10. RETURN OF CONFIDENTIAL INFORMATION.Upon the termination or expiration of this Agreement, Employee shall return to the Company all material in Employee's possession or control which is of a confidential matter relating to the Company's business. The provisions of this Section 10 shall survive the termination or expiration of this Agreement.
11. Employee shall be indemnified by the Company against any liability incurred in connection with any proceeding in which Employee may be involved by reason of his service as an officer, director or employee of the Company except where such liability results from willful misconduct or recklessness or where such indemnification is prohibited by applicable law.
12. SEVERABILITY. The invalidity or unenforceability of any term of this Agreement shall not affect the validity or enforceability of this Agreement or any of its other terms; and this Agreement and such other terms shall be construed as though the invalid or unenforceable term(s) were not included herein, unless the effect would be to vitiate the parties' fundamental purpose in entering into the Agreement.
13. REMEDIES CUMULATIVE. Except as otherwise expressly provided herein, each of the rights and remedies of the parties set forth in this Agreement shall be cumulative with all other such rights and remedies, as well as with all rights and remedies of the parties otherwise available at law or in equity.
14. WAIVER. The failure of either party at any time or times to require performance of any provisions hereof shall in no manner effect the right at a later time to enforce the same. To be effective, any waiver must be contained in a written instrument signed by the party waiving compliance by the other party of the term or covenant as specified. The waiver by either party of the breach of any term or covenant contained herein, whether by conduct or otherwise in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.
15. GOVERNING LAW. Employee agrees that this Agreement shall be governed by the laws of the State of Arizona as applied by the courts of Arizona.
16. CAPTIONS. Captions of articles and paragraphs of this Agreement are included for convenient reference only, shall not be construed as part of this Agreement and shall not be used to define, limit, extend or interpret the terms hereof.
17. WARRANTIES. Employee represents, warrants, covenants and agrees that he has a right to enter into this Agreement, that he is not a party to any agreement or understanding whether or not written which would prohibit or restrict his performance of his obligations under this Agreement and that he will not use in the performance of his obligations hereunder any proprietary information of any other party which he is legally prohibited from using.
18. NOTICE. Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and sent by registered mail, to the parties at the following addresses:
To the Employer: Dimensional Visions Group, Ltd.
Attn: Board of Directors
2301 W. Dunlap, Suite 201
Phoenix, AZ 85021
To the Employee: Mr. Bruce D. Sandig 5801 N. 14th Street Phoenix, AZ 85014
19. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, it being specifically agreed and understood that in the event that the Company engages in a so-called "bulk sale" of its assets, this Agreement may, at the Company's option, for all purposes be deemed an asset of the Company.
20. DEFINITION. For purposes of this Agreement, the term "Company" shall mean the Company, its subsidiaries, its successors or assignees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
DIMENSIONAL VISIONS, INC.
By /s/ John D. McPhilimy --------------------------------------------- John D. McPhilimy Chairman, President & Chief Executive Officer By: /s/ Bruce D. Sandig --------------------------------------------- Bruce D. Sandig, Individual |