SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10 - QSB
QUARTERLY REPORT UNDER REGULATION SB OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number:
December 31, 2000 2-96976-D
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DCI TELECOMMUNICATIONS, INC.
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(Exact Name of Registrant as specified in its charter)
COLORADO 84-1155041
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(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
488 Schooley's Mountain Road, Hackettstown, NJ 07840
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(Address and zip code of principal executive offices)
(908) 684-8233
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required by Regulation SB of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to the filing requirements for at least the past 90 days.
YES __X__ NO_____
Indicate the number of shares outstanding of each of the issuer/s
classes of common stock, as of the last practicable date:
Number of Shares Outstanding Class Date
- ---------------------------- ------- ----------
30,775,644 Common Stock, December 31, 2000
$.0001 par value
DCI TELECOMMUNICATIONS, INC.
Index
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheet December 31, 2000 3
Statements of Operations
Three Months Ended December 31, 2000 and 1999 5
Statements of Cash Flow
Nine Months Ended December 31, 2000 and 1999 7
Notes to Unaudited Financial Statements
December 31, 2000 9
ITEM 2. Management's Discussion and Analysis or
Plan of Operations 10
PART II
Other Information 15
Signatures 15
DCI Telecommunications, Inc.
Consolidated Balance Sheet
(unaudited)
December 31,
2000
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ASSETS
Current assets:
Cash $ 1,409,277
Accounts receivable, net 2,153,113
Other current assets 40,165
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Total Current Assets 3,602,555
Fixed Assets 673,583
Less: Accumulated depreciation (277,490)
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Net Fixed Assets 396,093
Accounts receivable-long term 2,762,954
Deposits 13,856
Assets Held for Sale 8,071
Cost in excess of assets acquired:
Muller Media 1,634,436
Less: Accumulated amortization (208,835)
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Net cost in excess of assets acquired 1,425,601
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Total Assets $ 8,209 130
==========
(continued)
See accompanying notes to consolidated financial statements.
3
December 31
2000
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses $ 5,608,739
Preferred stock dividend 353,119
Due to shareholders 56,711
Short term note payable 80,000
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Total Current Liabilities 6,098,569
Long-term debt 1,150,448
Accounts payable 2,607,559
Redeemable, convertible preferred stock,
$1,000 par and redemption
value, 2,000,000 shares authorized,
282.45 shares issued & outstanding 275,000
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Total Liabilities 10,131,576
Common stock, $.0001 par value,
500,000,000 shares authorized,
30,775,644 shares issued and outstanding 3,077
Paid-in capital 37,421,216
Treasury stock (1,356,547 shares at cost) (1,127,439)
Accumulated deficit subsequent to 12/31/95,
date of quasi-reorganization (total
deficit eliminated $4,578,587) (38,219,300)
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Total Shareholders' Deficit (1,922,446)
-----------
Total Liabilities and Shareholders' Deficit $ 8,209,130
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See accompanying notes to consolidated financial statements.
4
DCI Telecommunications, Inc.
Consolidated Statement of Operations
(unaudited)
Nine Months Ended Nine Months Ended
December 31 December 31
2000 1999
Net Sales $ 4,443,695 $ 2,523,856
Cost of Sales 3,224,875 1,505,230
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Gross profit (loss) 1,218,820 1,018,626
Selling, general and
Administrative Expenses 524,379 629,015
Salaries and compensation 595,287 852,904
Professional and consulting fees 350,850 996,231
Amortization and depreciation 163,248 147,538
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1,633,764 2,625,688
Loss before other income and
Expense (414,944) (1,607,062)
Investment Income 310,060 242,958
Interest expense (13,995) (1,585,111)
Other Income 14,532 477
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310,597 (1,341,676)
Loss from continuing operations (104,347) (2,948,738)
Discontinued Operations:
Gain/(loss) on dissolution of
Subsidiaries:
DCI Spain 408,627
Coast to Coast 408,679
EDGE Telecommunications 1,412,914
DCI UK 1,426,149
EDGE- Goodwill write-off (6,454,709)
Loss on Master Service
Agreement (13,321,093)
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2,230,220 (18,349,653)
(continued)
5
Loss from discontinued Operations:
Fone.Com UK (96,981) (855,634)
Travel Source 11,339 ( 6,736)
EDGE Telecommunications (3,213,563)
DCI Spain (258,524)
DCI UK (560,414)
Coast to Coast 55
Amortization on Master Service
agreement (1,567,188)
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(85,642) (6,462,004)
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Net Gain/(loss) before dividends
On preferred stock 2,040,231 (27,760,395)
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Dividends on preferred stock 133,870
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Net Gain/loss aplicable to
Common shareholders 2,040,231 (27,894,265)
=========== ============
Basic and diluted net loss per common shares:
Loss from continuing operations 0.00 ( 0.10)
Gain(loss) from discontinued
operations 0.07 ( 0.82)
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Net gain (loss) per common
share-basic and diluted 0.07 ( 0.92)
========== ===========
Weighted average common
shares outstanding 30,775,644 30,242,819
See accompanying notes to consolidated financial statements
6
DCI Telecommunications, Inc
Consolidated Statements of Cash Flow
(unaudited)
Nine Months Ended
December 31
2000 1999
---- ----
Reconciliation of net loss to net
cash used in operating activities:
Net loss from continuing operations $ ( 104,347) $( 2,948,738)
Adjustments to reconcile net loss from
continuing operations to net cash
used in operating activities:
Amortization and depreciation 163,248 147,538
Accrued interest converted to note 1,348,605
Changes in assets and liabilities:
(Increase) Decrease in:
Accounts receivable (1,861,161) (2,979,434)
Inventory 20,111
Deposits 75,534
Other current assets 21,614 84,939
Increase (Decrease):
Accounts payable & accrued expenses 1,859,428) 2,975,057
Deferred revenue ( 107,216) ( 267,943)
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( 28,434) (1,544,331)
Cash flows from investing activities:
Additions to Fixed Assets (202,361)
Sale of Fixed Assets 31,803 6,277
(Increase) Decrease in long term Assets 196,509
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Net cash from(used in)investing activities 228,312 (196,084)
(continued)
7
Proceeds from stock options
Exercised 51,260
Payment of Notes Payable (550,000)
Net Payments to shareholders (25,426) (47,070)
Proceeds from issuance of notes
Payable 1,930,000
Payment of long-term debt (53,529)
Proceeds from line of credit 80,000
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Net cash from financing activities 54,574 1,330,661
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Net (decrease) increase in cash 254,452 ( 409,754)
Cash, beginning of period 1,154,825 1,631,186
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Cash, end of period $ 1,409,277 $ 1,221,432
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Supplemental disclosures of cash flow information:
Cash paid for interest 13,995 44,435
Non-cash investing and financing
transactions:
Preferred stock dividends 133,870
Stock issued for other assets 40,000
Assets acquired by lease 705,757
See accompanying notes to consolidated financial statements.
8
DCI Telecommunications, Inc.
Notes to Unaudited Financial Statements December 31, 2000
NOTE 1.
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The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the provisions of Regulation SB.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Certain
restatements of prior year numbers have been made to conform to the
current years presentations and to account for discontinued
operations.
The consolidated financial statements include the accounts of the
Company and its wholly and majority owned subsidiaries. Material
inter-company balances and transactions have been eliminated in
consolidation.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full
year. The accompanying financial statements should be read in
conjunction with the Company's form 10-KSB filed for the year
ended March 31, 2000.
Per share amounts were computed using the weighted average number
of common shares outstanding.
NOTE 2. Sale of Fone.com
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Effective May 31, 2000, (closing date June 2, 2000) The Company sold
all of the Common stock of Fone to Corzon, Inc formerly Tanners
Restaurant Group, Inc. ("Corzon") in exchange for 40,000,000
shares of Corzon and the assumption by Corzon of $3,453,652 of debt
of the Company. The debt assumed was a $ 1,348,605 note,
$1,905,047 of redeemable convertible preferred stock and $ 200,000
of notes payable to Triton Private Equities Fund, Ltd, After the
transaction DCI owned 62.67% of the outstanding shares of Corzon. DCI
has been informed that the SB2 registration statement filed by Corzon
became effective in November, 2000.
The Board of Directors of DCI Telecommunications, Inc. declared a
one-time special dividend. Under this declaration, each outstanding
share of DCI Common Stock held of record as of 5pm eastern standard
time on December 6, 2000 will receive one share of Corzon, Inc. (OTC
Bulletin Board: CRZN) common stock. The Company had anticipated that
the shares would have been distributed on/or about January 30, 2001.
The Company has been advised however that Corzon must amend its most
recent SB2 Registration Statement. It is anticipated that the shares
9
will be distributed by Corzon's Stock Transfer Agent to DCI's
shareholders as of the December 6, 2000 record date, as soon as such
amendment is efective.
NOTE 3. Bankruptcy
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On July 27, 2000, EDGE and Coast to Coast, were placed in Bankruptcy
under Chapter 7. In October , 2000, a hearing was held by the Trustee
in Maryland. DCI has received official documentation from the Trustee
and $ 1.8 million in net liabilities was written off as discontinued
operations.
Note 4. Other
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Travel Source Impairment
- ------------------------
Due to the intense competition from airline carriers and internet
travel service, as well as a loss of key employees, the Company has
determined that the remaining goodwill was impaired and wrote off the
remaining $ 78,586 in September 30, 2000.
Note 5.- Subsequent Event.
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DCI Telecommunications, Inc. has purchased The Music Factory, a
privately owned company that is in the entertainment, educational and
commercial software business. The Music Factory's production team
records entertainment and educational events on an international
scale and then produces interactive multimedia enhanced CD's and
offers them for resale. It's products range from history making
events to international Christmas CD's with original video,
photography, music and sound effects.
At closing 745,000 shares of DCI Telecommunications, Inc. Stock will
be issued to the current shareholders of the Music Factory. These
shares will be issued in accordance with and subject to SEC Rule 144.
The total Purchase price will be determined by the performance of the
Music Factory over a 24-month period. The total purchase price will
be predicated upon a sales formula.
Management's Discussion and Analysis or Plan of Operations
Overview
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The following discussion and analysis provides information that
management believes is relevant to an assessment and
understanding of DCI Telecommunications, Inc. and its
subsidiaries (collectively, the Company), consolidated results of
operations and financial condition for the nine months ended
10
December 31, 2000. The discussion should be read in conjunction with
the Company's consolidated financial statements and accompanying notes.
The Company currently operates predominantly in the motion picture
distribution industry.
Recent Dispositions
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Fone. Com
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Effective May 31, 2000, (closing date June 2, 2000) the Company sold
all of the common stock of Fone to Corzon, Inc formerly Tanners
Restaurant Group, Inc. ("Corzon") in exchange for 40,000,000
shares of Corzon and the assumption by Corzon of $3,453,652 of debt
of the Company. The debt assumed was a $1,348,605 note,
$1,905,047 of redeemable convertible preferred stock, and $200,000
of notes payable to Triton Private Equities Fund, Ltd. After the
transaction DCI owned 62.67% of the outstanding shares of Corzon. DCI
has been informed that the SB2 registration statement filed by Corzon
became effective on November 14 ,2000.
The Board of Directors of DCI Telecommunications, Inc. declared a
one-time special dividend. Under this declaration, each outstanding
share of DCI Common Stock held of record as of 5pm eastern standard
time on December 6, 2000 will receive one share of Corzon, Inc (OTC
Bulletin Board: CRZN) common stock. The Company had anticipated that
the shares would have been distributed on/or about January 30, 2001.
The Company has been advised however that Corzon must amend its most
recent SB2 Registration Statement. Is is anticipated that the shares
will be distributed by Corzon's Stock Transfer Agent to DCI's
shareholders as of the December 6, 2000 record date, as soon as such
amendment is effective.
Bankruptcy of subsidiaries
- --------------------------
On July 27, 2000 EDGE and Coast to Coast, were placed in Bankruptcy
under chapter 7. In October 2000, a hearing was held by the Trustee
in Maryland. DPI has received official documentation from the Trustee
And $J 1.8 million in net liabilities was written off as discontinued
operations.
11
Liquidity and Capital Resources
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At December 31, 2000 the Company had unrestricted cash of
approximately $1,409,000. Net cash increased $ 108,000 during the
last three months. Cash used in operating activities was about
$28,000. The Company has negative working capital of approximately $
2,500,000 at December 31, 2000. The ability of the Company to
finance all new and existing operations will be heavily dependent
on external sources. No assurance can be given that additional
financing will be available or, if available, that it will be on
acceptable terms.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
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This report contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Where any such forward-looking
statement includes a statement of the assumptions or bases underlying
such forward-looking statement, the Company cautions that assumed
facts or bases almost always vary from the actual results, and
the differences between assumed facts or bases and actual results
can be material, depending upon the circumstances. Where, in any
forward-looking statement, the Company or its management
expresses an expectation or belief as to future results, there
can be no assurance that the statement of expectation or belief
will result or be achieved or accomplished. The words
"believe", "expect", "estimate", "anticipate", "project"
and similar expressions may identify forward-looking statements.
Consolidated Results of Operations
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Nine months Ended
December 31
2000 1999
---- ----
Net Sales $ 4,443,695 $ 2,523,856
Net Sales from continuing operations increased approximately
$1,920,000 in the nine months ending December 31, 2000, compared to
12
the same period a year ago. Increased movie sales by Muller accounts
for the increase due to better quality movie packages and more movie
contracts
2000 1999
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Cost of Sales $ 3,224,875 $ 1,505,230
Cost of Sales increased $ 1,720,000 in the first nine months
compared to a year ago. Cost of Sales of Muller accounts for the
difference corresponding to their sales growth.
2000 1999
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Selling, General & Administration
Expense $524,379 $ 629,015
Selling, General & Administration declined $ 105,000 in the
current period compared to last year nine months period principally
as a result of the higher activity and more employees at the
corporate level in the 1999 period.
2000 1999
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Salaries and Compensation $ 595,287 $ 852,904
Salaries declined $ 258,000 in the current period compared to
last year nine months period principally as a result of fewer
employees at the corporate level.
2000 1999
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Professional and Consulting Fees $ 350,850 $ 996,231
Professional fees declined $ 645,000 in the first nine months
principally since last year included heavy professional fees as a
result of the SEC investigation.
2000 1999
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Amortization and Depreciation $ 163,248 $ 147,538
Amortization and depreciation increased $ 16,000 over the prior year
nine months period due an increase of depreciation expense
related to the purchase of furniture and computers, during the
prior year.
13
2000 1999
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Investment Income $ ( 310,560) $ (242,958)
Interest Expense $ 13,995 $ 1,585,111
Other Income $ ( 14,532) $ ( 477)
The entire investment income in both periods is from Muller Media
which earned $ 67,000 more in the current period on higher
investments at higher yields. Interest expense fell approximately
$ 1,571,000 due to the fact that 1999 results included interest and
penalties associated with Series F. convertible preferred stock of
approximately $ 1,379,000
Gain (loss) on Dispositions 2000 1999
----------- ------------
$ 2,230,220 $( 18,349,353)
The gain in the current period relates to write-off of net
liabilities upon the Bankruptcy of EDGE ($1,412,914), Coast to Coast
($ 408,679), and closing Spanish operations ($ 408,627). The losses
in the prior year are the write-off of the Master Service Agreement,
$13,321,093, the write off of EDGE Goodwill, $ 6,454,709, partially
offset by gain on Bankruptcy of DCI UK totalling $ 1,426,149
Loss from Discontinued Operations 2000 1999
----------- -----------
$ ( 85,642) $( 6,462,004)
The loss in the current year is principally from Fone.Com which was
sold earlier in the year. The prior year losses principally relate to
telecommunications business that were shut down last year as well as
amortization related to the Master Service Agreement.
14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
FORM 8K November 27 2000 - Announce special dividend
FORM 8K January 30, 2001 - Change in special dividend
FORM 8K February 9, 2001 - Purchase of The Music Factory
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
DCI TELECOMMUNICATIONS, INC.
(Registrant)
Dated: February 16, 2000 By: /s/John J. Adams
-------------------------
John J. Adams - President
15