SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
QUARTERLY REPORT UNDER REGULATION SB OF THE SECURITIES EXCHANGE ACT OF
1934
For the Quarter Ended Commission File Number:
June 30, 1996 2-96976-D
DCI TELECOMMUNICATIONS, INC. (Exact Name of Registrant as specified in
its charter)
COLORADO 84-1155041
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
303 Linwood Avenue, Fairfield, Connecticut 06430
(Address and zip code of principal executive offices)
(203) 259-7713 (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 August 2, 1996
Common Stock, $.0001 par value 4,041,040
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DCI TELECOMMUNICATIONS, INC.
Index
PART I FINANCIAL INFORMATION
Balance Sheets
June 30, 1996 3
Statements of Operations
Three Months Ended
June 30, 1996 and 1995 4
Statements of Cash Flow
Three Months Ended
June 30, 1996 and 1995 5
Notes to Unaudited Financial Statements
June 30, 1996 7
Management's Discussion and Analysis of 9
Financial Condition and Results of
Operations
PART II
Other Information 11
Signatures 12
2
DCI Telecommunications, Inc.
Consolidated Balance Sheet
June 30,
ASSETS 1996
Current Assets:
Cash $106,505
Accounts Receivable - trade 129,295
-shareholders 134,142
Deposits 4,684
Inventory 27,169
Total Current Assets 401,795
Property and Equipment 153,675
Less: Accumulated depreciation 15,771
Net property and equipment 137,904
Other Assets - copyrights 1,700,000
- customer base 653,752
2,353,752
Less: Accumulated amortization 250,391
Net other assets 2,103,361
Total Assets $2,643,060
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank overdraft $5,280
Notes and settlements payable 172,771
Accounts payable 215,572
Accrued expenses 9,145
Total Current Liabilities 402,768
Long Term Debt 83,424
Commitments and Contingencies
Shareholders' Equity:
9.25% cumulative convertible, preferred stock
$100 par value, 9,000,000 shares authorized,
29,076 shares issued and outstanding; 305,000
Common stock, $.0001 par value,
500,000,000 shares authorized,
4,026,740 shares issued
and outstanding 403
Paid in capital 2,026,967
Subscriptions for common stock 69,800
Treasury Stock (29)
Retained earnings (Deficit) (since 12/31/95) (245,273)
Total Shareholders' Equity 2,156,868
Total Liabilities and Shareholders' Equit $2,643,060
See Accompanying Notes to Consolidated Financial Statements
3
DCI Telecommunications, Inc.
Consolidated Statement of Operations
Year Ended June 30,
1996 1995
Net Sales $268,226 $197,250
Cost of Sales 134,144 86,091
Gross Profit 134,082 111,159
Selling, General & Administrative Expenses 118,148 190,253
Salaries and Compensation 88,426 100,289
Amortization and Depreciation 61,236 77,828
267,810 368,370
Income (Loss) from Operations (133,728) (257,211)
Other Income and (Expense):
Interest Expense (7,127) (3,800)
Net (Loss) ($140,855) ($261,011)
Net (loss) per common share ($0.04) ($0.14)
Weighted average common shares
outstanding 3,359,639 1,908,564
See Accompanying Notes to Consolidated Financial Statements
4
DCI Telecommunications, Inc.
Consolidated Statements of Cash Flows
Three Months Ended
March 31,
Cash Flows from Operating Activities: 1996 1995
Net Loss ($140,855) ($261,011)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 61,236 77,828
Stock issued for services -- 157,318
Deferred compensation -- 32,550
Changes in assets and liabilities:
(Increase) Decrease in:
Accounts Receivable 10,256 (68,982)
Accounts Receivable - Shareholders (35,639) --
Inventory -- (2,000)
Deposits 1,164 --
Prepayments -- (28,125)
Increase (Decrease) in:
Accounts Payable (136,543) 95,481
Accrued Expenses 645 (4,857)
Total Adjustments: (98,881) 259,213
Net cash provided by (used in)
operating activities (239,736) (1,798)
Cash flows from (used in) investing activities:
Additions to property, plant & equipment (11,514) --
Net cash provided by (used in)
investing activities (11,514) --
Cash flows from (used in) financing activities:
Proceeds from sale of stock 368,514 --
Bank overdraft (36,724) (2,942)
Payment of notes payable (3,555) --
Proceeds from affilates -- 15,443
Net cash provided by (used in)
financing activities 328,235 12,501
Net Increase (Decrease) in cash 76,985 10,703
Cash, Beginning of Year 29,520 --
Cash, End of Period $106,505 $10,703
See Accompanying Notes to Consolidated Financial Statements
5
DCI Telecommunications, Inc.
Consolidated Statements of Cash Flows
Three Months Ended
June 30,
1996 1995
Supplemental disclosures of cash flow information:
Non cash investing and financing transactions:
Acquisition of R&D Scientific by
stock issuance -- $1,700,000
See Accompanying Notes to Consolidated Financial Statements
6
DCI Telecommunications, Inc.
Notes to Unaudited Financial Statements June 30, 1996
NOTE 1.
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.
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-K filed for the year ended March 31, 1996.
Income (loss) per share was computed using the weighted average number
of common shares outstanding.
Note 2. Acquisition of R&D Scientific Corp.
On June 19, 1995, the Company entered into an agreement to acquire the
common stock of R&D Scientific Corporation ("R&D") in a stock for stock
purchase, with the Company exchanging 106,250 shares for all of R&D's
outstanding stock. The stock of both companies is being held in escrow
pending certain cash infusion requirements. The Company was granted an
extension until August 31, 1996 to make the cash infusion of $150,000
in order to consummate the transaction with R&D. In consideration for
the extension, R&D has the right to terminate the purchase and sale
contract at its sole discretion prior to DCI making the cash infusion.
Note 3. Pending Acquisitions
a) On April 16, 1996, the Company signed an agreement with Franklin
Telecom Corporation of Westlake Village, California, whereby DCI
receives a 50% ownership of Franklin Datacom Inc., a wholly-owned
subsidiary of Franklin Telecom upon raising an agreed upon amount of
"bridge financing". It is the intent of the parties to rename this
subsidiary "FNet" and finance its growth through an Initial Public
Offering (IPO).
FNet is a provider of a comprehensive range of Internet access
options, applications and consulting services to business,
professionals and on-line service providers.
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After completion of the bridge financing, DCI and Franklin Telecom
will exchange shares with each other, with the goal of cross ownership
in the 10-15% range, to facilitate a possible future merger.
b) On August 9, 1996, the Company signed a letter of intent to acquire
Muller Media, Inc., a privately held entertainment company located in
New York, NY. It is contemplated that the acquisition will involve an
exchange of stock valued at approximately $3.0 million. Muller Media is
a national distributor of motion pictures and syndicated programming to
television stations and cable companies.
Note 4. Common Stock
During the quarter ending June 30, 1996, the Company issued 1,644,234
shares of its common stock under a Regulation D, 504 offering, raising
over $368,000 in cash, in addition to extinguishment of debt.
Note 5. Notes Payable
In connection with a judgement against the Company for liability
incurred while it was operating as Fantastic Foods, the Company entered
into a settlement with the shareholder which had a remaining balance of
$50,000 at March 31, 1996. During the quarter ended June 30, 1996, the
Company made cash payments and issued stock for which it has been
verbally told has satisfied the obligation. The Company is awaiting
signed releases.
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Item 2 - Managements Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
On December 30, 1994 and January 5, 1995 the Company acquired the
assets of Sigma Telecommunications and Alpha Products through the issue
of 1,330,000 shares of common stock, and renamed the Company DCI
Telecommunications, Inc. The liabilities remaining from the former
Fantastic Foods, Inc. have left the Company with negative working
capital. The Company continues to try to settle these liabilities
through the issue of common stock and other methods.
Net cash used in operating activities for the three months ended June
30, 1996 totalled $240,000. The Company raised $368,000 by the private
sale of stock to cover this cash shortfall.
The Company continues to pursue long-term financing. However, no
assurance can be given that additional financing will be available or,
if available, that it will be available on acceptable terms. The
ability to finance and expand all operations will be partially
dependant on external sources.
Results of Operations
Three Months Ended
June 30,
1996 1995
Sales $268,226 $197,250
Net sales increased in the 1996 first quarter by approximately $71,000
compared to the prior year first quarter principally due to increased
sales of R&D monitoring devices.
1996 1995
Cost of Sales $134,144 $ 86,091
Cost of sales increased $48,000 in the 1996 first quarter due to
increased R&D Scientific sales volume. In addition, more salaries were
allocated to cost of sales in 1996, which reduced the gross margin from
56% to 50% in 1996.
1996 1995
Selling, General & Administrative $118,148 $190,253
S.G.&A. expense declined $72,000 in 1996 compared to the quarter
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ending June 30, 1995. Lower costs for outside services, advertising and
R&D Scientific expenses account for the variance.
1996 1995
Salaries & Compensation $ 88,426 $100,289
Salaries declined in 1996 principally due to more being allocated to
cost of sales.
1996 1995
Amortization & Depreciation $ 61,236 $ 77,828
Amortization in the June 1995 quarter included Casino Marketing
trademarks of $58,000 (written off in December, 1995) while the current
quarter has amortization of R&D Scientific copyrights of $42,000,
resulting in the $16,000 decline.
1996 1995
Interest Expense $ 7,127 $ 3,800
The increase in interest expense in the current quarter is principally
due to interest on the R&D Scientific mortgage which was not included
in the 1995 quarter.
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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.
Not applicable.
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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: August 19, 1996 By: Joseph J. Murphy
Joseph J. Murphy
President
By: Larry Shatsoff
Larry Shatsoff
Acting Secretary
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