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:
September 30, 1996 2-96976-D
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DCI TELECOMMUNICATIONS, INC.
(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)
303 Linwood Avenue, Fairfield, Connecticut 06430
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(Address and zip code of principal executive offices)
(203) 259-7713 (Registrant's telephone number, including area code)
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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 November 5, 1996
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Common Stock, $.0001 par value 4,396,948
1
DCI TELECOMMUNICATIONS, INC.
Index
PART I FINANCIAL INFORMATION
Balance Sheet
September 30, 1996 3
Statements of Operations
Six Months Ended
September 30, 1996 and 1995 4
Statements of Cash Flow
Six Months Ended
September 30, 1996 and 1995 5
Notes to Unaudited Financial Statements
September 30, 1996 7
Management's Discussion and Analysis of 8
Financial Condition and Results of
Operations
PART II
Other Information 10
Signatures 12
2
DCI Telecommunications, Inc.
Consolidated Balance Sheet
September 30,
ASSETS 1996
Current Assets:
Cash $ 54,463
Accounts Receivable - trade 153,786
-shareholders 228,394
Deposits 4,684
Inventory 27,446
Total Current Assets 468,773
Property and Equipment 159,018
Less: Accumulated depreciation 19,534
Net property and equipment 139,484
Other Assets - copyrights 1,700,000
- customer base 653,752
2,353,752
Less: Accumulated amortization 309,235
Net other assets 2,044,517
Total Assets $2,652,774
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and settlements payable 57,238
Accounts payable 204,657
Accrued expenses 6,000
Total Current Liabilities 267,895
Long Term Debt 83,240
Commitments and Contingencies
Shareholders' Equity:
9.25% cumulative convertible, preferred stock
$100 par value, 9,000,000 shares authorized,
30,298 shares issued and outstanding; 305,000
Common stock, $.0001 par value,
500,000,000 shares authorized,
3,949,140 shares issued
and outstanding 395
Paid in capital 2,414,067
Subscriptions for common stock 69,800
Stock subscriptions receivable (58,384)
Treasury Stock (29)
Retained earnings (Deficit) (since 12/31/95) (429,210)
Total Shareholders' Equity 2,301,639
Total Liabilities and Shareholders' Equity $2,652,774
See Accompanying Notes to Consolidated Financial Statements
3
DCI Telecommunications, Inc.
Consolidated Statements of Operations
Three Months Ended Six Months Ended
September 30, September 30
1996 1995 1996 1995
Net Sales $237,483 $189,277 $505,709 $386,527
Cost of Sales 163,397 62,591 297,541 148,682
Gross Profit 74,086 126,686 208,168 237,845
Selling, General &
Administrative Expenses 48,936 157,543 144,259 205,484
Salaries and Compensation 95,130 136,673 183,556 236,962
Amortization&Depreciation 62,607 74,843 123,843 187,187
Professional Fees 39,827 40,000 53,995 66,547
Consulting Fees 7,813 -- 16,470 81,249
254,313 409,059 522,123 777,429
Income (Loss) from Operations (180,227) (282,373) (313,955) (539,584)
Other Income and (Expense):
Interest Expense (3,709) (10,091) ( 10,836) (13,891)
Net (Loss) ($183,936) ($292,464) ($324,791) ($553,475)
Net (loss) per common share ($0.05) ($0.15) ($0.09) ($0.29)
Weighted average common
shares outstanding 3,635,098 1,987,012 3,635,098 1,925,545
See Accompanying Notes to Consolidated Financial Statements
4
DCI Telecommunications, Inc.
Consolidated Statements of Cash Flows
Six Months Ended
September 30,
Cash Flows from Operating Activities: 1996 1995
Net Loss ($324,791) ($553,475)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 123,843 194,314
Stock issued for services 10,335 197,318
Deferred compensation -- 65,100
Non cash settlements (43,235) --
Accrued interest -- 5,600
Changes in assets and liabilities:
(Increase) Decrease in:
Accounts Receivable (14,235) 30,953
Inventory (277) 7,450
Prepayments -- (9,375)
Deposits (1,164) 8,830
Increase (Decrease) in:
Accounts Payable (103,671) 43,512
Accrued Expenses (2,500) (6,557)
Total Adjustments: (30,904) 537,145
Net cash provided by (used in)
operating activities (355,695) (16,330)
Cash flows from (used in) investing activities:
Additions to property, plant & equipment (16,857) (3,145)
Cash acquired with investment in R&D -- 10,405
(16,857) 7,260
Cash flows from (used in) financing activities:
Accounts Receivable shareholders (57,991) (106,440)
Proceeds from sale of stock 534,674 140,000
Bank overdraft (42,004) (11,958)
Payment of notes payable (37,184) --
Note payable - affiliate -- 3,150
Net cash provided by (used in)
financing activities 397,495 24,752
Net Increase (Decrease) in cash 24,943 15,682
Cash, Beginning of Year 29,520 --
Cash, End of Period $ 54,463 $15,682
See Accompanying Notes to Consolidated Financial Statements
5
DCI Telecommunications, Inc.
Consolidated Statements of Cash Flows
Six Months Ended
September 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
Stock subscriptions receivable $ 58,384
Non cash settlements $151,900
See Accompanying Notes to Consolidated Financial Statements
6
DCI Telecommunications, Inc.
Notes to Unaudited Financial Statements September 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. During the quarter ending
September 30, 1996, the Company was granted an extension until December
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
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 September 30, 1996 , the Company issued 61,112
shares of its common stock under a Regulation D, 504 offering, raising over
$108,000 in cash.
Also, 1,450,000 options to purchase common stock at an exercise price of
$.1875 were issued to employees with exercise dates commencing June 21,
1996 through November 1, 1996. At September 30, 175,000 shares had been
exercised.
7
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. at acquisition 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 six months ended September 30,
1996 totaled $356,000. The Company raised $535,000 by the private sale of
stock to cover this cash shortfall.
At September 30, 1996, the Company showed its first positive working
capital since inception.
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 heavily dependent on external
sources.
Results of Operations
Six Months Ended
September 30,
1996 1995
Sales $505,709 $386,527
Net sales increased in the 1996 first six months by approximately $119,000
compared to the prior year first six months principally due to increased
sales of R&D monitoring devices.
1996 1995
Cost of Sales $297,541 $ 148,682
Cost of sales increased $149,000 in the 1996 first six months 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 62% to 41% in
1996.
8
1996 1995
Selling, General & Administrative $144,259 $205,484
S.G.&A. expense declined $61,000 in 1996 compared to the six months
ending September 30, 1995. Lower costs for outside services, advertising,
directors fees and R&D Scientific expenses account for the variance.
1996 1995
Salaries & Compensation $183,556 $236,962
Salaries declined in 1996 principally due to more being allocated to cost of
sales.
1996 1995
Amortization & Depreciation $123,843 $187,187
Amortization in the 1995 first six months included Casino Marketing
trademarks of $117,000 (written off in December, 1995) and one quarters
amortization of R&D copyrights of $37,500 while the current six months
has amortization of R&D Scientific copyrights of $85,000 (two quarters),
resulting in a $69,000 decline.
1996 1995
Professional Fees $ 53,995 $ 66,547
Professional fees declined $12,552 in the 1996 period due to less legal costs
associated with settlements of obligations.
1996 1995
Consulting Fees $ 16,470 $ 81,249
Consulting fees declined approximately $65,000 during the current year due
to much less reliance on outside help on corporate matters.
1996 1995
Interest Expense $ 10,836 $ 13,891
The reduction in interest expense in the current six months is principally
due to paydown and settlement of notes partially offset by interest on the
R&D Scientific mortgage which was not included in the entire 1995 six months.
9
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.
Page 11.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Page 11.
10
ITEM 4 - Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders held on August 21, 1996 the
following matters were approved:
a) Election of Directors: For Against Abstained
2,609,104 0 51
John J. Adams, Carter H. Hills, Robert Muller, Joseph J. Murphy,
Larry Shatsoff, Richard Sheppard
b) Ratification of selection of Schnitzer & Kondub as Independent Certified
Public Accountants.
For Against Abstained
2,603,839 5,151 165
c) Amendment to the Company's Restated Certificate of Incorporation and
By-Laws to increase the number of common shares received from conversion
of each share of Series A Convertible Preferred Stock from one-third (1/3)
share to one-hundred (100) shares.
For Against Abstained
2,369,389 234,473 5,293
ITEM 6 - Exhibits and Reports on Form 8K
The Company filed a Form 8K dated October 21, 1996 reporting the acquisition
of assets of Paul L. Bettencourt and Associates, and the entering into a new
incentive agreement with Franklin Telecommunications Corp., of Westlake
Village, California.
11
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: November 14, 1996 By: Joseph J. Murphy
Joseph J. Murphy
President
By: Larry Shatsoff
Larry Shatsoff
Acting Secretary
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