UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2001
- -------------------------------------------------------------------------------
Commission File Number 0-30652
- -------------------------------------------------------------------------------
VIDEOPROPULSION, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Wisconsin 39-1976286
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
251 Info Highway, Slinger, Wisconsin 53086
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(262) 644-1000
- -------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
State the number of shares outstanding of each of the issuers' classes of
common stock as of the latest practicable date.
18,344,048 Shares, Common Stock, $.01 Par Value
- ------------------------------------------------------------------------------
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
VIDEOPROPULSION, INC.
FORM 10-QSB
For Quarter Ended March 31, 2001
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Balance Sheets . . . . . . . . . . . 3 - 4
Statements of Operations . . . . . . . . . . . 5
Condensed Statements of Cash Flows . . . . . . 6 - 7
Notes to Unaudited Financial Statements . . . 8 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . 10 - 13
PART II - OTHER INFORMATION
Item 2 - Changes in Securities . . . . . . . . . . . . . . 14
Signature. . . . . . . . . . . . . . . . . . . . . . . . . 14
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
VIDEOPROPULSION, INC.
CONDENSED BALANCE SHEETS
ASSETS (Unaudited) (Audited)
---------- ----------
March 31, December 31,
2001 2000
---------- ----------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . $ 6,557 $ 13,964
Accounts Receivable . . . . . . . . . . . 24,562 11,495
Advances to Employees . . . . . . . . . . 12,966 -
Inventories. . . . . . . . . . . . . . . . 121,893 132,177
Prepaid Expenses . . . . . . . . . . . . . 10,310 6,167
--------- ---------
Total Current Assets. . . . . . . . . . 176,288 163,803
PROPERTY AND EQUIPMENT, at cost
Machinery and Equipment . . . . . . . . . 17,526 12,511
Less - Accumulated Depreciation. . . . . . (2,560) (1,683)
--------- ---------
Net Property, Plant and Equipment . . . 14,966 10,828
--------- ---------
Total Assets. . . . . . . . . . . . . . $ 191,254 $ 174,631
--------- ---------
--------- ---------
VIDEOPROPULSION, INC.
CONDENSED BALANCE SHEETS
(Unaudited) (Audited)
----------- -----------
March 31, December 31,
2001 2000
----------- -----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts Payable - Trade . . . . . . . . . . $ 77,695 $ 63,051
Accounts Payable - GENROCO, Inc. . . . . . . 221,882 188,532
Accrued Payroll and Payroll Taxes . . . . . 15,758 29,094
Other Accrued Liabilities . . . . . . . . . 79,697 56,792
Due to Related Party . . . . . . . . . . . . 479,325 180,000
--------- ---------
Total current liabilities. . . . . . . 874,357 517,469
Due to Related Party . . . . . . . . . . . . 91,899 345,361
--------- ---------
Total liabilities. . . . . . . . . . . 995,296 862,830
SHAREHOLDERS' INVESTMENT:
Common Stock, $.01 par value, 24,900,000 shares
authorized, 18,344,048 issued and outstanding
on March 31, 2001 and 18,534,448 issued and
outstanding on December 31, 2000. . . . . 183,440 185,344
Additional paid-in capital . . . . . . . . . 194,258 192,354
Unearned Compensation . . . . .. . . . . . . (566,405) (689,685)
Retained Deficit . . . . . . . . . . . . . . (586,295) (376,212)
--------- ---------
Total shareholders' investment. . . . . . (775,002) (688,199)
--------- ---------
Total liabilities and
shareholders' investment. . . . . . . . $ 191,254 $ 174,631
--------- ---------
--------- ---------
See accompanying notes.
VIDEOPROPULSION, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
----------------------
Three Months Ended
March 31,
----------------------
2001 2000
-------- --------
NET SALES . . . . . . . . . . . . . . . . . . . $ 63,669 $ 124,075
COST OF GOODS SOLD. . . . . . . . . . . . . . . 19,948 33,389
--------- ---------
Gross Profit . . . . . . . . . . . . . . . . 43,721 90,686
OPERATING EXPENSES:
Engineering. . . . . . . . . . . . . . . . . 129,853 94,197
Selling and Administrative . . . . . . . . . 122,656 195,146
--------- ---------
252,509 289,343
--------- ---------
Loss from Operations. . . . . . . . . . . . . . (208,788) (198,657)
Interest Expense. . . . . . . . . . . . . . . 100 3,698
Interest Income . . . . . . . . . . . . . . . 100 -
Other Non-Operating Expenses. . . . . . . . . 1,295 3,974
--------- ---------
LOSS BEFORE TAXES . . . . . . . . . . . . . . . (210,083) (206,329)
Benefit (Provision)-Income Taxes. . . . . . . - -
--------- ---------
NET LOSS. . . . . . . . . . . . . . . . . . . . $(210,083) $(206,329)
--------- ---------
--------- ---------
BASIC AND FULLY DILUTED
LOSS PER SHARE . . . . . . . . . . . . . . . $ (.01) $ (51.58)
--------- ---------
--------- ---------
Average number of
shares outstanding . . . . . . . . . . . . . . 18,532,332 4,000
---------- ---------
---------- ---------
Average number of
shares - Assuming dilution . . . . . . . . . . 18,532,332 4,000
---------- ---------
---------- ---------
See accompanying notes.
VIDEOPROPULSION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
----------------------------
Three Months Ended March 31,
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations . . . . . . $(210,083) $(206,329)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation, amortization and
deferred income taxes. . . . . . . . . . . 877 -
Compensation expense due to forgiveness of
notes receivable related to sale of
GENROCO stock to employees . . . . . . . . 94,242 -
Change in assets and liabilities:
Current assets, other than cash . . . . . (19,892) (79,381)
Current liabilities, other
than notes payable . . . . . . . . . . . 23,538 179,793
--------- ---------
Net cash used in operating activities. (111,318) (105,917)
CASH FLOWS FROM INVESTING ACTIVITIES:
dditions to property, plant and equipment,
net of retirements . . . . . . . . . . . . . . . (5,015) -
--------- ---------
Net cash used in investing activities. . . . . . (5,015) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Note Payable From Shareholder . . 300,000 -
Capital Contribution From Parent. . . . . . . . - 200,000
(Decrease) Increase in Funding
From Related Party . . . . . . . . . . . . . (191,074) -
--------- ---------
Net cash generated by financing activities . 108,926 200,000
--------- ---------
Net (decrease) increase in cash
and cash equivalents . . . . . . . . . . . . (7,407) 94,083
Cash and cash equivalents at
beginning of period . . . . . . . . . . . . 13,964 9,947
--------- ---------
Cash and cash equivalents at end of period . . $ 6,557 $ 104,030
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(Unaudited)
March 31,
---------------------
2001 2000
-------- --------
Cash paid during year for:
Interest. . . . . . . . . . . . . . . . . . . $ 100 $ -
------ ------
------ ------
Income taxes. . . . . . . . . . . . . . . . . $ - $ -
------ ------
------ ------
See accompanying notes.
VIDEOPROPULSION, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2001
1. BASIS OF PRESENTATION
The condensed financial statements of VideoPropulsion, Inc. ("VDOP") have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission.
The historical share data in this report has been adjusted to reflect the effect
of the 4-for-1 stock split on July 3, 2000.
Certain information and footnote disclosures normally included in financial
statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations, and as such, the Company believes that the disclosures are adequate
to make the information presented not misleading. The results for the quarter
ended March 31, 2001 may not be indicative of the results for the entire year.
It is suggested these statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Form 10-KSB for the
Company's year ended December 31, 2000.
2. GOING CONCERN
The Company continues to generate negative cash flows from operations. Current
forecasts indicate that the Company may be unable to fund current plans beyond
the second quarter of fiscal 2001 unless it is able to raise additional capital.
The Company currently owes $313,781 to GENROCO for interim operational funding
and reimbursement to GENROCO for compensation expense relating to GENROCO stock
purchase plans granted to VDOP employees. There can be no assurances that
GENROCO or existing shareholders will continue to fund or have the resources to
fund the Company's operations in this manner.
The Company has $479,325 outstanding at March 31, 2001, due on demand to a
related party, director and shareholder.
The Company is considered a development stage company. A market for the
Company's products may not develop. The Company's growth will be limited if DVB
technology and solutions do not become widely accepted. The Company's
development efforts are focused on the DVB market, which has only begun to
develop and is rapidly evolving.
The Company believes that the combination of current existing cash and the
Company's ability to obtain additional long-term indebtedness is not adequate to
finance the Company's operations for the current activities and foreseeable
future. As a result, the Company does not have adequate cash to meet current
obligations and is currently delinquent in payments to its vendors and service
providers. Management is currently seeking to raise additional capital either
through a private placement or an offering of VDOP stock. To date, no
additional capital has been raised and in light of economic conditions will be
difficult.
If the Company is not successful in raising additional capital, the Company will
not be able to continue its current operations and there is substantial doubt as
to the Company's ability to continue as a going concern. There can be no
assurance that the Company will be successful in raising such capital at all or
on terms commercially acceptable to the Company or shareholders. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
3. INVENTORIES
Cost of the Company's inventory is determined using the average cost first-in,
first-out (FIFO) inventory valuation method. The distribution between major
classes of inventories is as follows:
(Unaudited) (Audited)
March 31, 2001 December 31,2000
-------------- ----------------
Raw Materials and Work-in-Process . $ 30,094 $ 54,503
Finished Goods. . . . . . . . . . . 91,799 77,674
-------- --------
$121,893 $132,177
-------- --------
-------- --------
4. DISTRIBUTION OF SUBSIDIARY
In August of 1999, the board of directors of GENROCO, Inc. (VDOP's former parent
corporation) began contemplating the spin-off and distribution of the Company's
Digital Video Broadcast (DVB) business as a separate company to be named
VideoPropulsion, Inc. The Company executed the distribution on July 10, 2000 by
issuing one new share of VideoPropulsion Inc. stock, for each share of Company
stock held by GENROCO shareholders of record, as of the close of business on
June 30, 2000.
Complete details are available in the amended SEC Form 10SB/A for
VideoPropulsion Inc., which was filed with the SEC on June 19, 2000 and mailed
to each shareholder, as an information statement, on June 20, 2000.
For additional information, see GENROCO Inc.'s SEC Form 10-QSB for the six
months ended June 30, 2000, as filed with the SEC on August 14, 2000.
5.SHAREHOLDERS' EQUITY
In July 2000, VideoPropulsion declared a 4-for-1 stock split as of July 3, 2000
with a distribution date of July 13, 2000. As a result, shareholders of record
as of July 3, 2000 received 13,900,836 new shares to bring the total outstanding
amount to 18,534,448.
In March 2001, the Company acquired treasury shares of 190,400 common shares of
VDOP. The treasury shares were immediately cancelled.
6. SUBSEQUENT EVENTS
The Company is currently in preliminary negotiations with GENROCO regarding the
potential merger of the two entities. To date no written documents have been
drafted but management believes it better to merge with GENROCO and have
combined companies, each with immediate cash needs, strive to raise capital.
The Board has not yet met to address the possible merger or reviewed any
documents, but is in preliminary discussions. There can be no assurances that
the impact of this on VDOP will be sufficient to maintain operations.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
RESULTS OF OPERATIONS
- ---------------------
Net sales for the Company for the three months ended March 31, 2001 ("2001"),
were $63,669 compared to $124,075 for the three months ended March 31, 2000
("2000"). The decrease is a refection of the overall sluggishness in the
electronic industry during the past twelve months. The Company continues to
rely on an existing customer base, most of whom are engaged in their own unique
product evaluation and development programs for new products that they intend to
sell into the digital video market. By placing its hardware and software
products with key players in the emerging digital video industry, management
believes the Company will seek to obtain significant future sales opportunities
as this technology becomes mainstream in the market place.
Cost of goods sold for the three months ended March 31, 2001 was $19,948,
compared to $33,389 for the three months ended March 31, 2000. This expense,
which was comprised of parts and labor associated with production and testing of
circuit boards shipped to customers, decreased as sales decreased.
Gross profit for the three months ended March 31, 2001 was $43,721 compared to
$90,686 for the three months ended March 31, 2000. This decrease is directly
related to the reduction in sales.
The resulting gross margin percentages were 68.7% and 73.1% for the three months
ended March 31, 2001 and March 31, 2000, respectively. These gross margin
percentages may not be indicative of future performance as anticipated price
reductions due to increased competition and volume discount pricing may effect
future gross margin percentages.
Research and development expenses for the three months ended March 31, 2001 were
$129,853 compared to $94,197 for the three months ended March 31, 2000, or
204.0% and 75.9% of net sales for 2001 and 2000 respectively. The increases are
primarily associated with new product development and additional personnel
costs. As of March 31, 2001, the Company had eight employees, five of whom were
involved with the Company's engineering effort.
Selling, marketing, customer service and general and administrative expenses for
the three months ended March 31, 2001 were $122,656 compared to $195,146 for the
three months ended March 31, 2000 or 192.6% and 157.3% of net sales for 2001 and
2000, respectively. The decrease is primarily associated with reduced payroll
costs in an effort to reduce operating costs.Loss from operations for the three
months ended March 31, 2001 was $208,788 compared to a loss of $198,657 for the
three months ended March 31, 2000.
Net loss for the three months ended March 31, 2001 was $210,083 compared to a
loss of $206,329 for the three months ended March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at March 31, 2001 was $6,557, a decrease from
$13,964 at December 31, 2000. The Company received interim funding from Carl
Pick, a director and shareholder, for $300,000 in February 2001.
During the three months ended March 31, 2001, net cash used in operating
activities was $111,318 versus $105,917 net cash used by operations for the
three months ended March 31, 2000.
Cash flows used in investing activities for the three months ended March 31,
2001 was $5,015 relating to the acquisition of computer equipment versus zero
for the three months ended March 31, 2000.
Cash flows from financing activities for the three months ended March 31, 2001
were $108,926 from loans from shareholders and interim funding from GENROCO,
versus $200,000 of capital contributions for the three months ended March 31,
2000.
Stockholders' equity decreased by $86,803 to $(775,002) at March 31, 2001 from
$(688,199) at December 31, 2000.
The Company's ratio of current assets to current liabilities (current ratio) was
.20 to 1 at March 31, 2001 versus .32 to 1 at December 31, 2000. The Company has
been unable to remain current with short-term obligations due to cash flow
constraints. The Company has relied solely on funding made available from
GENROCO or existing shareholders. The Company received a demand loan of
$300,000 from a shareholder in February 2001 to cover short-term operational
funding. There can be no assurances that GENROCO or existing shareholders will
continue to fund or have the resources to fund the Company's operations in this
manner.
The Company continues to generate negative cash flows from operations. Current
forecasts indicate that the Company may be unable to fund current plans beyond
the second quarter of fiscal 2001 unless it is able to raise additional capital.
The Company currently owes $313,781 to GENROCO for interim operational funding
and reimbursement to GENROCO for compensation expense relating to GENROCO stock
purchase plans granted to VDOP employees. The Company has $479,325 outstanding
at March 31, 2001, due on demand to a shareholder and director.
The Company is considered a development stage company. A market for the
Company's products may not develop. The Company's growth will be limited if
Digital Video Broadcast ("DVB") technology and solutions do not become widely
accepted. The Company's development efforts are focused on the DVB market,
which has only begun to develop and is rapidly evolving.
The Company believes that the combination of current existing cash and the
Company's ability to obtain additional long-term indebtedness is not currently
adequate to finance the Company's operations for the current activities and
foreseeable future. As a result, the Company does not have adequate cash to
meet current obligations and is delinquent in payments to its vendors and
service providers. Management is currently seeking to raise additional capital
either through a private placement or an offering of VDOP stock. To date, no
additional capital has been raised and prospects are difficult in light of the
technology industry's downturn in general.
If the Company is not successful in raising additional capital, the Company will
not be able to continue its current operations and there is substantial doubt as
to the Company's ability to continue as a going concern. There can be no
assurance that the Company will be successful in raising such capital at all or
on terms commercially acceptable to the Company or the current shareholders.
No events occurred which required the Company to file an SEC Form 8-K.
CAUTIONARY STATEMENT
- --------------------
With the exception of historical facts, the statements contained in Item 2. of
this Form 10-QSB may be forward looking statements. Statements in the future
tense and statements including the words "anticipate," "believe," continue,"
"estimate," "expect," "goal," "objective," "outlook," and other similar
expressions are intended to identify forward looking statements. The forward
looking statements in this 10-Q involve certain assumptions, risks and
uncertainties, many of which are beyond the Company's control, that could cause
our actual results and performance to differ. These factors are not limited to,
but certainly include: 1) cyclical downturns affecting the markets for capital
goods; 2) substantial increases in interest rates that impact the cost of the
Company's outstanding debt; 3) the success of management in increasing sales and
maintaining or improving the operating margins of its businesses; 4) the
availability of or material increases in the costs of select raw materials or
parts; and 5) actions taken by competitors. Investors are directed to the
Company's documents, such as its initial filing on Form 10-SB/A filed with the
Securities and Exchange Commission and the annual reports on Form 10-KSB.
PART II - OTHER INFORMATION
Item 2 - Change in Securities
--------------------
None.
SIGNATURE
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.
VIDEOPROPULSION, INC.
(Small Business Issuer)
/s/ Carl A. Pick
----------------------------------
Carl A. Pick
Chairman and Director
/s/ Barbara R. Pick
----------------------------------
Barbara R. Pick
CEO and Director
/S/ Brad Powers
----------------------------------
Brad Powers
Financial Manager
DATE: May 15, 2001