-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IBFSLnhfa3xyNW1tLqmgd9fyZpBvICHQ9CmU/PFmo7mxPxN5+OlYRvZc+9FrWFmu M8VdBS+cc/PwzlHCI4mmLw== 0000950116-96-001355.txt : 19961121 0000950116-96-001355.hdr.sgml : 19961121 ACCESSION NUMBER: 0000950116-96-001355 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961119 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROJECTAVISION INC CENTRAL INDEX KEY: 0000848135 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 133499909 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19218 FILM NUMBER: 96669094 BUSINESS ADDRESS: STREET 1: TWO PENN PLZ STE 640 CITY: NEW YORK STATE: NY ZIP: 10121 BUSINESS PHONE: 2129713000 MAIL ADDRESS: STREET 1: TWO PENN PLAZA STREET 2: STE 640 CITY: NEW YORK STATE: NY ZIP: 10121 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended September 30, 1996. -------------------- Commission File Number 33-33997 -------- Projectavision Inc. -------------------- (Exact name of registrant as specified in its charter) Delaware 13-3499909 --------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Two Penn Plaza, Suite 640, New York, NY 10121 ---------------------------------------------- (Address of Principal Executive Offices) (zip code) (212) 971-3000 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 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 such filing requirements for the past 90 days. Yes_X_ No___ As of September 30, 1996, there were 14,074,401 shares of the Registrant's common stock outstanding. PROJECTAVISION, INC. (A DEVELOPMENT STAGE COMPANY) FORM 10-Q TABLE OF CONTENTS ----------------- PAGE ---- Item 1. Financial Statements Comparative Balance Sheet (Unaudited) F-2 Comparative Statements of Operations (Unaudited) F-3 Statements of Stockholders' Equity (Unaudited) F-4 Comparative Statements of Cash Flows (Unaudited) F-10 Notes to Financial Statements (Unaudited) F-11 Item 2. Management's Discussion and Analysis of F-23 Financial Condition and Results of Operations SIGNATURES PROJECTAVISION, INC. (A Development Stage Company) COMPARATIVE BALANCE SHEETS DECEMBER 31, 1995 AND JUNE 30,1996 - ------------------------------------------------------------------------------
(Unaudited) December 31, September 30, ASSETS 1995 1996 CURRENT ASSETS: Cash and cash equivalents (Note 1) $3,491,982 $4,101,183 Investments-held to maturity (Notes 1) - 4,959,470 Due from related parties (Notes 6 and 11) 10,683 10,683 Other current assets 324,470 55,359 ---------- ----------- Total Current Assets 3,827,135 9,126,695 ---------- ----------- INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATE (Note 4) - - PROPERTY AND EQUIPMENT (Note 1): Furniture, fixtures and equipment 68,421 68,422 Computers and software 116,155 2,958,352 Tooling 0 201,430 Leasehold improvements 180,795 185,030 ---------- ----------- 365,371 1,592,092 Less: Accumulated depreciation 151,612 220,991 ---------- ----------- Property and equipment, net 213,759 3,192,243 OTHER ASSETS: Deposits 127,521 774,607 Deferred Commission - 89,444 ---------- ------------ TOTAL ASSETS $4,168,415 $13,182,989 ========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 485,710 $1,229,678 ---------- ----------- Total Current Liabilities 485,710 1,229,678 ---------- ----------- LONG-TERM CONVERTIBLE DEBT 8% Debentures Due January 31, 1999 - 2,300,000 COMMITMENTS AND CONTINGENCIES (Note 14) - - STOCKHOLDERS' EQUITY (Notes 8, 9, and 10) Preferred stock $.01 par value - 1,000,000 shares authorized; Series A Preferred Stock, 100 shares outstanding ($100,000 liquidation preference) Series B Preferred Stock, 410,144 and 385,982 shares outstanding in 1994 and 1995 NIL NIL respectively (liquidation preference $1,929,920 plus accrued and unpaid interest); 3,859 3,859 Series C Preferred Stock, $.001 Par Value-1,000,000 shares Authorized; 7,500 shares issued; ($100,000 liquidation preference) - 8 Common stock $.0001 par value - 30,000,000 shares authorized; 12,228,803 and 12,388,7790 issued and outstanding in 1994 and 1995 respectively 1,239 1,407 Additional paid-in capital 23,998,477 34,104,426 Deficit accumulated during the development stage (20,320,870) (24,456,389) ---------- ----------- Total Stockholders' Equity 3,682,705 9,653,311 ---------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,168,415 $13,182,989 ========== =========== See notes to financial statements F-2
PROJECTAVISION, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited) - -----------------------------------------------------------------------------
For the Period For the Three For the Period For theThree For the Period September 9, Months Ended Jan. 1, 1995 to Months Ended Jan. 1, 1996 to 1988 (Date of Sept. 30, 1995 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1996 Incorporation) to Sept. 30, 1996 REVENUE (Note 3) $ - $ - $ 150,000 $ 150,000 $1,455,000 ------------ ------------ ------------ ----------- ------------ OPERATING EXPENSES General and Administrative 342,737 1,113,167 410,915 1,505,123 8,694,753 Salaries 173,401 679,010 266,822 936,581 4,496,150 Legal fees (Notes 8 and 14) 237,570 429,178 158,628 657,604 2,677,753 Amortization and depreciation 18,804 54,935 58,185 479,934 686,984 (Note 1) Research and development (Notes 1 and 8) 207,679 364,376 191,577 503,930 3,925,853 Patent expense (Note 8) 50,103 226,561 104,360 242,445 1,320,863 License - 16,667 - - 46,667 ------------ ------------ ------------ ------------ ------------ Total Operating Expenses 1,030,294 2,883,894 1,190,487 4,325,617 21,849,023 ------------ ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS (1,030,294) (2,883,894) (1,040,487) (4,175,617) (20,394,023) ------------ ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE) Provision for allowances on advances (Notes 5 and 10) (11.669) (124,845) - - (298,426) Interest income 99,898 301,536 152,687 360,147 1,408,028 ------------ ------------ ------------ ------------ ------------ Interest expense - - (46,334) (320,049) (346,719) Other Income - Net 88,229 176,691 106,353 40,098 762,883 ------------ ------------ ------------ ------------ ------------ LOSS BEFORE EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE (942,065) (2,507,202) (934,134) (4,135,519) (19,631,140) EQUITY IN LOSS OF UNCON- SOLIDATED AFFILIATE (Note 4) (122,747) (511,095) - - (4,825,249) ------------ ------------ ------------ ------------ ------------ NET LOSS $(1,064,812) $(3,018,297) $ (934,134) $(4,135,519) $(24,456,389) ------------ ------------ ------------ ------------ ------------ NET LOSS PER SHARE $( .09) $( .24) $( .07) $( .30) $( 2.71) ------------ ------------ ------------ ------------ ------------ AVERAGE NUMBER OF SHARES OUTSTANDING (Note 1) 12,415,525 12,381,788 14,271,681 13,595,111 9,031,539 ------------ ------------ ------------ ------------- ------------ See notes to financial statements F-3
PROJECTAVISION, INC (A Developed Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 8 AND 9) - ------------------------------------------------------------------------------
Series A Series B Preferred Stock Common Stock Preferred Stock ------------------------ --------------------- --------------- Proceeds Proceeds Shares Amount Shares per Share Amount Shares Per Share Amount OCTOBER 1988 ISSUANCE OF COMMON STOCK 3,849,544 $.00002 $ 106 TO FOUNDERS FOR CASH NOVEMBER 1988 ISSUANCE OF COMMON STOCK 98,706 1.01 289 TO INVESTORS FOR CASH MERGER WITH DKY, INC.: Issuance of preferred stock 100 $NIL Distribution to DKY stockholders Additional paid-in capital NET LOSS ----- ----- ----- -------- --------- ------ BALANCE, DECEMBER 31, 1988 100 NIL 3,948,250 1.32 395 FEBRUARY 1989 ISSUANCE OF COMMON STOCK TO INVESTORS FOR CASH (Net of private placement costs) 518,416 1.32 52 NET LOSS ----- ----- ----- -------- --------- ------ BALANCE, DECEMBER 31, 1989 100 NIL 4,466,666 447 REVERSAL OF ACCRUAL FOR PRIVATE PLACEMENT COSTS JULY 1990 INITIAL PUBLIC OFFERING (Net of public offering costs) 1,600,000 1.86 160 NET LOSS ----- ----- ----- -------- ---------- -------- BALANCE, DECEMBER 31, 1990 100 NIL 6,066,666 607 ISSUANCE OF COMMON STOCK FOR RESEARCH AND DEVELOPMENT 146,000 1.24 15 ISSUANCE OF COMMON STOCK FOR MEMBERSHIP FEE 30,000 .83 2 ISSUANCE OF COMMON STOCK FOR PATENT COSTS NET LOSS 105,251 1.00 10 ----- ----- ----- -------- --------- ------ BALANCE, DECEMBER 31, 1991 100 $ NIL 6,347,91 $ 635 ----- ----- ----- -------- --------- ------ See notes to financial statements.
Deficit Accumulated Additional During the Paid-In Development Unearned Capital Stage Compensation Total OCTOBER 1988 ISSUANCE OF COMMON STOCK TO FOUNDERS FOR CASH $ $ $ 106 NOVEMBER 1988 ISSUANCE OF COMMON STOCK TO INVESTORS FOR CASH 99,711 100,000 MERGER WITH DKY, INC.: Issuance of preferred stock (300,000) (300,000) Distribution to DKY stockholders 100,900 100,900 Additional paid-in capital NET LOSS (257,443) (257,443) --------- --------- --------- (99,389) (257,443) (S57,443) BALANCE, DECEMBER 31, 1988 FEBRUARY 1989 ISSUANCE OF COMMON STOCK TO INVESTORS FOR CASH (Net of private placement costs) 681,443 681,495 NET LOSS (589,653) (589,653) --------- --------- --------- BALANCE, DECEMBER 31, 1989 582,054 (847,096) (264,595) REVERSAL OF ACCRUAL FOR PRIVATE PLACEMENT COSTS 50,000 50,000 JULY 1990 INITIAL PUBLIC OFFERING (Net of public offering costs) 2,977,472 2,977,632 NET LOSS (1,019,31) (1,019,315) --------- --------- --------- BALANCE, DECEMBER 31, 1990 3,609,526 (1,866,411) 1,743,722 ISSUANCE OF COMMON STOCK FOR RESEARCH AND DEVELOPMENT 180,985 181,000 ISSUANCE OF COMMON STOCK FOR MEMBERSHIP FEE 24,997 25,000 ISSUANCE OF COMMON STOCK FOR PATENT COSTS 105,241 105,251 NET LOSS (1,617,501) (1,617,501) --------- --------- --------- BALANCE, DECEMBER 31, 1991 $3,920,749 $(3,483,912) $ 0 $ 437,472 --------- --------- ---------
See notes to financial statements. F-4 PROJECTAVISION, INC (A Developed Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 8 AND 9) - -------------------------------------------------------------------------------
Series A Series B Preferred Stock Common Stock Preferred Stock ------------------------ --------------------- --------------- Proceeds Proceeds Shares Amount Shares per Share Amount Shares Per Share Amount JANUARY 1992 ISSUANCE OF COMMON STOCK FOR CONSULTING 200,000 1.4 $ 20 APRIL 1992 ISSUANCE OF COMMON STOCK FOR CASH 317,460 2.14 32 MAY 1992 ISSUANCE OF SERIES B PREFERRED STOCK FOR SALARIES 80,000 $800 ISSUANCE OF SERIES B PREFERRED STOCK FOR PROFESSIONAL SERVICES 29,000 290 ISSUANCE OF SERIES B PREFERRED STOCK FOR FUTURE RENT 9,000 90 ISSUANCE OF SERVICES B PREFERRED STOCK FOR FUTURE LEGAL SERVICES 20,000 200 JUNE 1992 ISSUANCE OF COMMON STOCK FOR CASH INCLUDING 28,064 SHARES ISSUED FOR COMMISSION 391,700 2.55 39 ISSUANCE OF COMMON STOCK FOR CASH 146,333 2.70 15 AUGUST 1992 ISSUANCE OF SERIES B PREFERRED STOCK FOR PROFESSIONAL SERVICES 30,000 300 NOVEMBER/DECEMBER 1992 ISSUANCE OF COMMON STOCK FOR WARRANTS AND CASH (Note 9) 500,000 1.00 50 ISSUANCE OF COMMON AND PREFERRED STOCK FOR WARRANTS 246,452 2,464 1,483,200 1.00 148 ISSUANCE OF COMMON STOCK FOR PATENT COSTS 37,065 1.00 3 AMORTIZATION OF UNEARNED COMPENSATION NET LOSS --- ---- ------- ------ --------- ---- BALANCE DECEMBER 31, 1992 100 $NIL 414,452 $4,144 9,423,675 $942 --- ---- ------- ------ --------- ----
Deficit Accumulated Additional During the Paid-In Development Unearned Capital Stage Compensation Total JANUARY 1992 ISSUANCE OF COMMON STOCK FOR CONSULTING $287,481 $(287,501) APRIL 1992 ISSUANCE OF COMMON STOCK FOR CASH 699,968 $900,000 MAY 1992 ISSUANCE OF SERIES B PREFERRED STOCK FOR SALARIES 359,200 360,000 ISSUANCE OF SERIES B PREFERRED STOCK FOR PROFESSIONAL SERVICES 130,210 130,500 ISSUANCE OF SERIES B PREFERRED STOCK FOR FUTURE RENT 40,410 (40,500) ISSUANCE OF SERVICES B PREFERRED STOCK FOR FUTURE LEGAL SERVICES 89,800 (9,159) 80,841 JUNE 1992 ISSUANCE OF COMMON STOCK FOR CASH INCLUDING 28,064 SHARES ISSUED FOR COMMISSION 999,961 1,000,000 ISSUANCE OF COMMON STOCK FOR CASH 395,085 395,100 AUGUST 1992 ISSUANCE OF SERIES B PREFERRED STOCK FOR PROFESSIONAL SERVICES 134,700 135,000 NOVEMBER/DECEMBER 1992 ISSUANCE OF COMMON STOCK FOR WARRANTS AND CASH (Note 9) 499,950 500,000 ISSUANCE OF COMMON AND PREFERRED STOCK FOR WARRANTS 2,222,188 2,224,800 ISSUANCE OF COMMON STOCK FOR PATENT COSTS 37,062 37,065 AMORTIZATION OF UNEARNED COMPENSATION 147,771 147,771 NET LOSS (2,002,795) (2,002,795) ------------ ------------- ----------- ------------ BALANCE DECEMBER 31, 1992 $10,016,764 $(5,486,707) $(169,389) $4,345,754 ------------ ------------- ----------- ------------
See notes to financial statements. F-5 PROJECTAVISION, INC (A Developed Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 8 AND 9) - -------------------------------------------------------------------------------
Series A Series B Preferred Stock Preferred Stock ------------------------ --------------- Proceeds Shares Amount Shares per Share Amount BALANCE, DECEMBER 31, 1992 100 NIL 414,452 $4,144 JANUARY, 1993 ISSUANCE OF COMMON STOCK FOR BONUS ISSUANCE OF COMMON STOCK FOR SERVICES ISSUANCE OF COMMON STOCK FOR FINDERS FEES MARCH, 1993 ISSUANCE OF COMMON STOCK FOR STOCK OPTIONS EXERCISED APRIL, 1993 ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR WARRANTS ISSUANCE OF COMMON STOCK FOR WARRANTS AUGUST, 1993 ISSUANCE OF COMMON STOCK FOR STOCK OPTIONS EXERCISED ISSUANCE OF COMMON STOCK FOR WARRANTS SEPTEMBER, 1993 ISSUANCE OF COMMON STOCK FOR CASH AMORTIZATION OF UNEARNED COMPENSATION NET LOSS ----- ----- -------- -------- BALANCE, DECEMBER 31,1993 100 $NIL 414,452 $4,144 ----- ----- -------- --------
See notes to financial statements. PROJECTAVISION, INC (A Developed Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 8 AND 9) - -------------------------------------------------------------------------------
DEFICIT COMMON STOCK ACCUMULATED -------------------------- ADDITIONAL DURING THE PROCEEDS PAID-IN DEVELOPMENT UNEARNED SHARES PER SHARE AMOUNT CAPITAL STAGE COMPENSATION TOTAL BALANCE, DECEMBER 31, 1992 9,423,675 $942 $10,016,764 ($5,486,707) ($189,389) $4,345,754 JANUARY, 1993 ISSUANCE OF COMMON STOCK 2,000 3.41 6,825 6,825 FOR BONUS ISSUANCE OF COMMON STOCK 100,500 3.41 10 342,947 342,957 FOR SERVICES ISSUANCE OF COMMON STOCK FOR FINDERS FEES 9,000 3.41 1 30,711 30,712 MARCH, 1993 ISSUANCE OF COMMON STOCK FOR STOCK OPTIONS EXERCISED 210,000 041.50 21 312,354 312,375 APRIL, 1993 ISSUANCE OF COMMON STOCK FOR CASH 565,230 5.80.9.63 57 3,899,027 3,899,084 ISSUANCE OF COMMON STOCK FOR CASH 100,000 2.75 10 274,990 275,000 ISSUANCE OF COMMON STOCK FOR WARRANTS 13,396 1.42 1 19,119 19,120 ISSUANCE OF COMMON STOCK FOR WARRANTS 4,547 3.00 13,692 13,692 AUGUST, 1993 ISSUANCE OF COMMON STOCK FOR STOCK OPTIONS EXERCISED 20,000 1.03 2 20,623 20,625 ISSUANCE OF COMMON STOCK FOR WARRANTS 800 0.75 600 600 SEPTEMBER, 1993 ISSUANCE OF COMMON STOCK FOR CASH 215,000 6.00 22 1,189,978 1,190,000 AMORTIZATION OF UNEARNED COMPENSATION 183,419 183,419 NET LOSS (2,730,242) (2,730,242) ---------- -------- ------------ ------------ -------- ------------ BALANCE, DECEMBER 31,1993 10,664,148 $1,066 $16,127,630 ($8,216,949) ($5,970) $ 7,909,921 ---------- -------- ------------ ------------ -------- ------------
F-6 PROJECTAVISION, INC (A Developed Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 8 AND 9) - ---------------------------------------------------------------------------
Series A Series B Preferred Stock Preferred Stock ------------------------- ------------------ Proceeds Shares Amount Shares per Share Amount BALANCE, DECEMBER 31, 1993 100 $NIL 414,452 $4,144 JANUARY 1994 ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR SERVICES ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR STOCK OPTIONS EXERCISED MARCH ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS ISSUANCE OF COMMON STOCK FOR BONUS ISSUANCE OF COMMON STOCK FOR SERVICES ISSUANCE OF COMMON STOCK FOR FEES STOCK WARRANTS AMORTIZATION OF UNEARNED COMPENSATION APRIL ISSUANCE OF COMMON STOCK FOR SERVICES MAY ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR STOCK WARRANTS EXERCISED JUNE ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR STOCK WARRANTS EXERCISED ISSUANCE OF COMMON STOCK FOR STOCK OPTIONS EXERCISED ----- ----- -------- ------- SUB TOTAL 100 $NIL 414,452 $4,144 ----- ----- -------- -------
Deficit Common Stock Accumulated ----------------------------- Additional During the Proceeds Paid-In Development Unearned Shares Per Share Amount Capital Stage Compensation Total BALANCE, DECEMBER 31, 1993 10,664,148 $1,066 $16,127,630 $(8,216,949) (5,970) $ 7,909,921 JANUARY 1994 ISSUANCE OF COMMON STOCK FOR CASH 200,000 7.8 20 1,574,980 1,575,000 ISSUANCE OF COMMON STOCK FOR SERVICES 1,000 10.50 - 10,500 10,500 ISSUANCE OF COMMON STOCK FOR CASH 250,000 6.40 25 1,381,225 1,381,250 ISSUANCE OF COMMON STOCK FOR STOCK OPTIONS EXERCISED 73,500 4.75 7 349,993 350,000 MARCH ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS 11,590 1 (1) ISSUANCE OF COMMON STOCK FOR BONUS 4,000 7.00 1 27,999 28,000 ISSUANCE OF COMMON STOCK FOR SERVICES 31,000 7.00 3 218,747 218,750 ISSUANCE OF COMMON STOCK FOR FEES STOCK WARRANTS 20,000 7.00 2 ( 2 ) AMORTIZATION OF UNEARNED COMPENSATION 5,970 5,970 APRIL ISSUANCE OF COMMON STOCK FOR SERVICES 500 MAY ISSUANCE OF COMMON STOCK FOR CASH 50,000 4.88 5 243,745 243,750 ISSUANCE OF COMMON STOCK FOR CASH 150,000 4.31 15 646,860 646,875 ISSUANCE OF COMMON STOCK FOR CASH 100,000 3.84 10 364,365 384,375 ISSUANCE OF COMMON STOCK FOR CASH 100,000 3.75 10 374,990 375,000 ISSUANCE OF COMMON STOCK FOR STOCK WARRANTS EXERCISED 1,000 1.50 - 1,500 1,500 JUNE ISSUANCE OF COMMON STOCK FOR CASH 150,000 4.03 15 604,485 604,500 ISSUANCE OF COMMON STOCK FOR CASH 125,000 3.75 13 468,737 468,750 ISSUANCE OF COMMON STOCK FOR STOCK WARRANTS EXERCISED 600 1.50 900 900 ISSUANCE OF COMMON STOCK FOR STOCK OPTIONS EXERCISED 30,000 0.81 24,372 24,375 ---------- -------- ------------- ------------- ---- ------------ SUB TOTAL 11,962,338 $ 1,196 $22,441,025 ($8,216,949) $0 $14,229,416 ---------- -------- ------------- ------------- ---- ------------
See notes to financial statements F-7 PROJECTAVISION, INC (A Developed Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 8 AND 9) - -----------------------------------------------------------------------------
Series A Series B Preferred Stock Preferred Stock Proceeds ---------------- ------------------------- Shares Amount Shares per Share Amount SUBTOTAL 100 NIL 414,452 4,144 ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS NOVEMBER ISSUANCE OF COMMON STOCK FOR CASH DIFFERED STOCK CONVERTED TO COMMON STOCK (4,306) (43) NET LOSS ----- ----- --------- --------- BALANCE, DECEMBER 31, 1994 100 $NIL 410,144 $ 4,101 ----- ----- --------- ---------
Deficit Common Stock Accumulated Proceeds Additional During the ------------------------ Paid-In Development Unearned Shares Per Share Amount Capital Stage Compensation Total SUBTOTAL ............................ 11,962,338 1,196 22,441,025 (8,216,949) 0 14,229,416 ISSUANCE OF COMMON STOCK FOR CASH ISSUANCE OF COMMON STOCK FOR STOC 45,860 4.59 5 210,662 210,667 DIVIDENDS NOVEMBER 16,297 -- 2 (2) ISSUANCE OF COMMON STOCK FOR CASH DIFFERED STOCK CONVERTED TO COMMON STOCK NET LOSS ............................ 200,000 4.03 20 806,230 806,250 BALANCE, DECEMBER 31, 1994 4,308 1 43 (5,632,283) (5,632,263) ------------ ------------ ------------ ------------ ------------ ------------ 12,228,803 $1,223 $ 23,457,958 $(13,849,232) $ 0 $ 9,614,050 ------------ ------------ ------------ ------------ ------------ ------------
See notes to financial statements F-8 PROJECTAVISION, INC (A Developed Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 8 AND 9) - --------------------------------------------------
SERIES A SERIES B SERIES C PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT TOTAL BALANCE, DECEMBER 31, 1994 100 NIL 410,144 $4,101 $0 NIL MARCH ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS APRIL ISSUANCE OF COMMON STOCK FOR PREFERRED STOCK (24,162) (242) ISSUANCE OF COMMON STOCK FOR COMPENSATION OF OFFICER & DIRECTOR ISSUANCE OF COMMON STOCK FOR PROFESSIONAL SERVICES SEPTEMBER ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS DECEMBER CANCELLATION OF COMMON STOCK FOR COMPENSATION OF OFFICER & DIRECTOR ------- ------- ------- ------ ------ ------ NET LOSS 100 NIL 385,982 $3,859 0 NIL ------- ------- ------- ------ ------ ------ BALANCE AT DECEMBER 31, 1995 MARCH ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS ------- ------- ------- ------ ------ ------ NET LOSS 100 0 385,982 $3,859 0 0 BALANCE AT MARCH 31, 1996 ------- ------- ------- ------ ------ ------ APRIL CONVERSION OF 8% DEBENTURES INTO COMMON STOCK JUNE ISSUANCE OF SERIES C PREFERRED STOCK 7,500 8 SERIES C PREFERRED STOCK PLACEMENT FEE SERIES C PREFERRED STOCK DIVIDEND EXERCISE STOCK OPTIONS NET LOSS ------- ------- ------- ------ ------ ------ BALANCE AT JUNE 30, 1996 100 0 385,982 $3,859 7,500 $8 JULY ------- ------- ------- ------ ------ ------ CONVERSION OF 8% DEBENTURES INTO COMMON STOCK SEPTEMBER ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS NET LOSS ------- ------- ------- ------ ------ ------ BALANCE AT SEPTEMBER 30, 1996 100 0 385,982 $3,859 7,500 $8 ------- ------- ------- ------ ------ ------ See notes to financial statements
ADDITIONAL DEFECIT DURING COMMON STOCK PAID IN DEVELOPMENT TOTAL SHARES AMOUNT CAPITAL STAGE TOTAL BALANCE, DECEMBER 31, 1994 12,228,803 $1,223 $23,457,958 ($13,849,232) $9,614,050 MARCH ISSUANCE OF COMMON STOCK 26,040 3 (2) NIL FOR STOCK DIVIDENDS APRIL ISSUANCE OF COMMON STOCK 24,162 2 240 FOR PREFERRED STOCK ISSUANCE OF COMMON STOCK FOR 50,000 5 124,995 125,000 COMPENSATION OF OFFICER & DIRECTOR ISSUANCE OF COMMON STOCK 83,030 8 540,284 540,292 FOR PROFESSIONAL SERVICES SEPTEMBER ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS 26,755 3 (3) DECEMBER CANCELLATION OF COMMON STOCK FOR COMPENSATION OF OFFICER & DIRECTOR (50,000) (5) (124,995) (125,000) (6,471,638) (6,471,638) ---------- ------- ------------ ----------- ----------- NET LOSS 12,388,790 $1,239 $23,998,477 ($20,320,870) $3,682,705 ---------- ------- ------------ ----------- ----------- BALANCE AT DECEMBER 31, 1995 MARCH ISSUANCE OF COMMON STOCK 16,545 2 (2) FOR STOCK DIVIDENDS (1,791,510) (1,791,510) ---------- ------- ------------ ----------- ----------- 12,405,335 $1,241 $23,998,475 ($22,112,380) $1,891,195 NET LOSS ---------- ------- ------------ ----------- ----------- BALANCE AT MARCH 31, 1996 APRIL CONVERSION OF 8% DEBENTURES INTO 1,456,329 145 2,842,855 $2,843,000 COMMON STOCK $7,500,000 JUNE ISSUANCE OF SERIES C PREFERRED STOCK 7,499,992 ($500,000) SERIES C PREFERRED STOCK PLACEMENT FEE (500,000) ($11,250) SERIES C PREFERRED STOCK DIVIDEND (11,250) EXERCISE STOCK OPTIONS 30,000 3 24,372 $24,372 NET LOSS (1,409,875 ($1,409,875) ---------- ------- ------------ ----------- ----------- BALANCE AT JUNE 30, 1996 13,891,664 $1,389 $33,854,444 ($23,522,255) $10,337,445 JULY ---------- ------- ------------ ----------- ----------- CONVERSION OF 8% DEBENTURES INTO $249,984 COMMON STOCK 161,616 $250,000 SEPTEMBER 16 ISSUANCE OF COMMON STOCK FOR STOCK DIVIDENDS 21,121 2 (2) 0 NET LOSS (934,134) (934,134) ---------- ------- ------------ ----------- ----------- BALANCE AT SEPTEMBER 30, 1996 14,074,401 $1,407 34,104,426 (24,456,389) $9,653,311 ---------- ------- ------------ ----------- -----------
See notes to financial statements F-9 PROJECTAVISION, INC. (A Development Stage Company) COMPARATIVE STATEMENTS OF CASH FLOWS (Unaudited) - -------------------------------------------------------------------------------
For the Period September 9, For the For the 1988 (Date of Nine Months Nine Months Incorporation) September 30, 1995 September 30, 1996 to September 30, 1996 ------------------- ----------------- --------------------- OPERATING ACTIVITIES Net loss $(3,018,297) $(4,135,519) $ 24,456,389) Adjustments to reconcile net loss to net cash used in operating activities: Amortization and depreciation ............................... 54,935 479,935 686,987 Issuance of common stock for services ....................... 665,292 -- 1,664,131 Other noncash operating expenses ............................ -- -- 288,216 Settlement of legal fees .................................... -- (11,250) (97,287) Provision for allowances on advances ........................ 124,845 -- 298,426 Equity in loss of unconsolidated affiliate .................. 511,094 -- 2,695,996 Asset and liability management: Prepaid expenses and other current assets ................ (329,546) 269,111 (103,359) Organization costs ....................................... -- -- (52,940) Due from related party ................................... 893 -- (10,683) Deposits .................................................... (1,000) (647,086) (774,607) Advances in contemplation of investment .................. (124,845) -- (298,426) Accounts payable and accrued expenses .................... 324,185 743,968 1,376,335 ------------ ------------ ------------ Net cash used in operating activities ....................... (1,792,444) (3,300,841) (18,794,850) ------------ ------------ ------------ INVESTING ACTIVITIES: Capital expenditures ............................................. (23,290) (3,047,863) (3,413,233) Investment in and advances to unconsolidated affiliate ........... (67,314) -- (4,703,440) Allowance taken on investment in unconsolidated affiliate ........ -- -- 2,129,252 Interest accrued on loan to unconsolidated affiliate ............. (60,000) -- (121,808) Licenses ......................................................... -- -- (30,000) Proceeds of investments held to maturity ......................... 8,503,385 -- 10,638,848 Purchase of investments held to maturity ......................... (7,737,033) (4,959,470) (15,598,318) Certificate of deposit ........................................... 91,505 -- 0 ------------ ------------ ------------ Net cash provided by (used in) investing activities ............. 707,253 (8,007,333) (11,098,699) ------------ ------------ ------------ FINANCING ACTIVITIES Proceeds from notes payable ................................. -- 10,000,000 10,800,000 Repayment of notes payable .................................. -- (4,607,000) (5,729,705) Issuance of preferred stock ................................. -- 7,500,000 8,216,341 Preferred Stock Issuance Fees ............................... -- (500,000) (500,000) Series C Preferred Stock Cash Dividend ...................... -- -- 18,617,239 Proceeds from warrants exercised ............................ -- -- 2,760,612 Proceeds from stock options exercised ....................... -- 24,375 398,750 Deferred private placement cost ............................. -- (500,000) (518,505) Deferred public offering costs............................... -- -- (50,000) ------------ ------------ ------------ Net cash provided by financing activities .............. 0 11,917,375 33,994,732 ------------ ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................... (1,085,191) 609,201 4,101,183 CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD ...................... 3,712,990 3,491,982 -- ------------ ------------ ------------ CASH AND CASH EQUIVALENTS-END OF PERIOD ............................ $ 2,627,799 $ 4,101,183 $ 4,101,183 ============ ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest .................... $ 320,049 $ 322,344 ============ ============ ============
See notes to financial statements F-10 PROJECTAVISION, INC. (A Development Stage Company) SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: - ------------------------------------------------------------------------------- A liability of $300,000 has been incurred in connection with the merger of DKY into the Company and has been recorded as a reduction of stockholders' equity. In March 1990, a $50,000 reduction in accounts payable and increase in additional paid-in capital was recorded to reflect the release of certain obligations in conjunction with the private placement. In January 1992, the Company issued 200,000 shares of its common stock for consulting services through January 1994. In May 1992, the Company issued 138,000 shares of Series B preferred stock (valued at $621,000); 109,000 of the shares were issued as compensation for services rendered, and 29,000 shares were for future services and office rental. In June 1992, the Company issued 28,064 shares of its common stock as payment for services rendered in conjunction with a private placement. In September 1992, the Company issued 30,000 shares of Series B preferred stock (valued at $135,000) for consulting services. In January 1993, the Company issued 2,000 shares of its common stock for bonuses, 100,500 shares for services rendered, and 9,000 shares for finder fees. In January 1994, the Company issued 1,000 shares of its common stock for services rendered. In March 1994, the Company issued 11,590 shares of its common stock as payment for the dividend on its series B convertible preferred stock, 4,000 shares of its common stock for bonuses, and 31,000 shares of its common stock for services rendered in connection with its private placements. Also in March 1994, the Company issued 20,000 shares of its common stock for fees regarding the exercise of the Company's stock warrants. In April 1994 the Company issued 500 shares of common stock for services rendered. In June 1994, the Company issued 16,297 shares of its common stock as payment for the dividend on its series B convertible preferred stock. In December 1994, the Company issued 4,308 shares of its common stock for 4,308 shares of its series B convertible preferred stock. In March 1995, the Company issued 26,040 of its common stock as payment for the dividend on its series B convertible stock. In April 1995, the Company issued 50,000 shares of its common stock for services rendered by an officer and director of the Company. These shares were canceled by the Company in December 1995. Also, in April 1995, the Company issued 24,162 shares of its common stock for 24,162 shares of its series B convertible preferred stock, and 83,030 shares of its common stock for professional services rendered and to be rendered. In September 1995, the Company issued 26,755 shares of its common stock as payment for the dividend on its series B convertible stock. In March 1996, the Company issued 16,545 shares of its common stock as payment for the dividend on its series B convertible stock. In April 1996, the Company issued 1,456,329 shares of its common stock and paid $ 4,357,000 in cash in exchange for retiring $ 7.2 million of convertible debt. In July 1996, the Company issued 161,616 shares of its common stock and paid $ 250,000 in cash in exchange for retiring $ 500,000 of convertible debt. In September 1996, the Company issued 21,121 shares of its common stock as payment for the dividend on its series B convertible stock. See notes to financial statements F-11 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization - Projectavision, Inc. (the "Company"), a Delaware corporation, was incorporated on September 9, 1988. The Company has been formed to complete development of a unique proprietary solid state projection television and related video display technology. In addition, the Company will seek to identify new high technology and electronic products for consumers and commercial customers. The Company is a development stage enterprise and has generated no revenue from its planned principal operations. Property and Equipment - Property and equipment are stated at cost and depreciated on the straight-line basis over the estimated useful lives of the respective assets. Tooling costs for the Digital Home Theater are being capitalized, with amortization to begin production. The estimated useful service lives of the assets are as follows: Furniture, fixtures and equipment 7 years Computers and software 5 years Leasehold improvements 3 years Property and equipment are carried at cost. Depreciation and amortization are computed based on economic useful lives using the straight-line method. Cash Equivalents - The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amount approximates fair value because of the short maturity of those instruments. Investments - The Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"), upon purchase of debt securities. SFAS 115 requires an enterprise to classify debt and equity securities into one of three categories: held-to-maturity, available-for-sale, or trading. Investments classified as held-to-maturity are measured at amortized cost. At December 31, 1994, the Company's investments were classified as held-to-maturity. The fair values of the investments were estimated based on quoted market prices. Organization Costs - Organization costs are recorded at cost and amortized on a straight-line basis over five years. Research and Development - Costs are expensed as incurred. Net Loss Per Share - The cumulative loss per share for the period September 9, 1988 (Date of incorporation) to December 31, 1995 will not agree to the sum of the individual years due to the weighted average of the shares outstanding. Net loss per share is computed based on the number of shares outstanding during the period, as adjusted for reverse splits in February 1990 and on July 17, 1990, and the stock split in March 1992 of the Company's common stock as well as the effect of stock options outstanding prior to August 1, 1990 (consummation date of the public offering), from December 31, 1993 through 1995, the net loss per share calculations are computed based on the weighted average number of shares outstanding. Excluded from the computations in each period are warrants, and in 1992, 1993, 1994, and 1995 stock options issued after August 1, 1990, as their effect is antidilutive. Escrowed shares were excluded from each period's computation up until their issuance on August 7, 1991. Development Stage - The Company, currently in the development stage, has not yet received revenues from its planned principal operations and has continued to incur losses since its inception. The Company has an accumulated deficit of $24,456,389 as of September 30, 1996, including a loss of $934,134 during the quarter ended September 30, 1996. Management of the Company believes that it has sufficient funds to successfully complete its development program and to sustain its operations. F-12 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No.109, "Accounting for Income Taxes," pursuant to which deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates, as well as any net operating or capital loss or tax credit carryforwards expected to reduce taxes payable in future years. 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Stock-Based Compensation - In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which requires adoption of the disclosure provisions no later than fiscal years beginning after December 15, 1995 and adoption of the measurement and recognition provisions for nonemployee transactions no later than after December 15, 1995. The new standard defines a fair value method of accounting for the issuance of stock options and other equity instruments. Under the fair value method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. Pursuant to SFAS No. 123, companies are encouraged, but are not required, to adopt the fair value method of accounting for employee stock-based transactions. Companies are also permitted to continue to account for such transactions under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," but would be required to disclose in a note to the financial statements pro forma net income and per share amounts as if the company had applied the new method of accounting. SFAS No. 123 also requires increased disclosures for stock-based compensation arrangements regardless of the method chosen to measure and recognize compensation for employee stock-based arrangements. The Company has not yet determined if it will elect to change to the fair value method, nor has it determined the effect the new standard will have on its operating results should it elect to make such a change. 2. MERGER WITH DKY In February 1990, an agreement in principle was reached, as a result of which, on July 12, 1990, DKY, Inc. (DKY), the Company's majority stockholder, was merged into the Company. Pursuant to the terms of the agreement, all shares of common stock of DKY were exchanged for an aggregate 3,223,764 shares of the Company's common stock, which gave effect to the July 17, 1990 two-for-three reverse stock split and the March 1992 two-for-one stock split. The equal number of shares of the Company owned by DKY were canceled. Each share of DKY preferred stock (100 shares) was exchanged for one share of the Company's Series A Preferred Stock with a liquidation value of $1,000 per share. In addition, $300,000 was paid to the former stockholders of DKY as additional consideration for their common stock in DKY. Such merger has been treated as if it were a pooling of interests and has been recorded in the financial statements retroactively. 3. REVENUE In October 1989, the Company entered into a firm fixed price contract with the United States Defense Advanced Research Projects Agency (DARPA) to utilize the Company's technology to develop prototype video projectors for potential use with high definition television. Under the terms of the contract, the Company received an aggregate of $1,000,000 over a nine-month period beginning October 2, 1989 upon submission of an aggregate of ten technical design and progress reports delineating the work performed. F-13 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 3. REVENUE (Continued) The Company recognized contract revenue in accordance with the terms specified by the contract, which requires submission of proper invoices and certification by a DARPA official that all reports have been received and accepted. During the year ended December 31, 1989, the Company submitted billings to DARPA totaling $625,000, of which $375,000 was accompanied by completed progress reports and recognized as revenue. During the year ended December 31, 1990, the Company recognized in full and collected the remaining revenue under the DARPA contract. In 1993, the Company received $105,000 royalty income from licensing agreements. In January, 1995, the Company received $200,000 royalty income from a licensing agreement. In July, 1996, the Company received $150,000 royalty income from a licensing agreement. 4. INVESTMENT IN UNCONSOLIDATED AFFILIATE On April 13, 1993, the Company entered into an agreement with Tamarack Storage Devices, Inc. ("Tamarack") pursuant to which the Company has the right to acquire up to 50 percent of Tamarack's common stock representing 37.2 percent of the issued and outstanding voting securities of Tamarack. Under the terms of the agreement, the Company invested $1,000,000 in cash in Tamarack on the date of the agreement and, in July 1993 and October 1993, respectively, invested an additional $2,000,000 in the aggregate in Tamarack. As of March 1994, the Company owns 37.2 percent of the voting stock of Tamarack and has accounted for this investment under the equity method. Market value of the common shares is not readily ascertainable. The goodwill recorded with this investment, which represented the excess of the Company's investment over the underlying net assets of Tamarack, was $1,883,995. Such amount was being amortized over ten years and is reported in the statement of operations as Equity in Loss from Unconsolidated Affiliate. Amortization expense related to such goodwill for the fiscal years ended December 31, 1993, 1994, and 1995 was $94,840, $197,884 and $148,413 respectively. The Company issued 32,000 shares of common stock (valued at $109,120) for advisory services received in connection with the acquisition. In May 1994 the Company loaned Tamarack $1,500,000 with interest payable at 6 percent such loan is evidenced by a note and is unsecured. The loan is to be repaid from 5 percent of gross revenues or a public offering, whichever comes first, and in any event, not after September 30, 2000. In conjunction with this loan Tamarack issued a warrant for the purchase of common stock at a price of $5.00 per share or the offering price in the event of a qualified offering, whichever comes first. The number of warrant shares is to be determined by dividing the face amount of the loan by the exercise price. The Company is entitled to purchase 1,500,000 shares of common stock of Tamarack at a price of $.01 per share. Such purchase would result in Projectavision obtaining a controlling interest in Tamarack. On March 16, 1995, Tamarack received a commitment from Projectavision to fund its cash needs through December 31, 1995 to continue its operations as then constituted. Pursuant to this $60,000 was advanced to Tamarack on August 28, 1995 and $34,240 in October and November of 1995. The Company recorded a reserve against its investment in Tamarack of $300,000 at December 31, 1994 and at December 31, 1995 the Company took its investment in and advances to Tamarack to zero recording an additional reserve of $2,129,252 due to Tamarack's inability, to date, to commercialize its holographic storage technology and its current lack of prospects. In addition, Tamarack continues to incur losses and its viability to achieve profitable operations is doubtful. F-14 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 4. INVESTMENT IN UNCONSOLIDATED AFFILIATE (Continued) The following represents audited summarized financial information of Tamarack at December 31, 1994: 9 months ended December 31, 1994: Other income $ 895,000 Costs and expenses 3,145,000 ---------------- Net loss $ (2,250,000) ---------------- Balance Sheet at December 31, 1994: Current assets $ 812,000 Noncurrent assets 226,000 ---------------- Total assets $ 1,038,000 ================ Current liabilities $ 338,000 Other liabilities 1,508,000 Shareholders' deficit ( 808,000) ---------------- Total liabilities and shareholders' deficit $ 1,038,000 ================ The following presents the Company's proportional interest in the audited summarized financial information of Tamarack: 9 months ended December 31, 1994: Other income $ 335,625 Costs and expenses 1,179,375 ---------------- Net loss $ (843,750) ================ Balance Sheet at December 31, 1994: Current assets $ 304,500 Non-current assets 84,750 Total assets $ 389,250 ================ Current liabilities $ 126,750 Other liabilities 565,500 Shareholders' deficit (303,000) ---------------- Total liabilities and shareholders' deficit $ 389,250 ================
F-15 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 4. INVESTMENT IN UNCONSOLIDATED AFFILIATE (Continued) Tamarack has changed its year-end to conform to that of Projectavision. The following presents unaudited summarized financial information of Tamarack at March 31, 1994:
3 months ended March 31, 1994: Unaudited --------- Other income $ 572,000 Costs and expenses 1,505,501 ---------------- Net loss $ ( 933,501) ================
The following presents the Company's proportional interest in the unaudited summarized financial information of Tamarack:
3 months ended March 31, 1994: Unaudited --------- Other income $ 214,500 Costs and expenses 564,563 ---------------- Net Loss $ ( 350,063) ================
5. PROVISION FOR ALLOWANCE ON ADVANCES The Company has made advances through July 31, 1995 in contemplation of an investment in a high technology company. The president of the Company is related to an individual who is an executive officer and director of Projectavision. Such advances aggregated $298,426 and have been fully reserved for at December 31, 1995. 6. ASSIGNMENT AGREEMENT On March 19, 1990, an officer/stockholder of the Company entered into an assignment agreement with the Company whereby all rights, title and interest to the projection technology were assigned to the Company. The rights, title and interest to the United States patent and foreign patents relating to the projector technology under development by the Company were originally applied for by this officer/stockholder. 7. EMPLOYMENT AGREEMENTS The Company has entered into employment agreements with several officers and directors. Aggregated minimum compensation under these agreements will be $360,000 per year through 1996. For the years ended December 31, 1992 and 1993, salary expense aggregated approximately $300,000 to its founders under the various employment agreements. For 1994 and 1995 salary expense was approximately $330,000 and $527,000 respectively. 8. STOCKHOLDERS' EQUITY On February 20, 1990, the Company amended its Certificate of Incorporation, decreasing the authorized stock of the Company to an aggregate of 31,000,000 shares consisting of 30,000,000 shares of common stock with a par value of $.0001 per share and 1,000,000 shares of $.01 par value preferred stock. Of the shares of preferred stock authorized for issuance, 100 shares have been designated as Series A Preferred Stock. Each share of Series A Preferred Stock entitles the stockholder to a liquidation preference of $1,000. Also, on February 20, 1990, the Company's Board of Directors declared a reverse split of common stock (one share for 11.34679611 shares) to the stockholders of record on February 20, 1990. On July 17, 1990, the Company effected a two-for-three reverse split of common stock. F-16 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 8. STOCKHOLDERS' EQUITY (continued) Pursuant to this agreement, the third party may, at any time prior to July 24, 1996, convert all or a portion of the shares of common stock in accordance with the following provisions: o If the Company achieves a net worth of at least $10,000,000, all of the shares may be exchanged for $181,000 in cash plus interest accrued at a rate of 10 percent per annum; o 20 percent or any multiple thereof of the shares may be exchanged for a royalty interest in the Company's licensing activities. The percentage and maximum amount payable shall be determined by the time period upon which the election to receive a royalty interest is made and is as follows: Election Royalty Maximum to Convert Percentage Amount Payable* Within 12 months 5% $ 500,000 13-24 months 4% 400,000 25-36 months 3% 300,000 37-48 months 2% 200,000 49-60 months 1% 100,000 *Based on exchange of all the shares of stock In addition, 30,000 shares of common stock were issued to the third party as payment for a one-year membership fee in the organization, valued at $25,000. During the year ended December 31, 1991, the Company also entered into an agreement with its patent attorneys whereby the attorneys would accept shares of the Company's common stock as payment for legal services rendered. As of December 31, 1995, the Company has issued 89,122 restricted shares at $1.00 per share and 60,878 restricted shares at a substantially higher value. The Company's attorneys do not agree with this higher value and are presently in discussion with the Company to resolve this. The shares have been recorded as a charge to operations and a credit to common stock and additional paid-in capital. In January 1992, the Company issued 200,000 shares of common stock to a third party as payment for consulting services for two years through January 1994. The value of the services was based upon the market value of the stock at the time of the contract. In connection with this transaction, the Company has recorded unearned compensation and is amortizing such amount over the two-year period. On April 30, 1992, the Company sold 317,460 shares of its common stock in a private placement for $1,000,000 (before deduction of $100,000 in issuance costs). On June 26, 1992, the Company received gross proceeds of $1,439,000 for the sale of 538,033 shares of its stock in two private placements. The Company paid $43,900 in cash and issued an additional 28,046 shares of common stock as payment for issuance costs which is included in the above shares incurred in conjunction with the private placements. In connection with one of these private placements, the investor was granted an option to purchase an additional $1,061,000 worth of nonregistered shares of common stock. Such option was exercisable until November 27, 1993. In January 1993, the Company issued 2,000 shares of its common stock for bonuses, 100,500 shares for services rendered, and 9,000 shares for finders fees. In April 1993, the Company sold 565,230 shares of its common stock in a series of private placements for $4,034,795 (before deduction of $135,711 brokers' fees). On April 10, 1993, the Company sold 100,000 shares of its common stock for $275,000. Such sale was under an agreement relating to a private placement made in 1992. F-17 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 8. STOCKHOLDERS' EQUITY (Continued) On September 9, 1993, the Company sold 10,000 shares of its common stock in a private placement for $60,000. On September 13, 1993, the Company sold 175,000 shares of its common stock in a private placement for $1,050,000 (before deduction of $100,000 in brokers' fees). On September 24, 1993, the Company sold 30,000 shares of its common stock in a private placement for $180,000. On January 12, 1994, the Company received gross proceeds of $1,575,000 in connection with the sale of 200,000 shares of its common stock in a private placement effected pursuant to Regulation S of the Securities Act of 1933, as amended (Registration S). On February 9, 1994, the Company received an additional $1,381,250 of gross proceeds in connection with the sale of 250,000 shares of its common stock pursuant to a private placement effected under Regulation S. In connection with the February private placement, the Company also issued an additional 31,000 shares of its common stock in payment of private placement costs. During May, June, July and November, 1994 the Company received gross proceeds of $3,740,167 in connection with the sale of 920,860 shares of common stock in a series of private placements effected pursuant to Regulation S of the Securities Act of 1933, as amended (Registration S). In April 1995 the Company issued 83,030 shares of common stock for professional services. Warrant Incentive Program On September 9, 1992, the Company's registration statement on Form S-1 was declared effective by the Securities & Exchange Commission (the Registration Statement). The Registration Statement was filed by the Company in order to induce the exercise of its outstanding Redeemable Warrants (the Warrant Incentive Program). Each of the company's Redeemable Warrants entitles its holder to receive two (2) shares of common stock for each Redeemable Warrant exercised. The exercise price of the Company's Redeemable Warrants is $3.00 per Warrant. The Warrant Incentive Program provided that those holders of the Company's outstanding redeemable Warrants who exercised their Redeemable Warrants within sixty-five (65) days after the effective date of the Registration Statement would receive, in addition to two (2) shares of common stock, one-third (1/3) of one (1) share of the Company's series B Preferred Stock for no additional cost. As of December 31, 1992, 739,386 out of 800,000 Redeemable Warrants were exercised resulting in net proceeds to the Company of approximately $2,218,000. During the year ended December 31, 1993, an additional 37,846 warrants were exercised resulting in net proceeds to the Company of approximately $33,411. For the year ended December 31, 1994 an additional 800 warrants were exercised resulting in net proceeds to the Company of $2,400. Preferred Stock On April 16, 1992 the Board of Directors authorized the issuance of up to 404,667 shares of nonvoting Series B Convertible Preferred Stock as set forth in a Certificate of Designation and Preferences. In August 1992, the Board of Directors authorized the issuance of another 30,000 shares of Series B Convertible Preferred Stock for future consulting services. The Series B Convertible Preferred Stock provides for cumulative annual stock dividends (payable in common shares) of 8 percent of the liquidation value of $5 per share (for a total of $2,173,335 including shares issued on May 15, 1992 as discussed below) to be paid semiannually and is convertible to one share of common stock, subject to adjustment. In 1994, 27,887 shares of common stock were paid as stock dividends on Series B Convertible Preferred Stock. This stock may be redeemed by the Company if certain conditions are met for $1.00 per share. All holders of redeemable warrants issued in conjunction with the 1990 initial public offering could receive an additional one-third share of the Series B Convertible Preferred Stock at no additional cost for each redeemable warrant that was exercised under the Warrant Incentive Program. F-18 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 8. STOCKHOLDERS' EQUITY (Continued) On May 15, 1992, the Company issued 138,000 shares of its Series B Convertible Preferred Stock to various parties, of which 90,000 shares were issued to officers and directors of the Company. The shares have been recorded at the fair market value of the stock at the date of issuance. The Company issued 109,000 of the shares as compensation for services rendered and 20,000 and 9,000 were issued for future legal services and future office rental, respectively. On August 20, 1992, the Company issued 30,000 shares of its Series B Convertible Preferred Stock for future consulting services. On June 11, 1996, the Company issued 7,500 shares of Series C Preferred Stock for $ 7,500,000, resulting in net proceeds to The Company of $ 7,000,000 after fees. The Series C Preferred Stock converts into shares of Common Stock at a 25% discount of the average closing bid price of the Common Stock for the five (5) trading days immediately preceding the date of conversion. The holder of the Series C Preferred Stock has the right to convert into Common Stock as follows: 25% can be converted on or after November 1, 1996; 25% may be converted on or after January 1, 1997; 25% may be converted on or after March 1, 1997; and 25% may be converted on or after May 1, 1997. The Company, in accordance with the terms and conditions of the sale of the Series C Preferred Stock, registered the shares of Common Stock into which the Series C Preferred Stock is convertible in the third quarter of 1996. The Series C Preferred Stock pays dividends semi-annually, seven (7) business days after each of December 31st and June 30th of each year, which may be in cash or shares of Common Stock at the election of The Company. The dividend rate is 3% per annum of the liquidation value of $ 1,000.00 per share unt iland through June 30, 1997; 6% per annum from July 1, 1997 through June 30, 1998; and 8% per annum from July 1, 1998 and thereafter. To date, no shares of The Company's Series C Preferred Stock have been converted into Common Stock. 9. CONVERTIBLE DEBT In February 1996 the Company completed an offshore private placement of $10,000,000 of convertible debt resulting in net proceeds to the Company of $9,500,000. The convertible debt bears interest at the rate of 8% per annum and interest quarterly in arrears on any unpaid or unconverted debt. To the extent not previously converted, the convertible debt is due in January 1999, and may be repaid in cash or common stock of the Company at the sole option of the Company. Prior to maturity, holders of the convertible debt, after 60 days, may convert up to 50% of their convertible debt to common stock of the Company (no conversions may be made prior to 60 days). After 90 days, holders of the convertible debt may convert up to all of their convertible debt into common stock of the Company. All conversions of convertible debt into common stock are based upon a 25% discount of the price of the Company's common stock for five consecutive trading days immediately prior to the date of conversion. In April 1996 the Company issued 1,456,329 shares of its common stock and paid $ 4,357,000 in cash in exchange for retiring $7.2 million in convertible debt. In July 1996, the Company issued 161,616 shares of its common stock and paid $250,000 in cash in exchange for retiring $0.5 million of convertible debt. There currently remains $ 2.3 million in convertible debt outstanding. 10. STOCK OPTION PLANS Non-qualified Option Plan - The Company has reserved 5,000,000 shares of common stock for issuance upon exercise of options under a non-qualified stock option plan adopted in February 1990 and amended in June 1990, July 1990, and November 1993. All options granted under this plan have been granted at fair market value at the date of grant. The following is a summary of non-qualified option plan activity for the yeas ended December 31, 1995: OUTSTANDING AT DECEMBER 31, 1994 2,455,333 ---------- Granted $1.875 - 4.38 68,000 Expired - Canceled ( 312,500) Exercised - ---------- OUTSTANDING AT DECEMBER 31, 1995 2,210,833 ==========
F-19 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 10. STOCK OPTION PLANS (continued) Incentive Option Plan - In February 1990, the 1988 Incentive Stock Option and Appreciation Plan was terminated and a new plan, as amended in June 1990, July 1990, and November 1993 was adopted under which options to purchase 1,000,000 shares of common stock have been reserved. The incentive option plan provides for the granting of incentive stock options (ISOS) at an exercise price not less than the fair market value of the common stock on the date the option is granted. ISOS may not be granted to an individual to the extent that, in the calendar year in which such ISOS first become exercisable, the shares subject to such ISOS have a fair market value on the date of grant in excess of $100,000. No option may be granted after February 20, 2000, and no option may be outstanding for more than ten years after its grant. As of September 30, 1996, no options have been granted under the Plan. 11. RELATED PARTY TRANSACTIONS The Company subleased from a stockholder, on a month-to-month basis, approximately 700 square feet of office space for $1,900 per month. Rent expense under this agreement aggregated approximately $15,000 and $10,000 for the years ended December 31, 1990 and 1989, respectively. In 1989 other advances totaling $10,833 were made to a principal stockholder of DKY and were outstanding at December 31, 1995. 12. INCOME TAXES The Company adopted Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes," effective January 1, 1993. The cumulative effect of adopting SFAS No. 109 was not material. SFAS No. 109 provides for the recognition of deferred tax assets and liabilities for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and for net operating and capital loss carryforwards. As of December 31, 1994 and 1995, the composition of the Company's net deferred taxes was as follows: 1994 1995 ----- ---- Deferred tax assets $ 4,261,000 $ 6,801,000 Less valuation allowance 4,261,000 (6,801,000) --------------- --------------- Net $ - $ - =============== ===============
Deferred tax assets principally result from the availability of net operating and capital loss carryforwards to offset income earned in future years. The offsetting valuation allowance reduces total deferred tax assets to an amount management believes will likely be realized. At December 31, 1995, the Company had tax net operating and capital loss carryforwards of approximately $15,400,000, which expire in the years 2003 through 2010. The utilization of tax net operating and capital losses may be subject to certain limitations. F-20 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 13. COMMITMENTS AND CONTINGENCIES The Company has agreed to indemnify a stockholder of the Company in connection with any costs he may incur as a result of becoming a stockholder for an amount not to exceed $350,000, plus related expenses. On March 29, 1993, the Company entered into a non-exclusive license with Matsushita Electric Industrial Co. Ltd. (Matsushita) pursuant to which the Company granted to Matsushita the right to use the Company's patented depixelization technology (as defined) in connection with the manufacturing and marketing of an advanced tubeless television system in the United States. The license is co-terminus with the life of the patents and patent applications relating to the proprietary rights underlying the license. On September 4, 1993, the Company entered into a non-exclusive, non-transferable license under any applicable world patents with CMC Magnetics Corporation (CMC) pursuant to which the Company granted to CMC, the following rights: - the right to use the technology and information in connection with CMC's manufacture, assembly, marketing and sale of licensed products; - the right to convey to CMC's customers with respect to licensed products sold to customers, rights to use licensed products in the form sold; and - the right to grant sublicenses to the affiliates. The Company canceled the license to CMC Magnetics on May 2, 1995. On November 18, 1994 the Company entered into a non exclusive, non-transferable license without a right to sublicense, except to related companies, with Samsung Electronics Co. pursuant to which the Company gave to Samsung the right to use the Company's patented depixelization technology (as defined) in connection with the manufacturing and marketing of LCD projectors. The license is co-terminus with the life of the patents and patent applications relating to the proprietary rights underlying the license. The Company entered into a sublease agreement for new premises which commenced on December 28, 1993 and expires on January 30, 1996. Upon the expiration of the sublease agreement, a lease agreement commences for a two year period. The future minimum rental commitments as of December 31, 1995 are as follows: Year Amount ----- ------ 1996 $ 253,112 1997 257,554 1998 21,462 ---------- $ 532,128 ========== Rent expense for the years ended December 31, 1994 and 1995 were $201,608 and $204,832 respectively. In August, 1994 a legal action was brought against the Company and various other parties by several former employees and a former consultant of Tamarack. The complaint alleged wrongful termination of employment and related charges. This complaint was settled in February, 1996 at no cost to the Company. In April 1995 a legal action was brought against the Company, certain members of the Board of Directors, and an employee of the Company by a former officer and employee of the Company. The complaint alleges, among other actions, breach of employment and patent assignment agreements. F-21 PROJECTAVISION, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 13. COMMITMENTS AND CONTINGENCIES (Continued) In June and August 1995 the Company was served with class action law suits, which have now been consolidated, alleging various federal securities laws violations primarily in connection with the Company's public disclosures. In July, 1996 the class action was denied by the court. In May, 1996 two of the eleven purchasers of the convertible debt commenced a lawsuit against the Company seeking an order to have their debt converted into common stock. One of the two purchasers settled their lawsuit with The Company in October, 1996. The litigation with the other debt holder remains outstanding. In June, 1996, a suit was filed by a individual investor against the Company and Marvin Maslow alleging fraudulent inducement in connection with the plaintiff's purchase of the Company's securities. In all of the above actions, the Company's management, based upon discussions with counsel, believe that they have a meritorious defense against these claims and intend a vigorous defense against these claims. The Company's management believes that the outcome of these matters will not have a material adverse effect on its financial position or results of operations. F-22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management discussion and analysis should be read in conjunction with the financial statements and notes there to. Liquidity and Capital Resources As of September 30, 1996, the Company had working capital of $7,897,017. To date, the Company has funded its operations primarily from sales of capital stock. In February, 1996, the Company completed a private placement of convertible debt of $10.0 million which resulted in $9.5 million in net proceeds to the Company after paying a 5% investment banking fee. The unsecured debt requires quarterly interest payments in cash based upon an annual interest rate of 8%. The debt matures in three (3) years, at which time any of this debt then outstanding is to be repaid by the Company in cash or common stock, at the Company's option. In June, 1996 the Company issued 7,500 shares of Series C preferred stock for $ 7.5 million which netted $ 7 milllion after fees, the proceeds of which were primarily used to retire convertible debt. The debt is convertible into the Company's Common Stock in whole or in part, at the option of the investor, at any time during the three year life of the debt, but not before 60 days (with respect to 50% of the debt) or 90 days (with respect to the entire debt) after the date of the investment. All conversions into Common Stock are at a 25% discount to the then-present price of the Company's Common Stock at the time of conversion. The Company intends to use the proceeds from this offering principally in connection with the commencement of the production and introduction of its Digital Home Theater (formerly the "Chameleon") projector. The Company also intends to rely on arrangements with retailers and contract manufacturers in connection with meeting the balance of the capital requirements necessary for the Company to manufacture, market and distribute the Digital Home Theater. All of the debt received in this offering was raised from institutional investors located in Belgium, Canada, Israel, Saudi Arabia, Singapore, Switzerland and England. As of December 31, 1995 and December 31, 1994, the Company had working capital of $3,341,425 and $6,659,132 respectively. The Company has funded its operations primarily from sales of capital stock, although the Company did not sell any securities during 1995. In January, 1994 the Company effected a private placement pursuant to foreign investors in the aggregate amount of 450,000 shares of the Company's Common Stock resulting in aggregate net proceeds to the Company of $2,956,250. In the second quarter of 1994, the Company also sold an aggregate of 720,860 shares of Common Stock to foreign investors in a private placement resulting in aggregate gross proceeds to the Company of $2,933,917. In November, 1994 the Company effected a private placement to a foreign investors for 200,000 shares, resulting in net proceeds to the Company of $806,250. In 1994, the Company also extended a $1,500,000 loan to its non-consolidated subsidiary, Tamarack and has reserved $300,000 of this loan on its financial statements. As of December 31, 1993, the Company had working capital of $5,181,003. The Company has funded its operations primarily from sales of capital stock and the exercise of its publicly traded Redeemable Warrants. In April of 1993, the Company sold 262,500 shares of its Common Stock in a private placement pursuant to Regulation D promulgated under the Securities Act of 1933, as amended ("Regulation D") and received gross proceeds therefrom of $1,522,000. In April of 1993, the Company effected a private placement pursuant to a Far Eastern investor in the amount of 60,000 shares of Common Stock for which the Company received gross proceeds of $577,875. The Company also effected two other private placements to two different groups of European investors in April of 1993 for 158,730 shares of Common stock and 84,000 shares of Common Stock, respectively, resulting in gross proceeds to the Company of $1,125,396 and $809,025, respectively. Also, in April of 1993, a Hong Kong based entity that purchased 146,33 shares of the Company's Common Stock in a private placement in June of 1992 (and was granted an option in connection therewith until December 27, 1993, to purchase up to 1,061,000 non-registered shares of the Company's Common Stock) purchased an additional 100,000 shares of the Company's Common Stock resulting in gross proceeds to the Company of $275,000. In September of 1993, the Company effected a private placement pursuant to Regulation D to a single institution, a private placement pursuant to Regulation D to a sole investor, and a private placement to a Middle Eastern investor for 175,000, 30,000 and 10,000 shares of the Company's Common Stock, respectively. These three private placements resulted in gross proceeds to the Company of $1,050,000, $180,000 and $60,000, respectively. F-23 The Company is in the development stage and, to date, its sole revenues have been $1,455,000. Of such revenues, $1,000,000 were derived from DARPA to develop certain projection technology for use in a high definition television projector and the balance, $455,000, from licensing agreements. The Company has substantially completed research and development with respect to the Digital Home Theater projector and, consequently, the Company does not presently anticipate that any significant expenditure of funds for research and development is necessary in order to complete the Digital Home Theater projector, although certain engineering refinements are still ongoing, including optimizing picture brightness for a new rear projection system. The Company is also expending research efforts in connection with testing the feasibility of the Company's thin screen. In addition, due to the inability of the Company's affiliate, Tamarack Storage Devices, Inc., to commercialize its holographic storage technology and Tamarack's current lack of prospects, the Company determined in the fourth quarter of 1995 to record a reserve of approximately $2,100,000 against its entire interest in Tamarack. Primarily as a result of work performed in developing its technology, the Company has sustained losses aggregating approximately $24,500,000 from its inception to September 30, 1996. The Company has continued to incur losses since September 30, 1996. As of September 30, 1996, the Company had available for Federal income tax purposes net operating and capital loss carry-forwards of approximately $19,000,000. The Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), may impose certain restrictions on the amount of net operating loss carryforwards which may be used in any year by the Company. Results of Operations January 1, 1993 to December 31, 1993 The Company had revenues of $105,000 for the twelve month period ended December 31, 1993, all of which was from licensing agreements. During this period, the Company incurred cash expenses of $2,111,933. The Company also incurred non-cash expenses of $380,494 during this period relating to the issuance of stock for services incurred for salaries paid or payable to officers and employees of, and consultants to, the Company as compensation for services rendered to the Company. January 1, 1994 to December 31, 1994 The Company has no revenue for the twelve months ended December 31, 1994. The Company incurred cash expenses of $3, 843,063. The Company also incurred non-cash expenses of $257,250 during this period relating to the issuance of stock for services incurred for salaries paid or payable to officers and employees of, and consultants to, the Company as compensation for services rendered to the Company. The Company also recorded its proportional share of the loss of Tamarack of $1,691,697. January 1, 1995 to December 31, 1995 The Company had revenues of $200,000 for the twelve month period ended December 31, 1995, all of which was from licensing agreements. During this period, the Company incurred cash expenses of $3,873,607. The Company also incurred non-cash expenses of $3,160,138 during this period relating to the issuance of stock for services incurred for salaries paid or payable to officers and employees of, and consultants to, the Company as compensation for services rendered to the Company, and the aforementioned reserved of the Company's interest in its affiliate, Tamarack Storage Devices, Inc. January 1, 1996 to March 31, 1996 The Company had no revenue for the quarter ended March 31, 1996. The operating expenses for this period totaled $1,718,432, which included $325,717 for research and development and $424,692 for salaries paid or payable to officers and employees of the Company. April 1, 1996 to June 30, 1996 The Company had no revenue for the quarter ended June 30, 1996. The operating expenses for this period totaled $ 1,358,549, which included $ 245,068 for salaries paid or payable to officers and employees of the Company. F-24 July 1, 1996 to September 30, 1996 The Company had $ 150,000 in license revenue for the quarter ended September 30, 1996. The operating expenses for this period totaled $ 1,269,239, which included $ 191,577 for research and development and $ 266,822 for salaries paid or payable to officers and employees of the Company. Ratio of Earnings to Combined Fixed Charges and Preferred Stock The Company incurred fixed interest expenses of $2,043, $2,295 and $0 for the years ended December 31, 1993, December 31, 1994 and December 31, 1995, respectively. Earnings in these years were insufficient to cover these fixed charges resulting in a deficiency of $2,044, $2,295 and $0 for 1993, 1994 and 1995, respectively. The 100 shares of Series A Preferred Stock do not pay dividends. The Series B Preferred Stock, none of which was outstanding in 1990 or 1991, only pays dividends in Common Stock. F-25 SIGNATURES Pursuant to the requirements of the Securities Act of 1994, the Registrant has duly authorized and caused the undersigned to sign this Report on the Registrant's behalf. PROJECTAVISION, INC. By: /s/ Marvin Maslow ----------------------------------- Marvin Maslow Chief Executive Officer and Chairman of the Board of Directors By: /s/ Jules Zimmerman ----------------------------------- Jules Zimmerman Chief Financial Officer Dated: November 19, 1996 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 JUL-01-1996 SEP-30-1996 4,101,183 4,959,470 10,683 0 0 9,126,695 1,592,092 220,991 13,182,989 1,229,678 2,300,000 0 3,859 1,407 9,648,037 13,182,989 150,000 150,000 0 1,190,487 (152,687) 0 46,334 (934,134) 0 (934,134) 0 0 0 (934,134) (0.07) (0.07)
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