Charlie
Filing is out - the reason the excitement diminishes is because reality sets in:
Results of Operations
Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003
Two major factors affected our results of operations for the three months endedMarch 31, 2004, compared to the corresponding period of 2004. First, revenuedeclined. Second, general and administrative expenses increased.
Revenues from our virtual reality product lines are somewhat unpredictable. Ourproducts are custom made to a particular client's needs and delivery schedules.Thus, our products tend to consist of a few large projects at any time, and thestage of completion of any particular project can significantly affect revenue.We had total revenue of $296,878 for the three months ended March 31, 2004,compared to $361,746 for the corresponding three months of 2003. Our revenue isnow broken down in our statement of operations into our two markets,training/simulation and advertising/promotion. Revenue for the period consistedprimarily of monies received for our recent IVR-300 HD training simulatordeliveries to Mexico, the Black Hawk helicopter recruitment project for theUnited States Army, from Schwans (Red Baron Pizza) for a promotional experienceat its new flight museum, and from our recent project for Bombardier's Sea-Doodivision. Cost of sales and services slightly increased proportionately.
General and administrative expenses of $383,729 for the three months ended March31, 2004, compared to $252,641 for the three months ended March 31, 2003,increased primarily due to an increase in development costs, travel,advertising/marketing, and trade show expense associated with final developmentand the recent product roll-out of the IVR HD line of advanced trainingsimulators, as well as the Immersa-Dome system for the advertising/promotionalmarket.
Liquidity and Plan of Operations
As of March 31, 2004, our liquidity position was extremely precarious. We hadcurrent liabilities of $9,712,723, including $6,236,817 in obligations under thelease financing for the old Ferris Productions virtual reality systems,$1,056,561 in accounts payable, and short-term notes payable of $1,654,593, someof which were either demand indebtedness or were payable at an earlier date andwere in default. As of March 31, 2004, there was only $410,191 in current assets available to meet those liabilities.
To date we have met our capital requirements by acquiring needed equipment underthe Ferris non-cancelable leasing arrangements, through capital contributions,loans from principal shareholders and officers, certain private placementofferings, and through our convertible debenture and equity line financing withDutchess Private Equities Fund, L.P.
For the quarter ended March 31, 2004, our net loss was $(523,465). After takinginto account the non-cash items included in that loss, our cash requirements foroperations were approximately $310,509. In addition, we made capitalexpenditures of $42,429 and repaid notes in the amount of $34,160. To coverthese cash requirements, we used existing cash and issued 1,545,628 shares ofour common stock under the Dutchess equity line for net cash proceeds of$373,887.
The opinion of our independent auditor for the year ended December 31, 2003 expressed substantial doubt as to our ability to continue as a going concern. Wewill need substantial additional capital or new lucrative custom applicationprojects to become profitable. In July of 2002, we entered into a financialcontract with Dutchess Private Equities Fund, L.P. Under this arrangement,Dutchess is to purchase up to $5 million of our common stock over the next twoyears under an equity line. The number of shares we may sell to Dutchess isbased upon the trading volume of our stock. Dutchess and several other investorsalso participated in a private placement of $450,000 in convertible debentures,which has been repaid in full. Based on recent increases in the stock's tradingvolume following our entry into the training/simulation market, managementbelieves that this equity line will allow us to continue our operations for atleast the next twelve months. However, operations will require the continued forbearance of the holders of various notes and equipment leases that arecurrently in default.
Take care
Bylo
AI
