U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the
quarterly period ended August 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Dita, Inc.
(Exact name of registrant as specified in its charter)
Nevada 0-27057 33-0696051
- -------------- ------------------------ --------------
(state of (Commission File Number) (IRS Employer
incorporation) I.D. Number)
6519 Fountain Avenue
Hollywood, CA 90028
323-953-9565
-------------------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
As of August 31, 1999, there were 3,142,530 shares of the Registrant's
Common Stock, par value $0.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DITA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
08-31-99 02-28-99
(Unaudited) Audited
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 15,364 $ 65,822
Cash - restricted 3,244 55,694
Accounts receivable - trade, net of allowance
for doubtful accounts of $37,160 and $37,160,
respectively 105,633 71,249
Inventory 132,931 71,587
Prepaid expenses 2,163 20,103
--------- ---------
Total current assets 259,335 284,455
Property and equipment, net of
accumulated depreciation and amortization 90,133 87,732
Other assets 2,434 2,434
--------- ---------
$ 351,902 $ 374,621
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 288,921 $ 209,578
Advances from officers-stockholders 26,546 36,531
Note payable, bank 4,762 19,000
Current maturities of obligations under
capital lease 14,600 14,600
--------- ---------
Total current liabilities 334,829 279,709
Obligations under capital lease, less
current maturities 16,883 17,869
--------- ---------
Stockholders' equity:
Common stock; $0.01 par value, 10,000,000 shares
authorized, 3,140,000 shares issued and
outstanding, respectively 31,400 31,400
Additional paid-in capital 613,339 613,339
Deficit (644,548) (567,696)
--------- ---------
Total stockholders' equity 190 77,043
--------- ---------
$ 351,902 $ 374,621
========= =========
</TABLE>
See notes to financial statements.
2
<PAGE>
DITA, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Three months ended Six months ended Six months ended
August 31, 1999 August 31, 1998 August 31, 1999 August 31, 1998
----------------- ----------------- ----------------- -----------------
Amount Amount Amount Amount
(Unaudited) Percent (Unaudited) Percent (Unaudited) Percent (Unaudited) Percent
----------- ------- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 241,892 100.0% $ 198,907 100.0% $ 531,179 100.0% $ 525,245 100.0%
Cost of sales 112,508 46.5 96,077 48.3 246,875 46.5 253,140 48.2
---------- ----- ---------- ----- ---------- ----- ---------- -----
Gross profit 129,384 53.5 102,830 51.7 284,303 53.5 272,105 51.8
Operating expenses 205,889 85.1 129,823 65.3 361,155 68.0 256,929 48.9
---------- ----- ---------- ----- ---------- ----- ---------- -----
Net income (loss) $ (76,505) (31.6) $ (26,993) (13.6) $ (76,852) (14.5) $ 15,176 (2.9)
========== ===== ========== ===== ========== ===== ========== =====
Net income (loss) per share -
basic and diluted $ (0.024) $ (0.01) $ (0.024) $ 0.005
========== ========== ========== ==========
Weighted average shares
outstanding - basic and diluted 3,140,000 2,623,311 3,140,000 2,623,311
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE>
DITA, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Six months ended August 31,
-------------------------------
1999 1998
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash flows provided by (used for)
operating activities:
Net income (loss) $ (76,852) $ 15,176
--------- ---------
Adjustments to reconcile net loss to
net cash provided by (used for)
operating activities:
Depreciation and amortization - -
Provision for doubtful accounts - 37
Other - -
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable $ (34,385) $ (11,310)
Inventory (61,344) (14,922)
Prepaid expenses 17,940 (1,335)
Increase (decrease) in liabilities -
Accounts payable and accrued expenses $ 84,863 $ 24,493
--------- ---------
Total adjustments $ 7,074 $ (3,037)
--------- ---------
Net cash used for operating activities $ (69,778) $ 12,139
--------- ---------
Cash flows used for investing activities:
Acquisition of property and equipment $ (2,400) $ (4,008)
Increase in other assets - -
--------- ---------
Net cash used for investing activities $ (2,400) $ (4,008)
--------- ---------
Cash flows provided by (used for)
financing activities:
(Payments on) advances from
officer-stockholders $ (9,985) $ (903)
(Payments on) proceeds from
note payable (19,000) -
(Payments on) proceeds from other
current liabilities (757) 14
(Payments on) obligations under capital lease (987) (7,203)
Proceeds from issuance of common stock - 200,000
--------- ---------
Net cash provided by financing activities $ (30,730) $ 191,908
--------- ---------
Net increase (decrease) in cash $(106,152) $ 200,039
Net increase in cash-reserve 3,244 -
Cash, beginning of year 121,516 17,806
--------- ---------
Cash, end of year $ 18,608 $ 217,845
========= =========
</TABLE>
See notes to financial statements.
4
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 28, 1999 AND
INTERIM PERIOD ENDED AUGUST 31, 1999
(1) Summary of Significant Accounting Policies:
Business Activity:
The Company is a wholesaler of unique, alternative and
fashionable women's sunglasses and sells to retailers throughout
the United States, Japan and Europe.
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.
Fair Value:
Unless otherwise indicated, the fair values of all reported
assets and liabilities which represent financial instruments
(none of which are held for trading purposes) approximate the
carrying values of such amounts.
Cash:
Equivalents
-----------
For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original
maturities of three months or less which are not securing any
corporate obligations.
Concentration
-------------
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts.
Inventory:
Inventory is valued at the lower of cost (first-in, first-out) or
market.
5
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 28, 1999 AND
INTERIM PERIOD ENDED AUGUST 31, 1999
(1) Summary of Significant Accounting Policies, Continued:
Income Taxes:
Deferred income taxes are reported using the liability method.
Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment (see Note 8).
Net Loss Per Share:
The Company has adopted Statement of Financial Accounting
Standard No. 128, Earnings per Share ("SFAS No. 128"), which is
effective for annual and interim financial statements issued for
periods ending after December 15, 1997. SFAS No. 128 was issued
to simplify the standards for calculating earnings per share
("EPS") previously in APB No. 15, Earnings per Share. SFAS No.
128 replaces the presentation of primary EPS with a presentation
of basic EPS. The new rules also require dual presentation of
basic and diluted EPS on the face of the statement of operations.
Net loss per common share is computed based on the weighted
average number of common shares outstanding.
Unaudited Interim Financial Statements:
In the opinion of the Company's management, all adjustments
(consisting of normal recurring accruals) necessary to present
fairly the Company's financial position as of August 31, 1999,
and the results of operations and cash flows for the six-month
periods ended August 31, 1999 and 1998 have been included. The
results of operations for the six-month period ended August 31,
1999, are not necessarily indicative of the results to be
expected for the full fiscal year. For further information, refer
to the financial statements and footnotes thereto included in the
Company's Form 10-SB filed for the year ended February 28, 1999
and 1998.
6
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 28, 1999 AND
INTERIM PERIOD ENDED AUGUST 31, 1999
(2) Property and Equipment:
<TABLE>
<CAPTION>
08-31-99 02-28-99
-------- --------
<S> <C> <C>
Display cases $ 76,254 $ 73,854
Computers and software 34,939 34,939
Furniture and fixtures 9,670 9,670
-------- --------
120,863 118,463
Less accumulated depreciation
and amortization 30,731 30,731
-------- --------
$ 90,133 $ 87,732
======== ========
</TABLE>
(3) Advances from Officer-Stockholders:
This amount represents the unpaid balance of non-interest bearing
short-term advances received from officer-stockholders. Such advances
are unsecured and payable on demand.
(4) Note Payable, Bank:
The Company has a line of credit with its bank in the amount of $55,000
which was secured by a collateral savings account in the amount of
$55,000. As of July 16, 1999, the line of credit was paid off and the
secured savings account was released to the Company.
Interest paid on all corporate borrowings, exclusive of related party
interest and other bank interest amounted to $798 for the year ended
February 28, 1999.
(5) Obligations under Capital Lease:
The Company leases computer equipment, software, lens cutters and trade
show booths under the terms of a capital lease, which is secured by the
related equipment costing $41,440. The following is a schedule by years
of future minimum lease payments required under the capital leases,
together with the present value of the net minimum lease payments:
7
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 28, 1999 AND
INTERIM PERIOD ENDED AUGUST 31, 1999
<TABLE>
<CAPTION>
Year ending February 28,
<S> <C>
2000 $14,600
2001 16,431
2002 1,438
-------
Present value of minimum lease payments 32,469
Less current maturities 14,600
-------
$17,869
=======
</TABLE>
Interest expense for the year ended February 28, 1999 amounted to $3,492
and for the six months ended August 31, 1999 amounted to $10,199.
(6) Common Stock:
Between April 18, 1997 and July 10, 1997, the Company's principal
supplier of sunglasses, who is also a shareholder and member of the
Board of Directors, purchased 425,000 shares of common stock for
$100,000. Also, on April 18, 1997, three officer-stockholders of the
Company were issued a total of 275,000 shares for services previously
provided on behalf of the Company.
As of February 28, 1999 and 1998, there were 92,900 shares outstanding
that had been sold through a December 1995 public offering made in
reliance upon an exemption from registration under federal and state
securities laws provided by Regulation D, Rule 504 of the Securities and
Exchange Commission.
(7) Related Party Transactions:
The Company's principal supplier of sunglasses is also a shareholder and
a member of the Board of Directors. Total product purchased from this
supplier for the year ended February 28, 1999 was $313,746. Accounts
payable and accrued expenses at February 28, 1999 include $131,162
payable to this supplier. The Company also pays interest on outstanding
accounts payable balances at a rate of 9% per year to this related
party.
(8) Income Taxes:
For federal income tax return purposes, the Company has available net
operating loss carryforwards of approximately $556,000 and $381,000,
which expire through 2013 and 2012 and are available to offset future
income tax liabilities for the years ended February 28, 1999 and 1998,
respectively.
Temporary differences which give rise to deferred tax assets and
liabilities at February 28, 1999 are as follows:
8
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 28, 1999 AND
INTERIM PERIOD ENDED AUGUST 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Net operating loss carryforwards $ 226,548 $ 152,400
Valuation allowance (226,548) (152,400)
--------- ---------
Net deferred taxes $ - $ -
========= =========
</TABLE>
(9) Subsequent Event:
The Company has had discussions with two companies that would like to
acquire the Company's corporate shell. As of October 20, 1999, no
negotiations have been finalized and none are under way. Upon completion
of any such proposed sale, the Company would be under different
management and would conduct a different business. The present business
of the Company would presumably be sold.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with
the financial statements and the accompanying notes thereto and is qualified in
its entirety by the foregoing and by more detailed financial information
appearing elsewhere. See "Item 1. Financial Statements."
Financial condition, changes in financial condition and results of
---------------------------------------------------------------------------
operations - Second Quarter of Fiscal Year 2000 Compared to Second Quarter of
- --------------------------------------------------------------------------------
Fiscal Year 1999
- ----------------
Dita's sales increased by $42,985 from $198,907 in the three-month period
ended August 31, 1998 (Q2:1999) to $241,892 in the three-month period ended
August 31, 1999 (Q2:2000) a 21.6 percent increase. There were, however,
significant changes in the origin of these sales, as follows:
<TABLE>
<CAPTION>
Q2:2000 Q2:1999
-------------------- ---------------------
Per- Per-
Origin of Sales Amount cent Amount cent
--------------- --------- ----- -------- -----
<S> <C> <C> <C> <C>
Optical $ 73,289 30.3 $ 50,082 25.2
Boutique 79,847 33.0 109,102 54.9
Department store 15,932 6.6 12,055 6.1
International 86,056 35.6 42,602 21.4
Freight income 2,378 1.0 2,744 1.4
Defective merchandise (24) .0 0 .0
Returns & exchanges (15,708) (6.5) (17,658) (8.9)
Discounts 14 .0 (397) (.2)
Interest income 109 .0 377 .2
-------- ----- -------- -----
Totals $241,892 100.0 $198,907 100.0
</TABLE>
Of particular note are the above increases in optical sales and
international sales and the decrease in boutique sales. The increase in optical
sales is especially healthy, because it represents the first results of a
strategic decision, taken in the second half of fiscal year 1998, to reduce
optical sales to the mass market - that is, the "low end" of the market - in
order to gain the standing needed to appeal to the "high end" of the market,
where the gross margin is higher.
The above increase in international sales is attributed primarily to $5,726
in higher sales in Canada and $46,679 in sales in Japan. As for Canada, our
distributor there, Overdrive, is now in its third year distributing Dita
products. Overdrive reports an increase in brand awareness for our products, as
reported to it by Canadian retail shops. As for Japan, the Q2:2000 sales in
Japan have no comparable sales in Q2:1998, as we had not yet acquired a
distributor for our products in Japan by the end of Q2:1999.
The above decrease in boutique sales essentially represents an earlier
delivery in Q1:2000 of products ordered by boutiques. As is shown in the
subsequent discussion of sales for the first half of fiscal year 2000, boutique
sales were flat for the first half of FY 2000 as compared with the first half of
FY 1999.
10
<PAGE>
The cost of sales increased from $96,077, or 48.3 percent of sales, in
Q2:1999 to $112,508, or 46.5 percent of sales, in Q2:2000, an increase of only
17.1 percent and a slight improvement when considered as a percentage of sales.
Operating expenses, however, increased from $129,823 - or 65.3 percent of
sales - in Q2:1999 to $205,889 - or 85.1 percent of sales - in Q2:2000. This
increase is due primarily to -
o an increase in advertising expense from $625 or 0.3 percent of
sales in Q2:1999 to $42,815 or 17.7 percent of sales in Q2:2000,
the increase being attributable to management's decision to
increase our marketing efforts in order to increase brand
awareness of our products;
o an increase in travel expense from $1,305 or 0.7 percent of sales
in Q2:1999 to $10,283 or 4.3 percent of sales in Q2:2000, the
increase being attributable to our attending three additional
trade shows during this period - one in Japan, one in Australia,
and one in London;
o an increase in accounting fees from $4,400 or 2.2 percent of
sales in Q2:1999 to $13,600 or 3.6 percent of sales in Q2:2000,
the increase being attributable to our having incurred our annual
audit for FY 1998 in the first quarter of FY 1999 and our annual
audit for FY 1999 in the second quarter of FY 2000; and
o an increase in equipment leasing expense from $506 or 0.3 percent
of sales in Q2:1999 to $6,694 or 2.8 percent of sales in Q2:2000,
the increase being attributable to the lease of a new lens
cutting machine, that helps us reduce excess inventory by
substituting lenses that will sell for lenses that will not sell,
and the lease of a trade show booth used to promote and sell our
products at trade shows.
Dita suffered a net loss from operations of $26,993 in Q2:1999, which loss
increased to a net loss of $76,505 in Q2:2000. The increases in advertising
expense and travel expense alone account for more than the increase in net loss
from operations. These increases reflect management's decision to increase
consumer awareness of our brands, particularly in new markets.
Our accounts receivable increased by $34,384 from $71,249 at the end of
fiscal year 1999 to $105,633 at the end of Q2:2000, and our accounts payable and
accrued expenses increased by $79,343 from $209,578 at the end of FY 1999 to
$288,921 at the end of Q2:2000. A cash position of $65,822 at the end of FY 1999
was reduced to $15,364 at the end of Q2:2000, but inventory increased from
$71,587 at the end of FY 1999 to $132,931 at the end of Q2:2000. Stockholders'
equity decreased from $77,043 at the end of FY 1999 to only $190 at the end of
Q2:2000.
11
<PAGE>
Financial condition, changes in financial condition and results of
- --------------------------------------------------------------------------------
operations - First Half of Fiscal Year 2000 Compared to First Half of Fiscal
- --------------------------------------------------------------------------------
Year 1999.
- ---------
Sales in the first half of FY 2000 were comparable to sales in the first
half of FY 1999 - $531,179 compared to the earlier $525,245. There were,
however, significant changes in the origin of these sales, as follows:
<TABLE>
<CAPTION>
1st Half:2000 1st Half:1999
Per- Per-
Origin of Sales Amount cent Amount cent
--------------- -------- ----- -------- -----
<S> <C> <C> <C> <C>
Optical $158,674 29.9 $353,593 67.3
Boutique 156,524 29.5 154,323 29.4
Department store 35,080 6.6 15,718 3.0
International 224,709 42.3 53,703 10.2
Freight income 5,853 1.1 7,571 1.4
Defective merchandise (24) .0 0 .0
Returns & exchanges (50,327) (9.5) (59,709) (11.4)
Discounts 14 .0 (416) (.1)
Interest income 676 .1 462 .1
-------- ----- -------- -----
Totals $531,179 100.0 $525,245 100.0
</TABLE>
Of particular significance is the above decrease in optical sales and the
increase in department store sales and international sales. After the first half
of FY 1999, management changed its marketing strategy for optical accounts. Dita
was having difficulty penetrating the high-end optical market, where prices are
higher and gross margins are higher than in the lower-end mass market. This
difficulty was attributable to high-end retailers' awareness of the presence of
Dita's trade name in the mass market. We deliberately eliminated many of our
mass market accounts after the second half of FY 1999 in order to gain, in time,
the high-end business we seek.
The above increase in department store sales occurred primarily during
Q1:2000 and at the Nordstrom and Barney New York stores where our sales
representatives conducted a monthly in-store promotion working with the stores'
sales staff selling products directly to customers.
The above increase in international sales is attributed to $35,280 in
higher sales in Canada and $80,020 in sales in Japan. Our Canadian distributor,
Overdrive, considerably increased its distribution to Canadian optical accounts
through the introduction in Canada of our ophthalmic line that we released for
Canada in the first quarter of FY 2000. Sales in Japan accounted for $80,000 of
the above increase in international sales, as we had not yet acquired a
distributor for Japan by the end of the first half of FY 1999.
The cost of sales decreased slightly from $253,140 or 48.2 percent of sales
in the first half of FY 1999 to $246,875 or 46.5 percent of sales in the first
half of FY 2000.
Operating expenses increased by $104,226 from $256,929 - or 48.9 percent of
sales - in the first half of FY 1999 to $361,155 - or 68 percent of sales - in
the first half of FY 2000. The increase is due primarily to -
12
<PAGE>
o an increase in advertising expense from $3,119 or 0.6 percent of
sales in the first half of FH 1999 to $86,643 or 16.3 percent of
sales in the first half of FY 2000, the increase being
attributable to management's decision to increase our marketing
efforts in order to increase brand awareness of our products;
o an increase in travel expenses from $2,776 or 0.5 percent of
sales in the first half of FY 1999 to $16,750 or 3.2 percent of
sales in the first half of FY 2000, the increase being
attributable to our attending three additional trade shows during
this period - one in Japan, one in Australia, and one in London;
o an increase in equipment leasing from $2,466 or 0.5 percent of
sales in the first half of FY 1999 to $12,124 or 2.3 percent of
sales in the first half of FY 2000, the increase being
attributable to the lease of a new lens cutting machine, that
helps us reduce excess inventory by substituting lenses that
will sell for lenses that will not sell, and the lease of a
trade show booth used to promote and sell our products at trade
shows;
o an increase in legal fees from $10,788 or 2.1 percent of sales in
the first half of FY 1999 to $16,407 or 3.1 percent of sales in
the first half of FY 2000, the increase being attributable to
legal advice and representation we sought in connection with
overtures made to us by two companies, each of which proposed
that we sell our present sunglasses business and sell to it our
resulting corporate shell; and
o an increase in interest expense from $6,890 or 1.3 percent of
sales in the first half of FY 1999 to $10,199 or 1.9 percent of
sales in the first half of FY 2000, the increase being
attributable to the institution by Glance in May 1998 of a one
percent a month interest charge on our outstanding balance to
Glance, which increase was not in effect the first two months of
the first quarter of FY 1999.
The above increases were offset, however, by several decreases in operating
expenses, primarily the following:
o a decrease in sales commissions expense from $61,715 or 11.7
percent of sales in the first half of FY 1999 to $43,473 or 8.2
percent of sales in the first half of FY 2000, the decrease
being attributable to the decrease in optical sales - sales for
which sales commissions are paid - and the increase in
international sales - sales for which no commissions are paid as
they are handled by our president, Troy Schmidt, who is a
salaried employee; and
o a decrease in postage expense from $3,357 or 0.6 percent of sales
in the first half of FY 1999 to $1,025 or 0.2 percent of sales in
the first half of FY 2000, the decrease being attributable to our
switching from FedEx to UPS for overnight international parcels
and a new policy of billing our
13
<PAGE>
international distributors for postage on all marketing
materials and supplies sent to them.
Dita realized net income from operations of $15,176 in the first half of
1999 but a net loss from operations of $76,852 in the first half of FY 2000. The
increase in advertising and travel expenses account for more than the difference
in net operating results.
Liquidity and Outlook.
---------------------
We have been able to stay in operation only (1) from the services provided
by Glance, Inc., a manufacturer of sunglasses under the control of Bendar Wu,
the chairman of our board of directors, which company funds and warehouses a
considerable portion of our inventory and (2) from the proceeds realized from
the sale of capital stock.
With respect to the sales of stock, we covered our $186,270 loss from
operations in fiscal 1999 by the sale of $200,000 in capital stock. In fiscal
1999 we also borrowed $19,000 on our bank line of credit. We ended fiscal 1999
with $121,516 cash in the bank.
By the end of the second quarter of fiscal 2000 (August 31, 1999) our cash
position had fallen to $18,608 from $121,516 at the end of fiscal 1999. Our net
loss from operations was $76,852 during the first half of FY 2000, but we
increased our inventory by $61,344 and repaid debt of $9,985 to officers and
$14,238 on our bank line of credit.
Glance provides liquidity as follows: standard payment terms in our
industry are to provide a secured letter of credit to the manufacturer for the
entire amount of a purchase order submitted. The letter of credit matures upon
the manufacturer's shipment of the product. Glance requires no letter of credit
or deposit of any type to secure a purchase order from us. In addition, Glance
takes shipment of the inventory ordered and warehouses it until we need it. Once
we order the inventory to be delivered from Glance's warehouse, we have 30 days
to pay for it.
We perceive the solution to our continuing losses to be an improvement in
our gross margin. The essential services provided by Glance, Inc. come at a cost
to us - they increase our cost of goods sold from 20 to 30 percent above
industry standard. Yet, it is impossible to dispense with these services without
the cash to pay for and warehouse all our inventory. We are working on obtaining
lines of credit from lending institutions that cater to small businesses. When
we have exhausted these possibilities, we will attempt to obtain capital through
the sale of shares of common stock.
Unfortunately, our inability to demonstrate profitable operations makes it
difficult to sell capital stock. At this time, we have not identified the
sources of additional lines of credit or of equity capital we need to break out
of our dilemma. During the next six months, we need to increase our bank line of
credit from $45,000 to approximately $100,000 to help pay for the implementation
of new prescription glasses lines.
Within the next year, though, we need additional equity capital or an
additional line of credit of approximately $150,000 to decrease our dependence
on Glance, Inc. and thereby improve our profit margins.
14
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule*
*Previously filed and incorporated herein by reference.
(b) Forms 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November 02, 1999 Dita, Inc.
By/s/ Troy Schmidt
---------------------------
Troy Schmidt, President and
Chief Financial Officer
15
