U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 2000
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)
2214 Beverly Boulevard
Los Angeles, CA 90057
213-368-3968
-------------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
As of August 31, 2000, 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
2
<PAGE>
Dita Inc.
Balance Sheet
August 31, 2000
ASSETS
<TABLE>
Current Assets
<S> <C> <C>
Cash Checking $ 21,323
Checking-Marketing Account 425
Secured Savings 2,691
Accounts Receivable 208,077
Allowance for Doubtful Account (40,660)
Inventory 178,922
--------
TOTAL Current Assets $ 370,779
Fixed Assets
Computer Equipment 26,208
Display Cases 73,854
Furniture and fixtures 9,670
Shop and Warehouse Equipment 8,731
(Less) Accumulated Depreciation (62,131)
Leasehold Improvements 5,711
--------
TOTAL Fixed Assets 62,044
Other Assets
Deposits 3,335
Organizational Costs 3,789
(Less) Accumulated Amortization (3,454)
--------
TOTAL Other Assets 3,670
--------
TOTAL Assets $ 436,493
========
LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable $ 318,825
Accrued Expenses 8,921
Officers Loan Payable 20,256
Credit Card-Wells Fargo (9227) 1,492
Business Line _0682 13,895
State Income Tax Payable (800)
Capital Lease Payable 9,597
Loan Payable 16,747
--------
TOTAL Current Liabilities 388,933
---------
TOTAL Liabilities 388,933
Equity
Common Stock 31,400
Paid In Capital 613,338
Retained Earnings (698,784)
Retained Earnings - Current Year 101,606
--------
TOTAL Equity 47,560
--------
TOTAL Liabilities AND Equity $ 436,493
========
</TABLE>
<PAGE>
Dita Inc.
Condensed Statement of Income
<TABLE>
<CAPTION>
Six Months Ended August 31
2000 1999
----------- -----------
<S> <C> <C>
Net Sales $ 677,620 $ 531,458
Cost of Sales 262,257 252,054
--------- ---------
Gross Profit 415,363 279,404
Operating Expenses 313,758 362,937
--------- ---------
Net Income $ 101,606 $ (83,533)
========= =========
Net Income per share $ .03 $ -
basic ad diluted
Weighted Average common Shares
outstanding basic ad diluted 3,140,000 3,140,000
========= =========
</TABLE>
<PAGE>
DITA, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Six months ended August 31, 2000
2000 1999
(Unaudited) (Unaudited)
---------------- ---------------
Cash flows provided by (used for)
operating activities:
<S> <C> <C>
Net Income (loss) $ 101,606 $ (83,533)
-------- --------
Adjustments reconcile net loss to
net cash provided by (used for)
operating activities:
Depreciation and amortization 10,000
Provision for doubtful accounts 13,297 -
Other
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (120,432) (34,385)
Inventory (16,924) (61,344)
Deposits (275)
Prepaid expenses 1,698 19,000
Increase (decrease) in liabilities -
Accounts payable and accrued
expenses 45,063 90,484
-------- --------
Total adjustments (67,573) 13,755
-------- --------
Net cash used for
operating activities 34,033 (69,778)
-------- --------
Cash flows used for investing activities:
Acquisition of property and equipment (2,400)
Increase in other assets (3,711) (2,400)
-------- --------
Net cash used for
investing activities (3,711) (2,400)
-------- --------
Cash flows provided by (used for)
financing activities:
(Payments on) advances from
officer-stockholders (3,219) (9,985)
(Payments on) proceeds from
note payable (11,625) (19,000)
(Payments on) proceeds from other
current liabilities (8,272) (757)
(Payments on) obligations under
capital lease (987)
Proceeds from note payable
Proceeds from issuance of common stock -
-------- --------
Net cash provided by
financing activities (23,116) (30,729)
-------- --------
Net increase (decrease) in cash 7,206 (102,907)
Net increase in cash-reserve
Cash, beginning of year 17,234 121,516
-------- --------
Cash, end of year $ 24,439 $ 18,609
======== ========
</TABLE>
<PAGE>
DITA, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
August 31, August 31, August 31, August 31,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 306,063 $ 241,892 $ 677,620 $ 531,179
Cost of sales 119,423 112,508 262,257 246,875
---------- ---------- ---------- ----------
Gross profit 186,640 129,384 415,363 284,303
Operating expenses 143,864 205,889 313,758 361,155
---------- ---------- ---------- ----------
Net income (loss) $ 42,776 $ (76,505) $ 101,606 $ (76,852)
========== ========== ========== ==========
Net income (loss) per
share - basic and diluted $ 0.014 $ (0.024) $ 0.03 $ (0.024)
========== ========== ========== ==========
Weighted average shares
outstanding - basic and
diluted 3,140,000 3,140,000 3,140,000 3,140,000
========== ========== ========== ==========
</TABLE>
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS AND THREEE MONTHS ENDED AUGUST 31, 2000
(1) Summary of Significant Accounting Policies:
The Company's financial statements are prepared using the
generally accepted accounting principles.
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.
See accompanying independent auditors' report.
F-1
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS AND THREEE MONTHS ENDED AUGUST 31, 2000
(1) Summary of Significant Accounting Policies, Continued:
Inventory:
Inventory is valued at the lower of cost (first-in, first-out) or
market.
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 10).
Recent Accounting Pronouncements Effective Subsequent to 1998:
In June 1998, the United States Financial Accounting Standards
Board (FASB) issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", the effective date for which
was deferred by SFAS No. 137 until fiscal years beginning after
June 15, 1999. The Company anticipates that due to its limited
use of derivative instruments, the adoption of SFAS No. 133 will
not have a material effect on its financial statements.
(2) Major Customers:
Total sales to three customers amounted to approximately $262,882
for the period ended August 31, 2000 and $126,196 for the quarter
ended August 31, 2000. Included in accounts receivable at August
31, 2000 is approximately $67,914.12 due from these customers.
(3) Property and Equipment:
August 31,
2000
----------
Display cases $ 73,854
Shop and warehouse equipment 8,731
Computers and software 26,208
Furniture and fixtures 9,670
Leasehold improvements 5,711
-----------
124,174
Less accumulated depreciation and amortization 62,131
-----------
$ 62,043
===========
See accompanying independent auditors' report.
F-2
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS AND THREEE MONTHS ENDED AUGUST 31, 2000
(4) 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.
(5) Note Payable, Bank:
The Company has a line of credit with its bank in the amount of $35,000
and is unsecured. As of August 31, 2000, the line of credit had a
remaining balance in the amount of $13,895.
(6) 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:
<TABLE>
<CAPTION>
August 31,
2000
----------
Year ending:
<S> <C>
February 28, 2001 7,969
February 28, 2002 1,628
-----
Present value of minimum lease payments 9,597
</TABLE>
(7) Note Payable:
Note payable is non-interest bearing and is due upon the sale of the
corporation.
See accompanying independent auditors' report.
F-3
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS AND THREEE MONTHS ENDED AUGUST 31, 2000
(8) 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 period ended August 31, 2000 $68,854. Accounts payable and
accrued expenses at August 31, 2000 of $207,667 were payable to this
supplier. The Company also pays interest on outstanding accounts payable
balances at a rate of 1.25% per month to this related party.
(9) Income Taxes:
For federal income tax return purposes, the Company has available net
operating loss carryforwards of approximately $687,000 and $556,000,
which expire through 2014 and 2013 and are available to offset future
income tax liabilities for the years ended February 29, 2000 and
February 28, 1999, respectively.
Temporary differences which give rise to deferred tax assets and
liabilities at February 28, 1999 are as follows:
<TABLE>
<CAPTION>
February 29, February 28,
2000 1999
------------ ------------
<S> <C> <C>
Net operating loss carryforwards $ 274,835 $ 226,548
Valuation allowance (274,835) (226,548)
----------- -----------
Net deferred taxes $ - $ -
=========== ===========
</TABLE>
(10) Commitments and Other:
The following is a schedule by years of future minimum rental payments
required under an operating lease that has a noncancellable lease term
in excess of one year as of February 29, 2000:
<TABLE>
Year ending February 28,
<S> <C>
2001 $ $18,360
2002 30,600
---------------
$ 67,320
===============
</TABLE>
Rent amounted to $17,930 and $9,180 for the period and quarter ended
August 31, 2000, respectively.
A deposit consisting of $3,060 was paid upon signing of the lease.
See accompanying independent auditors' report.
F-4
<PAGE>
DITA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS AND THREEE MONTHS ENDED AUGUST 31, 2000
(11) Subsequent Event:
The Company is in the process of negotiating to sell its corporation to
a third party. As of October 18, 2000, no negotiations have been
finalized. Upon completion of the proposed sale, the Company will
reorganize and continue to operate under a different entity.
See accompanying independent auditors' report information.
F-5
<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 2001 Compared to Second Quarter
of Fiscal Year 2000
Dita's sales increased by $64,171 from $241,892 in the three-month
period ended August 31, 1999 (Q2:2000) to $306,063 in the three-month period
ended August 31, 2000 (Q2:2001), a 26.5 percent increase. There were, however,
significant changes in the origin of these sales, as follows:
<TABLE>
<CAPTION>
Q2:2000 Q2:2001
Per- Per-
Origin of Sales Amount cent Amount cent
--------------- ------ ---- ------ ----
<S> <C> <C> <C> <C>
Optical $ 73,289 30.3 $ 74,004 24.2
Boutique 79,847 33.0 66,676 21.8
Department store 15,932 6.6 50,733 16.6
International 86,056 35.6 126,552 41.3
Freight income 2,378 1.0 2,753 .9
Miscellaneous (24) .0 1,305 .4
Returns & exchanges (15,708) (6.5) (15,991) (5.2)
Discounts 14 .0 20 .0
Interest income 109 .0 11 .0
-------- ----- -------- -----
Totals $241,892 100.0 $306,063 100.0
======== ===== ======== =====
</TABLE>
Of particular note are the above increases in department store sales and
international sales and the decrease in boutique sales.
The cost of sales decreased from 46.5 percent of sales in Q2:2000 to 39
percent of sales in Q2:2001.
Operating expenses, most significantly, decreased from $205,889 - or
85.1 percent of sales - in Q2:2000 to $143,864 - or 47 percent of sales in
Q2:2001. This decrease is due primarily to -
o a decrease in advertising expense from $42,815, or 17.7 percent
of sales in Q2:2000, to $1,685 or 0.6 percent of sales in
Q2:2001. The decrease is attributable to management's decision
to rely on editorial advertising only during our spring
advertising season, which is when the company spends the
majority of its advertising dollars. We hope that the free
editorial coverage will be sufficient to maintain our brand
image and increase sales. By avoiding our considerable
advertising expenditures, we hope to improve some of the negative
aspects of our historically unstable financial position;
3
<PAGE>
o a decrease in accounting fees from $13,600, or 3.6 percent of
sales in Q2:2000, to $850 or 0.3 percent of sales in Q2:2001; and
o a decrease in equipment leasing expense from $6,694, or 2.8
percent of sales in Q2:2000, to a credit of $1,524 in Q2:2001.
Dita had $42,776 net income from operations in Q2:2001, compared to a
net loss of $76,505 in Q2:2000.
Our accounts receivable (net of allowance for doubtful accounts)
increased by $107,134 from $60,283 at the end of fiscal year 2000 to $167,417 at
the end of Q2:2001, and our accounts payable and accrued expenses increased by
$43,963 from $283,783 at the end of FY 2000 to $327,746 at the end of Q2:2001.
Inventory increased from $161,998 at the end of FY 2000 to $178,922 at the end
of Q2:2001. Stockholders' equity increased from a deficit of $54,045 at the end
of FY 2000 to positive equity of $47,560 at the end of Q2:2001.
Financial condition, changes in financial condition and results of
operations - First Half of Fiscal Year 2001 Compared to First Half of Fiscal
Year 2000.
Sales in the first half of FY 2001 increased by $146,162 (27.5 percent)
over sales in the first half of FY 2000 - $677,620 compared to the earlier
$531,179.
<TABLE>
<CAPTION>
1st Half:FY2000 1st Half:FY2001
Per- Per-
Origin of Sales Amount cent Amount cent
--------------- ------ ---- ------ ----
<S> <C> <C> <C> <C>
Optical $158,674 29.9 $182,128 26.9
Boutique 156,524 29.5 174,863 25.8
Department store 35,080 6.6 74,519 11.0
International 224,709 42.3 261,228 38.6
Freight income 5,853 1.1 6,308 .9
Miscellaneous (24) .0 5,000 .7
Returns & exchanges (50,327) (9.5) (26,544) (3.9)
Discounts 14 .0 2 .0
Interest income 676 .1 22 .0
-------- ----- -------- -----
Totals $531,179 100.0 $677,620 100.0
======== ===== ======== =====
</TABLE>
Sales were up in all categories. We are experiencing the benefit, we
believe, in a change in our marketing strategy. Dita was having difficulty
penetrating the high-end 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 2000 in order to gain, in time, the high-end business we seek.
Our gross margin increased from 52.5 percent ($279,404) of sales in the
first half of FY 2000 to 61.3 percent ($415,363) of sales in the first half of
FY 2001.
4
<PAGE>
Operating expenses decreased by $49,179 from $362,937 - or 68.3 percent
of sales - in the first half of FY 2000 to $313,758 - or 46.3 percent of sales -
in the first half of FY 2001. The decrease is due primarily to -
o a decrease in advertising expense from $86,643 or 16.3 percent of
sales in the first half of FY 2000, to $1,685, or 0.2 percent of
sales in the first half of FY 2001;
o a decrease in equipment leasing expense from $12,124 or 2.3
percent of sales in the first half of FY 2000, to $7,169, or 1.1
percent of sales in the first half of FY 2001;
o a decrease in legal fees from $16,407 or 3.1 percent of sales in
the first half of FY 2000, to $224 in the first half of FY 2001;
and
o a decrease in interest expense from $10,199 or 1.9 percent of
sales in the first half of FY 2000, to $1,202, or 0.2 percent of
sales in the first half of FY 2001;
The above decreases were offset, however, by several increases in
operating expenses, primarily the following:
o an increase in sales commissions expense from $43,473, or 8.2
percent of sales in the first half of FY 2000, to $49,866, or 7.4
percent of sales in the first half of FY 2001;
o an increase in repairs and maintenance from $20 in the first half
of FY 2000 to $5,991, or 0.9 percent of sales in the first half
of FY 2001;
o an increase of $5,213 in accounting fees expense from $14,200, or
2.7 percent of sales, in the first half of FY 2000 to $19,413, or
2.9 percent of sales in the first half of FY 2001;
o an increase of $5,014 in research and development from $1,017, or
0.2 percent of sales in the first half of FY 2000, to $6,031, or
0.9 percent of sales in the first half of FY 2001;
o an increase of $11,816 in bad debts expense from $1,481, or 0.3
percent of sales in the first half of FY 2000, to $13,297, or 2.0
percent of sales in the first half of FY 2001; and
o an increase of $14,392 in finance charges from $1,756, or 0.3
percent of sales in the first half of FY 2000, to $16,148, or 2.4
percent of sales in the first half of FY 2001.
Dita realized net income from operations of $101,606, or $0.03 a share,
in the first half of 2001 as contrasted with a net loss from operations of
$83,533 in the first half of FY 2000.
5
<PAGE>
Liquidity and Outlook.
The improvement from a loss of $83,533 to a profit of $101,606 is
encouraging but not without problems. Our accounts payable and accrued expenses
exceed our accounts receivable (net of allowances for doubtful accounts) by
$160,329. Our profits so far this fiscal year reflect a decrease of $84,958 in
advertising expense from the comparable period the last fiscal year, a savings
in expenses that could have repercussions ahead. At the moment, though, we are
liquid and believe we will be able to realize this six-month profit at year end.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(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: October 16, 2000 Dita, Inc.
By/s/ Troy Schmidt
---------------------------------
Troy Schmidt, President and
Chief Financial Officer
6
