<PAGE>
Conformed copy
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1996 Commission File No. 0-9996
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DOTRONIX, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 41-1387074
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 First Street S.E.
New Brighton, Minnesota 55112
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(Address of principal executive offices) (Zip Code)
(612) 633-1742
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(Registrants' 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
Exchange Act 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
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Indicate the number of shares outstanding of each of the issuers
classes of common stock as of the latest practicable date.
Class Outstanding at October 15, 1996
------------------------- -------------------------------------
Common stock, par value
$ .05 per share 4,285,135
<PAGE>
DOTRONIX, INC.
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INDEX
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<TABLE>
<CAPTION>
Part I - Financial Information Page(s)
- ------------------------------ -------
<S> <C>
Item 1. Financial Statements (Unaudited)
Balance Sheets 1
Statements of Operations 2
Statements of Cash Flows 3
Notes to Financial Statements 4
Item 2. Managements' Discussion and Analysis
of Financial Condition and Results
of Operations. 5-6
Part II - Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 7
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
--------------------------------
ITEM 1. FINANCIAL STATEMENTS
- ------------------------------
DOTRONIX, INC.
BALANCE SHEETS
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<TABLE>
<CAPTION>
ASSETS September 30, June 30,
1996 1996
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(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,626,612 $ 3,457,274
Accounts receivable, less allowance
for doubtful accounts of $ 61,874
and $ 55,442, respectively 2,213,588 2,642,132
Inventories:
Raw materials 2,980,180 3,111,361
Work-in-process 774,125 682,854
Finished goods 456,604 445,221
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Total inventories 4,210,909 4,239,436
Prepaid expenses 82,784 79,785
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Total current assets 10,133,893 10,418,627
PROPERTY, PLANT & EQUIPMENT, at cost net of
accumulated depreciation of $5,268,912 and
$5,231,242, respectively 1,081,133 1,123,958
OTHER ASSETS:
Excess of cost over fair value of net assets
acquired, less amortization 755,976 773,975
Other 27,374 39,095
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TOTAL ASSETS $11,998,376 $12,355,655
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Revolving loan $ 1,826,931 $ 1,937,280
Accounts payable 723,031 783,597
Salaries, wages and payroll taxes 310,221 532,971
Other accrued liabilities 129,965 102,805
----------- -----------
Total current liabilities 2,990,148 3,356,653
STOCKHOLDERS' EQUITY:
Common stock, $.05 par value 214,257 210,947
Additional paid-in capital 11,050,256 10,987,304
Accumulated deficit (2,256,285) (2,199,249)
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Total stockholders' equity 9,008,228 8,999,002
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,998,376 $12,355,655
=========== ===========
</TABLE>
The balance sheet at June 30, 1996 has been taken from the audited financial
statements at that date.
See notes to financial statements.
1.
<PAGE>
DOTRONIX, INC.
STATEMENTS OF OPERATIONS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------------------
1996 1995
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<S> <C> <C>
REVENUES: $2,985,296 $4,040,378
OPERATING EXPENSES:
Cost of Sales 2,050,661 2,826,636
Selling, general and administrative 927,517 994,366
Interest 64,155 66,772
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Total operating expenses 3,042,333 3,887,774
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Net (loss) income ($ 57,037) $ 152,604
============= =============
Net (loss) income per common and common
equivalent share ($ .01) $ .04
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Average number of common and common
equivalent shares outstanding 4,234,763 4,280,202
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</TABLE>
See notes to financial statements.
2.
<PAGE>
DOTRONIX, INC.
--------------
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
--------------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (57,037) $ 152,604
Adjustments to reconcile net (loss) income to
cash provided by (used in) operating
activities:
Depreciation and amortization 66,256 100,204
Provision for loss on accounts
receivable 15,000 30,000
Changes in assets and liabilities:
Accounts receivable 413,543 (600,830)
Inventories 28,527 354,718
Prepaid expenses (2,999) (3,875)
Other assets 11,721 4,687
Accounts payable accrued liabilities (256,156) (202,660)
----------- -----------
Net cash provided by (used in)
operating activities
218,855 (165,152)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases property, plant and equipment (5,431) (2,975)
----------- -----------
Net cash used in investing activities (5,431) (2,975)
CASH FLOWS FROM FINANCING activities:
Proceeds from sale of stock 66,262 3,117
Borrowings on revolving loan 3,364,335 3,557,893
Repayments on revolving loan (3,474,683) (3,532,052)
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Net cash (used in) provided by financing activities (44,086) 28,958
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 169,338 (139,169)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE QUARTER 3,457,274 2,028,371
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CASH AND CASH EQUIVALENTS AT THE END
OF THE QUARTER $ 3,626,612 $ 1,889,202
=========== ===========
</TABLE>
See notes to financial statements.
3.
<PAGE>
DOTRONIX, INC.
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Unaudited)
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A. Basis of Presentation
The balance sheet as of September 30, 1996, the statements of operations
and cash flows for the three month periods ended September 30, 1996 and 1995
have been prepared by the Company without audit. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position, results of operations and cash flows at
September 30, 1996 and for the periods ended September 30, 1996 and 1995
presented herein have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Company's financial statements and notes thereto
included in the Annual Report on Form 10-KSB of the Company for the fiscal year
ended June 30, 1996.
4.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
RESULTS OF OPERATIONS
- ---------------------
Revenue for the three months ended September 30, 1996 decreased 26% from the
corresponding period of 1995 and decreased 31% from the quarter ended June 30,
1996. The decreases are due mainly to no units being shipped for the FAA upgrade
program in the first quarter. Shipments for this program are expected to resume
in the third quarter.
Gross margin percentage for the quarter was 31.3% compared to 30.0% for the
quarter ended September 30, 1995, and 35.5% for the year ended June 30, 1996.
The increase in gross margin from the comparable quarter of fiscal year 1996 was
due primarily to reductions in certain manufacturing overhead costs realized due
to the reduction in volume. The decrease from the year ended June 30, 1996 was
due to the significant change in product mix, specifically the absence of
shipments for the FAA upgrade program.
Selling, general and administrative expense decreased $66,849, or 7%, from the
comparable prior year period. This decrease was due primarily to reductions in
the amount of depreciation, engineering consulting fees, and bad debt reserves.
Interest expense decreased $2,617 from the comparable prior year period.
There is no income tax charge because the Company has available the tax benefit
of operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On October 3, 1994, the Company entered into Amendment Number 3 to the Revolving
Working Capital Loan commitment which has been in effect since October 10, 1991.
This amendment provided for the payoff of all of the Company's other existing
debt and consolidated it into two demand loans totaling $657,000 and a revolving
loan with a maximum availability of $4,000,000. The loans continue to bear
interest at 3% over the base rate (11.25% at September 30, 1996) and are secured
by all assets of the Company. The monthly principal payment on the demand loans
is $10,950. The amendment also provided for a total minimum monthly interest
payment based on the higher of the average daily outstanding principal balance
or $2,000,000. The agreement now has an expiration date of October 11, 1997.
5.
<PAGE>
The Company believes future amounts available to it under this agreement should
be adequate to meet both short and long term capital needs.
During the three months ended September 30, 1996 operations provided cash of
$219,000, primarily due to a decrease in accounts receivable. Net payments on
the revolving loan amounted to $110,000 and the Company had proceeds from common
stock issuance of $66,000. The overall result was to increase cash by $169,000.
At September 30, 1996, working capital amounted to $7,143,745.
6.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27...... Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were issued during the quarter.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 8, 1996 DOTRONIX, INC.
By /s/ William S. Sadler
-----------------------------
William S. Sadler,
President and Treasurer
(Principal Executive
Officer)
By /s/ David R. Beel
-----------------------------
David R. Beel, Chief
Financial Officer
(Principal Financial and
Accounting Officer)
7.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,626,612
<SECURITIES> 0
<RECEIVABLES> 2,275,462
<ALLOWANCES> (61,874)
<INVENTORY> 4,210,909
<CURRENT-ASSETS> 10,133,894
<PP&E> 6,350,045
<DEPRECIATION> (5,268,912)
<TOTAL-ASSETS> 11,998,376
<CURRENT-LIABILITIES> 2,990,149
<BONDS> 0
<COMMON> 214,257
0
0
<OTHER-SE> 8,793,971
<TOTAL-LIABILITY-AND-EQUITY> 11,998,376
<SALES> 2,941,831
<TOTAL-REVENUES> 2,985,296
<CGS> 2,050,661
<TOTAL-COSTS> 2,978,178
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64,155
<INCOME-PRETAX> (57,037)
<INCOME-TAX> 0
<INCOME-CONTINUING> (57,037)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (57,037)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
