<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 December 31, 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
- ---------------------------------------- -------------------
(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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(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 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 issuer's classes
of common stock as of the latest practicable date.
Class Outstanding at January 15, 1997
- --------------------------- -----------------------------------
Common stock, par value
$ .05 per share 4,130,335
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DOTRONIX, INC.
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INDEX
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Part I - Financial Information Page(s)
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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
Part II - Other Information
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Item 4. Submission of Matters to a Vote of
Securities Holders 6
Item 6. Exhibits and Reports on Form 8-K 6
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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DOTRONIX, INC.
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BALANCE SHEETS
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<TABLE>
<CAPTION>
ASSETS December 31, June 30,
- ------ 1996 1996
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(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,993,582 $ 3,457,274
Accounts receivable, less allowance
for doubtful accounts of $91,868
and $48,865, respectively 1,549,990 2,642,132
Inventories:
Raw materials 3,013,944 3,111,361
Work-in-process 868,844 682,854
Finished goods 484,460 445,221
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Total inventories 4,367,248 4,239,436
Prepaid expenses 81,415 79,785
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Total current assets 8,992,235 10,418,627
PROPERTY, PLANT & EQUIPMENT, at cost
net of accumulated depreciation of
$5,311,155 and $5,231,242,
respectively 1,083,774 1,123,958
OTHER ASSETS:
Excess of cost over fair value of
net assets acquired, less
amortization 737,976 773,975
Other 13,309 39,095
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TOTAL ASSETS $10,827,294 $12,355,655
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Revolving loan $ 1,388,073 $ 1,937,280
Accounts payable 447,555 783,597
Salaries, wages and payroll taxes 234,339 532,971
Other accrued liabilities 101,364 102,805
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Total current liabilities 2,171,331 3,356,653
STOCKHOLDERS' EQUITY: (Note B)
Common stock, $.05 par value 207,847 210,947
Additional paid-in capital 10,913,809 10,987,304
Accumulated deficit (2,465,693) (2,199,249)
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Total stockholders' equity 8,655,963 8,999,002
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,827,294 $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.
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DOTRONIX, INC.
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STATEMENTS OF OPERATIONS
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(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
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1996 1995 1996 1995
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<S> <C> <C> <C> <C>
REVENUES: $ 2,249,549 $ 3,077,795 $ 5,234,845 $ 7,118,173
OPERATING EXPENSES:
Cost of Sales 1,492,200 1,951,445 3,542,861 4,778,081
Selling, general and administrative 903,046 988,828 1,830,563 1,983,194
Interest 63,710 62,222 127,865 128,994
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Total operating expenses 2,458,956 3,002,495 5,501,289 6,890,269
------------ ----------- ------------ -----------
Net (loss) income ($ 209,407) $ 75,300 ($ 266,444) $ 227,904
============ =========== ============ ===========
Net (loss) income per common and
common equivalent share ($ .05) $ .02 ($ .06) $ .05
------------ ----------- ------------ -----------
Average number of common and common
equivalent shares outstanding 4,259,670 4,308,965 4,247,217 4,294,584
------------ ----------- ------------ -----------
</TABLE>
See notes to financial statements.
2.
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DOTRONIX, INC.
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STATEMENTS OF CASH FLOWS
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(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
December 31,
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1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($ 266,444) $ 227,904
Adjustments to reconcile net (loss) income
to cash provided by operating
activities:
Depreciation and amortization 115,912 200,400
Provision for loss on accounts
receivable 45,000 30,000
Changes in assets and liabilities:
Accounts receivable 1,047,142 322,692
Inventories ( 127,812) 536,662
Prepaid expenses ( 1,630) 7,017
Other assets 25,786 14,065
Accounts payable and accrued liabilities ( 636,115) ( 748,970)
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Net cash provided by
operating activities 201,839 589,770
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ( 39,729) ( 38,243)
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Net cash used in investing
activities ( 39,729) ( 38,243)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock purchases ( 142,857)
Proceeds from sale of stock 66,262 5,368
Borrowings on revolving and demand loans 5,786,456 7,689,538
Repayments on revolving and demand loans ( 6,335,663) ( 7,454,826)
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Net cash (used in) provided by
financing activities ( 625,802) 240,080
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NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS ( 463,692) 791,607
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE PERIOD 3,457,274 2,028,371
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CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,993,582 $ 2,819,978
============ ============
</TABLE>
See notes to financial statements.
3.
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DOTRONIX, INC.
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NOTES TO FINANCIAL STATEMENTS
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(Unaudited)
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A. Basis of Presentation
The balance sheet as of December 31, 1996, the statements of operations for
the three and six month periods ended December 31, 1996 and 1995 and the
statements of cash flows for the six month periods then ended 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 December 31, 1996
and for the periods ended December 31, 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.
B. Common Stock Repurchases
In November 1996, the Company decided to repurchase up to 250,000 shares of
its common stock at current market prices. The Company believes the purchases
represent an attractive use of a portion of the Company's cash. As of
December 31, 1996 the Company had repurchased 128,200 shares for an aggregate
cost of $142,857.
4.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
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RESULTS OF OPERATIONS
Revenue decreased 27% and 26%, respectively, for the quarter and six months
ended December 31, 1996 compared to the prior year. Revenues were down for the
periods due to a larger than expected seasonal slowdown in the retail multimedia
markets and the end of the FAA upgrade program. The quarter ended December 31,
1995 also included a $350,000 price adjustment due to previous delays and
cutbacks in the FAA program. Revenue is expected to continue at these lower
levels for the third and possibly the fourth quarter. This trend could change
dependent on timely completion of the negotiations and agreements on several
significant new contracts and introduction of new products.
Gross margin percentage for the quarter was 34% compared to 37% for the quarter
ended December 31, 1995. Gross margin for the six month period was 32% compared
to 33% in the prior year period. The decreases are due primarily to the decrease
in revenue referred to above while the fixed portion of manufacturing costs
could not be reduced proportionately.
Selling, general and administrative expenses decreased $85,782, or 9% for the
quarter and $152,631 or 8% for the six months ended December 31, 1996, from the
comparable prior year periods. Both the quarter and year to date decreases are
due primarily to a decrease in bonus and commission expenses compared to the
prior year.
Interest expense increased $1,488 and decreased $1,129 for the three and six
month periods, respectively, compared to the prior year periods due mainly to
fluctuations in borrowing levels.
There is no income tax charge for the three and six month periods ended December
31, 1996 because the Company incurred a loss and the realization of the income
tax benefit is not expected at this time.
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 December 31, 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
5.
<PAGE>
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. The Company believes that the cash and cash equivalents on hand at
December 31, 1996 and the future amounts available to it under the
aforementioned credit agreement should be adequate to meet both short and long
term capital needs. The Company anticipates that it will renew the current
agreement or replace it.
During the six months ended December 31, 1996 operations provided cash of
$202,000, primarily from reductions in accounts receivable offset by the net
loss and a decrease in accounts payable and accrued expenses. The Company
received $66,000 from the issuance of shares of common stock upon exercise of
options and warrants and used $143,000 to repurchase shares of common stock. Net
payments on debt amounted to $549,000 and purchases of property, plant and
equipment used $40,000. The overall result was to decrease cash by $464,000.
At December 31, 1996 working capital amounted to $6,821,000.
PART II - OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Securities Holders
At the annual meeting of shareholders of the Company held on November 6,
1996 the following were elected directors:
Votes for Withheld
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William S. Sadler 3,795,494 287,055
Ray L. Bergeson 3,798,534 284,015
Robert J. Snow 3,798,534 284,015
Edward L. Zeman 3,798,534 284,015
L. Daniel Kuechenmeister 3,798,534 284,015
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
Exhibit 27......Financial Data Schedule
(b) No reports on Form 8-K were issued during the quarter.
6.
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SIGNATURES
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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: February 11, 1997 DOTRONIX, INC.
By /s/ William S. Sadler
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William S. Sadler,
President and Treasurer
(Principal Executive
Officer)
By /s/ David R. Beel
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David R. Beel,
Chief Financial Officer
7.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CAPTION>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> OCT-01-1996 JUL-01-1996
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 2,993,582 0
<SECURITIES> 0 0
<RECEIVABLES> 1,641,858 0
<ALLOWANCES> (91,868) 0
<INVENTORY> 4,367,248 0
<CURRENT-ASSETS> 8,992,235 0
<PP&E> 6,394,929 0
<DEPRECIATION> (5,311,155) 0
<TOTAL-ASSETS> 10,827,294 0
<CURRENT-LIABILITIES> 2,171,331 0
<BONDS> 0 0
<COMMON> 207,847 0
0 0
0 0
<OTHER-SE> 8,448,116 0
<TOTAL-LIABILITY-AND-EQUITY> 10,827,294 0
<SALES> 2,205,497 5,147,328
<TOTAL-REVENUES> 2,249,549 5,234,845
<CGS> 1,492,200 3,542,861
<TOTAL-COSTS> 2,395,246 5,373,424
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 63,710 127,865
<INCOME-PRETAX> (209,407) (266,444)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (209,407) (266,444)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (209,407) (266,444)
<EPS-PRIMARY> (.05) (.06)
<EPS-DILUTED> (.05) (.06)
</TABLE>
