<PAGE>
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 March 31, 1997 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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(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 April 15, 1997
- -------------------------------- -----------------------------
Common stock, par value
$ .05 per share 4,085,835
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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
Item 6. Exhibits and Reports on Form 8-K 6
<PAGE>
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>
March 31, June 30,
1997 1996
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(Unaudited)
<S> <C> <C>
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 2,703,369 $ 3,457,274
Accounts receivable, less allowance
for doubtful accounts of $121,874
and $55,442, respectively 1,536,925 2,642,132
Inventories:
Raw materials 2,866,425 3,111,361
Work-in-process 696,240 682,854
Finished goods 532,159 445,221
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Total inventories 4,094,824 4,239,436
Prepaid expenses 100,647 79,785
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Total current assets 8,435,765 10,418,627
PROPERTY, PLANT & EQUIPMENT, at cost
net of accumulated depreciation of
$5,353,782 and $5,231,242, respectively 1,050,285 1,123,958
OTHER ASSETS:
Excess of cost over fair value of net assets
acquired, less amortization 719,977 773,975
Other 49,087 39,095
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TOTAL ASSETS $ 10,255,114 $ 12,355,655
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Revolving Loans $ 1,367,825 $ 1,937,280
Accounts Payable 534,281 783,597
Salaries, wages and payroll taxes 237,921 532,971
Other accrued liabilities 121,892 102,805
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Total current liabilities 2,261,919 3,356,653
STOCKHOLDERS' EQUITY: (Note B)
Common stock, $.05 par value 202,247 210,947
Additional paid-in capital 10,801,120 10,987,304
Accumulated deficit (3,010,172) (2,199,249)
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Total stockholders' equity 7,993,195 8,999,002
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,255,114 $ 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 Nine months ended
March 31, March 31,
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1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES: $ 2,129,928 $ 3,135,751 $ 7,364,773 $10,253,924
OPERATING EXPENSES:
Cost of Sales 1,712,315 2,041,945 5,255,176 6,820,026
Selling, general
and administrative 895,319 923,932 2,725,883 2,907,126
Interest 66,773 57,283 194,638 186,277
----------- ----------- ----------- -----------
Total operating
expenses 2,674,407 3,023,160 8,175,697 9,913,429
----------- ---------- ----------- -----------
Net (loss) income $ (544,479) $ 112,591 $ (810,924) $ 340,495
=========== =========== =========== ===========
Net (loss) income per
common and common
equivalent share $ (.13) $ .03 $ (.19) $ .08
----------- ----------- ----------- -----------
Average number of common
and common equivalent
shares outstanding 4,133,317 4,289,087 4,209,250 4,292,751
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
2.
<PAGE>
DOTRONIX, INC.
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STATEMENT OF CASH FLOWS
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(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (810,924) $ 340,495
Adjustments to reconcile net (loss) income to
cash provided by operating activities:
Depreciation and amortization 176,538 271,043
Provision for loss on accounts
receivable 75,000 60,000
Changes in assets and liabilities:
Accounts receivable 1,030,206 (380,721)
Inventories 144,612 333,296
Prepaid expenses (20,861) (2,359)
Other assets (9,992) 23,442
Accounts payable and accrued liabilities (525,278) (45,209)
Net cash provided by
operating activities 59,301 599,987
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (48,867) (55,650)
Net cash used in investing activities (48,867) (55,650)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock purchases (261,146)
Proceeds from sale of stock 66,262 12,460
Borrowings on revolving and demand loans 7,873,127 9,758,474
Repayments on revolving and demand loans (8,442,582) (9,996,813)
Net cash (used in) provided by
financing activities (764,339) (225,879)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (753,905) 318,458
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE PERIOD 3,457,275 2,028,371
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,703,370 $ 2,346,829
</TABLE>
See notes to financial statements.
3.
<PAGE>
DOTRONIX, INC.
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NOTES TO FINANCIAL STATEMENTS
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(Unaudited)
A. Basis of Presentation
The balance sheet as of March 31, 1997, the statements of operations for
the three and nine month periods ended March 31, 1997 and 1996 and the
statements of cash flows for the nine 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 March 31,
1997 and for the periods ended March 31, 1997 and 1996 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 March 31,
1997 the Company had repurchased 240,200 shares for an aggregate cost of
$261,146.
4.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
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RESULTS OF OPERATIONS
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Revenue decreased 32% and 28%, respectively, for the quarter and nine months
ended March 31, 1997 compared to the prior year. Revenues were down for the
periods due primarily to the end of the FAA upgrade program and reduced
shipments in the retail multimedia markets. 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
fourth quarter. This trend could change dependent on the timely completion of
the negotiations and agreements on several significant new contracts and
introduction of new products.
Gross margin percentage for the quarter was 20% compared to 35% for the quarter
ended March 31, 1996. Gross margin for the nine month period was 29% 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 $28,713, or 3% for the
quarter and $181,243 or 6% for the nine months ended March 31, 1997, 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 $9,490 and $8,361 for the three and nine 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 nine month periods ended March
31, 1997 because the Company incurred a loss and the realization of the income
tax benefit is not expected at this time.
LIQUIDITY AND CAPITAL RESOURCES
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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 March 31,1997) 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. The
Company believes that the cash and cash equivalents on hand at March 31, 1997
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 nine months ended March 31, 1997 operations provided cash of $59,000,
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 $261,000 to repurchase shares of common stock. Net payments on
debt amounted to $569,000 and purchases of property, plant and equipment used
$49,000. The overall result was to decrease cash by $754,000.
At March 31, 1997 working capital amounted to $6,174,000.
5.
<PAGE>
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.
<PAGE>
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: May 14, 1997
DOTRONIX, INC.
By /s/ William S. Sadler
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William S. Sadler,
President and
Treasurer
(Principal Executive
Officer)
By /s/ William S. Sadler
------------------------
William S. Sadler,
President and
Treasurer
(Principal Financial
Officer)
7.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> JAN-01-1997 JUL-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1997
<CASH> 2,703,369 0
<SECURITIES> 0 0
<RECEIVABLES> 1,658,799 0
<ALLOWANCES> (121,874) 0
<INVENTORY> 4,094,824 0
<CURRENT-ASSETS> 8,435,765 0
<PP&E> 6,404,067 0
<DEPRECIATION> (5,353,782) 0
<TOTAL-ASSETS> 10,255,114 0
<CURRENT-LIABILITIES> 2,261,919 0
<BONDS> 0 0
0 0
0 0
<COMMON> 202,247 0
<OTHER-SE> 7,790,948 0
<TOTAL-LIABILITY-AND-EQUITY> 10,255,114 0
<SALES> 2,088,481 7,235,809
<TOTAL-REVENUES> 2,129,928 7,364,773
<CGS> 1,712,315 5,255,176
<TOTAL-COSTS> 2,607,634 7,981,058
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 66,773 194,638
<INCOME-PRETAX> (544,479) (810,924)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (544,479) (810,924)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (544,479) (810,924)
<EPS-PRIMARY> (.13) (.19)
<EPS-DILUTED> (.13) (.19)
</TABLE>
