<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 September 30, 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 November 7, 1997
- ----------------------- -------------------------------
Common stock, par value
$ .05 per share 4,287,135
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DOTRONIX, INC.
INDEX
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. Management's 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
ITEM 1. FINANCIAL STATEMENTS
DOTRONIX, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
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(Unaudited)
<S> <C> <C>
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 2,644,764 $ 2,582,679
Accounts receivable, less allowance
for doubtful accounts of $146,597
and $136,597, respectively 1,928,996 1,886,093
Inventories:
Raw materials 2,638,302 2,591,608
Work-in-process 788,733 598,524
Finished goods 40,284 360,792
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Total inventories 3,467,319 3,550,924
Prepaid expenses 69,608 72,603
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Total current assets 8,110,687 8,092,299
PROPERTY, PLANT & EQUIPMENT, at cost
net of accumulated depreciation of
$5,423,018 and $5,395,569, respectively 996,704 1,008,289
OTHER ASSETS:
Excess of cost over fair value of net assets
acquired, less amortization 683,978 701,977
Other 63,225 45,725
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TOTAL ASSETS $ 9,854,594 $ 9,848,290
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Revolving loans $ 1,654,529 $ 1,472,864
Accounts payable 575,946 631,176
Salaries, wages and payroll taxes 239,550 235,978
Other accrued liabilities 147,982 129,558
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Total current liabilities 2,618,007 2,469,576
STOCKHOLDERS' EQUITY: (Note B)
Common stock, $.05 par value 201,857 202,017
Additional paid-in capital 10,793,903 10,797,043
Accumulated deficit (3,759,173) (3,620,346)
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Total stockholders' equity 7,236,587 7,378,714
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,854,594 $9,848,290
============= =============
</TABLE>
The balance sheet at June 30, 1997 has been derived from the audited
financial statements at that date.
See notes to financial statements.
1.
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DOTRONIX, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
September 30,
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1997 1996
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REVENUES: $2,840,577 $2,985,296
OPERATING EXPENSES:
Cost of Sales 2,089,859 2,050,661
Selling, general
and administrative 828,861 927,517
Interest 60,684 64,155
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Total operating
expenses 2,979,404 3,042,333
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Net loss ($138,827) ($57,037)
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Net loss per common share ($.03) ($.01)
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Average number of common
shares outstanding 4,037,170 4,234,763
========== ==========
See notes to financial statements
2.
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DOTRONIX, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
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1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($138,827) ($57,037)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 45,448 66,256
Provision for loss on accounts
receivable 10,000 15,000
Changes in assets and liabilities:
Accounts receivable (42,903) 413,543
Inventories 83,605 28,527
Prepaid expenses 2,995 (2,999)
Other assets (17,500) 11,721
Accounts payable and accrued liabilities (33,234) (256,156)
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Net cash (used in)/provided by
operating activities (100,416) 218,855
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (15,864) (5,431)
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Net cash used in investing activities (15,864) (5,431)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock purchases
Proceeds from sale of stock (3,300) 66,262
Borrowings on revolving and demand loans 2,974,120 3,364,335
Repayments on revolving and demand loans (2,792,455) (3,474,683)
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Net cash provided by/(used in)
financing activities 178,365 (44,086)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 62,085 169,338
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE PERIOD 2,582,679 3,457,274
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CASH AND CASH EQUIVALENTS AT END
OF PERIOD $2,644,764 $3,626,612
=========== ============
</TABLE>
See notes to financial statements.
3.
<PAGE>
DOTRONIX, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
A. Basis of Presentation
The balance sheet as of September 30, 1997, the statements of operations
for the three month periods ended September 30, 1997 and 1996 and the
statements of cash flows for the three 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 September
30, 1997 and for the periods ended September 30, 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, 1997.
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. Since inception
of the stock repurchase program, the Company had repurchased 250,000 shares for
an aggregate cost of $271,253.
C. New Accounting Standard
SFAS No. 128 "Earnings per Share" was issued in February 1997 and will be
adopted in the second quarter of fiscal 1998. The adoption of SFAS No. 128 is
not expected to have a significant impact on the calculation of earnings per
share as currently reported.
4.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
RESULTS OF OPERATIONS
Revenue decreased 5% for the quarter ended September 30, 1997 compared to the
prior year. Revenues were down for the period due primarily to reduced
shipments in the retail multimedia markets. The quarter was favorably impacted
by the initial shipments of a new flight information display product.
Gross margin percentage as a percentage of sales for the quarter ended September
30, 1997 was 26% compared to 31% for the prior year quarter. The decreases are
due primarily to a change in the product mix and reduced manufacturing
utilization.
Selling, general and administrative expenses decreased $98,656 or 11% when
compared to the prior year quarter. The decrease is due primarily to a
reduction in staff as compared to the prior year.
Interest expense decreased $3,471 for the quarter when compared to the prior
year period due primarily to a reduction in average borrowing levels.
There is no income tax charge for the three month periods ended September 30,
1997 and 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 (11.5% at September 30, 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 expired as of October 11, 1997. On October 14, 1997
all outstanding loans were repaid with available cash balances. The Company
believes that the cash and cash equivalents on hand as of October 14, 1997 will
be sufficient for the Company's cash needs until a new financing agreement is
negotiated. The Company expects that a new agreement will be negotiated in
November of 1997.
During the three months ended September 30, 1997 operations used cash of
$100,416, primarily due to the loss for the quarter. The Company used $3,300 to
repurchase shares of common stock. Net borrowing on debt amounted to $181,655
and purchases of property, plant and equipment used $15,864. The overall result
was to increase cash by $62,085.
At September 30, 1997 working capital amounted to $5,492,680.
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
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 14, 1997
DOTRONIX, INC.
By /s/ William S. Sadler
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William S. Sadler,
President and Treasurer
(Principal Executive
Officer)
By /s/ Erling J. Anderson
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Erling J. Anderson,
CFO and Secretary
(Principal Financial
Officer)
7.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,644,764
<SECURITIES> 0
<RECEIVABLES> 1,928,996
<ALLOWANCES> (146,597)
<INVENTORY> 3,467,319
<CURRENT-ASSETS> 8,110,687
<PP&E> 6,419,722
<DEPRECIATION> (5,423,018)
<TOTAL-ASSETS> 9,854,594
<CURRENT-LIABILITIES> 2,618,007
<BONDS> 0
0
0
<COMMON> 201,857
<OTHER-SE> 7,034,730
<TOTAL-LIABILITY-AND-EQUITY> 9,854,594
<SALES> 2,806,818
<TOTAL-REVENUES> 2,840,577
<CGS> 2,089,859
<TOTAL-COSTS> 2,918,720
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,684
<INCOME-PRETAX> (138,827)
<INCOME-TAX> 0
<INCOME-CONTINUING> (138,827)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,827)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
