SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended Commission File Number
June 30, 2000 0-11686
DYNAMIC SCIENCES INTERNATIONAL, INC.
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(Exact name of Registrant as specified in its charter)
NEVADA 94-3226065
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(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
6130 Variel Avenue
Woodland Hills, California 91367 (818)226-6245
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(Address of principal executive offices and telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act.
Common Stock - $.00l Par Value
$1.00 Cumulative Convertible Preferred Stock - $.0l Par Value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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__
No X
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As of June 30, 2000 , the Registrant had 34,431,995 shares of the
Company's Common Stock outstanding. The aggregate market value of the voting
stock held by non-affiliates was $3,443,200 computed by reference to the ask
prices on June 30, 2000.
Documents Incorporated By Reference
NONE
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Item 1. Financial Statements
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DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
( In Thousands )
ASSETS
30 June 2000 31 December 1999
(Unaudited) (Audited)
Current Assets ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 20 $ 0
Accounts receivable, net 142 5
Inventories 954 913
Prepaid expenses and other current assets 75 65
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Total current assets 1191 983
Property and equipment, at cost
Machinery and equipment 358 358
Office furniture and fixtures 6 6
Leasehold improvements 16 16
Less accumulated depreciation and amortization 326 310
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Total fixed assets, net 54 70
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Other assets
Other intangible assets, net of amortization 1566 1546
Deposits 9 8
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Total other assets 1555 1554
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TOTAL ASSETS $ 2,820 $ 2,607
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LIABILITIES & STOCKHOLDERS' EQUITY
June 30, 2000 December 31, 1999
(UNAUDITED) (AUDITED)
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<S> <C> <C>
Current liabilities
Short-term notes payable $ - $ 2
Accounts payable 103 133
Payroll taxes payable 1,239 1233
Income taxes payable 2 2
Deferred income 52 42
Current portion of long term debt 7 5
Other accrued liabilities 511 483
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Total current liabilities 1,914 1,900
Long-term liabilities
Long-term debt, net of current portion 475 475
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TOTAL LIABILITIES 2,389 2,375
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000 shares authorized
Series A -- outstanding 2,935,000, stated at par 1,443 1,443
Series B to Series G -- outstanding 4,144,188 after deducting
1,855,800 canceled shares in treasury, started at par 60 60
Common stock, $.001 par value, 250,000,000 shares authorized
35,298,662 issued and outstanding including
17,746,517 subscribed, stated at par 35 32
Additional paid-in capital 629 448
Notes receivable from shareholders, non-interest bearing (160) (160)
Retained deficit (1,511) (1,526)
Less treasury stock, at cost, 1,855,800 Preferred stock B-G shares (65) (65)
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TOTAL STOCKHOLDERS' EQUITY 431 232
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,820 $ 2,607
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<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
Sales ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
TOTAL REVENUE $ 250 $ 352 $ 538 $ 805
TOTAL COST OF SALES 110 194 239 365
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GROSS PROFIT 140 194 299 440
OPERATING EXPENSES
Selling, general, and administrative 119 143 241 326
Research & development net of new software 10 9 28 32
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TOTAL OPERATING EXPENSE 129 152 269 358
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INCOME (LOSS) FROM OPERATIONS 11 42 30 82
OTHER INCOME AND EXPENSES
Interest expense 7 10 15 19
Interest income - - - -
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TOTAL OTHER INCOME AND EXPENSES 7 10 15 19
INCOME (LOSS) BEFORE PROVISION FOR TAXES 4 32 15 63
PROVISION FOR TAXES 0 0 0 0
NET INCOME (LOSS) $ 4 $ 32 $ 15 $ 63
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BASIC EARNINGS (LOSS) PER SHARE $ .00001 $.0009 $ .0004 $ .0019
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WEIGHTED NUMBER OF SHARES OUTSTANDING 34,431,995 32,052,031 34,431,995 32,052,031
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<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR SIX MONTHS
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ENDED June 30,
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CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
(UNAUDITED) (RESTATED)
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<S> <C> <C>
Net income (loss) $ 15 $ 63
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: 0 0
Depreciation and Amoritization 114 114
Issuance of common stock for rent expenses 1 0
Issuance of additional paid-in capital for rent expenses 79 0
(Increase) decrease in:
Accounts receivable (137) (186)
Inventory (41) 35
Prepaid expenses (10) 0
(Decrease) increase in:
Accounts payable (30) 9
Accrued expenses (28) 0
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (37) 35
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES
Software development costs, net (46) (5)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short term debt (1) 5
Repayment of long term debt 0 (25)
Issuance of common stock 2 0
Additional paid in capital through issuance
Of common stock 102 0
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NET CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES 103 (20)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20 10
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 0 0
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CASH AND CASH EQUIVALENTS AT THE END OF PERIOD $ 20 $ 10
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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
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Total net sales for the second quarter of year 2000 decreased $102,000 or 29%
From the second quarter of the previous year, and $38,000 or 13% lower than the
first quarter of the current year. The Company's sales volume is affected by
its dependence on a market generated or influenced by government agency
requirements and their budget allocations.
Gross profit decreased by $54,000 or 28% from Q1 1999 as a result of decreased
sales with cost of sales remaining proportionally the same at 44%.
Research and development costs increased $1,000 or 11% from Q2 Fiscal 1999 to
Q2, 2000. As a percentage of sales, R & D expenses increased from 2.5% in 1999
to 4% in 2000. The small increase in dollars spent was the result of
development of the R-1550 Receiver and DSI-1550 system integration efforts.
Selling, general and administrative expenses decreased $24,000 or 17% from 1999.
As a percentage of sales, those expenses represented 40% in 1999 and 48% in
2000.
The gross profit from DSII operations in Q2 1999 of $42,000 decreased to $11,000
in Q2 of 2000. As a percentage of sales, this was 11.8% in 1999 and 4.4% in
2000, or a decrease of 7.4% of profit as a percent of sales. Operating income
was a profit of 32,000 in Q2 1999 and a profit of $4,000 in Q2 2000 or as a
percentage of sales 9.1% in 1999, and 1.6% in 2000. The Company did not
capitalize any additional software development costs in the second quarter of
2000. The balance of net software development costs was increased by $29,000 to
account for Capitalization of certain costs associated with the R-1550 and
R-1560 development. These costs will be written off over the next five years.
Interest expense decreased $3,000 or 33% from Q2 1999 to Q2 of 2000.
Liquidity and Capital Resources
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At June 30, 2000, the Company was not encumbered by bank debt, and its
working capital was $431,000, a increase of $199,000 from December 31, 1999. The
Company is presently committed to generating working capital requirements from
internal operations, while external-financing resources will continue to be
pursued. Due to the nature of its products, the Company has been able to
negotiate prompt payment schedules with some of its customers. The process is
expected to continue during 2000. Short-term liquidity problems have developed
due to delayed sales and the lack of external financing resources. Long-term
liquidity would be dependent on achieving sales projections.
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Exhibits:
2.1 Copy of the Plan and Agreement of merger by and among National
Pay Telephone Corporation, a Nevada corporation, NPT Acquisition,
Inc., a California corporation, and Dynamic Sciences, Inc., a
California corporation dated December 12, 1986, is incorporated
by reference to the Registrant's Form 8-K filed December 30,
1986.
2.2 Copy of the Agreement dated September 22, 1986, by and between
National Pay Telephone Corporation and Dynamic Sciences, Inc. is
incorporated by reference to the Registrant's Form 8-K filed on
December 30, 1986.
2.3 Copy of the Purchase and Sale Agreement dated December 26, 1986,
between National Pay Telephone Corporation and David J. Stein and
associates, Inc., is incorporated by reference to the
Registrant's Form 8-K filed on December 30, 1986.
2.4 Financial Statements for Affiliate Company, Phoebus Secure
Technologies Corporation, is incorporated by reference to the
Registrant's Form 10-K for the year ended December 31, 1989.
3.1 Copy of Registrant's Articles of Incorporation and Amendment
thereto is incorporated by reference to SEC File #2-86622-LA,
Exhibit 3.1, filed on September 17, 1983.
3.2 Copy of Registrant's amended by-laws was filed as an Exhibit 3.1
on Form 8-K dated December 30, 1986 and is incorporated by
reference.
4.1 Copy of Stock Certificate for $1.00 Cumulative Convertible
Preferred Stock (Series "A"), is incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended July 31, 1986.
4.2 Form of Certificate of Determination for the $1.00 Cumulative
Preferred Stock is incorporated by reference to Exhibit 4.2 to
Registration Statement of the Registrant on Form S-l, #33-5232,
as filed on or about April 30, 1986.
4.3 Copy of Stock Certificate for Cumulative Convertible Preferred
Stock Series "B-G" is incorporated by reference to the
Registrant's Form 10-K for fiscal year end December 31, 1986.
4.4 Copy of Certificate of Determination (corrected) filed with the
Secretary of the State of Nevada in connection with the
Cumulative Convertible Preferred Stock Series "B-G." Conversion
rights may be exercised for Series "C" on November 14, 1987; for
Series "D" on May 14, 1988; for Series "E" on November 14, 1988;
for Series "F" on May 14, 1989; and for Series "G" on November
14, 1989. This document is incorporated by reference to the
Registrant's Form 10-K for fiscal year ended December 31, 1986.
22.1 List of Subsidiaries of the Registrant.
Form 8-K Reports
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There were no filings made on Form 8-K during the quarter ending December 31,
1999.
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SIGNATURES
Pursuant to the requirements of Section 13, or 115(d) 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: 8 August, 2000 Dynamic Sciences International, Inc.
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By: /s/ Eli I. Shiri
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Eli I. Shiri
Chairman of the board
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