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, 1999 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, 1999 , the Registrant had 32,052,031 shares of the Company's
Common Stock outstanding. The aggregate market value of the voting stock held
by non-affiliates was $324,694 computed by reference to the average of the low
bid and high ask prices on June 30, 1999.
Documents Incorporated By Reference
NONE
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Item 1. Financial Statements
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<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
( In Thousands )
ASSETS
Current Assets 30 June 1999 30 June 1998
(AUDITED) (AUDITED)
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<S> <C> <C>
Cash and cash equivalents $ 10 $ 0
Accounts receivable, net 86 77
Inventories 983 1053
Prepaid expenses and other current assets 70 92
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Total current assets 1149 1222
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 294 257
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Total fixed assets, net 86 123
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Other assets
Other intangible assets, net of amortization 1434 1361
Deposits 8 3
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Total other assets 1442 1364
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TOTAL ASSETS $ 2,677 $ 2,709
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LIABILITIES & STOCKHOLDERS' EQUITY
June 3, 1999 June 30, 1998
(AUDITED) (AUDITED)
Current liabilities
Short-term notes payable $ 22 $ 6
Accounts payable 120 209
Payroll taxes payable 1,040 875
Income taxes payable 2 1
Deferred income 25 55
Current portion of long term debt 23 100
Other accrued liabilities 442 322
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Total current liabilities 1,674 1,568
Long-term liabilities
Long-term debt, net of current portion 475 475
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TOTAL LIABILITIES 2,149 2,043
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
33,565,329 issued and outstanding including
17,746,517 subscribed, stated at par 32 32
Additional paid-in capital 448 448
Notes receivable from shareholders, non-interest bearing (160) (160
Retained deficit (1,230) (1,092
Less treasury stock, at cost, 1,855,800 Preferred stock B-G shares (65) (65
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TOTAL STOCKHOLDERS' EQUITY 528 666
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,677 $ 2,709
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</TABLE>
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<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months ended June 30 Six months ended June 30
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1999 1998 1999 1998
<S> <C> <C> <C> <C>
Sales
TOTAL REVENUE $ 352 $ 270 $ 805 $ 346
TOTAL COST OF SALES 158 111 365 139
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GROSS PROFIT 194 159 440 207
OPERATING EXPENSES
Selling, general, and administrative 143 136 326 295
Research & development net of new software 9 14 32 31
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TOTAL OPERATING EXPENSE 152 150 358 326
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INCOME (LOSS) FROM OPERATIONS 42 9 82 (119)
OTHER INCOME AND EXPENSES
Interest expense 10 8 19 10
Interest income 0 0 - -
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TOTAL OTHER INCOME AND EXPENSES 10 8 19 10
INCOME (LOSS) BEFORE PROVISION FOR TAXES 32 1 63 (129)
PROVISION FOR TAXES 0 0 0 0
NET INCOME (LOSS) 32 1 $ 63 $ (129)
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BASIC EARNINGS (LOSS) PER SHARE $ 0.0009 $ 0.00003 $ 0.0019 $ (0.004)
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WEIGHTED NUMBER OF SHARES OUTSTANDING 32,052,031 32,052,031 32,052,031 32,052,031
</TABLE>
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<TABLE>
<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 1999 1998
(AUDITED) (RESTATED)
<S> <C> <C>
Net income (loss) $ 63 $ (129)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and Amoritization 114 53
Issuance of common stock for rent expenses 0 1
Issuance of additional paid-in capital for rent expenses 0 41
(Increase) decrease in:
Accounts receivable (186) 42
Inventory 35 43
Prepaid expenses 0 0
(Decrease) increase in:
Accounts payable 9 (38)
Accrued expenses 0 0
NET CASH PROVIDED BY OPERATING ACTIVITIES 35 13
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (5) (15)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short term debt 5 0
Repayment of long term debt (25) 2
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NET CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES (20) 2
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - -
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD - -
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CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 10 $ 0
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Item 2. Management's Discussion and Analysis of Financial Condition and
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Second Quarter of 1999 Compared to the Second Quarter of 1998
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Total net sales for the second quarter of year 1999 increased $ 82,000 or 30%
From the second quarter of 1998, primarily due to the delivery of additional
R-110 Receivers to Europe. The Company's sales volume is affected by its
dependence on a market generated by governmental agency requirements and their
budget allocations.
Gross profit increased by $34,000 or 21% from Q2 of 1998 as a result of
increased sales with only a small percentage increase in cost of sales.
Research and development costs decreased $5,000 or 37% from Q2 Fiscal 1998 to
Q2, 1999. As a percentage of sales, R & D expenses decreased from 5% in 1998 to
2.5% in 1999. The decrease in dollars spent was the result of completing
efforts on the DSI-200 EMC System.
Selling, general and administrative expenses increased $7,000 or 5% from 1998.
As a percentage of sales, those expenses represented 50% in 1998 and 41% in
1999.
The income from DSII operations in Q2 1998 of $9,000 increased to $42,000 in Q2
of 1999. As a percentage of sales, this was 3.3% in 1998 and 11.9% in 1999, or
an increase of 8.6% of profit as a percent of sales. Operating income was a
profit of $1,000 in Q2 1998 and a profit of $32,000 in Q2 1999 or as a
percentage of sales 0.3% in 1998, and 9.1% in 1999. The Company capitalized
$47,000 in Q2 1999 in software development costs on new projects. These costs
will be written off over the next five years.
Interest expense increased $2,000 or 25%.
Liquidity and Capital Resources
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At June 30, 1999, the Company was not encumbered by bank debt, and its working
capital was $528,000, a decrease of $138,000 from June 30, 1998. 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 1999. 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 June 30,
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: 14 September, 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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