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
September 30, 1999 0-11686
DYNAMIC SCIENCES INTERNATIONAL, INC.
---------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 94-3226065
-------------------------------- ---------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
6130 Variel Avenue
Woodland Hills, California 91367 (818)226-6245
------------------------------------ -------------
(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
---------------------- ---------------------
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
--- ---
As of September 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 $1,282,081 computed by reference to the average
of the low bid and high ask prices on September 30, 1999.
Documents Incorporated By Reference
NONE
<PAGE>
Item 1. Financial Statements
-------- --------------------
<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
( In Thousands )
ASSETS
Current Assets 30 Sept.1999 30 Sept.1998
(AUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 5 $ 1
Accounts receivable, net 27 72
Inventories 1004 1022
Prepaid expenses and other current assets 72 85
------------ ------------
Total current assets 1108 1180
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 302 265
------------ ------------
Total fixed assets, net 78 115
------------ ------------
Other assets
Other intangible assets, net of amortization 1490 1439
Deposits 8 3
------------ ------------
Total other assets 1498 1442
------------ ------------
TOTAL ASSETS $ 2,684 $ 2,737
============ ============
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY
SEPT 30, 1999 SEPT 30, 1998
(AUDITED) (AUDITED)
<S> <C> <C>
Current liabilities
Short-term notes payable $ 0 $ 9
Accounts payable 170 180
Payroll taxes payable 1,191 940
Income taxes payable 2 1
Deferred income 42 62
Current portion of long term debt 18 80
Other accrued liabilities 462 302
--------- ---------
Total current liabilities 1,885 1,574
Long-term liabilities
Long-term debt, net of current portion 475 475
--------- ---------
TOTAL LIABILITIES 2,310 2,049
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 (1,434) (1,070)
Less treasury stock, at cost, 1,855,800 Preferred stock B-G shares (65) (65)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 324 688
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,684 $ 2,737
========= =========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months ended SEPT 30 Six months ended SEPT 30
--------------------------- ------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Sales
TOTAL REVENUE $ 151 $ 336 $ 956 $ 682
TOTAL COST OF SALES 81 164 446 303
--------------------------- ------------------------
GROSS PROFIT 70 172 510 379
OPERATING EXPENSES
Selling, general, and administrative 160 182 486 477
Research & development net of new software 11 11 43 42
--------------------------- ------------------------
TOTAL OPERATING EXPENSE 171 193 529 519
--------------------------- ------------------------
INCOME (LOSS) FROM OPERATIONS (101) (21) (19) (140)
OTHER INCOME AND EXPENSES
Interest expense 8 8 27 18
Interest income 0 0 - -
--------------------------- ------------------------
TOTAL OTHER INCOME AND EXPENSES 8 8 27 18
INCOME (LOSS) BEFORE PROVISION FOR TAXES (109) (29) (46) (158)
PROVISION FOR TAXES 0 0 0 0
NET INCOME (LOSS) (109) (29) $ (46) $ (158)
============================ ========================
BASIC EARNINGS (LOSS) PER SHARE $(0.0034) $ (0.0009) $(0.0014) $ (0.0049)
============================ ========================
WEIGHTED NUMBER OF SHARES OUTSTANDING 32,052,031 32,052,031 32,052,031 32,052,031
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR NINE MONTHS
----------------------
ENDED SEPT 30
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
(AUDITED) (RESTATED)
<S> <C> <C>
Net income (loss) $ (46) $ (158)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and Amoritization 114 114
Issuance of common stock for rent expenses 0 1
Issuance of additional paid-in capital for rent expenses 0 62
(Increase) decrease in:
Accounts receivable (69) 5
Inventory (21) 31
Prepaid expenses 0 0
(Decrease) increase in:
Accounts payable 50 29
Accrued expenses 0 0
NET CASH PROVIDED BY OPERATING ACTIVITIES 28 84
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (10) (57)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short term debt (3) 0
Repayment of long term debt (10) (26)
---------- ----------
NET CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES (13) (26)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5 1
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 0 0
---------- ----------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 5 $ 1
========== ==========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------------------------
Third Quarter of 1999 Compared to the Third Quarter of 1998
-----------------------------------------------------------
Total net sales for the third quarter of year 1999 decreased $ 185,000 or 55%
From the third quarter of 1998, primarily due to slower sales during the period.
The Company's sales volume is affected by its dependence on a market generated
by governmental agency requirements and their budget allocations.
Gross profit decreased by $102,000 or 59% from Q3 of 1998 as a result of
decreased sales. Cost of sales were 53% in 1999 and 48% in 1998 for the period.
Research and development costs remained the same at $11,000 for Q3 of 1999
Compared to Q3, 1998. As a percentage of sales, R & D expenses increased from 3%
in 1998 to 7% in 1999. The increased percentage of R & D dollars shows DSII's
commitment to maintaining new product development in spite of slower sales
during the period.
Selling, general and administrative expenses decreased $22,000 or 12% from
1998. As a percentage of sales for the period, those expenses represented
54% in 1998 and 106% in 1999.
The income (loss) from DSII operations in Q3 1998 of ($21,000) increased to
($101,000) in Q3 of 1999. Operating income was a loss of $29,000 in Q3 1998 and
a loss of $109,000 in Q3 1999. These losses are primarily due to the operating
expenses remaining almost constant during the slower sales period. Management
feels that it has reduced the operating expenses to the minimum level consistent
with efficient operation of all the required functions of the company. The
Company capitalized $46,000 in Q3 1999 in software development costs on new
projects. These costs will be written off over the next five years.
Interest expense ramained at $11,000 for the two compared periods.
Liquidity and Capital Resources
----------------------------------
At September 30, 1999, the Company was not encumbered by bank debt, and its
working capital was $324,000, a decrease of $364,000 from Sept. 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.
5
<PAGE>
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
------------------
There were no filings made on Form 8-K during the quarter ending September 30,
1999.
6
<PAGE>
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.
------------------
By: /s/ Eli I. Shiri
--------------------------------
Eli I. Shiri
Chairman of the board
