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, 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
---------------------- ---------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT.
COMMON STOCK - $.001 PAR VALUE
$1.00 CUMULATIVE CONVERTIBLE PREFERRED STOCK - $.01 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 X NO
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AS OF SEPTEMBER 30, 2000 , THE REGISTRANT HAD 34,074,141 SHARES OF THE
COMPANY'S COMMON STOCK OUTSTANDING. THE AGGREGATE MARKET VALUE OF THE VOTING
STOCK HELD BY NON-AFFILIATES WAS $1,603,707 COMPUTED BY REFERENCE TO THE AVERAGE
OF THE LOW BID AND HIGH ASK PRICES ON SEPTEMBER 30, 2000.
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 Sept.2000 31 Dec. 1999
(UNAUDITED) (AUDITED)
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<S> <C> <C>
Cash and cash equivalents $ 11 $
Accounts receivable, net 42 5
Inventories 979 913
Prepaid expenses and other current assets 78 65
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Total current assets 1110 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 333 310
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Total fixed assets, net 47 70
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Other assets
Other intangible assets, net of amortization 1532 1546
Deposits 9 8
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Total other assets 1541 1554
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TOTAL ASSETS $ 2,698 $ 2,607
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LIABILITIES & STOCKHOLDERS' EQUITY
SEPT 30, 2000 DEC 31, 1999
(UNAUDITED) (AUDITED)
Current liabilities
Short-term notes payable $ 0 $ 2
Accounts payable 48 133
Payroll taxes payable 1,259 1233
Income taxes payable 2 2
Deferred income 43 42
Current portion of long term debt 0 5
Other accrued liabilities 516 483
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Total current liabilities 1,868 1,900
Long-term liabilities
Long-term debt, net of current portion 472 475
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TOTAL LIABILITIES 2,340 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
33,565,329 issued and outstanding including
17,746,517 subscribed, stated at par 36 32
Additional paid-in capital 676 448
Notes receivable from shareholders, non-interest bearing (160) (160)
Retained deficit (1,632) (1,526)
Less treasury stock, at cost, 1,855,800 Preferred stock B-G shares (65) (65)
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TOTAL STOCKHOLDERS' EQUITY 358 232
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,698 $ 2,607
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</TABLE>
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<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months ended SEPT 30 Nine months ended SEPT 30
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2000 1999 2000 1999
<S> <C> <C> <C> <C>
Sales
TOTAL REVENUE $ 318 $ 151 $ 856 $ 956
TOTAL COST OF SALES 103 81 342 446
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GROSS PROFIT 215 70 514 510
OPERATING EXPENSES
Selling, general, and administrative 171 160 412 486
Research & development net of new software 16 11 44 43
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TOTAL OPERATING EXPENSE 187 171 456 529
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INCOME (LOSS) FROM OPERATIONS 28 (101) 58 (19)
OTHER INCOME AND EXPENSES
Interest expense 9 8 24 27
Interest income 0 0 0 0
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TOTAL OTHER INCOME AND EXPENSES 9 8 24 27
INCOME (LOSS) BEFORE PROVISION FOR TAXES 19 (109) 34 (46)
PROVISION FOR TAXES 0 0 0 0
NET INCOME (LOSS) 19 (109) $ 34 $ (46)
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BASIC EARNINGS (LOSS) PER SHARE $ 0.0005 $ (0.0034) $ 0.0009 $ (0.0014)
========== =========== =========== ===========
WEIGHTED NUMBER OF SHARES OUTSTANDING 34,074,141 32,052,031 34,074,141 32,052,031
</TABLE>
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<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR NINE MONTHS
----------------------
ENDED SEPT 30
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
(UNAUDITED) (AUDITED)
<S> <C> <C>
Net income (loss) $ 34 $ (46)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and Amoritization 171 114
Issuance of common stock for rent expenses 0 0
Issuance of additional paid-in capital for rent expenses 0 0
(Increase) decrease in:
Accounts receivable (100) (69)
Inventory (25) (21)
Prepaid expenses (3) 0
(Decrease) increase in:
Accounts payable (55) 50
Accrued expenses (54) 0
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NET CASH PROVIDED BY OPERATING ACTIVITIES (32) 28
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (16) (10)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short term debt (9) (3)
Repayment of long term debt (3) (10)
Issuance of common stock 4 0
Additional paid in capital from stock issued 47 0
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NET CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES 39 (13)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9) 5
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 20 0
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CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 11 $ 5
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Item 2. Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------------------------
Third Quarter of 2000 Compared to the Third Quarter of 1999
---------------------------------------------
Total net sales for the third quarter of year 2000 increased $ 167,000 or 110%
From the third quarter of 1999, primarily due to increased service agreement
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 increased by $145,000 or 207% from Q3 of 1998 as a result of
increased sales. Cost of sales were 32% in 2000 and 54% in 1999 for the period.
Research and development costs increased by $5,000 to $16,000 for Q3 of 2000
Compared to Q3, 1999. As a percentage of sales, R & D expenses decreased from
7% in 1999 to 5% in 2000. The increase in dollars spent, even though a smaller
percentage of sales, shows DSII's commitment to continued new product
development.
Selling, general and administrative expenses increased $11,000 or 7% from 1999.
As a percentage of sales for the period, those expenses represented 106% in 1999
and 54% in 2000.
The income (loss) from DSII operations in Q3 1999 of ($101,000) increased to
$28,000 in Q3 of 2000. Operating income was a profit of $19,000 in Q3 2000
following a loss of $109,000 in Q3 1999. 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 $16,000 in Q3 2000 in software development costs on new
projects. These costs will be written off over the next five years.
Interest expense was $9,000 for Q3 of 2000, and $8,000 for Q3 1999.
Liquidity and Capital Resources
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At September 30, 2000, the Company was not encumbered by bank debt, and its
working capital was $358,000, an increase of $126,000 from Dec. 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 September 30,
2000.
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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: 27 October, 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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