SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Years ended Commission File Number
December 31, 1999, 1998 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
-
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this form 10-KSB
or any amendments to this form 10-KSB. [ ]
The Registrant's revenues for its most recent fiscal year were
$1,230,551. As of July, 2000 , 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 $1,602,601 computed by reference to the average
of the low bid and high ask prices on December 31, 1999.
Documents Incorporated By Reference
NONE
<PAGE>
FORWARD LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT CONTAINS FORWARD
LOOKING STATEMENTS WHICH WE BELIEVE ARE WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 AND THE COMPANY DESIRES TO TAKE
ADVANTAGE OF THE "SAFE HARBOR" PROVISIONS THEREOF. THEREFORE THE COMPANY IS
INCLUDING THIS STATEMENT FOR THE EXPRESS PURPOSE OF SUCH SAFE HARBOR WITH
RESPECT TO ALL SUCH FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS
IN THIS REPORT REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS
AND FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED HEREIN, WHICH COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THESE
ANTICIPATED. IN THIS REPORT THE WORDS "ANTICIPATES", "BELIEVES", "INTENDS",
"FUTURE" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS CONTAINED
HEREIN, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS
OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE HEREOF.
Item 1. Business
-------- --------
Background
----------
Dynamic Sciences International, Inc. (the "Company" or DSII was organized under
the laws of the State of Nevada as National Pay Telephone Corporation or "NPT"
on August 8, 1983. According to its Articles of Incorporation, the Company may
engage in any lawful business.
DSII's principal business is the development, manufacture and distribution of
high technology, proprietary, electronic communication products. DSII sells its
products on a worldwide basis to industrial customers, and U.S. and foreign
governmental agencies. Previously, the Company's principal business through
December 16, 1986, was the marketing, service and maintenance of systems
utilizing privately owned credit card pay telephones. On December 29, 1986, the
Company completed the sale of the operating pay telephone assets and terminated
the Company's involvement in this business. On December 16, 1986, the Company
completed the acquisition of Dynamic Sciences, Inc., a California Corporation
("DSI") by merging DSI into the Company's wholly owned subsidiary NPT
Acquisition, Inc., a California Corporation ("NPTAC"). The shareholders of
Dynamic Sciences were issued a new series of preferred stock (Series B-G) which
provided for 68.6% voting control of the Company.
At the July 10, 1987 Shareholders Meeting, the parent Company's name was changed
to Dynamic Sciences International, Inc.
2
<PAGE>
Product Summary
----------------
DSII has developed a suite of radio receiving, processing and display equipment,
which can be employed as individual units or configured into overall systems. An
important market for DSIIs' receiving technology has developed as a result of
certain requirements of the U.S. and allied governments relating to specialized
"Electronic Warfare" applications.
The DSI-9000A
--------------
The DSI-9000A is a computer automated receiving system, which permits extremely
sensitive and efficient measurement, test and analysis associates with
intercept/surveillance applications as well as test applications relating to
electromagnetic radiation. Complete manual or automatic receiver operation is
provided, and the computer, which manages the equipment, allows straightforward
access to and control of a series of processing and display functions. DSII
supports the system with additional equipment, which extends the application and
utilization of the system. The system operates in both laboratory and field
environments.
A portion of the market for this product has been created by the desire to
insure that electronic devices do not create electronic impulses that can be
"read." In that application, the product is used as a test device to insure that
equipment being used to communicate or process data which the government seeks
to keep private conforms to allowable levels of signal radiation. The company
believes it possesses a market position in this application superior to its
principal competitors.
The R-ll0 Receiver
--------------------
The R-ll0 Wide Range Receiver is designed for both field and laboratory
applications. The receiver features modular construction, permitting plug-in
addition of special circuits to tailor the device for a variety of applications,
including surveillance and EMI testing.
The receiver meets the needs of government users in domestic and foreign
markets. The Company continues to market and sell this receiver and a group of
related products worldwide.
The R-1550 Receiver
---------------------
The success of the R-110 Receiver led to the possibility of developing a new
receiver using this technology. The development was begun in 1996 to design a
3
<PAGE>
replacement for the DSI-9000 to be used for TEMPEST test applications. The
development was completed in 1999, and the new receiver is being demonstrated
and marketed in the United States, European NATO countries and Australia. The
sales forecast for this new product look very promising.
New Product Development
-------------------------
The Company operates in an industry, which is subject to continuous
technological change. The Company is committed to keeping its receiver and
computer product lines current to the state-of-the-art with respect to customer
application requirements, as well as government agency technical specifications.
The Company continues to develop enhancement products for its product lines. The
required Company-funded development costs for both new product development and
continuing improvement to current products have been absorbed within the current
Company cash basis.
At December 31, 1999, the Company had 5 employees partially engaged in Company
funded research and development at its California facilities. During the fiscal
years 1999, and 1998, the Company-funded expenditures for research and
development were $174,683 and $130,219, respectively. This effort was primarily
directed toward development of the R-1550 Receiver and new system software as a
replacement for the DSI-9000.
Customers and Marketing
-------------- ---------
DSII markets its products in the United States through its area sales and
technical representatives, and supplies substantial marketing support with
customer demonstrations and trade show participation. Customers are United
States Government agencies and contractors doing business with the United States
Government and commercial companies engaged in testing products for compliance
with government regulations.
International sales of the Company's products are supported in each country
through independent, local sales representatives. The sales representatives are
compensated through commissions.
The following table illustrated the Company's sales expressed in dollars and as
a percent of total sales, by major geographic markets, for the past two fiscal
years.
1999 1998
---- ----
Domestic $ 456,781 37% $ 583,972 57%
International $ 773,770 63% $ 437,673 43%
TOTAL $ 1,230,551 100% $ 1,021,645 100%
----------- ---- ----------- ----
4
<PAGE>
DSII generally warrants its products against defects in materials and
workmanship for one year from date of shipment. The Company sells extended
maintenance contracts for software and hardware after that period. Primarily,
support is provided by technicians and engineers from DSII's California
facility. This team provides support and repair services to the total worldwide
installed base of systems, except for the United Kingdom, where the Company's
representatives who have been trained by the Company over the past several years
augment such support.
Order Backlog
--------------
The Company's order backlog at December 31, 1999, was approximately $ 25,000.
Comparatively, backlog at December 31, 1998 was $ 500,000. Backlog includes only
firm orders for which a delivery schedule has been specified by the customer,
and for amounts specified in customer purchase orders. Substantially all orders
shown in the backlog at December 31, 1999 were scheduled for delivery in 2000.
Competition
-----------
The Company competes in the electromagnetic radiation measuring and analysis
market. The market is sensitive to governmental agency (e.g., DOD, FCC, etc.)
regulations and changes in the "state-of-the-art." The market for the Company's
products is not subject to any seasonal variations. The markets in which the
Company's products compete range from single-function laboratory instruments to
manual multifunction systems to automatic integrated systems. Additionally, the
Company realizes substantial sales directly to the United States Government and
other allied governments for their specific applications.
Within the Company's market, two competitors are identified:
Rhode and Schwartz, Germany; Hewlett Packard Although both of these companies
possess substantially larger economic resources, and have been suppliers to the
Company's specialized market for a longer period of time, the Company believes
it can compete successfully with its current and new products. The Company
relies on its comparative performance advantages and flexibility in customizing
equipment and automated systems to customer requirements to allow it to continue
to compete favorably in the marketplace and to offset any greater financial
resource advantages its competitors may have.
5
<PAGE>
Manufacturing
-------------
Dynamic Sciences' manufacturing operations presently include the assembly and
testing of its receiving and computer devices, and the integration of the
various units into automated systems.
Components of the Company's products are purchased directly from outside
vendors. Long lead time items may be ordered under OEM agreements and letters of
intent, based on forecasts, with stipulated escape clauses and releases for
delivery by purchase order; thus, the Company commitment for inventory is based
on a combination of firm customer sales orders and short-term forecasts.
The Company maintains product and component inventories adequate for its
short-term needs. Occasionally, shortages in discrete components occur which the
Company has solved either by expediting deliveries or utilizing alternative
sources.
The Company employed 9 personnel directly associated with product manufacturing
and testing at December 31, 1999.
Patents and Trademarks
------------------------
The Company has various rights, patents and trademarks for devices, products,
and processes.
Employees
----------
At December 31, 1999, the Company employed 15 persons, all in the United
States.
The Company pays wages and salaries that it believes are competitive in its
areas of operation; and has group health, dental, and life insurance plans.
None of the Company's employees is represented by a labor union, and the Company
has experienced no work stoppages.
Item 2. Properties
-------- ----------
In November 1993, the Company moved its principal executive offices to a
facility of approximately 16,000 square feet in Woodland Hills, California. The
Company's lease obligation on this facility expires in 1998, with an option to
renew for five years. The company has not renewed the lease. This move has
resulted in a significant reduction in rent.
6
<PAGE>
Item 3. Legal Proceedings
------- -----------
In 1995 and in subsequent years the Internal Revenue Service filed a Notice of
Federal Tax Lien in California, and Nevada for payroll taxes, interest and
penalties. The tax liability due at December 31, 1999 has been recorded in the
attached financial statements in both current and long-term debt.
The Company is presently involved in litigation brought against the landlord, D
and S Distributors and their insurance carrier, Truck Insurance Exchange, for
certain damages incurred due to flooding in the Company's facility.
Item 4. Submission of Matters to a Vote of Security Holders
-------- -----------------------------------------------------------
The Company did not submit any matter to a vote of its security holders during
the quarter ending December 31, 1999.
7
<PAGE>
PART II
Item 5. Market for the Registrants' Common_Equity and_Related Stockholder
-------- -------------------------------------------------------------------
Matters
-------
The Company's Common Stock is traded in the "pink sheets" under the symbol
"DYNS". The following table sets forth the quotations as reported by a broker
who makes a market in the stock:
<TABLE>
<CAPTION>
Bid
----------
1998 Quarter Ended High Low
-------------------- ---- ----
<S> <C> <C>
March 31, 1998 0.05 0.01
June 30, 1998 0.05 0.01
September 30, 1998 0.05 0.01
December 31, 1998 0.05 0.01
Bid
----------
1999 Quarter Ended High Low
-------------------- ---- ----
March 31, 1999 0.09 0.01
June 30, 1999 0.07 0.01
September 30, 1999 0.13 0.04
December 31, 1999 0.04 0.01
</TABLE>
The quotations shown above represent prices between dealers and do not include
retail mark-up, mark-down or commissions.
The number of record holders of Common Stock of the Company as of December 31,
1999, was approximately 2,500.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. The Company has paid no dividends
on the Common Stock, and the Company anticipates that no dividends will be paid
in the foreseeable future.
Dividends on the $1.00 Series A Cumulative Convertible Preferred
Stock are payable semiannually, commencing February 1, 1987, at
$O.035 per share in cash, or by the issuance of registered Common
Stock. Due to the Company's current financial position, the
Company has not declared, and has been prohibited from making such
Dividend payments for 1999 and 1998.
Item 6. Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------------------------
Results of Operations
-----------------------
8
<PAGE>
Results of Operations
-----------------------
DSII's results of operations and analysis are compared below.
The following table sets forth items in the Consolidated Statements of
Operations. The discussion following compares results of the two years as a
percentage of net sales and a percentage increase or decrease of those items as
compared to the prior period.
<TABLE>
<CAPTION>
Statements of Operations
Two Year Period Ending December 31, 1999
For the Year Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Net Sales $1,230,551 $1,021,646
Cost of Sales 767,930 751,817
Gross Profit 462,621 269,817
Operating Expenses:
Research and Development
Expenses 174,683 130,219
Selling, General and Administrative
Expenses 579,183 482,958
Total Operating Expense 753,866 613,177
Income (loss) from operations (291,245) (343,348)
Other Income and Expenses
Interest Expense (161,113) (144,586)
Interest Income 8 22
Total other Income and Expenses (161,105) (144,586)
Income (loss) before provision for taxes (452,350) (487,912)
Provision for Taxes
Income Tax Provision 800 800
Total Provision for Taxes 800 800
Net Income (loss) $ (453,150) $ (487,912)
Basic Earnings (loss) per Share $ (0.03) $ (0.03)
Diluted Earnings (loss) per Share $ (0.01) $ (0.01)
</TABLE>
9
<PAGE>
Fiscal Year 1989 Compared to Fiscal Year 1988
---------------------------------------------
Total net sales for fiscal year 1999 increased $208,905 or 20% from fiscal year
1998 primarily due to increased unit volume of DSI-110 based systems. The
Company's sales volume is affected by its dependence on a market generated by
governmental agency requirements.
Gross profit increased by $192,804 or 71% from fiscal 1998 as a result of
increased sales with only a small increase in costs.
Research and development costs increased $44,464 or 34% from Fiscal 1998
to 1999. As a percentage of sales, R & D expenses increased from 12.7%
in 1998 to 14% in 1999. The increase in dollars spent was the result of
development efforts on the R-1550 Receiver.
Selling, general and administrative expenses increased $96,225 or 20% from
1998. As a percentage of sales, those expenses represented 47% in 1998
and 47% in 1999.
The operating loss from DSII operations in 1998 of $487,912 was improved by
$34,762 to an operating loss of $453,150 in 1999, an improvement of 7%. As a
percentage of sales, operating income was a loss of 48% in 1998 and 37% in 1999.
The Company capitalized $ 225,571 in 1999 and $ 315,019 in 1998 in software
development costs on new projects in 1999. These costs will be written off over
the next five years.
Interest expense increased $16,527 or 11%.
Liquidity and Capital Resources
----------------------------------
At December 31, 1999, the Company was not encumbered by bank debt, and its
working capital was $231,688, a decrease of $417,150 from December 31, 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 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.
10
<PAGE>
Effects of Inflation
----------------------
It is management's position that inflation has not had a significant adverse
effect during the past year on the Company's business, and it does not expect
inflation to have a significant adverse effect during the company's 1991 fiscal
year.
Industry Trends
----------------
Management is of the view that the market for its newer products is stable, and
believes it will be able to improve its market share with the new R-l550 Wide
Range Receiver. However, state-of-the-art technology will require continued
upgrading and new development of the Company's basic products to maintain its
position in the market. In order to accomplish the future technology tasks
required, external debt financing or funded research contracts are required in
the future to sustain long-term growth of the Company.
Year 2000 Issue
-----------------
Because many computer applications have been written using two digits rather
than four to define the applicable year, some date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
year 2000 issue could result in system failures or miscalculations causing
disruptions of operations, or business activities.
As of July 2000 we had no problems with the change to the year 2000. Thus far,
we do not believe that there is any need for alternative plans to deal with the
year 2000 issue.
Item 7. Financial Statements and Supplementary Data
-------- -----------------------------------------------
1. Kevin G. Breard Co. audited years ended December 31, 1999, and 1998.
Financial statements are included as part of the exhibits in Part IV.
Item 8. Changes in and Disagreements with Accountants on
------- ------------------------------------------------------
Accounting and Financial Disclosures
---------------------------------------
None
11
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant
-------- --------------------------------------------------------
The Executive officers and directors of the registrant are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
---------------------------------------- --- ----------------------
<S> <C> <C>
Eli I. Shiri . 58 Chairman of the Board,
Chief Executive Officer,
Chief Financial Officer
and Director
Robert M. Cooke, Jr. 59 Vice President,
General Manager,
and Director
</TABLE>
Mr. Shiri was appointed a Director in August, 1988. He has previously been
Chairman and President of SNC Development Corporation, Inc. and Night Vision
Corporation, and became President and Chief Executive Officer and
Chief Financial Officer in 1992.
Mr. Cooke joined the Company in 1980 and was appointed Vice President of DSI in
October 1983. In February of 1991, Mr. Cooke was elected Director to fill the
existing vacancy on the Board. Previously, he was employed by Teledyne Systems
Company and Honeywell, Inc.
Officers and directors are elected on an annual basis. The present term of
office for each director will expire at the next annual meeting of the Company's
shareholders or at such time as his successor is duly elected. Officers serve at
the discretion of the Board of Directors. There are no arrangements or
understandings pursuant to which any person has been or is to be selected as a
director.
12
<PAGE>
Item 10. Executive Compensation Cash Compensation
--------- --------- --------------------------------
The following table sets forth each of the most highly compensated executive
officers and directors of the Company and, as to all executive officers as a
group, information concerning all cash compensation from the Company for
services in all capacities during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Names of Individual Capacities Cash
or Persons in Group in which Served Compensation*
---------------------- ----------------- -----------------
1999 1998
-------- -------
<S> <C> <C> <C>
Eli I. Shiri Chairman, CEO $ 84,000 $ 68,500
CFO, Director
Robert M. Cooke, Jr. Vice President,
GM, Director $ 82,000 $ 67,500
All executive officers
as a group (2 persons above) $166,000 $136,000
</TABLE>
*Amounts paid as salary.
Directors of Dynamic Sciences International, Inc. may receive cash compensation
for their services as Directors. During fiscal 1999 and 1998, no compensation
for directors was provided.
Stock Option Plans
--------------------
No stock option plan is currently in effect.
Employment Agreements
----------------------
No employment agreements are currently in effect.
Item 11. Security Ownership of Certain Beneficial Owners and
-------- ---------------------------------------------------------
Management
----------
The following table sets forth, as of July 1, 2000, certain information with
respect to all those known by the company to be beneficial owners of more than
5% of its outstanding voting securities, all directors of the company, and all
officers and directors of the Company as a group.
13
<PAGE>
The Company's outstanding voting securities are its Common Stock and the Series
B-G Preferred Stock, which votes at an equivalent of 3.525 shares of Common
Stock for each share owned.
<TABLE>
<CAPTION>
Beneficial
Shares Percent Shares of Percent Ownership
of of B-G of of Voting
Name and Address Common Class Preferred Class Stock
-------------------- ---------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Eli I Shiri 11,831,011 35.2 957,678 23.1 31.5
6130 Variel Ave.
Woodland Hills, CA.
91367
Robert M Cooke, Jr. 5,915,506 17.6 90,000 2.2 12.9
6130 Variel Ave.
Woodland Hills, CA
91367
Donald Kennedy ---- ---- 315,000 7.6 2.3
11551 Charisma Ct.
Camarillo, CA 93010
Phillip K. Hammond 996,000 24 7.3
(Estate)
</TABLE>
Directors and executive officers as a group owned 17,746,517 of Common Stock
shares and 1,034,988 Series B-G Preferred shares which represents 44.4% of the
voting power of the Company.
Item 12. Certain Relationships and Related Transaction
--------- -------------------------------------------------
None
14
<PAGE>
PART IV
Item 13. Exhibits1Financial Statement Schedules, and Reports on Form 8-K
--------- ---------------------------------------------------------------------
(a) The following documents are filed as part of this report:
Financial Statements from Part II, Item 8.
---------------------
Financial Schedules
--------------------
All schedules are omitted since the required information is not present or is
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements and
notes thereto. Prior to the reverse purchase and reorganization with DSI, no
such schedules were required to be filed.
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.
15
<PAGE>
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 December 31,
1999.
16
<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: 18 July 2000 Dynamic Sciences International, Inc.
-----------
By:/s/ Eli I. Shiri
-------------------------------
Eli I. Shiri
Chairman of the board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
---------------------- --------------------- --------------
/s/ Eli I. Shiri President, CEO, CFO 7/18/2000
------------------------------ ----------------
and Director
Eli I. Shiri (Principal Executive Officer)
(Principal Financial Officer)
/s/ Robert M. Cooke Vice President, General 7/18/2000
------------------------------ ----------------
Manager and Director
Robert M. Cooke
17
<PAGE>
EXHIBIT 22.1
------------
List of Subsidiaries of the Registrant.
1. Turpin Systems, Inc.
18
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
AND
DECEMBER 31, 1998
19
<PAGE>
KEVIN G. BREARD, CPA
AN ACCOUNTANCY CORPORATION
To the Board of Directors and Shareholders
Dynamic Sciences International, Inc.
Woodland Hills, California
Independent Auditor's Report
----------------------------
I have audited the accompanying consolidated balance sheets of Dynamic Sciences
International, Inc. and Subsidiary as of December 31, 1999 and 1998 and the
related consolidated statements of operations and changes in stockholders'
equity, and changes in cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I have conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial positions of
Dynamic Sciences International, Inc. and Subsidiary as of December 31, 1999 and
1998, and the consolidated results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's operations to date have
resulted in substantial net losses of $453,150 and $487,912 during the years
ended December 31, 1999 and 1998 respectively, and, as of those dates, had
working capital deficiencies of $916,666 and $455,977 respectively. The Company
has a plan for the next twelve months. First, the Company is seeking additional
financing through a private placement offering. Second, the Company anticipates
an increase in sales through the realization of new products that have been
primarily developed over the last three years. The Company's ability to achieve
the foregoing element of its plan, which may be necessary to permit the
realization of assets and satisfaction of liabilities in the ordinary course of
business, is uncertain. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Kevin Breard, CPA
Northridge, California
May 18, 2000
20
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
----------------------
Current assets 1999 1998
------------ ------------
<S> <C> <C>
Accounts receivable, net $ 5,465 $ 70,234
Inventories 912,647 985,143
Prepaid expenses and other current assets 65,410 88,482
------------ ------------
Total current assets 983,522 1,143,859
Fixed assets
Property and equipment, net of $310,195 and $273,871
accumulated depreciation 69,929 102,888
------------ ------------
Total fixed assets, net 69,929 102,888
------------ ------------
Other assets
Other intangible assets, net of amortization 1,546,047 1,517,681
Deposits 8,000 400
------------ ------------
Total other assets 1,554,047 1,518,081
------------ ------------
TOTAL ASSETS $ 2,607,498 $ 2,764,828
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 1,862 $ 13,648
Accounts payable 133,573 120,856
Payroll taxes payable 1,233,011 983,192
Income taxes payable 1,600 800
Deferred income 42,113 70,423
Current portion of long term debt 5,282 88,947
Other accrued liabilities 482,747 321,970
------------ ------------
Total current liabilities 1,900,188 1,599,836
Long-term liabilities
Payable to related party, non-interest bearing 472,567 472,567
Long-term debt, net of current portion 3,075 7,607
------------ ------------
Total long-term liabilities 475,642 480,174
------------ ------------
TOTAL LIABILITIES 2,375,830 2,080,010
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000 shares authorized
Series A -- outstanding 2,935,000, stated at par 1,442,697 1,442,697
Series B to Series G -- outstanding 4,144,188 after deducting
1,855,800 canceled shares in treasury, started at par 60,000 60,000
Common stock, $.001 par value, 250,000,000 shares authorized
32,052,031 issued and outstanding including
17,746,517 subscribed, stated at par 32,052 32,052
Additional paid-in capital 447,978 447,978
Notes receivable from shareholders, non-interest bearing (159,719) (159,719)
Retained deficit (1,526,208) (1,073,058)
Less treasury stock, at cost, 1,855,800 Preferred stock B-G shares (65,132) (65,132)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 231,668 648,818
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,607,498 $ 2,764,828
============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR
------------------------
ENDED DECEMBER 31,
------------------------
REVENUE 1999 1998
----------- -----------
<S> <C> <C>
Sales $1,230,551 $1,021,646
----------- -----------
TOTAL REVENUE 1,230,551 1,021,646
TOTAL COST OF SALES 767,930 751,817
----------- -----------
GROSS PROFIT 462,621 269,829
OPERATING EXPENSES
Selling, general, and administrative 579,183 482,958
Research & development net of new software 174,683 130,219
----------- -----------
TOTAL OPERATING EXPENSE 753,866 613,177
----------- -----------
INCOME (LOSS) FROM OPERATIONS (291,245) (343,348)
OTHER INCOME AND EXPENSES
Interest expense (161,113) (144,586)
Interest income 8 22
----------- -----------
TOTAL OTHER INCOME AND EXPENSES (161,105) (144,564)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR TAXES (452,350) (487,912)
PROVISION FOR TAXES
Income tax provision 800 800
----------- -----------
TOTAL PROVISION FOR TAXES 800 800
----------- -----------
NET INCOME (LOSS) $ (453,150) $ (488,712)
=========== ===========
BASIC EARNINGS (LOSS) PER SHARE $ (0.03) $ (0.03)
=========== ===========
DILUTED EARNINGS (LOSS) PER SHARE $ (0.01) $ (0.01)
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
22
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR
----------------------
ENDED DECEMBER 31,
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
---------- ----------
<S> <C> <C>
Net income (loss) $(453,150) $(488,712)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 36,324 107,032
Amortization 197,204 197,204
Issuance of common stock for rent expenses - 1,000
Issuance of additional paid-in capital for rent expenses - 82,489
(Increase) decrease in:
Accounts receivable 18,053 85,075
Allowance for doubtful accounts 46,716 23,936
Inventory 72,496 96,708
Prepaid expenses 23,072 (85,673)
(Decrease) increase in:
Accounts payable 12,717 (77,242)
Income taxes payable 800 800
Payroll taxes payable 249,819 4,261
Unearned income (28,310) (37,536)
Other liabilities 160,777 321,970
---------- ----------
Total adjustments 789,668 720,024
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 336,518 231,312
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (3,364) (11,229)
Decrease in deposits (7,600) 3,150
Deferred software costs (225,571) (315,019)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (236,535) (323,098)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank overdraft - 13,648
Proceeds from issuance of short-term debt - 88,947
Repayment of bank overdraft (11,786) -
Repayment of short term debt (83,665) -
Repayment of short term debt related party - (2,000)
Repayment of long term debt (4,532) (8,809)
---------- ----------
NET CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES (99,983) 91,786
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - -
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR - -
---------- ----------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ - $ -
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
23
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For the Year
--------------------
Ended December 31,
--------------------
Cash paid during the period for 1999 1998
--------- ---------
Interest $ 3,600 $ -0-
Income taxes $ -0- $ -0-
Noncash investing and financing transactions
Issuance of common stock in the year ended December 31, 1998
for $83,489 in rent Expenses
Common stock $ 1,000
Additional paid-in capital 82,489
---------
$ 83,489
=========
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Preferred Stock
----------------------------------------- Treasury Stock
Series A Series B to G Common Stock Additional Notes Series
-------------------------------------------------------------- Paid-in Accumulated Receivable B to G
Shares Amount Shares Amount Shares Amount Capital Deficit Shareholders Preferred
--------- ---------- --------- ------- ---------- ------- -------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCES,
DECEMBER 31, 1997
(UNAUDITED) 2,935,000 $1,442,697 4,144,188 $60,000 31,052,031 $31,052 $365,489 $(584,346) $(159,719) $(65,132)
Common stock issued
for rent - - - - 1,000,000 1,000 82,489 - - -
Net income (loss) - - - - - - - (488,712) - -
--------- ---------- --------- ------- ---------- ------- -------- ------------ ---------- ---------
CONSOLIDATED BALANCES,
DECEMBER 31, 1998 2,935,000 $1,442,697 - $60,000 32,052,031 $32,052 $447,978 $(1,073,058) $(159,719) $(65,132)
Net income (loss) - - - - - - - (453,150) - -
--------- ---------- --------- ------- ---------- ------- -------- ------------ ---------- ---------
CONSOLIDATED BALANCES,
DECEMBER 31, 1999 2,935,000 $1,442,697 4,144,188 $60,000 32,052,031 $32,052 $447,978 $(1,526,208) $(159,719) $(65,132)
========= ========== ========= ======= ========== ======= ======== ============ ========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
25
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------
General
Dynamic Sciences International, Inc. and subsidiary (the Company) is in the
business of developing, manufacturing and marketing of government and commercial
electronics equipment, primarily in the radio communications industry. Its
principal products have been used for testing. It has recently developed a
surveillance suite of products that, the Company believes, will expand its
market.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might be necessary should the Company be
unable to continue in existence.
Going Concern
The Company's operations to date have resulted in substantial net losses of
$453,150 and $487,912 during the years ended December 31, 1999 and 1998
respectively, and, as of those dates, had working capital deficiencies of
$916,666 and $455,977 respectively. The Company has a plan for the next twelve
months. First, the Company is seeking additional financing through a private
placement offering. Second, the Company anticipates an increase in sales
through the realization of new products that have been primarily developed over
the last three years. The Company's ability to achieve the foregoing element of
its plan, which may be necessary to permit the realization of assets and
satisfaction of liabilities in the ordinary course of business, is uncertain.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Summary of Significant Accounting Policies
The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts of
Dynamic Sciences International, Inc. (DSII) and its wholly owned subsidiary,
Turpin Systems, Inc., both are Nevada Corporations. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The Parent and the Subsidiary have allowed borrowing and lending on an interest
free basis.
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
26
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------
(CONTINUED)
Property and equipment are recorded at cost. Depreciation of property and
equipment is recorded on the straight-line method over the respective useful
lives of the assets.
In accordance with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standard (SFAS) No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed," certain computer
software development costs were capitalized in the accompanying balance sheets.
Capitalization of computer software development costs begins with technological
feasibility. The Company capitalized $225,571 and $315,019 in 1999 and 1998
respectively. The costs covered the completion two new products. These
products have yet to be sold by the Company and therefore have not begun to be
amortized.
In accordance with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of," the carrying
value of intangible assets and other long-lived assets is reviewed on a regular
basis for the existence of facts or circumstances, both internal and external,
that may suggest impairment. To date, no such impairment has been indicated.
Should there be an impairment in the future, the Company will measure the amount
of the impairment based on undiscounted expected future cash flows from the
impaired assets. The cash flow estimates that will be used will contain
management's best estimates, using assumptions and projections appropriate and
customary at the time.
Inventory is valued at the lower of cost or market. Inventory will be recorded
on a first-in first-out basis.
The Company has related party transactions. The Company is not collecting
interest, nor charging interest from the loan payable/receivable to the
shareholders. The Company owes the shareholders and officers $472,567. The
loan payable to mature October 2002. The Company has a receivable from the same
parties for $159,719, for the purchase of 17,476,517 shares of common stock.
The stock is the collateral for the receivable.
Rent expense for 1999 and 1998 were $117,167 and $119,925 respectively. The
Company has a lease with less than five (5) years of lease commitments at
December 31, 1999. Rent expense for the year 2000 will be $122,683.
The Company calculates it's earnings per share in accordance with the Statement
of Financial Accounting Standards No. 128, " Earnings Per Share", which requires
basic and diluted earnings per share calculations. Basic earnings per share is
calculated on the weighted average stock outstanding.
27
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------
(CONTINUED)
For the year ended December 31, 1999 and 1998, the Company had common stock
issued and outstanding of 32,052,031. In calculating basic E.P.S., shares
issued but not purchased, are not considered outstanding. The Company had
17,746,517 common stock shares issued but not purchased. For basic E.P.S.,
these shares are considered as not outstanding shares. For basic E.P.S., the
weighted average stock outstanding for December 31, 1999 and 1998 was 14,305,514
and 14,193,185, respectively.
In calculating diluted E.P.S., the Company considers all potentially convertible
securities as converted into common stock. Included as potentially convertible
is the 17,746,517 shares issued but not purchased. The Preferred Stock A Series
is convertible on a 1 to 1 ratio to common stock. Accordingly, for diluted
E.P.S., an additional 2,935,000 shares would be considered as outstanding. The
Preferred Stock B Series is convertible on a 3.525 to 1 ratio. Accordingly for
diluted E.P.S., an additional 14,608,263 shares would be considered as
outstanding. For diluted E.P.S., the weighted average stock outstanding for
December 31, 1999 and 1998 was 49,595,294 and 49,482,965, respectively.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. Because the Company has never used nor currently intends to use
derivatives, management does not anticipate that the adoption of this new
standard will have a significant effect on earnings or the financial position of
the Company.
NOTE 2: ACCOUNTS RECEIVABLE, NET
--------------------------
Accounts receivable are recorded on the balance net of the allowance for
doubtful accounts, and consisted of the following:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Accounts receivable trade $ 76,117 $ 94,170
Allowance for doubtful accounts (70,652) (23,936)
--------- ---------
Accounts receivable, net $ 5,465 $ 70,234
========= =========
</TABLE>
NOTE 3: INVENTORIES
-----------
<TABLE>
<CAPTION>
Inventories consist of: 1999 1998
---------- -----------
<S> <C> <C>
Raw materials $ 380,428 $ 450,506
Work in process 138,620 128,183
Finished goods 393,599 406,452
---------- -----------
Total 912,647 $ 985,142
========== ===========
</TABLE>
28
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NOTE 4: PROPERTY, PLANT AND EQUIPMENT
--------------------------------
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
Depreciable
1999 1998 Lives
---------- ---------- ---------
<S> <C> <C> <C>
Machinery & equipment $ 358,392 $ 360,541 5 years
Leasehold Improvements 16,220 16,220 5 years
Furniture & fixtures 5,513 - 7 years
---------- ----------
Total property, plant and equipment 380,125 376,761
Accumulated depreciation (310,195) (273,871)
---------- ----------
Total property, plant and
equipment, net $ 69,929 $ 102,888
========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1999 and December 31, 1998
was $36,324 and $107,032 respectively.
NOTE 5: OTHER LIABILITIES
------------------
Other liabilities are the penalties and interest on past due payroll taxes (see
note 6).
NOTE 6: COMMITMENTS AND CONTINGENCIES
-------------------------------
The Company has the ongoing unresolved IRS liens and encumbrances for past due
payroll taxes.
The Company has not publicly reported it's results of operations to the
Securities and Exchange Commission in nine (9) years. Fines and penalties for
not filing have not been included in these financial statements due to the
uncertainty of an amount, if any.
The Company has recorded 18,246,517 shares of common stock transactions, which
the transfer agent has not recorded. Additionally, it seems there was a
mis-recorded stock transaction for 2,566 shares between the preferred A shares
and the common stock. The stock transfer agent needs to record and resolve
these differences.
NOTE 7: INCOME TAXES
-------------
Only the Californian minimum state tax provision of $800 has been recorded. No
Federal provision for income taxes have been provided. The Company incurred a
loss for the year ended December 31, 1999. The Company has elected to carry
forward the losses to offset future taxable income. The losses incurred for the
years ended December 31, 1998 and December 31,
29
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NOTE 7: INCOME TAXES
-------------
(CONTINUED)
1999 can be carried forward until they expire at December 31, 2018 and December
31, 2019, respectively. There is no assurance that future taxable income will
be sufficient to realize the net asset or utilize the tax carryforward. Thus,
the Company has certain deferred tax assets related to the net operating loss
carryforward. The Company has determined that it is more likely than not that
the deferred tax asset may not be realizable. Therefore, a 100% valuation
allowance has been recorded.
NOTE 8: CAPITAL STOCK
--------------
The $1.00 (referred to herein as Series A) Series A Cumulative Convertible
Preferred Stock is nonvoting, initially convertible into common stock on a 1 to
1 ratio, and redeemable at the option of the Company in whole or in part at call
prices.
Dividends on the $1.00 Series A Cumulative Convertible Preferred Stock are
payable semiannually commencing February 1, 1987 at $0.035 per share in cash, or
by the issuance of registered Common Stock. In the event of an involuntary
dissolution of the Company, these preferred shareholders are entitled to a
liquidation preference equal to $1.00 per share, plus unpaid dividends.
The Company has not declared and has been prohibited from making such dividend
payments since 1989 due to its current financial position.
The Company issued 1,000,000 shares of stock for prepaid rent and to cover back
rent on the Company's facilities. For the year ended December 31, 1998, the
Company valued the securities issued in accordance with FASB 123, which requires
that the value of goods and services be recorded at the fair market value of the
securities issued.
In the event of a involuntary dissolution of the Company, the Series B to Series
G preferred shareholders are entitled to a liquidation preference equal to $1.00
per share, and shall be treated equally with the holders of the $1.00 Series A
Cumulative Convertible Preferred Stock only if the Company shall have a net
worth in excess of $4,000,000.
30
<PAGE>
DYNAMIC SCIENCES INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NOTE 9: SEGMENT INFORMATION
--------------------
Industry Segment Data
The Company has organized its operations into a single business segment. The
developing, manufacturing and marketing of government and commercial electronics
equipment, and the sale of service contracts for the equipment.
<TABLE>
<CAPTION>
Geographic Area Data
For the year ended, International Domestic Total
------------- ----------- -----------
<S> <C> <C> <C>
December 31, 1998
Revenues $ 437,673 $ 583,972 $1,021,645
Earnings from operations before
income taxes (7,046) (336,302) (343,348)
Identifiable assets - 2,764,828 2,764,828
Net assets - 648,818 648,818
December 31, 1999
Revenues $ 773,770 $ 456,781 $1,230,551
Earnings from operations before
income taxes 140,087 (431,332) (291,245)
Identifiable assets - 2,607,498 2,607,498
Net assets - 231,668 231,668
</TABLE>
31
<PAGE>
