<PAGE> 1
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ____________________
Commission file number 0-14843
DENSE-PAC MICROSYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
CALIFORNIA 33-0033759
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
7321 LINCOLN WAY
GARDEN GROVE, CALIFORNIA 92841
( Address of Principal Executive Offices )
(714) 898-0007
Issuer's Telephone Number, Including Area Code
Not Applicable
( Former Name, Former Address and Former Fiscal Year
if Changed Since Last Year )
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of common stock, no par value, outstanding as of
September 30, 1998 was 17,759,800.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
- -------------------------------------------------------------------------------
TOTAL PAGES: 12
<PAGE> 2
PART I- FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
Dense-Pac Microsystems, Inc.
Consolidated Balance Sheet
August 31, February 28,
1998 1998
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,344,368 $ 3,626,388
Accounts receivable, net 1,426,092 1,066,553
Inventories 2,355,904 3,090,889
Other current assets 123,332 141,538
------------ ------------
Total current assets 5,249,696 7,925,368
Property, net 3,715,540 4,299,795
Other assets 14,360 14,360
------------ ------------
$ 8,979,596 $ 12,239,523
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 405,923 438,125
Accounts payable 1,312,200 1,319,486
Accrued compensation 168,767 240,595
Other accrued liabilities 147,790 121,435
------------ ------------
Total current liabilities 2,034,680 2,119,641
------------ ------------
Note payable to related parties 1,900,000 1,900,000
------------ ------------
Other long-term debt 429,677 597,095
------------ ------------
Stockholders' equity
Common stock 17,405,667 17,022,138
Accumulated deficit (12,790,428) (9,399,351)
------------ ------------
Total stockholders' equity 4,615,239 7,622,787
------------ ------------
$ 8,979,596 $ 12,239,523
============ ============
</TABLE>
See accompanying note to condensed financial statements.
<PAGE> 3
Dense-Pac Microsystems, Inc.
and Consolidated Subsidiary
Summary of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the quarter ended Six months ended
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 2,775,525 $ 4,571,050 $ 4,980,223 $ 8,019,759
COST OF SALES
Cost of sales 3,149,496 2,848,729 4,891,724 5,859,260
Inventory write-down 773,954 773,954
------------ ------------ ------------ ------------
Total cost of sales 3,923,450 2,848,729 5,665,678 5,859,260
GROSS PROFIT (LOSS) (1,147,925) 1,722,321 (685,455) 2,160,499
COSTS AND EXPENSES:
Selling, general and administrative 835,037 907,954 1,615,960 1,874,211
Research and development 326,553 314,441 655,029 468,512
Other costs 372,447 372,447
------------ ------------ ------------ ------------
Total costs and expenses 1,534,037 1,222,395 2,643,436 2,342,723
INCOME (LOSS) FROM OPERATIONS (2,681,962) 499,926 (3,328,891) (182,224)
------------ ------------ ------------ ------------
OTHER EXPENSE (INCOME)
Interest expense 70,897 34,771 129,751 95,428
Interest income (36,253) (42,047) (69,965) (87,353)
------------ ------------ ------------ ------------
Total other expense (income) 34,644 (7,276) 59,786 8,075
INCOME (LOSS) BEFORE INCOME
TAX PROVISION (2,716,606) 507,202 (3,388,677) (190,299)
INCOME TAX PROVISION 2,400 -- 800 800
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (2,719,006) $ 507,202 $ (3,389,477) $ (191,099)
============ ============ ============ ============
BASIC AND DILUTED NET INCOME
(LOSS) PER SHARE ($0.15) $0.03 ($0.19) ($0.01)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
USED TO CALCULATE BASIC AND
DILUTED NET INCOME (LOSS) PER
SHARE 17,732,000 17,291,000 17,740,000 17,036,000
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 4
DENSE-PAC MICROSYSTEMS, INC.
Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended
August 31, August 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,391,077) $ (191,099)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 574,873 533,300
Write-off of fixed assets 373,196
Changes in operating assets and liabilities:
Accounts receivable (359,539) (537,708)
Inventories 734,985 1,151,043
Other current assets 18,206 (42,628)
Other assets
Accounts payable (7,286) (388,137)
Accrued compensation (71,828) (247,460)
Accrued liabilities 26,355 112,187
----------- -----------
Net cash (used in) provided by operations (2,102,115) 389,498
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (363,814) (354,707)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on other long-term debt (199,620) (224,731)
Proceeds from issuance on other long-term debt
Proceeds from issuance of common stock 383,529 57,187
----------- -----------
Net cash provided by (used in) financing activities 183,909 (167,544)
----------- -----------
NET DECREASE IN CASH (2,282,020) (132,753)
CASH AT BEGINNING OF YEAR 3,626,388 4,660,769
----------- -----------
CASH AT END OF QUARTER $ 1,344,368 $ 4,528,016
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 129,751 $ 95,428
=========== ===========
Income taxes paid $ 2,400 $ 800
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 5
DENSE-PAC MICROSYSTEMS, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - Dense-Pac Microsystems, Inc., a California corporation, ("Dense-Pac" or
the "Parent Company") and its wholly-owned subsidiary, TypeHaus, Inc., a Texas
corporation (together, the "Company"), is a technology company that specializes
in designs and automated manufacturing of proprietary and patented
three-dimensional high density memory products, printer media devices, printer
memory, electronic laser printer products, custom memory subsystems, development
of support software for OEM manufacturers of laser printers and Internet
commerce solutions. The Company's web site is a www.dense-pac.com. CommercePac,
a division of Dense-Pac provides internet commerce solutions for businesses and
retail operations. Its web site is at www.commercepac.com.
NOTE 2 - As contemplated by the Securities and Exchange Commission ("SEC") under
Item 310 (b) of Regulation S-B, the accompanying financial statements and
footnotes have been condensed and therefore do not contain all disclosures
required by generally accepted accounting principles. This report on Form 10-QSB
for the period ended August 31, 1998 should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1998 filed with the SEC.
In the opinion of the Company management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly its financial position as of August 31,
1998, and the results of operations and its cash flows for the quarters ended
August 31, 1998 and 1997. Results for the interim period are not necessarily
indicative of those to be expected for the full year.
NOTE 3 - Recent Accounting Pronouncements - In June 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income," applicable to entities with
other comprehensive income. This pronouncement is effective for the year
beginning March 1, 1998. The Company had no items of other comprehensive income,
as defined, for the three months ended August 31, 1998 or 1997, or for the six
month ended August 31, 1998 or 1997. The Company will adopt in fiscal 1999, SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information."
The Company is reviewing the impact of such statement on its financial
statements.
NOTE 4 - Year 2000 Compliance. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from the 20th century dates. As a result, in less
than two years, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. The Company believes
that its internal systems are Year 2000 compliant and that this will not result
in a material adverse effect on the Company's business, operating results or
financial condition. The Company is currently evaluating its vendors for their
Year 2000 compliance and believes that it will not result in a material adverse
effect on the Company's business.
NOTE 5 - In October 1994, the Company borrowed $2,000,000 from a principal
shareholder and director evidenced by a five year, interest only, eight percent
note (the "Note"). The Note is secured by all of the Company's assets. As
consideration for the loan, the Company issued
<PAGE> 6
1,000,000 warrants exercisable for five years at $2.00 per share for Company
stock. The warrants were callable when the Company's stock reached a trading
price of $4.50 for twenty consecutive days. On September 25, 1995, the Company
called the warrants. On October 23, 1995, the Company received $1,900,000 for
the exercise of the warrants and extinguished debt for $100,000.
In conjunction with the exercise of the warrants, the Company re-negotiated the
interest rate on the $1,800,000 note to a rate of 5% per annum. In connection
with the amended loan agreement, the Company issued four year warrants to
purchase 375,000 shares of the Company stock at $7.00 per share. At August 31,
1998, all of the warrants were outstanding and exercisable.
NOTE 6 - The following table summarizes stock option activity under the
Dense-Pac's 1985 and 1996 Stock Option Plan for the six months ended August 31,
1998:
<TABLE>
<CAPTION>
Number of Price per Number of
Shares Share Options Exercisable
--------- ---------- -------------------
<S> <C> <C> <C>
Balance, February 28, 1998 1,902,244 $.24-$4.41 711,840
=======
Granted 352,000 1.89- 2.00
Exercised (163,619) 1.59- 2.875
Canceled (576,900) 1.25- 3.78
Balance, August 31, 1998 1,513,725 $.81-$4.41 716,195
========= ========== =======
</TABLE>
NOTE 7 - The following table is a reconciliation of the loss and share amounts
used in the calculation of basic loss per share and diluted loss per share for
the three and six month periods ended August 31, 1998.
<TABLE>
<CAPTION>
Per
Net Share
Loss Shares Amount
----------- ---------- ------
<S> <C> <C> <C>
Three months ended August 31, 1998
Basic loss per share $(2,719,000) 17,732,000 ($0.15)
Effect of dilutive stock options 0
----------- ---------- -----
$(2,719,000) 17,732,000 ($0.15)
=========== ========== =====
Six months ended August 31, 1998
Basic loss per share $(3,389,000) 17,740,000 ($0.19)
Effect of dilutive stock options 0
----------- ---------- -----
$(3,389,000) 17,740,000 ($0.19)
=========== ========== =====
</TABLE>
The weighted average shares outstanding during the three and six month periods
ended August 31, 1998 was 17,732,000 and 17,740,000, respectively. Options to
purchase shares of common
<PAGE> 7
stock during these periods were below the current market price and therefor not
included in the calculation of weighted outstanding shares and dilutive stock
options. Warrants to purchase share during theses period were below the current
market price and therefor were not included in the above calculations.
ITEM 2 - Management's Discussion and Analysis or Plan of Operations
RESULTS OF OPERATIONS
Net sales for the quarter ended August 31, 1998, decreased
$1,795,525 or 39% compared to the quarter ended August 31, 1997. For the six
months ended August 31, 1998, sales decreased $3,039,536 or 38%, as compared to
the six months ended August 31, 1997. Additionally, a standard industrial
product for Dense-Pac, the 512k x 8 has decreased in overall revenue due to
decreasing revenue due to a decline in the demand in the marketplace and an
overall decrease in product cost resulting in a lower sell price. This product
has reached the end of its technology life and therefor a newer higher density
product is replacing the needs for this product. The newer product, the one
megabyte product has not begun production type quantities in the market. The
sales decrease during the quarter as compared to the previous quarter can be
attributed, in part, to the shipment in the previous year's quarter of a large
order to one customer for a customized and specialized commercial memory
product. Revenue of 512k x 8 for the three months ended August 31, 1998 was $
115,000 versus $ 1,121,000 in the same period in the prior year. For the six
months ended August 31, 1998, revenue of the 512k x 8 was $ 238,000 or 5% of
sales as compared to $ 1,568,000 of 512k x 8 shipped for the six months ended
August 31, 1997, representing approximately 20% of sales.
Additionally, the sales decrease can be attributed to the
decreasing prices of memory components in the world-wide market. Over the last
several periods, the Company has experienced price decreases for some of the
components it sells, of up to 50%, depending on the product and type of memory
produced. For the quarter ended August 31, 1998, the total number of units
shipped increased by approximately 120% as compared to the same quarter in the
previous year. For the quarter ended August 31, 1998, the average sell price for
each unit shipped decreased by 76% as compared to the same quarter in the
previous year. For the six months ended August 31, 1998, the total number of
units shipped increased by approximately 75% as compared to the same period in
the prior year. For the six months ended August 31, 1998, the average sell price
for each unit shipped decreased by 69% as compared to the same period in the
previous year.
For the second quarter, $ 326,000 of revenue was generated from
the Company's wholly-owned subsidiary, TypeHaus, Inc. which Dense-Pac purchased
in September 1997. For the six months ended August 31, 1998, TypeHaus had
revenue of $ 611,000.
Gross profit as a percentage of sales for the three month period
ended August 31, 1998, decreased to a negative factor from 38% in the three
month period ended August 31, 1998. The decrease in the gross margin for the
second quarter ended August 31, 1998 can be attributed, in part, to the
Company's decision to expand into the commercial marketplace and accept lower
margin business in exchange for market share. The Company did not increase its
business into this marketplace but did sacrifice the margin associated with the
orders that it did accept. Additionally, during the quarter, slower moving
ceramic products that are potentially being replaced by newer technology were
decreased in value by approximately $ 450,000, the inventory reserve for
obsolete products was increased by $ 100,000 and the scrap associated with the
<PAGE> 8
production of commercial and other products was approximately $ 270,000. The
above expenses were recognized in the cost of goods sold for the quarter. In
addition, at the end of the quarter, the Company discontinued several commercial
product lines due to a change in the strategy of the Company. Low end commercial
products lines and commercial ceramic memory modules were discontinued,
resulting in a charge of $ 774,000. The balance of the negative margin for the
quarter can be associated with the product mixed of low end commercial products
shipped during the quarter.
For the first six months, gross profit as a percentage of sales
was negative as compared to 27% in the first six months of fiscal year 1998. A
majority of the margin erosion occurred in the second quarter as commercial
product shipped did not generate profitable margins. Additionally, the scrap for
the first six months of fiscal year 1999 was approximately $ 596,000 as compared
to $ 217,000 in the same period in the previous year. Additionally, slower
moving ceramic products that are potentially being replaced by newer technology
were decreased in value by approximately $ 450,000, the inventory reserve for
obsolete products was increased by $ 100,000 and the scrap associated with the
production of commercial and other products was approximately $ 347,000. The
above expenses were recognized in the cost of goods sold for the quarter.
During the third quarter, the Company will be reducing its
offering of commercial products and focus on those that relate to the Company's
proprietary packaging technology. In this manner, the Company believes that the
Company will be able to define a niche for the products that use a unique
proprietary stacking technology and market these products to a defined market.
The Company believes that margins should improve due it its discontinuation of
certain low margin commercial product lines. See "Cautionary Statements."
During the third quarter, the Company will be reducing its
offering of commercial products and focus on those that relate to the Company's
proprietary packaging technology. In this manner, the Company believes that the
Company will be able to define a niche for the products that use a unique
proprietary stacking technology and market these products to a defined market.
The Company believes that margins should improve due it its discontinuation of
certain low margin commercial product lines. See "Cautionary Statements."
Selling, general and administrative expenses decreased in the
second quarter of fiscal 1999 by $ 73,000 or 8% from the second quarter of the
prior fiscal year. For the six months ended August 31, 1998 these expenses
decreased $ 258,000 or 14%. The decrease in general and administrative expense
for the period ending August 31, 1998 can be attributed in an decrease in
utility expense of approximately $ 65,000 due to an adjusted utility bill that
the Company re-negotiated. Additionally, during the quarter there was a
decrease in sales and marketing payroll expenses as compared to the first
quarter, due to decreased sales personnel. The decrease in the expense was
partially offset with additional legal costs associated with a patent
infringement lawsuit and other legal expenses. For the six months ended August
31, 1998, travel, relocation and recruiting expenses decreased by approximately
$110,000. Additionally, commission expense decreased by approximately $ 280,000
from the previous period due to the decrease in overall revenue.
For the quarter ended August 31, 1998, the Company wrote-off $
372,000 of equipment used in the production of commercial products no longer
being offered for sale by the Company.
For the three months ended August 31, 1998, research and
development costs increased $12,000 or 4% from the same quarter in the previous
fiscal year and for the six months ended August 31, 1998 such expenses increased
$ 187,000 or 40% as compared to the prior six months. The increase for the six
month period was due to expenses incurred in the first quarter as compared to
the previous period for research and development efforts for new plastic
stacking technology. This included the development of new stacking technology
and the development of
<PAGE> 9
products associated with the commercial plastic stacking technology. The Company
is continuing to invest in research and development for new products in the
aerospace and commercial marketplace.
For the three months ended August 31, 1998, other expense has
increased $ 42,000 from the same period last year. This increase is due to
additional interest expense associated with equipment purchases and a decrease
in interest income due to the lower cash balance. For the six month ended August
31, 1998 other expense (the excess of interest expense over interest income)
increased $ 52,000 or 640% from the same period in the previous year due to
increased debt principal outstanding for the purchase of automatic production
equipment and a decrease in interest income associated with a lower cash
balance.
The Company believes that its internal systems are Year 2000
compliant and that this will not result in a material adverse effect on the
Company's business, operating results or financial condition. The Company is
currently evaluating its vendors for their Year 2000 compliance and believes
that it will not result in a material adverse effect on the Company's business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity for the second quarter
of Fiscal Year 1998 was $4.3 million cash from the private placement of stock
completed in February 1996. The Company is attempting to improve its operating
performance in order to avoid potential problems which could arise if
significant losses continue. Assuming that the Company is successful in its
efforts to significantly improve its financial performance, the Company believes
that the remaining proceeds from the private placement and cash from operations
will be sufficient to meet the Company's cash needs for the next twelve months.
Net cash used in operations was approximately $ 2,102,000 during
the first six months of Fiscal Year 1999. A majority of the cash used in
operations as a result of the loss from the six months of $ 3,390,000. During
the first six months, accounts receivable increased by approximately $ 360,000,
due to the timing of shipments this quarter versus yearend shipments and
inventory decreased by $ 735,000, mainly from the write-off of discontinued
product lines. The Company also received approximately $ 384,000 in proceeds
from the issuance of stock options from the employee stock option plan in the
first six months of Fiscal Year 1999 which contributed to the cash provided by
financing activities.
The Company purchased approximately $ 363,000 in new equipment
during the first six months of Fiscal Year 1998. The Company does not expect to
have any additional major equipment purchases for the remainder of the Fiscal
Year.
At August 31, 1998, the Company had a $1.8 million loan payable to
a major shareholder with interest at 5% per annum, and a $100,000 loan payable
to a director with interest at 8% per annum, with interest payable quarterly on
both loans and the principal on both loans due in October 1999. These loans are
secured by all of the Company's asset's, although the major shareholder has
agreed to subordinate its security interest in accounts receivable in order to
permit the Company to obtain conventional financing for accounts receivable.
These loans preclude the Company from incurring additional debt without the
consent of the lenders except for purchase money indebtedness incurred for the
purchase or lease of equipment and machinery. The Company has begun the process
of re-negotiating this loan with the majority shareholder in order to extend the
due date beyond the October 1999 due date. It is undetermined whether the
Company will be successful in re-negotiating this loan and in the event the
Company is
<PAGE> 10
unsuccessful in renegotiating the due date, the Company may lack the ability to
pay the debt when it becomes due.
The Company also has a loan from a Belgium bank due November 2000, which
provides for semi-annual principal payments of $70,533. The interest rate is two
points over the LIBOR rate in effect at the time of each principal payment, and
interest is payable semi-annually. At August 31, 1998, the outstanding amount
was $ 352,765.
FORWARD-LOOKING STATEMENTS
Included in the Notes to Consolidated Financial Statements, this Item 2.
Management's Discussion and Analysis or Plan of Operation and elsewhere in this
Report are certain forward-looking statements reflecting the Company's current
expectations. Although the Company believes that its expectations are based on
reasonable assumptions, there can no assurance that the Company financial goals
or expectations will be realized. Numerous factors may affect the Company's
actual results and may cause results to differ materially from those expressed
in forward-looking statements made on or on behalf of the Company.
Some of these factors include demand for and acceptance of new and
existing products, technological advances and product obsolescence, availability
of semiconductor devices at reasonable prices, competitive factors and the
availability of capital to finance growth. These and other factors which could
cause actual results to differ materially from those in the forward looking
statements are discussed in greater detail in the Company's Annual Report on
Form 10-KSB for the year ended February 29, 1998.
PART II
Item 1 - Legal Proceedings
On July 13, 1998, Dense-Pac Microsystems, Inc. filed a patent lawsuit against
Staktek, Inc. in U.S District Court, City of Los Angeles for patent infringement
for an amount in excess of $ 1,000,000 on Dense-Pac's patent covering stacking
memory devices, using proprietary technology. The suit alleges that Staktek
patent infringement has benefited Staktek and unlawfully interfered with
Dense-Pac's sales efforts. On August 17, 1998, Staktek, Inc. filed suit in
Travis County, Texas against Dense-Pac Microsystems and a current and former
officer for $ 20,000,000 in damages for alleged libel and slander arising from
Dense-Pac's press release dated July 13, 1998. Dense-Pac believes that the
Staktek complaint is without merit and intends to vigorously defend itself
against such charges.
On September 23, 1998, Dense-Pac Microsystems, Inc. was served with
a complaint from Simple Technology, Inc., filed in U.S. District Court for the
Central District of California, Santa Ana Division for an undetermined amount,
alleging that Dense-Pac's stacking technology infringes on a Simple Technology
patent. Dense-Pac believes that the Simple Technology complaint is without merit
and intends to vigorously defend itself against such charges.
<PAGE> 11
Item 4 - Submission of Matters to a vote of Security Holders
1. (a) Annual Shareholders' Meeting - August 14, 1998 (Aaron Uri Levy
resigned as chief executive officer, president and chairman of the
board on July 31, 1998. Lyle Jensen resigned from the board of
director on August 5, 1998.)
<TABLE>
<CAPTION>
(b) Election of Directors: Votes For Withheld
<S> <C> <C>
Roger Claes 15,756,996 420,920
Robert Southwick 15,761,996 415,920
Trude Taylor 15,660,540 517,376
Charles Dickenson 15,759,296 418,620
</TABLE>
(c) Approval of amendment to the Company's 1996 Stock Option Plan to
increase the number of shares of Common Stock which may be
subject to options under the plan by 1,000,000 shares
Votes For Against Abstain
6,568,711 1,328,048 95,789
(d) Ratification of Deloitte & Touche as independent accountants of
the Company for the fiscal year ended February 28, 1999.
Votes For Against Abstain
16,034,195 77,771 65,950
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
<PAGE> 12
SIGNATURES
Pursuant to the requirements 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.
DENSE-PAC MICROSYSTEMS, INC.
(Small Business Issuer)
October 12, 1998 /s/ RICHARD J. DADAMO
- -------------------------- -----------------------------------
Date Richard J. Dadamo,
Interim Chief Executive Officer
October 12, 1998 /s/ WILLIAM M. STOWELL
- -------------------------- -----------------------------------
Date William M. Stowell,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTERLY
REPORT - FORM 10-QSB FOR PERIOD AUGUST 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-QSB FOR QUARTER ENDED AUGUST 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 1,344,368
<SECURITIES> 0
<RECEIVABLES> 1,526,092
<ALLOWANCES> 100,000
<INVENTORY> 2,355,904
<CURRENT-ASSETS> 5,249,696
<PP&E> 6,478,770
<DEPRECIATION> 2,763,230
<TOTAL-ASSETS> 8,979,596
<CURRENT-LIABILITIES> 2,034,680
<BONDS> 0
0
0
<COMMON> 17,405,667
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,979,596
<SALES> 4,980,223
<TOTAL-REVENUES> 4,980,223
<CGS> 4,891,724
<TOTAL-COSTS> 3,417,390
<OTHER-EXPENSES> 59,786
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> 129,751
<INCOME-PRETAX> (3,388,677)
<INCOME-TAX> 800
<INCOME-CONTINUING> (3,388,677)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,388,677)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
