<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 1996.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16250
------------------------------
DYNATEM, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 95-3627099
- ---------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23263 MADERO, SUITE C, MISSION VIEJO, CALIFORNIA 92691
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(714) 855-3235
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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 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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On March 31, 1996, there were 1,418,400 shares of the issuer's Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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DYNATEM, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets at February 29, 1996
and May 31, 1995 1
Statements of Operations for the Three
Months Ended February 29, 1996
and 1995
Statements of Operations for the Nine
Months Ended February 29, 1996
and 1995 3
Statements of Cash Flows for the Nine
Months Ended February 29, 1996
and 1995 4
Notes to Financial Statements 5,6
Item 2. Management's Discussion and Analysis or
Plan of Operation 7,8
Part II. Other Information 9
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DYNATEM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 29, MAY 31,
1996 1995
------------ ----------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash $ 443,750 $ 497,611
Accounts receivable, net 365,040 245,283
Inventories (note 2) 283,586 258,651
Prepaid expenses 44,809 9,799
---------- ----------
Total current assets $1,137,185 $1,011,344
Note Receivable 11,645 13,985
Plant and equipment, net 27,606 40,253
Other assets 52,832 39,155
---------- ----------
$1,229,268 $1,104,737
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 253,044 $ 127,809
Accrued expenses 49,198 47,381
---------- ----------
Total current liabilities $ 302,242 $ 175,190
---------- ----------
Shareholders' equity:
Common stock, no par value authorized
50,000,000 shares; issued 1,418,400 shares
at February 29, 1996 and May 31, 1995 $2,383,385 $2,383,385
Accumulated deficit (1,456,359) (1,453,838)
---------- ----------
Total shareholders' equity 927,026 929,547
---------- ----------
$1,229,268 $1,104,737
========== ==========
</TABLE>
See accompanying notes to financial statements.
1
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DYNATEM, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 29, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net Sales $ 675,972 $ 588,679
Cost of Sales 442,262 413,828
---------- ----------
Gross profit 233,710 174,851
---------- ----------
Operating expenses:
Selling, general and administrative 169,499 151,124
Research and development 40,616 39,339
---------- ----------
Total operating expenses 210,115 190,463
---------- ----------
Operating income (loss) 23,595 (15,612)
Other income, net 3,745 2,398
---------- ----------
Net income (loss) $ 27,340 $ (13,214)
========== ==========
Earnings (loss) per share $ .02 $ (.01)
========== ==========
Weighted average shares outstanding
(note 3) 1,418,400 1,418,400
========== ==========
</TABLE>
See accompanying notes to financial statements
2
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DYNATEM, INC.
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED FEBRUARY 29, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net Sales $ 2,077,111 $ 1,885,354
Cost of Sales 1,489,207 1,347,071
--------- ---------
Gross profit 587,904 538,283
--------- ---------
Operating expenses:
Selling, general and administrative 491,535 449,966
Research and development 108,296 104,175
--------- ---------
Total operating expenses 599,831 554,141
--------- ---------
Operating (loss) (11,927) (15,858)
Other income, net 10,206 6,864
--------- ---------
Net (loss) before taxes (1,721) (8,994)
Provision for income taxes 800 800
--------- ---------
Net (loss) $ (2,521) $ (9,794)
========= =========
Loss per share (note 3) $ (.01) $ (.01)
========= =========
Weighted average shares outstanding
(note 3) 1,418,400 1,418,400
========= =========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
DYNATEM, INC.
STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED FEBRUARY 29, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,521) $ (9,794)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 13,475 12,539
Change in assets and liabilities:
(Increase) in receivables (119,757) (73,439)
(Increase) decrease in inventories (24,935) 39,796
(Increase) in prepaid expenses (35,010) (12,318)
(Increase) in other assets (13,677) (3,774)
Increase in accounts payable 125,235 127,654
(Increase) decrease in
accrued expenses 1,817 (18,038)
--------- ---------
Total adjustments (52,852) 72,420
--------- ---------
Net cash provided by (used in)
operating activities (55,373) 62,626
--------- ---------
Cash flows from investing activities:
Equipment additions (828) (10,465)
Repayment of note receivable 2,340 2,340
--------- ---------
Net cash used in investing activities 1,512 (8,125)
--------- ---------
Net increase (decrease) in cash $ (53,861) $ 54,501
Cash, beginning balance 497,611 298,410
--------- ---------
Cash, ending balance $ 443,750 $ 352,911
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the nine months for:
Taxes $ 800 $ 800
========= =========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
DYNATEM, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Interim Accounting Policy
-------------------------
In the opinion of the Company's management, the accompanying unaudited
financial statements include only normal recurring adjustments necessary
for a fair presentation of the Company's financial position and the results
of operations and cash flows for the three and nine months ended February
29, 1996 and February 28, 1995 respectively. Although the Company believes
that the disclosures in these financial statements are adequate to ensure
that the information presented is not misleading, certain information and
footnote information normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Results of operations for interim
periods are not necessarily indicative of results of operations to be
expected for the full year. Refer to the Company's Annual Report on Form
10-KSB for the year ended May 31, 1995 for further information.
(2) Inventories
-----------
A summary of inventories follows:
<TABLE>
<CAPTION>
February 29, 1996 May 31, 1995
----------------- ------------
<S> <C> <C>
Finished Goods $ 35,507 $ 40,641
Work-in-process 32,524 70,604
Raw Materials 215,555 147,406
-------- --------
$283,586 $258,651
======== ========
</TABLE>
(3) Earnings (loss) Per Share
-------------------------
Earnings (loss) per common share is computed based on the weighted average
number of common shares outstanding during the periods presented. The
potential exercise of stock options and warrants is not included in the
computation of net income (loss) per share because the effect would not
impact per share information or would be antidilutive.
(4) Foreign Currency transactions
-----------------------------
For the nine months ended February 29, 1996, cost of sales was higher than
the prior year due to an unfavorable exchange rate of the US Dollar versus
the German DeutschMark, which had adversely affected our gross margin.
5
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DYNATEM, INC.
(5) Income taxes
------------
Income tax expense for the three and nine month periods ended February 29,
1996 and February 28, 1995 are not considered material due to the
utilization of net operating loss carryforwards.
Significant deferred tax assets of the Company consist of the net operating
loss carryforwards for the federal and state tax purposes of approximately
$1,647,000 and $187,000 at February 29, 1996, respectively.
(6) Risk, Uncertainties and Concentrations
--------------------------------------
During the nine months ended February 29, 1996 and 1995, one customer
accounted for 33% and 42% of sales, respectively. In addition, one supplier
represented 70% and 65% of total purchases of inventory, respectively.
A growing portion of Dynatem's sales has been generated by its distribution
of the OR product line. This arrangement with the German company has not
only increased Dynatem's overall sales volume but has increased the
Company's ability to promote and provide its own manufactured products. At
the end of February 29, 1996, the Company's sales of OR products accounted
for 74% of the total year to date sales. Therefore, due to its unforseen
dependence on its relationship with OR, the Company has decided to
diversify its distribution and support service for highly qualified
technical suppliers.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Net sales for the three months ended February 29, 1996, increased 15% to
$675,972 over net sales of $588,679 in the same period a year ago. For the
nine months ended February 29, 1996, net sales were $2,077,111, $191,757
higher than the corresponding period in the previous fiscal year, for an
increase of 10%. Net sales of the or products in the nine months ended
February 29, 1996, were 75% of total net sales compared to 65% of total net
sales as of February 28, 1995. One customer accounted for 33% of the total net
sales as compared to 42% for the previous year.
Cost of sales for the three months ended February 29, 1996, was $442,262 or
65% of net sales and compares to $413,828 or 70% of net sales in the same
period a year ago. For the nine months ended February 29, 1996, cost of sales
of $1,489,207 represented 72% of net sales and compares to $1,347,071 and 71%
for the same period a year ago. The Company realizes a lower margin from
sales of OR products than from sales of products manufactured by the Company.
Operating costs for the three-month and nine-month period ended February 29,
1996, were slightly higher than the corresponding periods a year ago. The
increase was due to some moving expenses incurred during the move of the
Company to a new facility, aside from the marketing expenses and research and
development costs for the Company's own proprietary products.
For the three-month and nine-month period ended February 29, 1996, net
earnings reflect net profit of $27,340 and a net loss of $2,521, respectively,
compared to net losses of $13,214 and $9,794, for the corresponding periods a
year ago. The changes in operations for the three-month periods ended
February 29, 1996, were the result of a higher sales volume with higher
margins with 65% cost of sales as compared to 70% cost of sales for the same
period the previous year.
The Company does not expect to pay significant income taxes due to its
utilization of net operating loss carryforwards which will expire through the
year 2010.
At February 29, 1996, the Company had a current ratio of 3.8:1 compared to
5.8:1 as of May 31, 1995. The Company, may consider additional sources of
capital should the need arise. At present, management is undertaking the
expansion of its product line through companies with complementary products.
7
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Items 1 through 6 have been omitted because there is nothing material to
report and there has been no report on Form 8-K during the quarter ended
February 29, 1996.
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DYNATEM, INC.
March 25, 1996 By: /s/ Eileen DeSwert
----------------------------------------
Eileen DeSwert
President and Chief
Executive Officer
March 25, 1996 By: /s/ Belen Ramos
----------------------------------------
Belen Ramos
Chief Financial Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> MAY-31-1996 MAY-31-1996
<PERIOD-START> JUN-01-1995 DEC-01-1995
<PERIOD-END> FEB-29-1996 FEB-29-1996
<CASH> 443,750 497,611
<SECURITIES> 0 0
<RECEIVABLES> 365,040 245,283
<ALLOWANCES> 0 0
<INVENTORY> 283,586 258,651
<CURRENT-ASSETS> 1,137,185 1,011,344
<PP&E> 27,606 40,253
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,229,268 1,104,737
<CURRENT-LIABILITIES> 302,242 175,190
<BONDS> 0 0
0 0
0 0
<COMMON> 2,383,385 2,383,285
<OTHER-SE> (1,456,359) (1,453,838)
<TOTAL-LIABILITY-AND-EQUITY> 1,229,268 1,104,737
<SALES> 2,077,111 675,972
<TOTAL-REVENUES> 2,077,111 675,972
<CGS> 1,489,207 442,262
<TOTAL-COSTS> 2,089,038 652,377
<OTHER-EXPENSES> (10,206) (3,745)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,721) 0
<INCOME-TAX> 800 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,521) 27,340
<EPS-PRIMARY> (0.01) 0.02
<EPS-DILUTED> 0 0
</TABLE>
