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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 August 31, 1997.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-16250
DYNATEM, INC.
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(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 92718
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(Address of principal executive offices)
(714) 855-3235
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Issuer's telephone number
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 August 31, 1997, 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
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets at August 31, 1997
and May 31, 1997 1
Statements of Operations for the Three
Months Ended August 31, 1997 and 1996 2
Statements of Cash Flows for the Three
Months Ended August 31, 1997 and 1996 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis or
Plan of Operation 5
Part II. Other Information 6
</TABLE>
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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DYNATEM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1997 1997
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<S> <C> <C>
ASSETS
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Current assets:
Cash and cash equivalents $ 591,919 $ 561,511
Accounts receivable 161,491 285,412
Inventories (note 2) 326,461 264,700
Prepaid expenses 13,382 21,386
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Total current assets 1,093,253 1,133,009
Note Receivable 10,106 10,886
Property and equipment, net 21,154 17,321
Other assets 49,421 35,406
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$1,173,934 $ 1,196,622
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LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 134,646 $ 76,807
Accrued expenses 54,805 65,907
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Total current liabilities 189,451 142,714
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Shareholders' equity:
Common stock, no par value authorized
50,000,000 shares; 1,418,400 shares
issued and outstanding 2,383,385 2,383,385
Accumulated deficit (1,398,902) (1,329,477)
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Total shareholders' equity 984,483 1,053,908
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$ 1,173,934 $ 1,196,622
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</TABLE>
See accompanying notes to financial statements.
1
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DYNATEM, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Net Sales $ 336,982 $ 364,332
Cost of Sales 204,156 216,010
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Gross profit 132,826 148,322
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Operating expenses:
Selling, general and administrative 164,866 153,024
Research and development 43,380 37,567
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Total operating expenses 208,246 190,591
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Operating loss (75,420) (42,269)
Other income, net 6,795 3,391
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Loss before income taxes (68,625) (38,878)
Provision for income taxes 800 800
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Net loss $ (69,425) $ (39,678)
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Loss per share (note 3) $ (.05) $ (.03)
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Weighted average common 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 CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (69,425) $ (39,678)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 3,146 3,871
Change in assets and liabilities:
Decrease in receivables 123,921 152,456
(Increase) in inventories (61,761) (104,993)
Decrease in prepaid expenses 8,004 8,200
Increase in accounts payable 57,839 9,825
(Decrease) in accrued expenses (11,102) (24,605)
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Total adjustments 120,047 44,754
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Net cash provided by operating activities 50,622 5,076
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Cash flows from investing activities:
Increase in other assets (14,015) (15,584)
Purchases of property and equipment (6,979) (3,061)
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Net cash used in financing activities (20,994) (18,645)
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Cash flows from financing activities:
Repayment of notes receivable 780 520
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Net increase (decrease) in cash and cash
equivalents 30,408 (13,049)
Cash and cash equivalents, beginning balance 561,511 532,918
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Cash and cash equivalents, ending balance $ 591,919 $ 519,869
=========== ==========
Supplemental disclosures of
cash flow information:
Cash paid during the quarter for:
Taxes $ 800 $ 800
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</TABLE>
See accompanying notes to financial statements.
3
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DYNATEM, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Interim Accounting Policy
-------------------------
In the opinion of the Company's management, the accompanying unaudited
statements include all adjustments including only normal recurring
adjustments necessary for a fair presentation of the financial position of
the Company as of August 31, 1997, and the results of operations and cash
flows for the three months ended August 31, 1997 and 1996. Although the
Company believes that the disclosures in these financial statements are
adequate to make the information presented 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.
(2) Inventories
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A summary of inventories follows:
<TABLE>
<CAPTION>
August 31, 1997 May 31,1997
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<S> <C> <C>
Finished Goods $ 54,953 $ 55,786
Work-in-process 38,030 46,071
Raw Materials 233,478 162,843
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$326,461 $264,700
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</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 period presented. The
potential exercise of stock options and warrants are 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 three months ended August 31, 1997 and 1996, transactions gains and
losses are not material to the financial statements taken as a whole.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Revenue for the first quarter ended August 31, 1997, decreased by 7.5% to
$336,982 compared to $364,332 in the same period of the prior fiscal year. The
decrease in sales revenue is due in part to the transition of the distribution
of or products to a new distributor relationship and the introduction of the new
pentium product.
Cost of sales for the three months ended August 31, 1997, was $204,156 or 61% of
net sales and compares to $216,010 or 59% of net sales in the same period a year
ago. The increase in cost of sales as a percent of net sales was the result of
a change in product mix.
Operating expenses for the three months ended August 31, 1997, increased by 8%
to $164,866 compared to $153,024 in the same period a year ago. The increase is
due to the additional expenditures relating to selling expenses.
Research and development expenses were $43,380 and $37,567 for the three months
ended August 31, 1997, and 1996, respectively. The increase in research and
development expenses relates to the continued development of new VME products
such as the DPCI boards and the D2070 boards. The Company, however, is
continuing to utilize outside engineering to expedite product development.
Income tax expense for the three months ended August 31, 1997, and 1996, are
not considered material due to the significant net operating loss carryforwards.
Significant deferred tax assets of the Company (which have been fully reserved
for in the accompanying balance sheets) consist of its net operating loss
carryforwards of approximately $1,545,308 and $12,780 for Federal and state tax
reporting purposes, respectively, which, if not utilized to offset future
taxable income, will expire through 2006.
Net earnings for the three months ended August 31, 1997 and 1996, reflect net
losses of $69,425 and $39,678, respectively. The decrease in net earnings was
the result of a lower sales revenue and the higher cost of sales during the
quarters ended August 31, 1997 and 1996.
The Company continues to believe that the cash flow generated from operations
will be sufficient to meet its short-term working capital needs over the next 12
months.
At August 31, 1997, the Company had a current ratio of 5.8:1 compared to a ratio
of 7.9:4 at May 31, 1997. The decrease is due to a lower sales revenue and a net
loss of $69,425 for the period ending August 31, 1997. The net worth for the
Company at August 31, 1997, was $984,483 compared to $1,053,908 at May 31, 1997.
5
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PART II. OTHER INFORMATION
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NOT APPLICABLE
SIGNATURES
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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.
/s/ Eileen DeSwert
October 10, 1997 By: __________________________________
Eileen DeSwert, President and
Chief Executive Officer
/s/ Belen Ramos
October 10, 1997 By: __________________________________
Belen Ramos, Chief Financial
Officer
6
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD
ENDED AUGUST 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAY-31-1997 MAY-31-1996
<PERIOD-START> JUN-01-1997 JUN-01-1996
<PERIOD-END> AUG-31-1997 AUG-31-1996
<CASH> 591,919 0
<SECURITIES> 0 0
<RECEIVABLES> 161,491 0
<ALLOWANCES> 0 0
<INVENTORY> 326,461 0
<CURRENT-ASSETS> 1,093,253 0
<PP&E> 679,257 0
<DEPRECIATION> (658,103) 0
<TOTAL-ASSETS> 1,173,934 0
<CURRENT-LIABILITIES> 189,451 0
<BONDS> 0 0
0 0
0 0
<COMMON> 2,383,385 0
<OTHER-SE> (1,398,902) 0
<TOTAL-LIABILITY-AND-EQUITY> 1,173,934 0
<SALES> 336,982 364,332
<TOTAL-REVENUES> 343,777 367,723
<CGS> 204,156 216,010
<TOTAL-COSTS> 412,402 406,601
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (68,625) (38,878)
<INCOME-TAX> 800 800
<INCOME-CONTINUING> (69,425) (39,678)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (69,425) (39,678)
<EPS-PRIMARY> (.05) (.03)
<EPS-DILUTED> (.05) (.03)
</TABLE>
