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Previous: PRICE T ROWE STATE TAX FREE INCOME TRUST, N-30D, 1999-04-12 |
Next: MARK VII INC, SC 13G, 1999-04-12 |
<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 28, 1999.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16250
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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)
(949) 855-3235
---------------------------
(Issuer's telephone number)
Not Applicable
- --------------------------------------------------------------------------------
(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
--- ___
On March 31, 1999, there were 1,418,400 shares of the issuer's Common
Stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes ____ No X
----
<PAGE>
DYNATEM, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets at February 28, 1999
and May 31, 1998 1
Statements of Operations for the Three
Months Ended February 28, 1999
and February 28, 1998 2
Statements of Operations for the Nine
Months Ended February 28, 1999
and February 28, 1998 3
Statements of Cash Flows for the Nine
Months Ended February 28, 1999
and February 28, 1998 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
<PAGE>
DYNATEM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, May 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash $ 617,380 $ 600,525
Accounts receivable, net of allowance
for doubtful accounts of $14,325 143,844 192,125
Inventories 288,809 420,585
Prepaid expenses 19,836 17,330
---------- ----------
Total current assets 1,069,869 1,230,565
Note receivable 6,076 7,766
Plant and equipment, net 27,052 16,132
Other assets 24,737 15,533
---------- ----------
$1,127,734 $1,269,996
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
Current liabilities:
Accounts payable $ 130,534 $ 112,065
Accrued expenses 55,754 40,512
---------- ----------
Total current liabilities 186,288 152,577
---------- ----------
Shareholders' equity:
Common stock, no par value, 50,000,000 shares
authorized; 1,418,400 shares issued
and outstanding 2,383,385 2,383,385
Accumulated deficit (1,441,939) (1,265,966)
---------- ----------
Total shareholders' equity 941,446 1,117,419
---------- ----------
$1,127,734 $1,269,996
========== ==========
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
DYNATEM, INC.
STATEMENTS OF OPERATIONS
Three months ended February 28, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net sales $ 368,105 $ 478,739
Cost of sales 270,722 269,775
---------- ----------
Gross profit 97,383 208,964
---------- ----------
Operating expenses:
Selling, general and administrative 141,542 139,732
Research and development 55,686 44,565
---------- ----------
Total operating expenses 197,228 184,297
---------- ----------
Operating income (loss) ( 99,845) 24,667
Other income, net 6,119 108,735
---------- ----------
Net income (loss) ( 93,726) $ 133,402
========== ==========
Earnings (loss) per share ($ .07) $ .09
========== ==========
Weighted average shares outstanding 1,418,400 1,418,400
========== ==========
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
DYNATEM, INC.
STATEMENTS OF OPERATIONS
Nine months ended February 28, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net sales $1,061,556 $1,303,892
Cost of sales 665,198 732,492
---------- ----------
Gross profit 396,358 571,400
---------- ----------
Operating expenses:
Selling, general and administrative 439,068 474,925
Research and development 150,632 139,886
---------- ----------
Total operating expenses 589,700 614,811
---------- ----------
Operating loss ( 193,342) ( 43,411)
Other income, net 18,169 121,643
---------- ----------
Net income (loss) before taxes ( 175,173) 78,232
Provision for income taxes 800 800
---------- ----------
Net income (loss) ($ 175,973) $ 77,432
========== ==========
Income (loss) per share ($ .12) $ .05
========== ==========
Weighted average shares outstanding 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 28, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ( $ 175,973) $ 77,432
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,208 9,085
Changes in operating assets
and liabilities:
Accounts receivables 48,281 ( 16,572)
Inventories 131,776 ( 145,572)
Prepaid expenses ( 2,506) ( 3,425)
Accounts payable 18,469 68,281
Accrued expenses 15,242 ( 8,409)
----------- ----------
Total adjustments 218,470 ( 96,612)
----------- ----------
Net cash provided by (used in)
operating activities 42,497 ( 19,180)
----------- ----------
Cash flows from investing activities:
Other assets ( 9,204) 11,112
Purchases of property & equipment ( 18,128) ( 10,819)
----------- ----------
Net cash used in investing activities ( 27,332) 293
----------- ----------
Cash flows from financing activities:
Repayment of notes receivable 1,690 2,340
----------- ----------
Net increase (decrease) in cash and
cash equivalents 16,855 ( 16,547)
Cash and cash equivalents, beginning balance 600,525 561,511
----------- ----------
Cash and cash equivalents, ending balance $ 617,380 $ 544,964
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income 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 management of Dynatem, Inc. (the "Company"), the
accompanying unaudited financial statements include only normal recurring
adjustments necessary for a fair presentation of the Company's financial
position as of February 28, 1999 and the results of operations and cash
flows for the three and nine months ended February 28, 1999 and February
28, 1998, 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.
(2) Inventories
-----------
A summary of inventories follows:
February 28, 1999 May 31, 1998
----------------- ------------
Finished goods $ 90,657 $ 195,959
Work-in-process 20,957 71,251
Raw materials 177,195 153,375
---------- ----------
$ 288,809 $ 420,585
========== ==========
(3) Income Per Share
----------------
Income (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 three-month and nine-month periods ended February 28, 1999 and
1998, transaction gains and losses are not material to the financial
statements taken as a whole.
5
<PAGE>
DYNATEM, INC.
NOTES TO FINANCIAL STATEMENTS
(5) Income taxes
------------
Income tax expense for the three-month and nine-month periods ended
February 28, 1999 and 1998 are not considered material due to the
utilization of net operating loss carryforwards.
The Company had Federal net operating loss carryforwards of $1,483,200 at
May 31, 1998, which, if not utilized to offset future taxable income, will
expire through 2006.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Net sales for the three months ended February 28, 1999, decreased 23.1% to
$368,105 over net sales of $478,739 in the same period a year ago. For the nine
months ended February 28, 1999, net sales were $1,061,556, $242,336 lower than
the corresponding period in the previous fiscal year, for a decrease of 18.6%.
The decrease in total net sales was due to a mix of factors, the most important
of which was the phase out of distributed products.
Cost of sales for the three months ended February 28, 1999, was $270,722 or
73.5% of net sales and compares to $269,775 or 56.4% of net sales in the same
period a year ago. For the nine months ended February 28, 1999, cost of sales of
$665,198 represented 62.7% of net sales and compares to $732,492 representing
56.2% of net sales for the same period a year ago. The three-month and
nine-month increase of cost of sales as a percentage of net sales is the result
of lower unit prices to preserve the Company's competitive advantage as well as
the write-off of obsolete inventory of approximately $42,000.
Selling, general and administrative expenses for the three-month and nine-month
periods ended February 28, 1999, were $141,542 and $439,068, as compared to
$139,732 and $474,925 for the same period a year ago. The overall decrease was
the result of the cost reduction program initiated primarily in the area of
selling, advertising and administrative expenses of the Company.
Research and development expenses for three-month and nine-month period ended
February 28, 1999, were $55,686 and $150,632 as compared to $44,565 and $139,886
for the same period a year ago. The Company continues to expand the use of
internal design engineers to optimize its ability to schedule the completion of
its product on a more timely basis and to obtain more competitive costs
consistent with its cost reduction program.
For the three-month and nine-month period ended February 28, 1999, the Company
had net losses of $93,726 and $175,973, respectively, compared to net profits of
$133,402 and $77,432, for the same periods ended February 28, 1998. Net losses
for the periods above were primarily the result of lower sales and write-offs of
obsolete inventory.
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 2006.
The Company has initiated a program to evaluate the impact of the "Year 2000"
situation on its operations. This program has developed into a four-phase
process which includes the following procedures:
1.) The Company has established communication with all customers who have
received a product, either software or hardware, which may or may not be
compliant with Year 2000. This communication has been exhibited in the form of a
webpage identified as www.dynatem.com/y2k-
7
<PAGE>
issues.html. Those customers who are concerned with our own compliance have been
referred to this page. As of this date, there has been no significant concern
expressed by our customers.
2.) The Company has advised its vendors to report on the progress of their
compliance with Year 2000 requirements. Currently, the Company is still in the
process of receiving responses from its vendors and evaluating the impact it may
have on the Company. So far, the responses we have received demonstrate general
confidence by these vendors that they will be prepared for the Year 2000.
3.) The primary focus of Dynatem's VMEbus product line is embedded computer
hardware. The Company has made an effort to determine which software being used
by Dynatem customers might have problems related to Y2K compliance. The
operating systems employed by our CPU modules are supplied by a number of
software vendors and in this regard, we refer our customers to the web sites of
these vendors. These web sites define potential Y2K problem areas, advise if and
how the various versions of their software products deal with them, and suggest
ways of modifying the application code to best avoid potential problems. In some
cases, software patches are offered, and in other cases upgrading to a newer
version is strongly recommended. To date, there has been no significant concern
expressed by customers.
4.) The Company is now in the process of initiating a computer upgrade program
for the Company's financial accounting and administrative systems in order to
better accomodate revised network software which will be compliant with Year
2000 standards. The accounting department has already begun an investigation
into various financial system upgrades and expects to have a decision on the
implementation of this system by the end of the current fiscal year, May 31,
1999.
At February 28, 1999, the Company's working capital was $883,581 and its current
ratio was 5.7:1 compared to $1,077,988 and a ratio of 8.1:1 as of May 31, 1998.
Management believes that the Company's existing working capital and cash flows
from operations will be sufficient to meet its working capital needs.
8
<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 28,
1999.
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.
April 12, 1999 By: /s/ Eileen DeSwert
__________________________
Eileen DeSwert
President and Chief
Executive Officer
April 12, 1999 By: /s/ Belen Ramos
__________________________
Belen Ramos
Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE THREE AND NINE MONTH
PERIODS ENDED FEBRUARY 28, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> MAY-31-1999 MAY-31-1999
<PERIOD-START> JUN-01-1998 DEC-01-1999
<PERIOD-END> FEB-28-1999 FEB-28-1999
<CASH> 617,380 0
<SECURITIES> 0 0
<RECEIVABLES> 143,844 0
<ALLOWANCES> 0 0
<INVENTORY> 288,809 0
<CURRENT-ASSETS> 1,069,869 0
<PP&E> 698,639 0
<DEPRECIATION> (671,587) 0
<TOTAL-ASSETS> 1,127,734 0
<CURRENT-LIABILITIES> 186,288 0
<BONDS> 0 0
0 0
0 0
<COMMON> 2,383,385 0
<OTHER-SE> (1,441,939) 0
<TOTAL-LIABILITY-AND-EQUITY> 1,127,734 0
<SALES> 1,061,556 368,105
<TOTAL-REVENUES> 1,079,725 374,224
<CGS> 665,198 270,722
<TOTAL-COSTS> 1,254,898 467,950
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (175,173) (93,726)
<INCOME-TAX> 800 0
<INCOME-CONTINUING> (175,973) (93,726)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (175,973) (93,726)
<EPS-PRIMARY> (.12) (.07)
<EPS-DILUTED> (.12) (.07)
</TABLE>
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