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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 November 30, 2000.
[_] 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.
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(Exact name of small business issuer as
specified in its charter)
California 95-3627099
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23263 Madero, Suite C, Mission Viejo, California 92691
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(Address of principal executive offices)
(949) 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 November 30, 2000, 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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<CAPTION>
Part I. Financial Information
Item 1. Financial Statements
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Balance Sheets at November 30, 2000
and May 31, 2000 1
Statements of Operations for the Three
Months Ended November 30, 2000
and November 30, 1999 2
Statements of Operations for the Six
Months Ended November 30, 2000
and November 30, 1999 3
Statements of Cash Flows for the Six
Months Ended November 30, 2000
and November 30, 1999 4
Notes to Financial Statements 5,6
Item 2. Management's Discussion and Analysis of
The Financial Results 7,8
Part II. Other Information 9
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DYNATEM, INC.
BALANCE SHEETS
November 30, May 31,
2000 2000
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ASSETS
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Current assets:
Cash $ 98,200 $ 265,265
Accounts receivable, net 290,569 334,173
Inventories (note 2) 744,377 459,434
Prepaid expenses 8,645 22,647
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Total current assets 1,141,791 1,081,519
Note receivable 1,136 2,046
Plant and equipment, net 35,980 41,516
Other assets 47,441 32,042
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$ 1,226,348 $ 1,157,123
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Accounts payable $ 239,567 $ 209,556
Accrued expenses 73,283 71,689
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Total current liabilities 312,850 281,245
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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 (1,469,887) (1,507,507)
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Total shareholders' equity 913,498 875,878
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$ 1,226,348 $ 1,157,123
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See accompanying notes to financial statements.
1
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DYNATEM, INC.
STATEMENTS OF OPERATIONS
Three months ended November 30, 2000 and 1999
2000 1999
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Net sales $ 654,356 $ 506,306
Cost of sales 388,629 262,595
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Gross profit 265,727 243,711
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Operating expenses:
Selling, general and administrative 145,804 135,514
Research and development 60,435 52,606
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Total operating expenses 206,239 188,120
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Operating income 59,488 55,591
Other income and expense (144) 6,388
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Income before income taxes 59,344 $ 61,979
Provision for income taxes 800 800
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Net income $ 58,544 $ 61,179
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Income per share - basic $ .04 $ .04
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Income per share - diluted $ .04 $ .04
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Weighted average shares outstanding - basic 1,418,400 1,418,400
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Weighted average shares outstanding - diluted 1,651,324 1,418,400
========== ==========
See accompanying notes to financial statements
2
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DYNATEM, INC.
STATEMENTS OF OPERATIONS
Six months ended November 30, 2000 and 1999
2000 1999
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Net sales $1,081,113 $ 829,981
Cost of sales 658,895 496,534
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Gross profit 422,218 333,447
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Operating expenses:
Selling, general and administrative 275,221 270,991
Research and development 112,033 97,753
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Total operating expenses 387,254 368,744
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Operating income (loss) 34,964 (35,297)
Other income, net 3,456 9,470
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Net income (loss) before taxes 38,420 (25,827)
Provision for income taxes 800 800
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Net income (loss) $ 37,620 $ (26,627)
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Income (loss) per share - basic $ .03 $ (.02)
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Income (loss) per share - diluted $ .02 $ (.02)
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Weighted average shares outstanding - basic 1,418,400 1,418,400
========== ==========
Weighted average shares outstanding - diluted 1,644,164 1,418,400
========== ==========
See accompanying notes to financial statements
3
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DYNATEM, INC.
STATEMENTS OF CASH FLOWS
For Six months ended November 30, 2000 and 1999
2000 1999
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Cash flows from operating activities:
Net income (loss) $ 37,620 $ (26,627)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and amortization 8,363 4,741
Changes in operating assets
and liabilities:
Accounts receivable 43,604 (26,308)
Inventories (284,943) (6,589)
Prepaid expenses 14,002 14,728
Accounts payable 30,011 (50,429)
Accrued expenses 1,594 11,726
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Total adjustments (187,369) (52,131)
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Net cash used in operating activities (149,749) (78,758)
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Cash flows from investing activities:
Other assets (15,399) (37,449)
Purchases of property & equipment (2,827) -
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Net cash used in investing activities (18,226) (37,449)
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Cash flows from financing activities:
Repayment of notes receivable 910 910
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Net decrease in cash and cash equivalents (167,065) (115,297)
Cash and cash equivalents, beginning balance 265,265 434,091
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Cash and cash equivalents, ending balance $ 98,200 $ 318,794
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Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Taxes $ 800 $ 800
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See accompanying notes to financial statements.
4
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DYNATEM, INC.
Notes to Financial Statements
(1) Interim Accounting Policy
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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 November 30, 2000 and the results of operations
and cash flows for the three and six months ended November 30, 2000 and
November 30, 1999, 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
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A summary of inventories follows:
November 30, 2000 May 31, 2000
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Finished Goods $ 44,442 $ 15,553
Work-in-process 223,313 132,472
Raw Materials 476,622 311,409
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$744,377 $459,434
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(3) Income Per Share
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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 included in the
computation of net income per diluted share in the periods when net
income is reflected using the treasury stock method. Such information is
not included when net loss is reflected because the effect would be
antidilutive.
(4) Foreign Currency Transactions
-----------------------------
For the three-month and six-month ended November 30, 2000 and 1999,
transaction gains and losses are not material to the financial
statements taken as a whole.
5
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DYNATEM, INC.
Notes to Financial Statements
(5) Income Taxes
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Income tax expense for the three-month and six-month periods ended
November 30, 2000 and 1999 are not considered material due to the
utilization of net operating loss carryforwards.
The Company had Federal and state net operating loss carryforwards of
$1,680,000 and $74,000 at May 31, 2000, which, if not utilized to offset
future taxable income, will expire in various years through 2020.
(6) Line of Credit
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On October 6, 2000, the Company entered into a $100,000 line of credit
with a bank bearing interest at 11.50% and guaranteed by certain Company
officers. As of November 30, 2000, there were no borrowings on this line
of credit.
6
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DYNATEM, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation
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Net sales for the three months ended November 30, 2000, increased 29.2% to
$654,356 compared to net sales of $506,306 in the same period a year ago. For
the six months ended November 30, 2000, net sales were $1,081,113, $251,132
higher than the corresponding period in the previous fiscal year, for an
increase of 30.3%. The increase in total net sales was due to the shipment of
approximately $290,000 that did not ship during the first quarter due to a delay
in receipt of component parts and also the result of an increased demand in the
market for the DRCI product.
Cost of sales for the three months ended November 30, 2000, was $388,629 or
59.4% of net sales and compares to $262,595 or 51.9% of net sales in the same
period a year ago. For the six months ended November 30, 2000, cost of sales of
$658,895 represented 60.9% of net sales and compares to $496,534 representing
59.8% of net sales for the same period a year ago.
Selling, general and administrative expenses for the three-month and six-month
periods ended November 30, 2000, were $145,804 and $275,221, as compared to
$135,514 and $270,991 the same period a year ago. The slight increase is
attributed to curtailing the cost reduction program initiated by the Company
since last year.
Research and development expenses for three-month and six-month period ended
November 30, 2000, were $60,435 and $112,033 as compared to $52,606 and $97,753
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.
For the three-month and six-month periods ended November 30, 2000, net earnings
are $58,544 and $37,620 respectively, compared to net income of $61,179 and a
net loss of $26,627, for the same periods ended November 30, 1999.
The Company does not expect to pay significant income taxes due to its
utilization of net operating loss carryforwards which will expire in various
years through 2020.
Inventory for the six months ended November 30, 2000 was $744,377 compared to
$419,428 in the same period a year ago. The increase is the result of purchasing
certain hard-to-obtain allocated component parts. The strong economy has led to
long lead times for some semiconductor devices and other parts. Obtaining the
necessary electronic components from which to fabricate our products has become
a challenge for the Company, given its relatively small size.
At November 30, 2000, the Company's working capital was $828,941 and its current
ratio was 3.65:1 compared to $800,274 and a ratio of 3.84:1 as of May 31, 2000.
The Company has obtained a credit line of $100,000 from a bank to meet its
short-term working capital needs over the next 12 months.
7
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DYNATEM, INC.
PART II. OTHER INFORMATION
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Items 1 through 3 and 5 have been omitted because there is nothing material to
report and there has been no report on Form 8-K during the quarter ended
November 30, 2000.
Item 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
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On November 10, 2000, the Company held its annual meeting of shareholders and
took the following actions:
ELECTION OF DIRECTORS
The following persons were duly elected to the Company's Board of Directors. The
tabulation of the votes cast for and against each director is set forth opposite
their names below.
Directors Yes No
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Robert Anslow 1,177,371 200
Harry Cavanaugh 1,177,371 200
Eileen DeSwert 1,177,371 200
Richard Jackson 1,177,371 200
Costis Toregas 1,177,371 200
Charles Spear 1,177,371 200
H. Richard Anderson 1,177,371 200
Michael Horan 1,177,371 200
APPOINTMENT OF AUDITORS
The shareholders approved the appointment of the accounting firm of Corbin &
Wertz as its independent auditors for the fiscal year ending May 31, 2001. Such
appointment was approved by 1,177,371 votes and 200 votes either abstained or
voted against approval of the appointment.
8
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DYNATEM, INC.
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.
January 10, 2001 By: /s/ EILEEN DESWERT
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Eileen DeSwert
President and Chief Executive Officer
January 10, 2001 By: /s/ BELEN RAMOS
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Belen Ramos
Chief Financial Officer
9
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DYNATEM, INC.
EXHIBIT INDEX
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Exhibit Number
3(a) Restated Articles of Incorporation of the Company (1)
3(b) Amended and Restated Bylaws of the Company (2)
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(1) Incorporated herein by reference to Exhibit 3(a) to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1997.
(2) Incorporated herein by reference to Exhibit 3(b) to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1997.
10
