Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended: March 31, 1998
Commission file number: 33-15682-LA
Exact name of small business issuer as specified in its charter:
Systems West, Inc.
State or other jurisdiction of incorporation or organization:
Colorado
IRS Employer Identification No.: 94-3026545
Address of principal executive offices:
3239 Imjin Road, Marina, CA 93933
Issuer's telephone number: (408) 582-1050
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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
May 1, 1998: 1,166,237
This Form 10-QSB is not covered by an accountant's report.
Page 1 of 11
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
March 31, 1998 (unaudited)
and June 30, 1997 Page 3
Statements of Operations
Three months and nine months ended
March 31, 1998 and 1997 (unaudited) Page 5
Statements of Cash Flows
Nine months ended March 31,
1998 and 1997 (unaudited) Page 6
Notes to Financial Statements
(unaudited) Page 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations Page 9
PART II. OTHER INFORMATION Page 9
SIGNATURES Page 11
EXHIBITS: Exhibit 27 - Financial Data Schedule
Page 2 of 11
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
ASSETS
March 31, June 30,
1998 1997
(unaudited)
______________________________________
<S> <C> <C>
CURRENT ASSETS
Cash 34,323 85,092
Receivables, net of allowance for
doubtful accounts 147,802 2,755
Inventory
Costs & estimated earnings on
long-term contracts 138,000 141,103
Work-in-process 24,807 36,084
Computer parts 58,979 61,524
Prepaid expenses 4,827 4,827
_______ _______
Total current assets 408,738 331,385
FURNITURE AND EQUIPMENT, net of
$71,548 and $65,290 of
accumulated depreciation 24,058 20,683
PROTOTYPE EQUIPMENT, net of
$123,698 and $107,375 of
accumulated depreciation 40,821 39,600
Deposits 4,474 8,474
_______ _______
478,091 400,142
Page 3 of 11
<PAGE>
<CAPTION>
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1998 1997
(unaudited)
________________________________
CURRENT LIABILITIES
Deposits 80 --
Note payable 311,000 143,400
Accounts Payable 31,858 61,177
Accrued Liabilities 56,166 48,046
Payables - officers/directors 177,633 143,883
Current portion of capitalized
lease obligation 4,918 8,284
Deferred Revenue/LT Contracts 29,642 --
_______ _______
Total current liabilities 611,297 404,790
Capitalized lease obligation 1,151 4,463
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
1,000,000 shares authorized,
Series A, 812.5 shares issued
and outstanding (liquidation
preference of $32,500) 8 8
Common stock, no par value;
5,000,000 shares authorized,
1,166,237 shares issued and
outstanding 1,713,416 1,703,416
Additional paid-in capital 160,435 160,435
Accumulated deficit (2,008,216) (1,872,970)
_________ _________
Total stockholders' equity (134,357) (9,111)
_________ _________
478,091 400,142
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
Page 4 of 11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
1998 1997 1998 1997
___________________________________________
<C> <C> <C> <C>
Revenues
Sales 331,098 139,065 585,322 577,320
Costs and expenses
Cost of sales 151,304 120,023 264,118 275,919
Marketing 50,204 68,964 123,925 195,009
Research and
development 22,762 11,025 95,242 33,234
General and
administrative 103,695 69,351 237,282 203,808
_______ _______ _______ _______
327,965 269,363 720,567 707,970
Net income (loss) 3,133 (130,298) (135,245) (130,650)
Net income (loss)
per common share .003 (.12) (.12) (.12)
Weighted average
common shares 1,166,237 1,066,237 1,166,237 1,066,237
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
Page 5 of 11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended March 31
1998 1997
____________________________
<S> <C> <C>
Cash flows from operating activities:
Net income <loss> (135,245) (130,650)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 22,581 21,113
(Increase) decrease in receivables (145,047) 101,549
(Increase) decrease in costs and
estimated earnings on long-term
contracts 3,103 (23,000)
(Increase) decrease in inventories 13,822 29,510
(Increase) decrease in prepaid
expenses/deposits 4,000 (1,771)
Increase (decrease) in accounts
payable (29,319) (22,585)
Increase (decrease) in accrued
liabilities and customer deposits 8,200 (22,585)
Increase (decrease) in payables--
officers/directors 33,750 (222)
Increase (decrease) in deferred
revenue 29,642 (6,020)
________ ________
Net cash provided by (used in)
operating activities (194,513) (54,661)
________ ________
Cash flows from investing activities
Acquisition of furniture & equipment (9,634) --
Acquisition of prototype equipment (17,544) (22,623)
________ ________
Net cash used in investing
activities (27,178) (22,623)
________ ________
Cash flows from financing activities
Proceeds from line of credit 311,000 35,709
Payments on line of credit (143,400)
Payments on capital lease (6,678) (2,579)
Common Stock Buyback/Issued 10,000 (330)
_________ _________
Net cash used in financing
activities: 170,922 32,800
_________ _________
Page 6 of 11
<PAGE>
Net increase (decrease) in cash and
cash equivalents (50,769) (44,484)
Cash and cash equivalents at beginning
of period 85,092 128,199
_______ _______
Cash and cash equivalents at end of
period 34,323 83,715
_______ _______
Supplemental disclosures of cash flow
information
Cash paid during the period for
interest 13,641 1,959
_______ _______
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
Page 7 of 11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared by
the Company without audit. In the opinion of management, the
accompanying unaudited financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary for a fair presentation of the Company's financial
position as at March 31, 1998 and 1997 and the results of its
operations, changes in its stockholders' equity and cash flows
for the respective periods then ended. Management has elected to
omit certain disclosure required by generally accepted accounting
principles. The Company's Form 10-KSB for fiscal year ended June
30, 1997 includes audited financial statements as of June 30,
1997 and 1996, complete with the auditors' report and footnotes
to the financial statements, and should be read in conjunction
with this Form 10-QSB.
2. STOCKHOLDERS' EQUITY
On May 25, 1993, the Company's shareholders approved a 1 for 400
reverse split of the Company's common stock and preferred stock,
and increased the authorized capital stock of the Company to
5,000,000 shares of no par value common stock and 1,000,000
shares of $.01 par value preferred stock. Retroactive effect has
been given to all share and per share data in the accompanying
financial statements.
The Series A preferred stock has a $40.00 per share liquidation
preference and is convertible to common stock on an eighteen for
one basis at the option of the holders. The preferred stock may
be redeemed at any time at $40.00 per share, at the election of
the Board of Directors of the Company.
The Company has authorized but unissued shares of preferred stock
which may be issued in such series and preferences as determined
by the Board of Directors.
The Company completed a limited common stock buyback program
during fiscal quarter three 1997, repurchasing 512 shares from
shareholders.
Page 8 of 11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Systems West, Inc. posted a net income of $3,133 on net revenue
of $331,098 for the quarter ended March 31, 1998 as compared to a
net (loss) of $(130,298) on net revenue of $139,065 for the
comparable quarter of the previous year. For the nine months
ended March 31, 1998, the Company reported a cumulative net
(loss) of $(135,245) on net revenue of $585,322 as compared to a
net (loss) of $(130,650) on net revenue of $577,320 for the nine
months ended March 31, 1997. In the third quarter of fiscal
1998, the Company commenced work on a major South American
project which is reflected in its significant backlog of
$1,019,000 at March 31, 1998. Most of this backlog is
deliverable during the next nine months.
Sales prospect activity continues to be strong worldwide and
management remains optimistic that the second-half of fiscal year
1998 will show significant improvement in revenue performance and
profitability, with the complete fiscal year likely reflecting
revenues approaching $1,000,000 and a net loss.
FINANCIAL CONDITION
At March 31, 1998 the Company had a net working capital deficit
of $(202,559) as compared to a working capital deficit of
$(50,924) at March 31, 1997. The Company continues to be
constrained by shortfalls in working capital to support
progressive levels of production and sales activity. Current
working capital requirements are supplemented by export loans
guaranteed by the California Export Finance Office. At March 31,
1998, the Company has borrowed $261,000 under this program.
Systems West is soliciting actively investors and strategic
partners to enable the Company to capitalize on the significant
worldwide opportunities available in its markets, although no
definitive investment opportunities have materialized as of this
report.
PART II. OTHER INFORMATION
No information is included in answer to Items 1, 3, 4, or 5
under Part II as the Items are either not applicable or, if
applicable, the answer is negative.
Item 2. Changes in Securities
On March 30, 1998, Kenneth W. Ruggles, President of Systems West,
Inc., exercised his option to purchase 100,000 shares of the
Company's restricted common stock, increasing the number of
shares outstanding from 1,066,237 to 1,166,237.
Page 9 of 11
<PAGE>
Item 6. Resignations of Registrant's Directors
Effective October 20, 1997, E. R. Reins resigned his position on
the Board of Directors and as an officer of Systems West, Inc.
Forward-Looking Statements
The statements contained in this report which are not historical
in nature are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors for
such statements under such sections. The forward-looking
statements herein are based on current expectations that involve
a number of risks and uncertainties. Such forward-looking
statements are based on numerous assumptions, including, but not
limited to, the assumption that the Company can successfully
compete with larger, more established competitors; that the
market segments targeted by the Company will continue to grow;
that pricing and other competitive pressures worldwide on
significant projects will not cause margins to erode
significantly; that the Company will complete its major project
cost-effectively to budgetary expectations; and that currency
fluctuations worldwide will not cause adverse pricing pressures.
The foregoing assumptions are based on judgments with respect to,
among other things, future economic, competitive and market
conditions, and future business decisions, all of which are
difficult or impossible to predict accurately and many of which
are beyond the Company's control. Accordingly, although the
Company believes that the assumptions underlying the forward-
looking statements are reasonable, any such assumption could
prove to be inaccurate and therefore there can be no assurance
that the results contemplated in forward-looking statements will
be realized. The forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ
materially from those set forth in or implied by the forward-
looking statements, including, but not limited to, the risk that
competitive conditions in the industry will change adversely or
otherwise become more intense; that changes in technology or
customer preference could cause the growth rate in the markets
the Company serves to slow or halt; that demand for the Systems
West product line will slow; that worldwide pricing and other
competitive pressures could adversely affect the Company's
margins; or that currency fluctuations could result in
international pricing pressures or could reduce the value in U.S.
dollar terms of the Company's international sales.
Page 10 of 11
<PAGE>
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.
SYSTEMS WEST, INC.
(Registrant)
3/13/98 Kenneth W. Ruggles
(Date) (Signature)
3/13/98 Douglas S. Timms
(Date) (Signature)
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 34,323
<SECURITIES> 0
<RECEIVABLES> 155,764
<ALLOWANCES> 7,962
<INVENTORY> 83,786
<CURRENT-ASSETS> 408,738
<PP&E> 260,125
<DEPRECIATION> 195,246
<TOTAL-ASSETS> 478,091
<CURRENT-LIABILITIES> 611,297
<BONDS> 0
<COMMON> 1,713,416
0
8
<OTHER-SE> 160,435
<TOTAL-LIABILITY-AND-EQUITY> 478,091
<SALES> 331,098
<TOTAL-REVENUES> 331,098
<CGS> 151,304
<TOTAL-COSTS> 327,965
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,133
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,133
<EPS-PRIMARY> .003
<EPS-DILUTED> .003
</TABLE>
