Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended: December 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:
February 3, 1999: 1,321,237
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
December 31, 1998 (unaudited)
and June 30, 1998 Page 3
Statements of Operations
Three months and six months ended
December 31, 1998 and 1997 (unaudited) Page 5
Statements of Cash Flows
Six months ended December 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 10
SIGNATURES Page 11
EXHIBITS: Exhibit 27 - Financial Data Schedule
Page 2 of 11
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
ASSETS
December 31, June 30,
1998 1998
(unaudited)
______________________________________
<S> <C> <C>
CURRENT ASSETS
Cash 10,322 23,952
Receivables, net of allowance for
doubtful accounts 579,658 52,615
Inventory
Costs & estimated earnings on
long-term contracts 138,000 359,580
Work-in-process 37,861 64,874
Computer parts 129,401 58,823
Prepaid expenses 5,461 5,461
_______ _______
Total current assets 900,703 565,305
FURNITURE AND EQUIPMENT, net of
$77,806 and $76,596 of
accumulated depreciation 26,743 27,954
PROTOTYPE EQUIPMENT, net of
$140,021 and $126,177 of
accumulated depreciation 26,880 39,343
Deposits 3,774 3,774
_______ _______
958,100 636,376
Page 3 of 11
<PAGE>
<CAPTION>
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1998 1998
(unaudited)
________________________________
CURRENT LIABILITIES
Deposits 80 --
Note payable 650,000 467,500
Accounts Payable 143,522 145,138
Accrued Liabilities 250,529 75,226
Payables - officers/directors 164,439 188,688
Current portion of capitalized
lease obligation 6,144 5,768
Deferred Revenue/LT Contracts -- 29 642
_______ _______
Total current liabilities 1,214,714 911,962
Capitalized lease obligation 3,674 6,889
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,
1,321,237 shares issued and
outstanding 1,733,316 1,723,316
Additional paid-in capital 160,435
160,435
Accumulated deficit (2,154,047) (2,166,234)
_________ _________
Total stockholders' equity (260,288) (282,475)
_________ _________
958,100 636,376
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
Page 4 of 11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
December 31 December 31
1998 1997 1998 1997
___________________________________________
<C> <C> <C> <C>
Revenues
Sales 303,590 164,233 641,837 254,224
Costs and expenses
Cost of sales 190,197 71,260 351,117 112,571
Marketing 52,465 29,953 97,765 73,722
Research and
development 12,234 23,394 35,236 72,723
General and
administrative 53,609 73,538 145,532 133,587
_______ _______ _______ _______
308,505 198,145 629,650 392,603
Net income (loss) (4,915) (33,912) 12,187 (138,379)
Net income (loss)
per common share ( --) (.03) .01 (.13)
Weighted average
common shares 1,321,237 1,066,237 1,321,237 1,066,237
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
Page 5 of 11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended December 31
1998 1997
____________________________
<S> <C> <C>
Cash flows from operating activities:
Net income <loss> 12,187 (138,379)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 15,054 15,054
(Increase) decrease in receivables (527,043) (21,076)
(Increase) decrease in costs and
estimated earnings on long-term
contracts 221,580 141,103
(Increase) decrease in inventories (43,565) (518)
(Increase) decrease in prepaid
expenses/deposits -- 4,000
Increase (decrease) in accounts
payable (1,616) (29)
Increase (decrease) in accrued
liabilities and customer deposits 175,383 (1,809)
Increase (decrease) in payables--
officers/directors (24,249) 37,123
Increase (decrease) in deferred
revenue (29,642) 22,521
________ ________
Net cash provided by (used in)
operating activities (201,911) 57,990
Cash flows from investing activities
Acquisition of furniture & equipment (213) (533)
Acquisition of prototype equipment (1,167) (337)
________ ________
Net cash used in investing
activities (1,380) (870)
________ ________
Cash flows from financing activities
Proceeds from line of credit 182,500 50,000
Payments on line of credit -- (143,400)
Payments on capital lease (2,839) (5,272)
Proceeds from stock sale 10,000
________ _________
Net cash used in financing
activities: 189,661 (98,672)
Page 6 of 11
<PAGE>
Net increase (decrease) in cash and
cash equivalents (13,630) (41,552)
Cash and cash equivalents at beginning
of period 23,952 85,092
_______ _______
Cash and cash equivalents at end of
period 10,322 43,540
Supplemental disclosures of cash flow
information
Cash paid during the period for
interest 54,791 10,280
<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 December 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, 1998 includes audited financial statements as of June 30,
1998 and 1997, 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.
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 (loss) of $(4,915) on net
sales of $303,590 for the second quarter of fiscal year 1999, and
a cumulative net profit of $12,187 on net sales of $641,837 for
the six months ended December 31, 1998. The first six months of
fiscal year 1999 continued to be impacted adversely by
significant cash constraints while near term revenues and
profitability have been favorably impacted by a significant South
American project.
The Company has a backlog in excess of $235,000 as of January 31,
1999, most of which is deliverable during the next six months.
Management remains encouraged that the fiscal year 1999 profit
performance will continue near breakeven during the second half
of the year.
FINANCIAL CONDITION
At December 31, 1998, the Company had a working capital deficit
of $(314,011) as compared to a working capital deficit of
($195,506) at December 31, 1997.
Systems West, Inc. currently has an outstanding line of credit
financing of $650,000. This line of credit and the Company's
existing working capital is supporting its short term operating
requirements. Ongoing working capital is supplemented
periodically by export loans guaranteed by the California Export
Finance Office on international business.
Page 9 of 11
<PAGE>
PART II. OTHER INFORMATION
No information is included in answer to Items 1, 2, 3, 4, 5 or 6
under Part II as the Items are either not applicable or, if
applicable, the answer is negative.
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)
2/13/99 Kenneth W. Ruggles
(Date) (Signature)
2/13/99 Douglas S. Timms
(Date) (Signature)
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 10,322
<SECURITIES> 0
<RECEIVABLES> 579,658
<ALLOWANCES> 2,100
<INVENTORY> 167,262
<CURRENT-ASSETS> 900,703
<PP&E> 53,623
<DEPRECIATION> 217,827
<TOTAL-ASSETS> 958,100
<CURRENT-LIABILITIES> 1,214,714
<BONDS> 0
<COMMON> 1,733,316
0
8
<OTHER-SE> 160,435
<TOTAL-LIABILITY-AND-EQUITY> 958,100
<SALES> 641,837
<TOTAL-REVENUES> 641,837
<CGS> 351,117
<TOTAL-COSTS> 629,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,187
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,187
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,187
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
