Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended: March 31, 1999
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: (831) 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, 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
March 31, 1999 (unaudited)
and June 30, 1998 Page 3
Statements of Operations
Three months and nine months ended
March 31, 1999 and 1998 (unaudited) Page 5
Statements of Cash Flows
Nine months ended March 31,
1999 and 1998 (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,
1999 1998
(unaudited)
______________________________________
<S> <C> <C>
CURRENT ASSETS
Cash 198 23,952
Receivables, net of allowance for
doubtful accounts 159,208 52,615
Inventory
Costs & estimated earnings on
long-term contracts -- 359,580
Work-in-process 12,878 64,874
Computer parts 128,507 58,823
Prepaid expenses 5,461 5,461
_______ _______
Total current assets 306,252 565,305
FURNITURE AND EQUIPMENT, net of
$79,892 and $73,634 of
accumulated depreciation 24,657 27,954
PROTOTYPE EQUIPMENT, net of
$145,462 and $129,139 of
accumulated depreciation 21,439 39,343
Deposits 3,774 3,774
_______ _______
356,122 636,376
Page 3 of 11
<PAGE>
<CAPTION>
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1999 1998
(unaudited)
________________________________
CURRENT LIABILITIES
Deposits 80 --
Note payable 224,253 467,500
Accounts Payable 149,577 145,138
Accrued Liabilities 189,581 75,226
Payables - officers/directors 164,439 188,688
Current portion of capitalized
lease obligation 5,847 5,768
Deferred Revenue/LT Contracts -- 29,642
_______ _______
Total current liabilities 733,777 911,962
Capitalized lease obligation 3,721 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 (2,275,135) (2,166,234)
_________ _________
Total stockholders' equity (381,376) (282,475)
_________ _________
356,122 636,376
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
Page 4 of 11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
1999 1998 1999 1998
___________________________________________
<C> <C> <C> <C>
Revenues
Sales 65,478 331,098 707,315 585,322
Costs and expenses
Cost of sales 69,306 151,304 420,423 264,118
Marketing 17,232 50,204 114,997 123,925
Research and
development 6,013 22,762 41,250 95,242
General and
administrative 94,015 103,695 239,547 237,282
_______ _______ _______ _______
186,566 327,965 816,217 720,567
Net income (loss) (121,088) 3,133 (108,902) (135,245)
Net income (loss)
per common share (.09) .003 (.08) (.12)
Weighted average
common shares 1,321,237 1,166,237 1,321,237 1,166,237
<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
1999 1998
____________________________
<S> <C> <C>
Cash flows from operating activities:
Net income <loss> (108,902) (135,245)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 22,581 22,581
(Increase) decrease in receivables (106,593) (145,047)
(Increase) decrease in costs and
estimated earnings on long-term
contracts 359,580 3,103
(Increase) decrease in inventories (17,688) 13,822
(Increase) decrease in prepaid
expenses/deposits -- 4,000
Increase (decrease) in accounts
payable 4,439 (29,319)
Increase (decrease) in accrued
liabilities and customer deposits 114,435 8,200
Increase (decrease) in payables--
officers/directors (24,249) 33,750
Increase (decrease) in deferred
revenue (29,642) 29,642
________ ________
Net cash provided by (used in)
operating activities 213,961 (194,513)
________ ________
Cash flows from investing activities
Acquisition of furniture & equipment (2,960) (9,634)
Acquisition of prototype equipment 1,581 (17,544)
________ ________
Net cash used in investing
activities (1,379) (27,178)
________ ________
Cash flows from financing activities
Proceeds from line of credit -- 311,000
Payments on line of credit (243,247) (143,400)
Payments on capital lease (3,089) (6,678)
Common Stock Buyback/Issued 10,000 10,000
_________ _________
Net cash used in financing
activities: (236,336) 170,922
_________ _________
Page 6 of 11
<PAGE>
Net increase (decrease) in cash and
cash equivalents (23,754) (50,769)
Cash and cash equivalents at beginning
of period 23,952 85,092
_______ _______
Cash and cash equivalents at end of
period 198 34,323
_______ _______
Supplemental disclosures of cash flow
information
Cash paid during the period for
interest 66,397 13,641
_______ _______
<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, 1999 and 1998 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 $(121,088) on net
revenue of $65,478 for the quarter ended March 31, 1999 as
compared to a net income of $3,133 on net revenue of $331,098 for
the comparable quarter of the previous year. For the nine months
ended March 31, 1999, the Company reported a cumulative net
(loss) of $(108,902) on net revenue of $707,315 as compared to a
net (loss) of $(135,245) on net revenue of $585,322 for the nine
months ended March 31, 1998.
A major Brazilian customer has defaulted on payment against
delivery in excess of $180,000, which has created a crisis in the
Company by depleting its working capital and leaving the Company
with a related substantial debt which it cannot service. The
Company has recorded a bad debt reserve of $40,000 in
consideration of this disputed receivable.
Dealing with the consequences of this default has consumed
management for the quarter. Staff has been reduced to a bare
minimum to support current business commitments and maintain a
revenue stream to apply against current costs and outstanding
debt. Within the capability of the Company, we are pursuing
negotiations with the customer to achieve payment of monies due,
however the outcome of such actions are presently unknown.
While the Company has future contracts for business, it is
questionable if the Company can accept these contracts and
perform the work without additional working capital. Without
equity funding, the Company is in danger of ceasing operations.
FINANCIAL CONDITION
At March 31, 1999 the Company had a net working capital deficit
of $(427,525) as compared to a working capital deficit of
$(202,559) at March 31, 1998.
Systems West, Inc. has an outstanding line of credit of $209,514,
which becomes due and payable on July 31, 1999. Until this is
paid, the Company's prospects for additional short-term working
capital are doubtful.
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.
Page 9 of 11
<PAGE>
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)
5/10/99 Kenneth W. Ruggles
(Date) (Signature)
5/10/99 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-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 198
<SECURITIES> 0
<RECEIVABLES> 159,208
<ALLOWANCES> 42,506
<INVENTORY> 141,385
<CURRENT-ASSETS> 306,252
<PP&E> 271,450
<DEPRECIATION> 225,354
<TOTAL-ASSETS> 356,122
<CURRENT-LIABILITIES> 733,777
<BONDS> 0
<COMMON> 1,733,316
0
8
<OTHER-SE> 160,435
<TOTAL-LIABILITY-AND-EQUITY> 356,122
<SALES> 65,478
<TOTAL-REVENUES> 65,478
<CGS> 69,306
<TOTAL-COSTS> 186,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (121,088)
<INCOME-TAX> 0
<INCOME-CONTINUING> (121,088)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,088)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
