Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended: September 30, 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:
November 8, 1999: 1,386,237
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
September 30, 1999 (unaudited)
and June 30, 1999 Page 3
Statements of Operations
Three months ended September 30,
1999 and 1998 (unaudited) Page 5
Statements of Cash Flows
Three months ended September 30,
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 10
SIGNATURES Page 11
EXHIBITS: Exhibit 27 - Financial Data Schedule
Page 2 of 11
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
ASSETS
September 30, June 30,
1999 1999
(unaudited)
______________________________________
<S> <C> <C>
CURRENT ASSETS
Cash 26,716 1,200
Receivables, net of allowance for
doubtful accounts 14,118 160,402
Inventory
Costs & estimated earnings on
long-term contracts 70,000 --
Work-in-process 286 42,987
Computer parts 70,957 43,477
Prepaid expenses 5,664 3,201
------- -------
Total current assets 187,741 251,267
FURNITURE AND EQUIPMENT, net of
84,064 and 81,978 of
accumulated depreciation 20,485 22,571
PROTOTYPE EQUIPMENT, net of
156,344 and 150,903 of
accumulated depreciation 10,557 15,998
Deposits 3,774 3,774
------- -------
222,557 293,610
======= =======
Page 3 of 11
<PAGE>
<CAPTION>
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
1999 1999
(unaudited)
________________________________
CURRENT LIABILITIES
Note payable 182,406 209,514
Accounts Payable 132,553 134,793
Accrued Liabilities 130,951 187,489
Payables - officers/directors 34,354 34,354
Current portion of capitalized
lease obligation 1,703 1,977
------- -------
Total current liabilities 481,967 568,127
Capitalized lease obligation 4,800 4,411
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,
1,386,237 shares issued and
outstanding 1,745,016 1,745,016
Additional paid-in capital 324,842 324,842
Accumulated deficit (2,334,076) (2,348,794)
--------- ---------
Total stockholders' equity (264,210) (278,928)
--------- ---------
222,557 293,610
========= =========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
Page 4 of 11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
September 30
1999 1998
_____________________________
<S> <C> <C>
Revenues
Sales 190,301 338,247
Costs and expenses
Cost of sales 94,002 160,920
Marketing 22,938 45,300
Research and development 6,080 23,002
General and administrative 52,563 91,923
------- -------
175,583 321,145
------- -------
Net income (loss) 14,718 17,102
======= =======
Net income (loss) per common share .01 .02
Weighted average common shares 1,386,237 1,091,000
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
Page 5 of 11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended September 30
1999 1998
____________________________
<S> <C> <C>
Cash flows from operating activities:
Net income <loss> 14,718 17,102
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,527 7,527
(Increase) decrease in receivables 146,284 (5,489)
(Increase) decrease in costs and
estimated earnings on long-term
contracts (70,000) (183,380)
(Increase) decrease in inventories 15,221 769
(Increase) decrease in prepaid
expenses/deposits (2,463) 317
Increase (decrease) in accounts
payable (2,240) (2,650)
Increase (decrease) in accrued
liabilities and customer deposits (56,538) (12,246)
Increase (decrease) in payables--
officers/directors -- (24,249)
Increase (decrease) in deferred
revenue -- --
------- -------
Net cash provided by (used in)
operating activities 52,509 (202,299)
Cash flows from investing activities
Acquisition of prototype equipment -- (213)
Decrease in other assets -- --
------- -------
Net cash used in investing
activities -- (213)
------- -------
Cash flows from financing activities
Increase on line of credit (27,108) 182,500
Payments on capital lease 115 (1,406)
Investment in Common Stock -- 10,000
------- -------
Net cash used in financing
activities: (26,993) 191,094
------- -------
Page 6 of 11
<PAGE>
Net increase (decrease) in cash and
cash equivalents 25,516 (11,418)
Cash and cash equivalents at beginning
of period 1,200 23,952
------- -------
Cash and cash equivalents at end of
period 26,716 12,534
======= =======
Supplemental disclosures of cash flow
information
Cash paid during the period for
interest 5,848 35,996
<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 September 30, 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, 1999 includes audited financial statements as of June 30,
1999 and 1998, 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. recorded net income of $14,718 on net revenue
of $190,301 for the quarter ended September 30, 1999 as compared
to net income of $17,102 on net revenue of $338,247 for the
comparable quarter of the previous year. Although revenues for
the Company continue to be weak, the corporate wide restructuring
initiated at fiscal year end June 30, 1999 has materially reduced
operating expenses and facilitated a profitable quarter.
Ongoing, the Company expects to operate at modest revenue levels
reflective of its existing back orders, support current business
commitments and aggressively pursue additional capital in order
to return Systems West to more active operating levels,
particularly in sales and marketing.
The Company's back orders at September 30, 1999 approximate
$193,000 representing European and Pacific Rim projects
deliverable in the next six months.
FINANCIAL CONDITION
At September 30, 1999, the Company had a net working capital
deficit of $317,000 as compared to a working capital deficit of
$149,000 at September 30, 1999. The current working capital
requirements are supplemented by export loans guaranteed by the
Small Business Administration and a $50,000 subordinated two
year, 8% interest note convertible at $.50 per share from a
private investor. However, the Company continues to be severely
constrained by shortfalls in working capital needed to support
normal levels of operating activities.
In addition to the borrowings mentioned above, the Company
continues to solicit investors and/or strategic partners to
enable it to capitalize on its core technology opportunities in
the significant global market. To date, definitive investment or
other opportunities have yet to materialize.
The Board and management have serious doubts concerning the
Company's ability to sustain successful operations and return the
operation to annual profitability without a material capital
infusion.
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)
11/11/99 Kenneth W. Ruggles
(Date) (Signature)
11/11/99 Douglas S. Timms
(Date) (Signature)
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 26,716
<SECURITIES> 0
<RECEIVABLES> 16,018
<ALLOWANCES> 1,900
<INVENTORY> 71,243
<CURRENT-ASSETS> 187,741
<PP&E> 271,450
<DEPRECIATION> 240,408
<TOTAL-ASSETS> 222,557
<CURRENT-LIABILITIES> 481,967
<BONDS> 0
<COMMON> 1,745,016
0
8
<OTHER-SE> 324,842
<TOTAL-LIABILITY-AND-EQUITY> 222,557
<SALES> 190,301
<TOTAL-REVENUES> 190,301
<CGS> 94,002
<TOTAL-COSTS> 175,583
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,718
<INCOME-TAX> 14,718
<INCOME-CONTINUING> 14,718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,718
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
