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DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
UNITED STATES
SECURIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-QSB
__________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES
EXCHANGE ACT OF 1934
For the quarter ended July 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES
EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number 1-11034
DIGITRAN SYSTEMS, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 72-086167
(State or other jurisdiction of (IRS) employer
incorporation or organization) identification No.)
2176 North Main, P.O. Box 6310, North Logan, UT 84341-6310
(Address of principal executive offices and zip code)
(435) 752-9067
(Registrant's telephone number, including area code)
Not applicable
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 2000
Common stock, $.01 par value 22,487,174
Class B Common stock, $.01 par value 2,600,000
Transitional Small Business Disclosure Format (Check one)
Yes No X
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DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheet
as of Jul. 31, 2000 3
Unaudited Condensed Consolidated Statements of
Operations, for the three month periods ended
Jul. 31, 2000 and 1999 4
Unaudited Condensed Consolidated Statements of Cash
flows, for the three month periods ended Jul. 31,
2000 and 1999 5
Notes to Unaudited Condensed Consolidated Interim
Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition or Plan of Operation 9
PART II. OTHER INFORMATION 11
SIGNATURES 12
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DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<TABLE>
DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<CAPTION>
July 31, 2000
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 14,645
Accounts receivable 4,000
Total Current Assets 18,645
Total assets $ 18,645
LIABILITIES AND STOCK HOLDERS EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $2,456,857
Short Term Notes Payable 716,017
Total Current Liabilities 3,172,874
Shareholder's Deficit
Preferred Stock $ 537
Common Stock 224,872
Class B Common Stock 26,000
Additional Paid-in Capital 10,380,683
Retained Earnings (Deficit) (13,786,321)
Total Shareholder's Deficit (3,154,229)
Total Liabilities & Shareholder's Deficit $ 18,645
</TABLE>
The accompanying notes are an integral part of these financial statements.
DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
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<TABLE>
DIGITRAN SYSTEMS, INCORPORATED and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three months Ended July
31,
2000 1999
<S> <C> <C>
REVENUES $ 0 $ 0
OPERATING COSTS $ 0 $ 0
EXPENSES
Selling,
general and
administrative
expenses $ 0 $ 0
Depreciation
and
Amortization $ 0 $ 0
OPERATING LOSS BEFORE LOSS FROM
DISCONTINUED OPERATIONS $ 0 $ 0
LOSS FROM DISCONTINUED OPERATIONS (NOTE 3) $ (175,377) $ (119,032)
NET LOSS $ (175,377) $ (119,032)
BASIC LOSS PER SHARE
Continuing operations $ 0 $ 0
Discontinued operations $ (.01) $ (.01)
Total Loss per share $ (.01) $ (.01)
WEIGHTED AVERAGE
COMMON STOCK AND
COMMON STOCK
EQUIVALENTS
OUTSTANDING 22,487,174 14,324,393
</TABLE>
The accompanying notes are an integral part of these financial statements
DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
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<TABLE>
DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
July 31,
2000 1999
<S> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (175,377) (119,032)
Adjustments to reconcilement loss to net cash
Provided by (used in) operating activities:
Depreciation and Amortization 0 40,628
(Increase) Decrease in:
Accounts Receivable 70,770 49,851
Increase (Decrease)in:
Accounts Payable and other Current liabilities 88,853 (206,944)
Net Cash Provided by Operating Activities $ (15,754) $(235,497)
Cash Flows From Investing Activities
Purchase of property and equipment $ 0 $ (3,446)
Proceeds from sale of buildings 550,000
Net Cash From Investing Activities $ 0 $ 546,554
Cash Flows From Financing Activities
Proceeds from short term borrowing 0 180,000
Payments on short term borrowing (5,600) (375,565)
Payments on long term borrowing 0 (104,110)
Net Cash Provided by Financing Activities (5,600) (299,675)
Net Increase (Decrease) in Cash (21,354) 11,382
Cash Beginning of Period 35,999 6,543
Cash End of Period $ 14,645 $ 17,925
</TABLE>
The accompanying notes are an integral part of these financial statements
DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
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NOTE 1 CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all material adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position at July 31, 2000 and the results of operations and cash
flows for the three month periods ended July 31, 2000 and 1999 have been
made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's April 30, 2000 audited
financial statements. The results of operation for the periods ended July 31,
2000 and 1999 are not necessarily indicative of the operating results for
the respective full years.
The simulator products which are marketed by the Company sell at a very high
price in comparison to the total annual sales of the Company. This
relationship leads to individual sales having a disproportionately large
effect on total sales. Therefore, sales within a quarter can lead to highly
volatile results of operations for individual quarters. The results for
individual quarters may not be indicative of annual results. All quarterly
information should be considered in light of the last fiscal year and the
current year to date operations of the Company. Furthermore, due to the fixed
nature of certain coast of revenues, the gross margins on relatively low
revenue volumes will be lower than otherwise expected.
NOTE 2 COMMITMENTS AND CONTIGENCIES
In the normal course of business, there may be various other legal actions
and proceedings pending which seek damages against the Company.
Going Concern
The accompanying financial statements have been presented on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred
recurring operating losses, has a deficit in working capital, has an
accumulated earnings deficit, and has discontinued certain operations. See
further discussion below in Management's discussion and analysis.
NOTE 3 RESULTS FROM DISCONTINUED OPERATIONS
The following is a summary of the loss from discontinued operations
resulting from the elimination of the operations. The financial
statements have been retroactively restated to reflect this event.
No tax benefit has been attributed to the discontinued operations.
For the Three months
Ended July 31,
2000 1999
NET SALES $ 4,000 $ 291,644
COST OF SALES 55,866 71,909
GROSS PROFIT (51,866) 219,735
EXPENSES
Selling, general and administrative expenses 58,511 612,780
Depreciation and amortization 0 40,628
LOSS FROM OPERATIONS (110,377) (433,673)
OTHER INCOME (EXPENSE)
Interest expense (65,000) (69,826)
Gain on disposal of assets 0 369,444
Other 0 15,023
LOSS BEFORE INCOME TAXES (175,377) (119,032)
INCOME TAX BENEFIT 0 0
NET LOSS (175,377) (119,032)
OTHER COMPREHENSIVE INCOME (LOSS)
Dividends on convertible preferred stock; unpaid 0 (7,920)
Total Other Comprehensive Income(Loss) (175,377) (126,952)
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DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
NOTE 4 CONCENTRATIONS OF CREDIT RISK
Most of the Company's remaining business activity is with oil companies,
training institutions and various other related entities, often outside the
United States. Normally, the Company attempts to secure shipments outside the
United States through letters of credit and/or progress payments. In cases
for which shipments are made on open accounts, the Company retains title or
ownership claims to the equipment shipped by terms of its contracts or
agreements until significant payment has been secured.
NOTE 5 CAPITAL STOCK
The Company's capital stock consists of common stock, Class B common
stock and preferred stock. The common stock provides for a
non-cumulative $0.05 per share annual dividend and a $0.01 per share
liquidation preference over Class B common. In addition, the
Company must pay the holders of the common stock a dividend per
share at least equal to any dividend paid to the holders of Class B
common. Holders of the common stock are entitled to one-tenth of a
vote for each share held.
Class B common may not receive a dividend until an annual dividend
of at least $0.05 is paid on the common stock. Holders of Class B
common have preemptive rights with respect to the Class B common
stock and may convert each share of Class B common into one share of
the common stock at any time. Holders of Class B common are
entitled to one vote per share held.
The Series 1 Class A 8% Cumulative Convertible Preferred Stock has a
par value of $0.01 per share. As of April 30, 2000, there were
53,650 shares outstanding. Holders of preferred shares are entitled
to cumulative dividends of 8% per annum on the stated value of the
stock, designated at $7 per share. Dividends are payable semi-
annually on September 15 and March 15. No dividends have been paid
since March 15, 1993, resulting in dividends in arrears at July 2000
of approximately $210,256 or $3.92 per share. Dividends are not
payable on any other class of stock ranking junior to the preferred
stock until the full cumulative dividend requirements of the
preferred stock have been satisfied. The preferred stock carries a
liquidation
preference equal to its stated value plus any unpaid dividends.
Convertibility of any preferred stock issued may be exercised at the
option of the holder thereof at three shares of common stock for
each preferred share converted. Holders of the preferred stock are
entitled to one-tenth of a vote for each share of preferred stock
held. The Company may, at its option, redeem at any time all shares
of the preferred stock or some of them upon notice to each preferred
stockholder at a per share price equal to the stated value ($7.00)
plus all accrued and unpaid dividends thereon (whether or not
declared) to the date fixed for redemption, subject to certain other
provisions and requirements.
For the fiscal year ended April 30, 2000 [ ] Transition Report
under Section 13 or 15(d7.00) plus all accrued and unpaid dividends thereon
(whether or not declared) to the date fixed for redemption, subject to certain
other provisions and requirements.
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DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
PART 1 FINANCIAL INFORMATION
ITEM 2 Management's Discussion and Analysis of Financial Condition or Plan
of Operations.
Management's Discussion For several years now, the company has been
unsuccessful in achievingprofitable operations, generating cash from
operations or attractingsufficient equity or debt financing to sustain its
then current level of operations. Consequently, the company was finally
compelled to drastically reduce its work force, sell its assets and settle its
debts in any way possible, including conversion of debt into the company's
stock.
Plan of Operations
The company still has nominal operations and operating capacity. The company
is represented by sales agents throughout the world, capable engineers
construct and support the company's products on a contract basis, and the
other aspects of the business are supported by shareholders. However, because
the operations are currently as described above, the results of operations are
summarized, netted and classified as the results of discontinued operations.
The prior year's results have been reclassified also for comparability.
In November 1999 the company entered into an agreement with another company (a
non-competitor who has served the same customer base as Digitran for many
years) regarding the company's Crane and Truck simulation divisions. As of
September 15, 2000 not all of the provisions of the agreement have been
completed. The agreement, in principle calls for the other company to: (1)
provide support to the crane and truck division's product lines and customers,
(2) to satisfy certain debts of secured creditors and (3) to assist the
company in payment of its past due taxes. In return, the other company would
be entitled to the benefit from their efforts expended in those divisions,
including revenues from maintenance contracts and future simulator sales. The
company continues to support the petroleum Division and other existing
projects.
Management's Future Plans
At this point, the company's management continues to entertain all viable
potential alternatives to provide creditor satisfaction and shareholder value
including, but not limited to: mergers, acquisitions, reverse acquisitions,
joint ventures, debt -restructures, spin-offs, realization of the company's
intangible assets or value, etc. Alternatives will continue to be
distinguished and favored based upon how well it provides for the existing
creditors and shareholders.
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DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
See "Note 2 Commitments and Contingencies".
ITEM 2 Changes in Securities
During this quarter, no shares were issued.
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DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
ITEM 3 Defaults on Senior Securities
Holders of Series 1 Class A 8% Cumulative Convertible Preferred Stock are
entitled to receive cumulative dividends at the annual rate of $.56 per share,
payable semi-annually on September 15 and March 15, beginning September 15,
1993 resulting in aggregate dividends in arrears of $210,256.
ITEM 4 Submission of Matters to a Vote of Security Holders
None
ITEM 5 Other
None
ITEM 6 Exhibits and reports on Form 8-K
None
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DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Digitran Systems, Incorporated
Registrant
Dated July 31, 2000 By:/s/Loretta Trevers
By: Loretta Trevers
(President, Chairman & Chief
Executive Officer)
