<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE TRANSITION PERIOD FROM _____ TO _____ .
COMMISSION FILE NUMBER 0-22698
- --------------------------------------------------------------------------------
GOLDEN SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
CALIFORNIA 95-4021568
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2125-C MADERA ROAD
SIMI VALLEY, CA 93065
(Address of principal executive offices)
(805) 582-4400
(Registrant's telephone number, including area code)
--------------------------------------------------
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 / / NO / X /
AS OF SEPTEMBER 30, 1999, THERE WERE 5,299,998 SHARES OF NO PAR VALUE COMMON
STOCK OUTSTANDING.
================================================================================
<PAGE>
INDEX LISTING
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets as of December 31, 1998 (unaudited) and March 31, 1998. 1
Consolidated Statements of Operations (unaudited) for the three months
and nine months ended December 31, 1998 and December 31, 1997. 2
Consolidated Statements of Cash Flows (unaudited) for the nine months
ended December 31, 1998 and December 31, 1997. 3
Notes To Consolidated Financial Statements (Unaudited). 4-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. 7-10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 10
PART II
OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 11
SIGNATURES
SIGNATURES 12
</TABLE>
i
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Dec. 31, 1998 March 31, 1998
--------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $22 $79
Accounts receivable, net of allowances 748 871
Inventories 488 790
Prepaid expenses and other current assets 117 122
--------------- -----------------
Total current assets 1,375 1,862
--------------- -----------------
PROPERTY, PLANT AND EQUIPMENT,
at cost, net of accumulated depreciation 576 665
--------------- -----------------
$1,951 $2,527
=============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $8,284 $7,904
Accounts payable 2,992 3,638
Note payable under Recapitalization Plan 2,135 2,023
Net due to related parties 2,319 1,834
Notes payable 922 834
Accrued liabilities 1,146 1,012
--------------- -----------------
Total current liabilities 17,798 17,245
--------------- -----------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 2,599 2,599
SHAREHOLDERS' EQUITY
Common Stock 16,405 16,405
Accumulated deficit (35,555) (34,070)
Cumulative translation adjustments 704 348
--------------- -----------------
Total shareholders' deficit (18,446) (17,317)
--------------- -----------------
$1,951 $2,527
=============== =================
</TABLE>
1
<PAGE>
GOLDEN SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ----------------------------------
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET SALES $1,519 $1,937 $2,790 $3,078
COST OF GOODS SOLD 873 1,713 1,845 3,397
---------------- --------------- --------------- ---------------
Gross Profit (Loss) 646 224 945 (319)
---------------- --------------- --------------- ---------------
OPERATING EXPENSES:
Selling, general and administration 351 455 1,018 1,575
Research and development 84 147 253 872
---------------- --------------- --------------- ---------------
435 602 1,271 2,447
----------------- --------------- --------------- ---------------
Operating Profit (Loss) 211 (378) (326) (2,766)
---------------- --------------- --------------- ---------------
OTHER INCOME (EXPENSE):
Interest expense (461) (503) (1,387) (1,385)
Foreign currency transaction gains (losses) 58 (299) 152 (307)
Gain on sale of subsidiary --- --- 61 ---
Other income 1 22 16 5
---------------- --------------- --------------- ---------------
(402) (780) (1,158) (1,687)
---------------- --------------- --------------- ---------------
Loss before provision for
income taxes (191) (1,158) (1,484) (4,453)
PROVISION FOR INCOME TAXES --- --- 1 1
---------------- --------------- --------------- ---------------
NET LOSS $(191) $(1,158) $(1,485) $(4,454)
================ =============== =============== ===============
BASIC LOSS PER SHARE $(0.04) $(0.22) $(0.28) $(0.84)
================ =============== =============== ===============
WEIGHTED AVERAGE NUMBER OF
OUTSTANDING SHARES 5,300 5,300 5,300 5,300
================ =============== =============== ===============
</TABLE>
2
<PAGE>
GOLDEN SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
Dec. 31, 1998 Dec. 31, 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,485) $(4,454)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization expense 38 167
Provision for losses on accounts receivable 96 108
Provision for losses on inventories 45 45
Loss on disposition of property and equipment --- 1
Decrease (increase) in:
Accounts receivable 27 (1,130)
Inventories 141 672
Prepaid expenses and other current assets (19) 175
Increase (decrease) in:
Accounts payable (448) 291
Accrued liabilities 190 252
--------------- ---------------
Net cash used in operating activities (1,415) (3,873)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (59) (19)
Proceeds from sale of property, plant & equipment --- 272
Restricted cash --- 18
--------------- ---------------
Net cash provided by (used in) investing activities (59) 271
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net of repayments 1,130 1,035
Note payable under Recapitaization Plan 75 ---
Borrowings (repayments) under notes payable --- (124)
Net change in related party balances 530 1,567
--------------- ---------------
Net cash provided by financing activities 1,735 2,478
--------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (318) (102)
--------------- ---------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (57) (1,226)
CASH & CASH EQUIVALENTS, beginning of period 79 1,363
--------------- ---------------
CASH & CASH EQUIVALENTS, end of period $22 $137
=============== ===============
</TABLE>
3
<PAGE>
GOLDEN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
NOTE 1. GENERAL
In management's opinion, all adjustments, which are necessary for a fair
presentation of financial condition and results of operations, are reflected in
the accompanying interim consolidated financial statements. All such adjustments
are of a normal recurring nature. All amounts are unaudited, except the March
31, 1998 balance sheet. This report should be read in conjunction with the
audited consolidated financial statements, notes, and disclosures presented in
the Company's 1998 Annual Report on Form 10-K. Footnotes and other disclosures
which would substantially duplicate the disclosures in the Company's audited
financial statements for fiscal year 1998 contained in the Company's 1998 Annual
Report on Form 10-K, have been omitted. The interim financial information herein
is not necessarily representative of operations for a full year.
NOTE 2. RISKS AND BASIS OF PRESENTATION
Results of operations for the quarter and nine months ended December 31,
1998 have been determined assuming that the Company will continue as a going
concern. However, the Company is currently facing significant issues which raise
substantial doubt that the Company has the ability to continue as a going
concern. These issues are summarized as follows:
-- At December 31, 1998, the Company had outstanding amounts due to four
separate Indian lenders in the amount of $9,206,000, all of which are
currently in default. Of that amount, three banks have issued notices
to the Company demanding immediate repayment of $8,284,000. At
September 30, 1999, the amount due to the banks was approximately $9.9
million. The Company has insufficient funds available to repay the
banks. Because the Indian debt is secured by the assets of Ultra Tek,
alternatives available to the banks include closing the operations of
Ultra Tek and forcing Ultra Tek into liquidation.
-- In fiscal 1995, Ultra Tek's importing of computer components into
India came under investigation by the Indian customs authorities. In
September 1997, the Indian customs authorities issued a separate "show
cause" notice alleging that Ultra Tek has not provided valid
explanations for shortages of imported raw material in its
inventories. In fiscal 1997, Ultra Tek came under the investigation of
the Indian Department of Revenue Intelligence concerning the import
and export of certain components used in the manufacture of power
supplies and customer returned product. Subsequently, a separate "show
cause" notice was issued requesting explanation of why duties should
not be assessed. The above governmental allegations and investigations
could lead to additional duty and penalties being assessed against
Ultra Tek in the amount of $2.4 million and penal action being
initiated against Ultra Tek. In addition, penal action under Indian
law, which the Company believes is very unlikely, could result in
possible monetary fines of up to a maximum of $16.9 million. The
Company is contesting these allegations, but currently, the matters
are unresolved and the outcomes uncertain.
-- The Company has incurred significant losses from operations over the
past four fiscal years and nine months ended December 31, 1998; has
lost its two main historical
4
<PAGE>
customers, which has significantly impacted its revenues; and at
December 31, 1998, had a shareholders' deficit of $18.4 million.
During fiscal 1999 and the six months ended September 30, 1999, the
Company continued to incur significant losses, and management has not
successfully executed on its efforts to achieve profitable operations
and positive cash flows. Outside of related party financing, the
Company has identified no viable source of financing.
Due to the significance of these factors in the Company's financial statements
at December 31, 1998, all assets have been stated at their estimated realizable
values. Costs of resolving the contingencies noted above or settling amounts due
to Indian banks or Company creditors have not been recorded as management is
currently unable to estimate these amounts. Accounts receivable and inventories
were valued at their subsequently realized amounts (inventories at cost), and
property, plant and equipment were valued based on estimates by management and
in accordance with the guidelines of Statement of Financial Accounting Standards
No. 121 "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS 121"). The estimated realizable values and
settlement amounts may be different from the proceeds ultimately received or
payments made.
NOTE 3. INVENTORIES
Inventories are valued at the lower of cost (first in, first out) or
market. Cost includes cost of material, freight and manufacturing overhead.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1998 March 31, 1998
------------- --------------
<S> <C> <C>
Raw materials $227 $584
Work-in-progress 126 78
Finished goods 135 128
------------- --------------
$488 $790
============= ==============
</TABLE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
A) LEASES
GSI leases its corporate headquarters from a related party under a three
year operating lease which expires in December 1999. Ultra Tek leases
certain factory premises from the Indian Government under operating leases
which expire at various dates through October 2000. Future minimum payments
under these and other various operating leases are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ending March 31:
---------------------
<S> <C>
1999 (three months) $ 24
2000 86
2001 27
2002 -
2003 -
-----
$ 137
=====
</TABLE>
5
<PAGE>
B) LITIGATION
The Company is subject to lawsuits in the normal course of business. In the
opinion of management and legal counsel to the Company, pending litigation
will not result in a material loss to the Company.
C) CONTINGENCIES
During fiscal year 1995, the Company's imports of computer components for
final assembly and sale into the domestic tariff area (DTA) of India
(outside the SEEPZ) came under investigation by the Indian customs
authorities. As a result, Company inventories of $1,087,000 (47,447,000 in
Indian rupees) were seized by the authorities. On May 30, 1995, the
authorities issued a notice to the Company alleging misdeclaration of
purported imports of complete computer systems as imports of computer
system components. The notice calls upon the Company to explain why the
authorities should not (a) confiscate all the goods so imported, (b) levy
additional duty of $1,120,000 (48,885,000 in Indian rupees) on the goods
already sold into the DTA, and (c) take penal action against the Company
under the law. The Company paid an advance of $700,000 (20,000,000 in
Indian rupees) against customs duty that may ultimately be levied by the
authorities and recorded this amount in "cost of goods sold" in fiscal
1995. During fiscal 1996, the authorities released the seized goods.
However, because of difficulties encountered in re-exporting the goods and
technological obsolescence, the entire amount of the seized goods has been
included in the inventory reserve amounts at December 31, 1998. No other
penalties or expenses related to this government action have been incurred
by the Company.
In September 1997, the Indian customs authorities issued a "show cause"
notice alleging that Ultra Tek has not provided valid explanations for
shortages of raw material in its inventories. The notice called upon the
Company to explain why the authorities should not (a) impose duty of
$590,000 (25,725,000 in Indian rupees) leviable on imported components
which were alleged not accounted for in the terms of bond executed, (b) why
penal action should not be initiated against the Company, and (c) why a
penalty equal to the duty held to be leviable, $590,000 (25,725,000 in
Indian rupees), in respect of unaccounted goods should not be imposed.
In fiscal 1997, the Company came under investigation by the Indian
Department of Revenue Intelligence (DRI) in connection with the import and
export of certain components and goods used in the manufacture of power
supplies and customer returns. The investigation focused on the alleged
discrepancy noted between the physical stock records and books, in respect
of the work-in-process inventory at March 31, 1996 and 1997 and customer
returned product at March 31, 1992 through March 31, 1997. In May 1998, the
DRI issued a "show cause" notice requesting that the Company explain why
the DRI should not impose duties of approximately $590,000 (25,720,000 in
Indian rupees). Penalties relating to the investigation, if any, have not
yet been determined.
The aggregate of threatened duties and penalties to the Company is
approximately $2,440,000, using the Indian rupee translation rate at
September 30, 1999. Although the Company is contesting the allegations of
the authorities, the outcome of these matters is uncertain at this time.
Accordingly, no additional provisions for any losses that may ultimately
result have been made in these financial statements. In addition, penal
action under Indian law, which the Company believes is very unlikely, could
result in possible monetary fines of up to $16,886,000 at September 30,
1999.
6
<PAGE>
GOLDEN SYSTEMS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
GENERAL
Any forward looking statements made in this Form 10-Q report involve risks
and uncertainties. The Company's future financial results could differ
materially from those anticipated due to the Company's dependence on conditions
in the electronics industry, level of consumer demand for products containing
the Company's power supply components, competitive pricing pressures, technology
and product development risks and uncertainties, product performance, increasing
consolidation of customers and suppliers in the electronics industry, and other
factors beyond the Company's control.
RESULTS OF OPERATIONS
OVERVIEW
As has been previously reported, the Company's operations and cash flow
were significantly impacted by the product rejection that took place during the
third quarter of fiscal 1995. Those returns cost the Company $4.2 million in
uncollected accounts receivable as a result of the issuance of credits for the
rejected units and $2.2 million relating to other direct costs, as well as
additional costs for transportation, unutilized capacity, business interruption,
reorganization, inventory carrying costs, and interest on short-term borrowings.
In fiscal 1996 the Company implemented a program to overcome its cash
difficulties by reducing inventory, organizational restructuring, price
increases, volume growth and more favorable payment terms from the Company's
existing customers. While a number of elements of that program were successfully
implemented, the Company has not been able to generate anticipated amounts of
cash from inventory reduction and, to date, has been unsuccessful in its efforts
to resell any significant number of units of the reworked rejected product. In
addition, the Company has not been successful, to date, in significantly
building its sales volumes to its existing customers or to new customers. While
the Company has implemented a plan to transition its business focus to power
supplies for products that are less price sensitive and therefore provide a
greater opportunity to develop positive profit margins, it has not been
successful in doing so. There can be no assurance that the Company will have
sufficient resources to carry out its plan in the future, or even if the
resources are available, that the Company will be able to successfully develop
the necessary customer relationships and obtain the product contracts to allow
it to continue to operate its business. In light of these facts, and the
operating results discussed below, the Company continues to look at
opportunities to obtain additional capital from sources outside the Company and
at transactions that would change it's fundamental structure.
In summary, the Company suffered a considerable decline in cash flow during
the four fiscal years ended March 31, 1998 and during the nine months ended
December 31, 1998. At December 31, 1998, the Company had negative working
capital of $16,423,000
7
<PAGE>
and an accumulated deficit of $35,555,000. Subsequent to December 31, 1998, the
Company continues to experience negative cash flow as a result of continuing
losses and working capital required to ramp-up production in India. While
current action is being taken to develop a viable operating plan to increase
sales and renegotiate the terms of certain short-term obligations with the
Indian banks, there can be no assurance that any of these actions will be
successfully completed.
THIRD QUARTER OF FISCAL YEAR 1999
Sales for the three months ended December 31, 1998 were $1,519,000 compared
to $1,937,000 for the same quarter in the prior year. This decrease in sales of
22% is due principally to a decline in demand for adapters from one of the
Company's customers and a former customer, which the Company is no longer
approving for credit.
Gross profit on third quarter sales was $646,000 compared to a gross profit
of $224,000 for the third quarter of fiscal year 1998. This increase in gross
margin is due principally to the increase in margins on unit sales which has
more than offset the effect of an overall reduction in sales. The Company
continues to incur unabsorbed indirect manufacturing overhead because of
under-utilization of manufacturing capacity; however, this factor is being
reduced as a result of cost reductions and the sale of the manufacturing
facility in Sri Lanka.
Selling, general and administrative expenses for the third quarter of
fiscal year 1999 were $351,000 compared to $455,000 or a decline of 23%. This
decrease is due to the Company's continuing efforts to reduce costs at all of
its facilities and the sale of the Sri Lanka subsidiary.
Research and development expenses for the current quarter were $84,000 as
compared to $147,000 for the third quarter of fiscal year 1998 or a 43%
decrease. This decrease resulted from the Company's decision during the third
quarter of fiscal 1998 to shut down its product research and development
facility in Scotland and relocate the research and product engineering to the
United States at a much reduced level.
Foreign currency transaction gains increased significantly during the three
months ended December 31, 1998, because of the decrease in the value of the
Indian rupee in relation to the U. S. dollar during the current period. These
gains result primarily from net receivable balances of Ultra Tek, which are
being paid in U. S. dollars.
Net loss for the third quarter ended December 31, 1998 was $191,000
compared to a net loss of $1,158,000 for the same period in the prior year. The
significant reasons for the loss decrease are set forth in the foregoing
discussion.
NINE MONTHS OF FISCAL YEAR 1999
For the nine months ended December 31, 1998, net sales were $2,790,000
compared to $3,078,000 for the same period in fiscal 1998. This 9% decrease is
due principally to a decrease in demand for adapters, which occurred in the
current quarter of fiscal 1999, and the Company's decision to cease doing
business with a former customer.
8
<PAGE>
Gross profit for the first nine months of fiscal 1999 was $945,000 compared
to a gross loss of $319,000 for the same period in fiscal 1998. This major
improvement on a 9% sales decrease is due primarily to significantly improved
sales margins, a reduction in production start-up costs and a decrease in
unabsorbed indirect manufacturing overhead due to cost reductions and the sale
of the manufacturing facility in Sri Lanka.
Selling, general and administrative expenses for the first nine months of
fiscal 1999 were $1,018,000 compared to $1,575,000 for the same period in fiscal
1998, a 35% decline. This reduction in expenses was due to the Company's
continuing actions to reduce costs, the most significant of which were the
decision to restructure its marketing strategy that resulted in the use of sales
representatives, the elimination of salaried employees and the sale of the Sri
Lanka subsidiary.
Research and development expenses for the first nine months of fiscal 1999
were $253,000 compared to $872,000 for the same period in fiscal 1998, or a 71%
decrease. As previously commented on under the analysis of the third quarter,
this reduction in expense resulted from the Company's decision to shut down its
research and development facility located in Scotland during the third quarter
of fiscal 1998.
Foreign currency transaction gains of $152,000 for the first nine months of
fiscal 1999 compared to a loss of $307,000 in the comparable period. As in the
third quarter, these gains result from a weaker Indian rupee in relationship to
the U.S. dollar, which results in more rupees being paid to satisfy U.S. dollar
net receivables due to Ultra Tek.
The gain on sale of subsidiary company of $61,000 represents the recovery
of an account receivable by Ultra Tek, the Company's manufacturing subsidiary in
India. At the time the Sri Lanka company was sold in the fourth quarter of
fiscal 1998, the receivable resulting from the sale of equipment was thought to
be uncollectible and consequently written off in computing the net gain on sale
of the Sri Lanka subsidiary. During the first quarter of fiscal 1999, the new
owner of the Sri Lanka company returned the equipment to Ultra Tek in full
satisfaction of its obligation.
Net loss for the nine months ended December 31, 1999 was $1,485,000
compared to a net loss of $4,454,000 for the same period in the prior year. The
significant reasons for the reduction in the net loss are set forth in the
foregoing discussion.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During the nine months ended December 31, 1998 the Company used $1,415,000
in cash in operating activities. The major use of this cash is due to the net
loss from operations.
INVESTING ACTIVITIES
Cash used in investing activities during the first nine months of fiscal
year 1999 was $59,000 due to the purchase of equipment.
9
<PAGE>
FINANCING ACTIVITIES
Cash provided in the first nine months of fiscal year 1999 from financing
activities aggregated $1,735,000. The primary factors contributing to this
amount relates to a net increase in short-term borrowings totaling $1,130,000,
resulting primarily from the accrual of interest on outstanding debt in India
and an increase of $530,000 in related party balances.
For the nine months ended December 31, 1998, the Company consumed $57,000
in cash, decreasing the $79,000 cash balance at the beginning of the period to
$22,000 at December 31, 1998. At September 30, 1999 the Company had a cash
balance of $112,000. Outside of related party financing, the Company has
identified no viable source of financing. While current actions are being taken
to implement a viable operating plan to increase sales, renegotiate the terms of
certain short-term obligations with three Indian banks and raise additional
capital, there can be no assurance that any of these actions will be
successfully completed.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Inapplicable
10
<PAGE>
PART II -- OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
At December 31, 1998, the Company had outstanding amounts due
to four separate Indian lenders in the amount of $9,206,000,
all of which are currently in default because of non-payment
of principal. Of that amount, three banks have issued notices
to the Company demanding immediate repayment of $8,284,000. At
September 30, 1999, the amount due was approximately $9.9
million. The Company has insufficient funds available to repay
the banks. Because the Indian debt is secured by the assets of
Ultra Tek, alternatives available to the banks include closing
the operations of Ultra Tek and forcing Ultra Tek into
liquidation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 27. Financial Data Sheet
(b) REPORTS ON FORM 8-K
On October 9, 1998 the Company filed Form 8-K
reporting the resignation of Arthur Andersen LLP, as
auditors of the Company, effective October 5, 1998. It
was also reported that Farber & Hass LLP had been
retained as the Company's new independent accountant as
of October 8, 1998.
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.
GOLDEN SYSTEMS, INC.
By: /s/ Jawahar L. Tandon
-----------------------------------
Jawahar L. Tandon
CHIEF EXECUTIVE OFFICER
(DULY AUTHORIZED OFFICER OF THE
REGISTRANT)
By: /s/ Harvey A. Marsh
-----------------------------------
Harvey A. Marsh
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
(DULY AUTHORIZED OFFICER OF THE
REGISTRANT)
Date: November 16, 1999
-----------------------------------
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLILDATED BALANCE SHEET AT DECEMBER 31, 1998 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 748
<ALLOWANCES> 0
<INVENTORY> 488
<CURRENT-ASSETS> 1,375
<PP&E> 576
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,951
<CURRENT-LIABILITIES> 17,798
<BONDS> 0
0
0
<COMMON> 16,405
<OTHER-SE> (34,851)
<TOTAL-LIABILITY-AND-EQUITY> 1,951
<SALES> 2,790
<TOTAL-REVENUES> 2,790
<CGS> 1,845
<TOTAL-COSTS> 1,845
<OTHER-EXPENSES> 1,271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,387
<INCOME-PRETAX> (1,484)
<INCOME-TAX> 1
<INCOME-CONTINUING> (1,485)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,485)
<EPS-BASIC> (.28)
<EPS-DILUTED> (.28)
</TABLE>
