UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934: For the quarterly period
ended: March 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: 000-25496
HYPERDYNAMICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 87-0400335
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2656 South Loop West, Suite 103
Houston, Texas 77054
(Address of principal executive offices, including zip code)
RAM-Z ENTERPRISES, INC.
(Registrant's former name)
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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS
As of March 31, 1998, 11,660,989 shares of common stock, $0.001 par
value, were outstanding.
Transitional Small Business Disclosure Format (check one):Yes [ ] No[X]
HYPERDYNAMICS CORPORATION
CONTENTS
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PART I. FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet at
March 31, 1998 (unaudited) 3
Consolidated Statements of Income for the three
and nine months ended March 31, 1998
and 1997 (both unaudited) 4
Consolidated Statements of Stockholders' Equity
for the nine months ended March 31,
1998 and 1997 (both unaudited) 5
Consolidated Statements of Cash Flows for the nine
months ended March 31, 1998 and 1997
(both unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURES 14
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<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
HYPERDYNAMICS CORPORATION
Balance Sheet
March 31, 1998
ASSETS
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CURRENT ASSETS
Cash $ 17,025
Accounts Receivable 47,184
Employee advances 700
Inventory 30,903
Prepaid expenses 92,566
Revenue interest current portion 47,900
--------------
TOTAL CURRENT ASSETS 236,278
PROPERTY AND EQUIPMENT 1,213
REVENUE INTEREST 99,659
OTHER ASSETS 3,348
---------------
$ 400,498
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Convertible notes payable to stockholders $ 37,500
Accounts payable 314,033
Accrued expenses 23,860
--------------
TOTAL CURRENT LIABILITIES 375,393
TOTAL LIABILITIES 375,393
STOCKHOLDERS' EQUITY
Common stock, par value $0.001; 50,000,000 shares
authorized; 11,499,322 shares issued and outstanding 11,499
Additional paid-in capital 1,085,209
Retained (deficit) (1,071,603)
-----------
TOTAL STOCKHOLDERS' EQUITY 25,105
$ 400,498
</TABLE>
See notes to financial statements
HYPERDYNAMICS CORPORATION
Consolidated Income Statements
3 Months and 9 Months Ended March 31, 1998 and 1997
<TABLE>
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3 months ended Mar. 31, 9 months ended Mar. 31,
1998 1997 1998 1997
-------------- -------------- ------------- ---------
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REVENUES $ 174,397 $ 364,495 $ 640,621 $1,362,029
COST OF REVENUES 115,505 314,820 560,604 1,181,798
------------ ------------- ------------- ------------
GROSS MARGIN 58,892 49,675 80,017 180,231
------------- ------------- ------------ ------------
OPERATING EXPENSES
Selling 24,461 12,889 44,483 27,691
General and administrative 177,541 166,717 448,662 456,692
Interest 1,331 3,373 2,543
Depreciation 4,481 43,592 12,235 70,122
-------------- ----------------- ------------- --------------
Total operating expenses 206,483 224,529 508,753 557,048
------------ ----------------- ----------------- ------------
OPERATING LOSS ( 147,591) ( 174,854) ( 428,736) ( 376,817)
OTHER INCOME (EXPENSE)
Miscellaneous other income
Loss from discontinued operations ( 53,351)
------------------ -------------- ---------- ------------
NET LOSS BEFORE
INCOME TAXES ( 147,591) ( 174,854) ( 428,736) ( 430,168)
INCOME TAX (BENEFIT) 50,616 70,607
------------------------------------------------------------------------
NET LOSS $(147,591) $(124,238) $(428,736) $(359,561)
============================================== =============
(LOSS) PER COMMON SHARE
Continuing operations $(0.02) $(0.03) $(0.07) $(0.06)
Discontinued operations 0.00 0.00 0.00 (0.01)
------- ------- ------- -------
NET LOSS PER COMMON SHARE $(0.02) $(0.03) $(0.07) $(0.07)
====== ================= ================= ======
Weighted average shares outstanding 6,566,056 5,256,891 6,566,056 5,061,198
</TABLE>
See notes to financial statements
<PAGE>
HYPERDYNAMICS CORPORATION
Consolidated Statements of Stockholders' Equity
9 Months Ended March 31, 1998 and 1997
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- -Common Stock - - Paid-in Retained
Shares Amount Capital (Deficit) Totals
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AS RESTATED
Balances, June 30, 1996 804,000 $ 804 $ 107,242 $( 2,861) $ 105,185
Issuance of stock for merger with:
Houston Creative
Connections, Inc. 2,102,000 2,102 ( 2,102) 216,487 216,487
RAM-Z Enterprises, Inc. 480,175 480 ( 480)
Common stock issued for cash 151,175 151 135,533 135,684
Common stock issued for services 3,108,383 3,108 27,291 30,399
Divestiture of Houston Creative
Connections, Inc. (2,102,000) ( 2,102) 2,102
Issuance of stock to former owners of
MicroData Systems, Inc. 700,000 700 ( 700)
Net (loss) ( 359,561) ( 359,561)
Balances, March 31, 1997 5,243,558 $ 5,243 $ 268,886 $ 145,935 $ 128,194
========= ======= ========= ========== =========
Balances, June 30, 1997 5,596,989 $ 5,597 $ 696,111 $( 642,867) $ 58,841
Options exercised 64,000 64 39,936 40,000
Conversion of debt 5,833,333 5,833 344,167 350,000
Stock issued for cash 5,000 5 4,995 5,000
Net (loss) ( 428,736) ( 428,736)
Balances, March 31, 1998 11,499,322 $11,499 $1,085,209 $(1,071,603) $ 25,105
========== ======= ========== =========== ==========
</TABLE>
See notes to financial statements
<PAGE>
HYPERDYNAMICS CORPORATION
Consolidated Statement of Cash Flows
9 Months Ended March 31, 1998 and 1997
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1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $( 428,736) $( 359,561)
Adjustments to reconcile net income to cash
provided from operating activities
Depreciation and amortization 12,235 70,122
Divestiture of Houston Creative Connections, Inc. 216,487
Common stock issued for services 36,596
Changes in:
Restricted certificate of deposit 70,000
Accounts receivable ( 7,412) 108,908
Due from officers 4,166
Inventory ( 4,166)
Other assets ( 76,325) ( 27,796)
Accounts payable 122,371 ( 85,533)
Accrued expenses ( 7,102) 7,026
Deferred revenue 6,316
------------------ --------------
NET CASH USED FOR OPERATING ACTIVITIES ( 314,969) ( 27,435)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in other assets ( 63,103)
Collection of revenue interest 29,441
Purchase of fixed assets ( 52,515) ( 62,411)
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES ( 23,074) ( 125,514)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 395,000 135,684
Net increase (decrease) under line of credit ( 70,000) 70,000
Reduction in notes payable ( 350,000) ( 32,177)
----------- ------------
NET CASH PROVIDED FROM FINANCING ACTIVITIES ( 25,000) 173,507
------------ ------------
NET DECREASE IN CASH ( 13,043) 20,558
CASH AT BEGINNING OF PERIOD 30,068 102,907
------------- ------------
CASH AT END OF PERIOD $ 17,025 $ 123,465
============ ===========
SUPPLEMENTAL INFORMATION
Interest paid $ 279 $ 1,356
</TABLE>
See notes to financial statements
<PAGE>
HYPERDYNAMICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. The unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. The financial statements contained
herein should be read in conjunction with the audited financial
statements of the Company. Accordingly, footnote disclosure which would
substantially duplicate the disclosure in those statements has been
omitted.
2. In October 1997, the Company agreed to assume the operations of two
small companies engaged in sales of wireless cable products and services by
signing employment agreements with the two owners of these two companies. One
owner received a total of $40,000 as a prepaid commission for assignment of all
sales in process. As of March 31, 1998, $40,000 has been paid and is carried as
a current asset pending the expected realization of these orders in the next
accounting quarter. The other owner has an agreement to receive 144,000 shares
of Company stock contingent on collections by the Company of at least $144,000
in contingent FCC license consultation fees. A Company subsidiary, Wired &
Wireless Corporation, is continuing these sales efforts. As of March 31, 1998,
the Company has collected $5,000 in consultation fees, and issued 5 shares of
common stock.
3. In October 1997, the Company entered into two executive employment
Agreements whereby the Company agreed to pay a total of $14,600 per
month. Other incentives are based on performance. The agreements
terminate June 30, 1998 and October 15, 1998.
4. The Company received $350,000 from Emerald Bay Interests, Ltd. as
convertible debt. The debt matured August 31, 1997 and was converted
into 5,833,333 shares of common stock at $0.06 per share in January
1998.
5. Convertible notes payable to stockholders in the amount of $37,500 matured in
January 1998. The notes are payable upon demand, or may be converted into 25,000
and 5,000 shares at $1.00 and $2.50 respectively. As of May 8, 1998,
no refinancing or conversion has been completed.
6. In December 1997, options for 64,000 shares were exercised for $40,000.
<PAGE>
HYPERDYNAMICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
7. Options for 336,000 shares at $1.25 were issued to professional
consultants for services during July 1997. Management believes $1.25 represents
the fair market value of the stock on the date of grant. Options for 3,350
shares at $1.00 were issued to professional consultants for services during
December 1997. Management believes $0.625 represents the fair market value of
the stock on the date of grant. Also in December 1997, options for 375,000
shares were canceled and reissued. The exercise price was changed from $1.25 to
$0.625 for 125,000 shares, $1.00 for 125,000 shares, and $1.375 for 125,000
shares.
8. In April 1998, options for 162,875 shares were exercised for $140,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Discussion
HyperDynamics Corporation is an information systems services company
that provides integrated wired and wireless voice, video, and data technology
that maximizes a business=s return on its technology investment. The Company has
accomplished two tactical business transactions with Wireless Cable Connection
and Barris Communications, Inc. that allow it to confidently enter into the
wireless technology market. The Company has continued to invest in and develop
its wireless capability through its subsidiary Wired and Wireless Corporation
during the quarter ended March 31, 1998. This increased investment is expected
provide positive results ramping up during the fourth quarter to end on June 30,
1998. These expected results include:
Significantly increased revenues and gross margins from International
customers for wireless TV equipment sales An expanding wireless
technical foundation to provide core capability necessary to offer
completely designed,
implemented, and maintained MMDS based wireless systems around the
world. This capability should significantly boost gross margin
averages as well.
Providing the capability of the Company to build out and operate
strategically acquired wireless TV markets which will present a
recurring revenue opportunity.
Providing the capability for HyperDynamics Corporation to develop
integrated wired and wireless information systems infrastructures
to include our customers voice, video, and data communication
needs associated with their own intranet and integrated Internet
access to the world.
This quarter ended March 31, 1998, the Company has more clearly defined
the business plan for MicroData Systems, Inc. (Wholly owned subsidiary of
HyperDyanamcis Corporation).
Results of Operations
As a result of the primary focus on tactical acquisitions for wireless
technology and a related delay due to technical problems with the wireless
equipment, revenues have decreased to $174,397 for the three months ended March
31,1998, from $364,495 for the same period in 1997. The decrease was a result of
the investment focus in Wired and Wireless with respect to limited capital
resources available and a technical problem with equipment ordered in the
quarter but not delivered yet as a result.
Cost of Revenues decreased, correspondingly to the sales decrease, to
$115,505 in the period, from $314,820 for the same period in 1997. Gross margin
percentage was considerably more at 51% in the quarter compared to 15.7% for the
same period last year as a result of reduced hardware sales and the beginnings
of increased higher margin services for MicroData.
Selling, General and Administrative expenses Increased to $202,002 in
the three month period, as compared to $179,606 for the same period in 1997.
This increase was caused by the additional overhead for two executive contracts
for Wired and Wireless which increase General and Administrative expenses by
approximately $46,288 for the quarter. These contracts were not in place for the
same period in 1997. The Company chose not to capitalize these costs as startup
costs for this first several ramp up months of Wired and Wireless operations.
Additionally, sales and marketing expenses for international business was
$24,461 for the quarter and did not exist in 1997.
Net Loss. The net loss of the Company was $(147,591) for the three
months ended December 31, 1997, or ($.02) per share.
Liquidity and Capital Resources
During this quarter the key bridge financing loan of $350,000 was
converted to 5,833,333 restricted common stock shares. Under the terms of
conversion no stock was converted for accrued interest and the debt has been
completely converted to equity. As of March 31, 1998, the Company continues to
operate with a current ratio of 1.07 and a negative quick ratio indicating a
tight cash flow position. Subsequent to the end of the quarter, the Company has
received $170,000 of cash contribution through the exercising of outstanding
options for 192,875 shares of common stock in the Company. A requirement for the
HyperDynamics business plan is to obtain significant equity funding starting in
the 3rd quarter 1998 for the following purposes:
To support our growing working capital requirement for our rapidly
expanding sales volume so as to provide the necessary liquidity to
keep this progress from slowing down
To help close additional tactical acquisitions that will immediately
enhance the core capabilities, sales volume, margins and bottom
line profitability of the Company
To provide working capital and some investment capital for marketing
and sales activity that will allow the most talented people of our
tactical acquisitions to focus on increased sales forecast and
critical operations instead of being bogged down by having to
manage tight cash flow.
To provide investment capital for strategic, money making technical
assets including hardware and software purchases and software
development.
To step closer to qualification for small-cap NASDAQ or American
Exchange qualifications.
The company has plans to raise a minimum of five million in the next 9
months to support these requirements. In addition to other capital raising plans
and strategies will be established and specified in the 4th quarter of FYE 1998
ending June 30, 1998.
Prospective Information
HyperDynamics Corporation has positioned itself to support and sustain
the anticipated significant revenue growth over the remainder of the fiscal year
1998 and throughout FYE 1999.
HyperDynamics Corporation is an information system
services company that provides integrated wired and wireless, voice, video,
and data communications technology that maximizes a business's return on its
technology investment. See www.hyd.net.
- -icroData Plans
In line with the Information System Services direction of HyperDynamics
Corporation, MicroData will re-focus its sales and marketing plan towards:
Providing wired and wireless Intranet and Internet Integration
using client-server application technology.
MicroData's plans for sales and marketing focus are as follows:
Client-server based accounting systems with uniquely developed
vertical industry capabilities Office automation and database
integration Telephony integration Internet application development
and integration Niche software application development
Personal computer integration and custom hardware solutions
With the capital constraint based focus this year being on the Wired
and Wireless investment through Wired and Wireless Corporation, MicroData has
taken a back seat to developing its area of the business plan. However, the
areas of its significant technical improvements so far this year are:
Greatly enhanced PC integration and custom hardware solution
capability for sales, implementation, and support. Rapidly growing
Internet application development and integration capability. See
www.hyd.net. Expanding software development ability to support the
client-server based accounting systems which are scheduled to
be ramped up during the first quarter of FYE 1999 beginning in
July of this year.
HyperDynamics has targeted plans for acquisitions and investment to
enhance MicroData's capabilities in the areas of:
Marketing and sales of Intranet and Internet integration as well
as sales and marketing for Great Plains CS+ SQL client-server
based accounting software and related development and Internet
integration projects.
Telephony integration expertise to enhance our voice and data
integration platform. Custom software application development
capabilities. Ongoing commitment to technical certification and
compliance for the Microsoft NT computing platform.
Wired and Wireless Plans -
By adding the new Wired & Wireless subsidiary, revenues and gross
profit margins are expected to increase substantially. This fiscal year, Wired
and Wireless has been the primary core investment of HyperDynamics to help it
solve its core revenue and capitalization issues. During the quarter ended March
31, 1998, the Company has experienced an unexpected technical delay from the
manufacturer for a purchase order received and pending delivery in the amount of
$350,000. It was believed that this order would ship during the quarter ended
March 31, 1998. The Company expects to either ship this particular order this
quarter ending June 30, 1998 or to get its $40,000 pre-paid deposit returned
post haste. Regardless of the resolution to this particular sale or possible
cancellation thereof, it has no bearing on the wireless down-converter business
which remains the primary focus.
Wireless TV equipment sales-
After a three month delay, purchase orders for June and July 1998 have
been received and are being processed in the amount of $110,000 and
$148,500 respectively.
Through the forecast of Joe Barris, Vice President for Wired & Wireless
Corporation, the forecast for international sales of wireless TV
equipment is growing rapidly. The Company will continue to invest in
the area of sales and marketing for wireless TV equipment sales.
Additionally, the Company is negotiating a distribution agreement with
key manufacturers of strategically based wireless equipment. The
Company plans to market its own private brand of down-converter and
transmitter equipment.
Wireless System Sales-
Among other goals the Company will start to make international
customers aware of the turn-key wireless system talent that it has
available to service their wireless needs.
As of May 14, 1998, the Company is expected to improve its operating
results on a monthly basis. Pending the outcome of current orders pending, the
Company could start reporting profits in the 1st quarter of FYE 1999 ending
September 30, 1998.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed with this Quarterly
Report or are incorporated herein by reference:
Exhibit Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K
On January 28, 1998, the Company filed a current
report on Form 8-K regarding a change in control of
the Company.
<PAGE>
SIGNATURE
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.
HYPERDYNAMICS CORPORATION
(Registrant)
By: /s/ Kent Watts
Kent Watts, Chairman of the Board, Chief
Executive Officer and Chief Accounting Officer
Dated: May 17, 1998
EXHIBITS INDEX
Exhibit Number Description
27 Financial Data Schedule
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<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary information extracted from Part 1
of Form 10-Qsb for the quarterly period ended March 31, 1998 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000937136
<NAME> HYPERDYNAMICS CORPORATION
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
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</TABLE>
