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: December 31, 1997
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 December 31, 1997, 5,660,989 shares of common stock, $0.001 par
value, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
HYPERDYNAMICS CORPORATION
CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheet at
December 31, 1997(unaudited) 3
Consolidated Statements of Income for the three
and six months ended December 31, 1997
and 1996 (both unaudited) 4
Consolidated Statements of Stockholders' Equity
for the six months ended December 31, 1997
and 1996 (both unaudited) 5
Consolidated Statements of Cash Flows for the six
months ended December 31, 1997 and 1996
(both unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on From 8-K 9
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURES 10
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1.Financial Statements
HYPERDYNAMICS CORPORATION
Consolidated Balance Sheet
December 31, 1997
ASSETS
CURRENT ASSETS
Cash $ 20,130
Certificate of deposit (restricted) 70,000
Accounts receivable 229,887
Due from officers 8,123
Inventory 35,535
Prepaid expenses 39,277
Revenue interest current portion 27,000
------
TOTAL CURRENT ASSETS 429,952
PROPERTY AND EQUIPMENT 53,189
REVENUE INTEREST 136,538
OTHER ASSETS 3,348
-----
623,027
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Convertible notes payable $ 350,000
Convertible notes payable to stockholders 37,500
Bank credit line 70,000
Accounts payable 327,745
Accrued expenses 20,086
------
TOTAL CURRENT LIABILITIES 805,331
-------
STOCKHOLDERS' EQUITY
Common stock, par value $0.001; 50,000,000 shares
authorized; 5,660,989 shares issued and outstanding 5,661
Additional paid-in capital 736,047
Retained (deficit) (924,012)
--------
TOTAL STOCKHOLDERS' EQUITY (182,304)
--------
623,027
=======
<PAGE>
HYPERDYNAMICS CORPORATION
Consolidated Income Statements
3 Months and 6 Months Ended December 31,
1997 and 1996
<TABLE>
<CAPTION>
3 months ended Dec. 31, 6 months ended Dec. 31,
1997 1996 1997 1996
-------------- -------------- ------------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 310,221 $ 566,062 $ 466,224 $ 996,940
COST OF REVENUES 297,361 493,015 445,099 866,978
------- --------- ------- ---------
GROSS MARGIN 12,860 73,047 21,125 129,962
------- --------- ------------ ------------
OPERATING EXPENSES
Selling 19,419 6,610 20,022 14,802
General and administrative 140,124 173,412 271,121 289,382
Interest 2,033 213 3,373 1,212
Depreciation 3,577 11,325 7,754 26,529
----- ------ ----- ------
Total operating expenses 165,153 191,560 302,270 331,925
------------ ----------- ----------------- ------------
OPERATING LOSS ( 152,293) ( 118,513) ( 281,145) ( 201,963)
OTHER INCOME (EXPENSE)
Miscellaneous other income
Loss from discontinued operations ( 50,982) ( 53,351)
------------ ----------- --------- ------------
NET LOSS BEFORE
INCOME TAXES ( 152,293) ( 169,495) ( 281,145) ( 255,314)
INCOME TAX (BENEFIT) 50,616 70,607
------------------ ----------------- ----------------------------------
NET LOSS $( 152,293) $( 118,879) $( 281,145) $( 184,707)
=========== ============ =========== ===========
NET LOSS PER COMMON SHARE $(0.03) $(0.02) $(0.05) $(0.03)
=========== ============ =========== ===========
Weighted average shares outstanding 5,397,861 6,504,279 5,397,861 6,424,519
</TABLE>
<PAGE>
HYPERDYNAMICS CORPORATION
Consolidated Statements of Stockholders' Equity
6 Months Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
- -Common Stock - - Paid-in Retained
Shares Amount Capital (Deficit) Totals
<S> <C> <C> <C> <C> <C>
AS RESTATED
Balances, June 30, 1996 804,000 $ 804 $ 107,242 $( 9,058) $ 98,988
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 59,000 59 37,941 38,000
Common stock issued for services 3,130,000 3,130 26,770 29,900
Net (loss) ( 184,707) ( 184,707)
---------------- ------------ ---------------- ---------- ----------
Balances, December 31, 1996 6,575,175 $ 6,575 $ 169,371 $ 22,722 $ 198,668
========= ======= ========= =========== =========
Balances, June 30, 1997 5,596,989 $ 5,597 $ 696,111 $(642,867) $ 58,841
Options exercised 64,000 64 39,936 40,000
Net (loss) (281,145) ( 281,145)
---------------- ------------ ---------------- --------- ----------
Balances, December 31, 1997 5,660,989 $ 5,661 $ 736,047 $(924,012) $( 182,304)
========= ======= ========= ========= ==========
</TABLE>
<PAGE>
HYPERDYNAMICS CORPORATION
Consolidated Statement of Cash Flows
6 Months Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $( 281,145) $( 184,707)
Adjustments to reconcile net income to cash
provided from operating activities
Depreciation and amortization 7,754 62,410
Common stock issued for services 16,891
Changes in:
Accounts receivable ( 190,115) 181,819
Due from officers ( 3,257)
Inventory ( 8,798)
Other assets ( 23,036) 3,940
Accounts payable 136,083 ( 92,982)
Accrued expenses ( 10,876) 59,110
Deferred revenue 21,272
Deferred income taxes ( 70,607)
----------- ------------
NET CASH USED FOR OPERATING ACTIVITIES ( 373,390) ( 2,854)
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in other assets ( 32,053)
Collection of revenue interest 13,462
Purchase of vehicles ( 84,173)
Purchase of equipment/leasehold improvements ( 40,010) ( 54,353)
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES ( 26,548) ( 170,579)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 40,000 103,682
Net increase under line of credit 23,000
Net increase in long-term debt 52,319
Increase in short-term convertible notes 350,000
Reduction in notes payable ( 31,009)
------------ ------------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 390,000 147,992
------------ ------------
NET DECREASE IN CASH ( 9,938) ( 25,441)
CASH AT BEGINNING OF PERIOD 30,068 153,462
------------- ------------
CASH AT END OF PERIOD $ 20,130 $ 128,021
============ ===========
SUPPLEMENTAL INFORMATION
Interest paid $ 279 $ 1,212
</TABLE>
<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 is to receive a total of $40,000 as a prepaid commission for
assignment of all sales in process. As of December 31, 1997, $26,461 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, will
continue these sales efforts.
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. 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.
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 voice, video, and data technology that maximizes its
customers return on their 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. This wireless capability has been organized under the Wired &
Wireless Corporation subsidiary and is strategically positioned to provide the
following for HyperDynamics Corporation:
1. Significantly increased revenues and gross margins from
International customers for wireless TV equipment sales.
2. Wireless technical foundation to provide core capability necessary
to offer completely designed, implemented, and maintained MMDS based wireless
systems around the world. This capability is expected to significantly boost
gross margin averages as well.
3. Wired & Wireless will provide the core technical capability to build
out and operate strategically acquired wireless TV markets which will present a
recurring revenue opportunity.
4. Wired & Wireless will on an ongoing basis work with other
HyperDynamics Technology companies 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 the Company has successfully retrofitted MicroData
Systems, Inc.'s facility for significantly enhanced PC integration services and
custom system sales. In a subsequent event to the end of this quarter, Wired &
Wireless has received orders for and is shipping $378,500 of wireless equipment
sales in the 3rd quarter. MicroData Systems, Inc. has received orders for over
$75,000 in the early February.
Results of Operations
As a result of the primary focus on strategic moves and tactical
acquisitions revenues decreased to $310,221 for the three months ended December
31,1997, from $566,062 for the same period in 1996. The decrease was a result of
the re-focus of the Company, the retrofit of the MicroData facility, and the
investment activity focused to establish the new Wired & Wireless subsidiary.
Cost of Revenues decreased, correspondingly to the sales decrease, to
$297,361 in the period, from $493,015 for the same period in 1996. Gross margin
percentage wise suffered in the quarter as a result of a conservative write-off
against cost of goods sold of usable but non-sellable inventory. This was
accomplished as part of the MicroData Systems, Inc. re-focus and retrofit.
Additionally, certain costs associated with system assembly personnel were
charged to costs of goods sold which will not significantly effect the gross
margin on a percentage basis as the sales volume ramps up.
Selling, General and Administrative expenses decreased to $165,153 in
the three month period, as compared to $191,560 for the same period in
1996. This reduction was caused significantly by a reduction in legal
and other professional fees. This reduction was accomplished while at the
same time two key employees with employment contracts and salaries were
hired for Wired & Wireless Corporation, during the quarter. The Company chose
not to capitalize these costs as startup costs for this first two months of
Wired and Wireless operations.
Net Loss. The net loss of the Company was $(152,293) for the three
months ended December 31, 1997, or ($.03) per share. This loss can be primarily
attributed to the significant operational changes made by management which
are expected to significantly improve the results of operations starting in
the quarter to end on March 31, 1998.
Liquidity and Capital Resources
During this quarter the key bridge financing plan was extended as the
President of the Company negotiated the funding to be extended to as much as
$500,000 on October 20, 1997. The bridge financing was completed at a total
funding of $350,000. In a subsequent event, the President of the Company has
negotiated the bridge loan to be converted to restricted common stock at less
than the previously agreed conversion. Under the negotiated terms no stock was
converted for accrued interest and the debt has been completely converted to
equity.
A requirement for the HyperDynamics business plan is to obtain
significant equity funding starting in the 3rd quarter 1998 for the following
purposes:
1. 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.
2. To help close additional tactical acquisitions that will immediately
enhance the core capabilities, sales volume, margins and bottom line
profitability of the Company.
3. 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.
4. To provide investment capital for strategic, money making technical
assets including hardware and software purchases and software development.
5. To step closer to qualification for small-cap NASDAQ qualifications.
The company has plans to tactically raise a minimum of five million in
the next 9 months to support these requirements. In addition to other capital
raising plans and strategies to be determined and specified in the 3rd quarter
of 1998, the Company can possibly obtain some additional capital upon the
exercise of previously issued warrants and outstanding options for common stock.
Prospective Information
HyperDynamics Corporation has positioned itself to support and sustain
the anticipated significant revenue growth over the remainder of the fiscal
year.
MicroData Plans - The retrofitted MicroData facility is capable of
handling multiples of sales volume compared to prior years with regard to PC
integration type sales.
Integration sales focus - MicroData's primary goals include a
concentrated effort to build it's integrated system sales volume with an
increasing margin due to an increasing ratio of professional services to
commodity hardware sales. To this end the Company is building the capabilities
of a separate group to concentrate on accounting systems and integrated network
sales. Details of this systems focus will be released further in the 3rd quarter
of 1998.
Software Development - Additionally, MicroData has completed its first
in-house software development project which will significantly enhance accurate
response time for quotation of computer hardware and software. The newly
developed application, QuoteSQL, uses the Microsoft SQL server database. This
application will be used in-house and be marketed as an application to enhance
the capabilities of Great Plains Software's Dynamics C/S+ SQL accounting system
as well as potentially other SQL database based accounting systems. This is a
natural direction for MicroData's client server based software development,
given its relationship with Great Plains. This new tool is expected to
dramatically increase the company's productivity. It is expected that customer
demands will direct the company into other vertically based software development
projects which will greatly enhance higher margin integrated system sales.
Wired and Wireless Plans - By adding the new Wired & Wireless
subsidiary, revenues and gross profit margins are increasing substantially.
Wireless TV equipment sales- Through the forecast of Joe Barris, Vice
President, 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- The company plans to attend the international
wireless cable show in Singapore, China in late March 1998. 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 February 14, 1998 and looking to the end of the 3rd quarter, the
Company has a very good chance to show profits for the quarter. This progress is
expected to continue at a growing pace.
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
From 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: February 17, 1998
<PAGE>
EXHIBITS INDEX
Exhibit Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL INFORMATION SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
PART I OF FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000937136
<NAME> HYPERDYNAMICS CORPORATION
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-01-1997
<EXCHANGE-RATE> 1
<CASH> 90130
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<RECEIVABLES> 238010
<ALLOWANCES> 0
<INVENTORY> 35535
<CURRENT-ASSETS> 429952
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0
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<INCOME-PRETAX> (152293)
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</TABLE>
