U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 August 31, 1996.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-16250
DYNATEM, INC.
(Exact name of small business issuer as
specified in its charter)
CALIFORNIA 95-3627099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23263 MADERO, SUITE C, MISSION VIEJO, CALIFORNIA 92718
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (714) 855-3235
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
-------
No
-------
On August 31, 1996, there were 1,418,400 shares of the issuer's Common
Stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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DYNATEM, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets at August 31, 1996
and May 31, 1996 1
Statements of Operations for the Three
Months Ended August 31, 1996
and 1995 2
Statements of Cash Flows for the Three
Months Ended August 31, 1996
and 1995 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis -
Results of Operations 5,6
Part II. Other Information 7
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
DYNATEM, INC.
BALANCE SHEETS
AUGUST 31, MAY 31,
1996 1996
---------- ----------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 519,869 $ 532,918
Accounts receivable 122,832 275,288
Inventories (note 2) 371,292 266,299
Prepaid expenses 11,780 19,980
---------- ----------
Total current assets 1,025,773 1,094,485
Note Receivable 10,215 10,735
Property and equipment, net 24,109 24,919
Other assets 73,201 57,617
---------- ----------
$1,133,298 $1,187,756
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 170,517 $ 160,692
Accrued expenses 36,964 61,569
---------- ----------
Total current liabilities 207,481 222,261
---------- ----------
Shareholders' equity:
Common stock, no par value authorized
50,000,000 shares; 1,418,400 shares
issued and outstanding 2,383,385 2,383,385
Accumulated deficit <1,457,568> <1,417,890>
---------- ----------
Total shareholders' equity 925,817 965,495
---------- ----------
$1,133,298 $1,187,756
========== ==========
See accompanying notes to financial statements.
1
DYNATEM, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1996 AND 1995
1996 1995
--------- ---------
Net Sales $ 364,332 $ 787,421
Cost of Sales 216,010 586,450
--------- ---------
Gross profit 148,322 200,971
--------- ---------
Operating expenses:
Selling, general and administrative 153,024 155,407
Research and development 37,567 26,600
--------- ---------
Total operating expenses 190,591 182,007
--------- ---------
Operating (loss) income (42,269) 18,964
Other income, net 3,391 3,676
--------- ---------
Income (loss) before income taxes (38,878) 22,640
Provision for income taxes 800 800
--------- ---------
Net income (loss) $ (39,678) $ 21,840
========= =========
Earnings (loss) per share (note 3) $ (.03) $ .02
========= =========
Weighted average commom shares outstanding
(note 3) 1,418,400 1,418,400
========= =========
See accompanying notes to financial statements
2
DYNATEM, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1996 AND 1995
1996 1995
--------- ---------
Cash flows from operating activities:
Net income (loss) $ (39,678) $ 21,840
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 3,871 4,583
Change in assets and liabilities:
<Increase> decrease in receivables 152,456 (92,294)
<Increase> decrease in inventories (104,993) 99
Decrease in prepaid expenses 8,200 2,179
Increase in accounts payable 9,825 186,854
<Decrease> in accrued expenses (24,605) (934)
--------- ---------
Total adjustments 44,754 487
--------- ---------
Net cash provided by operating activities 5,076 22,327
--------- ---------
Cash flows from investing activities:
Increase in other assets (15,584) (30,726)
Purchases of property and equipment (3,061) --
--------- ---------
Net cash used in financing activities (18,645) (30,726)
--------- ---------
Cash flows from financing activities:
Repayment of notes receivable 520 780
--------- ---------
Net decrease in cash (13,049) (7,619)
Cash and cash equivalents, beginning balance 532,918 497,611
--------- ---------
Cash and cash equivalents, ending balance $ 519,869 $ 489,992
========= =========
Supplemental disclosures of
cash flow information:
Cash paid during the quarter for:
Taxes $ 800 $ 800
========= =========
See accompanying notes to financial statements.
3
DYNATEM, INC.
-------------
NOTES TO FINANCIAL STATEMENTS
(1) Interim Accounting Policy
-------------------------
In the opinion of the Company's management, the accompanying unaudited
statements include all adjustments including only normal recurring
adjustments necessary for a fair presentation of the financial position of
the Company as of August 31, 1996, and the results of operations and cash
flows for the three months ended August 31, 1996 and 1995. Although the
Company believes that the disclosures in these financial statements are
adequate to make the information presented not misleading, certain
information and footnote information normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Results of
operations for interim periods are not necessarily indicative of results of
operations to be expected for the full year.
(2) Inventories
-----------
A summary of inventories follows:
August 31, 1996 May 31,1996
--------------- -----------
Finished Goods $ 38,829 $ 33,117
Work-in-process 41,299 66,644
Raw Materials 291,164 166,538
-------- --------
$371,292 $266,299
======== ========
(3) Earnings (loss) Per Share
-------------------------
Earnings (loss) per common share is computed based on the weighted average
number of common shares outstanding during the period presented. The
potential exercise of stock options and warrants are not included in the
computation of net income (loss) per share because the effect would not
impact per share information or would be antidilutive.
(4) Foreign Currency Transactions
-----------------------------
For the three months ended August 31, 1996 and 1995, transactions gains and
losses are not material to the financial statements taken as a whole.
4
DYNATEM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Revenue for the first quarter ended August 31, 1996, decreased by 54% to
$364,332 compared to $787,421 in the same period of the prior fiscal year. The
decrease in sales revenue is due to a temporary condition in which shipment of
orders amounting to approximately $380,000 was delayed. Of these orders, 85%
will be shipped and billed in September 1996, and 15% in October 1996.
Cost of sales for the three months ended August 31, 1996, was $216,010 or 59% of
net sales and compares to $586,450 or 74% of net sales in the same period a year
ago. The decrease in cost of sales as a percent of net sales was the result of
a change in product mix. The sales of or products with higher cost of goods
compared to Dynatem products were lower (69% of net sales in 1996) than a year
ago (77% of net sales).
Operating expenses for the three months ended August 31, 1996, and 1995,
experienced no significant fluctuations.
Research and development expenses were $37,567 and $26,600 for the three months
ended August 31, 1996, and 1995, respectively. The increase in research and
development expenses relates to the development of new VME products such as
D2070 and DPCI boards. The Company, however, is utilizing some outside
engineering staff to expediate certain product developments required by some
customers. This may continue to be a factor in the near future at some
additional cost.
Income tax expense for the three months ended August 31, 1996, and 1995, are
not considered material due to the significant net operating loss carryforwards.
Significant deferred tax assets of the Company (which have been fully reserved
for in the accompanying balance sheets) consist of its net operating loss
carryforwards of approximately $1,610,000 and $152,800 for Federal and state tax
reporting purposes, respectively, which, if not utilized to offset future
taxable income, will expire through 2006.
Net earnings decreased for the three months ended August 31, 1996, to a net loss
of $39,678 compared to a net income of $21,840 for the three months ended August
31, 1995. The decrease in net earnings was the result of a much lower revenue
during the quarter as compared to the same period a year ago.
The Company continues to believe that the cash flow generated from operations
will be sufficient to meet its short-term working capital needs over the next 12
months. Additional financing is being considered to achieve increased product
development.
5
DYNATEM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
At August 31, 1996, the Company had a current ratio of 4.9:1 compared to a ratio
of 3.3:1 a year ago. The net worth for the Company at August 31, 1996, was
$925,817 compared to $951,387 at August 31, 1995.
6
DYNATEM, INC.
PART II. OTHER INFORMATION
-----------------
SIGNATURES
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In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DYNATEM, INC.
October 4, 1996 By: /s/ EILEEN DeSWERT
-----------------------------------
Eileen DeSwert, President and
Chief Executive Officer
October 4, 1996 By: /s/ BELEN RAMOS
-----------------------------------
Belen Ramos, Chief Financial
Officer
7