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 NOVEMBER 30, 1996.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16250
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DYNATEM, INC.
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(Exact name of small business issuer as
specified in its charter)
CALIFORNIA 95-3627099
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23263 MADERO, SUITE C, MISSION VIEJO, CALIFORNIA 92691
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(Address of principal executive offices)
(714) 855-3235
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
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
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On December 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 November 30, 1996
and May 31, 1996 1
Statements of Operations for the Three
Months Ended November 30, 1996
and 1995 2
Statements of Operations for the Six
Months Ended November 30, 1996
and 1995 3
Statements of Cash Flows for the Six
Months Ended November 30, 1996
and 1995 4
Notes to Financial Statements 5,6
Item 2. Management's Discussion and Analysis or
Plan of Operation 7
Part II. Other Information 8
DYNATEM, INC.
BALANCE SHEETS
NOVEMBER 30, MAY 31,
1996 1996
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ASSETS
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Current assets:
Cash and cash equivalents $ 525,467 $ 532,918
Accounts receivable, less allowance
for doubtfull accounts 340,308 275,288
Inventories (note 2) 315,990 266,299
Prepaid expenses 3,572 19,980
------------ ------------
Total current assets $ 1,185,337 $ 1,094,485
Note Receivable 9,695 10,735
Plant and equipment, net 24,453 24,919
Other assets 64,856 57,617
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$ 1,284,341 $ 1,187,756
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 235,304 $ 160,692
Accrued expenses 49,302 61,569
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Total current liabilities $ 284,606 $ 222,261
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Shareholders' equity:
Common stock, no par value, authorized
50,000,000 shares; issued and
outstanding 1,418,400 shares at
November 30, 1996 and May 31, 1996 $ 2,383,385 $ 2,383,385
Accumulated deficit (1,383,650) (1,417,890)
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Total shareholders' equity 999,735 965,495
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$ 1,284,341 $ 1,187,756
============ ============
See accompanying notes to financial statements.
1
DYNATEM, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
1996 1995
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Net Sales $ 853,304 $ 613,718
Cost of Sales 579,387 460,495
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Gross profit 273,917 153,223
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Operating expenses:
Selling, general and administrative 168,619 166,629
Research and development 37,214 41,080
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Total operating expenses 205,833 207,709
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Operating income (loss) 68,084 (54,486)
Other income, net 5,834 2,785
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Net income (loss) $ 73,918 $ (51,701)
=========== ==========
Income (loss) per share (note 3) $ .05 $ (.04)
Weighted average shares outstanding
(note 3) 1,418,400 1,418,400
=========== ==========
See accompanying notes to financial statements
2
DYNATEM, INC.
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1996 AND 1995
1996 1995
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Net Sales $ 1,217,636 $ 1,401,139
Cost of Sales 795,397 1,046,945
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Gross profit 422,239 354,194
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Operating expenses:
Selling, general and administrative 321,643 322,036
Research and development 74,781 67,680
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Total operating expenses 396,424 389,716
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Operating income (loss) 25,815 (35,522)
Other income, net 9,225 6,461
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Income (loss) before income taxes 35,040 (29,061)
Provision for income taxes 800 800
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Net income (loss) 34,240 $ (29,861)
=========== ===========
Income (loss) per share (note 3) $ .02 $ (.02)
=========== ===========
Weighted average shares outstanding
(note 3) 1,418,400 1,418,400
=========== ===========
See accompanying notes to financial statements
3
DYNATEM, INC.
STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED NOVEMBER 30, 1996 AND 1995
1996 1995
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Cash flows from operating activities:
Net income (loss) $ 34,240 ($ 29,861)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,855 9,309
Change in assets and liabilities:
Increase in receivables (65,020) (213,466)
Increase in inventories (49,691) (14,789)
Decrease in prepaid expenses 16,408 7,797
Increase in accounts payable 74,612 254,104
Increase <decrease> in
accrued expenses (12,267) 6,069
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Total adjustments (28,103) 49,024
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Net cash provided by operating activities 6,137 19,163
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Cash flows from investing activities:
Increase in other assets (7,239) (31,589)
Purchases of property & equipment (7,389) -
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Net cash used in financing activities (14,628) (31,589)
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Cash flows from financing activities:
Repayment of notes receivable 1,040 1,430
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Net decrease in cash (7,451) (10,996)
Cash, beginning balance 532,918 497,611
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Cash, ending balance $ 525,467 $ 486,615
=========== ==========
Supplemental disclosures of
cash flow information:
Cash paid during the quarter for:
Taxes $ - $ -
=========== ==========
See accompanying notes to financial statements.
4
DYNATEM, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Interim Accounting Policy
-------------------------
In the opinion of the Company's management, the accompanying unaudited
statements include only normal, recurring adjustments necessary for a
fair presentation of the Company's financial position and the results of
operations and cash flows for the three and six months ended November
30, 1996 and 1995. Although the Company believes that the disclosures in
these financial statements are adequate to ensure that the information
presented is 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
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A summary of inventories follows:
November 30, 1996 May 31, 1996
----------------- ------------
Finished Goods $ 65,428 $ 33,117
Work-in-process 63,465 66,644
Raw Materials 187,097 166,538
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$315,990 $266,299
======== ========
(3) Income (loss) Per Share
-----------------------
Income (loss) per common share is computed based on the weighted average
number of common shares outstanding during the periods presented. The
potential exercise of stock options and warrants are not included in the
computation of net income (loss) per share because their effect would
not impact per share information or would be antidilutive.
5
DYNATEM, INC.
NOTES TO FINANCIAL STATEMENTS
(4) Foreign Currency Transactions
-----------------------------
During the three months ended November 30, 1996 and 1995, transaction
gains and (losses) were $28,781 and $244 and for the six months ended
November 30, 1996 and 1995, were $37,898 and $18,098 respectively. The
exchange rates of German DeutschMark versus the U.S. dollar was
Approximately 67% for November 30, 1996 as compared to 73% for November
30, 1995.
(5) Income Taxes
------------
Income tax expense for the six months ended November 30, 1996 and 1995
are not considered material due to the utilization of net operating loss
carryforwards.
Significant deferred tax assets of the Company consist of the net
operating loss carryforwards for federal and state tax purposes of
approximately $1,610,000 and $152,800 at November 30, 1996,
respectively, which, if not utilized to offset future taxable income,
will expire through 2006.
(6) Concentration of Credit Risk
----------------------------
During the six months ended November 30, 1996, four customers accounted
for 16% and 10% of net sales, compared to one customer accounting for
38% of net sales of the same period a year ago. In addition, one
supplier represented 51% and 60% of total purchases of inventory,
respectively.
6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Revenue for the three months ended November 30, 1996, was $853,304, $239,586
higher than the same period a year ago for an increase of 39%. For the six
months ended November 30, 1996, net sales were $1,217,636, $183,503 lower than
the corresponding period in the previous fiscal year, for a decrease of 13%.
The Company attributes the 39% sales increase to revenues during the three
months ended November 30, 1996, on shipments of delayed orders during the first
quarter ended August 31, 1996. The decrease of sales revenue during the six
months ended November 30, 1996, is due to a temporary condition caused by the
delay of the OR order shipments. Net sales of the OR products in the six months
ended November 30, 1996, were 69% of total net sales compared to 78% of total
net sales for the same period the previous year.
Cost of sales for the three months ended November 30, 1996, was $579,387 or 68%
of net sales and compares to $460,495 or 75% of net sales in the same period a
year ago. For the six months ended November 30, 1996, cost of sales of $795,397
represented 65% of net sales as compared to $1,046,945 representing 75% of net
sales the same period a year ago. The decrease in the cost of sales as a
percentage of net sales is the result of a greater strength in the exchange
value of the U.S. Dollar against the DeutschMark. In addition, the Company
realizes a higher margin from sales of its own manufactured products than sales
of OR products.
Operating costs for the six-month period ended November 30, 1996, were slightly
higher than the corresponding period a year ago. The increase was due for the
most part to research and development expenses for the Company's own proprietary
products, particularly, the Pentium VMEbus DPCI board and its accompanying
transition module.
The three-month and six-month period ended November 30, 1996, reflect net
earnings of $73,918 and $34,240 respectively, compared to net losses of $51,701
and $29,861 for the corresponding periods a year ago. Net earnings for the
three-month and six-month periods ended November 30, 1996, were the result of
factors explained in the preceding paragraphs - the higher margins on the
Company's manufactured products and lower cost of sales on the OR products due
to a favorable exchange rate of the U.S. Dollar against the DeutschMark as
compared to the negative currency devaluation last year.
At November 30, 1996, the Company had a current ratio of 4.2:1 compared to 4.9:1
as of May 31, 1996. Management believes its present working capital will be
sufficient for the Company's existing operating activities. Management will
continue to develop products internally and will consider additional expansion
through an acquisition or strategic alliance.
7
PART II. OTHER INFORMATION
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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On October 3, 1996, the Company held its annual meeting of shareholders. In
addition to the election of directors, the shareholders approved the appointment
of the accounting firm of Corbin & Wertz as its independent auditors for the
fiscal year ending May 31, 1997. There were 969,452 votes cast in favor of the
appointment and no votes were withheld or voted against such appointment.
The tabulation of the votes cast for and against each director are set forth
opposite their names below.
DIRECTORS YES NO
- ------------------ ------- ---
Robert Anslow 968,952 500
Harry Cavanaugh 968,952 500
Eileen DeSwert 968,952 500
Richard Jackson 968,952 500
Costis Toregas 968,952 500
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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.
January 09, 1997 By: /s/ EILEEN DESWERT
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Eileen DeSwert
President and Chief
Executive Officer
January 09, 1997 By: /s/ BELEN RAMOS
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Belen Ramos
Chief Financial Officer
9