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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Dita, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-27057 33-0696051
- -------------- ---------------------- ------------
(state of Commission File Number IRS Employer
incorporation) I.D. Number)
2214 Beverly Boulevard
Los Angeles, CA 90057
213-368-3968
-------------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
As of November 30, 2000, there were 3,140,000 shares of the Registrant's
Common Stock, par value $0.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Dita Inc.
Balance Sheet
November 30, 2000
Unaudited
ASSETS
Current Assets
Cash $ 15,770
Accounts Receivable 108,092
Inventory 172,427
---------
Total Current Assets $ 296,289
Property and Equipment, net of
accumulated depreciation and amortization 59,148
Other Assets 3,946
--------
Total Assets $ 359,383
========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable and accrued expenses $ 246,171
Officers Loan Payable 19,064
Business Line 35,674
Capital Lease Payable 9,597
Loan Payable 16,747
---------
Total Current Liabilities $ 327,253
---------
Stockholders' Equity
Common Stock; $.01 par value, 10,000,000
shares authorized, 3,140,000 shares
issued and outstanding 31,400
Additional paid In Capital 613,338
Accumulated deficit (612,608)
--------
Total Stockholders' Equity 32,130
---------
Total Liabilities and Stockholders' Equity $ 359,383
=========
3
Dita Inc.
Balance Sheet
November 30, 2000
Unaudited
ASSETS
Current Assets
Cash Checking $ 12,679
Checking-Marketing Account 389
Secured Savings 2,702
Accounts Receivable 135,391
Allowance for Doubtful Account (27,299)
Inventory 172,427
---------
Total Current Assets $ 296,289
---------
Fixed Assets
Computer Equipment 26,208
Display Cases 73,854
Furnitures and fixtures 9,670
Shop and Warehouse Equipment 10,836
Leasehold Improvements 5,711
(Less) Accumulated Depreciation (67,131)
--------
Total Fixed Assets 59,148
---------
Other Assets
Deposits 3,610
Organizational Costs 3,790
(Less) Accumulated Amortization (3,454)
--------
Total Other Assets 3,946
--------
Total Assets $ 359,383
========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 237,416
Accrued Expenses 8,162
Officers Loan Payable 19,064
Credit Card 1,393
Business Line 35,674
State Income Tax Payable (800)
Capital Lease Payable 9,597
Loan Payable 16,747
---------
Total Current Liabilities $ 327,253
---------
Stockholders' Equity
Common Stock 31,400
Paid In Capital 613,338
Retained Earnings (698,784)
Retained Earnings - Current Year 86,176
--------
Total Stockholders' Equity 32,130
---------
Total Liabilities and Stockholders' Equity $ 359,383
=========
4
Dita Inc.
Condensed Statement of Operations
Unaudited
Nine months ended Three months ended
November 30 November 30
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net Sales $ 865,763 $ 730,719 $ 188,143 $ 199,260
Cost of Sales 338,603 318,599 76,346 66,545
---------- ---------- ---------- ----------
Gross Profit 527,160 412,120 111,797 132,715
Operating Expenses 440,984 489,210 127,051 126,273
---------- ---------- ---------- ----------
Net Income $ 86,176 $ (77,090) $ (15,255) $ 6,443
========== ========== ========== ==========
Net Income per share
basic ad diluted $ 0.03 $ (0.02) $ (0.00) $ 0.00
========== ========== ========== ==========
Weighted average common
shares outstanding -
basic and diluted 3,140,000 3,140,000 3,140,000 3,140,000
========== ========== ========== ==========
See notes to unaudited financial statements
5
DITA, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine months ended November 30
2000 1999
(Unaudited) (Unaudited)
----------- -----------
Cash flows provided by (used for)
operating activities:
Net Income (loss) $ 86,176 $ (77,090)
---------- -----------
Adjustments to reconcile net loss
to net cash provided by (used for)
operating activities:
Depreciation and amortization 15,000
Provision for doubtful accounts (63) -
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (47,745) (17,528)
Inventory (10,429) (77,148)
Deposits (550) -
Prepaid expenses 1,698 19,000
Increase (decrease) in liabilities -
Accounts payable and accrued
expenses (37,107) 72,057
---------- -----------
Total adjustments (79,196) (3,619)
---------- -----------
Net cash used for
operating activities 6,980 (80,709)
---------- -----------
Cash flows used for investing activities:
Acquisition of property and
equipment (2,105) -
Increase in other assets (3,711) -
---------- -----------
Net cash used for
investing activities (5,816) -
---------- -----------
Cash flows provided by (used for)
financing activities:
(Payments on) advances from
officer-stockholders (4,409) (11,488)
(Payments on) proceeds from
note payable - (19,000)
Proceeds from other
current liabilities 10,054 5,991
(Payments on) obligations
under capital lease (8,272) (987)
---------- -----------
Net cash provided by
financing activities (2,627) (25,484)
---------- -----------
Net increase (decrease) in cash (1,463) (106,193)
Cash, beginning of period 17,233 121,516
---------- -----------
Cash, end of period $ 15,770 $ 15,323
========== ===========
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DITA, INC.
NOTES TO FINANCIAL STATEMENTS
NINE AND THREEE MONTHS ENDED NOVEMBER 30, 2000
(1) Summary of Significant Accounting Policies:
The condensed interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of management, are
necessary for fair presentation of the information contained
therein. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and notes
thereto included in the Company's annual report on Form 10-K for the
year ended February 28, 2000. The Company follows the same
accounting policies in preparation of interim reports.
Business Activity:
The Company is a wholesaler of unique, alternative and fashionable
women's sunglasses and sells to retailers throughout the United
States, Japan and Europe.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Fair Value:
Unless otherwise indicated, the fair values of all reported assets
and liabilities which represent financial instruments (none of which
are held for trading purposes) approximate the carrying values of
such amounts.
(2) Advances from Officer-Stockholders:
This amount represents the unpaid balance of non-interest bearing
short-term advances received from officer-stockholders. Such advances are
unsecured and payable on demand.
(3) Business line:
The Company has a line of credit with its bank in the amount of $45,000
and is unsecured. As November 30, 2000, the line of credit had a remaining
balance in the amount of $35,674.
7
DITA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS AND THREE MONTHS ENDED NOVEMBER 30, 2000
(7) Loan Payable:
Loan payable is non-interest bearing and is due upon the sale of the
corporation.
(8) Related Party Transactions:
The Company's principal supplier of sunglasses is also a shareholder and a
member of the Board of Directors. Total product purchased from this
supplier for period ended November 30, 2000 was $111,139. Accounts payable
and accrued expenses at November 30, 2000 of $192,435 were payable to this
supplier. The Company also pays interest on outstanding accounts payable
balances at a rate of 1.25% per month to this related party.
(11) Subsequent Event:
In the August 31, 2000 10Q-SB the company reported that it was in
negotiations to sell its Company to a 3rd party. As a result of the
volatility of the stock market as a whole at that time the negotiations
were terminated. The company will continue to look for a new candidate for
the sale of the shell.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with
the financial statements and the accompanying notes thereto and is qualified in
its entirety by the foregoing and by more detailed financial information
appearing elsewhere. See "Item 1. Financial Statements."
Financial condition, changes in financial condition and results of
------------------------------------------------------------------------
operations - Third Quarter of Fiscal Year 2001 Compared to Third Quarter of
- --------------------------------------------------------------------------------
Fiscal Year 2000
- ----------------
Dita's sales decreased by $11,117 from $199,260 in the three-month
period ended November 30, 1999 (Q3:2000) to $188,143 in the three-month period
ended November 30, 2000 (Q3:2001), a 5.58 percent decrease. There were, however,
significant changes in the origin of these sales, as follows:
Q3:2000 Q3:2001
------------------- --------------------
Per- Per-
Origin of Sales Amount cent Amount cent
--------------- -------- ----- -------- -----
Optical $ 57,717 29.0 $ 65,725 28.6
Boutique 66,469 33.4 59,300 27.0
Department store 12,198 6.1 29,228 15.5
International 70,203 35.2 44,451 23.6
Freight income 2,115 1.1 2,320 1.0
Miscellaneous 0 0.0 3,353 1.0
Returns & exchanges (9,435) (4.7) (16,236) (4.9)
Discounts (17) 0.0 (8) .0
Interest income 11 0.0 10 .0
-------- ----- -------- -----
Totals $199,260 100.0 $188,143 100.0
Of particular note are the above increases in department store sales
resulting mainly for the increase is sales from one of the company's key
accounts, Nordstrom.
The cost of sales increased from 33.4 percent of sales in Q3:2000 to
40.06 percent of sales in Q3:2001.
Operating expenses increased insignificantly, from $126,272 - or 63.4
percent of sales - in Q3:2000 to $127,051 - or 67.5 percent of sales - in
Q3:2001. Some items of expense deserve mention:
o An increase in sales commissions occurred from $16,457, or 8.3
percent of sales in Q3:2000, to $22,355, or 11.9 percent of sales
in Q3:2001. The increase is attributable to the change in the
make up of the sales figures in each respective quarter. The
company does not pay sales commissions on international sales,
which were $70,202 or 35.2% of sales in Q3:2000 decreasing to
44,451 or 23.6 percent of sales in Q3:2001. As a result,
commissionable sales (Optical, Boutique and Department store)
accounted for approximately 64.80% of the total sales in Q3:2000,
which increased to 76.40% of total sales in Q3:2001.
o An increase in rent from $8,005, or 4.0 percent of sales in
Q3:2000, to $10,180 or 5.4 percent of sales in Q3:2001. The
company moved its corporate offices, resulting in an increase in
monthly rental costs of approximately $600 per month.
o An increase in general liability insurance from $889, or .4
percent of sales in Q3:2000, to $2,138 or 1.1 percent of sales in
Q3:2001. The Company increased its coverages as a result of the
requirements of the new office space as well as per direction
from the Company's Auditors Stonefield and Josephson.
o A decrease in accounting fees from $9,015, or 4.5 percent of
sales in Q3:2000, to $4,365 or 2.3 percent of sales in Q3:2001.
The invoice was paid later in FY 2000 than in FY 2001.
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Dita had $15,254 net loss from operations in Q3:2001, compared to a net
income of $6,443 in Q3:2000. The net loss occurred as a direct result of a
decrease in sales resulting from the company not receiving a production order on
time. Dita had approximately $30,000 in pre-booked orders that did not ship in
the last month of the Q3:2001, because the product had not been received.
Our accounts receivable (net of allowance for doubtful accounts)
increased by $47,808 from $60,283 at the end of fiscal year 2000 to $108,191 at
the end of Q3:2001, and our accounts payable and accrued expenses decreased by
$46,369 from $283,783 at the end of FY 2000 to $237,414 at the end of Q3:2001.
Inventory decreased from $161,998 at the end of FY 2000 to $172,427 at the end
of Q3:2001. Stockholders' equity increased from a deficit of $54,045 at the end
of FY 2000 to positive equity of $32,130 at the end of Q3:2001.
Financial condition, changes in financial condition and results of
------------------------------------------------------------------------
operations - 9 months ended November 30, 2000 Compared to 9 months ended
- --------------------------------------------------------------------------------
November 30, 1999.
- ------------------
Sales during the first 9 months of the 2001 FY increased by $135,045
(15.66 percent) over sales during the 9 months of FY 2000 - $865,763 compared to
the earlier $730,178.
1st 9 mo:FY2000 1st 9 mo:FY2001
------------------- --------------------
Per- Per-
Origin of Sales Amount cent Amount cent
--------------- -------- ----- -------- -----
Optical $216,390 29.0 $247,853 28.6
Boutique 222,992 30.5 234,164 27.0
Department store 47,278 6.1 103,748 12.0
International 294,912 35.2 305,680 35.2
Freight income 7,967 1.1 8,718 1.0
Miscellaneous 280 0.0 8,353 1.0
Returns & exchanges (59,785) 8.2 (42,780) 4.9
Discounts (2) 0.0 (6) 0.0
Interest income 687 0.1 33 .0
-------- ----- -------- -----
Totals $730,718 100.0 $865,763 100.0
Sales were up in all categories. We are experiencing the benefit, we
believe, in a change in our marketing strategy. Dita was having difficulty
penetrating the high-end market, where prices are higher, and gross margins are
higher, than in the lower-end mass market. This difficulty was attributable to
high-end retailers' awareness of the presence of Dita's trade name in the mass
market. We deliberately eliminated many of our mass-market accounts after the
second half of FY 2000 in order to gain the high-end business.
Our gross margin increased from 56.4 percent ($412,119) of sales in the
9 months of FY 2000 to 60.9 percent ($527,160) of sales in the 9 months of FY
2001.
Operating expenses decreased by $48,226 from $489,210 - or 66.9 percent
of sales - in the 9 months of FY 2000 to $440,983 - or 50.9 percent of sales -
in the 9 months of FY 2001. The decrease is due primarily to -
o a decrease in advertising expense from $87,142, or 11.9 percent
of sales in the 9 months of FY 2000, to $1,135, or 0.1 percent of
sales in the 9 months of FY 2001; This decrease is a direct
result of management's decision to hold off on a 2001 ad campaign
in order to help overall profitability and cash flow. This task
was accomplished without sacrificing increases in sales.
o a decrease in graphics and layout expense from $12,344, or 1.7
percent of sales in the 9 months of FY 2000, to $4,068, or .5
percent of sales in the 9 months of FY 2001. Decreasing costs
resulted from the postponement of a 2001 ad campaign.
10
o a decrease in legal fees from $23,494, or 3.2 percent of sales in
the 9 months of FY 2000, to $1,797, or .2 percent of sales in the
9 months of FY 2001. The decrease is a direct result of legal
fees related to the proposed public shell sale that occurred in
the 2000 FY that did not occur in 2001 FY.
The above decreases were offset, however, by several increases in
operating expenses, primarily the following:
o an increase in sales commissions expense from $59,930, or 8.23
percent of sales in the 9 months of FY 2000, to $72,222, or 8.3
percent of sales in the 9 months of FY 2001. The increase is a
direct result of the increase in sales.
o an increase in automobile expense from $14,331 in the 9 months of
FY 2000 to $22,141, or 2.6 percent of sales in the 9 months of FY
2001. The increase is a result of the fact that the company did
not begin reimbursing automobile expenses of the President,
Director of Operations and Marketing Director until the 2nd half
of 2000 FY.
o an increase in rental expense from $21,235, or 2.9 percent of
sales in the 9 months of FY 2000, to $28,109, or 3.2 percent of
sales in the 9 months of FY 2001;
o an increase in repairs and maintenance expense from $20, or .0
percent of sales in the 9 months of FY 2000, to $7,227, or .8
percent of sales in the 9 months of FY 2001. This increase
resulted from improvements made in the company's new corporate
offices.
o an increase in insurance general liability expense from $1,015 in
the 9 months of FY 2000, to $2,149, in the 9 months of FY 2001.
The company increased its coverages as a result of the
requirements of the new office space as well as per direction
from the companies Auditors Stonefield and Josephson.
o an increase in office expense from $11,795, or 1.6 percent of
sales in the 9 months of FY 2000, to $16,101, or 1.9 percent of
sales in the 9 months of FY 2001. The increase is a direct result
of additional office supplies necessary to set up new corporate
offices.
o an increase in research and development expense from $1,016 in
the 9 months of FY 2000, to $8,792, or percent of sales in the 9
months of FY 2001. The increase is a result of two factors. The
company's research into the possibility of developing a belt
line, and the company used a rapid laser prototyping system to
develop a new frame for FY 2001 that was not used in FY 2000.
o an increase in depreciation expense from $0.00 or 0.0 percent of
sales in the 9 months of FY 2000, to $15,000 in the 9 months of
FY 2001. This increase is a result of a chance in accounting
policies necessitated by new SEC rulings. In FY 2000 the company
only booked depreciation at the end of the year. Due to the new
quarterly reporting requirements, depreciation is now being
booked quarterly.
o an increase in finance charges and interest expense from $19,304,
or 2.64 percent of sales in the 9 months of FY 2000, to $25,973,
or 3.0 percent of sales in the 9 months of FY 2001. This increase
is a result of the increase in sales and the company's increased
reliance on external sources of credit.
11
o an increase in workers compensation insurance expense from
$(24.13), or 0.0 percent of sales in the 9 months of FY 2000, to
$2,943.92 in the 9 months of FY 2001. The increase is a result of
the invoice being paid earlier in FY 2001 than FY 2000.
o an increase in health insurance from $6,295, or .9 percent of
sales in the 9 months of FY 2000, to $8,380 in the 9 months of FY
2001. The increase resulted from the addition of two new
employees to the corporate insurance plan as well as an increase
in premiums on two previously covered employees resulting from
increases in age.
Dita realized net income from operations of $86,176, or 10 percent of
sales, in the 9 months of 2001 as contrasted with a net loss from operations of
$77,090 in the 9 months of FY 2000.
Liquidity and Outlook.
---------------------
The improvement from a loss of $77,090 to a profit of $86,176 is
encouraging but not without problems. Our accounts payable and accrued expenses
exceed our accounts receivable (net of allowances for doubtful accounts) by
$136,223. Our profits so far this fiscal year are a result of a decrease in
advertising expense from $86,007 from FY 2000 to FY 2001. This is a savings in
expenses that could have repercussions ahead. At the moment, though, we are
liquid and believe we will be able to realize this nine-month profit at year
end.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Forms 8-K
None
SIGNATURES
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.
Date: January 9, 2001 Dita, Inc.
By/s/ Troy Schmidt
----------------------------------
Troy Schmidt, President and
Chief Financial Officer
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