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 February 29, 2000.
[ ] 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 92691
------------------------------------------------------
(Address of principal executive offices)
(949) 855-3235
--------------
(Issuer's telephone number)
Not Applicable
--------------
(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 ___
---
On March 31, 2000, there were 1,418,400 shares of the issuer's Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes_____ No [X]
---
INDEX
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets at February 29, 2000 and May 31, 1999 1
Statements of Operations for the Three Months Ended
February 29, 2000 and February 28, 1999 2
Statements of Operations for the Nine Months Ended
February 29, 2000 and February 28, 1999 3
Statements of Cash Flows for the Nine Months Ended
February 29, 2000 and February 28, 1999 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
February 29, May 31,
2000 1999
---------- ----------
ASSETS
- ------
Current assets:
Cash $ 266,015 $ 434,091
Accounts receivable, net 259,697 188,384
Inventories 462,650 412,839
Prepaid expenses and other 28,803 20,629
---------- ----------
Total current assets 1,017,165 1,055,943
Note receivable 2,956 4,386
Property and equipment, net 18,605 24,086
Other assets 38,504 13,785
---------- ----------
$1,077,230 $1,098,200
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 226,600 $ 244,250
Accrued expenses 60,676 37,654
----------- -----------
Total current liabilities 287,276 281,904
----------- -----------
Shareholders' equity:
Common stock, no par value, 50,000,000 shares
authorized; 1,418,400 shares issued
and outstanding 2,383,385 2,383,385
Accumulated deficit <1,593,431> <1,567,089>
----------- -----------
Total shareholders' equity 789,954 816,296
----------- -----------
$ 1,077,230 $ 1,098,200
=========== ===========
See accompanying notes to financial statements.
1
DYNATEM, INC.
STATEMENTS OF OPERATIONS
Three months ended February 29, 2000 and February 28, 1999
2000 1999
-------- --------
Net sales $469,860 $368,105
Cost of sales 274,597 270,722
-------- --------
Gross profit 195,263 97,383
-------- --------
Operating expenses:
Selling, general and administrative 145,554 141,542
Research and development 54,323 55,686
-------- --------
Total operating expenses 199,877 197,228
-------- --------
Operating loss (4,614) (99,845)
Other income, net 4,899 6,119
-------- --------
Net income (loss) 285 $(93,726)
======== ========
Basic and diluted income (loss) per share $ .00 $ (.07)
======== ========
Weighted average shares outstanding - basic
and dilutive 1,418,400 1,418,400
========= =========
See accompanying notes to financial statements
2
DYNATEM, INC.
STATEMENTS OF OPERATIONS
Nine months ended February 29, 2000 and February 28, 1999
2000 1999
---------- ----------
Net sales $1,299,841 $1,061,556
Cost of sales 771,131 665,198
---------- ----------
Gross profit 528,710 396,358
---------- ----------
Operating expenses:
Selling, general and administrative 416,545 439,068
Research and development 152,076 150,632
---------- ----------
Total operating expenses 568,621 589,700
---------- ----------
Operating loss (39,911) (193,342)
Other income, net 14,369 18,169
---------- ----------
Net loss before taxes (25,542) (175,173)
Provision for income taxes 800 800
---------- ----------
Net loss $ (26,342) $ (175,973)
========== ==========
Basic and diluted loss per share $(.02) $(.12)
========== ==========
Weighted average shares outstanding -
basic and dilutive 1,418,400 1,418,400
========== ==========
See accompanying notes to financial statements
3
DYNATEM, INC.
STATEMENTS OF CASH FLOWS
For nine months ended February 29, 2000 and February 28, 1999
2000 1999
--------- ---------
Cash flows from operating activities:
Net loss $ (26,342) $(175,973)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,111 7,208
Change in assets and liabilities:
Accounts receivables (71,313) 48,281
Inventories (49,811) 131,776
Prepaid expenses (8,174) (2,506)
Accounts payable (17,650) 18,469
Accrued expenses 23,022 15,242
--------- ---------
Total adjustments (116,815) 218,470
--------- ---------
Net cash provided by (used in)
operating activities (143,157) 42,497
--------- ---------
Cash flows from investing activities:
Other assets (24,719) (9,204)
Purchases of property & equipment (1,630) (18,128)
--------- ---------
Net cash used in investing activities (26,349) (27,332)
--------- ---------
Cash flows from financing activities:
Repayment of notes receivable 1,430 1,690
--------- ---------
Net increase (decrease) in cash and
cash equivalents (168,076) 16,855
Cash and cash equivalents, beginning balance 434,091 600,525
--------- ---------
Cash and cash equivalents, ending balance $ 266,015 $ 617,380
========= =========
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Taxes $ 800 $ 800
========= =========
See accompanying notes to financial statements.
4
Notes to Financial Statements
(1) Interim Accounting Policy
-------------------------
In the opinion of the management of Dynatem, Inc. (the "Company"), the
accompanying unaudited financial statements include only normal recurring
adjustments necessary for a fair presentation of the Company's financial
position as of February 29, 2000 and the results of operations and cash flows
for the three and nine months ended February 29, 2000 and February 28, 1999,
respectively. 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
-----------
A summary of inventories follows:
February 29, 2000 May 31, 1999
----------------- ------------
Finished goods $ 83,277 $216,630
Work-in-process 37,012 34,013
Raw materials 342,361 162,196
-------- --------
$462,650 $412,839
======== ========
(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 is 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-month and nine-month periods ended February 29, 2000 and February
28, 1999, transaction gains and losses are not material to the financial
statements taken as a whole.
5
DYNATEM, INC.
Notes to Financial Statements
(5) Income taxes
------------
Income tax expense for the three-month and nine-month periods ended February 29,
2000 and 1999 are not considered material due to the Company's current losses
and its net operating loss carryforwards.
At May 31, 1999, the Company had Federal and State net operating loss
carryforwards of $1,732,000 and $127,000, respectively, which, if not utilized
to offset future taxable income, will expire in various years through 2009.
6
Item 2. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
Net sales for the three months ended February 29, 2000, increased 27.7% to
$469,860 over net sales of $368,105 in the same period a year ago. For the nine
months ended February 29, 2000, net sales were $1,299,841, $238,285 higher than
the corresponding period in the previous fiscal year, for an increase of 22.4%.
The Company has put forth great effort in an attempt to increase sales by
offering new products based upon the latest PC compatible technology.
Cost of sales for the three months ended February 29, 2000, was $274,597 or
58.4% of net sales and compares to $270,722 or 73.5% of net sales in the same
period a year ago. For the nine months ended February 29, 2000, cost of sales
of $771,131 represented 59.3% of net sales and compares to $665,198,
representing 62.7% of net sales for the same period a year ago. The three-month
and nine-month decrease of cost of sales as a percentage of net sales is the
result of product mix factors, most specifically, lower cost of production of
the VME boards and using outside manufacturing facilities on a contractual
basis.
Selling, general and administrative expenses for the three-month and nine-month
periods ended February 29, 2000, were $145,554 and $416,545, as compared to
$141,542 and $439,068 the same period a year ago.
Research and development expenses for three-month and nine-month periods ended
February 29, 2000, were $54,323 and $152,076 as compared to $55,686 and $150,632
the same period a year ago. The Company continues to increase the use of
internal design engineers, optimizing its ability to schedule the completion of
its products on a more timely basis, and to obtain more competitive costs
consistent with its cost reduction program.
For the three-month and nine-month periods ended February 29, 2000, net earnings
reflect net income of $285 and net loss of $26,342, compared to net losses of
$93,796 and $175,973, for the same periods ended February 28, 1999, for the
reasons described above.
The Company does not expect to pay significant income taxes due to its
utilization of net operating loss carryforwards which will expire in various
years through 2009.
At February 29, 2000, the Company's working capital was $729,889 and its current
ratio was 3.54:1 compared to $774,039 and a ratio of 3.75:1 as of May 31, 1999.
Management believes that the Company's existing working capital and cash flows
from operations will be sufficient to meet its working capital needs. The
Company may consider additional sources of capital should the need arise.
7
Year 2000
The information provided below constitutes a "Year 2000 Readiness Disclosure"
for purposes of the Year 2000 Information and Readiness Disclosure Act.
The Company passed a number of critical "Year 2000" dates (September 9, 1999;
January 1, 2000; and February 29, 2000) with no significant issues. In this
regard, no customer contacted the Company about any consequential Year 2000
incident, nor did the Company experience any significant Year 2000-related issue
that would have affected its ability to manufacture, ship, sell or service
products.
The Company is encouraged by the success of its Year 2000 efforts and will
continue to offer any needed Year 2000 support to customers when, and if, the
need arises through its regular support and service activities.
PART II. OTHER INFORMATION
---------------------------
Items 1 through 5 have been omitted because there is nothing material to report
and there has been no report on Form 8-K during the quarter ended February 29,
2000.
Item 6(A). EXHIBITS
--------
See attached Exhibit Index.
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.
DYNATEM, INC.
March 24, 2000 By: /s/Eileen DeSwert
------------------------
Eileen DeSwert
President and Chief
Executive Officer
March 24, 2000 By: /s/Belen Ramos
------------------------
Belen Ramos
Chief Financial Officer
8
EXHIBIT INDEX
-------------
Exhibit
Number
- -------
3(a) Restated Articles of Incorporation of the Company (1)
3(b) Bylaws of the Company (2)
27 Financial Data Schedule
__________________________________
(1) Incorporated herein by reference to Exhibit 3(a) to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1997.
(2) Incorporated herein by reference to Exhibit 3(b) to the Company's Quarterly
Report on Form 10-QSB for the fiscal quarter ended November 30, 1998.