UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report of Small Business Issuers under Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the quarterly period
ended September 30, 2002
Commission File No. 333-42936
DND TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Nevada 84-1405298
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
375 E. Elliot Rd., Bldg. 6
Chandler, Arizona 85225
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (480) 892-7020
3960 Howard Hughes Parkway, 5th Floor
Las Vegas, Nevada 89109
(Former name, former address, and former fiscal year, if changed
since last report)
The issuer has (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) been subject to
such filing requirements for the past 90 days.
- --------------------------------------------------------------------------------
Number of shares outstanding of each of the issuer's classes of common equity:
- --------------------------------------------------------------------------------
Class Outstanding as of November 15, 2002
Common stock, $0.001 par value 22,000,000
- --------------------------------------------------------------------------------
The issuer is not using the Transitional Small Business Disclosure format.
DND TECHNOLOGIES, INC.
Table of Contents
Page
PART I FINANCIAL INFORMATION.......................................... 3
Item 1. Consolidated Financial Statements.............................. 3
Consolidated Unaudited Balance Sheet...................................... 4
Consolidated Unaudited Statement of Income/Operations..................... 6
Consolidated Unaudited Statements of Cash Flows........................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................... 11
Item 3. Controls and Procedures........................................... 17
PART II OTHER INFORMATION................................................. 18
Item 6. Exhibits and Reports on Form 8-K............................... 18
SIGNATURES ............................................................... 19
CERTIFICATIONS ........................................................... 20
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited)
3
DND TECHNOLOGIES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS ZURICKIRCH CORP.
BALANCE SHEET
SEPTEMBER 30, 2002
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 62,731
Accounts receivable, trade 694,803
Accounts receivable, other 44,912
Inventory 1,891,286
Prepaid and other assets 65,246
-----------
TOTAL CURRENT ASSETS $ 2,758,978
PROPERTY AND EQUIPMENT, NET
OF ACCUMULATED DEPRECIATION 616,742
-----------
TOTAL $ 3,375,720
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 715,703
Accounts payable, customer core deposits 178,011
Accrued expenses 617,537
Deferred revenue 26,250
Note payable, line of credit 995,369
Current portion of long-term debt 146,404
Notes payable, related parties 431,350
-----------
TOTAL CURRENT LIABILITIES $ 3,110,624
LONG-TERM DEBT,
NET OF CURRENT PORTION 241,908
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share
Authorized - 10,000,000 shares
Issued and outstanding - 0 - shares 0
Common stock, par value $.001 per share
Authorized - 50,000,000 shares
Issued and outstanding - 22,000,000 shares 22,000
Paid in capital 1,825,835
Accumulated deficit (1,824,647)
-----------
TOTAL STOCKHOLDERS' EQUITY 23,188
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,375,720
===========
4
DND TECHNOLOGIES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS ZURICKIRCH CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
Preferred Stock Common Stock Paid Accumulated
---------------------- ------------------------ --------------------------
Shares Amount Shares Amount In Capital Deficit
------ ------ ------ ------ ---------- -------
Balance, January 1, 2002 0 0 6,745,000 $ 6,745 $ 312,957 $ (366,377)
Shares cancelled 0 0 (2,745,000) (2,745) 2,745 0
--------- --------- ----------- -------- ---------- -----------
Balance after
shares cancelled 0 0 4,000,000 4,000 315,702 (366,377)
Common stock
issued pursuant to
acquisition of Aspect
Semiquip International, Inc. 0 0 18,000,000 18,000 1,463,757 (1,062,815)
--------- --------- ----------- -------- ---------- -----------
Balance after acquisition
of Aspect Semiquip
International, Inc. 0 0 22,000,000 22,000 1,779,459 (1,429,192)
Net (loss) for the nine
months ended
September 30, 2002 0 0 0 0 0 (395,455)
--------- --------- ----------- -------- ---------- -----------
Balance, September 30, 2002 0 0 22,000,000 $ 22,000 $1,779,459 $(1,824,647)
========= ========= =========== ======== ========== ===========
5
DND TECHNOLOGIES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS ZURICKIRCH CORP.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
Three Months Ended Nine Months Ended
----------------------------------- ------------------------------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
REVENUES $ 1,719,766 $ 897,399 $ 4,391,350 $ 7,205,437
COST OF SALES 830,108 406,430 1,862,422 3,734,487
------------ ------------ ------------ ------------
GROSS PROFIT 889,658 490,969 2,528,928 3,470,950
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES 1,034,370 1,145,715 2,924,383 4,606,287
------------ ------------ ------------ ------------
NET (LOSS) $ (144,712) $ (654,746) $ (395,455) $ (1,135,337)
============ ============ ============ ============
NET (LOSS) PER
COMMON SHARE
BASIC AND DILUTED $ (.00) $ (.03) $ (.02) $ (.05)
============ ============ ============ ============
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING
BASIC AND DILUTED 22,000,000 22,000,000 22,000,000 22,000,000
============ ============ ============ ============
6
DND TECHNOLOGIES, INC. AND SUBSIDIARIES
FORMERLY KNOWN AS ZURICKIRCH CORP.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
2002 2001
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(395,455) $(1,135,337)
Adjustments to reconcile net (loss)
to net cash (used) by operating activities:
Depreciation 155,427 9,731
Changes in operating assets and liabilities:
Accounts receivable (238,309) 1,980,385
Accounts receivable, other (44,912) 0
Inventory (2,036) 470,552
Prepaid expenses and other assets (4,063) (1,606)
Accounts payable 322,604 (1,080,383)
Accrued expenses (286,196) (83,270)
Deferred revenue 5,956 (194,367)
--------- -----------
NET CASH (USED) BY
OPERATING ACTIVITIES (486,984) (34,295)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (26,382) (20,403)
--------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (26,382) (20,403)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 249,153 0
Changes in long-term debt (92,746) 45,491
--------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 156,407 45,491
--------- -----------
NET (DECREASE) IN CASH AND
CASH EQUIVALANTS (356,959) (9,207)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 419,690 567,418
--------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 62,731 $ 558,211
========= ===========
SUPPLEMENTARY DISCLOSURE
OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 28,501 $ 21,078
========= ===========
Taxes $ 0 $ 0
========= ===========
7
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of DND
Technologies, Inc. and its wholly-owned subsidiaries Aspect Semiquip
International, Inc. (a supplier of semiconductor manufacturing capital
equipment) and its 85% own subsidiary ASI Team Asia Ltd. (an inactive
subsidiary).
On May 15, 2002, the Company issued 18,000,000 shares of its common stock
for 100% of the stock of Aspect Semiquip International, Inc. In connection
with the legal form of this transaction, Aspect Semiquip International,
Inc. became a wholly-owned subsidiary of the Company. For accounting
purposes, the acquisition was treated as a recapitalization of Aspect
Semiquip International, Inc., rather than a business combination.
Going Concern
These financial statements are presented on the basis that the Company is
a going concern. Going concern contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business over a
reasonable length of time. The Company has incurred $1,843,993 of
operating losses since January 1, 2001, has negative working capital and
is in violation of its loan covenants on its line of credit. These factors
raise uncertainty as to the Company's ability to continue as a going
concern.
Management's plans to eliminate the going concern situation include, but
are not limited to the following:
1 - Restructure the line of credit to allow amortization of the
principal balance.
2 - Obtain additional financing from investors.
In addition, the Company completed an agreement with Lam Research whereby
the Company received inventory, intellectual properties and support
programs of Lam's Auto Etch and Dry Tek models of plasma dry etch
equipment. This agreement should enable the Company to increase its
revenues.
NOTE 2 REVENUE RECOGNITION
Product sales - The Company recognizes its revenue when the goods are
shipped and title passes to its customers.
Service income - when services are performed.
8
NOTE 3 INVENTORY
Inventory consists of the following:
Raw materials $ 1,707,094
Work-in-process 339,192
Allowance for obsolescence (155,000)
-----------
$ 1,891,286
-----------
NOTE 4 LINE OF CREDIT
The Company has available a $1,000,000 revolving line of credit with a
financial institution, maturing on May 31, 2002 and bearing interest at
Libor plus 2.75%. The note is secured by corporate assets and has been
personally guaranteed by a 70% shareholder. The effective interest rate at
September 30, 2002 is 4.67%
The note contains numerous loan covenants that the Company is not in
compliance with. The Company is negotiating an installment repayment plan
with the financial institution.
NOTE 5 LONG-TERM DEBT AND SECURED ASSETS
Note payable, former shareholder, dated May 15, 1997, payable
in quarterly installments of $24,319, including interest at
10%. Final payment is due on May 15, 2004
(Secured by common stock held in escrow) $ 149,821
Note payable with a financial institution, dated May 18, 2001
The note is payable in sixty monthly installments of $4,167
with interest at Libor plus 2.75%. The effective interest
rate at September 30, 2002 is 4.67% 185,875
Obligations under capital leases 48,658
---------
384,354
Current maturities (146,404)
---------
Long-term maturities $ 237,950
=========
NOTE 6 RELATED PARTY TRANSACTIONS
During the fiscal years ended December 31, 1999, 1998 and 1997, the
Company entered into various note payable agreements with two shareholders
and officers. The notes bear interest ranging from 3% to 7% and are due
upon demand.
9
NOTE 7 STOCK OPTIONS
Aspect Semiquip International, Inc. has adopted a stock option plan that
provides for the granting of options to certain officers and key employees
of that Company. The option price, numbers of shares and grant dates are
determined at the sole discretion of the Company's Board of Directors.
Grantees vest in the options subject to a vesting schedule as is disclosed
in the "Stock Option Agreement". A grantee's right to exercise a vested
portion of their Options shall occur no later than five years following
the grant date. The fair market value of each option is $.50 as determined
by the Board. For the nine months ended September 30, 2002, no options
have been exercised.
NOTE 8 STOCK REDEMPTION AGREEMENT
In May, 1997, the employment of the former president, who was a 35%
shareholder, was terminated. Pursuant to the stock redemption agreement,
dated November 2, 1990, the Company exercised its option to redeem the
shares held by the former president. The Agreement calls for a total
purchase price equal to the book value of the common shares held as of May
31, 1997, payable in quarterly installments over a seven year term at a
10% interest rate. The associated stock relating to this agreement has
been endorsed in blank and is being held in escrow until the purchase
price is paid in full.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. In consultation with our Board of Directors and Audit
Committee, we have identified seven accounting policies that we believe are key
to an understanding of our financial statements. These are important accounting
policies that require management's most difficult, subjective judgments.
1. Going Concern
These financial statements are presented on the basis that the Company is
a going concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable
length of time. The Company has incurred $1,843,993 of operating losses since
January 1, 2001, has negative working capital and is in violation of its loan
covenants on its line of credit. These factors raise uncertainty as to the
Company's ability to continue as a going concern.
Management's plans to eliminate the going concern situation include, but
are not limited to, the following:
1 - Restructure the line of credit to allow amortization of the
principal balance.
2 - Obtain additional financing from investors.
In addition, the Company completed an agreement with Lam Research whereby
the Company received inventory, intellectual properties and support programs of
Lam's Auto Etch and Dry Tek models of plasma dry etch equipment. This agreement
should enable the Company to increase its revenues.
2. REVENUE RECOGNITION
Product sales - The Company recognizes its revenue when the goods are
shipped and title passes to its customers.
Service income - When services are performed.
3. ACCOUNTS RECEIVABLE
Accounts receivable are reported at the customers' outstanding balances
less any allowance for doubtful accounts.
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts on accounts receivable is charged to
income in amounts sufficient to maintain the allowance for uncollectible
accounts at a level management believes is adequate to cover any probable
losses.
5. INVENTORIES
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Management has established an allowance for
obsolescence in the amount of $155,000.
11
6. INCOME TAXES
Provisions for income taxes are based on taxes payable or refundable for
the current year and deferred taxes on temporary differences between the amount
of taxable income and pretax financial income and between the tax basis of
assets and liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or settled as
prescribed in FASB Statement No. 109, Accounting for Income Taxes. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
7. STOCK OPTIONS
Aspect Semiquip International, Inc. has adopted a stock option plan that
provides for the granting of options to certain officers and key employees of
that Company. The option price, numbers of shares and grant dates are determined
at the sole discretion of the Company's Board of Directors. Grantees vest in the
options subject to a vesting schedule as is disclosed in the "Stock Option
Agreement". A grantee's right to exercise a vested portion of their Options
shall occur no later than five years following the grant date. The fair market
value of each option is $.50 as determined by the Board. For the nine months
ended September 30, 2002, no options have been exercised. .
Results of Operations
Through its wholly owned subsidiary, Aspect Semiquip International, Inc.
("ASI"), DND Technologies, Inc. ("DND" or the "Company") is in the business of
manufacturing and re-manufacturing capital equipment used in the production of
semiconductor devices and supplying replacement parts for semiconductor devices.
ASI is a supplier of re-manufactured single chamber dry etch equipment,
re-manufactured process chillers, etch-system consumables, spares and
sub-assemblies for Lam Research Corporation's AutoEtch, Rainbow and TCP etch
tools, as well as ASI's own line of single-chamber etch equipment.
Selected Financial Information.
Three Month Period Ended
------------------------
9/30/2002 9/30/2001
--------- ---------
(Unaudited) (Unaudited)
Statement of Operations Data
Total revenue $1,719,766 $897,399
Operating income (loss) $(144,712) $(654,746)
Net earnings (loss) per share $(0.00) $(0.03)
Nine Month Period Ended
-----------------------
9/30/2002 9/30/2001
--------- ---------
(Unaudited) (Unaudited)
Statement of Operations Data
Total revenue $4,391,350 $7,205,437
Operating income (loss) $(395,455) $(1,135,337)
Net earnings (loss) per share $(0.02) $(0.05)
9/30/2002 9/30/2001
--------- ---------
Balance Sheet Data
Total assets $3,375,720 $4,199,124
Total liabilities $3,352,532 $3,139,755
Stockholders' equity (deficit) $23,188 $763,487
12
Results of Operations.
Three month period ended September 30, 2002, compared to three month period
ended September 30, 2001.
Revenues. Revenues significantly increased approximately 92% to $1,719,766
for the three month period ended September 30, 2002 from $897,399 for the three
month period ended September 30, 2001. This increase was the result of
refocusing our sales from new products to remanufactured parts, equipment and
spare parts.
Cost of Sales. The cost of sales significantly increased by approximately
104% to $830,108 in the three month period ended September 30, 2002 from
$406,430 for the three month period ended September 30, 2001. Cost of sales
increased because the volume of remanufactured and spare parts being purchased
and sold significantly increased.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses slightly decreased approximately 10% to $1,034,370 in
the three months ended September 30, 2002 from $1,145,715 for the three months
ended September 30, 2001. The decrease was due to a decrease in the number of
employees as we continued to downsize our engineering staff.
Net Loss. DND had a net loss of $144,712 for the three months ended
September 30, 2002, compared to a net loss of $654,746 for the three months
ended September 30, 2001. The decrease in the net loss was caused primarily by
the increase in revenues.
Nine month period ended September 30, 2002, compared to nine month period
ended September 30, 2001.
Revenue. Revenue decreased approximately 39% from $7,205,437 in the nine
month period ended September 30, 2001 to $4,391,350 in the nine month period
ended September 30, 2002. Revenue decreased due to a decrease in sales of DND's
manufactured equipment which was not alleviated by the increase in the sale of
parts.
Cost of Sales. The cost of sales decreased approximately 50% from
$3,734,487 for the nine month period ended September 30, 2001 to $1,862,422 for
the nine month period ended September 30, 2002. The decease in cost of sales was
caused by the fact that for the nine months ended September 30, 2002, the
Company purchased significantly less inventory.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased approximately 37% to $2,924,383 in the nine
month period ended September 30, 2002 from $4,606,287 for the nine month period
ended September 30, 2001. The decrease was primarily due to significant lay-offs
of employees and the resulting decrease in payroll expenses.
Net Loss. DND had a net loss of $395,455 for the nine month period ended
September 30, 2002, compared to a net loss of $1,135,337 for the nine month
period ended September 30, 2001. The decrease in the net loss resulted from the
decrease in selling, general and administrative expenses and in cost of sales.
CAPITAL AND SOURCES OF LIQUIDITY
Assuming the holder of the line of credit continues to forbear on
collection of its $1.2 million line of credit which went into default on July
31, 2002, management believes that its existing capital will be sufficient to
meet the Company's cash needs required for the next three months, and if the
recent contract with Lam produces revenues projected by management, then our
cash needs should continue to be met beyond the three month period. ASI is
currently attempting to refinance the $1.2 million line of credit, which expired
on July 31, 2002,
13
and is seeking an increased credit line of another $2 million to provide for the
purchase of additional inventory required to consummate acquisition of a product
line. There is no assurance that the line of credit will be replaced and we
currently do not have any parties interested in replacing it. ASI is seeking an
additional $3 million to finalize the research and development of a new
proprietary etch tool and to produce the first 10 beta tools for sale to both
commercial wafer fabricators as well as research institutions such as MIT and
Stanford.
Net cash used by operating activities was $486,984 for the nine months
ended September 30, 2002 compared to cash used of $34,295 primarily from
accounts receivable for the nine months ended September 30, 2001.
Purchase of new property and equipment caused net cash used by investing
activities to increase by $5,979 for the nine months ended September 30, 2002
from $20,403 for the nine months ended September 30, 2001.
DND borrowed under its line of credit during the nine months ended
September 30, 2002, which resulted in $156,407 being generated by financing
activities. For the nine month period ended September 30, 2001, DND generated
$45,491 from financing activities.
DND has been in default on its line of credit with a lender since
July 31, 2002 and is actively seeking another party to assume its obligations
under the line of credit. Presently, DND is making default interest payments of
approximately eight percent.
As of September 30, 2002, DND had a working capital of approximately
$351,646, consisting of current assets of approximately $2,758,978 and current
liabilities of approximately $3,110,624. DND believes that it will generate
sufficient funds to fund its present operations for at least three months but is
actively seeking a financing source for a new line of credit.
On October 23, 2002, DND obtained financing in the form of a bridge loan
in the amount of $200,000. The bridge loan has a twelve-month term and interest
is due monthly in an amount equal to one percent per month. The bridge loan
contains an option whereby the investor may acquire up to 400,000 shares of DND
common stock.
DND entered into a contract with Lam Research Corp. effective November 8,
2002, under which DND will purchase assets from Lam and receive certain licenses
to use Lam's intellectual property in DND's manufacturing, refurbishing,
servicing and repair of certain Lam machines. Under the contract, DND will pay a
royalty of $5,376,000 for the licenses. Management of DND believes the contract
with Lam Research Corp. could offset DND's additional fixed costs and lead to a
potentially significant increase in revenue. This contract has the potential to
return DND to profitability, although management can make no assurances because
the contract was recently entered into and it is too early to determine what
effect it will have on DND's operations.
14
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Certain written statements in this Form 10-QSB, including the documents that we
incorporate by reference, are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 and are intended to qualify
for the safe harbor thereunder. Forward-looking statements include, without
limitation, any statement that may predict, forecast, indicate or imply future
results, performance or achievements, and may contain the words "believe",
"anticipate", "expect", "estimate", "project", "will be", "will continue", "will
result", or words or phrases of similar meaning. Descriptions of goals, future
plans and objectives are also forward-looking statements. Forward-looking
statements involve risks and uncertainties that may cause actual results to
differ materially from the forward-looking statements. You are urged to consider
these factors in evaluating the forward-looking statements and are cautioned not
to place undue reliance on them. The forward-looking statements included herein
are only made as of the date of this Form 10-QSB and we undertake no obligation
to publicly update them to reflect subsequent events or circumstances. We detail
the risks and uncertainties from time to time in reports we file with the
Securities and Exchange Commission, including Forms 8-K, 10-QSB, and 10-KSB and
include, among others, those described below in "Risk Factors".
Risk Factors
Management has expressed doubt about our ability to continue as a going concern,
which may hinder our ability to obtain future financing.
Our ability to continue as a going concern is an issue raised as a result of the
Company's $1,843,993 of operating losses incurred since January 1, 2001, its
negative working capital, and its violation of loan covenants on its line of
credit. We continue to experience net operating losses. The party which extended
the $1.2 million line of credit may foreclose on our business at any time and is
under no obligation to forbear collecting its $1.2 million line of credit.
Management intends to negotiate an extended payment plan with this lender
beginning in February, 2003 but ther is no assurance that this plan will
ultimately be agreed to. Our ability to continue as a going concern is subject
to our ability to generate a profit and/or obtain necessary funding from outside
sources, including obtaining additional funding from the sale of our securities,
increasing sales or obtaining loans and grants from various financial
institutions where possible. The going concern increases the difficulty in
meeting such goals and there can be no assurances that such methods will prove
successful.
The demand for our products may decline, which would result in a decline of
operations and a corresponding decline in profitability of our company.
Demand for our products has continued to decline. We heavily rely on sale of
remanufactured and spare parts to cover our costs. Many of our competitors have
liquidated and sold their products well below cost making it increasingly
difficult to sell any of our new products at a profit. Our sales will continue
to decrease as long as sustained price discounting in the industry continues and
without significant increases in demand we will not return to profitability.
Our ability to raise additional financing is uncertain, as is our ability to
raise further financing, if required.
We currently anticipate that our available cash resources combined with our
anticipated revenues will meet any immediate working capital needs we have. A
shortfall in projected revenues primarily from a new contract with Lam Research
would negatively impact any future expansion of our operations. Although we have
been actively searching for available capital, we do not have any current
arrangements for additional outside sources of financing and we cannot provide
any assurance that such financing will be available.
We depend on key management personnel and the loss of any of them would
seriously disrupt our operations.
Douglas Dixon, our CEO and Chairman of the Board, is vital to our continued
operations due to his relationship with Lam Research Corp. His loss would
adversely impact our operations.
Our operations are not diversified and we will not have the benefit of reducing
our financial risks by relying on other revenues.
We are engaged in the business of manufacturing capital equipment used in the
production of semiconductor devices As a result, our financial viability will
depend exclusively on our ability to generate revenues from our operations. We
will not have the benefit of reducing our financial risks by relying on revenues
derived from other operations.
15
We have incurred operating losses and could continue to do so, which could cause
us to go out of business.
We have incurred net losses and experienced negative cash flow during our
operating history. We could continue to incur losses in the future, which could
result in an inability to continue to operate as a going concern. See,
"FINANCIAL STATEMENTS."
There is a limited market for our common stock.
Currently only a limited trading market exists for DND common stock. DND common
stock trades on the OTC Bulletin Board under the symbol "DNDT.OB." The Bulletin
Board is a limited market and subject to substantial restrictions and
limitations in comparison to the NASDAQ system. Any broker/dealer that makes a
market in our stock or other person that buys or sells our stock could have a
significant influence over its price at any given time. Effective January 1,
2003, the OTC Bulletin Board will no longer offer companies a market on which to
trade. The new BBX Exchange, which is intended to replace the OTC Bulletin
Board, will have stricter listing standards. Management intends to apply to be
listed on the BBX Exchange as soon as applications become available but there is
no assurance that DND will meet the minimum criteria required. If DND fails to
meet the BBX Exchange listing requirements, then it will be forced to trade
solely on the pink sheets, a market with very limited liquidity and minimal
listing standards. We cannot assure our shareholders that a market for DND stock
will be sustained. There is no assurance that the DND shares will have any
greater liquidity than shares which do not trade on a public market.
Our Common Stock is Subject to Penny Stock Regulation.
Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be penny stock unless
that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Since our shares are deemed to be "penny stocks", trading in the
shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors.
16
We depend upon revenues generated by our contract with Lam Research Corp.
If our contract with Lam Research Corp. to manufacture capital equipment does
not produce the amount of revenue currently anticipated by management, we may
not be able to return to profitability.
ITEM 3. CONTROLS AND PROCEDURES
In the quarter ended September 30, 2002, we did not make any significant changes
in, nor take any corrective actions regarding, our internal controls or other
factors that could significantly affect these controls. We plan to conduct an
evaluation of our disclosure controls and procedures each quarter.
17
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
99.1 Certification of CEO and CFO
(b) Reports on Form 8-K:
During the third quarter of 2002, the Company filed the following
current reports on Form 8-1K:
August 7, 2002 under Item 5: Other Events and Item 7:
Financial Statements and Exhibits.
September 27, 2002 under Item 1: Changes in Control of
Registrant, Item 2: Acquisition or Disposition of Assets and
Item 7: Financial Statements and Exhibits.
18
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.
Dated: November 19, 2002
DND TECHNOLOGIES, INC.,
a Nevada corporation
By: /s/ Douglas N. Dixon
--------------------------------------------
Douglas N. Dixon, CEO and Director
19
CERTIFICATION
I, Douglas N. Dixon, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of DND
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 19, 2002
By: /s/ Douglas N. Dixon
-----------------------
Douglas N. Dixon
Chief Executive Officer
20
CERTIFICATION
I, Paul Gallo, Chief Financial Officer, certify that:
7. I have reviewed this quarterly report on Form 10-QSB of DND
Technologies, Inc.;
8. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
9. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
10. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
11. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls;
12. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 19, 2002
By: /s/ Paul Gallo
-----------------------
Paul Gallo
Chief Financial Officer
21