-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QMQR00yZVPu+StPaw8DuPg85CUd81EGG/skhl+8D/hSVMTena0OIiwN53lZ5WQ5S g8nJ5v5EIblP6qqbm6TD9A== 0001060830-00-000001.txt : 20000202 0001060830-00-000001.hdr.sgml : 20000202 ACCESSION NUMBER: 0001060830-00-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DITA INC CENTRAL INDEX KEY: 0001010698 STANDARD INDUSTRIAL CLASSIFICATION: OPHTHALMIC GOODS [3851] IRS NUMBER: 330696051 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27057 FILM NUMBER: 506718 BUSINESS ADDRESS: STREET 1: 915 CALLE AMANECER STREET 2: STE G CITY: SAN CLEMENTE STATE: CA ZIP: 92673 MAIL ADDRESS: STREET 1: 6519 FOUNTAIN AVENUE CITY: HOLLYWOOD STATE: CA ZIP: 90028 10QSB 1 FORM 10QSB FOR DITA, INC. 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, 1999 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) 6519 Fountain Avenue Hollywood, CA 90028 323-953-9565 ------------------------------------------------------- (Address and telephone number of registrant's principal executive offices and principal place of business) As of November 30, 1999, 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 SHEETS
11-30-99 02-28-99 (Unaudited) Audited ----------- ----------- ASSETS Current assets: Cash $ 11,568 $ 65,822 Cash - restricted 3,753 55,694 Accounts receivable - trade, net of allowance for doubtful account of $37,160 94,943 71,249 Inventory 148,735 71,587 Prepaid expenses 1,663 20,103 --------- --------- Total current assets 260,662 284,455 Property and equipment, net of accumulated depreciation and amortization 88,436 87,732 Other assets 2,434 2,434 --------- --------- $ 351,532 $ 374,621 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 282,273 $ 209,578 Advances from officers-stockholders 25,043 36,531 Note payable, bank 3,771 19,000 Current maturities of obligations under capital lease 14,600 14,600 --------- --------- Total current liabilities 325,687 279,709 Obligations under capital lease, less current maturities 16,883 17,869 --------- --------- Stockholders' equity: Common stock; $0.01 par value, 10,000,000 shares authorized, 3,140,000 shares issued and outstanding, respectively 31,400 31,400 Additional paid-in capital 613,338 613,339 Deficit (635,775) (567,696) --------- --------- Total stockholders' equity 8,962 77,043 --------- --------- $ 351,352 $ 374,621 ========= =========
See notes to financial statements. 2 DITA, INC. STATEMENT OF OPERATIONS
Three months ended Three months ended Nine months ended Nine months ended November 30, 1999 November 30, 1998 November 30, 1999 November 30, 1998 ------------------ ------------------ ----------------- ----------------- Amount Amount Amount Amount (Unaudited) Percent (Unaudited) Percent (Unaudited) Percent (Unaudited) Percent ----------- ------- ----------- ------- ----------- ------- ----------- ------- Net sales $ 205,426 100.0% $ 179,460 100.0% $ 736,605 100.0% $ 704,705 100.0% Cost of sales 66,381 32.3 102,013 56.8 318,830 43.3 355,153 50.4 ---------- ----- ---------- ----- ---------- ----- ---------- ----- Gross profit 139,045 67.7 77,447 43.2 417,725 56.7 349,552 49.6 Operating expenses 125,199 60.9 152,987 85.3 485,853 65.9 409,917 58.2 ---------- ----- ---------- ----- ---------- ----- ---------- ----- Net income (loss) $ 13,846 6.7 $ (75,540) (42.1) $ (68,078) (9.2) $ (60,365) (8.6) ========== ===== ========== ===== ========== ===== ========== ===== Net income (loss) per share - basic and diluted $ 0.004 $ (0.024) $ (0.022) $ (0.019) ========== ========== ========== ========== Weighted average shares outstanding - basic and diluted 3,140,000 3,140,000 3,140,000 3,140,000 ========== ========== ========== ==========
See notes to financial statements. 3 DITA, INC. STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine months ended November 30, ------------------------------ 1999 1998 (Unaudited) (Unaudited) ----------- ----------- Cash flows provided by (used for) operating activities: Net income (loss) $ (68,079) $ 60,365 --------- --------- Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization - - Provision for doubtful accounts - 37 Other - - Changes in assets and liabilities: (Increase) decrease in assets: Accounts receivable $ (23,694) $ (4,466) Inventory (77,150) 4,191 Prepaid expenses 18,440 (2,287) Increase (decrease) in liabilities - Accounts payable and accrued expenses $ 70,475 $ 36,063 --------- --------- Total adjustments $ (11,929) $ 33,538 --------- --------- Net cash used for operating activities $ (80,008) $ (26,826) --------- --------- Cash flows used for investing activities: Acquisition of property and equipment $ (704) $ (8,634) Increase in other assets - - ---------- ---------- Net cash used for investing activities $ (704) $ (8,634) --------- ---------- Cash flows provided by (used for) financing activities: (Payments on) advances from officer-stockholders $ (11,488) $ (1,530) (Payments on) proceeds from note payable (19,000) 19,000 (Payments on) proceeds from other current liabilities 5,991 978 (Payments on) obligations under capital lease (987) (8,216) Proceeds from issuance of common stock - 200,000 --------- --------- Net cash provided by financing activities $ (25,485) $ 210,232 --------- --------- Net increase (decrease) in cash $(106,196) $ 119,663 Net increase in cash-reserve 55,108 Cash, beginning of year 121,516 17,806 --------- --------- Cash, end of year $ 15,320 $ 192,577 ========= =========
See notes to financial statements. 4 DITA, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED FEBRUARY 28, 1999 AND INTERIM PERIOD ENDED NOVEMBER 30, 1999 (1) Summary of Significant Accounting Policies: 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. Cash: Equivalents ----------- For purposes of the statement of cash flows, cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations. Concentration ------------- The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Inventory: Inventory is valued at the lower of cost (first-in, first-out) or market. 5 DITA, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED FEBRUARY 28, 1999 AND INTERIM PERIOD ENDED NOVEMBER 30, 1999 (1) Summary of Significant Accounting Policies, Continued: Income Taxes: Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment (see Note 8). Net Loss Per Share: The Company has adopted Statement of Financial Accounting Standard No. 128, Earnings per Share ("SFAS No. 128"), which is effective for annual and interim financial statements issued for periods ending after December 15, 1997. SFAS No. 128 was issued to simplify the standards for calculating earnings per share ("EPS") previously in APB No. 15, Earnings per Share. SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS. The new rules also require dual presentation of basic and diluted EPS on the face of the statement of operations. Net loss per common share is computed based on the weighted average number of common shares outstanding. Unaudited Interim Financial Statements: In the opinion of the Company's management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position as of November 30, 1999, and the results of operations and cash flows for the nine-month periods ended November 30, 1999 and 1998 have been included. The results of operations for the nine-month period ended November 30, 1999, are not necessarily indicative of the results to be expected for the full fiscal year. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-SB filed for the year ended February 28, 1999 and 1998. 6 DITA, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED FEBRUARY 28, 1999 AND INTERIM PERIOD ENDED NOVEMBER 30, 1999 (2) Property and Equipment:
11-30-99 02-28-99 -------- -------- Display cases $ 73,854 $ 73,854 Computers and software 35,643 34,939 Furniture and fixtures 9,670 9,670 -------- -------- 119,167 118,463 Less accumulated depreciation and amortization 30,731 30,731 -------- -------- $ 88,436 $ 87,732 ======== ========
(3) 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. (4) Note Payable, Bank: The Company has a line of credit with its bank in the amount of $55,000 which originally was secured by a collateral savings account in the amount of $55,000. As of November 30, 1999, the line of credit was paid down to $3,771 and the secured savings account was reduced to $3,753. Interest paid on all corporate borrowings, exclusive of related party interest and other bank interest amounted to $798 for the year ended February 28, 1999. (5) Obligations under Capital Lease: The Company leases computer equipment, software, lens cutters and trade show booths under the terms of a capital lease, which is secured by the related equipment costing $41,440. The following is a schedule by years of future minimum lease payments required under the capital leases, together with the present value of the net minimum lease payments: 7 DITA, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED FEBRUARY 28, 1999 AND INTERIM PERIOD ENDED NOVEMBER 30, 1999 Year ending February 28, 2000 $14,600 2001 16,431 2002 1,438 ------- Present value of minimum lease payments 32,469 Less current maturities 14,600 ------- $17,869 ======= Interest expense for the year ended February 28, 1999 amounted to $3,492 and for the nine months ended November 30, 1999 amounted to $16,353. (6) Common Stock: Between April 18, 1997 and July 10, 1997, the Company's principal supplier of sunglasses, who is also a shareholder and member of the Board of Directors, purchased 425,000 shares of common stock for $100,000. Also, on April 18, 1997, three officer-stockholders of the Company were issued a total of 275,000 shares for services previously provided on behalf of the Company. As of February 28, 1999 and 1998, there were 92,900 shares outstanding that had been sold through a December 1995 public offering made in reliance upon an exemption from registration under federal and state securities laws provided by Regulation D, Rule 504 of the Securities and Exchange Commission. (7) 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 the year ended February 28, 1999 was $313,746. Accounts payable and accrued expenses at February 28, 1999 include $131,162 payable to this supplier. The Company also pays interest on outstanding accounts payable balances at a rate of 9% per year to this related party. (8) Income Taxes: For federal income tax return purposes, the Company has available net operating loss carryforwards of approximately $556,000 and $381,000, which expire through 2013 and 2012 and are available to offset future income tax liabilities for the years ended February 28, 1999 and 1998, respectively. Temporary differences which give rise to deferred tax assets and liabilities at February 28, 1999 are as follows: 8 DITA, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED FEBRUARY 28, 1999 AND INTERIM PERIOD ENDED NOVEMBER 30, 1999
Net operating loss carryforwards $ 226,548 $ 152,400 Valuation allowance (226,548) (152,400) --------- --------- Net deferred taxes $ - $ - ========= =========
(9) Subsequent Event: The Company has had discussions with two companies that would like to acquire the Company's corporate shell. As of January 12, 2000, no negotiations have been finalized and none are under way. Upon completion of any such proposed sale, the Company would be under different management and would conduct a different business. The present business of the Company would presumably be sold. 9 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 informaton appearing elsewhere. See "Item 1. Financial Statements." Financial condition, changes in financial condition and results of ------------------------------------------------------------------------ operations - Third Quarter of Fiscal Year 2000 Compared to Third Quarter of - -------------------------------------------------------------------------------- Fiscal Year 1999 - ---------------- Dita's sales increased from $179,460 in the three-month period ended November 30, 1998 (Q3:1999) to $205,426 in the three-month period ended November 30, 1999 (Q3:2000), a 14.5 percent increase of $25,966. The increase is due primarily to an increase of $22,174 in sales of optical sunglasses. The cost of sales decreased from $102,013, or 56.8 percent of sales, in Q3:1999 to $66,382, or 32.3 percent of sales, in Q3:2000, a decrease of 24.5 percent when considered as a percentage of sales. Operating expenses also decreased from $152,987 - or 85.2 percent of sales - in Q3:1999 to $125,199 - or 60.9 percent of sales - in Q3:2000. This decrease is due primarily to - o a decrease in photography expense from $15,412 or 0.6 percent of sales in Q3:1999 to none in Q3:2000; o a decrease in travel expense from $10,442 or 5.8 percent of sales in Q3:1999 to $4,973 or 2.4 percent of sales in Q3:2000; o an increase in legal and accounting fees from $4,460 or 2.5 percent of sales in Q3:1999 to $16,311 or 8.0 percent of sales in Q3:2000; o a decrease in research and development expense from $3,648 or 2.0 percent of sales in Q3:1999 to nothing in Q3:2000; o a decrease in collection expense and bad debts from $9,785 or 5.5 percent of sales in Q3:1999 to none in Q3:2000; and o a decrease in office salaries from $10,283 or 5.7 percent of sales in Q3:1999 to $6,250 or 3.0 percent of sales in Q3:2000. Dita suffered a net loss from operations of $75,541 in Q3:1999 but had net income of $13,846 in Q3:2000. This $89,387 turnaround is attributable to the above-described increase in sales, decrease in cost of sales and decrease in operating expenses. Our accounts receivable increased by $23,674 from $71,249 at the end of fiscal year 1999 to $94,943 at the end of Q3:2000, and our accounts payable and accrued expenses increased by $72,695 from $209,578 at the end of FY 1999 to $282,273 at the end of Q3:2000. A cash position of $65,822 at the end of FY 1999 was reduced to $11,568 at the end of Q3:2000, but 10 inventory increased from $71,587 at the end of FY 1999 to $148,735 at the end of Q3:2000. Stockholders' equity decreased from $77,043 at the end of FY 1999 to $8,962 at the end of Q3:2000. Financial condition, changes in financial condition and results of ------------------------------------------------------------------------ operations - First Nine Months of Fiscal Year 2000 Compared to First Nine - -------------------------------------------------------------------------------- Months of Fiscal Year 1999. - -------------------------- Sales in the first nine months of FY 2000 increased by $31,900 or 4.5 percent over sales in the first nine months of FY 1999 - $736,605 compared to the earlier $704,705. Of greatest significance is the increase in international sales of $160,687 - from $134,225 in the first nine months of FY 1999, or 19.0 percent of sales, to $294,912, or 40.0 percent of sales in the first nine months of FY 2000. Boutique sales remained fairly constant, but optical sales decreased from $389,137 in the first nine months of FY 1999 or 55.2 percent of sales to $216,390 in the first nine months of FY 2000 or 29.4 percent of sales. The cost of sales decreased slightly from $355,153 or 50.4 percent of sales in the first nine months of FY 1999 to $318,830 or 43.3 percent of sales in the first nine months of FY 2000. Operating expenses increased from $409,917 - or 58.2 percent of sales - in the first nine months of FY 1999 to $485,853 - or 66 percent of sales - in the first months of FY 2000. The increase is due primarily to - o an increase in advertising expense from $4,231 or 0.6 percent of sales in the first nine months of FY 1999 to $87,143 or 11.8 percent of sales in the first nine months of FY 2000; o a decrease in photography expense from $15,642 or 2.2 percent of sales in the first nine months of FY 1999 to $1,400 or 0.2 percent of sales in the first nine months of FY 2000; o a decrease in printing and reproduction expense from $4,343 or 0.6 percent of sales in the first nine months of FY 1999 to $839 or 0.1 percent of sales in the first nine months of FY 2000; o a decrease in sales commission expense from $82,565 or 11.7 percent of sales in the first nine months of FY 1999 to $59,930 or 8.1 percent of sales in the first nine months of FY 2000; o an increase in automobile expense from nothing in the first nine months of FY 1999 to $14,332 or 1.9 percent of sales in the first nine months of FY 2000; o a decrease in postage expense from $5,408 or 0.8 percent of sales in the first nine months of FY 1999 to $1,527 or 0.2 percent of sales in the first nine months of FY 2000; 11 o an increase in legal and accounting fees from $29,237 or 4.1 percent of sales in the first nine months of FY 1999 to $46,918 or 6.4 percent of sales in the first nine months of FY 2000; o an increase in equipment leasing expense from $6,960 or 1.0 percent of sales in the first nine months of FY 1999 to $17,503 or 2.4 percent of sales in the first nine months of FY 2000; o a decrease in research and development from $6,098 or 0.9 percent of sales in the first nine months of FY 1999 to $1,017 or 0.1 percent of sales in the first nine months of FY 2000; o a decrease in collection expense and bad debts from $11,956 or 1.7 percent of sales in the first nine months of FY 1999 to $1,481 or 0.2 percent of sales in the first nine months of FY 2000; and o an increase in interest expense from $11,263 or 1.6 percent of sales in the first nine months of FY 1999 to $16,353 or 2.2 percent of sales in the first nine months of FY 2000. Dita had a net loss from operations of $60,365 in the first nine months of 1999 and a net loss from operations of $68,079 in the first nine months of FY 2000. Liquidity and Outlook. --------------------- We have been able to stay in operation only (1) from the services provided by Glance, Inc., a manufacturer of sunglasses under the control of Bendar Wu, the chairman of our board of directors, which company funds and warehouses a considerable portion of our inventory and (2) from the proceeds realized from the sale of capital stock. With respect to the sales of stock, we covered our loss from operations in fiscal 1999 by the sale of $200,000 in capital stock. In fiscal 1999 we also borrowed $19,000 on our bank line of credit. We ended fiscal 1999 with $121,516 cash in the bank. By the end of the third quarter of fiscal 2000 (November 30, 1999) our cash position had fallen to $15,321 from $121,516 at the end of fiscal 1999. Our net loss from operations was $68,078 during the first nine months of FY 2000, but we increased our inventory by $77,148 and repaid debt of $11,488 to officers and $15,229 on our bank line of credit. Glance provides liquidity as follows: standard payment terms in our industry are to provide a secured letter of credit to the manufacturer for the entire amount of a purchase order submitted. The letter of credit matures upon the manufacturer's shipment of the product. Glance requires no letter of credit or deposit of any type to secure a purchase order from us. In addition, Glance takes shipment of the inventory ordered and warehouses it until we need it. Once we order the inventory to be delivered from Glance's warehouse, we have 30 days to pay for it. We perceive our long-term solution to our continuing losses to be an improvement in our gross margin. The essential services provided by 12 Glance, Inc. come at a cost to us - they increase our cost of goods sold from 20 to 30 percent above industry standard. Yet, it is impossible to dispense with these services without the cash to pay for and warehouse all our inventory. We are working on obtaining lines of credit from lending institutions that cater to small businesses. When we have exhausted these possibilities, we will attempt to obtain capital through the sale of shares of common stock. Unfortunately, our inability to demonstrate profitable operations makes it difficult to sell capital stock. At this time, we have not identified the sources of additional lines of credit or of equity capital we need to break out of our dilemma. Short term, we need to increase our bank line of credit from $45,000 to approximately $100,000 to help pay for the implementation of new prescription glasses lines. Long term, we need an additional line of credit of approximately $150,000 to decrease our dependence on Glance, Inc. and thereby improve our profit margins. 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 13, 2000 Dita, Inc. By/s/ Troy Schmidt ------------------------------------- Troy Schmidt, President and Chief Financial Officer 13 EX-27 2 11/30/99 FINANCIALS
5 9-MOS Feb-28-2000 Mar-01-1999 Nov-30-1999 15,321 0 132,103 37,160 148,735 260,662 149,898 30,731 351,532 325,687 0 0 0 644,739 (635,975) 351,352 736,605 736,605 318,830 318,830 485,853 0 16,353 (68,078) 0 (68,078) 0 0 0 (68,078) (0.022) (0.022)
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