10QSB 1 0001.txt 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 May 31, 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 May 31, 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 Three Months Ended, May 31, 2000 ASSETS Current Assets Cash Checking $ 7,733 Checking-Marketing Account 461 Secured Savings 2,679 Accounts Receivable 210,065 Allowance for Doubtful Account (40,659) Inventory 148,837 ---------- TOTAL Current Assets $ 329,116 Fixed Assets Computer Equipment 26,208 Display Cases 73,854 Furniture and fixtures 9,670 Shop and Warehouse Equipment 8,731 (Less) Accumulated Depreciation (58,131) Leasehold Improvements 5,711 ---------- TOTAL Fixed Assets 66,044 Other Assets Deposits 3,335 Organizational Costs 3,790 (Less) Accumulated Amortization (3,454) ---------- TOTAL Other Assets 3,671 ---------- TOTAL Assets $ 398,831 ========== LIABILITIES AND EQUITY Current Liabilities Accounts Payable $ 287,368 Purchases Clearing Account 5,500 Accrued Expenses 9,870 Officers Loan Payable 21,859 Credit Card-Wells Fargo (9227) 5,450 Business Line _0682 30,384 Capital Lease Payable 16,241 Lease -Secured Funding 1,628 Loan Payable 16,747 ---------- TOTAL Current Liabilities $ 395,047 ---------- TOTAL Liabilities 395,047 Equity Common Stock 31,400 Paid In Capital 613,338 Retained Earnings (640,954) ---------- TOTAL Equity 3,784 ---------- TOTAL Liabilities and Equity $ 398,831 ==========
2 Dita Inc. Condensed Statement of Income Three Months Ended May 31, 2000
2000 - 2001 1999 - 2000 --------------- --------------- Net Sales $371,557 $289,566 Cost of Sales 142,833 133,848 --------- --------- Gross Profit 228,724 155,718 Operating Expenses 170,894 155,086 --------- --------- Net Income $ 57,830 $ 632 ========= ========= Net Income per share $.02 $ - basic ad diluted Weighted Average common Shares outstanding basic ad diluted 3,140,000 3,140,000 ========== ==========
3 DITA, INC. STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three months ended May 2000 --------------------------- 2000 1999 (Unaudited) (Unaudited) ----------- ----------- Cash flows provided by (used for) operating activities: Net Income (loss) $ 57,830 $ 631 ---------- ---------- Adjustments reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 6,000 - Provision for doubtful accounts 13,297 Other - Changes in assets and liabilities: (Increase) decrease in assets: Accounts receivable (122,419) (78,929) Inventory 13,160 (44,244) Deposits (275) Prepaid expenses 1,698 19,000 Increase (decrease) in liabilities - Accounts payable and accrued expenses 20,856 73,743 ---------- --------- Total adjustments (67,684) (30,430) ---------- ---------- Net cash used for operating activities (9,854) (29,799) ---------- ---------- Cash flows used for investing activities: Acquisition of property and equipment (2,400) Increase in other assets (3,711) ---------- ---------- Net cash used for investing activities (3,711) (2,400) ---------- ---------- Cash flows provided by (used for) financing activities: (Payments on) advances from officer-stockholders (1,615) (5,507) (Payments on) proceeds from note payable 5,271 (14,000) (Payments on) proceeds from other current liabilities 3,550 (Payments on) obligations under capital lease (283) Proceeds from note payable (987) Proceeds from issuance of common stock - ---------- ----------- Net cash provided by financing activities 7,205 (20,778) ---------- ----------- Net increase (decrease) in cash (6,359) (52,976) Net increase in cash-reserve Cash, beginning of year 17,234 121,516 ---------- ---------- Cash, end of year $ 10,874 $ 68,540 ========== ==========
4 Dita Inc. Notes to Interim Condensed Financial Statements Three Months ended May 31, 2000 Basis of Preparation The accompanying Interim Condensed Financial Statements are prepared in accordance with rules set forth in Retaliation SB of the Securities and Exchange Commission. As said, these statements do not include all disclosures required under generally accepted principles and should be read in conjunction with the audited financial statements for the year ended February 29, 2000. In the opinion of management all adjustments consisting of normal reoccurring accruals have been made to the financial statements. The results of operation for the three months ended May 31, 2000. Are not necessarily indicative of the results to be expected for the fiscal year ending May 31, 2000. 5 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 - First Quarter of Fiscal Year 2001 Compared to First Quarter of Fiscal Year 2000 Dita's sales increased from $289,566 in the three-month period ended May 31, 1999 (Q1:2000) to $371,557 in the three-month period ended May 31, 2000 (Q1:2001), a 28.3 percent increase of $81,991. The increase is due primarily to increases of $22,739 in sales of optical sunglasses and $31,511 in sales in boutiques, and a decrease of $24,066 in returns and allowances. The cost of sales increased from $133,848, or 46.2 percent of sales, in Q1:2000 to $142,833, or 38.4 percent of sales, in Q1:2001, a decrease of 7.8 percent when considered as a percentage of sales. Operating expenses increased from $155,086 - or 53.6 percent of sales - in Q1:2000 to $170,894 - or 46 percent of sales - in Q1:2001. The only significant changes were - o a decrease in advertising expense from $43,828 in Q1:2000 to nothing in Q1:2001; o an increase in accounting fees from $600 in Q1:2000 to $18,563 in Q1:2001; o an increase in trade show expense from $5,528 in Q1:2000 to $11,029 in Q1:2001; o an increase in sales commissions from $17,667 or 6.1 percent of sales in Q1:2000 to $24,045 or 6.5 percent of sales in Q1:2001; and o an increase in bad debts from none in Q1:2000 to $13,297 or 3.6 percent of sales in Q1:2001. Dita had net income from operations of $631 in Q1:2000 but had net income of $57,829 in Q1:2001. This $57,198 forward move is attributable to the above-described increase in sales, decrease in cost of sales and almost level operating expenses. Our accounts receivable, net of allowances for doubtful accounts, increased by $109,122 from $60,283 at the end of fiscal year 2000 to $169,405 at the end of Q1:2001, and our accounts payable and accrued expenses increased by $54,789 from $283,783 at the end of FY 2000 to $338,572 at the end of Q1:2001. A cash position of $17,234 at the end of FY 2000 was reduced to $10,873 at the end of Q1:2001. Inventory decreased from $161,998 at the end of FY 2000 to $148,838 at the end of Q1:2001. 6 Stockholders' equity increased from a deficit of $54,045 at the end of FY 2000 to equity of $3,783 at the end of Q1:2001. 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, (2) from the proceeds realized from the sale of capital stock and recently (3) from maintaining a large accounts payable. 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 2000 we borrowed $25,113 on our bank line of credit. In Q1:2001 we made our first significant profit but have had to slow-pay our trade creditors to stay in operation. 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 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 still 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. 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. Possibility of a Reverse Acquisition and Reorganization We have been approached by several development-stage companies that are interested in acquiring our corporate shell. Each proposes that our present sunglasses business either be spunoff to our shareholders or sold, leaving the company as a trading public shell. Our management is open to the proposals but none of the development-stage companies has secured adequate financing or commenced meaningful operations. Until such occurs, 7 there is no point in negotiating a contract with a company that is not viable. 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: July __, 2000 Dita, Inc. By /s/ Troy Schmidt --------------------------- Troy Schmidt, President and Chief Financial Officer 8