-----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, N62VuYbGJ+ld38MdOsbmpZQHE8uP6ehL0nbRvexz7r83d8cBe5YtjivMuLZb0ErZ VS406vbGAz6PeCsQocxnww== 0001060830-01-500062.txt : 20010716 0001060830-01-500062.hdr.sgml : 20010716 ACCESSION NUMBER: 0001060830-01-500062 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010531 FILED AS OF DATE: 20010713 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: 1680862 BUSINESS ADDRESS: STREET 1: 2214 BEVERLY BLVD CITY: LOS ANGELES STATE: CA ZIP: 90057 MAIL ADDRESS: STREET 1: 2214 BEVERLY BLVD CITY: LOS ANGELES STATE: CA ZIP: 90057 10QSB 1 doc1.txt 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, 2001 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 33-0696051 (state of 0-27057 (IRS Employer incorporation) (Commission File Number) 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, 2001, there were 3,142,530 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 2 DITA, INC BALANCE SHEET May 31, 2001 (Unaudited) ASSETS ------
CURRENT ASSETS: Cash & cash equivalent $ 14,624 Accounts receivable, net 186,222 Prepaid expenses 9,541 Inventory 221,018 ------------ Total current assets 431,405 PROPERTY AND EQUIPMENT, net 68,778 OTHER ASSETS 3,609 ------------- $ 503,792 ============= LIABILITIES AND STOCKHOLDERS' EQUITY -------------------------------------- CURRENT LIABILITIES: Accounts payable $ 370,488 Accrued expense 14,131 Advance from officers 18,466 Note payable-Bank 49,232 Note Payable 16,747 Current maturities of obligations under capital lease 6,007 ------------- Total current liabilities 475,071 Obligations under capital lease less current maturities 4,934 STOCKHOLDERS' EQUITY Common stock, $.001 par value; Authorized shares 10,000,000, 3,142,530 shares issued and outstanding 31,425 Additional paid in capital 613,314 Accumulated deficit (620,952) ------------- Total stockholders' equity 23,787 $ 503,792 =============
The accompanying notes are an integral part of these consolidated financial statements. 3 DITA, INC STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 2001 AND 2000 (Unaudited)
2001 2000 ---- ---- Net Sales $ 395,970 $ 371,546 Cost of Sales 160,981 142,833 ------------- ------------ Gross Profit 234,989 228,713 Total operating expenses 178,034 163,229 ------------- ------------- Income from Operations 56,955 65,484 Non-Operating Income (expense): Interest expense (11,652) (6,865) Interest income - 11 ------------ ------------- Income before income taxes 45,303 58,630 Provision for income taxes 800 800 ------------ ------------- Net Income $ 44,503 $ 57,830 ============ ============ Basic weighted and diluted average number of common stock outstanding* 3,142,530 3,142,530 ============ ============ Basic net Income per share $ 0.01 $ 0.02 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 DITA, INC STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MAY 31, 2001 AND 2000 (Unaudited)
2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 44,503 $ 57,830 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 3,116 6,000 Provision for doubtful accounts - 13,297 (Increase)/decrease in current assets: Accounts receivable (89,075) (122,420) Inventory (55,034) 13,160 Deposit - (275) Prepaid Expense 4,081 1,698 Increase/(decrease) in current liabilities: Accounts payable and accrued expenses 90,066 20,856 ------------ ------------ Total adjustments (46,846) (67,684) ------------ ------------ Net cash used in operating activities (2,343) (9,854) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Increase in other assets - (3,711) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of loans from officers (31) (1,616) Proceeds from note payable, bank 9,197 5,271 Proceeds from other current liability - 3,550 Payments on obligation under capital lease (2,260) - ------------- ------------ Net cash provided by financing activities 6,906 7,205 ------------ ------------ NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENT 4,563 (6,360) CASH & CASH EQUIVALENT, BEGINNING BALANCE 10,061 17,234 ------------- ------------ CASH & CASH EQUIVALENT, ENDING BALANCE $ 14,624 $ 10,874 ============= ============ Supplemental disclosure of cash flow information: Income tax paid - - ============= ============ Interest paid 5,000 2,600 ============= ============
The accompanying notes are an integral part of these consolidated financial statements. 5 DITA, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS MAY 31, 2001 AND 2000 1. ORGANIZATIONS AND BASIS OF PRESENTATION Dita, Inc. (the "Company") was incorporated on October 3, 1995 in the State of Nevada. The Company is a wholesaler of unique, alternative and fashionable women's sunglasses and sells to retailers throughout the United States, Japan and Europe. 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 28, 2001. 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, 2001 are not necessarily indicative of the results to be expected for the fiscal year ending February 28, 2002. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and cash equivalents The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. Inventories Inventories, comprising mostly of finished goods, are stated at the lower of cost (first-in, first-out method) or market. Property & Equipment Property and equipment is carried at cost. Depreciation of property and equipment is provided using the declining balance method over the estimated useful lives (generally two to seven years) of the assets. Expenditures for maintenance and repairs are charged to expense as incurred. Long-lived assets The Company accounts for the impairment and disposition of long-lived assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of long-lived Assets and for long-lived Assets to be disposed of." In accordance with SFAS No. 121, long-lived assets to be held 6 DITA, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS MAY 31, 2001 AND 2000 are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. As of May 31, 2001, no impairment has been indicated. Income taxes Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income (loss). Valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. Revenue Recognition Revenue is recognized when merchandise is shipped to a customer. Generally, the Company extends credit to its customers and does not require collateral. The Company performs ongoing credit evaluations of its customers and historic credit losses have been within management's expectations. Basic and diluted net loss per share Net loss per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Stock-based compensation In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123 requires compensation expense to be recorded (i) using the new fair value method or (ii) using the existing accounting rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and related interpretations with proforma disclosure of what net income and earnings per share would have been had the Company adopted the new fair value method. The 7 DITA, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS MAY 31, 2001 AND 2000 company uses the intrinsic value method prescribed by APB25 and has opted for the disclosure provisions of SFAs No.123. The implementation of this standard did not have any impact on the Company's financial statements. Fair value of financial instruments Statement of financial accounting standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value. Costs of start-up activities In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the costs of start-up activities", effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires the costs of start-up activities and organization costs to be expensed as incurred. The implementation of this standard did not have a material impact on the Company's financial statements. Research and Development Expenditures for software development costs and research are expensed as incurred. Such costs are required to be expensed until the point that technological feasibility is established. The period between achieving technological feasibility and the general availability of such software has been short. Consequently, costs otherwise capitalizable after technological feasibility is achieved are generally expensed because they are insignificant. Allowance for doubtful accounts In determining the allowance to be maintained, management evaluates many factors including industry and historical loss experience. The allowance for doubtful accounts is maintained at an amount management deems adequate to cover estimated losses. Allowance for bad debts as of May 31, 2001 and 2000, was $11,000 and $41,000, respectively. Advertising The Company expenses advertising costs as incurred. Advertising expense for the periods ended May 31, 2001 and 2000 amounted to $4,700 and $1,400, respectively. 8 DITA, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS MAY 31, 2001 AND 2000 Segment Reporting During the periods ended May 31, 2001 and 2000, the Company only operated in one segment therefore segment disclosure has not been presented. Recent Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded on the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, is effective for fiscal quarters of fiscal years beginning after June 15, 2000. This statement is not applicable to the Company. In June 2000, the FASB issued Financial Accounting Standards (SFAS) No. 138, "Accounting for Certain Instruments and Certain Hedging Activities." This statement is not applicable to the Company. In June 2000, the FASB issued Financial Accounting Standards (SFAS) No. 139, "Rescission of FASB Statement No. 53 and Amendments to Statements No. 63, 89, and 121." This statement is not applicable to the Company. In September 2000, the FASB issued Financial Accounting Standards SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and a replacement of FASB Statement No. 125." This statement is not applicable to the Company. In December 1999, the Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 summarizes the SEC's views on the application of GAAP to revenue recognition. In June 2000, the SEC released SAB No. 101B that delays the implementation date of SAB 101 until no later than the fourth fiscal quarter of fiscal year beginning after December 15, 1999. The Company has reviewed SAB No. 101 and believes that it is in compliance with the SEC's interpretation of Revenue recognition. In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation." This Interpretation clarifies (a) the definition of employee for purposes of applying APB Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a no compensatory plan, (c) the accounting consequence of various modifications to the terms of a previously 9 DITA, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS MAY 31, 2001 AND 2000 fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. The adoption of this Interpretation has not had a material impact on the Company's financial position or operating results. Certain significant risks and uncertainties General business - The Company's success is dependent, in part, to its introduction of products which are perceived to represent an improvement in performance over products available in the market. The Company's future success will depend, in part, upon its continued ability to develop and introduce such innovative products, and there can be no assurance of the Company's ability to do so. The consumer products industry, including the sunglass, apparel, footwear, and watch categories, is fragmented and highly competitive. In order to retain its market share, the Company must continue to be competitive in the areas of quality, technology, method of distribution, style, brand image, intellectual property protection and customer service. These industries are subject to changing consumer preferences; shifts in consumer preferences may adversely affect companies that misjudge such preferences. If management is unable to anticipate or manage growth effectively, the Company's operating results could be materially adversely affected. 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 periods. Actual results could differ from those estimates. Vulnerability due to supplier concentrations - The Company uses a single source for the supply of several components. Total purchases from the source amounted to $102,006 in the period ended May 31, 2001. In the event of the loss of the source, the Company has identified an alternate source which may be available. The effect of the loss of any of these sources or a disruption in their business will depend primarily upon the length of time necessary to find a suitable alternative source and could have a material adverse effect on the Company's results of operations. Vulnerability due to customer concentrations - Net sales to two major customers in the period ended May 31, 2001 amounted to approximately $146,000. Account receivable from the major customers at May 31, 2001, amounted to $39,000. 3. ADVANCES FROM 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. 10 DITA, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS MAY 31, 2001 AND 2000 4. NOTE PAYABLE: Note payable is non-interest bearing and is due upon the sale of the corporation. 5. COMMITMENTS: The Company occupies office space under lease agreements expiring on December 31, 2001. The lease requires the Company to pay for utilities, insurance, taxes and maintenance, and contains renewal options. Total rent expense charged to operations was $9,100 and $8,700 in the periods ended May 31, 2001 and 2000, respectively. Future minimum payments relating to operating leases for 2002 amounted to $23,000. A deposit consisting of $3,060 was paid upon signing of the lease. 6. SEBSEQUENT EVENT: The Company is in the process of negotiating to sell its corporation to a third party. As of June 30, 2001, no negotiations have been finalized. Upon completion of the proposed sale, the Company will reorganize and continue to operate under a different entity. 11 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 2002 Compared to First Quarter of Fiscal Year 2001 Dita's sales increased in the three-month period ended May 31, 2001 (Q2:2002)over sales achieved in the three months ended May 31, 2000 (Q2:2001), a total of $24,413. The increase in overall sales is due primarily to increases in International and Department store sales. However, the increase in the aforementioned sales categories was partially offset by decreases in Boutique and Optical sales as well as increased returns and allowances, all attributable to the slowing economy. The cost of sales increased in the three-month period ended May 31, 2001 (Q1:2002) over cost of sales incurred in the three-month period ended May 31, 2001 (Q2:2002), a total of $31,081. This increase is attributable to the above noted increase in sales as well is decreased margins caused by increased international sales. International distributors are given volume discounts ranging from 20% to 50% off U.S. wholesale prices thus reducing the overall gross margin. Operating expenses increased from $169,894 - in Q1:2001 to $177,381 - in Q1:2002. The only significant changes were - * an increase in advertising expense from $0.00 in Q1:2001 to $2,776 in Q1:2002; * an increase in photography expense from $0.00 in Q1:2001 to $7,779 in Q1:2002; * a decrease in tradeshow expense from $11,029 in Q1:2001 to $4,009 in Q1:2002; * an increase in printing and reproduction expense from $176.73 in Q1:2001 to $9,480 in Q1:2002; * a decrease in accounting fees from $18,563 in Q1:2001 to $11,8753 in Q1:2002; * a decrease in equipment leasing expense from $8,693 in Q1:2001 to $0.00 in Q1:2002; * a decrease in bad debt expense from $13,297 in Q1:2001 to $0.00 in Q1:2002; 12 * a decrease in finance charge expense from $6,865 in Q1:2001 to $2,533 in Q1:2002; * an increase in salaries office expense from $6,750 in Q1:2001 to $11,074 in Q1:2002; * an increase in salaries officers expense from $29,250 in Q1:2001 to $34,650 in Q1:2002; and * an increase in interest expense from $0.00 in Q1:2001 to $8,737 in Q1:2002. Dita had a decrease in net income from operations in Q1:2002 over the net income accomplished in Q1:2001 of ($14,155). This decline is attributable to two factors. First the decrease in Operating expenses noted above and second the increase in cost of goods sold as noted above. Our accounts receivable, net of allowances for doubtful accounts, increased by $89,075 from the end of fiscal year 2001 to the end of Q1:2002, and our accounts payable and accrued expenses increased by $82,765 from the end of FY 2001 to the end of Q1:2002. Our cash position increased by $4,583 from the end of FY 2001 to the end of Q1:2002. Inventory increased by $55,034 from the end of FY 2001 to the end of Q1:2002. Stockholders' equity increased by $44,503 from the end of FY 2001 to the end of Q1:2002. Liquidity and Outlook ----------------------- The company's limited liquidity position was supported in Q1:2002 mainly by three factors: (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 a considerable portion of our inventory; (2) from the small profit realized in fiscal year 2001; and (3) from maintaining a large accounts payable. 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 for continued improvement upon profits shown in FY 2001 to be two fold. First our gross margin must continue to improve. The company showed improvement in this area by bettering its gross margin in fiscal year 2001 over fiscal 2000. However, gross margin needs to be continually improved. The essential services provided by Glance, Inc. come at a cost - they increase our cost of goods sold from 10 to 20 percent above industry standard. Yet, it is impossible to dispense with these services without the cash to pay for a considerable portion of our inventory that Glance provides. 13 We are still working on obtaining additional 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. The second area in which the company can increase its profitability is to move into licensing of additional brands. With Dita's relationship with Glance, the company has the ability to fund the production requirements of a new sunglass license. The company has not identified a source of funds required for the implementation of a new licensing program. In order for Dita to enter into a licensing agreement with another brand it will be necessary to form a partnership with the proposed licensor. In this partnership Dita would fund the production, utilize its existing property plant equipment, in-house sales, shipping and customer service staff and the licensor would fund the remaining capital deficiencies. Currently Dita is researching several different markets where licensing could be profitable. 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 improve the overall stability of our liquidity position. 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 spun-off 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, 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 No. Description ----------- ----------- 3 - Articles of Incorporation of Dita, Inc.* 3.1 - Bylaws of Dita, Inc.* 10 - Dita, Inc. Distributor Agreement of September 1, 1999, between Dita, Inc. and Levante, a representative distributorship agreement of the Registrant** 14 * Previously filed with Form 10-SB; Commission File No. 0-27057, incorporated herein by reference. ** Previously filed with Amendment No. 1 to Form 10-SB; Commission File No. 0-27057, incorporated herein by reference. (b) Forms 8-K Form 8-K - Item 4. Changes in Registrant's Certifying Accountant (SEC File #0-27057) filed February 23, 2001. Amendment No. 1 to Form 8-K - Item 4. Changes in Registrant's Certifying Accountant (SEC File #0-27057) filed March 8, 2001. Amendment No. 2 to Form 8-K - Item 4. Changes in Registrant's Certifying Accountant (SEC File #0-27057) filed March 14, 2001. 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 13, 2001 Dita, Inc. By/s/ Troy Schmidt ------------------------------ Troy Schmidt, President and Chief Financial Officer 15 -----END PRIVACY-ENHANCED MESSAGE-----