-----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, R2brYi5fPVF6NDwGq8FYVN6DHd2e0yoj/tURgSWY+c0iNnwE7ThdcdSQsmUgJyqS 0I3X12Qdug9RqRVWMubpBA== 0001010412-02-000035.txt : 20020415 0001010412-02-000035.hdr.sgml : 20020415 ACCESSION NUMBER: 0001010412-02-000035 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20020314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITRAN SYSTEMS INC /DE CENTRAL INDEX KEY: 0000876134 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 720861671 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19470 FILM NUMBER: 02574605 BUSINESS ADDRESS: STREET 1: 2176 NORTH MAIN STREET 2: PO BOX 6310 CITY: LOGAN STATE: UT ZIP: 84341-6310 BUSINESS PHONE: 8017529067 MAIL ADDRESS: STREET 1: 2176 NORTH MAIN CITY: LOGAN STATE: UT ZIP: 84341-1739 10QSB 1 q0102.txt DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARY UNITED STATES 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 quarter ended January 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number 1-11034 DIGITRAN SYSTEMS, INCORPORATED (Exact name of registrant as specified in its charter) Delaware 72-086167 (State or other jurisdiction of (IRS) employer Incorporation or organization) identification No.) 205 West 8800 South, P.O. Box 91, Paradise, UT 84328-0091 (Address of principal executive offices and zip code) (435) 757-4408 (Registrant's telephone number, including area code) Not applicable (Former name, address, and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at January 31, 2002 Common stock, $.01 par value 24,347,699 Class B Common stock, $.01 par value 2,000,000 Transitional Small Business Disclosure Format (Check one) Yes No X DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARY TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Condensed Consolidated Balance Sheet as of January 31, 2002 3 Unaudited Condensed Consolidated Statements of Operations, for the nine month periods ended January 31, 2002 and 2001 4 Unaudited Condensed Consolidated Statements of Cash flows, for the nine month periods ended January 31, 2002 and 2001 5 Notes to Unaudited Condensed Consolidated Interim Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation 9 PART II. OTHER INFORMATION 18 SIGNATURES 20 PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
January 31, 2002 ASSETS CURRENT ASSETS Cash and cash equivalents $ 341 Total Current Assets 341 Total assets $ 341 LIABILITIES AND STOCK HOLDERS EQUITY CURRENT LIABILITIES Accounts Payable and Accrued Expenses $2,682,435 Short Term Notes Payable 551,899 Total Current Liabilities 3,234,334 Shareholder's Deficit Preferred Stock $ 516 Common Stock 243,477 Class B Common Stock 20,000 Additional Paid-in Capital 10,416,438 Retained Earnings (Deficit) (13,914,424) Total Shareholder's Deficit (3,233,993) Total Liabilities & Shareholder's Deficit $ 341
The accompanying notes are an integral part of these financial statements. 3 DIGITRAN SYSTEMS, INCORPORATED and Subsidiary CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended January 31, January 31, 2002 2001 2002 2001 REVENUES $ - $ - $ - $ - COST OF GOODS SOLD - - - - GROSS PROFIT $ - $ - $ - $ - EXPENSES Depreciation and Amortization $ - $ - $ - $ - Selling, general and administrative expenses - - - - OPERATING INCOME (LOSS) $ - $ - $ - $ - OTHER INCOME (EXPENSE) Interest $ - $ - $ - $ - Gain sale of divisions - - - - INCOME (LOSS) FROM DISCONTINUED OPERATIONS (Note 3) $ 510,000 $(62,000) $302,064 $(340,471) NET INCOME (LOSS) $ 510,000 $(62,000) $302,064 $(340,471) BASIC LOSS PER SHARE Continuing Operations - - - - Discontinued Operations $ 0.02 $ (0.00)$ 0.01 $ (0.02) Total Loss per share $ 0.02 $ (0.00)$ 0.01 $ (0.02) Weighted Average number of shares 24,247,699 22,750,000 23,774,937 22,750,000
The accompanying notes are an integral part of these consolidated financial statements. 4 DIGITRAN SYSTEMS, INCORPORATED and Subsidiary CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Nine Months Ended January 31, 2002 2001 Cash Flows From Operating Activities Net(Loss) or Income $ 302,064 $(340,471) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Gain on sale of Divisions (377,564) - Issuance of common stock for services 10,000 (Increase) Decrease in: Accounts receivable - 70,770 Inventory - - Increase (Decrease) in: Accounts Payable and other current liabilities 65,500 105,902 Net Cash (Used in) provided by Operating Activities (0) (163,799) Cash Flows Used in Investing Activities Purchase of Property, plant & equipment - - Net Cash used in Investing Activities - - Cash Flows from Financing Activities Proceeds from short term borrowing - 119,850 Payments on short term borrowing - (12,500) Payments on long term borrowing - - Proceeds from stock-conversion of debt - - Proceeds from sale of buildings - - Issuance of Common Stock - 21,450 Net Cash Provided by Financing Activities - 128,800 Net Increase (Decrease) in Cash - (34,999) Cash at Beginning of Period 341 35,999 Cash at End of Period $ 341 $ 1,000
The accompanying Notes are an integral part of these consolidated financial statements. 5 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARY NOTE 1 CONDENSED FINANCIAL STATEMENTS The accompanying financial statements have been prepared by the Company without audit. They include information of Digitran Systems, Incorporated and its subsidiary, Digitran, Inc. In the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at January 31, 2002 and the results of operations and cash flows for the nine month periods ended January 31, 2002 and 2001 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's April 30, 2001 audited financial statements. The results of operation for the periods ended January 31, 2002 and 2001 are not necessarily indicative of the operating results for the respective full years. The simulator products marketed by the Company sell at a very high price in comparison to the total annual sales of the Company. This relationship leads to individual sales having a disproportionately large effect on total sales. Therefore, sales within a quarter can lead to highly volatile results of operations for individual quarters. The results for individual quarters may not be indicative of annual results. All quarterly information should be considered in light of the last fiscal year and the current year to date operations of the Company. Furthermore, due to the fixed nature of certain cost of revenues, the gross margins on relatively low revenue volumes will be lower than otherwise expected. All operating results have been shown as discontinued. NOTE 2 COMMITMENTS AND CONTINGENCIES In the normal course of business, there may be various and sundry legal actions and proceedings pending which seek damages against the Company. The Company is behind in all its obligations and has discontinued operations. It is possible that additional legal action could be brought against the Company. For the nine months ended January 31, 2002, the Company accrued interest expense of $97,500 and approximately $130,000 in Selling, General and Administrative expenses primarily for legal expenses incurred in settling a case in which the Company was the plaintiff. The case was dropped when Ms. Trevers passed away. The case was withdrawn before trial, with no reportable incident. In a non-cash transaction, certain accrued liabilities (including those listed above), interest expense, notes payable and SG&A were reversed by $510,000 resulting in a net gain from the sale of the divisions of $377,564. Note that this gain had been deferred since November 1999 and was recognized in this quarter because the company and the buyer signed mutual waivers. See also Plan of Operations under Item 2: Management's Discussion and Analysis. 6 Going Concern The accompanying financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring operating losses, has a deficit in working capital, has an accumulated earnings deficit, and has discontinued certain operations. See further discussion below in Management's discussion and analysis and in Item 6: Exhibits and reports on Form 8-K. On April 27, 2001 the former Chairman, President, CEO and co-founder of the Company, Ms. Loretta Trevers passed away due to illness. We express our sincere appreciation to her for her seemingly endless attempts to keep the Company alive. Before she passed, she was actively involved with the Board and management in the evaluation of various alternatives for the Company, including the proposed transaction described below, herein. NOTE 3 RESULTS FROM DISCONTINUED OPERATIONS The following is a summary of the loss from discontinued operations resulting from the elimination of the operations. Where necessary, the financial statements have been retroactively restated to reflect this event. No tax benefit has been attributed to the discontinued operations. DIGITRAN SYSTEMS, INCORPORATED and Subsidiary CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended January 31, January 31, 2002 2001 2002 2001 REVENUES $ - $ - $ - $ 9,000 COST OF GOODS SOLD - - - 58,866 GROSS PROFIT $ - $ - $ - $ (49,866) EXPENSES Depreciation and Amortization $ - $ - $ - $ - Selling, general and administrative expenses (131,936) 30,000 10,000 192,700 OPERATING INCOME (LOSS) $ 131,936 $ (30,000) $ (10,000) $(242,566) OTHER INCOME (EXPENSE) Interest $ 500 $ (32,000) $ (65,000) $ (97,905) Gain on sale of Divisions 377,564 - 377,564 - INCOME (LOSS) BEFORE INCOME TAXES $ 510,000 $ (62,000) $ 302,064 $(340,471) INCOME TAXES, Net of Tax - - - - NOL NET INCOME (LOSS) $ 510,000 $ (62,000) $ 302,064 $(340,471) LESS CURRENT UNPAID DIVIDENDS ON PREFERRED STOCK (14,420) (15,046) NET LOSS $ 510,000 $ (62,000) $ 287,144 $(353,517)
7 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARY NOTE 4 CONCENTRATIONS OF CREDIT RISK Most of the Company's remaining business activity is with oil companies, training institutions and various other related entities, often outside the United States. Normally, the Company attempts to secure shipments outside the United States through letters of credit and/or progress payments. In cases for which shipments are made on open accounts, the Company retains title or ownership claims to the equipment shipped by terms of its contracts or agreements until significant payment has been secured. NOTE 5 CAPITAL STOCK The Company's capital stock consists of common stock, Class B common stock and preferred stock. The common stock provides for a non-cumulative $0.05 per share annual dividend and a $0.01 per share liquidation preference over Class B common. In addition, the Company must pay the holders of the common stock a dividend per share at least equal to any dividend paid to the holders of Class B common. Holders of the common stock are entitled to one- tenth of a vote for each share held. Class B common may not receive a dividend until an annual dividend of at least $0.05 is paid on the common stock. Holders of Class B common have preemptive rights with respect to the Class B common stock and may convert each share of Class B common into one share of the common stock at any time. Holders of Class B common are entitled to one vote per share held. The Series 1 Class A 8% Cumulative Convertible Preferred Stock has a par value of $0.01 per share. As of January 31, 2002, there were 51,500 shares outstanding. Holders of preferred shares are entitled to cumulative dividends of 8% per annum on the stated value of the stock, designated at $7 per share. Dividends are payable semi-annually on September 15 and March 15. No dividends have been paid since March 15, 1993, resulting in dividends in arrears at October 2001 of approximately $253,380 or $4.92 per share. Dividends are not payable on any other class of stock ranking junior to the preferred stock until the full cumulative dividend requirements of the preferred stock have been satisfied. The preferred stock carries a liquidation preference equal to its stated value plus any unpaid dividends. Holders of the preferred stock are entitled to one-tenth of a vote for each share of preferred stock held. The Company may, at its option, redeem at any time all shares of the preferred stock or some of them upon notice to each preferred stockholder at a per share price equal to the stated value ($7.00) plus all accrued and unpaid dividends thereon (whether or not declared) to the date fixed for redemption, subject to certain other provisions and requirements. 8 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARY PART 1 FINANCIAL INFORMATION (Continued) ITEM 2 Management's Discussion and Analysis of Financial Condition or Plan of Operations. Management's Discussion See Item 6: Exhibits and reports on Form 8-K for current developments regarding Management's Discussion and Plan of Operations. For several years now, the company has been unsuccessful in achieving profitable operations, generating cash from operations or attracting sufficient equity or debt financing to sustain its then current level of operations. Consequently, the company was finally compelled to drastically reduce its work force, sell its assets and settle its debts in any way possible, including conversion of debt into the company's stock. Plan of Operations The company still has nominal operations and operating capacity: The company is represented by sales agents throughout the world; capable engineers construct and support the company's products on a contract basis; and other aspects of the business are sustained with the voluntary efforts of its shareholders. However, because the operations are currently as described above, the results of operations are summarized, netted and classified as the results of discontinued operations. The prior year's results may have been reclassified as necessary, for the sake of comparability. In November 1999, the company entered into an agreement with another company (a non-competitor who has served the same customer base as Digitran for many years) regarding the company's Crane and Truck simulation divisions. As of January 31, 2002, the non-competitor and the company had signed mutual releases which resulted in the recognition of gain from the sale of the Crane and Truck divisions, the release of certain obligations (secured and unsecured) and the consummation of the transfer of the then existing technology of the company. Please note that the recognition of the gain was a non-cash transaction that had been deferred since November 1999. The Company continues to support the petroleum Division and other existing Projects. 9 Management's Future Plans At this point, the company's management continues to entertain all viable potential alternatives to provide creditor satisfaction and shareholder value including, but not limited to: mergers, acquisitions, reverse acquisitions, joint ventures, debt-restructures, spin-offs, realization of the company's intangible assets or value, etc. Alternatives will continue to be distinguished and favored based upon how well it provides for the existing creditors and shareholders. Proposed Transactions and Mergers In accordance with the information contained in Item 6, below, the Company plans to participate in a series of mergers whereby the Company will be controlled by another entity. Consequently, two sets of Pro Forma Financial Statements follow: First, the pro forma information with respect to the Merger between Digitran, Inc. (a Utah Corporation) and Digitran Simulation Systems, Inc. (an Arizona Corporation), as if they were combined for the full year ended January 31, 2002. Secondly, the pro forma information of the Company, assuming the merger between Digitran, Inc. and Digitran Simulation systems, Inc. were effective as of January 31, 2002: PRO FORMA FINANCIAL STATEMENTS DIGITRAN, INC. AND DIGITRAN SIMULATION SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
January 31, 2002 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,341 Total Current Assets 1,341 Total assets $ 1,341 LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) CURRENT LIABILITIES Accounts Payable and Accrued Expenses $2,682,435 Short Term Notes Payable 551,899 Due to Parent 1,819,421 Total Current Liabilities 5,053,755 Shareholder's Deficit Common Stock 1,000 Additional Paid-in Capital - Retained Earnings (Deficit) (5,056,096) Total Shareholder's Deficit (5,055,096) Total Liabilities & Shareholder's Deficit $ 1,341
The accompanying notes are an integral part of these financial statements. 10 PRO FORMA FINANCIAL STATEMENTS DIGITRAN, INC. AND DIGITRAN SIMULATION SYSTEMS, INC. Consolidated Statements of Operations For the Year Ended January 31, 2002 REVENUES $ 140,000 OPERATING COSTS (61,000) GROSS MARGINS 79,000 Selling, general and administrative (51,936) OPERATING Income 27,064 Other Income (expense) Gain on sale of Divisions 377,564 Interest (65,500) NET INCOME $ 339,128 BASIC GAIN (LOSS) PER SHARE Pro Forma Continuing operations $ 0.01 WEIGHTED AVERAGE SHARES OF COMMON STOCK 23,000,000 The accompanying notes are an integral part of these financial statements 11 PRO FORMA FINANCIAL STATEMENTS DIGITRAN, INC. AND DIGITRAN SIMULATION SYSTEMS, INC. Consolidated Statements of Cash Flows For the Year Ended January 31,2002 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 339,128 Adjustments to reconcile net loss to net cash used in operating activities: Gain on Sale of Divisions (377,564) Changes in operating assets and liabilities: Decrease in accounts receivable 4,000 Increase in accounts payable and other current liabilities 185,063 Net Cash Provided by (Used In) Operating Activities 150,627 CASH FLOWS FROM INVESTING ACTIVITIES Decrease in Due to Parent (149,968) Purchase of property and equipment - Net Cash Provided In Investing Activities (149,968) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable Net Cash Used by Financing Activities $ 659 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 659 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,000 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,341 The accompanying notes are an integral part of these Pro Forma financial statements. 12 NOTE 1 PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying Pro Forma financial statements have been prepared by the Company without audit, and represent the Forma Financial position and results of operations of the combined entities had the proposed merger of the Company?s subsidiary Digitran, Inc., a Utah corporation into Digitran Simulation Systems, Inc., an Arizona Corporation, occurred as of January 31, 2002. See Item 6, below for additional information regarding the proposed merger. In the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly the Pro Forma financial position at January 31, 2002 and the results of operations and cash flows for the year ended January 31, 2002 have been made. This transaction is expected to be complete by March 31, 2002. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's April 30, 2001 audited financial statements, the company?s latest filed 8-K, and definitive proxy statement filed on February 20, 2002. The Pro Forma results of operation for the year ended January 31, 2002 are not necessarily indicative of the operating results for the respective fiscal year. 13 PRO FORMA FINANCIAL STATEMENTS DIGITRAN SYSTEMS, INCORPORATED CONDENSED BALANCE SHEET (Unaudited)
January 31, 2002 ASSETS CURRENT ASSETS Cash and cash equivalents $ 0 Total Current Assets 0 Investment in DSSI (see Pro Forma Note 2) Total assets $ 0 LIABILITIES AND STOCK HOLDERS EQUITY CURRENT LIABILITIES Accounts Payable and Accrued Expenses $ 0 Short Term Notes Payable 0 Total Current Liabilities 0 Shareholder's Deficit Preferred Stock $ 516 Common Stock 243,477 Class B Common Stock 20,000 Additional Paid-in Capital 10,416,438 Retained Earnings (Deficit) (10,681,431) Total Shareholder's Deficit 0 Total Liabilities & Shareholder's Deficit $ 0
The accompanying notes are an integral part of these financial statements. 14 PRO FORMA FINANCIAL STATEMENTS DIGITRAN SYSTEMS, INCORPORATED Consolidated Statements of Operations For the Year Ended January 31, 2002 REVENUES $ 0 OPERATING COSTS 0 GROSS MARGINS 0 Selling, general and administrative 0 OPERATING LOSS 0 Other Income (expense) Interest 0 Gain on disposal of assets 0 NET INCOME (LOSS) from Discontinued Operations 302,064 NET INCOME (LOSS) before Extraordinary Item Valuation Credit on Merger (See Pro Forma Note 2) $ 3,388,416 Utilization of Net Operating Loss Carry-forward (3,388,416) Extraordinary Item net of tax 0 NET INCOME (LOSS) before taxes $ (302,064) BASIC GAIN (LOSS) PER SHARE Pro Forma Continuing operations $ 0.01 Pro Forma Extraordinary Item (0.00) WEIGHTED AVERAGE SHARES OF COMMON STOCK 23,410,857 The accompanying notes are an integral part of these financial statements 15 PRO FORMA FINANCIAL STATEMENTS DIGITRAN SYSTEMS, INCORPORATED Consolidated Statements of Cash Flows For the Year Ended January 31,2002 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) $ 302,064 Adjustments to reconcile net loss to net cash used in operating activities: Gain on sale of Divisions (377,564) Issuance of Common Stock for Services 10,000 Changes in operating assets and liabilities: Increase in accounts payable and other current liabilities 65,500 Net Cash Used In Operating Activities - CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment - Net Cash Provided In Investing Activities - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable - Payments on notes payable - Issuance of common stock - Net Cash Used by Financing Activities $ - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ - CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR - CASH AND CASH EQUIVALENTS AT END OF YEAR $ - The accompanying notes are an integral part of these financial statements 16 NOTE 1 PRO FORMA CONDENSED FINANCIAL STATEMENTS The accompanying Pro Forma financial statements have been prepared by the Company without audit, and represent the Pro Forma financial position and results of operations of Digitran Systems, Incorporated assuming its subsidiary, Digitran, Inc.?s (a Utah corporation) merger with Digitran Simulation Systems, Inc. (an Arizona corporation) were effective as of January 31, 2002. See Item 6, below for the status of the Merger. In the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at January 31, 2002 and the results of operations and cash flows for the nine month period ended January 31, 2002 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed Pro Forma financial statements be read in conjunction with the financial statements and notes thereto included in the Company's April 30, 2001 audited financial statements. The Pro Forma results of operation for the period ended January 31, 2002 are not necessarily indicative of the operating results for the respective full year. NOTE 2 PRO FORMA INVESTMENT IN DSSI The Company carried its investment in Digitran, Inc. at a net credit of $3,388,416 as of April 30, 2001. In this Pro Forma Balance Sheet, the investment is shown net of the Utilization of Income Tax Net Operating Loss carry forward of $3,388,416. The Carrying value is an estimate, and ignores any applicable local, state, excise, alternative minimum or other taxes that might be applicable. 17 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARY PART II OTHER INFORMATION ITEM 1 Legal Proceedings See "Note 2 Commitments and Contingencies". ITEM 2 Changes in Securities During this quarter, no shares were issued. ITEM 3 Defaults on Senior Securities Holders of Series 1 Class A 8% Cumulative Convertible Preferred Stock are entitled to receive cumulative dividends at the annual rate of $.56 per share, payable semi-annually on September 15 and March 15, beginning September 15, 1993 resulting in aggregate dividends in arrears of $253,380. ITEM 4 Submission of Matters to a Vote of Security Holders See Item 6: Exhibits and reports on Form 8-K. (See also filed definitive proxy statement filed February 20, 2002.) ITEM 5 Other None ITEM 6 Exhibits and reports on Form 8-K, filed since the April 30, 2001 10-K. The following was reported on Form 8-K: Item 5. Other Events. The Registrant deems the following information to be of importance to security holders: The Board of Directors of Digitran Systems, Incorporated has resolved to call a Special Meeting of Shareholders where it will seek to have the majority of voting shares of the Company consider the following items: A. To approve an Agreement and Plan of Merger by and between the Company and TradinGear.com, Incorporated, a Delaware corporation ("TradinGear"), whereby TradinGear will merge with DSI Acquisition, Inc., a wholly owned subsidiary of the Company, B. To approve the issuance of approximately 19,154,309 shares of the Company's Class A common stock (ultimately to be distributed to the shareholders of TradinGear) to DSI Acquisition, Inc. after giving effect to a reverse stock split on a twenty-one to one share basis, C. To approve changing the name of the Company to "TG FIN Holdings, Inc." and the address of the Company in accordance with the desires of the acquisition target, D. To approve the merger of Digitran, Inc., a Utah corporation, the Company's wholly-owned subsidiary, with Digitran Simulation Systems, 18 Inc., an Arizona company owned by the heirs of Loretta P. Trevers, the deceased president of Digitran Systems, Incorporated, E. To approve a reverse stock split of the Company's Class A common stock on a twenty-one (21) to one (1) basis, F. To approve a reverse stock split of the Company's Class B common stock on a twenty (20) to one (1) basis, G. To elect as directors three representatives of TradinGear. The Board of Directors has given its approval to the Agreement and Plan of Merger with TradinGear subject to approval by a majority of voting shareholders in accordance with the bylaws of the Company and the laws of Delaware. It is anticipated that the transaction and all related transactions will close on or before March 31, 2002. TradinGear is a company specializing in software solutions to facilitate online trading of securities. TradinGear is currently focused on the financial services and brokerage industry but plans to expand into other areas of the financial industry with its cutting edge technological products. Management believes that the above listed proposed actions will be approved by a majority of shareholders. Consummation of the Agreement and Plan of Merger will cause the following events to occur which are normally reported on Form 8-K: Change in Control of Registrant Acquisition of Assets Disposition of Assets Change in Registrant's Certifying Accountants Resignation of Registrant's Current Directors The information contained in this Form 8-K is being given voluntarily under Item 5 in advance of actual reporting requirements. 19 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARY SIGNATURES In accordance with the requirements of the Securities Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Digitran Systems, Incorporated Registrant Dated March 13, 2002 By:/s/Aaron Etra By: Aaron Etra (Chairman) By:/s/Gary Blum By: Gary Blum (Director) By:/s/Scott Lybbert By: Scott Lybbert (Secretary) 20 -----END PRIVACY-ENHANCED MESSAGE-----