-----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, HpUAaWpOD4GrCyTR8EGhk4NjK2oeIZF3fUb2HwRr7Kqtu9oIwej+XN6AojZqTyOc mLfxDhBO6NKYXLFu1ROf6A== 0000912057-99-006517.txt : 19991118 0000912057-99-006517.hdr.sgml : 19991118 ACCESSION NUMBER: 0000912057-99-006517 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19991117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDEN SYSTEMS INC CENTRAL INDEX KEY: 0000911876 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 954021568 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22698 FILM NUMBER: 99759318 BUSINESS ADDRESS: STREET 1: 2125-C MADERA RD CITY: SIMI VALLEY STATE: CA ZIP: 93065 BUSINESS PHONE: 8055824400 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998 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 0-22698 - -------------------------------------------------------------------------------- GOLDEN SYSTEMS, INC. (Exact name of registrant as specified in its charter) - -------------------------------------------------------------------------------- CALIFORNIA 95-4021568 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2125-C MADERA ROAD SIMI VALLEY, CA 93065 (Address of principal executive offices) (805) 582-4400 (Registrant's telephone number, including area code) -------------------------------------------------- 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 / / NO / X / AS OF SEPTEMBER 30, 1999, THERE WERE 5,299,998 SHARES OF NO PAR VALUE COMMON STOCK OUTSTANDING. ================================================================================ INDEX LISTING
Page Number ------ PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. Consolidated Balance Sheets as of December 31, 1998 (unaudited) and March 31, 1998. 1 Consolidated Statements of Operations (unaudited) for the three months and nine months ended December 31, 1998 and December 31, 1997. 2 Consolidated Statements of Cash Flows (unaudited) for the nine months ended December 31, 1998 and December 31, 1997. 3 Notes To Consolidated Financial Statements (Unaudited). 4-6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 7-10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 10 PART II OTHER INFORMATION ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 11 SIGNATURES SIGNATURES 12
i PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GOLDEN SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
Dec. 31, 1998 March 31, 1998 --------------- ----------------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $22 $79 Accounts receivable, net of allowances 748 871 Inventories 488 790 Prepaid expenses and other current assets 117 122 --------------- ----------------- Total current assets 1,375 1,862 --------------- ----------------- PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation 576 665 --------------- ----------------- $1,951 $2,527 =============== ================= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings $8,284 $7,904 Accounts payable 2,992 3,638 Note payable under Recapitalization Plan 2,135 2,023 Net due to related parties 2,319 1,834 Notes payable 922 834 Accrued liabilities 1,146 1,012 --------------- ----------------- Total current liabilities 17,798 17,245 --------------- ----------------- COMMITMENTS AND CONTINGENCIES MINORITY INTEREST 2,599 2,599 SHAREHOLDERS' EQUITY Common Stock 16,405 16,405 Accumulated deficit (35,555) (34,070) Cumulative translation adjustments 704 348 --------------- ----------------- Total shareholders' deficit (18,446) (17,317) --------------- ----------------- $1,951 $2,527 =============== =================
1 GOLDEN SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
Three Months Ended Nine Months Ended --------------------------------- ---------------------------------- Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997 ---------------- --------------- --------------- --------------- NET SALES $1,519 $1,937 $2,790 $3,078 COST OF GOODS SOLD 873 1,713 1,845 3,397 ---------------- --------------- --------------- --------------- Gross Profit (Loss) 646 224 945 (319) ---------------- --------------- --------------- --------------- OPERATING EXPENSES: Selling, general and administration 351 455 1,018 1,575 Research and development 84 147 253 872 ---------------- --------------- --------------- --------------- 435 602 1,271 2,447 ----------------- --------------- --------------- --------------- Operating Profit (Loss) 211 (378) (326) (2,766) ---------------- --------------- --------------- --------------- OTHER INCOME (EXPENSE): Interest expense (461) (503) (1,387) (1,385) Foreign currency transaction gains (losses) 58 (299) 152 (307) Gain on sale of subsidiary --- --- 61 --- Other income 1 22 16 5 ---------------- --------------- --------------- --------------- (402) (780) (1,158) (1,687) ---------------- --------------- --------------- --------------- Loss before provision for income taxes (191) (1,158) (1,484) (4,453) PROVISION FOR INCOME TAXES --- --- 1 1 ---------------- --------------- --------------- --------------- NET LOSS $(191) $(1,158) $(1,485) $(4,454) ================ =============== =============== =============== BASIC LOSS PER SHARE $(0.04) $(0.22) $(0.28) $(0.84) ================ =============== =============== =============== WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES 5,300 5,300 5,300 5,300 ================ =============== =============== ===============
2 GOLDEN SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Nine Months Ended --------------------------------- Dec. 31, 1998 Dec. 31, 1997 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(1,485) $(4,454) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 38 167 Provision for losses on accounts receivable 96 108 Provision for losses on inventories 45 45 Loss on disposition of property and equipment --- 1 Decrease (increase) in: Accounts receivable 27 (1,130) Inventories 141 672 Prepaid expenses and other current assets (19) 175 Increase (decrease) in: Accounts payable (448) 291 Accrued liabilities 190 252 --------------- --------------- Net cash used in operating activities (1,415) (3,873) --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (59) (19) Proceeds from sale of property, plant & equipment --- 272 Restricted cash --- 18 --------------- --------------- Net cash provided by (used in) investing activities (59) 271 --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings, net of repayments 1,130 1,035 Note payable under Recapitaization Plan 75 --- Borrowings (repayments) under notes payable --- (124) Net change in related party balances 530 1,567 --------------- --------------- Net cash provided by financing activities 1,735 2,478 --------------- --------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (318) (102) --------------- --------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (57) (1,226) CASH & CASH EQUIVALENTS, beginning of period 79 1,363 --------------- --------------- CASH & CASH EQUIVALENTS, end of period $22 $137 =============== ===============
3 GOLDEN SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ NOTE 1. GENERAL In management's opinion, all adjustments, which are necessary for a fair presentation of financial condition and results of operations, are reflected in the accompanying interim consolidated financial statements. All such adjustments are of a normal recurring nature. All amounts are unaudited, except the March 31, 1998 balance sheet. This report should be read in conjunction with the audited consolidated financial statements, notes, and disclosures presented in the Company's 1998 Annual Report on Form 10-K. Footnotes and other disclosures which would substantially duplicate the disclosures in the Company's audited financial statements for fiscal year 1998 contained in the Company's 1998 Annual Report on Form 10-K, have been omitted. The interim financial information herein is not necessarily representative of operations for a full year. NOTE 2. RISKS AND BASIS OF PRESENTATION Results of operations for the quarter and nine months ended December 31, 1998 have been determined assuming that the Company will continue as a going concern. However, the Company is currently facing significant issues which raise substantial doubt that the Company has the ability to continue as a going concern. These issues are summarized as follows: -- At December 31, 1998, the Company had outstanding amounts due to four separate Indian lenders in the amount of $9,206,000, all of which are currently in default. Of that amount, three banks have issued notices to the Company demanding immediate repayment of $8,284,000. At September 30, 1999, the amount due to the banks was approximately $9.9 million. The Company has insufficient funds available to repay the banks. Because the Indian debt is secured by the assets of Ultra Tek, alternatives available to the banks include closing the operations of Ultra Tek and forcing Ultra Tek into liquidation. -- In fiscal 1995, Ultra Tek's importing of computer components into India came under investigation by the Indian customs authorities. In September 1997, the Indian customs authorities issued a separate "show cause" notice alleging that Ultra Tek has not provided valid explanations for shortages of imported raw material in its inventories. In fiscal 1997, Ultra Tek came under the investigation of the Indian Department of Revenue Intelligence concerning the import and export of certain components used in the manufacture of power supplies and customer returned product. Subsequently, a separate "show cause" notice was issued requesting explanation of why duties should not be assessed. The above governmental allegations and investigations could lead to additional duty and penalties being assessed against Ultra Tek in the amount of $2.4 million and penal action being initiated against Ultra Tek. In addition, penal action under Indian law, which the Company believes is very unlikely, could result in possible monetary fines of up to a maximum of $16.9 million. The Company is contesting these allegations, but currently, the matters are unresolved and the outcomes uncertain. -- The Company has incurred significant losses from operations over the past four fiscal years and nine months ended December 31, 1998; has lost its two main historical 4 customers, which has significantly impacted its revenues; and at December 31, 1998, had a shareholders' deficit of $18.4 million. During fiscal 1999 and the six months ended September 30, 1999, the Company continued to incur significant losses, and management has not successfully executed on its efforts to achieve profitable operations and positive cash flows. Outside of related party financing, the Company has identified no viable source of financing. Due to the significance of these factors in the Company's financial statements at December 31, 1998, all assets have been stated at their estimated realizable values. Costs of resolving the contingencies noted above or settling amounts due to Indian banks or Company creditors have not been recorded as management is currently unable to estimate these amounts. Accounts receivable and inventories were valued at their subsequently realized amounts (inventories at cost), and property, plant and equipment were valued based on estimates by management and in accordance with the guidelines of Statement of Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). The estimated realizable values and settlement amounts may be different from the proceeds ultimately received or payments made. NOTE 3. INVENTORIES Inventories are valued at the lower of cost (first in, first out) or market. Cost includes cost of material, freight and manufacturing overhead. Inventories consist of the following (in thousands):
Dec. 31, 1998 March 31, 1998 ------------- -------------- Raw materials $227 $584 Work-in-progress 126 78 Finished goods 135 128 ------------- -------------- $488 $790 ============= ==============
NOTE 4. COMMITMENTS AND CONTINGENCIES A) LEASES GSI leases its corporate headquarters from a related party under a three year operating lease which expires in December 1999. Ultra Tek leases certain factory premises from the Indian Government under operating leases which expire at various dates through October 2000. Future minimum payments under these and other various operating leases are as follows (in thousands):
Year Ending March 31: --------------------- 1999 (three months) $ 24 2000 86 2001 27 2002 - 2003 - ----- $ 137 =====
5 B) LITIGATION The Company is subject to lawsuits in the normal course of business. In the opinion of management and legal counsel to the Company, pending litigation will not result in a material loss to the Company. C) CONTINGENCIES During fiscal year 1995, the Company's imports of computer components for final assembly and sale into the domestic tariff area (DTA) of India (outside the SEEPZ) came under investigation by the Indian customs authorities. As a result, Company inventories of $1,087,000 (47,447,000 in Indian rupees) were seized by the authorities. On May 30, 1995, the authorities issued a notice to the Company alleging misdeclaration of purported imports of complete computer systems as imports of computer system components. The notice calls upon the Company to explain why the authorities should not (a) confiscate all the goods so imported, (b) levy additional duty of $1,120,000 (48,885,000 in Indian rupees) on the goods already sold into the DTA, and (c) take penal action against the Company under the law. The Company paid an advance of $700,000 (20,000,000 in Indian rupees) against customs duty that may ultimately be levied by the authorities and recorded this amount in "cost of goods sold" in fiscal 1995. During fiscal 1996, the authorities released the seized goods. However, because of difficulties encountered in re-exporting the goods and technological obsolescence, the entire amount of the seized goods has been included in the inventory reserve amounts at December 31, 1998. No other penalties or expenses related to this government action have been incurred by the Company. In September 1997, the Indian customs authorities issued a "show cause" notice alleging that Ultra Tek has not provided valid explanations for shortages of raw material in its inventories. The notice called upon the Company to explain why the authorities should not (a) impose duty of $590,000 (25,725,000 in Indian rupees) leviable on imported components which were alleged not accounted for in the terms of bond executed, (b) why penal action should not be initiated against the Company, and (c) why a penalty equal to the duty held to be leviable, $590,000 (25,725,000 in Indian rupees), in respect of unaccounted goods should not be imposed. In fiscal 1997, the Company came under investigation by the Indian Department of Revenue Intelligence (DRI) in connection with the import and export of certain components and goods used in the manufacture of power supplies and customer returns. The investigation focused on the alleged discrepancy noted between the physical stock records and books, in respect of the work-in-process inventory at March 31, 1996 and 1997 and customer returned product at March 31, 1992 through March 31, 1997. In May 1998, the DRI issued a "show cause" notice requesting that the Company explain why the DRI should not impose duties of approximately $590,000 (25,720,000 in Indian rupees). Penalties relating to the investigation, if any, have not yet been determined. The aggregate of threatened duties and penalties to the Company is approximately $2,440,000, using the Indian rupee translation rate at September 30, 1999. Although the Company is contesting the allegations of the authorities, the outcome of these matters is uncertain at this time. Accordingly, no additional provisions for any losses that may ultimately result have been made in these financial statements. In addition, penal action under Indian law, which the Company believes is very unlikely, could result in possible monetary fines of up to $16,886,000 at September 30, 1999. 6 GOLDEN SYSTEMS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- GENERAL Any forward looking statements made in this Form 10-Q report involve risks and uncertainties. The Company's future financial results could differ materially from those anticipated due to the Company's dependence on conditions in the electronics industry, level of consumer demand for products containing the Company's power supply components, competitive pricing pressures, technology and product development risks and uncertainties, product performance, increasing consolidation of customers and suppliers in the electronics industry, and other factors beyond the Company's control. RESULTS OF OPERATIONS OVERVIEW As has been previously reported, the Company's operations and cash flow were significantly impacted by the product rejection that took place during the third quarter of fiscal 1995. Those returns cost the Company $4.2 million in uncollected accounts receivable as a result of the issuance of credits for the rejected units and $2.2 million relating to other direct costs, as well as additional costs for transportation, unutilized capacity, business interruption, reorganization, inventory carrying costs, and interest on short-term borrowings. In fiscal 1996 the Company implemented a program to overcome its cash difficulties by reducing inventory, organizational restructuring, price increases, volume growth and more favorable payment terms from the Company's existing customers. While a number of elements of that program were successfully implemented, the Company has not been able to generate anticipated amounts of cash from inventory reduction and, to date, has been unsuccessful in its efforts to resell any significant number of units of the reworked rejected product. In addition, the Company has not been successful, to date, in significantly building its sales volumes to its existing customers or to new customers. While the Company has implemented a plan to transition its business focus to power supplies for products that are less price sensitive and therefore provide a greater opportunity to develop positive profit margins, it has not been successful in doing so. There can be no assurance that the Company will have sufficient resources to carry out its plan in the future, or even if the resources are available, that the Company will be able to successfully develop the necessary customer relationships and obtain the product contracts to allow it to continue to operate its business. In light of these facts, and the operating results discussed below, the Company continues to look at opportunities to obtain additional capital from sources outside the Company and at transactions that would change it's fundamental structure. In summary, the Company suffered a considerable decline in cash flow during the four fiscal years ended March 31, 1998 and during the nine months ended December 31, 1998. At December 31, 1998, the Company had negative working capital of $16,423,000 7 and an accumulated deficit of $35,555,000. Subsequent to December 31, 1998, the Company continues to experience negative cash flow as a result of continuing losses and working capital required to ramp-up production in India. While current action is being taken to develop a viable operating plan to increase sales and renegotiate the terms of certain short-term obligations with the Indian banks, there can be no assurance that any of these actions will be successfully completed. THIRD QUARTER OF FISCAL YEAR 1999 Sales for the three months ended December 31, 1998 were $1,519,000 compared to $1,937,000 for the same quarter in the prior year. This decrease in sales of 22% is due principally to a decline in demand for adapters from one of the Company's customers and a former customer, which the Company is no longer approving for credit. Gross profit on third quarter sales was $646,000 compared to a gross profit of $224,000 for the third quarter of fiscal year 1998. This increase in gross margin is due principally to the increase in margins on unit sales which has more than offset the effect of an overall reduction in sales. The Company continues to incur unabsorbed indirect manufacturing overhead because of under-utilization of manufacturing capacity; however, this factor is being reduced as a result of cost reductions and the sale of the manufacturing facility in Sri Lanka. Selling, general and administrative expenses for the third quarter of fiscal year 1999 were $351,000 compared to $455,000 or a decline of 23%. This decrease is due to the Company's continuing efforts to reduce costs at all of its facilities and the sale of the Sri Lanka subsidiary. Research and development expenses for the current quarter were $84,000 as compared to $147,000 for the third quarter of fiscal year 1998 or a 43% decrease. This decrease resulted from the Company's decision during the third quarter of fiscal 1998 to shut down its product research and development facility in Scotland and relocate the research and product engineering to the United States at a much reduced level. Foreign currency transaction gains increased significantly during the three months ended December 31, 1998, because of the decrease in the value of the Indian rupee in relation to the U. S. dollar during the current period. These gains result primarily from net receivable balances of Ultra Tek, which are being paid in U. S. dollars. Net loss for the third quarter ended December 31, 1998 was $191,000 compared to a net loss of $1,158,000 for the same period in the prior year. The significant reasons for the loss decrease are set forth in the foregoing discussion. NINE MONTHS OF FISCAL YEAR 1999 For the nine months ended December 31, 1998, net sales were $2,790,000 compared to $3,078,000 for the same period in fiscal 1998. This 9% decrease is due principally to a decrease in demand for adapters, which occurred in the current quarter of fiscal 1999, and the Company's decision to cease doing business with a former customer. 8 Gross profit for the first nine months of fiscal 1999 was $945,000 compared to a gross loss of $319,000 for the same period in fiscal 1998. This major improvement on a 9% sales decrease is due primarily to significantly improved sales margins, a reduction in production start-up costs and a decrease in unabsorbed indirect manufacturing overhead due to cost reductions and the sale of the manufacturing facility in Sri Lanka. Selling, general and administrative expenses for the first nine months of fiscal 1999 were $1,018,000 compared to $1,575,000 for the same period in fiscal 1998, a 35% decline. This reduction in expenses was due to the Company's continuing actions to reduce costs, the most significant of which were the decision to restructure its marketing strategy that resulted in the use of sales representatives, the elimination of salaried employees and the sale of the Sri Lanka subsidiary. Research and development expenses for the first nine months of fiscal 1999 were $253,000 compared to $872,000 for the same period in fiscal 1998, or a 71% decrease. As previously commented on under the analysis of the third quarter, this reduction in expense resulted from the Company's decision to shut down its research and development facility located in Scotland during the third quarter of fiscal 1998. Foreign currency transaction gains of $152,000 for the first nine months of fiscal 1999 compared to a loss of $307,000 in the comparable period. As in the third quarter, these gains result from a weaker Indian rupee in relationship to the U.S. dollar, which results in more rupees being paid to satisfy U.S. dollar net receivables due to Ultra Tek. The gain on sale of subsidiary company of $61,000 represents the recovery of an account receivable by Ultra Tek, the Company's manufacturing subsidiary in India. At the time the Sri Lanka company was sold in the fourth quarter of fiscal 1998, the receivable resulting from the sale of equipment was thought to be uncollectible and consequently written off in computing the net gain on sale of the Sri Lanka subsidiary. During the first quarter of fiscal 1999, the new owner of the Sri Lanka company returned the equipment to Ultra Tek in full satisfaction of its obligation. Net loss for the nine months ended December 31, 1999 was $1,485,000 compared to a net loss of $4,454,000 for the same period in the prior year. The significant reasons for the reduction in the net loss are set forth in the foregoing discussion. LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES During the nine months ended December 31, 1998 the Company used $1,415,000 in cash in operating activities. The major use of this cash is due to the net loss from operations. INVESTING ACTIVITIES Cash used in investing activities during the first nine months of fiscal year 1999 was $59,000 due to the purchase of equipment. 9 FINANCING ACTIVITIES Cash provided in the first nine months of fiscal year 1999 from financing activities aggregated $1,735,000. The primary factors contributing to this amount relates to a net increase in short-term borrowings totaling $1,130,000, resulting primarily from the accrual of interest on outstanding debt in India and an increase of $530,000 in related party balances. For the nine months ended December 31, 1998, the Company consumed $57,000 in cash, decreasing the $79,000 cash balance at the beginning of the period to $22,000 at December 31, 1998. At September 30, 1999 the Company had a cash balance of $112,000. Outside of related party financing, the Company has identified no viable source of financing. While current actions are being taken to implement a viable operating plan to increase sales, renegotiate the terms of certain short-term obligations with three Indian banks and raise additional capital, there can be no assurance that any of these actions will be successfully completed. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Inapplicable 10 PART II -- OTHER INFORMATION ITEM 3. DEFAULTS UPON SENIOR SECURITIES. At December 31, 1998, the Company had outstanding amounts due to four separate Indian lenders in the amount of $9,206,000, all of which are currently in default because of non-payment of principal. Of that amount, three banks have issued notices to the Company demanding immediate repayment of $8,284,000. At September 30, 1999, the amount due was approximately $9.9 million. The Company has insufficient funds available to repay the banks. Because the Indian debt is secured by the assets of Ultra Tek, alternatives available to the banks include closing the operations of Ultra Tek and forcing Ultra Tek into liquidation. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit 27. Financial Data Sheet (b) REPORTS ON FORM 8-K On October 9, 1998 the Company filed Form 8-K reporting the resignation of Arthur Andersen LLP, as auditors of the Company, effective October 5, 1998. It was also reported that Farber & Hass LLP had been retained as the Company's new independent accountant as of October 8, 1998. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GOLDEN SYSTEMS, INC. By: /s/ Jawahar L. Tandon ----------------------------------- Jawahar L. Tandon CHIEF EXECUTIVE OFFICER (DULY AUTHORIZED OFFICER OF THE REGISTRANT) By: /s/ Harvey A. Marsh ----------------------------------- Harvey A. Marsh VICE PRESIDENT, CHIEF FINANCIAL OFFICER (DULY AUTHORIZED OFFICER OF THE REGISTRANT) Date: November 16, 1999 ----------------------------------- 12 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLILDATED BALANCE SHEET AT DECEMBER 31, 1998 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS MAR-31-1999 APR-01-1998 DEC-31-1998 22 0 748 0 488 1,375 576 0 1,951 17,798 0 0 0 16,405 (34,851) 1,951 2,790 2,790 1,845 1,845 1,271 0 1,387 (1,484) 1 (1,485) 0 0 0 (1,485) (.28) (.28)
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