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U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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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 February 29, 2004.



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



Commission file number 0-16250



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DYNATEM,INC.

(Exact name of small business issuer as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|California                                                     |  | 95-3627099                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



23263 Madero, Suite
C, Mission Viejo, California 92691

(Address of principal executive offices)



(949) 855-3235

(Issuers telephone number)



---



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ̈



On March 1, 2004, there were 1,590,176 shares of the issuers Common Stock outstanding.



Transitional Small Business Disclosure Format (check
one):    Yes ̈No  x



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DYNATEM, INC.



INDEX



|                              |  |         |  |                                                                                                       |  |  
|----------------------------- |  | ------- |  | ----------------------------------------------------------------------------------------------------- |  | -
|Part I. Financial Information |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Financial Statements                                                                                  |  |  
|                              |  |         | 
|                              |  |         |  | Condensed Balance Sheets at February 29,2004 and May 31, 2003                                         |  | 1
|                              |  |         | 
|                              |  |         |  | Condensed Statements of Operations for the Three Months Ended February 29, 2004 and February 28, 2003 |  | 2
|                              |  |         | 
|                              |  |         |  | Condensed Statements of Operations for the Nine Months Ended February 29, 2004 and February 28, 2003  |  | 3
|                              |  |         | 
|                              |  |         |  | Condensed Statements of Cash Flows for the Nine Months Ended February 29, 2004 and February 28, 2003  |  | 4
|                              |  |         | 
|                              |  |         |  | Notes to Condensed Financial Statements                                                               |  | 5
|                              |  |         | 
|                              |  | Item 2. |  | Managements Discussion and Analysis or Plan of Operation                                             |  | 7
|                              |  |         | 
|                              |  | Item 3. |  | Controls and Procedures                                                                               |  | 8
|                              | 
|Part II.
Other Information    |  | 9      



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DYNATEM, INC.



CONDENSED BALANCE
SHEETS



|                                                                                                                              |  |                  |           |   |             |   |           |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | --------- | - | ----------- | - | --------- | -
|                                                                                                                              |  | February 29,2004 |           |   | May 31,2003 |  
|                                                                                                                              |  | (Unaudited)      |           |   | (Audited)   |  
|ASSETS                                                                                                                        |  |                  |           |   |             |   |           |  
|                                                                                                                              |  |                 
|Current assets:                                                                                                               |  |                  |           |   |             |   |           |  
|Cash                                                                                                                          |  | $                | 1,042,270 |   |             | $ | 1,531,431 |  
|Accounts receivable, net                                                                                                      |  |                  | 617,369   |   |             |   | 238,033   |  
|Inventories, net                                                                                                              |  |                  | 728,754   |   |             |   | 572,628   |  
|Prepaid expenses and other                                                                                                    |  |                  | 56,605    |   |             |   | 52,417    |  
|                                                                                                                              |  |                  |           |   |             |   |           |  
|                                                                                                                              |  |                 
|Total current assets                                                                                                          |  |                  | 2,444,998 |   |             |   | 2,394,509 |  
|                                                                                                                              |  |                 
|Property and equipment, net                                                                                                   |  |                  | 49,286    |   |             |   | 55,853    |  
|Other assets                                                                                                                  |  |                  | 32,148    |   |             |   | 9,581     |  
|                                                                                                                              |  |                  |           |   |             |   |           |  
|                                                                                                                              |  | $                | 2,526,432 |   |             | $ | 2,459,943 |  
|                                                                                                                              |  |                  |           |   |             |   |           |  
|                                                                                                                              |  |                 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                          |  |                  |           |   |             |   |           |  
|                                                                                                                              |  |                 
|Current liabilities:                                                                                                          |  |                  |           |   |             |   |           |  
|Accounts payable                                                                                                              |  | $                | 218,008   |   |             | $ | 113,208   |  
|Accrued liabilities                                                                                                           |  |                  | 139,955   |   |             |   | 219,684   |  
|Deferred revenue                                                                                                              |  |                  | 65,953    |   |             |   | 156,450   |  
|                                                                                                                              |  |                  |           |   |             |   |           |  
|Total current liabilities                                                                                                     |  |                  | 423,916   |   |             |   | 489,342   |  
|                                                                                                                              |  |                  |           |   |             |   |           |  
|                                                                                                                              |  |                 
|Stockholders equity                                                                                                          |  |                  |           |   |             |   |           |  
|Common stock, no par value, 50,000,000 shares authorized; 1,590,176 and 1,519,042 shares issued and outstanding, respectively |  |                  | 2,382,956 |   |             |   | 2,389,085 |  
|Accumulated deficit                                                                                                           |  |                  | (280,440  | ) |             |   | (418,484  | )
|                                                                                                                              |  |                  |           |   |             |   |           |  
|Total stockholders equity                                                                                                    |  |                  | 2,102,516 |   |             |   | 1,970,601 |  
|                                                                                                                              |  |                  |           |   |             |   |           |  
|                                                                                                                              |  | $                | 2,526,432 |   |             | $ | 2,459,943 |  
|                                                                                                                              |  |                  |           |   |             |   |           |  



See accompanying notes
to condensed financial statements



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DYNATEM, INC.



CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)



Three months ended February
29, 2004 and February 28, 2003



|                                              |  |      |           |      |   |           |  
|--------------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                              |  | 2004 |           | 2003 |  
|Net sales                                     |  | $    | 1,370,017 |      | $ | 725,882   |  
|Cost of sales                                 |  |      | 830,779   |      |   | 476,534   |  
|                                              |  |      |           |      |   |           |  
|Gross profit                                  |  |      | 539,238   |      |   | 249,348   |  
|                                              |  |      |           |      |   |           |  
|                                              |  |     
|Operating expenses:                           |  |      |           |      |   |           |  
|Selling, general and administrative           |  |      | 226,243   |      |   | 205,625   |  
|Research and development                      |  |      | 136,151   |      |   | 115,359   |  
|                                              |  |      |           |      |   |           |  
|                                              |  |     
|Total operating expenses                      |  |      | 362,394   |      |   | 320,984   |  
|                                              |  |      |           |      |   |           |  
|                                              |  |     
|Operating income (loss)                       |  |      | 176,844   |      |   | (71,636   | )
|Other income, net                             |  |      | 2,744     |      |   | 3,365     |  
|                                              |  |      |           |      |   |           |  
|                                              |  |     
|Net income (loss)                             |  | $    | 179,588   |      | $ | (68,271   | )
|                                              |  |      |           |      |   |           |  
|                                              |  |     
|Basic income (loss) per share                 |  | $    | 0.11      |      | $ | (.05      | )
|                                              |  |      |           |      |   |           |  
|                                              |  |     
|Diluted income (loss) per share               |  | $    | 0.11      |      | $ | (.05      | )
|                                              |  |      |           |      |   |           |  
|                                              |  |     
|Weighted average shares outstanding  basic   |  |      | 1,587,660 |      |   | 1,504,110 |  
|                                              |  |      |           |      |   |           |  
|                                              |  |     
|Weighted average shares outstanding  diluted |  |      | 1,713,364 |      |   | 1,504,110 |  
|                                              |  |      |           |      |   |           |  



See accompanying notes
to condensed financial statements



2



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DYNATEM, INC.



CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)



Nine months ended February 29, 2004 and February 28, 2003



|                                              |  |      |           |      |   |          
|--------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                              |  | 2004 |           | 2003
|                                              |  |     
|Net sales                                     |  | $    | 2,855,744 |      | $ | 2,733,787
|Cost of sales                                 |  |      | 1,641,014 |      |   | 1,517,610
|                                              |  |      |           |      |   |          
|Gross profit                                  |  |      | 1,214,730 |      |   | 1,216,177
|                                              |  |      |           |      |   |          
|Operating expenses:                           |  |      |           |      |   |          
|Selling, general and administrative           |  |      | 695,487   |      |   | 606,084  
|Research and development                      |  |      | 390,809   |      |   | 351,567  
|                                              |  |      |           |      |   |          
|Total operating expenses                      |  |      | 1,086,296 |      |   | 957,651  
|                                              |  |      |           |      |   |          
|                                              |  |     
|Operating income                              |  |      | 128,434   |      |   | 258,526  
|                                              |  |     
|Other income, net                             |  |      | 10,410    |      |   | 10,902   
|                                              |  |      |           |      |   |          
|                                              |  |     
|Net income before taxes                       |  |      | 138,844   |      |   | 269,428  
|                                              |  |     
|Provision for income taxes                    |  |      | 800       |      |   | 800      
|                                              |  |      |           |      |   |          
|                                              |  |     
|Net income                                    |  | $    | 138,044   |      | $ | 268,628  
|                                              |  |      |           |      |   |          
|                                              |  |     
|Basic income per share                        |  | $    | .09       |      | $ | .18      
|                                              |  |      |           |      |   |          
|                                              |  |     
|Diluted income per share                      |  | $    | .08       |      | $ | .16      
|                                              |  |      |           |      |   |          
|                                              |  |     
|Weighted average shares outstanding  basic   |  |      | 1,566,776 |      |   | 1,498,851
|                                              |  |      |           |      |   |          
|                                              |  |     
|Weighted average shares outstanding  diluted |  |      | 1,692,480 |      |   | 1,713,790
|                                              |  |      |           |      |   |          



See accompanying notes
to condensed financial statements



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DYNATEM, INC.



CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)



For nine months ended February 29, 2004 and February 28, 2003





|                                                                                        |  |      |           |   |      |   |           |  
|--------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                                        |  | 2004 |           |   | 2003 |  
|Cash flows from operating activities:                                                   |  |      |           |   |      |   |           |  
|Net income                                                                              |  | $    | 138,044   |   |      | $ | 268,628   |  
|Adjustments to reconcile net income to net cash provided by operating activities:       |  |      |           |   |      |   |           |  
|Depreciation and amortization                                                           |  |      | 15,497    |   |      |   | 7,943     |  
|Changes in operating assets and liabilities:                                            |  |      |           |   |      |   |           |  
|Accounts receivable                                                                     |  |      | (379,336  | ) |      |   | (161,740  | )
|Inventories                                                                             |  |      | (156,126  | ) |      |   | (188,174  | )
|Prepaid expenses and other                                                              |  |      | (4,188    | ) |      |   | (19,041   | )
|Accounts payable                                                                        |  |      | 104,800   |   |      |   | 509,434   |  
|Accrued liabilities                                                                     |  |      | (79,729   | ) |      |   | (74,496   | )
|Deferred revenue                                                                        |  |      | (90,497   | ) |      |   |          |  
|                                                                                        |  |      |           |   |      |   |           |  
|                                                                                        |  |     
|Net cash provided by (used in) operating activities                                     |  |      | (451,535  | ) |      |   | 342,554   |  
|                                                                                        |  |      |           |   |      |   |           |  
|                                                                                        |  |     
|Cash flows from investing activities:                                                   |  |      |           |   |      |   |           |  
|Other assets                                                                            |  |      | (8,930    | ) |      |   | 8,170     |  
|Purchases of property and equipment                                                     |  |      | (22,567   | ) |      |   | (20,000   | )
|                                                                                        |  |      |           |   |      |   |           |  
|                                                                                        |  |     
|Net cash used in investing activities                                                   |  |      | (31,497   | ) |      |   | (11,830   | )
|                                                                                        |  |      |           |   |      |   |           |  
|                                                                                        |  |     
|Cash flows from financing activities:                                                   |  |      |           |   |      |   |           |  
|Proceeds from issuance of common stock in connection with the exercise of stock options |  |      | 15,197    |   |      |   |          |  
|Repurchase of common stock                                                              |  |      | (21,326   | ) |      |   |          |  
|                                                                                        |  |      |           |   |      |   |           |  
|                                                                                        |  |     
|Net cash provided by (used in) financing activities                                     |  |      | (6,129    | ) |      |   |          |  
|                                                                                        |  |      |           |   |      |   |           |  
|                                                                                        |  |     
|Net increase (decrease) in cash                                                         |  |      | (489,161  | ) |      |   | 330,724   |  
|                                                                                        |  |     
|Cash and cash equivalents, beginning balance                                            |  |      | 1,531,431 |   |      |   | 959,042   |  
|                                                                                        |  |      |           |   |      |   |           |  
|                                                                                        |  |     
|Cash and cash equivalents, ending balance                                               |  | $    | 1,042,270 |   |      | $ | 1,289,766 |  
|                                                                                        |  |      |           |   |      |   |           |  



See accompanying notes
to condensed financial statements



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DYNATEM, INC.



Notes to Condensed Financial Statements



(1)
Interim Accounting Policy



In the opinion of the management of
Dynatem, Inc. (the Company), the accompanying unaudited condensed financial statements include only normal recurring adjustments necessary for a fair presentation of the Companys financial position as of February 29, 2004 and the
results of operations and cash flows for the three and nine months ended February 29, 2004 and February 28, 2003, respectively. Although the Company believes that the disclosures in these financial statements are adequate to ensure that the
information presented is not misleading, certain information and footnote information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed
or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Results of operations for interim periods are not necessarily indicative of results of operations to be expected for the full year.



(2)Accounting for Stock-Based Compensation



The Company accounts for employee stock options in accordance with the Accounting Principles
Board Opinion No. 25 (APB 25) Accounting for Stock Issued to Employees and related Interpretations and makes the necessary pro forma disclosures mandated by SFAS No. 123 (SFAS 123) Accounting for Stock-based
Compensation.



In March 2000, the Financial Accounting Standards Board
(FASB) issued Interpretation No. 44, (FIN 44), Accounting for Certain Transactions Involving Stock Compensation  an Interpretation of APB 25 . This Interpretation clarifies (a) the definition of employee for
purposes of applying APB 25, (b) the criteria for determining whether a plan qualifies as a non-compensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the
accounting for an exchange of stock compensation awards in a business combination. FIN 44 became effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occur after either December 15, 1998, or January 12, 2000.
Management believes that the Company accounts for its employee stock based compensation in accordance with FIN 44.



In December 2002, the FASB issued SFAS No. 148 (SFAS 148), Accounting for Stock-Based Compensation -Transition and Disclosure  an Amendment of
FASB Statement No. 123. SFAS 148 amends SFAS 123 to provide alternative methods of transition for an entity that voluntarily changes to the fair-value-based method of accounting for stock-based employee compensation. It also amends the
disclosure provisions of that statement to require prominent disclosure about the effects on reported net income and earnings per share and the entitys accounting policy decisions with respect to stock-based employee compensation. Certain of
the disclosure requirements are required for all companies, regardless of whether the fair value method or intrinsic value method is used to account for stock-based employee compensation arrangements. The Company continues to account for its
employee incentive stock option plans using the intrinsic value method in accordance with the recognition and measurement principles of APB 25. SFAS 148 is effective for financial statements for fiscal years ended after December 15, 2002 and for
interim periods beginning after December 15, 2002. The Company had adopted the disclosure provisions of this statement during the year ended May 31, 2003.



At February 29, 2004, the Company has two stock-based employee compensation plans (the Plans). The Company accounts for the Plans under the recognition and
measurement principles of APB 25 and related Interpretations. There was no stock-based employee compensation cost reflected in net income for the nine-month periods ended February 29, 2004 and February 28, 2003. The following table illustrates the
effect on net income and earnings per common share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation.



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DYNATEM, INC.



|                                                                |  |                                |         |      |   |         |  
|--------------------------------------------------------------- |  | ------------------------------ | ------- | ---- | - | ------- | -
|                                                                |  | Three Months EndedFebruary 29, |        
|                                                                |  | 2004                           |         | 2003 |  
|Net income (loss) available to common stockholders, as reported |  | $                              | 179,588 |      | $ | (68,271 | )
|Pro forma compensation expense                                  |  |                                |        |      |   |        |  
|                                                                |  |                                |         |      |   |         |  
|Pro forma net income (loss) available to common stockholders    |  | $                              | 179,588 |      | $ | (68,271 | )
|                                                                |  |                                |         |      |   |         |  
|Income (loss) per share, as reported                            |  |                                |         |      |   |         |  
|Basic                                                           |  | $                              | 0.11    |      | $ | (0.05   | )
|                                                                |  |                                |         |      |   |         |  
|Diluted                                                         |  | $                              | 0.11    |      | $ | (0.05   | )
|                                                                |  |                                |         |      |   |         |  
|Income (loss) per share, pro forma                              |  |                                |         |      |   |         |  
|Basic                                                           |  | $                              | 0.11    |      | $ | (0.05   | )
|                                                                |  |                                |         |      |   |         |  
|Diluted                                                         |  | $                              | 0.11    |      | $ | (0.05   | )
|                                                                |  |                                |         |      |   |         |  



|                                                                |  |                                |         |      |   |        
|--------------------------------------------------------------- |  | ------------------------------ | ------- | ---- | - | -------
|                                                                |  | Nine Months Ended February 29,
|                                                                |  | 2004                           |         | 2003
|Net income (loss) available to common stockholders, as reported |  | $                              | 138,044 |      | $ | 268,628
|Pro forma compensation expense                                  |  |                                |        |      |   |       
|                                                                |  |                                |         |      |   |        
|Pro forma net income (loss) available to common stockholders    |  | $                              | 138,044 |      | $ | 268,628
|                                                                |  |                                |         |      |   |        
|Income (loss) per share, as reported                            |  |                                |         |      |   |        
|Basic                                                           |  | $                              | 0.09    |      | $ | 0.18   
|                                                                |  |                                |         |      |   |        
|Diluted                                                         |  | $                              | 0.08    |      | $ | 0.16   
|                                                                |  |                                |         |      |   |        
|Income (loss) per share, pro forma                              |  |                                |         |      |   |        
|Basic                                                           |  | $                              | 0.09    |      | $ | 0.18   
|                                                                |  |                                |         |      |   |        
|Diluted                                                         |  | $                              | 0.08    |      | $ | 0.16   
|                                                                |  |                                |         |      |   |        



(3)Inventories



A summary of inventories follows:



|                |  |              |         |         |   |        
|--------------- |  | ------------ | ------- | ------- | - | -------
|                |  | February 29, |         | May 31,
|                |  | 2004         |         | 2003   
|Raw materials   |  | $            | 364,377 |         | $ | 284,621
|Work-in-process |  |              | 327,939 |         |   | 256,237
|Finished goods  |  |              | 36,438  |         |   | 31,770 
|                |  |              |         |         |   |        
|                |  | $            | 728,754 |         | $ | 572,628
|                |  |              |         |         |   |        



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DYNATEM, INC.



(4)Common Stock



During the quarter ended February 29, 2004, the Company issued 5,000 shares of common stock in connection with the exercise of certain stock options resulting in cash
proceeds of $1,100.



During the quarter ended February 29, 2004, the Company
repurchased 9,600 shares of common stock resulting in a cash outlay of $14,651.



(5)Income (loss) per share



Under SFAS No. 128
Earnings Per Share, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares assumed to be outstanding during the period of computation. Diluted
earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. Pro forma per share data has been computed using the weighted average number of common shares outstanding during the periods. Because the Company had incurred net losses during the three months ended February
28, 2003, basic and diluted loss per share are equal since additional potential common shares would be anti-dilutive (approximately 173,000 shares were potential additional common shares as of February 28, 2003, using the treasury stock method).



(6)Concentrations



During the quarter, the Company received a purchase order from one of its current customers
for the delivery of the Companys DPC2 systems with an aggregate gross revenue value in excess of $837,000 (the Systems). All Systems are scheduled for shipment prior to May 31, 2004.



|Item 2. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------



Net sales for the three months ended February 29, 2004, increased 88.7% to $1,370,017 compared to net sales of $725,882 in the same period a year ago. For the nine months
ended February 29, 2004, net sales were $2,855,744, $121,957 higher than the corresponding period in the previous fiscal year, for an increase of 4.5%. The increase in total net sales was due primarily to sales of the Companys DPC2 systems.



Cost of sales for the three months ended February 29, 2004, was $830,779 or
60.6% of net sales and compares to $476,534 or 65.7% of net sales in the same period a year ago. For the nine months ended February 29, 2004, cost of sales of $1,641,014 represented 57.5% of net sales and compares to $1,517,610, representing 55.5%
of net sales for the same period a year ago. The nine-month slight increase of cost of sales as a percentage of net sales is the result of the introduction of several new products that are not yet in volume production.



Selling, general and administrative expenses for the three-month and nine-month periods ended
February 29, 2004, were $226,243 and $695,487, respectively, as compared to $205,625 and $606,084, respectively, the same period a year ago. The increase in selling, general and administrative expenses is primarily the result of aggressive spending
for marketing, as well as the increased cost of some expenses in relation to certain rules and regulations recently adopted by the Securities and Exchange Commission.



Research and development expenses for the three-month and nine-month periods ended February 29, 2004, were $136,151 and $390,809,
respectively, as compared to $115,359 and $351,567, respectively, the same period a year ago. The increase in research and development expenses reflects an increased emphasis on new product development, as well as added engineering staff. The
Company expanded its engineering capabilities in its new office in Escondido, California, to better support its many customers designs, which incorporate Dynatem products.



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DYNATEM, INC.



For the three-month and nine-month periods ended February 29, 2004, there was a net earnings of $179,588 and $138,044, compared to net loss
of $68,271 and net income of $268,628, respectively, for the same periods ended February 28, 2003. Net income for the nine-month period as a percentage of sales were 4.8% for 2004 and 9.8% for 2003. The reduction of net earnings as a percentage of
net sales for the current period was the result of the overall additional expenses incurred by the Company as noted above.



The Company does not expect to pay significant income taxes due to its utilization of net operating loss carryforwards, which will expire in various years through 2019.



Inventories for the nine months ended as of February 29, 2004, was $728,754
compared to $572,628 at May 31, 2003. The increase was due primarily to buying components in larger quantities in preparation for the large orders in backlog scheduled to ship next quarter.



At February 29, 2004, the Companys working capital was $2,012,082 and its current ratio
was 5.77:1 compared to $1,905,167 and a ratio of 4.89:1 as of May 31, 2003.



In
March 2004, the shareholders of the Company approved an amendment to increase the number of shares of common stock reserved for issuance under the 1998 Stock Option Plan from 200,000 shares to 400,000 shares, which are going to be registered on Form
S-8.



|Item 3. | Controls and Procedures
|------- | -----------------------



Evaluation of Controls and Procedures



Under the supervision
and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures
(as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of a date (the Evaluation Date) within 90 days prior to filing the Companys February 29, 2004 Form 10-QSB. Based upon that evaluation, the CEO and CFO concluded
that, as of February 29, 2004, our disclosure controls and procedures were effective in timely alerting management to the material information relating to us required to be included in our periodic filings with the Securities and Exchange
Commission. Based on their most recent evaluation as of the Evaluation Date, the CEO and the CFO have also concluded that there are no significant deficiencies in the design or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information, and such officers have identified no material weaknesses in the Companys internal controls over financial
reporting.



Changes in Controls and Procedures



There were no significant changes made in our internal controls over financial reporting
during the quarter ended February 29, 2004 that have materially affected or are reasonably likely to materially affect these controls. Thus, no corrective actions with regard to significant deficiencies or material weaknesses were necessary.



Limitations on the Effectiveness of Internal Control



The Companys management, including the CEO, does not expect that our disclosure
controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people,
and/or by management override of the control. The design of any system of internal control



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DYNATEM, INC.



is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, and/or the degree of compliance with the policies and procedures may deteriorate. Because of
the inherent limitations in a cost-effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis.



The Certifying Officers also have indicated that as of the Evaluation Date, there were no significant changes in the
Companys internal controls or other factors that could significantly affect such controls, subsequent to the Evaluation Date and there were no corrective actions with regard to significant deficiencies and material weaknesses.



PART II.
OTHER INFORMATION



Items 1
through 5have been omitted because there is nothing material to report.



|Item 6. | Exhibits and Reports on Form 8-K.
|------- | ---------------------------------



|(a) | See Exhibit Index attached hereto.
|--- | ----------------------------------



|(b) | On March 3, 2004, the Company filed a Form 8-K with the Securities and Exchange Commission with regard to a purchase order received from one of the Companys current customers
for the delivery of the Companys DPC2 systems with an aggregate gross revenue value in excess of $837,000 (the Systems). All Systems are currently scheduled for shipment prior to May 31, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



|               |  |  |  |               |  |                      |  |                                                    
|-------------- |  |  |  | ------------- |  | -------------------- |  | ---------------------------------------------------
|               |  |  |  | DYNATEM, INC.
|               |  |  | 
|April 12, 2004 |  |  |  | By:           |  | /s/    Michael Horan
|               |  |  |  |               |  |                      | 
|               |  |  |  |               |  |                      |  | Michael Horan President and Chief Executive
Officer
|               |  |  |  |               |  |                      |  |                                                    



|               |  |  |  |     |  |                    |  |                                    
|-------------- |  |  |  | --- |  | ------------------ |  | -----------------------------------
|               |  |  | 
|April 12, 2004 |  |  |  | By: |  | /s/    Belen Ramos
|               |  |  |  |     |  |                    | 
|               |  |  |  |     |  |                    |  | Belen Ramos Chief Financial
Officer



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DYNATEM, INC.



EXHIBIT INDEX



The following is a list of Exhibits required by Item 601 of Regulation S-B. Except for those exhibits indicated by an asterisk which are filed herewith, the remaining
exhibits below are incorporated by reference to the exhibit previously filed by us as indicated.



|              |  |                                                                                                                                                        
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit                                                                                                                                                
|              | 
|3(a)          |  | Restated Articles of Incorporation of the Company (1)                                                                                                  
|              | 
|3(b)          |  | Bylaws of the Company (2)                                                                                                                              
|              | 
|31.1*         |  | Certifications Pursuant to 18 U.S.C. Section 1350-Section 302, signed by Michael Horan, Chief Executive Officer                                        
|              | 
|31.2*         |  | Certifications Pursuant to 18 U.S.C. Section 1350-Section 302, signed by Belen Ramos, Chief Financial Officer                                          
|              | 
|32*           |  | Certification Pursuant to 18 U.S.C. Section 1350-Section 906, signed by Michael Horan, Chief Executive Officer and Belen Ramos, Chief Financial Officer

---

|(1) | Incorporated herein by reference to Exhibit 3(a) to the Companys Annual Report on Form 10-KSB for fiscal year ended May 31, 1997.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



|(2) | Incorporated herein by reference to Exhibit 3(b) to the Companys Annual Report on Form 10-KSB for fiscal year ended May 31, 1997.
|--- | ----------------------------------------------------------------------------------------------------------------------------------