14
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 0-14204
DATA NATIONAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Colorado 84-0958983
________________________________ _________________________________
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
11465 West I-70 Frontage Road North, Wheat Ridge, CO 80033
__________________________________________________________
(Address of principal executive offices)
(303) 431-1933
___________________________
(Issuer's telephone number)
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 No X
The number of shares outstanding of the issuers Common Stock, .0001 par value
as of June 30, 1995 was 327,478,340 shares.
Transition Small Business disclosure format. Yes No X
INDEX
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS page 2
CONSOLIDATED INCOME STATEMENTS (unaudited) page 3 and 4
CONSOLIDATED STATEMENT OF CASH FLOWS page 5
MANAGEMENT'S STATEMENT page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES page 7 and 8
NO OTHER FORMS FILED page 9
SIGNATURES page 10
ITEM 1. FINANCIAL STATEMENTS
DATA NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Unaudited)
June 30, September 30,
1995 1994
___________ _____________
Assets
Current Assets:
Cash and equivalents $ 55,434 $ 84,245
Receivables:
Trade, less allowances for bad 279,463 245,221
debts of $5,077 in 1995 and
1994, respectively
Other 3,883 15,134
Inventory, at cost 69,757 41,568
Prepaid expenses 13,201 7,843
_______ _______
Total current assets 421,738 394,011
Property and equipment, at cost 442,688 368,106
_________ _________
Less: Accumulated depreciation (325,480) (286,856)
117,208 81,250
Other assets 6,110 2,888
$545,056 $478,149
________ ________
________ ________
Liabilities and Stockholders' Deficit
Current Liabilities:
Deferred revenue $124,465 $127,977
Accounts payable 41,786 64,475
Accrued expenses 49,287 60,967
Current portion - capital leases 7,393 8,261
_______ _______
Total current liabilities 222,931 261,680
_______ _______
Note payable - related party 864,379 868,208
Capital leases, net of 2,136 10,526
current portion
Stockholders' Deficit:
Common stock $.0001 par value,
authorized 800,000,000 shares;
327,478,340 shares issued and
outstanding 32,747 32,747
Accumulated deficit (577,137) (695,012)
________ ________
$545,056 $478,149
See Note to Consolidated Financial Statements
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
DATA NATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
Nine Months Ended
______________________
June 30, June 30,
1995 1994
________ ________
Net sales $ 1,848,413 $ 1,848,795
Cost of sales 932,893 920,616
___________ ___________
Gross profit 915,520 928,179
Selling and marketing expense 283,661 305,893
General and administrative expense 448,562 419,792
____________ ___________
Operating income 183,297 202,494
Other income (expense):
Interest and other income 4,532 (12,631)
Interest expense, primarily related party (69,954) (71,456)
________ ________
(65,422) (84,087)
________ ________
Net income $ 117,875 $ 118,407
___________ ____________
___________ ____________
Net income per share - -
Weighted average shares outstanding 327,478,340 327,478,340
___________ ___________
___________ ___________
See Note to Consolidated Financial Statements
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
DATA NATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
Three Months Ended
_______________________
June 30, June 30,
1995 1994
________ ________
Net sales $ 598,413 $ 532,346
Cost of sales 260,366 282,265
___________ ___________
Gross profit 338,047 250,081
Selling and marketing expense 89,478 77,463
General and administrative expense 143,478 133,198
__________ __________
Operating income 105,091 39,420
Other income (expense):
Interest and other income 2,510 (10,223)
Interest expense, primarily related party (23,212) (24,242)
________ ________
(20,702) (34,465)
___________ ___________
Net income $ 84,389 $ 4,955
___________ ___________
___________ ___________
Net income per share - -
Weighted average shares outstanding 327,478,340 327,478,340
___________ ___________
___________ ___________
See Note to Consolidated Financial Statements
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
DATA NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
______________________
June 30, June 30,
1994 1993
________ ________
Cash flow from (used in) operating activities
Net income $ 117,875 $ 118,407
Adjustments to reconcile net income to
cash flow from operating activities:
Depreciation 38,624 25,416
Changes in assets and liabilities:
(Increase) decrease in receivables (22,991) (141,426)
(Increase) decrease in inventory (28,189) 6,100
(Increase) decrease in prepaid
expenses (5,358) (1,215)
(Increase) decrease in other assets (3,222) (2,738)
Increase (decrease) in accounts
payable (22,689) 3,328
Increase (decrease) in accrued
expenses (11,680) (35,933)
Increase (decrease) in deferred
revenue (3,512) 42,342
________ _________
Total adjustments (59,017) (104,126)
________ _________
Cash flow from (used in)
operating activities 58,858 14,281
Cash flow (used in) investing activities:
Purchases of property and equipment (74,582) (36,216)
Cash flow from (used in) financing activities:
Borrowings - related party - (5,614)
Repayment of related party note (3,829) -
Borrowing under (repayment of) capital
leases (9,258) 7,581
________ ________
Cash flow from (used in) financing activities (13,087) 1,967
Increase (decrease) in cash and equivalents (28,811) (19,968)
Cash and equivalents, beginning of period 84,245 200,255
__________ __________
Cash and equivalents, end of period $ 55,434 $ 180,287
__________ __________
__________ __________
Supplemental information:
Income taxes paid - -
Interest paid $ 69,954 $ 71,456
__________ __________
__________ __________
See Note to Consolidated Financial Statements
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
DATA NATIONAL CORPORATION
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - MANAGEMENT'S STATEMENT
In the opinion of management, the accompanying financial statements
contain all adjustments (which consist only of normal, recurring adjustments)
necessary to fairly present the Company's financial position, results of
operations, and cash flows. The operating results presented are not
necessarily indicative of the operating results for the years ending
September 30, 1995 and 1994.
Reference should be made to the notes to the consolidated financial
statements included in Form 10-KSB for the year ended September 30, 1994, for
additional information.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
June 30, 1995 as Compared to September 30, 1994
The Company's working capital increased from $132,331 at September 30,
1994 to $198,807 at June 30, 1995, primarily because of cash flow from
operations of $58,858. Cash flow and current cash reserves were used to
acquire additional equipment of $74,582, and $9,258 was used to repay capital
leases. The Company was not obligated for additional capital expenditures at
June 30, 1995, but may be expected to continue to upgrade its systems given
the nature of its business.
The Company remains dependent upon the Dillon note for financing, and
almost certainly would cease operations if the note were deemed in default and
called or not renewed.
The Company believes that favorable operating results will continue and
provide adequate liquidity for the near-term future.
Results of Operations
For the quarter ended June 30, 1995, the nature of the Company's
operations remained focused on providing marketing services to service
stations and similar entities, nationally. The Company began aggressively
marketing and billing for creative services previously offered to customers on
a limited basis. These creative services generated $107,569 additional
revenue during the quarter ended June 30, 1995. However, the Company
continues to remain dependent upon two major customers which account for over
50% of net sales. For the three month period ended June 30, 1995 "Service
Income" and "New Resident" income each decreased $20,045 and $23,832,
respectively, from the comparable period in the prior year. There were no
other significant trends.
For the nine month period ended June 30, 1995, "Service Income"
decreased $32,769 from the comparable period in the prior year. "Auto PM",
"New Resident", and "Customer Handouts" billings also decreased $28,623,
$13,454, and $10,938, respectively. Revenue from creative services increased
$112,228, and revenue from all other sources decreased $26,826 from the
comparable period ended June 30, 1994.
Cost of sales for the quarter ended June 30, 1995 decreased to 43.5% as
a percentage of sales because of the lower cost burden related to the recently
implemented creative services function, and because much of production costs
are fixed rather than variable. For the nine months ended June 30, 1995 cost
of sales was 50.5% as a percentage of sales compared to 49.8% for the nine
months ended June 30, 1994. Selling and marketing expense increased from
$77,463 for the quarter ended June 30, 1994 to $89,478 for the quarter ended
June 30, 1995. The increase is primarily due to additional marketing for
creative services. For the nine months ended June 30, 1995 selling and
marketing expense decreased $22,232 from the comparable period in the prior
year. The major reason for the change is not incurring the cost of attending
trade shows of two major customers, which occur biannually.
General and administrative expenses increased from $133,198 for the
quarter ended June 30, 1994 to $143,478 for the quarter ended June 30, 1995.
For the nine month period ended June 30, 1995 general and administrative
expenses increased by $28,770 over the nine month period ended June 30, 1994.
Administrative salaries were increased because of raises for existing
employees and employment of additional clerical staff. Legal expense
increased as a result of litigation as more fully described in Form 10-KSB,
and audit fees were incurred in the current year but not in the quarter ended
June 30, 1994.
Interest expense is substantially all related to the Dillon note, and is
expected to remain a significant cost in the near future.
DATA NATIONAL CORPORATION
FORM 10-QSB
December 31, 1994
PART II
ITEM 6. Not applicable.
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(REGISTRANT) DATA NATIONAL CORPORATION
BY (SIGNATURE) /s/ Richard S. Simms
(DATE) January 11, 1996
(NAME AND TITLE) Richard S. Simms, Vice President
(6-30-95.10q)
[ARTICLE] 5
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] JUN-30-1995
[CASH] 55,434
[SECURITIES] 0
[RECEIVABLES] 284,540
[ALLOWANCES] 5,077
[INVENTORY] 69,757
[CURRENT-ASSETS] 421,738
[PP&E] 442,688
[DEPRECIATION] 325,480
[TOTAL-ASSETS] 545,056
[CURRENT-LIABILITIES] 222,931
[BONDS] 0
[COMMON] 327,478,340
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 545,056
[SALES] 1,848,413
[TOTAL-REVENUES] 1,848,413
[CGS] 932,893
[TOTAL-COSTS] 1,665,116
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] (69,954)
[INCOME-PRETAX] 117,875
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 117,875
[EPS-PRIMARY] 0
[EPS-DILUTED] 0