1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Quarterly
Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended September 30, 1996 Commission File Number 0-19875
DMI, INC.
Exact name of registrant as specified in its charter
Colorado 93-3500183
- - --------------------------- ------------
State or other jurisdiction (IRS employer identification number)
2501 West Fifth Street Santa Ana, Ca. 92703
- - -------------------------------------- ----------
Address of principal executive offices Zip Code
Registrant's telephone number, including area code 714-571-1900
------------
Indicate by check mark whether 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 preceeding 12 months (or 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
----- -----
Number of shares outstanding as of September 30, 1996: Common stock, no par
value,
8,762,843
- - ---------
Exhibit 27. Financial Data Schedule included.
2
INDEX
Part I Financial Information Page
Item 1 Financial Statements
Balance Sheets as of September 30, 1996
and December 31, 1995 F-3
Statements of Operations for the Three Months
and Nine months ended
September 30, 1996, and September 30, 1995 F-4
Statements of Cash Flows for the Nine Months
Ended September 30, 1996, and September 30, 1995 F-5
Condensed Notes to Financial Statements F-6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Signatures
2
3
DMI,INC.
BALANCE SHEETS
ASSETS
September Dec. 31,
30,1996 1995
Unaudited
CURRENT ASSETS
Cash and Cash $48,501 $164,338
Equivalents
Accounts Receivable, Net 0 2,000
Inventory 25,078 45,178
Other Assets 6,000 --
------- --------
Total Current Assets 79,579 211,516
Property and Equipment -- 11,134
Net of accumulated
depreciation of $91,932
at September 30, 1996,
and $80,798
at December 31,
1995
------- --------
TOTAL ASSETS $79,579 $222,650
======= ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
September 30, December 31,
1996 1995
Unaudited
CURRENT LIABILITIES
Accounts Payable $ 10,000 $ 12,081
Accrued Expenses 91,220 214,428
Loan from stockholder 16,000
----------- -----------
Total Current Liabilities 117,220 226,509
Deferred Revenue 51,134 51,134
STOCKHOLDER'S DEFICIT
Common stock, no par value
Authorized 10,000,000 shares
Issued and outstanding
8,728,343 and 8,503,736 shares
at June 30, 1996 and
December 31, 1995 4,117,083 4,053,887
Committed and not issued shares -- 16,000
Paid in Capital 350,000 350,000
Accumulated Deficit (4,555,858) (4,474,880)
----------- -----------
(88,775) (54,993)
----------- -----------
TOTAL LIABILITIES AND DEFICIT $ 79,579 $ 222,650
=========== ===========
See Accompanying Notes
F-3
4
DMI, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
( Unaudited)
Three Months Ended September 30, Nine months Ended September 30,
1996 1995 1996 1995
REVENUES $ 3,851 $ 58,158 $ 40,073 $ 205,803
COSTS AND EXPENSES
Cost of sales -- 44,683 12,000 175,717
Selling, General and
administrative expense 25,900 246,064 109,283 608,772
----------- ----------- ----------- -----------
OTHER INCOME
Interest (income)/expense,net -- (3,842) (232) (6,796)
LOSS BEFORE
PROVISION FOR
INCOME TAXES (22,049) (228,747) (80,978) (571,890)
NET LOSS ($ 22,049) ($ 228,747) ($ 80,978) ($ 571,890)
=========== =========== =========== ===========
LOSS PER COMMON SHARE
WEIGHTED AVERAGE ($.003) ($0.03) ($.009) ($0.07)
=========== =========== =========== ===========
COMMON SHARES
OUTSTANDING
8,721,639 8,483,736 8,719,958 8,483,736
=========== =========== =========== ===========
See accompanying notes
F-4
5
DMI, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,1996 AND SEPTEMBER 30,1995
(Unaudited)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($ 80,978) ($ 571,890)
Depreciation and amortization 11,134 76,504
Stock issued for services rendered 63,196 0
Issuance of common stock previously committed (16,000)
Changes in assets and liabilities
increase(decrease) in accounts receivable 2,000 (32,784)
increase(decrease) in inventories 20,100 16,747
increase(decrease) in prepaid expenses -- (12,530)
increase(decrease) in other assets (6,000) 0
increase(decrease) in accounts payable (2,081) (54,113)
increase(decrease) in accrued expenses (123,208) 124,833
increase(decrease) in other liabilities -- (3,280)
--------- -----------
Net cash used in operating activities (131,837) (390,995)
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in capitalized software 0 (66,207)
--------- -----------
Net cash used in investing activities 0 (66,207)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(decrease) in stockholder loans 16,000 0
--------- -----------
Net cash provided by financing activities 16,000 0
INCREASE(DECREASE) IN CASH (115,837) (457,202)
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, 164,338 1,504,243
BEGINNING OF PERIOD
--------- -----------
CASH AND CASH EQUIVALENTS, $ 48,501 $ 1,047,041
========= ===========
END OF PERIOD
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES
Interest Paid $ 0 $ 32,151
See accompanying notes
F-5
6
DMI,INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,1996 AND 1995
(Unaudited)
1. Unaudited Interim Financial Information
The interim financial statements are unaudited, but in the opinion of management
of DMI, INC. ("the Company"), contain all adjustments consisting of normal
recurring accruals, necessary to present fairly the financial position of the
Company as of September 30 1996 and 1995. The results of operations for the
three months ended September 30, 1996 are not necessarily indicative of the
results of operations to be expected for the full year ending December 31, 1996,
Reference is made to the Company's Form 10-KSB for the year ended December 31,
1995, as filed with the Securities and Exchange Commission.
2. Accounting Policies
The Company's accounting policies are as stated in its annual report on Form
10-KSB, for the year ended December 31, 1995.
3. Contingencies
The Company does not have product liability insurance. Thus, the Company can be
held liable for all damages or other losses resulting from the use of its'
products. Presently, management is unaware of any potential liabilities or
contingencies resulting from product liability.
F-6
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three months and nine months ended September 30, 1996 and September 30,1995
Revenues
Revenues for the three months ended September 30, 1996 represent recognition of
service income from a prepaid service contract, the sale of inventory items,
and payment for the preparation of a demonstration ARS system for a potential
licensee.
The Company is continuing to develop its relationship with Unicomp, Inc. as
reported in the Form 10-KSB report for December, 1995. During the nine months
ended September 30, 1996, a joint venture agreement was completed with Unicomp,
Inc. to export Toshiba telecommunications systems, and reported with an Form 8K
filing. Active development of this program is proceeding, but revenues have not
yet been received.
During the nine month period ended September 30, 1996, a letter of intent was
signed with Autologue Computer Systems, Inc. to form a business combination for
the marketing of business automation systems to the automotive market, including
Autologue's proprietary auto parts software and systems, and DMI's ARS system.
This agreement has also been reported with a Form 8K filing.
Cost of Sales
Cost of sales for the period represents the cost of printers sold from
inventory.
Operating Expenses
Operating expenses were $25,900 and $109,283 for the three and nine months
respectively, ended September 30, 1996, compared to $246,064 and $608,772,
respectively, for the comparable periods in 1995. These decreases reflect the
layoff of all employees except for two officers, relocation of the Company's
offices to less expensive facilities and general cost containment activities.
Net Earnings
Net losses have been limited by reducing operating expenses, but are expected to
continue until revenues are received from the programs described.
Liquidity and Capital
Cash declined to $48,501 at September 30, 1996, from $164,338 at December 31,
1995.
The Company is continuing to pursue sources of capital to finance its expansion
in all product areas. A.M. Razo & Company was engaged to seek additional
financing, primarily for use with the Autologue program.
7
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
DMI, Inc.
(Registrant)
11/12/96 Duncan MacDonald
- - -------------------------------- --------------------------------
Date By
Duncan MacDonald
Secretary
8