SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER PERIOD ENDED JUNE 30, 1995, 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 0-13873
DIMENSIONAL MEDICINE, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1431387
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10901 Bren Road East
Minnetonka, Minnesota 55343
(Address of principal executive offices) (Zip Code)
(612) 938-8280
(Registrant's telephone number, including area code)
Not Applicable
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes _X_ No___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.15 Par Value--32,533,460 shares as of August 10, 1994
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DIMENSIONAL MEDICINE, INC.
BALANCE SHEET (unaudited)
June 30, March 31,
1995 1995
ASSETS (In thousands)
CURRENT ASSETS
Cash and cash equivalents $ 25,711 $ 71,215
Accounts receivable 1,416,511 1,651,853
Lease receivables 113,724 111,960
Tax benefit receivable 68,875 172,044
Inventories 257,118 186,720
Other current assets 47,939 119,126
TOTAL CURRENT ASSETS 1,929,878 2,312,918
Software 462,881 470,893
Long-term lease receivables 260,106 284,876
Property, plant and equipment 2,368,921 2,335,358
Less: Accumulated depreciation and amortization (2,086,435) (2,060,015)
282,486 275,343
TOTAL ASSETS $ 2,935,351 $ 3,344,030
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 500,000 $ 500,000
Accounts payable 406,806 433,757
Accrued expenses 518,619 573,970
Accounts payable due to National Computer 72,665 78,785
Systems, Inc.
Deferred revenues 106,850 164,269
Customer deposits 16,205 59,715
Current portion-note payable to National
Computer Systems, Inc. 701,831 200,000
Current portion of other note payable 98,182 96,173
TOTAL CURRENT LIABILITIES 2,421,158 2,106,669
Notes Payable to National Computer Systems, Inc. -- 655,000
Income tax payable to National Computer Systems, Inc. 60,670 68,875
Other note payable 232,579 257,891
Capital lease obligations 12,045 2,287
Long-term rental abatement 8,891 35,561
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, issued and outstanding
32,533,460 shares 4,880,019 4,880,019
Additional paid-in capital 8,633,407 8,633,407
Retained-earnings deficit (deduction) (13,313,418) (13,295,679)
TOTAL STOCKHOLDERS' EQUITY 200,008 217,747
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,935,351 $ 3,344,030
See Notes to Financial Statements (unaudited).
DIMENSIONAL MEDICINE, INC.
STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended
June 30,
1995 1994
REVENUES
Net sales $ 607,439 $ 730,735
Customer maintenance and support 559,558 625,961
1,166,997 1,356,696
COSTS AND EXPENSES
Cost of products sold 239,597 216,200
Cost of maintenance and support provided 125,866 243,116
Customer support costs 236,368 228,643
Research, development and engineering 274,778 268,802
Selling, general and administrative 291,395 282,238
1,168,004 1,238,999
OPERATING INCOME (LOSS) (1,007) 117,697
OTHER INCOME (EXPENSE)
Interest and other income (expense) 9,698 11,251
Interest expense (32,135) (24,442)
(22,437) (13,191)
INCOME (LOSS) BEFORE INCOME TAXES (23,444) 104,506
Income tax provision (benefit) (5,705) 40,235
NET INCOME (LOSS) $ (17,739) $ 64,271
NET INCOME (LOSS) PER SHARE $ (.001) $ .002
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD 32,553,460 32,553,460
See Notes to Financial Statements (unaudited).
DIMENSIONAL MEDICINE, INC.
STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended
June 30,
1995 1994
OPERATING ACTIVITIES
Net income (loss) $ (17,739) $ 64,271
Adjustments to reconcile to net cash provided by
(used in) operating activities:
Depreciation and amortization 71,924 67,030
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 361,517 87,000
(Increase) decrease in inventories and other
current assets 789 (37,151)
Increase (decrease) in accounts payable and
accrued expenses (100,226) (146,381)
Other (127,599) 371,777
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES 188,666 406,546
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (16,255) (42,243)
Capitalization of software development costs (37,492) (44,377)
NET CASH USED IN INVESTING ACTIVITIES (53,747) (86,620)
FINANCING ACTIVITIES
Net bank line of credit borrowings -- (279,000)
Principal payments on notes payable and capital
lease obligations (180,423) (16,693)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (180,423) (295,693)
INCREASE (DECREASE) IN CASH (45,504) 24,233
CASH AT BEGINNING OF PERIOD 71,215 39,623
CASH AT END OF PERIOD $ 25,711 $ 63,856
See Notes to Financial Statements (unaudited).
DIMENSIONAL MEDICINE, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE A - The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10Q and, therefore, do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
all periods presented have been made. The results of operations for the period
ended June 30, 1995 are not necessarily indicative of the operating results that
may be expected for the entire fiscal year ending March 31, 1996. For further
information, refer to the financial statements and footnotes included in the
Company's Annual Report on Form 10K for the year ended March 31, 1995.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Revenues
The Company reported net sales of $607,439 for the quarter ended June 30, 1995,
vs. $730,735 for the same quarter of the prior fiscal year. The decline came
primarily in the area of hardware sales.
Customer maintenance and support also decreased (10.6%) in the first quarter
when compared to the first quarter of fiscal 1995. The bulk of the change
resulted from continuing declines in revenues related to a contract with the
U.S. Government under which the Company provided maintenance and support
services to various military hospitals. Although the contract expired on
September 30, 1994, three hospitals contracted directly with the Company for
continued services. These contracts will be phasing out through March 31, 1996.
Costs and Expenses
The cost of products sold increased $23,397 in the three-month period ended June
30, 1995, vs. the prior year. This reflected, in part, increased amortization of
software and inventory. Third-party software also represented a larger
percentage of costs in the quarter. The result was a 10.8% decline in gross
margin from quarter to quarter.
The cost of maintenance and support (direct costs of support incurred with
third-party vendors) declined by $117,250 (48.2%) in the first quarter. This
decline is consistent with the reduced revenues associated with the U.S.
Government contract referenced above. The costs related to Maxifile hardware
maintenance also declined, reflecting the continuing replacement of outdated
hardware at customer sites with new hardware that is less expensive to maintain.
The result was an increase in direct margin on customer maintenance and support
revenues of $50,847.
The combined total of all other operating expenses (customer support costs;
research, development and engineering; selling, general and administrative)
increased nominally from $779,683 in the three-month period ended June 30, 1994,
to $802,541 in the same period ended June 30, 1995. There were no single
significant expense categories contributing to the increase.
Interest expense for the quarter was up $7,693 (31.5%), reflecting increased
line of credit borrowings as well as a higher comparative interest rate.
Liquidity and Capital Resources
The Company reported a working capital deficit of $491,280 at June 30, 1995, vs.
working capital of $206,653 at March 31, 1995. The decline resulted from the
reclassification of the long-term portion of the note payable to National
Computer Systems ($501,831) to current liabilities. The unpaid principal amount
of the note is payable in a lump sum on April 30, 1996. The Company relies on
cash flow from operations and a $500,000 bank line of credit to fund its
operating cash needs. Management of cash and control of costs continue to be top
priorities.
The Company remains dependent on the continuing financial support of NCS, who
currently guarantees the Company's borrowings under its line of credit with a
bank and other long-term borrowings. Funds generated from operations and funds
available from the Company's line of credit facility are expected to be adequate
to meet current cash requirements. The company and NCS continue to seek
strategic alliances with corporate partners to enhance cash flow and/or sources
of additional capital.
The Company does not have any material commitments for the acquisition of
long-term assets. The impact of inflation on the company is not significant.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of matters to a vote of Security Holders
Not Applicable
Item 5. Other information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein: None
The Company did not file any reports on Form 8-K during the three months ended
June 30, 1994.
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.
Dimensional Medicine, Inc.
(Registrant)
Date August 10, 1995 /s/ David H. Littlefield
David H. Littlefield, President and CEO
Date August 10, 1995 /s/ Mark D. Holman
Mark D. Holman, Chief Financial Officer