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 SEPTEMBER 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 November 10, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DIMENSIONAL MEDICINE, INC.
BALANCE SHEET (unaudited)
Sept. 30, March 31,
1995 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 46,017 $ 71,215
Accounts receivable 1,475,625 1,651,853
Lease receivables 115,524 111,960
Tax benefit receivable 26,972 103,169
Inventories 122,103 186,720
Other current assets 108,947 119,126
TOTAL CURRENT ASSETS 1,895,188 2,244,043
Software 457,561 470,893
Long-term lease receivables 234,894 284,876
Property, plant and equipment 2,369,432 2,335,358
Less: Accumulated depreciation and amortization 2,113,027 (2,060,015)
256,405 275,343
TOTAL ASSETS $ 2,844,048 $ 3,275,155
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 500,000 $ 500,000
Accounts payable 379,559 433,757
Accrued expenses 592,323 573,970
Accounts payable due to National Computer
Systems, Inc. 87,590 78,785
Deferred revenues 134,367 164,269
Customer deposits 7,800 59,715
Current portion -- note payable to National
Computer Systems, Inc. 651,831 200,000
Current portion of other note payable 100,233 96,173
TOTAL CURRENT LIABILITIES 2,453,703 2,106,669
Note Payable to National Computer Systems, Inc. 655,000
Other note payable 206,739 257,891
Capital lease obligations 9,702 2,287
Long-term rental abatement 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) (13,339,522) (13,295,679)
TOTAL STOCKHOLDERS' EQUITY 173,904 217,747
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,844,048 $ 3,275,155
See Notes to Financial Statements (unaudited).
DIMENSIONAL MEDICINE, INC.
STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
REVENUES
Net sales $ 790,358 $ 1,091,001 $ 1,397,797 $ 1,821,736
Customer maintenance and support 542,441 566,031 1,101,999 1,191,992
1,332,799 1,657,032 2,499,796 3,013,728
COSTS AND EXPENSES
Cost of products sold 356,693 623,916 596,290 840,116
Cost of maintenance and support provided 124,150 226,741 250,016 469,857
Customer support costs 239,815 261,090 476,183 489,733
Research, development and engineering 243,337 256,234 518,115 525,036
Selling, general and administrative 388,928 275,608 680,323 557,846
1,352,923 1,643,589 2,520,927 2,882,588
OPERATING INCOME (LOSS) (20,124) 13,443 (21,131) 131,140
OTHER INCOME (EXPENSE)
Interest and other income (expense) 5,375 89,297 15,073 100,548
Interest expense (29,255) (41,531) (61,390) (65,973)
(23,880) 47,766 (46,317) 34,575
INCOME (LOSS) BEFORE INCOME TAXES (44,004) 61,209 (67,448) 165,715
Income tax provision (benefit) (17,900) 23,566 (23,605) 63,801
NET INCOME (LOSS) $ (26,104) $ 37,643 $ (43,843) $ 101,914
NET INCOME (LOSS) PER SHARE $ (.001) $ .001 $ (.001) $ .003
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD 32,553,460 32,553,460 32,553,460 32,553,460
See Notes to Financial Statements (unaudited).
DIMENSIONAL MEDICINE, INC.
STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended
September 30
1995 1994
OPERATING ACTIVITIES
Net income (loss) $ (43,843) $ 101,914
Adjustments to reconcile to net cash provided by
(used in) operating activities:
Depreciation and amortization 144,020 135,263
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 367,718 (21,269)
(Increase) decrease in inventories and
other current assets
74,796 (154,192)
Increase (decrease) in accounts payable and
accrued expenses (217,053) 267,338
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES 325,638 329,054
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (16,766) (74,071)
Capitalization of software development costs (77,676) (95,626)
NET CASH USED IN INVESTING ACTIVITIES (94,442) (169,697)
FINANCING ACTIVITIES
Net bank line of credit borrowings -- 16,000
Principal payments on notes payable and capital lease obligations
(256,394) (189,316)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (256,394) (173,316)
INCREASE (DECREASE) IN CASH (25,198) (13,959)
CASH AT BEGINNING OF PERIOD 71,215 39,623
CASH AT END OF PERIOD $ 46,017 $ 25,664
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 September 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.
NOTE B - Reclassification of some financial statement items has been made to
conform with fiscal 1995 presentation formats.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Revenues
The Company reported net sales of $790,358 for the quarter ended September 30,
1995 vs. $1,091,001 for the same quarter of the prior year. The decline of
$300,643 resulted from lower revenues in the area of hardware upgrades and
Maxiview systems, offset partially by increased Maxifile software revenues.
For the six-month period ended September 30, 1995, net sales decreased 18.9%,
also reflecting reduced hardware upgrade and Maxiview system revenue as
described in the preceding paragraph.
Customer maintenance and support revenues declined slightly (4.0%) in the
three-month period ended September 30, 1995 when compared to the same quarter of
the prior year. The decrease was the net effect of the combination of lower
maintenance, support and lease revenues resulting from the cancellation of a
contract with the U.S. Government, and higher Maxifile support revenues.
On a year-to-date basis, customer maintenance and support revenues were
$1,101,999 compared to $1,191,992 in the first half of the prior fiscal year.
The year-to-date reduction also occurred as a result of the factors cited in the
foregoing paragraph.
Costs and Expenses
Costs of products sold declined on a comparative quarter basis, reflecting the
decline in hardware upgrade and Maxiview system revenue. The gross margin on net
sales increased from 42.8% to 54.9% reflecting the increased Maxifile software
revenue component, which has nominal direct costs associated with it.
For the six months ended September 30, 1995, the Company reported a reduction in
cost of products sold of $243,826 (40.9%) Decreased hardware upgrade and
Maxiview system revenue resulted in correspondingly lower costs. The gross
margin on net sales improved to 57.3% in the current fiscal year from 53.9% in
the prior year.
The cost of maintenance and support (direct costs of support incurred with
third-party vendors) decreased by $102,591 in the second quarter of fiscal 1996
vs. the second quarter of the prior year. The majority of the decline resulted
from reduced hardware maintenance cost. As the cost of hardware declines, there
is a corresponding trend towards lower costs of maintenance and the use of
extended warranty periods provided by the manufacturer. The direct margin on
customer maintenance and support revenues increased from 59.9% to 77.1% on a
quarter-to-quarter basis.
The cost of maintenance and support also declined in the six-month period ended
September 30, 1995 when compared to the same period in 1994. Declining third
party maintenance costs ( related to lower hardware prices) and cost reductions
were responsible for the decrease. Direct margin for this period improved by
3.4%
Other operating expenses increased on both a year-to-date and a comparative
quarter basis ($102,006 and $79,148 respectively). The majority of the increase
came as the result of a one-time charge for termination costs in the second
quarter.
The Company recognized other income of $15,073 in the six-month period ended
September 30, 1995 vs. $100,548 in the same period of the prior year. Prior year
results included the impact of the sale of a Company trademark that was not
repeated in the current fiscal year.
Interest expense declined in the six and three-month periods ended September 30,
1995 when compared to the same periods of the prior year. Reduced debt levels
were responsible for the decrease.
Liquidity and Capital Resources
The Company's working capital deficit at September 30, 1995 totaled $558,515,
down from a balance 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 ($451,831) 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
The Company announced the resignation of David H. Littlefield, its President,
Chief Executive Officer, and member of the Board of Directors, effective
October, 1, 1995.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
Exhibit 27 - Financial Data Schedule (for SEC use only)
The Company did not file any reports on Form 8-K during the three months ended
September 30, 1995.
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 November 10, 1995 /s/ John P. Paumen
John P. Paumen, President and CEO
Date November 10, 1995 /s/ Mark D. Holman
Mark D. Holman, Chief Financial Officer