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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-4748
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Data Dimensions, Inc.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 06-0852458
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(NAME OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 - 108th Avenue NE, Suite 2070, Bellevue, WA 98004
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (206) 688-1000
-----------------------------
Indicate by check whether the 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 preceding 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______.
Indicate the number of shares outstanding of each of the issuers classes
of common stock, of the latest practicable date Common Stock 3,778,890 shares
as of July 31, 1996
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Transitional small business disclosure format (check one).
YES_____ NO___X___.
The index to exhibits appears on Page 10.
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DATA DIMENSIONS, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION NUMBER
- ------------------------------ ------
ITEM 1 - FINANCIAL STATEMENTS
- ------
Condensed Balance Sheets 3
June 30, 1996 and December 31, 1995
Condensed Statements of Operations 5
for the three and six month period ended June 30, 1996
and June 30, 1995
Condensed Statements of Cash Flow 6
for the six month period ended June 30, 1996
and June 30, 1995
Notes to Condensed Financial Statements 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS 8
- ------ OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PART II - OTHER INFORMATION 11
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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
- ------ SECURITY HOLDERS 11
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K 11
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Signatures 12
Page 2 of 13
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DATA DIMENSIONS, INC.
CONDENSED BALANCE SHEETS
(In thousands)
ASSETS June 30, 1996 December 31, 1995
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CURRENT ASSETS
Cash $14,438 $ 65
Accounts receivable, less allowance
for doubtful accounts of $2,500
in 1996, 1995 2,374 1,448
Due from officer -0- 35
Prepaid and other assets 637 90
Deferred income taxes 358 450
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TOTAL CURRENT ASSETS 17,807 2,088
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EQUIPMENT, FURNITURE AND
LEASEHOLD IMPROVEMENTS
Computers and Equipment 344 222
Furniture 38 16
Leasehold improvements 21 21
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403 259
Less accumulated depreciation 111 93
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EQUIPMENT AND FURNITURE, NET 292 166
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$18,099 $2,254
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The accompanying notes to the financial statements are an integral part of
these balance sheets.
Page 3 of 13
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DATA DIMENSIONS, INC.
CONDENSED BALANCE SHEETS
LIABILITIES AND (In thousands)
STOCKHOLDERS EQUITY
(DEFICIT) June 30, 1996 December 31, 1995
------------- -----------------
CURRENT LIABILITIES
Advance billing 417 655
Advances from factor -0- 824
Accrued compensation 255 221
Accounts payable 508 211
Accrued payroll taxes 240 121
Accrued commissions 137 143
Dividends payable -0- 70
Accrued expenses 26 37
Notes and other payable to officers -0- 0
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TOTAL CURRENT LIABILITIES $ 1,583 $ 2,282
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STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value;
20,000,000 shares authorized;
3,501,826 and 2,171,821 shares issued 4(1) 2(1)
Capital in excess of par value 17,979 1,524
Accumulated deficit (1,416) (1,554)
Less shares held in treasury at cost;
1,328 shares and 0 shares at June 30,
1996 and December 31, 1995 respectively (51) -0-
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Total Stockholders' Equity (Deficit) 16,516 (28)
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$18,099 $ 2,254
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(1) Adjusted to give effect to a 1 for 3 reverse stock split.
The accompanying notes to the financial statements are an integral part of
these balance sheets.
Page 4 of 13
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DATA DIMENSIONS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Month Period Six Month Period
Ended June 30, Ended June 30,
1996 1995 1996 1995
------ ------ ------ ------
REVENUE $3,018 $1,349 $5,589 $2,387
DIRECT COSTS 1,657 814 3,175 1,446
------ ------ ------ ------
Gross Margin 1,361 535 2,414 941
GENERAL, ADMIN &
SELLING EXPENSES 1,309 370 2,273 701
------ ------ ------ ------
Income From Operations 52 165 141 240
OTHER EXPENSE (INCOME) (174) 57 (89) 108
------ ------ ------ ------
INCOME BEFORE TAXES 226 108 230 132
INCOME TAXES 90 -0- 92 -0-
------ ------ ------ ------
NET INCOME $136 $108 $138 $132
------ ------ ------ ------
NET INCOME PER SHARE $.04 $0.05(1) $0.04 $0.06(1)
------ ------ ------ ------
WEIGHTED AVERAGE
SHARES OUTSTANDING 3,864 2,376(1) 3,902 2,366(1)
------ ------ ------ ------
(1) Adjusted to give effect to a 1 for 3 reverse stock split.
The accompanying notes to the financial statements are an integral part of these
balance sheets.
Page 5 of 13
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DATA DIMENSIONS, INC.
CONDENSED STATEMENTS OF CASH FLOW
Six Month Period Ended June 30
(In thousands)
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 138 $ 132
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 18 14
Changes in assets and liabilities
Accounts receivable (926) (198)
Prepaid and other assets (455) (43)
Advance billings (238) 90
Accounts payable 297 26
Accrued compensation 28 (52)
Accrued and withheld payroll taxes 119 (113)
Accrued expenses (11) 2
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Net Cash Provided by (Used in) Operating Activities (1,030) (142)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and furniture (134) (9)
Leasehold improvements (10) (15)
Due from officer 0 124
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Net Cash Provided by (Used in) Investing Activities (144) 100
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes and other payables to officers -0- (135)
Payments on dividend (35) 0
Decrease in advances from factor (824) 110
Issuance of common stock 16,406 37
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Net Cash Provided by (Used in) Financing Activities 15,547 12
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NET CHANGE IN CASH 14,373 (30)
CASH, beginning of year 65 42
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CASH, June 30, 1996 and June 30, 1995 $14,438 $ 12
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The accompanying notes to the financial statements are an integral part of these
statements.
Page 6 of 13
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DATA DIMENSIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The financial information included herein for the six month periods
ended June 30, 1996 and 1995 is unaudited; however, such information reflects
all adjustments consisting only of normal recurring adjustments which are, in
the opinion of management, necessary for a fair presentation for the
financial position, results of operations and cash flows for the interim
periods. The financial information as of December 31, 1995 is derived from
Data Dimensions, Inc.'s Annual Report to Shareholders which is incorporated
by reference into the Company's 1995 Form 10-KSB. The interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's 1995
Annual Report to Shareholders.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
NOTE 2: ACCOUNTING POLICIES
Reference is made to Note l of Notes to Financial Statements in the
Company's Annual Report on Form 10-KSB for the summary of significant
accounting policies.
Page 7 of 13
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Management's Discussion and Analysis
of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Revenue for the three months ended June 30, 1996 was $3,018,000,
compared to $1,349,000 for the three months ended June 30, 1995, an increase
of $1,669,000, or 124%. This increase was primarily attributable to an
increase in the general awareness of the millennium problem and demand for
millennium consulting services and the Company's expanded marketing efforts.
Gross margin for the three months ended June 30, 1996 was $1,361,000,
compared to $535,000 for the three months ended June 30, 1995, an increase of
$826,000, or 154%. Gross margin as a percentage of revenue for the three
months ended June 30, 1996 was 45.1%, compared to 39.7% for the like period
in 1995, an increase of 5.4%. This percentage increase was primarily the
result of an increase in the amount of licensee income.
General, administrative and selling expenses for the three months ended
June 30 , 1996 were $1,309,000, compared to $370,000 for the three months
ended June 30, 1995, an increase of $939,000 or 254%. General,
administrative and selling expenses as a percentage of revenue for the three
months ended June 30, 1996 were 43.4%, compared to 27.4% for the three months
ended June 30, 1995, an increase of 16.0%. Approximately $650,000 of this
increase in cost was the result of additions to the Company's administrative
and support staff and related operating costs and the reorganization of its
domestic operations into three regions in the last six months of 1995. The
remaining increase in cost was related to adding support and sales staff and
the acquisition and training cost of increased sales and technical staff..
Other income for the three months ended June 30, 1996 was $174,000,
compared to other expense of $57,000 for the three months ended June 30,1995.
The income for the three months in 1996 was attributable to interest earned
from investments. The other expense for the three months in 1995 was
attributable to accounts receivable factored and the related finance charges.
The Company reported a net income of $136,000 for the three months ended
June 30, 1996, compared to a net income of $108,000 for the three months
ended June 30, 1995.
Page 8 of 13
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COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenue for the six months ended June 30, 1996 was $5,589,000, compared
to $2,387,000 for the six months ended June 30, 1995, an increase of
$3,202,000, or 134%. This increase was primarily attributable to an increase
of the general awareness of the millennium problem and demand for millennium
consulting services and the Company's expanded marketing efforts.
Gross margin for the six months ended June 30, 1996 was $2,414,000,
compared to $941,000 for the six months ended June 30, 1995, an increase of
$1,473,000, or 157% Gross margin as a percentage of revenue for the six
months ended June 30, 1996 was 43.2%, compared to 39.4% for the like period
in 1995, an increase of 3.8%. This percentage increase was primarily the
result of an increase in the amount of licensee income.
General, administrative and selling expenses for the six months ended
June 30, 1996 were $2,273,000, compared to $701,000 for the six months ended
June 30, 1995, an increase of $1,572,000 or 224%. General, administrative
and selling expenses as a percentage of revenue for the six months ended June
30, 1996 was 40.7%, compared to 29.4% for the six months ended June 30, 1995,
an increase of 11.3%. Approximately $1,275,000 of this increase in cost was
the result of additions to the Company's administrative and support staff and
related operating costs and the reorganization of its domestic operations
into three regions in the last six months of 1995. In addition, during the
second quarter of 1996, additional support staff and personnel training and
acquisition costs were incurred to support the Company's continued growth.
Other income for the six months ended June 30, 1996 was $89,000,
compared to other expense of $108,000 for the like six months in 1995. The
other income for the six months in 1996 was attributable to investment income
during the second quarter of 1996, offset by costs related to accounts
receivable factored during the first quarter of 1996. The other expense for
the six months in 1995 was attributable to accounts receivable factored and
related finance charges for six months.
The Company reported a net income of $138,000 for the six months ended
June 30, 1996, compared to a net income of $132,000 for the six months ended
June 30, 1995.
LIQUIDITY AND CAPITAL COMMITMENTS
During the six months ended June 30, 1996, the company generated its
cash needs through factoring its accounts receivable and proceeds from an
underwritten public offering of Common Stock. The net proceeds to the
Company were approximately $16,300,000. The Company used a portion of the
proceeds to eliminate reliance on advances from its accounts receivable
factor and to pay accrued dividends on previously outstanding Preferred
Stock. In addition, the Company initiated the establishment of an
international production facility in Ireland, where code and data conversion
is being performed.
Page 9 of 13
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At June 30, 1996, the Company had working capital of $16,224,000
compared to a working capital deficit of $194,000 on December 31, 1995.
During the next twelve months, the Company plans to invest up to
approximately $1,500,000 in personnel, equipment, and other related expenses
to develop and market an advance Year 2000 product based upon its current
proprietary Year 2000 methodology. The product will be available to
third-party providers, including computer and software companies, systems
integrators, and consultants. These expenses will be deferred and amortized
over a 4 to 5 year period. The funds for this investment will be taken from
available working capital.
Page 10 of 13
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PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of the shareholders of the Company was held on June 3, 1996
at which the shareholders elected the two nominees for director to the Board of
Directors of the Company. The two directors elected, along with the voting
results are as follows:
No. of Shares No. of Shares
Name Voting For Withheld Voting
----- ------------- ---------------
Philip N. Newbold 2,846,886 2,755
(Class II)
Thomas W. Fife 2,846,853 2,788
(Class III)
The terms of Larry W. Martin and William H. Parsons as directors continued
after the annual meeting of shareholders.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarter June 30, 1996.
The exhibits filed as a part of this report are listed below.
EXHIBIT NO.
11. Calculations of Net Income Per Share
Page 11 of 13
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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.
Data Dimensions, Inc.
--------------------------
(Registrant)
By: /s/ Larry W. Martin
- ------------------------------- -------------------------------
Date Larry W. Martin, President
and Chief Executive Officer
(Principal Executive Officer)
By: /s/ William H. Parsons
- ------------------------------- -------------------------------
Date William H. Parsons, CFO
(Principal Financial and
Accounting Officer)
Page 12 of 13
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EXHIBIT 11
DATA DIMENSIONS, INC.
CALCULATIONS OF NET INCOME PER SHARE (1)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
------ ------ ------ ------
Actual weighted average shares
outstanding for period 3,773,000 2,201,000 3,773,000 2,201,000
Dilutive common stock options
using the treasury stock method 91,000 175,000 129,000 165,000
--------- --------- --------- ---------
Total shares used in per share
calculations 3,864,000 2,376,000(1) 3,902,000 2,366,000
--------- --------- --------- ---------
Net Income $136,000 $108,000 $138,000 $132,000
--------- --------- --------- ---------
Net income per share (2) $0.04 $0.05(1) $0.04 $0.06(1)
--------- --------- --------- ---------
(1) Adjusted to give effect to a 1 for 3 reverse stock split
(2) Fully diluted earnings per share is not disclosed on the consolidated
statement of operations for the three month and six month periods ended
June 30, 1996 and 1995, since it is not more than three percent different
from primary earnings per share.
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,438
<SECURITIES> 0
<RECEIVABLES> 2,374
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,807
<PP&E> 403
<DEPRECIATION> 111
<TOTAL-ASSETS> 18,099
<CURRENT-LIABILITIES> 1,583
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,099
<SALES> 5,589
<TOTAL-REVENUES> 5,589
<CGS> 3,175
<TOTAL-COSTS> 3,175
<OTHER-EXPENSES> 2,273
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (89)
<INCOME-PRETAX> 230
<INCOME-TAX> 92
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
