<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
__ X___ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
___________________________________
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 0-4748
________________________
Data Dimensions, Inc.
________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Delaware 06-0852458
_______________________________ ______________________________
(Name or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
777 - 108th Avenue N.E., Suite 2070, Bellevue, WA 98004
___________________________________________________________________
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code (206) 688-1000
________________________
Indicate by check whether the issuer (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 issuer's classes of
common stock, of the latest practicable date: Common Stock, 3,681,826
shares as of April 29, 1996
______________________________________________________________________________
The index to exhibits appears on Page 11.
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DATA DIMENSIONS, INC.
INDEX
PAGE
NUMBER
------
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Balance Sheets (unaudited) 3
March 31, 1996 and December 31, 1995
Statements of Operations (unaudited) 5
for the three month periods ended March 31, 1996
and March 31, 1995
Statements of Cash Flows (unaudited) 6
for the three month periods ended March 31, 1996
and March 31, 1995
Notes to Financial Statements 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS 8
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PART II - OTHER INFORMATION 10
ITEM 2 - CHANGES IN SECURITIES 10
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 6 - EXHIBITS AND REPORT ON FORM 8K 11
Signatures 13
Page 2 of 14
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DATA DIMENSIONS, INC.
BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS March 31, 1996 December 31, 1995
-------------- -----------------
CURRENT ASSETS
Cash $ 46 $ 65
Accounts receivable, less allowance
for doubtful accounts of $2,500
in 1994, 1995 2,075 1,448
Due from officer 35 35
Prepaid and other assets 305 90
Deferred income taxes 448 450
------- ------
TOTAL CURRENT ASSETS 2,909 2,088
------- -------
EQUIPMENT, FURNITURE AND
LEASEHOLD IMPROVEMENTS
Computers and Equipment 249 222
Furniture 28 16
Leasehold improvements 21 21
------- -------
298 259
Less accumulated depreciation 102 93
------- -------
EQUIPMENT AND FURNITURE, NET 196 166
------- -------
$3,105 $2,254
------- ------
The accompanying notes to the financial statements are an integral part of these
balance sheets.
Page 3 of 14
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DATA DIMENSIONS, INC.
BALANCE SHEETS
(Unaudited)
In thousands)
LIABILITIES AND
STOCKHOLDERS (DEFICIT) March 31, 1996 December 31, 1995
-------------- -----------------
CURRENT LIABILITIES
Advance billing 541 655
Advances from factor 1,584 824
Accrued compensation 164 221
Accounts payable 265 211
Accrued payroll taxes 257 121
Accrued commissions 121 143
Dividends payable 70 70
Accrued expenses 63 37
Notes and other payable to officers 65 0
------ ------
TOTAL CURRENT LIABILITIES $3,130 $2,282
====== ======
STOCKHOLDERS' (DEFICIT)
Common stock, $.001 par value;
20,000,00 shares authorized;
3,501,826 and 2,171,821 shares issued 7(1) 7(1)
Capital in excess of par value 1,520(1) 1,519(1)
Accumulated deficit (1,552) (1,554)
------- -------
Total Stockholders' (Deficit) (25) (28)
---- ----
$3,105 $2,254
====== ======
(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 14
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DATA DIMENSIONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Month Period Ended
(In thousands, except share
and per share data)
March 31, 1996 March 31, 1995
-------------- --------------
REVENUE $2,571 $1,038
DIRECT COSTS 1,518 632
--------- ---------
GROSS MARGIN 1,053 406
GENERAL, ADMINISTRATIVE
AND SELLING EXPENSES 964 331
--------- ---------
INCOME FROM OPERATIONS 89 75
OTHER EXPENSE 85 51
--------- ---------
INCOME BEFORE TAXES 4 24
INCOME TAXES 2 0
--------- ---------
NET INCOME $ 2 $ 24
--------- ---------
NET INCOME PER SHARE $ 0.00(1) $ 0.01(1)
--------- ---------
WEIGHTED AVERAGE SHARES 3,731,000(1) 2,300,000(1)
OUTSTANDING --------- ---------
(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
Statements of Operations.
Page 5 of 14
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DATA DIMENSIONS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Month Period Ended March 31
(In thousands)
1996 1995
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES $ 2 $ 24
Net Income
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 9 6
Changes in assets and liabilities
Accounts receivable (627) (91)
Prepaid and other assets (213) (26)
Advance billings (114) 131
Accounts payable 54 36
Accrued compensation (79) (13)
Accrued and withheld payroll taxes 136 (94)
Accrued expenses 26 (46)
------ ------
Net Cash Provided by (Used in) Operating Activities (806) (73)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and furniture (39) (3)
Leasehold improvements 0 (7)
Due from officer 0 124
------ ------
Net Cash Provided by (Used in) Investing Activities (39) 114
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes and other payables to
officers 65 (7)
Payments on notes payable to officer 0 100
Increase in advances from factor 760 13
Issuance of common stock 1 4
------ ------
Net Cash Provided by (Used in) Financing Activities 826 (90)
------ ------
NET CHANGE IN CASH (19) (49)
CASH, beginning of period 65 42
------ ------
CASH, end of period 46 (7)
------ ------
The accompanying notes to the financial statements are an integral part of these
Statements of Cash Flows.
Page 6 of 14
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DATA DIMENSIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: GENERAL
The unaudited financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements, which are prepared in accordance with generally accepted
accounting principles, have been omitted pursuant to such rules and
regulations. The Company believes that the financial statements and the notes
thereto contain all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the financial position as of March 31, 1996, the
results of operations for the three month periods ended March 31, 1996 and
March 31, 1995 and cash flows for the three month periods ended March 31, 1996
and March 31, 1995. 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 1 of Notes to Financial Statements in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1995 for the summary of significant accounting policies.
Page 7 of 14
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL COMMITMENTS
During the quarter ended March 31, 1996, the Company generated its cash
needs through factoring its accounts receivable and obtaining advance payments
for services to be rendered to certain clients. In April 1996, the Company
completed an underwritten public offering of its Common Stock (the "Offering").
The net proceeds to the Company were approximately $16,000,000. The Company
expects to use a portion of the proceeds to eliminate reliance on advances from
its accounts receivable factor, to finance its accounts receivable growth and to
pay accrued dividends on previously outstanding Preferred Stock. In addition,
the Company intends to establish regional and international production
facilities, where code and data conversion will be completed. The Company
intends to use the balance for additional working capital and general corporate
purposes.
At March 31, 1996, the Company had advances of $1,584,000 under a factoring
agreement. Advances are limited to 90% of receivables purchased by the factor.
A 10% reserve is established upon the purchase of a receivable. In addition,
the Company is required to repurchase from the factor any receivable that has
not been paid within 90 days of invoice date. Obligations under the factoring
agreement are secured by all of the Company's assets. The agreement provides
for a finance charge equal to 2% per month of the average daily account balance
outstanding. The finance charge is deducted from the established reserve. On
April 4, 1996, the Company paid its factor $1,389,473 and terminated its
factoring agreement.
At March 31, 1996, the Company had a working capital deficit of $221,000
compared to a working capital deficit of $194,000 on December 31, 1995.
The Company has no significant commitments for capital expenditures nor
does it anticipate entering into any such commitments in the very near future.
Management believes that, as a result of increases in sales and
improvements in operating efficiencies, cash generated from operations along
with the proceeds from the Offering will be adequate to finance its working
capital requirements for the next twelve months.
RESULTS OF OPERATIONS
Revenue for the three months ended March 31, 1996 was $2,571,000, compared
to $1,038,000 for the three months ended March 31, 1995, an increase of
$1,533,000, or 148%. 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.
Page 8 of 14
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Gross margin for the three months ended March 31, 1996 was $1,053,000,
compared to $406,000 for the three months ended March 31, 1995, an increase of
$627,000, or 154%. Gross margin as a percentage of revenue for the three months
ended March 31, 1996 was 41.0%, compared to 39.1%, an increase of 1.9%.
General, administrative and selling expenses for the three months ended
March 31, 1996 were $964,000, compared to $331,000 for the three months ended
March 31, 1995, an increase of $633,000, or 191%. General, administrative and
selling expenses as a percentage of revenue for the three months ended March 31,
1996 was 37.5%, compared to 31.8% for the three months ended March 31, 1995, an
increase of 5.7%. This increase in cost and percentage was primarily the result
of additions to the Company's administrative and support staff and the
reorganization of its domestic operations into three regions in 1995.
Other expense for the three months ended March 31, 1996 was $85,000,
compared to $51,000 for the three months ended March 31, 1995, an increase of
$34,000. The increase was attributable to the increase in volume of accounts
receivable factored and the related finance charges.
The Company reported a net income of $2,000 for the three months ended
March 31, 1996, compared to a net income of $24,000 for the three months ended
March 31, 1995.
Page 9 of 14
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PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES
At a special meeting of the Company's stockholders held on February 16,
1996, the Company's stockholders approved, subject to the closing of the
Offering, an amendment to the Company's Certificate of Incorporation to give
effect to a one-for-three reverse stock split of the Company's Common Stock. As
a result of the one-for-three reverse stock split, each three shares of the
Company's Common Stock, par value $.01 per share, outstanding immediately prior
to closing of the Offering became exchangeable for one share of Common Stock,
par value $.001 per share. The amendment to the Company's Certificate of
Incorporation also eliminated authorization of the Company's Preferred Stock.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the Company's stockholders was held on February 16,
1996. At the meeting, the Company's stockholders approved the following
proposals:
1. A reverse stock split (the "Reverse Stock Split") causing
one (1) share of $.001 par value Common Stock (the "New Common Stock")
to be substituted for each three (3) shares of $.01 par value Common
Stock of the Company outstanding immediately prior to the Reverse
Stock Split, to occur simultaneously with the closing of the Offering;
and
2. An amendment of the Company's Certificate of Incorporation
(a) authorizing the New Common Stock, (b) effecting the Reverse Stock
Split and providing a procedure for payments to shareholders on
account of fractional shares resulting from the same, and
(c) eliminating the authorization of Preferred Stock and all
provisions in the Certificate of Incorporation related to the Series A
Preferred Stock.
As to the first proposal, 6,068,751 shares were voted for the proposal,
32,800 shares were voted against the proposal, 28,700 shares abstained from
voting, and 36,473 shares were broker non-votes.
As to the second proposal, 4,123,432 shares were voted for the proposal,
31,200 shares were voted against the proposal, 30,400 shares abstained from
voting, and 1,981,692 shares were broker non-votes.
Page 10 of 14
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarter ended March 31, 1996.
The exhibits filed as a part of this report are listed below.
Exhibit No. Description
- ----------- -----------
3.1* Certificate of Incorporation and all amendments thereto
3.2* Amended and Restated Bylaws
4.1* Form of Common Stock Certificate
4.2 See Exhibits 3.1 and 3.2 for provisions in the Certificate of
Incorporation and Amended and Restated Bylaws of the Company
defining the rights of the holders of Common Stock
10.1* 1988 Incentive Stock Option Plan and 1988 Nonstatutory Stock
Option Plan
10.2* Lease Agreement, dated June 7, 1994, between the Company and
Rainier Plaza Limited Partnership
10.3* Lease Agreement, dated December 14, 1994, between the Company and
Wright Runstad Properties L.P.
10.4* Factoring Agreement, dated June 13, 1995, between the Company and
Silicon Valley Financial Services
10.5* Promissory Note, dated February 28, 1994, made by Larry W. Martin
in favor of the Company in the original principal amount of
$65,000
Page 11 of 14
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10.6* Promissory Note, dated August 31, 1994, made by Larry W. Martin
in favor of the Company in the original principal amount of
$50,000
10.7* 1996 Client Services Agreement and Financial Schedule, dated
September 27, 1995, between the Company and Kaiser Permanente
10.8* Promissory Note, dated February 9, 1996, made by the Company in
favor of William H. Parsons in the original principal amount of
$65,000
10.9* Promissory Note, dated February 9, 1996, made by the Company in
favor of Larry W. Martin in the original principal amount of
$50,000
11.1 Statement regarding computation of per share earnings
27.1 Financial Data Schedule
* Filed as an exhibit to Amendment No. 1 to Form SB-2 Registration Statement
filed with the U.S. Securities and Exchange Commission on behalf of the
Company on March 20, 1996 (Registration No. 333-841).
Page 12 of 14
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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)
05/15/96 By /s/ William H. Parsons
--------- ------------------------------------------
Date William H. Parsons, Chief Financial Officer,
on behalf of the registrant, and as
Principal Financial and Accounting Officer
Page 13 of 14
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EXHIBIT 11.1
DATA DIMENSIONS, INC.
CALCULATIONS OF NET INCOME PER SHARE (1)
(Unaudited)
Three Months Ended
March 31,
1996 1995
------ ------
Actual weighted average shares
outstanding for the period 3,502,000 2,300,000
Dilutive common stock options
using the treasury stock method 229,000 0
---------- ---------
Total shares used in per share
calculations 3,731,000 2,300,000
---------- ---------
Net income $2,000 $24,000
---------- ---------
Net income per share(2) $0.00 $0.01
---------- ---------
(1) Adjusted to give effect to a 1 for 3 reverse stock split.
(2) Fully diluted earnings per share are not disclosed on the statements of
operations for the three month periods ended March 31, 1996 and 1995, since they
are not more than three percent different from primary earnings per share.
Page 14 of 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 2,075
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,909
<PP&E> 298
<DEPRECIATION> 102
<TOTAL-ASSETS> 3,105
<CURRENT-LIABILITIES> 3,130
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> (1,552)
<TOTAL-LIABILITY-AND-EQUITY> 3,105
<SALES> 2,571
<TOTAL-REVENUES> 2,571
<CGS> 1,518
<TOTAL-COSTS> 1,518
<OTHER-EXPENSES> 964
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85
<INCOME-PRETAX> 4
<INCOME-TAX> 2
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
