<PAGE>
10
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from to
Commission file number 0-14204
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DATA NATIONAL CORPORATION
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-0958983
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
11415 West I-70 Frontage Road North, Wheat Ridge, CO 80033
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(Address of principal executive offices)
(303) 431-1933
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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____
The number of shares outstanding of the issuers Common Stock,
.0001 par value as of March 31, 1996 was 327,478,340 shares.
Transition Small Business disclosure format. Yes_____ No X
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INDEX
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PART I
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PAGE #
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Income Statements (Unaudited) 3
Consolidated Statements of Cash Flows 4
Management's Statement 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
PART II
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ITEMS LIST 7
SIGNATURES 8
FINANCIAL DATA SCHEDULE 9
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ITEM 1. FINANCIAL STATEMENTS
DATA NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
March 31, March 31,
1996 1995
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Assets
<S> <C> <C>
Current Assets:
Cash and equivalents $ 30,341 $107,674
Receivables:
Trade, less allowances for bad 270,570 229,655
debts of $5,077 in 1995 and
1996, respectively
Other 2,662 4,731
Inventory, at cost 69,660 63,853
Prepaid expenses 28,767 12,109
Total current assets 402,000 418,022
Property and equipment, at cost 579,923 385,607
Less: Accumulated depreciation (339,887) (319,105)
240,036 66,502
Other assets 8,086 3,892
$650,122 $488,416
<CAPTION>
Liabilities and Stockholders' Deficit
<S> <C> <C>
Current Liabilities:
Deferred revenue $133,207 $120,486
Accounts payable 83,631 28,101
Accrued expenses 27,848 89,198
Current portion - capital leases 18,169 7,836
Total current liabilities 262,854 245,621
Note payable - related party 869,072 867,789
Capital leases, net of 101,637 3,785
current portion
Stockholders' Deficit:
Common stock $.0001 par value,
authorized 800,000,000 shares;
327,478,340 shares issued and
outstanding 32,747 32,747
Accumulated deficit (616,189) (661,526)
$650,122 $488,416
</TABLE>
See Note to Consolidated Financial Statements
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
DATA NATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION
Six Months Ended
March 31, March 31,
1996 1995
-------------------------------
<S> <C> <C>
Net sales $ 1,268,425 $1,250,000
Cost of sales 625,548 672,527
Gross profit 642,877 577,473
Selling and marketing expense 207,633 194,183
General and administrative expense 407,227 305,084
Operating income 28,017 78,206
Other income (expense):
Interest and other income 7,569 2,022
Interest expense, primarily related party (44,248) (46,742)
Net income (loss) $ (8,662) $ 33,486
Net income (loss) per share - -
Weighted average shares outstanding 327,478,340 327,478,340
</TABLE
See Note to Consolidated Financial Statements
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
DATA NATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
December 31, December 31,
1996 1995
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<S> <C> <C>
Cash flow from (used in) operating activities
Net income $ (8,662) $ 33,486
Adjustments to reconcile net income to
cash flow from operating activities:
Depreciation 20,750 32,249
Changes in assets and liabilities:
(Increase) decrease in receivables (25,638) 25,969
(Increase) decrease in inventory (21,968) (22,285)
(Increase) decrease in prepaid
expenses (24,134) (4,266)
(Increase) decrease in other assets 4,937 (1,004)
Increase (decrease) in accounts
payable 21,853 (36,374)
Increase (decrease) in accrued
expenses 7,777 28,231
Increase (decrease) in deferred
revenue 729 (7,491)
Total adjustments (15,694) 15,029
Cash flow from (used in )
operating activities (24,357) 48,515
Cash flow (used in) investing activities:
Purchases of property and equipment (148,782) (17,501)
Cash flow from (used in) financing activities:
Borrowings - related party - -
Repayment of related party note (419)
Borrowing under (repayment of) capital
leases 112,121 (7,166)
Cash flow from (used in) financing activities 112,121 (7,585)
Increase (decrease) in cash and equivalents (61,018) 23,429
Cash and equivalents, beginning of period 91,359 84,245
Cash and equivalents, end of period $ 30,341 $ 107,674
</TABLE>
See Note to Consolidated Financial Statements
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
DATA NATIONAL CORPORATION
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - MANAGEMENT'S STATEMENT
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In the opinion of management, the accompanying financial statements
contain all adjustments (which consist only of normal, recurring
adjustments) necessary to fairly present the Company's financial position,
results of operations, and cash flows. The operating results presented are
not necessarily indicative of the operating results for the years
ending September 30, 1996 and 1995.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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Liquidity and Capital Resources
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March 31, 1996 as Compared to September 30, 1995
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The Company's working capital decreased from $173,347 at September 30,
1995 to $139,146 at March 31, 1996, primarily because of a cash deficit
from operations of $8,662, and an increase in prepaid expenses. $148,782
was used to acquire additional equipment, and $112,121 was received to
finance the equipment acquisitions through leases. The Company was not
obligated for additional capital expenditures at March 31, 1996, but will
continue to upgrade its systems given the nature of its business.
The Company remains dependent upon the Dillon note for financing, and
almost certainly would cease operations if the note were deemed in default
and called or not renewed.
The Company believes that favorable operating results will continue and
provide adequate liquidity for the near-term future.
Results of Operations
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For the quarter ended March 31, 1996 the nature of the Company's
operations primarily focused on providing marketing services to service
stations and similar entities, nationally. The Company remains dependent
upon two major customers which account for over 50% of net sales. The
Company did commence services to other industries, specifically the mortgage
loan industry and automotive dealers.
Sales increased by $18,425 or 1.5%. Cost of sales decreased by $46,979
or 7% due to operational efficiencies. Marketing expenses increased by
$13,450 due to additional marketing and sales efforts, including the hiring
of additional personnel. General and administrative expenses increased by
$102,143, primarily due to increases in the information technology department
and development of the Company's "in house" software.
Interest expense is substantially all related to the Dillon note, and is
expected to remain a significant cost in the near future.
<PAGE>
DATA NATIONAL CORPORATION
FORM 10-QSB
March 31, 1996
PART II
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ITEMS 1 - 6. Not Applicable
EX-27 Financial Data Schedule
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SIGNATURES
In accordance with the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) DATA NATIONAL CORPORATION
BY (Signature) /s/ Richard S. Simms
(Date) May 20, 1996
(Name and Title) Richard S. Simms, Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 30,341
<SECURITIES> 0
<RECEIVABLES> 265,493
<ALLOWANCES> 5,077
<INVENTORY> 69,660
<CURRENT-ASSETS> 402,000
<PP&E> 579,923
<DEPRECIATION> 339,887
<TOTAL-ASSETS> 650,122
<CURRENT-LIABILITIES> 262,854
<BONDS> 0
<COMMON> 327,478,340
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 650,122
<SALES> 1,268,425
<TOTAL-REVENUES> 1,268,425
<CGS> 625,548
<TOTAL-COSTS> 1,240,408
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,248
<INCOME-PRETAX> (8,662)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,662)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
