<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Quarterly Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For The Period Ended June 30, 1997 Commission File Number 0-19875
DMI, INC.
---------
Exact Name of Registrant as specified in its charter
Colorado
(State or other jurisdiction of incorporation or organization
2501 West Fifth Street
Santa Ana, California 92703
(Address of principal Executive Offices)
95-3500183
(I.R.S. Employer Identification No.)
Registrant's telephone number, including area code (714)-571-1900
Indicate by check mark whether 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 preceeding 12 months (or 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 No X
----- -----
Number of shares outstanding as of June 30, 1997:
Common Stock, no par value 9,612,843
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INDEX
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<TABLE>
<CAPTION>
Page
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<S> <C>
Part 1 Financial Information
Item 1 Financial Statements
Balance Sheets as of June 30, 1997
and December 31, 1996 F-3
Statements of Operations for the Three Months and
Six Months Ended March 31, 1997 and March 31, 1996 F-4
Statements of Cash Flows for the Six Months
Ended June 30, 1997 and June 30, 1996 F-5
Condensed Notes to Financial Statements F-6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Signatures
</TABLE>
2
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DMI, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS LIABILITIES
June 30, Dec. 31, June 30, Dec. 31,
1997 1996 1997 1996
----------- -------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS CURRENT LIABILITIES
Cash and cash equivalents $1,715 $9,302 Accounts Payable $ 4,965 $ 6,216
Accounts Receivable, Net -- -- Accrued Expenses 170,397 119,101
Inventory -- -- Loan from Shareholder 25,600 16,000
Other Assets -- -- ----------- -----------
------ ------ Total Current Liabilities 200,962 141,317
Total 1,715 9,302 Deferred Revenue 30,807 38,509
STOCKHOLDER'S DEFICIT
Common Stock, no par
value. 1,000,000,000
shares authorized.
8,862,843 shares issued
and outstanding 4,142,583 4,117,083
Paid-in capital 350,000 350,000
Accumulated Deficit (4,772,637) (4,637,607)
Total Stockholder's
Equity (Deficit) (230,054) (170,524)
------ ----------- -----------
TOTAL ASSETS $1,715 TOTAL LIABILITIES AND DEFICIT $ 1,715 $ 9,302
====== =========== ===========
</TABLE>
F-3
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DMI, INC.
STATEMENTS OF OPERATIONS
For the Periods Ended June 30, 1997 and June 30, 1996
<TABLE>
<CAPTION>
Three Months Ended June 30 Six months Ended June 30
-------------------------- --------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 3,851 $ 26,851 $ 7,702 $ 36,222
COSTS AND EXPENSES
Cost of Sales -- 6,000 -- 12,000
Selling, General and Administrative 56,886 46,919 93,372 83,383
Expense
LOSS FROM OPERATIONS (53,035) (26,068) (85,670) (59,161)
OTHER INCOME
Interest income (expense), net 328 232 640 232
NET LOSS $ (52,707) $ (25,836) $ (85,030) $ (58,929)
========= ========= ========= =========
Loss Per Common Share $ (0.006) $ (0.003) $ (0.009) $ (0.007)
Weighted Average Common Shares
Outstanding 9,362,843 8,728,343 9,079,510 8,705,269
</TABLE>
F-4
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DMI, INC.
STATEMENTS OF CASH FLOWS
For The Six Months Ended
June 30, 1997 and June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(85,030) $(58,929)
Depreciation and Amortization -- 10,000
Stock Issued For Services Rendered 25,500 56,296
Issuance of stock previously committed -- (16,000)
Changes in assets and liabilities -- --
Increase (decrease) in accounts receivable -- --
Increase (decrease) in inventories -- 14,000
Increase (decrease) in prepaid expenses -- --
Increase (decrease) in other assets -- (6,000)
Increase (decrease) in accounts payable (1,251) (2,081)
Increase (decrease) in accrued expenses 51,296 (80,839)
Increase (decrease) in other liabilities (7,702) --
-------- --------
Net cash provided for (used by) operating activities 17,187 (83,553)
CASH FLOWS FROM FINANCING ACTIVITIES
increase (decrease) in stockholder loans 9,600 6,000
-------- --------
Net cash provided by financing activities 9,600 6,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,587) 77,553
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,302 164,338
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,715 $ 86,785
======== ========
</TABLE>
See accompanying notes
F-5
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DMI, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1. Unaudited Interim Financial Information
- ------------------------------------------
The interim financial statements are unaudited, but in the opinion of management
of DMI, Inc. (the Company), contain all adjustments consisting of normal
recurring accruals, necessary to present fairly the financial position of the
Company as of June 30, 1997 and 1996. The results of operations for the six
months ended June 30, 1997 are not necessarily indicative of the results of
operations to be expected for the full year ending December 31, 1997. Reference
is made to the Company's Form 10-KSB for the year ended December 31, 1996, as
filed with the Securities and Exchange Commission.
2. Accounting Policies
- ----------------------
The Company's accounting policies are as stated in its annual report on Form
10-KSB for the year ended December 31, 1996.
3. Contingencies
- ----------------
The Company does not have product liability insurance. Thus, the Company can be
held liable for all damages or other losses resulting from the use of its
products. Presently, management is unaware of any potential liabilities or
contingencies resulting from product liability.
F-6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three months ended March 31, 1997, and March 31, 1996
GENERAL
Recorded revenues were due to recognition of a portion of a deferred revenue
accrual associated with a prior service obligation. Selling, general and
administrative expense reflects salary accruals to the two employees of the
Company. In a subsequent event, these accruals were forgiven in July of 1997 in
conjunction with the purchase of DTI Technology, Inc. (dba Dega Technology).
As discussed in the Company's Form 10KSB for fiscal year 1996, the Company
entered into a purchase agreement on January 31, 1997 to acquire DTI Technology,
Inc. (doing business as Dega Technology) in exchange for 57 million shares of
DMI, Inc. common stock. In an event subsequent to the period of this report, the
agreement became effective July 21, 1997.
In May of 1996, the Company entered into a joint venture agreement with Unicomp,
Inc. to establish a distribution channel for remanufactured Toshiba telephone
systems in Vietnam, Laos, and Cambodia. The terms were amended on February 4,
1997 to rescind the agreement in favor of a $250,000 cash settlement. In a
subsequent event, the Company accepted a promissory note for $250,000 on July
21, 1997, due October 21, 1997, with interest at 8% per annum.
Due to the above, and because the results for the period do not include the
operations of DTI Technology, Inc., the results of operations for the six months
ended June 30, 1997 are not an indication of any future results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27 Financial Data Schedule.
Reports on Form 8-K:
Acquisition of DTI Technology, Inc. filed April 2, 1997.
7
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DMI, INC.
(Registrant)
8/25/97 By: /s/ DUNCAN MAC DONALD
- ------------------------------- ---------------------------
Date Duncan Mac Donald
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,715
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,715
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,715
<CURRENT-LIABILITIES> 200,962
<BONDS> 0
0
0
<COMMON> 8,862,843
<OTHER-SE> (230,054)
<TOTAL-LIABILITY-AND-EQUITY> 1,715
<SALES> 7,702
<TOTAL-REVENUES> 7,702
<CGS> 0
<TOTAL-COSTS> 93,372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 640
<INCOME-PRETAX> (85,670)
<INCOME-TAX> 0
<INCOME-CONTINUING> (85,670)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (85,030)
<EPS-PRIMARY> (.009)
<EPS-DILUTED> (.009)
</TABLE>
