<TABLE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial statements.
DATA SYSTEMS NETWORK CORPORATION
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<CAPTION>
Three months ended
March 31
__________________
1996 1995
_________ __________
<S> <C> <C>
Net sales $4,246,349 $6,605,314
Service revenue 767,515 470,686
---------- ----------
Total revenues 5,013,864 7,076,000
Cost of sales 3,728,824 5,739,248
Cost of service revenues 233,800 317,299
---------- ---------
Total cost of revenues 3,962,624 6,057,547
Gross Profit 1,051,240 1,018,453
Selling expenses 473,148 484,124
General and administrative
expenses 404,357 256,029
---------- ---------
Total operating expenses 877,505 740,152
Income from operations 173,735 279,300
Other income(expenses)
Interest expense (92,378) (91,046)
Interest income 85,200 43,594
---------- ---------
Net income before minority
interest in subsidiary 166,557 231,848
Less minority interest
in subsidiary (53,027)
---------- ---------
Net income 113,530 231,848
<CAPTION>
Three Months Ended March 31,
1996 1995
------------------------ -----------------------
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Earnings per commmon
shares: $0.04 $0.04 $0.09 $0.08
Weighted number of
shares outstanding: 2,560,281 2,860,281 2,560,000 2,860,000
<FN>
See Accompanying Notes to Financial Statements
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DATA SYSTEMS NETWORK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, 1996 December 31, 1995
______________ ______________
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $3,249,788 $3,171,544
Accounts receivable (net of
allowance of $61,088 and
$67,086 at March 31, 1996 and
December 31, 1995, respectively)4,788,864 5,249,771
Notes Receivable 412,409 692,387
Inventories,net 1,008,154 992,922
Other current assets 196,813 294,296
--------------- --------------
Total Current Assets 9,656,028 10,400,860
Service Parts, net 1,114,744 1,169,781
Property and Equipment, net 593,877 297,029
Other Assets 74,247 70,743
Goodwill, net (note 3) 999,078
---------------- --------------
TOTAL ASSETS $12,437,974 $11,938,413
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<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Bank line of credit(Note 2) $3,910,912 $3,956,000
Current portion of long-term debt 130,322 213,039
Accounts payable(Note 4) 3,437,055 3,449,520
Accrued liabilities 538,495 514,693
Deferred maintenance revenues 396,995 228,060
---------- ----------
Total Current Liabilities 8,413,779 $8,361,312
Long Term Debt,less current portion 380,537 100,000
Minority Interest In Subsidiary 53,027
Stockholders' Equity
Preferred stock
Common stock par value $0.01 per share
Authorized 10,000,000 shares
Issued and outstanding - 2,715,000 27,150 27,150
Additional paid-in capital 6,385,047 6,385,047
Accumulated deficit (2,821,566) (2,935,096)
----------- -----------
Total Stockholders' Equity $3,590,631 $3,477,101
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $12,437,974 $11,938,413
<FN>
See Accompanying Notes to Financial Statements
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<TABLE>
DATA SYSTEMS NETWORK CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flow From Operating Activities:
Income From Operations $113,530 $231,848
_______ _______
Adjustments To Reconcile Net
Income to Net Cash Provided by
Changes in assets and liabilities, net of
Effects from purchase of majority interest
In subsidiary
Depreciation and amortization 90,351 85,694
Provision for doubtful receivables 21,121 2,925
Provision for inventory obsolesence 8,331 4,313
Asset contributions received (80,000)
Changes in assets & liabilities
Accounts and notes receivable 440,067 (874,105)
Investment in affiliate 279,978
Inventories 67,585 (857,682)
Other current assets 90,423 (34,917)
Service parts (5,019) 14,150
Other assets (2,710) (11,312)
Accounts payable (302,895) 1,774,884
Accrued liabilities (1,004) (98,890)
Deferred maintenance revenues 18,368 13,798
_______ _______
Net Cash generated by
operating activities $818,127 $170,716
_______ _______
Cash Flow From Investing Activities:
Acquisition of property, plant &
equipment $(32,736)
Payment for purchase of common stock
Of subsidiary, net of cash acquired $(7,000)
----------- --------
Net Cash used in Investing
Activities $(7,000) $(32,736)
Cash Flow From Financing Activities:
Net repayments under bank line
of credit $(45,088) $(9,407)
Notes payable (605,000)
Payment of principal on long-
term debt (82,717) (39,447)
_______ _______
Net Cash used by
Financing Activities $(732,883) $(48,854)
_______ _______
Net increase in cash 78,244 89,116
Cash at Beginning of Year $3,171,544 $3,196,038
_______ _______
Cash at End of Period $3,249,788 $3,285,154
Supplemental Schedule of Noncash Investing and Financing Activities
The Company purchased common stock of UNS for $7,000. In conjunction
with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired $204,745
Goodwill $999,078
Cash paid for Capital Stock ($7,000)
-----------------
Liabilities assumed $1,196,823
<FN>
See Accompanying Notes to Financial Statements
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DATA SYSTEMS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
Note 1. Basis of Presentation
The accompanying unaudited interim financial statements of the Company,
have been prepared in accordance with generally accepted accounting principles
for interim financial information and should be read in conjunction with
the Company's audited financial statements and Notes contained in the
Company's Form 10-K for the year ended December 31, 1995. The condensed
consolidated financial statements include all adjustments, consisting of
normal reocurring adjustments, necessary for a fair presentation of results
of of operations for the periods presented. The results of such interim
periods are not necessarily indicative of the results of operations for the
full year. The consolidated financial statements include the financial
statements of Data Systems Network Corporation and the majority-owned
subsidiary Unified Network Services. All significant intercompany balances
and transactions have been eliminated in consolidation.
Note 2. Bank line
The Company has a bank line of credit of $7.5 million bearing interest at
.75% over the bank's prime rate (effective rate of 9% at March 31, 1996). The
current agreement extends until February 1, 1997 and can be terminated at any
time by the Company or the bank. Borrowings under the line of credit are due
on demand. Borrowing limits are determined based on a collateral formula
which includes 85% of qualified trade receivables less than 90 days old and
25% of eligible inventory and spare parts. The line is collateralized by
substantially all of the Company's assets. The line of credit agreement
contains certain covenants requiring the Company's receivables to be genuine
and free of all other encumbrances and requiring the Company's inventory
financed under the term agreement to be kept at designated locations and
free from all other encumbrances. Subsequent to July 28, 1995, the inventory
covenants are restricted to apply solely to the inventory financed through
this agreement, exclusive of any and all inventories financed under the IBM
Credit Corporation Agreement (see Note 4).
Note 3. Acquisitions
On February 22, 1996, the Company purchaseed 70% (or 7,000 shares) of
Unified Network Services, Inc. for $7,000. As of March 31, 1996, the
Company's balance sheet and results of operations are consolidated, with
appropriate adjustments to reflect intercompany transactions and minority
interest. The acquisition of UNS was accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets acquired
based upon their estimated fair market value. The excess of the purchase
price over the estimated fair market value of the net assets acquired
amounted to approximately $999,078, which is being accounted for as
goodwill and is being amnortized over 20 years using a straight-line method.
This allocation was based on preliminary estimates and may be revised at
a later date.
Note 4. Credit Line
On July 28, 1995, the Company entered into a secured finance agreement
with IBM Credit Corporation. For the period ending March 31, 1996, the
current agreement extends a maximum of $1,250,000 in secured funds to be used
exclusively for the acquisition of inventory for resale, limited to those
products manufactured by Apple, Compaq, Hewlett Packard, IBM and Lexmark. Use
of this credit line is at the Company's option. To secure payment of all
current debt under this agreement, IBM Credit Corporation was granted a first
security interest in the Company's inventory equal to the amount of the
outstanding debt. This agreement allows for interest-free financing if paid
within thirty days of invoicing. The agreement also provides for a variable
discount option, ranging from .5% to 1.0% off of the invoice ,if paid within
fifteen days. This agreement can be terminated at any time by the Company or
the lender. The terms and conditions of this financing agreement can be
changed at the discretion of IBM Credit Corporation.
[/FN]
<PAGE>
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 SYSTEMS NETWORK CORPORATION
August 14, 1996
Date Julie A. Vitale-Johnston
Controller and Principal Accounting Officer
May 14, 1996 Michael W. Grieves
Date Michael W. Grieves
President and Chief Executive Officer
