UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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.
[ ] 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: 0-27704
DIGITAL DATA NETWORKS, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C>
Washington 91-1426372
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3102 Maple Avenue, Suite 230
Dallas, Texas 75201
(Address of principal executive offices) (Zip Code)
</TABLE>
(214) 969-7200
(Registrant's telephone number, including area code)
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 [ ]
As of June 30, 1996, 2,210,000 shares of Common Stock and 1,840,000 Common Stock
Purchase Warrants were outstanding.
1
<PAGE>
INDEX
Page
PART I. FINANCIAL INFORMATION
Financial Statements 3
Management's Discussion and Analysis 9
of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (a)
Item 2. Changes in Securities (a)
Item 3. Defaults Upon Senior Securities (a)
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 16
- ----------------------------------------------------------------------------
These items are inapplicable or have a negative response and have
therefore been omitted.
2
<PAGE>
DIGITAL DATA NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
--------- ------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 12 $ 3,842
Accounts receivable 14 55
Prepaid expenses and other current assets 3 104
--------- -------
Total Current Assets 29 4,001
EQUIPMENT, net of accumulated depreciation
of $1,018 and $ 1,156 445 362
INTANGIBLE ASSETS, net of accumulated
amortization of $159 and $225 183 726
--------- -------
TOTAL ASSETS $ 657 $ 5,089
========= =======
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 227 $ 230
Notes payable and accrued interest 770 775
Current portion of long term debt 76 -
Unearned income 54 80
--------- -------
Total Current Liabilities 1,127 1,085
--------- -------
LONG-TERM OBLIGATIONS
Long-term debt and accrued interest 947 -
Expanded software license commitment 250 75
Total Long-Term Obligations 1,197 75
--------- -------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, 1 million shares authorized, none issued - -
Common Stock, no par value, 10 million shares authorized,
704,547 and 2,210,000 shares issued and outstanding 6,359 13,047
Accumulated Deficit (8,026) (9,118)
--------- -------
Total Stockholders' Equity (Deficit) (1,667) 3,929
--------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 657 $ 5,089
========= =======
</TABLE>
3
<PAGE>
DIGITAL DATA NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1995 1996 1995 1996
<S> <C> <C> <C> <C>
REVENUES $ 97 $ 126 $ 202 $ 227
------- ------ ------ ------
EXPENSES:
Direct operating costs 115 139 235 245
Product development costs - 303 - 303
Salaries and related 138 280 320 558
Marketing, general and administrative 99 120 161 202
Financing, legal and other consulting 64 10 123 40
------- ----- -------- ----
Total Expenses 416 852 839 1,348
------- ----- ------ ------
Loss Before Interest Expense 319 726 637 1,121
------- ------- -------- -----
INTEREST EXPENSE (INCOME):
Interest expense 28 15 69 41
Interest income - (48) - (70)
------- ------ ------ ------
Net Interest Expense (Income) 28 (33) 69 (29)
------- ------ ------ ------
NET LOSS $ (347) $(693) $ (706) $(1,092)
======== ====== ======== ========
NET LOSS PER SHARE $ (0.52) $(0.34) $ (1.15) $ (0.63)
==============================================================
</TABLE>
4
<PAGE>
DIGITAL DATA NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1995 1996
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $ (706) $ (1,092)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 162 215
Product development costs - 303
Non-cash compensation expense relating to
Common Stock issued to employees - 95
Increase (decrease) in accrued interest 61 (123)
Increase (decrease) in accounts payable 71 (191)
Other 92 17
-------- ---------
Net Cash Used by Operating Activities (320) (776)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (19) (22)
--------- ----------
Net Cash Used by Investing Activities (19) (22)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of stock issue costs 25 5,823
Proceeds from issuance of notes payable 305 30
Repayment of expanded license commitment - (225)
Repayment of notes payable (5) (1,000)
--------- ----------
Net Cash Provided by Financing Activities 325 4,628
-------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (14) 3,830
CASH AND CASH EQUIVALENTS
Beginning of Period 29 12
-------- ---------
End of Period $ 15 $ 3,842
======== =========
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS
Exchange of debt for equity $ 3,120 $ -
Common Stock issued in business acquisitions $ - $ 761
</TABLE>
5
<PAGE>
Digital Data Networks, Inc.
Notes to Consolidated Financial Statements
Note 1 Description of Business
Digital Data Networks, Inc. (the "Company"), a wireless, passenger communication
and advertising company, is principally engaged in development, design,
installation and operation of the "digital information network", a network of
computerized electronics message displays that deliver news, information and
advertising to riders on-board public transit vehicles. The digital information
network consists of a series of electronic information displays utilizing
digital radio transmission technology. The Company currently operates the
digital information network on the entire bus fleet of Dallas Area Rapid Transit
("DART") and on a portion of the buses of Rhode Island Public Transit Authority.
As more fully described in Note 4, as a result of recent acquisitions of two
Internet related businesses, the Company is also engaged in other operating and
development activities. The Company's subsidiary, Pro.Net Communications, Inc.
("Pro.Net"), provides a range of Internet offerings to business customers,
including connectivity services to local subscribers, Intranet services to
corporations, and the development of on-line working programs for commercial
clients. Pro.Net's present primary operations are in Vancouver, British
Columbia, Canada. The Company's subsidiary, Cyber America Corporation ("Cyber
America"), is a primary services provider to the Internet, presently in the
development stage of implementation and marketing its service capabilities. The
Company's financial statements are consolidated and include the results of
operations of its acquired subsidiaries from the date of their acquisition.
Intercompany account balances and transactions are eliminated in consolidation.
The consolidated financial statements presented herein include all adjustments
which are, in the opinion of management, necessary to present fairly the
operating results for the interim periods reported. The financial statements
should be read in conjunction with the audited, annual financial statements for
the year ended December 31, 1995, included in the Company's Annual Report on
Form 10-KSB.
Certain reclassifications have been made to prior period financial statements in
order to conform to current period classifications.
Note 2 Initial Public Offering and Repayment of Certain Indebtedness
In February 1996, the Company closed its initial public offering and received
net cash proceeds of approximately $5.8 million, after deduction for
underwriters commissions and certain other offering related costs, from the
issuance of 1,322,500 shares of its common stock and 1,840,000 of its common
stock purchase warrants. The Company has reported proceeds received from the
6
<PAGE>
sale of common stock and warrants, net of related stock issue costs, as an
increase in common stock. The warrants are redeemable after one year, under
certain circumstances, and entitle the holder to purchase one share of the
Company's common stock at an exercise price of $6 per share during five years
commencing upon issuance.
During the three months ended March 31, 1996, as a result of the closing of its
initial public offering, the Company paid $225,000 representing the Expanded
License Payment obligation due to its software supplier. This payment included
an additional $50,000 over the minimum payment obligation originally recorded as
an intangible asset. This increment has been recorded as an intangible asset and
is being amortized straight line over the remaining estimated useful life.
Additionally, during February and March 1996, as a result of the closing of its
initial public offering the Company repaid in full, totaling approximately
$548,000, its 10% promissory notes due December 1995 (which had been extended to
March 1996), and in accordance with certain mandatory prepayment conditions,
repaid certain of its other promissory notes payable, including approximately
$48,000 of its 5% demand notes, $125,000 of its 8% notes, $150,000 of its 10%
notes due March 1997, $50,000 of its secured notes, and approximately $57,000 of
its 11% to 12% notes.
The Company's proforma supplemental loss per share for the six months ended June
30, 1996 approximates $(.60) presented on a basis as if the 1996 public offering
and related interest-bearing debt repayment with a portion of the proceeds
therefrom, had occurred at the beginning of such period.
Note 3 Exchange of Debt for Common Stock
During the six months ended June 30, 1995, certain holders of the Company's 5%
Convertible Promissory Notes having a combined principal and accrued interest
total approximating $2.9 million, and the holder of a Company 5% $150,000
promissory note agreed to exchange such debt and related accrued interest for
approximately 232,500 shares of Company common stock. On a supplemental basis,
giving effect to the exchange of debt for common stock as if it had occurred at
the beginning of such period, loss per share would have approximated $(1.07) for
the six months ended June 30, 1995.
Note 4 Business Acquisitions
On June 3, 1996, the Company acquired all of the outstanding common stock of
Pro.Net for 100,000 shares of the Company's common stock valued at approximately
$480,000. Shares of Company common stock issued are subject to a two year resale
restriction, and were recorded at their estimated fair value determined on the
basis of discounting (for, among other things, resale restrictions) the closing
market value of Company common stock at the acquisition date. The total purchase
price, including assumed liabilities at their estimated fair values (which
approximate book value), is allocated to assets acquired based on preliminary
7
<PAGE>
estimates of fair value. Assets acquired include tangible assets (which fair
values are estimated to approximate book value) and identifiable intangible
assets, a customer subscription base. The excess of purchase price over fair
value of current assets has been allocated to non-current tangible and
intangible assets based upon their relative estimated fair values. Intangible
assets recorded in purchase accounting approximate $600,000 and are amortized
over five years.
On June 14, 1996, the Company acquired all of the outstanding common stock of
Cyber America for 50,000 shares of the Company's common stock valued at
approximately $280,000. One of the Company's Directors had a family member who
was a majority shareholder of Cyber America. Shares of Company common stock
issued are subject to a two year resale restriction, and were recorded at their
estimated fair value determined on the basis of discounting (for, among other
things, resale restrictions) the closing market value of Company common stock at
the acquisition date. The total purchase price, including assumed liabilities at
their estimated fair values (which approximate book value), is allocated to
assets acquired based on preliminary estimates of fair value. Assets acquired
include tangible assets (which fair values are estimated to approximate book
value) and identifiable intangible assets, products in development. The
estimated value of products in development which are not deemed to have attained
technological feasibility, as defined, are capitalized in purchase accounting at
their estimated fair values of approximately $303,000 and immediately expensed
as product development cost subsequent to recording the business combination.
The following unaudited pro forma summary presents financial information on the
basis as if the business combination of Pro.Net and Cyber America had occurred
at the beginning of the periods presented. The pro forma information is based on
historical information and is not necessarily indicative of results of
operations that would have occurred, nor is it necessarily indicative of future
results of operations of the combined companies (in thousands, except per share
data):
......... Year Ended Six Months Ended
......... December 31, 1995 June 30, 1996
----------------- -------------
Revenues. $ 678 $ 308
======== ======
Net loss. $ (1,683) $ (799)
======== =======
Net loss per share $ (2.10) $(0.43)
========= =======
The above pro forma financial information does not include non-recurring
expenses of approximately $303,000 of expenses recorded in June 1996 immediately
subsequent to recording the business combination relating to the estimated fair
value of intangible assets acquired associated with products in development
which have not been determined to have yet attained technological feasibility.
Note 5 Income Taxes
8
<PAGE>
As a result of losses for each of the interim periods, there was no provision
for income taxes recorded.
9
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Revenues increased $25,000 from $202,000 to $227,000 during the six
months ended June 30, 1996, as compared to the prior year period. This increase
is the result of the acquisition of Pro.Net Communications, Inc., which had
revenues of $18,000 during this period, and an increase in the Company's Transit
Network operation of $7,000. Cyber America Corporation, which was also acquired
in the second quarter, had no revenues during this period. Total expenses
increased from $839,000 to $1,348,000 during the six months ended June 30, 1996
as compared to the prior year period, primarily the result of a one-time charge
of $303,000 in connection with the acquisition of Cyber America Corporation, and
total operating costs in the amount of $133,000 incurred by Pro.Net
Communications, Inc.
The non-recurring product development costs charge of $303,000 relates
to the expensing of the estimated fair value of intangible assets acquired as it
relates to products in development acquired in the Cyber America acquisition.
Under generally accepted accounting principles, such product development costs
are required to be expensed until technological feasibility, as defined, has
been attained.
The net loss for the six months ended June 30, 1996 as compared to the
prior year period increased $386,000 to $1,092,000. The Company's Transit
Network operation's losses decreased $61,000, such improvement being contributed
to by the retirement of certain short-term and long-term debt obligations, which
reduced interest expense by $28,000, and the receipt of public offering
proceeds, from which the Company earned an additional $70,000 of investment
income, compared to the prior year period. This decrease in net loss was offset
by net losses of $5,000 and $155,000 by Cyber America and Pro.Net, respectively,
and the Company's one-time charge in the amount of $303,000, as previously
described.
Financial Condition, Liquidity and Capital Resources
In February 1996, the Company closed its initial public offering and
realized cash proceeds of approximately $5.9 million, net of underwriter's
commissions and certain offering related costs. Approximately $1 million of
offering proceeds were utilized for the repayment of certain notes payable and
$225,000 of offering proceeds were utilized for the payment of amounts due
relating to expanded software license obligations. Cash used by operating
activities approximated $776,000 and included payment from offering proceeds of
approximately $70,000 of accrued interest and $60,000 of accounts payable for
which payment had been deferred beyond normal terms as a result of creditors'
forbearance.
Although the Company has no present commitments to do so, as described
more fully in the prospectus relating to the stock offering, estimates of
anticipated uses of proceeds include approximately $1 million for capital
10
<PAGE>
expenditures. Pending use of offering proceeds to fund operating activities,
capital expenditures, and potential future business acquisitions, the Company
has invested such proceeds in short-term, interest-bearing investments with
banks and other commercial financial institutions.
At June 30, 1996, the Company's principal assets consisted of
approximately $3.8 million of cash, of which approximately $3.7 million was
invested in short-term, interest-bearing investments with banks and other
financial institutions, and from which interest income is earned. The Company's
total obligations of $1.16 million consisted primarily of $185,000 in accrued
expenses and $700,000 in short-term notes payable incurred by the Company's
Transit Network operations.
The Company believes that its future operating results, liquidity, and
capital resources will improve, the result of anticipated revenue growth by
Pro.Net Communications, Inc. and the commencement of revenue generation by Cyber
America Corporation in the near future.
The Company believes that with the cash it has invested in short-term
financial instruments, interest earned from these investments, and anticipated
revenues from operations, the Company's working capital requirements will be
sufficient for at least the next 24 months.
Effect of Recently Issued Accounting Standards
Recently issued accounting standards having relevant applicability to
the Company consist primarily of Statement of Financial Accounting Standards No.
123 ("SFAS No. 123"), which establishes standards for accounting for stock-based
compensation. SFAS No. 123 is effective for financial statements for fiscal
years beginning after December 15, 1995. It is not expected that the Company
will adopt the "fair value based method" of accounting for stock options, which
is encouraged by SFAS No. 123, but rather will continue to account for such,
utilizing the "intrinsic value based method" as is allowed by that statement.
11
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On June 17, 1996, the Registrant held its Annual Meeting of Shareholders. An
election of the board of directors was held, with Ronald P. Erickson, Donald B.
Scott, Jr., James F. Biagi, Jr. and Richard F. Rutkowski being nominated to
serve as directors until the next annual meeting or until their successors have
been elected and qualified. The results of the vote for the election of
directors were as follows:
<TABLE>
<CAPTION>
NAME ......... FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Ronald P. Erickson 1,657,922 -0- 18,115
Donald B. Scott, Jr. 1,665,255 -0- 10,782
James F. Biagi, Jr. 1,670,794 -0- 5,243
Richard F. Rutkowski 1,670,794 -0- 5,243
</TABLE>
A vote was also held for the ratification of the appointment of BDO Seidman, LLP
as the Registrant's independent public accountants, to examine the Registrant's
financial statements for the current year ending December 31, 1996 and to
perform other appropriate accounting services. The results of the vote on the
ratification of BDO Seidman, LLP as the Registrant's independent public
accountants were as follows:
......... FOR - 1,665,838
......... AGAINST - 4,900
......... ABSTAIN - 5,299
Shareholders also voted on the approval of the Registrant's 1996 Combined
Incentive and Nonqualified Stock Option Plan. The results of the vote were as
follows:
SHARES REPRESENTED IN PERSON OR BY PROXY - 1,100,792
......... FOR - 969,701
......... AGAINST - 63,629
......... ABSTAIN - 67,462
Item 5. Other Information
Pursuant to a Stock Purchase Agreement dated June 14, 1996, the Registrant
acquired all of the outstanding capital stock of Cyber America Corporation, a
Pennsylvania corporation, as well as Cyber America Corporation's pending patent
on the implementation of its technology. The Registrant issued 50,000 shares of
its Common Stock, no par value, to the three (3) shareholders of Cyber America
Corporation in exchange for all of its outstanding capital stock. One of the
three shareholders of Cyber America Corporation, Joseph Rutkowski, is the
brother of Richard F. Rutkowski, a director of the Company.
12
<PAGE>
All shareholders who received shares of the Registrant's Common Stock relating
to this transaction did so for investment purposes and without a view toward
distribution. Further, all stock certificates issued in connection with this
transaction were stamped with a restrictive legend prohibiting transfer of said
shares for a period of twenty-four (24) months.
Cyber America Corporation is a primary service provider to the Internet, with a
unique implementation of fast packet communication technology, which brings
corporate customers and retail service providers closer to the backbone of the
Internet.
Effective July 10, 1996, Ronald P. Erickson resigned from the Board of the
Company and from his position has Chairman of the Board. Donald B. Scott, the
Company's president, was elected as the new Chairman of the Board, and Stephen
R. Willey, Executive Vice President of Microvision, Inc., was elected as a
director to fill the vacated seat on the Board.
Pro forma financial information required pursuant to Item 7(b) of Form 8-K
relating to the acquisition of Pro.Net Communications, Inc. as reported in Item
2 of the Company's June 3, 1996 Current Report on Form 8-K, is filed herewith on
the following pages 13 through 15 of this Form 10-QSB.
13
<PAGE>
Digital Data Networks, Inc.
Proforma Consolidated Financial Information
The following unaudited pro forma consolidated financial information has been
prepared in accordance with guidelines established by regulations promulgated by
the Securities and Exchange Commission. The unaudited pro forma consolidated
statements of operations for the year ended December 31, 1995 and the six months
ended June 30, 1996 include the results of operations of Digital Data Networks,
Inc.("Digital Data"), Pro.Net Communications, Inc. ("Pro.Net") and Cyber America
Corporation ("Cyber America") for the respective periods presented to the extent
that such companies were in existence during such periods and give effect to the
pro forma adjustments determined on the basis as described below as if all such
transactions had occurred at the beginning of the respective periods.
1. The business acquisitions of Pro.Net and Cyber America are accounted
for utilizing the purchase method of accounting. The estimated fair value
attributed to Company Common Stock issued to former Pro.Net and Cyber America
stockholders approximated $480,000 and $280,000, respectively. Shares of Company
Common Stock issued are subject to a two year resale restriction, and were
recorded at their estimated fair value determined on the basis of discounting
(for, among other things, resale restrictions) the closing market value of
Company Common Stock at the acquisition date.
2. The total purchase price for each acquired company, including
assumed liabilities at their estimated fair values (which approximates book
value), is allocated to assets acquired based on preliminary estimates of fair
values. Pro.Net assets acquired include tangible assets (which fair values are
estimated to approximate book value) and identifiable intangible assets, a
customer subscription base. The excess of purchase price over fair value of
current assets has been allocated to non-current tangible and intangible assets
based upon their relative estimated fair values. Intangible assets recorded in
purchase accounting approximate $600,000 and are amortized over five years.
Cyber America assets acquired include tangible assets (which fair values are
estimated to approximate book value) and identifiable assets, products in
development. The estimated value of products in development which are not deemed
to have attained technological feasibility, as defined, are capitalized in
purchase accounting at their estimated fair values of approximately $303,000 and
immediately expensed as product development cost subsequent to recording the
business combination.
3. Increased amortization expense results from amortization of
intangible assets recorded in the purchase price allocation of the Pro.Net
business combination based on preliminary estimates of fair value.
These pro forma consolidated financial statements are not necessarily indicative
of future results of operations of the Company.
14
<PAGE>
DIGITAL DATA NETWORKS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(thousands of dollars, except per share data)
For The Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
Cyber Pro Forma Proforma
Digital Data Pro,Net America Adjustments Consolidated
<S> <C> <C> <C> <C> <C>
REVENUES $ 209 $ 99 $ - $ - $ 308
------- ------- ------- ------- -------
EXPENSES
Direct operating costs 228 64 - 50(a) 342
Salaries and related 434 - - - 434
Marketing, general and administrative 183 95 19 - 297
Financing, legal and other consulting 38 25 - - 63
------- ------- ------- ------- -------
TOTAL EXPENSES 883 184 19 50 1,136
------- ------- ------- ------- -------
LOSS BEFORE INTEREST EXPENSE
674 85 19 50 828
------- ------- ------- ------- -------
INTEREST EXPENSE (INCOME)
Interest Income (70) - - - (70)
Interest Expense 41 - - - 41
------- ------- ------- ------- -------
Net interest income (29) - - - (29)
-------- ------- ------- ------- --------
NET LOSS $ (645) $ (85) $ (19) $ (50) $ (799) (b)
======== ======== ======== ======== =====
NET LOSS PER SHARE $ (0.43) (c)
=======
</TABLE>
(a) To reflect pro forma increased amortization charges resulting from the
allocation of the purchase price paid for Pro.Net, based upon estimated
remaining useful lives of five years.
(b) In accordance with guidelines established by the Securities and
Exchange Commission, proforma net loss does not include approximately
$303,000 of expense to be recorded immediately subsequent to recording
the business combination relating to the esteemed fair value of
intangible assets acquired associated with products in development
which have not been determined to have yet attained technological
feasibility.
(c) Calculated on the basis of approximately 1,847,000 weighted average
shares of Common Stock for the six months ended June 30, 1996,
respectively. Stock options were not included in such computations as
the effects were antidilutive.
15
<PAGE>
DIGITAL DATA NETWORKS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(thousands of dollars, except per share data)
For The Year Ended December 31, 1995
<TABLE>
<CAPTION>
Pro Forma Proforma
Digital Data Pro.Net Adjustments Consolidated
<S> <C> <C> <C> <C>
REVENUES $ 498 $ 180 $ - $ 678
------- --------- ------- -------
EXPENSES
Direct operating costs 466 83 120 (a) 669
Salaries and related 615 - - 615
Marketing, general and administrative 306 210 - 516
Financing, legal and other consulting 379 42 - 421
------- --------- ------- -------
TOTAL EXPENSES 1,766 355 120 2,221
------- --------- ------- -------
LOSS BEFORE INTEREST EXPENSE 1,268 155 120 1,543
INTEREST EXPENSE 140 - - 140
------- -------- ------- -------
NET LOSS $ (1,408) $ (155) $ (120) $ (1,683) (b)
======== ========== ======== ========
NET LOSS PER SHARE $ (2.10) (c)
=========
</TABLE>
(a) To reflect pro forma increased amortization charges resulting from the
allocation of the purchase price paid for Pro.Net, based upon estimated
remaining useful lives of five years.
(b) In accordance with guidelines established by the Securities and
Exchange Commission, proforma net loss does not include approximately
$303,000 of expense to be recorded immediately subsequent to recording
the business combination relating to the estimated fair value of
intangible assets acquired associated with products in development
which have not been determined to have yet attained technological
feasibility.
(c) Calculated on the basis of approximately 800,000 weighted average
shares of Common Stock for the year ended December 31, 1995. Stock
options were not included in such computations as the effects were
antidilutive.
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none filed with this report.
(b) The Registrant filed a Form 8-K with the Securities and
Exchange Commission on June 17, 1996, to report the acquisition of Pro.Net
Communications, Inc.
17
<PAGE>
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.
Digital Data Networks, Inc.
(Registrant)
Date: August 13, 1996 By: /s/ Donald B. Scott, Jr.________
------------------------------
Donald B. Scott, Jr., President
Date: August 13, 1996 By: /s/ Richard J. Boeglin__________
---------------------------
Richard J. Boeglin
Vice President,
Finance & Operations
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 3,842
<SECURITIES> 0
<RECEIVABLES> 55
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,001
<PP&E> 1,518
<DEPRECIATION> 1,156
<TOTAL-ASSETS> 5,089
<CURRENT-LIABILITIES> 1,085
<BONDS> 75
0
0
<COMMON> 13,047
<OTHER-SE> (9,118)
<TOTAL-LIABILITY-AND-EQUITY> 5,089
<SALES> 227
<TOTAL-REVENUES> 227
<CGS> 548
<TOTAL-COSTS> 1,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (29)
<INCOME-PRETAX> (1,092)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,092)
<DISCONTINUED> 0
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</TABLE>
