-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nu6ws6fRGAqXOeNtqNynDZdrqGXlmwGrIYNcMRJPqqOYTDtaEhWpt2iKOBBMNrVs B67dTKG5avMiqKLHvjsdAQ== 0000819005-98-000002.txt : 19980128 0000819005-98-000002.hdr.sgml : 19980128 ACCESSION NUMBER: 0000819005-98-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIEHL GRAPHSOFT INC CENTRAL INDEX KEY: 0000819005 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 521407016 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24318 FILM NUMBER: 98514423 BUSINESS ADDRESS: STREET 1: 10270 OLD COLUMBIA RD STREET 2: STE 100 CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4102905114 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. __________________ FORM 10-QSB (Mark One) [P] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 1997 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: 0-24318 DIEHL GRAPHSOFT, INC. (Exact name of registrant as specified in its charter) Maryland 52-1407016 (State or other jurisdiction of (I.R.S. employer identification no.) incorporation or organization) 10270 Old Columbia Road, Columbia, Maryland 21046 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 410-290-5114 Former name, former address and former fiscal year, if changed since last report. Indicate by check P whether the 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 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 P No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _____ No ______ APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 3,143,887 shares of common stock . DIEHL GRAPHSOFT, INC. FORM 10-QSB INDEX NumberPage PART I FINANCIAL INFORMATION Financial Statements: Item 1 Balance Sheet (unaudited) as of November 30, 1997 3 Statements of Operations (unaudited) for the three months ended November 30, 1996 and 1997 and (unaudited) for the six months ended November 30, 1996 and 19974 Statements of Cash Flows (unaudited) for the six months ended November 30, 1996 and 19975 Statements of Stockholder's Equity (unaudited) as of November 30, 1996 and 19976 Notes to Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations8 PART II OTHER INFORMATION Item 1 Legal Proceedings11 Item 2 Changes in Securities 11 Item 3 Defaults Upon Senior Securities11 Item 4 Submission of Matters to a Vote of Security Holders11 Item 5 Other Information12 Item 6 Exhibits and Reports12 SIGNATURES13 DIEHL GRAPHSOFT, INC. BALANCE SHEET NOVEMBER 30, 1997 (Unaudited) ASSETS Current assets: Cash$ 454,768 Marketable securities 7,072,880 Accounts receivable 590,662 Inventory 161,794 Other current assets 180,509 Total current assets8,460,613 Fixed assets: Equipment747,096 Furnishings and fixtures117,740 Leasehold improvements 47,688 912,524 Accumulated depreciation 540,628 Net fixed assets 371,896 Other assets: Unamortized organization expenses 28,654 Software development and licensing costs, net of accumulated amortization of $1,304,562 817,443 Total other assets 846,097 Total assets$9,678,606 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses$ 490,687 Income taxes payable 15,226 Deferred income taxes 21,522 Total current liabilities 527,435 Long term liabilities: Deferred income taxes 308,145 Total liabilities 835,580 Stockholders' equity: Common stock - $.01 par value; 10,000,000 shares authorized, 3,143,887 shares issued and outstanding 31,439 Additional paid in capital4,168,318 Retained earnings4,643,269 Total stockholders' equity8,843,026 Total liabilities and stockholders' equity$9,678,606 See accompanying notes to financial statements DIEHL GRAPHSOFT, INC. STATEMENTS OF OPERATIONS (Unaudited)
For the three month period For the six month period ended November 30, ended November 30, 1997 1996 1997 1996 Revenues $1,638,168 $1,571,332 $3,665,076$3,297,137 Cost of revenues 450,596 353,276 1,013,526 724,606 Gross profit 1,187,572 1,218,056 2,651,5502,572,531 Operating expenses: General and administrative 479,831 459,299 985,459877,691 Selling and marketing 412,370 453,256 827,263864,726 Research and development 88,611 51,041 185,993 111,332 Total operating expenses 980,812 963,596 1,998,7151,853,749 Income from operations 206,760 254,460 652,835 718,782 Other income: Interest income 91,328 95,984 180,907 187,689 Gain on equipment disposition 900 - 900 - Total other income 92,228 95,984 181,807 187,689 Income before income taxes 298,988 350,444 834,642 906,471 Provision for corporate income taxes 91,000 124,000 281,000 327,050 Net income $ 207,988 $ 226,444 $ 553,642$ 579,421 Net income per share $ .07 $ .07 $ .18$ .18 Weighted average number of shares outstanding 3,143,122 3,168,525 3,142,2643,170,499
See accompanying notes to financial statements DIEHL GRAPHSOFT, INC. STATEMENTS OF CASH FLOWS (Unaudited)
For the six month period ended November 30, 1997 1996 Cash flows from operating activities: Net income $ 553,642 $ 579,421 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 21,204 (72,677) Amortization of bond premiums and discounts (80,422)(136,680) Depreciation and amortization 477,565323,679 Changes in operating assets and liabilities: Accounts receivable (259,527) 33,179 Inventory 1,034 (96,888) Other assets (12,944) 47,313 Accounts payable and accrued expenses 231,506156,368 Income taxes receivable/payable 148,596 324,677 Net cash provided by operating activities 1,080,6541,158,392 Cash flows from investing activities: Purchases of marketable securities (2,130,753) (2,185,008) Maturities of marketable securities 1,825,0001,739,000 Capitalized software costs (439,939)(322,824) Purchases of fixed assets (127,553) (89,642) Organizational expenses - (6,125) Net cash used in investing activities (873,245) (864,599) Net increase in cash 207,409 293,793 Cash balance beginning of period 247,359 375,278 Cash balance end of period $ 454,768$ 669,071 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 111,200$ 75,050 Issuance of common stock $ 20,745$ - Reduction in accrued expenses 20,745 - $ - $ -
See accompanying notes to financial statements DIEHL GRAPHSOFT, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
Additional Common Common Paid in Retained shares stock Capital earnings Total Balance May 31, 1996 3,140,739 $31,407 $4,147,605 $3,543,623$7,722,635 Net income - - - 579,421 579,421 Balance November 30, 1996 3,140,739 $31,407 $4,147,605 $4,123,044$8,302,056 Balance May 31, 1997 3,140,739 $31,407 $4,147,605 $4,089,627$8,268,639 Issuance of common stock 3,148 32 20,713 - 20,745 Net income - - - 553,642 553,642 Balance November 30, 1997 3,143,887 $31,439 $4,168,318 $4,643,269$8,843,026
See accompanying notes to financial statements DIEHL GRAPHSOFT, INC. NOTES TO FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-QSB as set forth in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all necessary adjustments (consisting of normal recurring accruals) for a fair presentation have been included. Operating results for the three and six month periods ended November 30, 1997 are not necessarily indicative of the results that may be expected for the year ended May 31, 1998. DIEHL GRAPHSOFT, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Results of Operations for the three and six months ended November 30, 1997 as compared to the three and six months ended November 30, 1996. Revenues for the three months ended November 30, 1997 were $1,638,168 as compared to $1,571,332 for the three months ended November 30, 1996 representing an increase of 4.3%. Revenues for the six month period ended November 30, 1997 were $3,665,076 as compared to $3,297,137 for the six months ended November 30, 1996 representing an increase of 11.2%. The increase in revenues for the three months ended November 30, 1997 as compared to the three months ended November 30, 1996 is due to an increase in sales of MiniCAD for the Windows platform which rose from $281,755 for the three months ended November 30, 1996 to $545,477 for the three months ended November 30, 1997. This increase is attributable to the continued marketing efforts in the Windows market since the introduction of MiniCAD for Windows in July 1996. Sales of MiniCAD for the Macintosh platform provided most of the remaining sales variance. International sales contributed to this decline with foreign distributors converting the latest version of MiniCAD into native languages during the quarter. The increase in revenues for the six months ended November 30, 1997 as compared to the six months ended November 30, 1996 is due principally to upgrade sales of MiniCAD which rose from $106,030 for the six months ended November 30, 1996 to $663,356 for the six months ended November 30, 1997. The surge is upgrade sales relates to the release of MiniCAD 7 in May 1997. The cost of revenues for the three months ended November 30, 1997 was $450,596 as compared to $353,276 for the three months ended November 30, 1996 representing an increase of 27.5%. The cost of revenues for the six months ended November 30, 1997 was $1,013,526 as compared to $724,606 for the six months ended November 30, 1996 representing an increase of 39.9%. The gross profit percentages for the three months ended November 30, 1997 and 1996 were 72.5% and 77.5%, respectively. The gross profit percentages for the six months ended November 30, 1997 and 1996 were 72.5% and 78.0%, respectively. The decrease in gross profit percentages in the three and six months ended November 30, 1997 as compared with the three and six months ended November 30, 1996 is due to an increase in amortization of software development costs. Amortization of software development to cost of revenues, which such costs are not directly a function of revenues, rose to $200,192 for the three months ended November 30, 1997 as compared to $135,895 for the three months ended November 30, 1996. Amortization expenses rose to $399,172 for the six months ended November 30, 1997 as compared with $262,948 for the six months ended November 30, 1996. This increase is attributable to an increased commitment to development of new software. The decrease in gross profit percentages in the six month period ended November 30, 1997 as compared with the six month period ended November 30, 1996 is also attributable to higher shipments of the upgrade version of MiniCAD 7 to existing customers. Upgrade versions of MiniCAD, which are sold substantially below the price of a new version, are as costly to produce and ship as a new product itself. Research and development expenses increased to $88,611 for the three month period ended November 30, 1997 as compared to $51,041 for the three month period ended November 30, 1996 representing a increase of 73.6%. Research and development expenses increased to $185,993 for the six month period ended November 30, 1997 as compared to $111,332 for the six month period ended November 30, 1996 representing a increase of 67.1%. This increase in the three and six month periods ended November 30, 1997 when compared with the three and six month periods ended November 30, 1996 is principally attributable to an increase in the number of employed engineers in this area. Selling and marketing expenses declined to $412,370 for the three month period ended November 30, 1997 as compared to $453,256 for the three month period ended November 30, 1996 representing a decrease of 9.0%. Selling and marketing expenses declined to $827,263 for the six month period ended November 30, 1997 as compared to $864,726 for the six month period ended November 30, 1996 representing an decrease of 4.3%. Advertising expenses declined to $255,731 for the three months ended November 30, 1997 as compared to $353,705 for the three months ended November 30, 1996. Advertising expenses declined to $508,390 for the six months ended November 30, 1997 as compared to $673,251 for the six months ended November 30, 1996. This decrease results from a redesign of the advertising campaign to more industry specific publications and away from general computer publications. Industry specific publications generally cost less per publication to advertise and are believed to be as effective in reaching the target market. Salary expenses rose to $73,773 for the three months ended November 30, 1997 as compared to $35,568 for the three months ended November 30, 1996. Salary expenses rose to $165,078 for the six months ended November 30, 1997 as compared to $68,180 for the six months ended November 30, 1996. This increase reflects an increase in other marketing efforts such as marketing brochures and trade shows. General and administrative expenses rose to $479,831 for the three month period ended November 30, 1997 as compared to $459,299 for the three month period ended November 30, 1996 representing an increase of 4.5%. General and administrative expenses rose to $985,459 for the six month period ended November 30, 1997 as compared to $877,691 for the six month period ended November 30, 1996 representing an increase of 12.3%. Expenses for payroll and related benefits rose to $219,734 for the three month period ended November 30, 1997 as compared to $197,706 for the three month period ended November 30, 1996. Expenses for payroll and related benefits rose to $501,598 for the six month period ended November 30, 1996 as compared to $416,441 for the six month period ended November 30, 1996. This increase is principally attributable to an increase in staffing required to service other functional areas of the Company. Other expenses also rose with the overall growth in business. Legal expenses partly offset this increase and declined to $48,189 for the six month period ended November 30, 1997 as compared with $118,013 for the six month period ended November 30, 1996 resulting from the settlement of a patent infringement claim and trademark dispute during the six month period ended November 30, 1997. Net profit decreased by $18,456 or 8.2% to $207,988 for the three months ended November 30, 1997 from $226,444 for the three months ended November 30, 1996. Net profits decreased by $25,779 or 4.4% to $553,642 for the six month ended November 30, 1997 from $579,421 for the six months ended November 30, 1996. The decrease in net profit for the three month period ended November 30, 1997 when compared to the three month period ended November 30, 1996 is after giving effect to a provision for income taxes of $91,000 and $124,000 for the three month periods ended November 30, 1997 and 1996, respectively. The effective tax rates were 30.4% and 35.4% for the three month periods ended November 30, 1997 and 1996 respectively. The decrease in net profits for the six month period ended November 30, 1997 when compared to the six month period ended November 30, 1996 is after giving effect to a provision for income taxes of $281,000 and $327,050 for the six month period ended November 30, 1997 and 1996 respectively. The effective tax rates were 33.7% and 36.1% for the six month periods ended November 30, 1997 and 1996, respectively. The decrease in effective tax rates is attributable to increases in tax exempt income associated with increasing investment into municipal bonds and a charitable contribution deduction reported in the three and six month periods ended November 30, 1997 resulting from donated Minicad 6 software. Liquidity and Capital Resources The Company increased its working capital by $438,653 or 5.9% to $7,933,178 at November 30, 1997 from $7,494,525 at November 30, 1996. Working capital also increased by $513,740 or 6.9% from $7,419,438 at May 31, 1997 due primarily to cash flows from operations. Company marketable securities continue to be in short to intermediate term government instruments. The Company's future capital requirements will depend upon many factors, including the extent, timing and progress of the Company's development of new software. The Company anticipates that its existing capital resources and earnings from operations will be adequate to satisfy the capital requirements for the next twelve months. PART II OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds On February 28, 1995, the Company completed its initial public offering of common stock and warrants and raised net proceeds of $4,135,075 including the exercise of warrants. The effective date of the registration statement for the initial public offering was November 29, 1994. From February 28, 1995 through November 30, 1997, the net proceeds were allocated to working capital and were invested temporarily in short term U.S. Government and municipal obligations. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting of shareholders on November 4, 1997. The following table summarizes the results of the meeting: Against/ Absten- Broker For Withheld tions Non-votes Election of Directors Frederick Unger 2,974,552 4,250 163,939 Richard Hug 2,974,552 4,250 163,939 Richard Diehl Continuing in Office Joseph Schmelzle Continuing in Office Adoption of Amended and Restated Stock Option Plan 2,882,977 90,310 5,515 163,939 Ratification of Appointment of Independent Auditors 2,973,652 1,350 3,800 163,939 Item 5. Other Information None Item 6. Exhibits and Reports Exhibit 27 - Financial Data Schedule SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DIEHL GRAPHSOFT, INC. DATE: January 13, 1998 Richard Diehl, President Chief Executive Officer DATE: January 13, 1998 Joseph Schmelzle, Treasurer Chief Financial and Accounting Officer SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DIEHL GRAPHSOFT, INC. DATE: January 13, 1998 s/Richard Diehl Richard Diehl, President Chief Executive Officer DATE: January 13, 1998 s/Joseph Schmelzle Joseph Schmelzle, Treasurer Chief Financial and Accounting Officer EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-QSB
5 1 3-MOS MAY-31-1997 NOV-30-1997 454768 7072880 590662 0 161794 8460613 912524 540628 9678606 527435 0 0 0 31439 8811587 9678606 1638168 1638168 450596 980812 0 0 0 298988 91000 207988 0 0 0 207988 .07 .07
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