Item 1. Description of Business ________________________________ (a) Business Development.
Data National Corporation (the Company) was formed under the laws of the State of Colorado in November 1982. On March 23, 1987, the Company acquired through an exchange of shares 97.8% of the outstanding shares of Data National Inc. (DNI), which resulted in a complete change in control of the Company. In June 1986, DNI acquired, through an exchange of its common stock, 100% of the outstanding common stock of Service Business Systems, Inc. (SBS) and National COM-LINK Systems, Inc. (COM-LINK). The Company acts as a holding company for these subsidiaries and coordinates their activities.
SBS is the only active entity, although during 1994, COM-LINK received royalties from licensing a trademarked name.
(b) Business of Issuer.
Principal Products and Services
The Company derives revenue from products and services provided by its subsidiary, SBS. SBS markets and sells the Autotrac system to the service stations of major oil companies, auto repair facilities that specialize in tire sales, quick-lube facilities, tune-up facilities, and independent repair facilities that are members of national groups (subscribers). The Autotrac system is designed to increase repeat business to such subscribers through the mailing of postcards to customers thanking them for the business, reminding them that it is time for regular servicing (such as a tune-up or oil change), or reminding customers that certain parts need to be replaced for safety reasons (e.g., brakes, tires, or shocks). To utilize the services provided by SBS, participating subscribers send SBS copies of their repair orders that include information about a specific customer, their vehicle, and the services performed at the repair facility. SBS extracts certain information and enters it into a computer database. Each subscriber then selects when and what types of cards are to be sent, and reminder cards are produced and mailed directly to the subscriber's customers. The subscriber also selects the messages to be printed on the cards, the promotions and/or specials to be offered, etc. The subscriber can update or change the messages, as desired.
As an integral part of the reminder system, SBS provides subscribers with monthly management reports detailing information concerning customers served and services performed, a customer zip code analysis of new versus repeat customers, and other information based on the data collected by SBS from the repair orders submitted by the subscriber.
SBS also markets and sells products that utilize information regarding the customer of the facility that uses Autotrac. The products are as follows:
1. Greeting Cards. Using the subscriber's database, SBS mails holiday greeting cards to customers of the subscriber.
2. New Residence. SBS mails promotional material to individuals who have moved into the subscriber's market area.
3. Cashier Handout. SBS produces point-of-sale coupons that can be used to increase the repair business of the subscriber.
4. Customer Surveys. SBS sends survey cards to the facility's customers and reports the results of the survey to the subscriber.
The key to the services provided by SBS is being able to utilize the existing customer database of the subscriber.
SBS also derives revenue from providing creative services to the subscriber.
The Company is expanding their customer base in fiscal 1996, and has contracted with a commonly controlled auto dealerships and a mortgage loan origination company to provide marketing services. The Company will focus its efforts on expansion of new markets and their existing customer base.
Employees
SBS employs all of the employees of the Company. As of September 30, 1995, SBS had 21 full-time employees working in the office of the Company. In addition, SBS has approximately 20 employees for coding and inputting the information received from repair facilities into the SBS computer system, some of whom are part- time. These employees are home based.
Status of Products
The Autotrac system requires customer information to be input into the database maintained by SBS. The information is either input by the SBS home-based computer operators or downloaded directly from the subscriber's computer. The information is processed by the computer, and the database for the customer is updated. Notices are printed and mailed to the customers in the database. The Autotrac system uses a Novell network that includes PC equipment. The system also includes three production printers. In addition, SBS has numerous PC work stations for use by the account executives and data entry personnel. Management of SBS believes this equipment, supplemented by additions in fiscal 1996 estimated at $75,000, will permit SBS to handle all of its present and foreseeable data processing needs through September 30, 1996.
Sources and Availability of Raw Materials
The Company has experienced no significant difficulty with the delivery and availability of supplies that it sells to its customers, and no difficulty is forecast for the immediate future.
Patents, Licenses, Franchises, Concessions, Etc.
The Company has no patent protection for its existing products that the Company considers to be proprietary items. Except in unusual circumstances, which do not apply to the Company, computer software is generally not patentable, but is protected by copyright and trade secret laws, as well as contractual and nondisclosure provisions of the Company's licensing agreements.
Seasonality
SBS produces holiday greeting cards in November and December. For the year ended September 30, 1995, SBS received revenues of approximately $228,000 as a result of the holiday greeting card program. There is no other seasonal factor to the Company's business.
Dependence Upon Small Number of Customers
The business of SBS is very dependent upon a few major customers; the loss of any one or more of these customers could have a materially adverse effect on the business and operations of the Company. During the fiscal year ended September 30, 1995, major customers represented approximately the following proportion of the SBS gross revenues:
Company A - 40.1% Company B - 18.1% Company C - 12.2%
Competition
SBS has approximately 20 competitors that compete directly with them in the automotive aftermarket business. Most of the competitors are small companies like SBS with none of them having a market share of more than 20%. However, the largest competitor is Moore/BCS, a division of Moore Business Forms in Toronto, Canada, a billion dollar conglomerate. Mailmark, Inc., based in Canoga Park, California, is a direct marketing/data processing company, which provides a specialized service reminder/customer contact program for the automotive industry. Other companies like Reynolds and Reynolds, Brandt Contact Services, Computer Care, and InteliMail are known competitors.
A competitive analysis suggests that there are many potential entrants in this industry primarily because technology today allows just about anyone with a computer to enter the business. Suppliers
to SBS, such as printing companies and direct mail companies could become competitors if they choose to expand their own channels of distribution. Repair facilities could also decide that they have all of the information necessary to do their own marketing and evaluations.
However, SBS believes that its marketing strategy permits it to effectively compete with these companies. With economies of scale and a national account strategy, SBS believes that the service provided is more cost effective.
Research and Development Expenditures
Although no costs were classified as research and development during each of the past two fiscal years, the Company expends considerable effort for software improvements on an annual basis. Such effort is a necessary element for maintaining the competitiveness of its software modules, and such costs are recorded as normal operating expenses.
Governmental Regulation and Compliance
There are no governmental regulations pertinent to operations that would differ from those applicable to any small manufacturer. There is no need for government approval of the Company's products. Any costs or effects of compliance with environmental laws are de minimis.
Item 2.
Item 2. Description of Property ________________________________
The Company occupies office space under two 3-year leases that expire in April 1997 and require an aggregate monthly payment of $2,800.
Item 3.
Item 3. Legal Proceedings __________________________
In October 1993, a corporation filed suit against the Company and others in the United States District Court for Northern District of Texas, alleging copyright infringement, unfair competition, and misappropriation of trade secrets. Basically, it has been alleged that certain computer programs formerly marketed by the Company infringed on the plaintiff's copyright, through the use of software developed by another defendant who had formerly worked for the plaintiff. The plaintiff requested actual and punitive damages in excess of $5,000,000.
On November 6, 1995, the Court granted the Company's motion for summary judgement on the statute of limitations and dismissed the case with prejudice. However, the plaintiff has moved to reconsider, and the time for appeal has not expired. Accordingly, there is still the possibility of an adverse verdict.
In December 1995, the Company's former president (president in 1994 and part of 1995) sued the Company for $36,000 relating to alleged unreimbursed moving expenses and $18,000 in damages. In 1994, the Company and the former president verbally agreed the Company would pay him up to $36,000 in shares of the company's common stock as a reimbursement for certain moving expenses. The Company was to determine the number of shares and the former president was to provide proper documentation of the expenses. The stock was never issued, and in February, 1995, the former president informed the Company that he did not want the stock as there was no market for the stock. In June of 1995, the Company offered to pay this amount in cash in return for certain releases regarding the departure of the former president. The Company was also under the impression that the former president had executed various covenants as a condition of his employment. The Company determined the covenants had not been executed and demanded their execution as a condition of the payment. The former president refused to sign the release and the covenants, and in December 1995 sued the Company for $36,000 and $18,000 in damages. Management has accrued $36,000 at September 30, 1993 to recognize the estimated liability, and believes that settlement of the claim will not be material to the accompanying financial statements.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders ____________________________________________________________
No matter was submitted during the fourth quarter of the fiscal year ended September 30, 1995 to a vote of security holders, through the solicitation of proxies or otherwise.
PART II
Item 5.
Item 5. Market for Company's Common Equity and Related Stockholder Matters _____________________________________________________________________
(a) Market Information.
The Company's common stock has not been traded on the over-the- counter market. Because of the lack of any viable trading market for the Company's securities, no accurate market information is currently available.
(b) Holders.
The number of holders of record of the Company's $.0001 par value common stock at September 30, 1995, was approximately 1,332.
(c) Dividends.
Holders of common stock are entitled to receive such dividends as may be declared by the Company's Board of Directors. No dividends have been paid with respect to the Company's common stock and no dividends are anticipated to be paid in the foreseeable future.
Item 6.
Item 6. Management's Discussion and Analysis or Plan of Operation _________________________________________________________________
Management's Discussion and Analysis of Financial Condition and Results of Operations
September 30, 1995 as Compared to September 30, 1994
The Company's working capital increased from $132,331 at September 30, 1994, to $173,347 at September 30, 1995. Cash flow from operations amounted to $80,389 in 1995, as a result of net income of $87,487. Included in the net cash flow from operations was a settlement payment with the State of Colorado Department of Revenue of $37,600, which was substantially offset by a non-cash charge for depreciation of $32,280. $63,035 was used to acquire additional equipment, primarily computers, and $11,102 was used to repay capital leases.
The Company is not obligated by contract for additional capital expenditures at September 30, 1995, but may be expected to continue to upgrade its systems, given the nature of its business. Management estimates capital expenditures of up to $75,000 in fiscal 1996.
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 for payment or not refinanced. The maturity date is presently extended to October 1, 1997.
As disclosed in the financial statements, the Company was named as a defendant, along with other parties, in a lawsuit filed in October 1993 in which the plaintiff requested actual and punitive damages in excess of $5,000,000. On November 6, 1995, the court granted the Company's motion for summary judgement on the statute of limitations and dismissed the case with prejudice. However, the plaintiff has moved to reconsider, and the time for appeal has not expired. Accordingly, there is still the possibility of an adverse verdict.
The Company believes that favorable operating results will continue and provide adequate liquidity for the near-term future.
Results of Operations
1995 Compared to 1994
For the year ended September 30, 1995, the nature of the Company's operations was unchanged and focused on providing marketing services to repair facilities and similar entities, nationally. One major customer accounted for 40.1% of net sales in 1995, as compared to 41% in 1994, and loss of this customer would have a materially adverse
effect, including possible cessation of operations. Another customer accounted for 18.1% of net sales in 1995, as compared to 12.2% in 1994. One other group of customers, affiliated with a national oil company, has been aggregated and constituted 12.2% of net sales in 1995 but did not exceed 10% in 1994. However, this group of customers is not subject to the same contractual relationship as the other two major customers discussed above and presumably subjects the Company to less risk through potential loss of the contract.
Sales were practically unchanged in 1995 as compared to 1994. Cost of sales increased from 51% of sales in 1994 to 53% in 1995, primarily because production salaries increased by approximately $45,000 as new positions were created. The other components of cost of sales (postage and card inventory) remained stable as a percentage of sales (22.1% in 1995 and 1994 for postage, and 6.8% versus 7.1% in 1995 and 1994, respectively, for materials).
Selling and marketing expenses decreased by $55,682, or 13.2%, in 1995. The decrease resulted primarily from the elimination of certain consulting fees, approximately $18,000 to an independent party and $12,000 to a member of the Board of Directors. Such services are now provided by Company staff. Other changes that resulted in cost reduction included not attending trade shows of two major customers, which occur biannually, and termination of employment of the Company president in July, which reduced travel and related expenses.
General and administrative expenses increased by $36,694, or 6.8%, in 1995. Executive salaries increased approximately $14,200 because of a raise for the former president and employment of a Chief Operating Officer in July 1995. Administrative salaries also increased by approximately $10,500, a result of raises for existing employees and employment of additional clerical staff. There were no other significant changes in individual expense accounts.
Interest expense is substantially all related to the Dillon note, as described above, and is expected to remain a significant cost in the near future.
Item 7.
Item 7. Financial Statements _____________________________
To the Stockholders and Board of Directors Data National Corporation
I have audited the consolidated balance sheets of Data National Corporation and subsidiaries as of September 30, 1995 and September 30, 1994, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Data National Corporation and subsidiaries as of September 30, 1995 and 1994, and the consolidated results of their operations and their consolidated cash flows for the years then ended, in conformity with generally accepted accounting principles.
Littleton, Colorado January 10, 1996
DATA NATIONAL CORPORATION
Consolidated Balance Sheets
September 30, 1995 and 1994
See accompanying notes to financial statements.
DATA NATIONAL CORPORATION
Consolidated Income Statements
Years Ended September 30, 1995 and 1994
See accompanying notes to financial statements.
DATA NATIONAL CORPORATION
Consolidated Statement of Changes in Stockholders' Equity
Years Ended September 30, 1995 and 1994
See accompanying notes to financial statements.
DATA NATIONAL CORPORATION
Consolidated Statements of Cash Flows
Years Ended September 30, 1995 and 1994
See accompanying notes to financial statements.
DATA NATIONAL CORPORATION
Notes to Consolidated Financial Statements
September 30, 1995 and 1994
(1) Organization, Operations, and Significant Accounting Policies
Organization and Operations
Data National Corporation (DNC) was incorporated under the laws of the State of Colorado on November 5, 1982.
On March 23, 1987, and in a subsequent exchange, DNC acquired 97.8% of the outstanding common stock of Data National, Inc. (DNI) in exchange for 168,688,240 shares of DNC's common stock, plus warrants to certain shareholders of DNI. The combination of the two companies was accounted for as a recapitalization, with DNI considered as the acquiring company (although DNC itself is the surviving corporation).
On June 2, 1986, DNI acquired 100% of the outstanding common stock of Service Business Systems (SBS) and National Com- Link Systems, Inc. (Com-Link) by exchanging 1,050,000 shares of its common stock. The combination of these companies was accounted for as a pooling of interests.
The Company derives revenue from products and services provided by its subsidiary, SBS, which is the only operating subsidiary. SBS markets and sells the Autotrac system to the service stations of major oil companies, auto repair facilities that specialize in tire sales, quick-lube facilities, tune-up facilities, and independent repair facilities that are members of national groups. The Autotrac system is designed to increase repeat business to such facilities through the mailing of postcards to customers thanking them for their business, reminding them that it is time for regular servicing (such as a tune-up or oil change), or reminding customers that certain parts need to be replaced for safety reasons (e.g., brakes, tires, or shocks).
As an integral part of the system, SBS provides the repair facilities with monthly management reports detailing information concerning customers served and services performed, a customer zip code analysis, new versus repeat customers, and other information based on the data collected by SBS from the repair orders submitted by the facility.
SBS also markets and sells products that utilize information regarding the customer and/or auto repair facility that uses Autotrac. The products are as follows:
1. Using the facility's database, SBS mails holiday greeting cards to customers of the facility.
2. SBS mails promotional material to individuals who have moved into the facility's market.
3. SBS produces point-of-sale coupons that can be used to increase the repair business of the facility.
4. SBS sends survey cards to the facility's customers and reports the results of the survey to the facility.
SBS also derives revenue from providing creative services to the facilities.
Principles of Consolidation
The consolidated financial statements include the accounts of DNC, DNI, SBS, and Com-Link (collectively, the Company). All material intercompany accounts and transactions are eliminated in consolidation.
Revenue and Credit Risk
Revenue is recognized upon production and shipping of products.
Sales are substantially made by extending credit to customers on a short-term basis, using informal credit evaluations, and are on an uncollateralized basis. See Note 5 for disclosure of major customers for further information on credit risk.
Inventory
Inventory consists of unprinted card stock, and is carried at cost determined on a first-in-first-out basis.
Property and Equipment
Property and equipment are stated at cost, and are depreciated over useful lines of from 5 to 7 years primarily using the straight-line method. A summary of property and equipment at September 30, 1995 and 1994 follows:
This amount may be further limited by separate return year limitations for the years 1984 to 1987, which aggregate $437,000 and would reduce the carry forwards with expirations from 1999 to 2002.
Deferred Revenue
Prepayments for products are recorded as deferred revenue until the product is delivered.
Advertising
The Company expenses advertising costs when incurred. Such costs amounted to $6,001 and $13,385 in 1995 and 1994, respectively.
Reclassification of Accounts
Certain depreciation in the amount of $28,000 has been reclassified from general and administrative expense to cost of sales in 1994 to conform with the presentation for the current year.
Use of Estimates
Preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates.
(2) Related Party Transactions
The Company refinanced certain existing indebtedness to two individuals (father and son), considered collectively in the note, in October 1991. One of the two individuals is now Chairman of the Board of Directors and owns or controls 104,793,403 shares of the Company's common stock. The principal amount of the note is $869,072, with interest at 10%, originally due on or before October 1, 1996, including $182,441 in accrued interest from prior indebtedness. The note is secured by inventory; trade receivables; the right to the name, "Data National Corporation," and related trademarks, licensing agreements, patents, and similar rights; bank accounts; and the stock of DNI and all of its subsidiary corporations.
In conjunction with the refinancing, the two individuals also received warrants to purchase 64,000,000 shares of the common stock of Data National Corporation. The warrants are exercisable on or before September 30, 1996, at a purchase price of $.0005 per share.
On January 10, 1996, the Note was extended to mature on October 1, 1997.
The two individuals have entered into an agreement with the (then) president (now chief financial officer) whereby, in consideration for him becoming president, they sold to him certain shares of stock, agreed to pay him 10% of any principal paid to them (i.e., the original principal of $737,000 referred to above), agreed to pay him 50% of interest payments collected by them, and assigned the warrants to purchase 64,000,000 shares of common stock to him. There have not been any (original) principal repayments to date. Interest expense amounted to $86,860, and $91,358, in 1995 and 1994, respectively.
A member of the Board of Directors received $3,000 per month in 1994 and for 8 months in 1995 for consulting services. Additionally, a company that he controls was indebted to the Company in the amount of $2,924 at September 30, 1995 and 1994 for certain health insurance premiums. At September 30, 1995, the Company was indebted to this individual for $3,000.
The son of the chief financial officer leases equipment to the Company under three capital leases, which are summarized in Note 3.
(3) Capital Leases
The Company leases various equipment under capital leases. Following is a summary of minimum lease payments required under capital leases as of September 30, 1995:
Assets held under capital leases are summarized as follows:
A summary of capital leases follows:
Amortization of capital leases is included in depreciation expense.
(4) Commitments
Office Lease
The Company occupies office space under two 3-year leases that expire in April 1997 and require monthly payments of $2,800. Following is a summary of future rental commitments under these leases:
Rent expenses and related charges amounted to $33,600 and $34,900 in 1995 and 1994, respectively.
Incentive Plans
In July 1994, the Company adopted an Employee Incentive Plan, which provides for a contribution to the Plan of 5% of quarterly sales in excess of $480,000. For the quarters ended September 30, 1995 and 1994, this contribution amounted to $1,424 and $1,422, respectively, and has been accrued in the accompanying balance sheet.
Also in July 1994, the Company adopted an Executive Compensation Incentive Plan, which provides for a contribution to the Plan of 20% of quarterly net income in excess of $75,000. Through September 30, 1995, there were no contributions due.
Profit-Sharing Plan
In August 1992, the Company adopted a 401-K Profit Sharing Plan, which covers all employees with one quarter of a year's service who are at least 21 years old. A participant may defer a maximum of 15% of compensation to a statutory limit, and the Company matches the first 5% of the deferral. In 1995 and 1994, such contributions amounted to $1,433 and $1,300, respectively.
(5) Major Customers
The following customers each accounted for more than 10% of sales in 1995 or 1994:
(6) Subsequent Events
Litigation
In October 1993, a corporation filed suit against the Company and others in the United States District Court for Northern District of Texas, alleging copyright infringement, unfair competition, and misappropriation of trade secrets. Basically, it has been alleged that certain computer programs formerly marketed by the Company infringed on the plaintiff's copyright, through the use of software developed by another defendant who had formerly worked for the plaintiff. The plaintiff requested actual and punitive damages in excess of $5,000,000.
On November 6, 1995, the Court granted the Company's motion for summary judgement on the statute of limitations and dismissed the case with prejudice. However, the plaintiff has moved to reconsider, and the time for appeal has not expired. Accordingly, there is still the possibility of an adverse verdict.
In 1994, the Company and its former president (who was at that time president) verbally agreed that the Company would pay him up to $36,000 in shares of the Company's common stock as reimbursement for certain moving expenses upon proper documentation of the expenses. The stock was never issued, and in February 1995, the former president informed the Company that he did not want the stock as there was no market for it. In June 1995, the Company offered to pay this amount in cash in return for certain releases and covenants and documentation of the claimed expenses. The former president refused to sign the releases and covenants, and in December 1995 sued the Company for $36,000 and $18,000 in damages. Management accrued $36,000 at September 30, 1993 to recognize the estimated liability, and believes that settlement of the claim will not be material to the accompanying financial statements.
Item 8.
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure _________________________________________________________________ In June 1994, the Company reported a change in its independent accountant. The firm of Miller and McCollom had performed the last audit of the Company's financial statements as of September 30, 1989, and for the year then ended. There were no reportable disagreements with that firm, and its report for 1989 was qualified regarding the Company's ability to continue as a going concern.
The Company engaged the firm of William G. Lajoie, P.C., to audit its financial statements for the years ending September 30, 1993, 1994, and 1995.
These actions were approved by the Company's Board of Directors.
PART III
Item 9.
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act of the Company ___________________________________________________________________________ The Directors and Officers of the Company at September 30, 1995, are as follows:
There is no family relationship between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer. All directors will hold office until the next annual meeting of shareholders. There are no arrangements or understandings between any director of the Company or any other person or persons pursuant to which such director was or is to be selected as a director.
The Board of Directors held two meetings during the past fiscal year, and all of the members then on the Board were present at all of the meetings. There were no meetings of any of the committees of the Board of Directors during the past fiscal year.
All officers of the Company hold office at the discretion of the Board of Directors. Except as set forth herein, there is no arrangement or understanding between any such officer or any other person pursuant to which such officer is to be selected as an officer of the Company. There is no person who is not a designated officer who is expected to make any significant contribution to the business of the Company.
The following sets forth biographical information as to the business experience of each officer and director of the Company.
Richard Simms is the Vice President of Finance of the Company. He was President and Chief Executive Officer of the Company from October 1990 to July 1993. He has been a Director of the Company since March 23, 1987, and of DNI since its inception. Since 1986, he has practiced as a certified public accountant and an independent financial advisor. Mr. Simms is a CPA registered in Colorado. Mr. Simms devotes part of his time to the business of the Company and its subsidiaries.
Ray E. Dillon III has been a Director of the Company since March 23, 1987, and of DNI since its inception. He is Vice President of Dillon Investments, a private trust management company for the Dillon family, where he has been employed since 1985. Mr. Dillon devotes only such time to the business of the Company as is necessary in his position.
Donald V. Warriner is President and CEO of the Company as of August 1995. Prior to joining the Company, Mr. Warriner was employed by Cherry Creek Mortgage Company. Prior to working for Cherry Creek, Mr. Warriner was President of Bainbridge International, a company that was involved in acquisitions and buy outs of small- to medium-sized firms. Mr. Warriner devotes all of his time to the business of the Company.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 does not require any of the Company's officers, directors or persons who own more than ten percent of the Company's equity securities to file any reports of ownership or changes in ownership with the Securities and Exchange Commission because the Company does not currently have any class of securities registered under Section 12 of that Act.
Item 10.
Item 10. Executive Compensation ________________________________ The following table sets forth the compensation paid or accrued to the Chief Executive Officer and each executive officer of the Company and its subsidiaries who received compensation in excess of $100,000 during the fiscal year ended September 30, 1995 and 1994:
________________________________
(1) There were no executive officers whose compensation exceeded $100,000 in either 1994 or 1995. (2) As described earlier, Mr. Eyerdom was offered certain restricted stock as reimbursement for moving expenses incurred in 1993. However, such stock was refused and the payment of the expenses is the subject of litigation filed in December of 1995 and more adequately explained under Item 3. (3) Represents the value of a leased automobile and reimbursement of gas and certain maintenance charges.
The following table shows certain information with respect to stock options granted to the Company's executive officers during the fiscal year ended 1995:
Option/SAR Grants in Last Fiscal Year
The following table sets forth certain information with respect to option exercises during the fiscal year ended September 30, 1995 by the executive officers of the Company and the value of each such officer's unexercised options at September 30, 1995:
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year - End Option/SAR Values
Estimated Future Payouts under Non-Stock Price-Based Plans _________________________________________
Item 11.
Item 11. Security Ownership of Certain Beneficial Owners and Management __________________________________________________________________ The following table sets forth information as of December 31, 1995, with respect to the beneficial ownership of the Company's $0.0001 par value common stock by (a) each person known by the Company to be beneficial owner of 5% or more of the Company's outstanding Common stock, (b) the directors of the Company, and (c) the directors and officers of the Company as a group:
(1) Includes warrants to purchase 64,000,000 shares. See Item 11 - Certain Relationships and Related Transactions. Includes shares owned by the Simms Family Partnership, controlled by Mr. Simms. (2) Includes 30,506,959 shares owned by other members of the Dillon family. (3) There are no additional officers or directors who own shares of the Company's common stock, but the Company has agreed to sell and grant certain employees shares of common stock.
Item 12.
Item 12. Certain Relationships and Related Transactions _________________________________________________________ No director and executive officer of the Company, nominee for election as a director, security holder who is known to the Company to own of record or beneficially more than 5% of any class of the Company's voting securities, or any member of the immediate family of any such persons, has had any transaction or series of similar transactions, during the Company's last two fiscal years, or had any currently proposed transaction, or series of similar transactions, to which the Company was or is to be a party, in which the amount involved exceeds $60,000 or in which any of such persons had or will have any direct or indirect material interest, except as follows:
The Company refinanced certain existing indebtedness to two individuals (father and son), considered collectively in the note (the "Dillon note"), in October 1991. One of the two individuals is now Chairman of the Board of Directors and owns and controls 104,793,403 shares of the Company's common stock. The principal amount of the note is $737,000, with interest at 10%, and was originally due on or before October 1, 1996. Additionally, the Company owed $182,441 in accrued interest from the prior indebtedness. The note and this accrued interest are secured by
inventory; trade receivables; the right to the name, "Data National Corporation," and related trademarks, licensing agreements, patents, and similar rights; bank accounts; and the stock of DNI and all of its subsidiary corporations.
In conjunction with the refinancing, the two individuals also received warrants to purchase 64,000,000 shares of the common stock of Data National Corporation. The warrants are exercisable on or before September 30, 1996, at a purchase price of $.0005 per share.
The two individuals have entered into an agreement with the (then) president (now chief financial officer) whereby, in consideration for him becoming president, they sold to him certain shares of stock, agreed to pay him 10% of any principal paid to them (i.e., the $737,000 referred to above), agreed to pay him 50% of interest payments collected by them, and assigned the warrants to purchase 64,000,000 shares of common stock to him. There have not been any (original) principal repayments to date. Interest expense amounted to $86,860, and $91,358, in 1995 and 1994, respectively.
On January 10, 1996, the Dillon note was extended to mature on October 1, 1997.
The Company has agreed to sell and grant restricted common stock to the new President and CEO and the new Vice President and COO (management team). The Company has agreed to sell approximately 150,000,000 shares of stock of the Company to the new management team at a price of $.0006 per share. The Company will grant approximately 50,000,000 shares of common stock to the new management team. It is anticipated the sale and grant of shares will take place before January 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATA NATIONAL CORPORATION Registrant
Date: January 12, 1996 By:/s/ Richard Simms Richard Simms, Chief Financial Officer, Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Date: January 12, 1996 By:/s/ Richard Simms Richard Simms, Chief Financial Officer, Director and Treasurer
Date: January 12,1996 By:/s/ Ray E. Dillon Ray E. Dillon III, Chairman of the Board and Director
Date: January 12, 1996 By:/s/ Donald Warriner Donald Warriner, Chief Executive Officer and Director
[ARTICLE] 5