<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Fiscal Year Ended June 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
0 - 9403
NBI, INC.
State of Incorporation IRS Employer I.D. Number
Delaware 84 - 0645110
1880 Industrial Circle, Suite F
Longmont, Colorado 80501
(303) 684-2700
Securities registered pursuant Name of each exchange
to section 12(b) of the Act: None on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act: Common Stock
($.01 par value)
Check whether the issuer (1) has 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.
[ X ] YES [ ] NO
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Revenues for the year ended June 30, 1996, are $11,767,000.
The aggregate market value of voting stock held by non-affiliates of the
registrant is approximately $4,692,000 as of market close on September 10,
1996.
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ X ] YES [ ] NO
Common stock ($.01 Par Value) 7,997,234 shares outstanding as of September 13,
1996.
Documents incorporated by reference: Part III-The Registrant's definitive
Proxy Statement for its 1996 Annual Meeting of Shareholders, to be filed not
later than 120 days after the end of the fiscal year.
<PAGE>
PART I
ITEM 1. BUSINESS
DOMESTIC OPERATIONS
NBI was incorporated in 1973 to develop and market a proprietary word
processing system. The Company was the first to introduce a software-based
word processing system and within a few years became known as a leading
provider of dedicated word processing and office automation systems. Because
of the declining interest in purchasing entire system solutions, it was
necessary to restructure the Company in October, 1989 and shift its focus from
manufacturing to customer service and support and into development and
marketing of word processing software products for personal computers. On
August 7, 1992, NBI sold its domestic customer service and support division.
As of June 30, 1995, the Company discontinued all software development
activities.
In 1990, NBI formed its domestic systems integration division to transition
the existing customer base from its proprietary hardware platforms to today's
open platforms. Because of the low margins, intense competition and long
sales cycle, NBI closed this business on June 15, 1994.
Late in fiscal 1994, NBI acquired its AlphaNet division which is a network
infrastructure business located in southern Ohio. AlphaNet's market focus is
on the physical cable layer of networks, including utilization of fiberoptic
technology. In August 1996, NBI decided to dispose of its AlphaNet division.
The Company is currently in negotiation with a third party regarding the sale
of certain assets and the assumption of certain liabilities of this operation.
With the decision to dispose of its AlphaNet division the Company has
discontinued all of its operations in the computer industry segment.
Therefore, it has separately reported the losses from this segment, consisting
of losses from its AlphaNet division, its international subsidiary, NBI, Ltd.,
and its software development activities, as discontinued operations for the
years ended June 30, 1996 and 1995.
Effective January 1, 1995, the Company acquired a majority interest in a small
children's paint and novelty toy manufacturer, Krazy Colors, Inc. located in
Las Vegas, Nevada, which manufacturers roll-on and dot-on paints for children,
as well as bulk tempera paints. Krazy Colors, Inc. distributes its products
primarily through national retail chains and toy distributors. Krazy Colors,
Inc. is subject to a royalty agreement which provides for royalty payments
based upon gross margin performance. (See also Notes 13 and 17 to
Consolidated Financial Statements).
On August 4, 1995, NBI, Inc. acquired 100% of the outstanding capital stock of
the Belle Vernon Motel Corporation. The Belle Vernon Motel Corporation owns
and operates an 81 room full service Holiday Inn in Southwestern Pennsylvania,
(the "Belle Vernon Holiday Inn"). The Company received approval as an
authorized Holiday Inn franchisee prior to the purchase transaction and is
licensed under a license agreement with Holiday Inns Franchising, Inc. which
expires in August 2005. The property and equipment acquired continues to be
operated as a Holiday Inn Hotel. During fiscal 1996, the Company changed the
name of the Belle Vernon Motel Corporation to NBI Properties, Inc.
On August 14, 1995, American Glass Inc., a wholly-owned subsidiary of NBI,
Inc., closed on its purchase of a majority of the assets, including the name,
of L.E. Smith Glass Company of Mount Pleasant, Pennsylvania, pursuant to an
asset purchase and sale agreement, with the effective date being the close of
business on July 31, 1995. L.E. Smith Glass Company is a manufacturer of
handmade fine glass giftware and lighting fixtures and has been in business
since 1907. The property, plant and equipment acquired continues to be used
in the manufacture of handmade fine glass giftware and lighting fixtures. The
company sells its products through in-house sales managers and manufacturer's
representatives. The giftware products are sold primarily to traditional and
specialty retailers, manufacturers/wholesalers and the food service market.
The lighting fixture products are sold to manufacturers and retailers.
<PAGE>
INTERNATIONAL OPERATIONS
NBI, Ltd. is a wholly-owned subsidiary of NBI, Inc. that sold integrated
document management solutions, workflow and COLD (Computer Output to Laser
Disk) to central and local government departments and commercial organizations
throughout the United Kingdom. Due to continuing losses incurred by the
subsidiary, NBI, Inc. decided to sell the operation in fiscal 1995.
On April 28, 1995, NBI, Ltd. completed a sale of certain assets of the
company, including its customer base. Under the terms of this agreement, NBI,
Ltd. retained certain assets and liabilities. NBI, Ltd. is currently in
voluntary liquidation which the Company expects to be completed within the
next year. The losses from this computer industry segment operation for the
years ended June 30, 1996 and 1995, have been included in the loss from
discontinued operations.
COMPETITION
Krazy Colors, Inc.: The company's primary competitors are children's finger
paint, paint and crayon manufacturers. Krazy Colors' competitive advantage for
the roll-on and dot-on paints is a unique bottle design that allows
children to use non-toxic, washable paint with little cleanup.
Belle Vernon Holiday Inn: The hotel has limited competition from other
full-service hotels in a relatively wide-spread area. However, it does
compete with several limited-service hotels in the wide-spread area including
three new hotels which have opened approximately 300 new rooms during the past
fiscal year. The local market includes several non-competitive motels in a
different class as to price and amenities.
L.E. Smith Glass Company: The glass company's main competition in giftware
is from imports, primarily from Europe, South America and the Orient. Most of
the competitive glass from overseas is twenty-four percent leaded crystal,
even though L.E. Smith Glass Company's giftware is unleaded crystal, because
foreign manufacturers are able to produce leaded glass less expensively due to
significantly less environmental restrictions and labor costs. The main
competition for the glass lighting fixtures is also imports from Europe, South
America and the Orient. There are also a few domestic companies that have
competing products to certain portions of L.E. Smith Glass Company's giftware
and lighting fixtures product lines. L.E. Smith Glass Company is able to
compete with other domestic and foreign glass companies primarily for the
following reasons. The company is one of only a few hand pressed glass
manufacturers remaining in the United States. They produce a large variety of
unique designs using twelve different colors of glass and they have a solid
reputation for their quality and reliability. In addition, they are price
competitive with other domestic manufacturers. The Company can compete with
foreign competitors because it has the flexibility to meet shorter lead times
without the restrictive minimum quantities required by most foreign
manufacturers.
SIGNIFICANT CUSTOMERS AND SUPPLIERS
The Company had no significant customers in fiscal 1995. However, the L.E.
Smith Glass Company currently has one significant customer, a specialty
retailer whose market is the "home-party" business. Sales to this customer
totaled approximately 26% of NBI's consolidated revenues in fiscal 1996. The
loss of this customer's business would have a material adverse effect on NBI;
however, L.E. Smith Glass Company is continually focusing its sales efforts on
expanding its customer base to lessen the impact this customer has on its
business. In addition, the Company's management believes that its
relationship with this customer will continue into the foreseeable future, due
in part to the large number of different items this customer purchases from
L.E. Smith.
The Company had no significant suppliers in fiscal 1995. However, the glass
manufacturer, acquired in fiscal 1996, purchases a majority of its raw
materials from only a few vendors. Management believes that other suppliers
could provide similar materials on comparable terms.
<PAGE>
SEASONAL VARIATIONS OF BUSINESSES
All of the Company's ongoing operations typically have their strongest revenue
performance during the first fiscal quarter due to seasonal variations in
these businesses. Generally, the second and fourth fiscal quarters' revenues
from these operations are moderately lower than in the first quarter, while
the third fiscal quarter's revenue is usually significantly lower than the
other quarters.
PRODUCT DEVELOPMENT AND ENGINEERING
In fiscal 1994, NBI began research and development work on a new software
product which was completed in fiscal 1995. However, as of June 30, 1995, the
Company discontinued all software development activities within its computer
industry segment. For the year ended June 30, 1995, the Company had
expenditures for product development and engineering of $278,000 which has been
included in the loss from discontinued operations.
BANKRUPTCY PROCEEDINGS
On February 6, 1991, NBI, Inc. filed a petition for reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Colorado. On January 21, 1992, the
Bankruptcy Court entered an order confirming the Company's Plan of
Reorganization ("Plan"). NBI emerged from Chapter 11 bankruptcy on February
3, 1992, the effective date of the Plan ("Effective Date").
EMPLOYEES
The Company currently employs a total of 241 employees including 189 full-time
employees. Currently, 142 of the total employees are covered by collective
bargaining agreements, including 107 employees of the glass manufacturing
company who are covered by a collective bargaining agreement which expires on
September 1, 1998 and 35 employees of the hotel who are covered by a
collective bargaining agreement which expires on November 7, 1998.
ITEM 2. PROPERTIES
NBI leases approximately 6,400 square feet of office space for administrative
personnel at its corporate headquarters in Longmont, Colorado. This lease
expires in October 1997. The Company leases 4,000 square feet of
office/warehouse space in Ohio for its AlphaNet division under a lease
expiring in March 1998. The Company also leases approximately 4,900 square
feet of warehouse space in Las Vegas, Nevada for its Krazy Colors, Inc.
manufacturing operation including 1,900 square feet under a lease expiring in
July 1997 and another 3,000 square feet under a month-to-month lease. The
Company believes its leased facilities are adequate to meet its needs for the
next several years and anticipates that it would encounter little difficulty
in locating alternative or additional suitable facilities should its
requirements change.
The Company's international subsidiary has outstanding commitments under an
office lease for 7,540 square feet of office space in Slough in the United
Kingdom under a lease that expires in March 1998. However, NBI, Inc. has no
liability for this subsidiary's leases.
The Company acquired the building and improvements of the Belle Vernon Holiday
Inn Hotel in Southwestern Pennsylvania as a result of its business acquisition
on August 4, 1995. The building is approximately 21,000 square feet and sits
on approximately 5.8 acres of land which is leased under an acquired land
lease expiring in 2026 with an option to extend the lease for an
additional twenty-five year term.
In connection with its franchise agreement, the Company's hotel operation has
committed to completion of approximately $1,000,000 in renovations to the
hotel during fiscal 1997. The Company is currently pursuing attainment of a
first mortgage on the property to cover these renovations.
<PAGE>
Effective August 1, 1995, the Company acquired the land and buildings held by
the L.E. Smith Glass Company, including a total of approximately 194,000
square feet of manufacturing, warehousing and office space on approximately
11.1 acres of land in Mount Pleasant, Pennsylvania.
During fiscal 1996, the Company entered into a contract granting it the option
to purchase approximately 88 acres of undeveloped land in southwestern
Pennsylvania for $1.0 million. The Company is considering purchasing the land
for the purpose of retail or commercial development.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
STOCK PROFILE: At June 30, 1996, there were 7,997,234 common shares of $.01
par value common stock outstanding, of which 1,500,000 shares are
unregistered. In March 1996, the Company issued 1,500,000 unregistered shares
of its common stock from shares held in treasury through a private placement
stock offering. Holders of at least 50% of the shares issued have the right
to demand registration of the shares after December 1, 1996. Holders also
have the right to have their shares registered at any time the Company
registers shares for its own purpose until December 31, 1999.
To date, no dividends have been paid on the $.01 par value common stock and it
is anticipated that future earnings will be retained for operating purposes.
COMMON STOCK ACTIVITY: On December 7, 1994, the Company's common stock was
delisted from the Pacific Stock Exchange due to its inability to meet certain
minimum stockholders' equity requirements. The Company's common stock is now
traded over-the-counter under the symbol NBII. The following table sets forth
the high and low sales prices for the common stock for the fiscal periods
specified. The quotations of the Company's common stock reflect inter-dealer
prices, without any retail mark-up, mark-down or commissions, and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal 1996 High Low
- -------------- ------ ------
First Quarter $1 1/2 $ 1/4
Second Quarter 1 1/8 7/8
Third Quarter 15/16 25/32
Fourth Quarter 31/32 11/16
Fiscal 1995 High Low
- -------------- ------ ------
First Quarter 3/8 1/8
Second Quarter 3/8 1/16
Third Quarter 3/16 1/25
Fourth Quarter 7/32 3/32
</TABLE>
The approximate number of stockholders of the Company was 2,830 as of
September 20, 1996. This includes shares held in nominee or "street"
accounts.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements in this discussion contain both historical and forward-looking
statements. The forward-looking statements are based upon current
expectations and the actual results could differ materially from those
anticipated. Factors that may affect such forward-looking statements include,
among others, competitive factors and pricing pressures, loss of significant
customers, availability of raw materials, labor disputes, investment results,
ability to comply with franchise agreements, ability to obtain financing,
inflation and general economic conditions.
RESULTS OF OPERATIONS 1996 - 1995 COMPARISON
The Company reported net income of $88,000 in fiscal 1996, compared to a net
loss of $483,000 in fiscal 1995. The improved performance resulted primarily
from a significant improvement in operating income resulting from the
Company's business acquisitions in August 1995, as well as a significant
decline in the loss from discontinued operations in fiscal 1996 mainly due
to the absence of losses from its international operation and software
development activities. However, these improvements were partially
offset by a significant decline in the net gain on investments during
fiscal 1996. This occurred primarily due to the absence in fiscal 1996
of a substantial unrealized gain related to one security position, as well as
a significantly lower average level of investments held during fiscal 1996
resulting from the use of a significant portion of the Company's cash and
marketable securities held at June 30, 1995 for the acquisitions.
Sales revenues from continuing operations of $10.0 million for the year ended
June 30, 1996 reflected an increase of $9.9 million as compared to fiscal
1995. The increase in sales revenue was primarily attributable to the L.E.
Smith Glass Company, acquired effective August 1, 1995, which generated $9.5
million of sales revenue during fiscal 1996. In addition, sales revenues from
Krazy Colors, Inc., acquired effective January 1, 1995, increased $357,000 due
to increased sales activity, as well as the inclusion of a full year of sales
revenues during fiscal 1996.
Service and rental revenues from continuing operations totaled $1.8 million
for the year ended June 30, 1996, and consisted primarily of room rental and
food service revenues from the Company's Belle Vernon Holiday Inn acquired on
August 4, 1995. There were no service and rental revenues from continuing
operations for fiscal 1995.
Total revenues from continuing operations are expected to increase moderately
in fiscal 1997 as compared to fiscal 1996, primarily due to the inclusion of a
full year of revenues from the L.E. Smith Glass Company and Belle Vernon
Holiday Inn in fiscal 1997.
Cost of sales as a percentage of sales revenues for the years ended June 30,
1996 and 1995 was 71.9% and 82.6%, respectively. The improved gross margin
resulted primarily from the inclusion of sales from the L.E. Smith Glass
Company at a higher gross margin rate than experienced for total sales in
fiscal 1995. In addition, the Company experienced an improvement in the gross
margin of sales from Krazy Colors, Inc. in fiscal 1996, due to the higher
revenue volume.
Cost of service and rental as a percentage of related revenue was 70.9% for
fiscal year 1996 and was entirely related to the Belle Vernon Holiday Inn
operation.
Total cost of sales, service and rentals as a percentage of total revenues was
71.8% in fiscal 1996 and is expected to remain relatively constant in fiscal
1997.
Marketing, general and administrative expenses totaled $2.7 million for the
year ended June 30, 1996, compared to $919,000 for the previous fiscal year.
The increase resulted from the inclusion of eleven months of marketing,
general and administrative expenses related to the glass manufacturing and
hotel businesses acquired in August 1995. In addition, the Company
experienced an increase in marketing, general and administrative expenses, in
fiscal 1996 compared to fiscal year 1995, resulting from the inclusion of a
full year of expenses from the children's paint and novelty toy business;
however, this increase was offset by savings realized in general corporate
expenses due to expense reduction efforts. Included in marketing, general
and administrative expenses incurred in fiscal 1996 was payroll and related
expenses of $1.2 million, commissions to outside sales representatives of
$315,000 and legal, accounting, hotel management and other professional fees
totaling $207,000.
<PAGE>
Total marketing, general and administrative expenses are expected to increase
moderately in fiscal 1997, compared to fiscal 1996, due to the inclusion of a
full year of marketing, general and administrative expenses related to the
L.E. Smith Glass Company and the Belle Vernon Holiday Inn operations.
Interest income totaling $28,000 for the fiscal year ended June 30, 1996,
reflected a decrease of $155,000 compared to the year ended June 30, 1995.
The decrease in interest income was primarily due to a lower level of average
cash and investments held during the current year, as well as variances in the
mix of debt and equity securities held.
The Company recorded a net gain on investments of $354,000 in fiscal 1996,
compared to a net gain on investments of $2.2 million for fiscal 1995. For
the year ended June 30, 1996, the Company recorded a net realized gain on
investments of $663,000 and a net unrealized loss on investments of $309,000.
This compares to a net realized loss on investments of $399,000 and a net
unrealized gain on investments of $2.6 million recorded in fiscal 1995. The
decline in the net gain on investments in fiscal 1996 as compared to fiscal
1995 resulted primarily from the absence in fiscal 1996 of a substantial
unrealized gain related to one security position, as well as a significantly
lower average level of investments held during fiscal 1996. As part of its
investment policy, the Company's investment portfolio may include investments
in option instruments and may include a concentrated position in one or more
securities. As a result of this, the financial results may fluctuate
significantly and have larger fluctuations than with a more diversified
portfolio. In addition, the Company may invest in short-sale transactions of
trading securities. Short-sales can result in off-balance sheet risk, as
losses can be incurred in excess of the reported obligation if market prices
of the securities subsequently increase.
Interest expense totaling $655,000 for the year ended June 30, 1996 reflected
a decrease of $86,000 from the prior fiscal year. Savings of $242,000,
resulting primarily from both a lower average outstanding balance and a
reduced interest rate on the IRS debt as well as lower average outstanding
corporate short-term borrowings, was significantly offset by inclusion of
$156,000 of interest expense related to debt assumed in conjunction with the
acquisition of the L.E. Smith Glass Company.
The Company recorded income tax provisions from continuing operations of
$172,000 for the year ended June 30, 1996, including $130,000 of state income
tax provisions, primarily related to the Company's Pennsylvania operations,
based upon book income from continuing operations. In accordance with
fresh start accounting, which was adopted as of April 30, 1992, and as a
result of the Company's reorganization under Chapter 11 of the U.S.
Bankruptcy Code, future utilization of any income tax benefit from
pre-reorganization net operating loss carryforwards are not credited to the
income tax provision, but rather, reported as an addition to capital in excess
of par value. No income tax benefit was recorded in fiscal 1995, as there was
a net loss for both federal and state purposes which was offset by an increase
in the Company's deferred tax asset valuation allowance.
DISCONTINUED OPERATIONS
During April 1995, NBI, Ltd., the Company's international operation, completed
a sale of certain of its assets including its customer base. NBI, Ltd. is
currently in voluntary liquidation which the Company expects to be completed
within the next year. As of June 30, 1995, NBI, Inc. discontinued all
software development activities. Then on August 27, 1996, the Company decided
to dispose of its AlphaNet division. The Company is currently in negotiation
with a third party regarding the sale of certain assets and the assumption of
certain liabilities of this operation.
With the decision to dispose of its AlphaNet division, the Company has
discontinued all of its operations in the computer industry segment.
Therefore, it has separately reported the losses from this segment as
discontinued operations for the years ended June 30, 1996 and 1995. The
Company has estimated the net realizable value of the discontinued operations,
including estimated costs and expenses directly associated with the disposal
and estimated losses from operations through the expected disposal date, and
expects a moderate overall gain from the sale or disposal of the discontinued
operations. Such gain will be recognized when it is realized.
At June 30, 1996, the net current and long-term assets from discontinued
operations consist primarily of cash and accounts receivable net of accounts
payable and accrued liabilities.
<PAGE>
The Company incurred a net loss from discontinued operations in fiscal 1996 of
$137,000 compared to a net loss of $997,000 in fiscal 1995. The reduced loss
in fiscal 1996 resulted primarily from the absence of fiscal 1995 losses of
$328,000 and $249,000 from its international operation and software
development activities, respectively. The net loss from discontinued
operations in fiscal 1996 was net of an income tax benefit of $68,000. No
income tax benefit related to discontinued operations was recorded in fiscal
1995 due to the Company's consolidated net loss position. Revenues from the
discontinued operations totaled $776,000 and $2,735,000 for the years ended
June 30, 1996 and 1995, respectively.
FINANCIAL CONDITION
Total current assets of the Company decreased $1.9 million, or 26.4%, during
fiscal year 1996 from $7.2 million at June 30, 1995 to $5.3 million at June
30, 1996. The decline in current assets was primarily related to cash and
trading securities used to fund the business acquisitions completed by the
Company in August 1995, which were in excess of current assets acquired, and
by the reclassification of current liabilities from the discontinued
operations to net current assets of discontinued operations at June 30, 1996.
Total assets of $10.2 million at June 30, 1996 reflected an increase of $2.6
million from June 30, 1995, and was primarily related to the business
acquisitions, partially offset by a decline resulting from the
reclassification of liabilities from the discontinued operations to net
current and long-term assets of discontinued operations at June 30,
1996.
Current liabilities increased $1.1 million to $3.8 million at June 30, 1996,
primarily due to current liabilities assumed as a part of the business
acquisitions, significantly offset by reductions caused by debt service and
payment of income tax liabilities during fiscal 1996 and the reclassification
of current liabilities from discontinued operations to net current assets from
discontinued operations at June 30, 1996.
Stockholders' equity of $300,000 at June 30, 1996 increased $1.2 million
compared to a deficit of $854,000 at June 30, 1995, primarily reflecting net
proceeds of $1.0 million received from a private placement offering completed
during fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased $1.1 million during fiscal 1996. The
decrease occurred primarily because the cash used for business acquisitions of
$3.5 million, fixed asset purchases of $636,000, net payment of debt service
of $1.3 million and payment of income tax liabilities of $897,000 exceeded the
cash generated from a reduction in trading securities and a private placement
offering of $4.0 million and $1.0 million, respectively.
The Company had working capital of $1.5 million at June 30, 1996, a decrease
of $3.0 million from $4.5 million at June 30, 1995. The reduction in working
capital was primarily related to cash and trading securities used to fund the
business acquisitions in fiscal 1996.
The Company's hotel operation has committed to completion of approximately
$1,000,000 in renovations to the hotel during fiscal 1997. The Company is
currently pursuing attainment of a first mortgage on the property to cover
these renovations. The Company's hotel franchise agreement generally requires
compliance with certain terms and conditions which are subject to review by
Holiday Inn. Under this agreement, the Company has been notified of its
noncompliance with the agreed upon timetable related to the planned
renovations. The outcome of such noncompliance presently cannot be determined
and no provision for any liability that may result has been made in the
financial statements.
The Company expects its other working capital requirements in the next fiscal
year to be met by existing working capital at June 30, 1996, internally
generated funds and short-term borrowings under an existing line of credit.
The entire outstanding principal balance on the IRS debt of $5,278,000 at June
30, 1996 is due in full on October 1, 1997. In order to pay such amount, the
Company will need to obtain additional debt or equity financing. There can be
no assurances that the Company will be able to obtain such financing or that
if it is able to obtain such financing, that it will be on favorable terms.
<PAGE>
TAX LOSS CARRYFORWARDS
As discussed in Note 7 to the accompanying consolidated financial statements,
the Company has approximately $61 million of tax loss carryforwards. A
valuation allowance of $23 million has been established for the net deferred
tax assets arising from the tax loss carryforwards because, in the Company's
assessment, it is more likely than not that the net deferred tax assets will
not be realized. See also Note 9 to the Consolidated Financial Statements.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued the Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets" and SFAS No. 123, "Accounting for Stock Based
Compensation." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amount or
their estimated recoverable amount. The adoption of this statement by the
Company is not expected to have an impact on the financial statements. SFAS
No. 123 encourages the accounting for stock-based employee compensation
programs to be reported within the financial statements on a fair value based
method. If the fair value based method is not adopted, then the statement
requires pro-forma disclosure of net income and earnings per share as if the
fair value based method had been adopted. The Company has not yet determined
how SFAS No. 123 will be adopted; however, it does not expect any impact on
the financial statements. Both statements are effective for fiscal years
beginning after December 15, 1995.
During fiscal 1995, the Company implemented Financial Accounting Standards
Board Statement No. 112, "Employers' Accounting for Postemployment Benefits"
("FAS 112"), effective July 1, 1994. The cumulative effect, as of July 1,
1994, of adopting this standard increased the Company's fiscal 1995 net loss
by $271,000. This resulted from accruing the present value of the expected
disability benefits to be paid out, under the Company's prior self-insured
disability benefits program, over the next 12 years to a maximum of $12,000
per quarter. The Company's current disability plan is fully insured.
<PAGE>
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of NBI, Inc.
We have audited the accompanying consolidated balance sheet of NBI, Inc. and
subsidiaries as of June 30, 1996, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
June 30, 1996 and 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of NBI, Inc.
and subsidiaries at June 30, 1996, and the results of their operations and
their cash flows for the years ended June 30, 1996 and 1995 in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
Denver, Colorado
August 21, 1996, except for Note 3 which is
as of August 27, 1996
<PAGE>
NBI, INC.
CONSOLIDATED BALANCE SHEET
June 30, 1996
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
- ------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 782
Accounts receivable, less allowance for doubtful accounts of $83 1,300
Inventories 2,317
Net current assets of discontinued operations 31
Other current assets 878
--------
Total current assets 5,308
Property, plant and equipment, net 4,558
Net long-term assets of discontinued operations 14
Other assets 315
--------
$10,195
========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------
Current liabilities:
Short-term borrowings and current portion of notes payable $ 1,454
Obligation for short-sale transactions 493
Accounts payable 952
Accrued liabilities 945
--------
Total current liabilities 3,844
Long-term liabilities:
Income taxes payable 5,362
Notes payable 224
Deferred income taxes 251
Postemployment disability benefits 214
--------
Total liabilities 9,895
--------
Commitments and contingencies
Stockholders' equity:
Common stock - $.01 par value (20,000,000 shares
authorized; 10,001,270 shares issued) 100
Capital in excess of par value 6,181
Accumulated deficit (5,429)
Foreign currency translation adjustment 316
--------
1,168
Less treasury stock, at cost (2,004,036 shares) (868)
--------
Total stockholders' equity 300
--------
$10,195
========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 1996 and 1995
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Revenues:
Sales $9,972 $ 115
Service and rental 1,795 --
------- --------
11,767 115
Costs and expenses:
Cost of sales 7,172 95
Cost of service and rental 1,273 --
Marketing, general and administrative 2,702 919
------- --------
11,147 1,014
-------- --------
Income (loss) from operations 620 (899)
------- --------
Other income (expense):
Interest income 28 183
Net gain on investments 354 2,210
Other income 50 32
Interest expense (655) (741)
------- --------
(223) 1,684
-------- --------
Income from continuing operations before provision
for income taxes and cumulative effect of change
in accounting method 397 785
Provision for income taxes (172) --
------- --------
Income from continuing operations before cumulative
effect of change in accounting method 225 785
Loss from discontinued operations, net of income tax
benefit of $68 in 1996 and $0 in 1995 (137) (997)
Cumulative effect of change in accounting method -- (271)
------- --------
Net income (loss) $ 88 $ (483)
======= ========
Income (loss) per common share:
Income from continuing operations before cumulative
effect of change in accounting method .03 .12
Loss from discontinued operations (.02) (.15)
Cumulative effect of change in accounting method -- (.04)
------- --------
Net income (loss) $ .01 $ (.07)
======= ========
Weighted average number of common and
common equivalent shares outstanding 6,923 6,743
======= ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended June 30, 1996 and 1995
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Common Foreign
Number of Stock Capital in Currency
Common (Par Value Excess of Accumulated Translation Treasury
Shares $.01) Par Value Deficit Adjustment Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance July 1, 1994 10,001,270 $100 $5,769 $(5,034) $304 $(1,400) $ (261)
Foreign currency translation
adjustment -- -- -- -- 7 -- 7
Treasury stock purchases -- -- -- -- -- (117) (117)
Net loss for the year
ended June 30, 1995 -- -- -- (483) -- -- (483)
---------- ---- ------- -------- ---- -------- -------
Balance June 30, 1995 10,001,270 100 5,769 (5,517) 311 (1,517) (854)
Foreign currency translation
adjustment -- -- -- -- 5 -- 5
Proceeds from private
placement, net of
offering costs -- -- 398 -- -- 649 1,047
Other -- -- 14 -- -- -- 14
Net income for the year
ended June 30, 1996 -- -- -- 88 -- -- 88
---------- ----- ------- -------- ----- ------- -------
Balance June 30, 1996 10,001,270 $100 $6,181 $(5,429) $316 $ (868) $ 300
========== ===== ======= ======== ===== ======== =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Year Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 88 $ (483)
Adjustments to reconcile net income (loss) to net cash
flow provided by operating activities:
Depreciation and amortization 480 131
Provisions for (reduction in) bad debt allowance 125 (27)
Provisions for writedown of inventories 123 23
Provision for impairment of property and equipment -- 14
Loss (gain) on sales of property and equipment (2) 6
Net unrealized loss (gain) on trading securities 309 (2,609)
Gain on sale of subsidiary -- (279)
Cumulative effect of accounting change -- 271
Other (49) 32
Changes in assets -- decrease (increase):
Accounts receivable (144) 482
Inventories (276) (37)
Trading securities 4,010 (1,715)
Marketable securities -- 5,086
Other current assets (85) 386
Changes in liabilities -- (decrease) increase:
Accounts payable and accrued liabilities (272) (391)
Income tax related accounts (897) (666)
-------- --------
Net cash flow provided by operating activities 3,410 224
-------- --------
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired (3,483) (288)
Proceeds from sales of property and equipment 2 55
Purchases of property and equipment (636) (20)
Collections from notes receivable -- 350
Issuance of notes receivable -- (350)
Payments for land option (108) --
Proceeds from sale of subsidiary -- 89
-------- --------
Net cash flow used in investing activities (4,225) (164)
-------- --------
<FN>
(continued on following page)
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Year Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of stock, net of offering costs 1,047 --
Purchases of treasury stock -- (117)
Payments on notes payable (462) (126)
Net payments on line of credit and short-term margin borrowings (871) (600)
-------- -------
Net cash flow used in financing activities (286) (843)
-------- -------
Effects of exchange rates on cash 5 6
-------- -------
Net decrease in cash and cash equivalents (1,096) (777)
Less cash and cash equivalents reclassified to net current assets
of discontinued operations at June 30, 1996 (53) --
Cash and cash equivalents at beginning of year 1,931 2,708
-------- -------
Cash and cash equivalents at end of year $ 782 $1,931
======== =======
Supplemental disclosures of cash flow information:
Interest paid $ 676 $ 749
======== =======
Income taxes paid $ 973 $ 666
======== =======
Noncash purchases of property, plant and equipment
included in accounts payable at end of year $ 127 $ --
======== =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NBI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and 1995
1. Summary of Significant Accounting Policies
BUSINESS DESCRIPTION: With the business acquisitions completed during the
first quarter of fiscal 1996 (see Note 2), the Company now operates primarily
in the glass manufacturing and hotel operations industries. Both of these
operations are located in southwestern Pennsylvania. The Company also owns a
small children's paint and novelty toy manufacturing company in Las Vegas,
Nevada. Previously, the Company operated primarily in the computer industry.
Those operations have been discontinued and reported separately (see Note 3).
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its wholly-owned and majority-owned
subsidiaries. All significant intercompany accounts, transactions and profits
have been eliminated.
USE OF ESTIMATES: Preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates or assumptions affect reported amounts of
assets, liabilities, revenue and expenses as reflected in the financial
statements. Actual results could differ from those estimates.
FAIR VALUES OF FINANCIAL INSTRUMENTS: Unless otherwise specified, the Company
believes the book value of financial instruments approximates their fair
value.
RECENT ACCOUNTING PRONOUNCEMENTS: The Financial Accounting Standards Board
has recently issued the Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets" and SFAS No.
123, "Accounting for Stock Based Compensation." SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles be reported at the
lower of the carrying amount or their estimated recoverable amount. The
adoption of this statement by the Company is not expected to have an impact on
the financial statements. SFAS No. 123 encourages the accounting for
stock-based employee compensation programs to be reported within the financial
statements on a fair value based method. If the fair value based method is
not adopted, then the statement requires pro-forma disclosure of net income
and earnings per share as if the fair value based method had been adopted.
The Company has not yet determined how SFAS No. 123 will be adopted; however,
it does not expect any impact on the financial statements. Both statements
are effective for fiscal years beginning after December 15, 1995.
INVESTMENTS IN SECURITIES:
The Company's accounting policies for investments in securities are as
follows:
Trading securities: Trading securities are held for resale in anticipation
of short-term market movements. These types of securities, consisting of
marketable debt and equity securities, are stated at fair market value. Gains
and losses, both realized and unrealized, are included in net gain (loss) on
investments when incurred. All dividends, interest and discount or premium
amortization is included in interest income as earned. Cash flows from
purchases and sales of trading securities are classified as cash flows from
operating activities rather than from investing activities.
Securities held-to-maturity: Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at
amortized cost. Interest earned on securities classified as held-to-maturity,
including any discount or premium amortization, is included in interest income
as earned.
Available for Sale: Marketable equity securities and debt securities not
classified as either trading or held-to-maturity are classified as
available-for-sale. Available-for-sale securities are carried at fair market
value, with
<PAGE>
the unrealized gains and losses, net of tax, reported as a separate component
of stockholders' equity. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are
included in net gain (loss) on investments and other income (expense) when
incurred. The cost of securities sold is based on the specific identification
method. Interest and dividends earned on securities classified as
available-for-sale, including any discount or premium amortization, are
included in interest income as earned.
INVENTORIES: Inventories are stated at the lower of cost (at standard which
approximates first-in, first-out method) or market and are comprised of the
following at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Raw Materials $ 712,000
Work in Process 303,000
Finished Goods 1,291,000
Food and Beverage Inventory 11,000
----------
$2,317,000
==========
</TABLE>
PROPERTY, PLANT AND EQUIPMENT: Capital assets are recorded at cost and are
depreciated on a straight-line basis over the following lives:
<TABLE>
<CAPTION>
<S> <C>
Asset Type Life
- ------------------------------------- -----------
Land N/A
Buildings 20-25 years
Machinery and equipment 3-10 years
Office and hotel furniture, fixtures 5-7 years
Construction-in-progress N/A
</TABLE>
TRANSLATION OF FOREIGN CURRENCIES: Accounts of foreign subsidiaries are
maintained in the currencies of the countries in which they operate and are
translated to U.S. dollars in conformity with generally accepted accounting
principles. Adjustments resulting from the translation of foreign currency
financial statements are deferred and classified as a separate component of
stockholders' equity.
The translation adjustment at June 30, 1996 is related to the Company's
foreign subsidiary, NBI Ltd. which is currently in liquidation (see Note 3).
When this liquidation is completed, the translation adjustment will be
recorded as a realized gain and included in the overall net gain (loss) from
sale or disposal of the discontinued operations.
NET INCOME (LOSS) PER SHARE: Net income (loss) per share is computed by
dividing net income (loss) by the weighted average number of common shares
and, if dilutive, common equivalent shares outstanding during the period.
Common equivalent shares recognize the potential dilutive effects of the
future exercise of stock options, warrants, convertible debt and convertible
preferred shares. For the years ended June 30, 1996 and 1995, the Company had
no preferred stock or convertible debt. In 1996 and 1995, the common
equivalent shares were not included in the computation because their effect is
not dilutive.
RECLASSIFICATIONS AND ADJUSTMENTS: Certain items in the 1995 financial
statements have been reclassified to conform to the 1996 manner of
presentation. The Company recorded a $99,000 reduction to cost of sales in
the fourth quarter of fiscal 1996 to correct a first quarter overstatement.
Note 2 - Business Acquisitions
On August 4, 1995, NBI, Inc. acquired 100% of the outstanding capital stock of
the Belle Vernon Motel Corporation for $2,430,000 in cash pursuant to a stock
purchase agreement. The Belle Vernon Motel Corporation owns and operates an
81 room Holiday Inn in Southwestern Pennsylvania. The primary assets held by
the acquired corporation consist of cash, accounts receivable, property and
equipment. The Company received approval as an authorized Holiday Inn
franchisee prior to the purchase transaction. The property and
<PAGE>
equipment acquired continues to be operated as a Holiday Inn Hotel. During
fiscal 1996, the Company changed the name of the Belle Vernon Motel
Corporation to NBI Properties, Inc.
On August 14, 1995, with an effective date of close of business on July 31,
1995, American Glass, Inc., a newly formed, wholly-owned subsidiary of NBI,
Inc., completed its purchase of a majority of the assets of L.E. Smith Glass
Company of Mount Pleasant, Pennsylvania, pursuant to an asset purchase and
sale agreement. L.E. Smith Glass Company is a manufacturer of handmade fine
glass giftware and lighting fixtures and has been in business since 1907. The
assets purchased consist primarily of accounts receivable, inventories, and
property, plant and equipment. The property, plant and equipment acquired
continues to be used in the manufacture of handmade fine glass giftware and
lighting fixtures. The final adjusted purchase price of $5,770,000 was paid
through the assumption of $3,449,000 of certain liabilities at July 31, 1995,
cash, and cash proceeds from the liquidation of other current assets held by
the Company.
Both acquisitions have been accounted for under the purchase method of
accounting. The results of operations of these acquired businesses have been
included in the accompanying Statements of Operations since the effective
dates of acquisition. The total purchase price, including acquisition costs,
for the Belle Vernon Motel Corporation and the L.E. Smith Glass Company was
$2,496,000 and $5,913,000, respectively. The fair market value of the net
assets acquired of the Belle Vernon Motel Corporation exceeded the purchase
price by $844,000. Accordingly, the noncurrent assets consisting of property
and equipment have been reduced by this amount under the purchase method of
accounting. Similarly, the fair market value of the net assets acquired of
the L.E. Smith Glass Company exceeded the purchase price by $916,000;
therefore, the noncurrent assets consisting of property, plant and equipment
were reduced by this amount.
Unaudited proforma consolidated results of operations of the Company are shown
in the following table as if these businesses were acquired as of the first
day of the periods presented, July 1, 1995 and 1994. This unaudited proforma
information is based on the Company's accompanying Statements of Operations
and the historical financial information of the acquired companies, and
includes adjustments to income taxes and depreciation, giving effect of the
terms of the transaction as if the acquisitions had occurred on the first day
presented.
Unaudited proforma consolidated results of operations:
<TABLE>
<CAPTION>
Year Ended
June 30,
1996 1995
(Amounts in thousands,
except per share data)
<S> <C> <C>
Revenue $12,591 $10,090
======= =======
Income from continuing operations before cumulative
effect of accounting change $ 257 $ 1,506
======= =======
Net income $ 120 $ 238
======= =======
Income per common share from continuing operations
before cumulative effect of accounting change $ .04 $ .22
======= =======
Net income per common share $ .02 $ .04
======= =======
</TABLE>
3. Discontinued Operations
During April 1995, NBI, Ltd. completed a sale of certain assets of the
company including its customer base. NBI, Ltd. is currently in voluntary
liquidation which the Company expects to be completed within the next year.
As of June 30, 1995, NBI, Inc. discontinued all software development
activities. For the year ended June 30,
<PAGE>
1995, the Company's expenditures for product development and engineering were
included in the loss from discontinued operations. The Company had no
expenditures for product development and engineering for the year ended June
30, 1996.
On August 27, 1996, the Company decided to dispose of its AlphaNet division.
The Company is currently in negotiation with a third party regarding the sale
of certain assets and the assumption of certain liabilities of this operation.
With the decision to dispose of its AlphaNet division, the Company has
discontinued all of its operations in the computer industry segment.
Therefore, it has separately reported the losses from this segment as
discontinued operations for the years ended June 30, 1996 and 1995. The
Company has estimated the net realizable value of the sale or disposal of the
discontinued operations, including estimated costs and expenses directly
associated with the disposal and estimated losses from operations through the
expected disposal date, and expects a moderate overall gain from the
discontinued operations. The gain will be recognized when it is realized.
At June 30, 1996, the net current and long-term assets from discontinued
operations consist primarily of cash and accounts receivable net of accounts
payable and accrued liabilities.
Revenues from the discontinued operations totaled $776,000 and $2,735,000 for
the years ended June 30, 1996 and 1995, respectively.
4. Cash and Cash Equivalents
Cash and cash equivalents include investments that are readily convertible to
known amounts of cash and have original maturities of three months or less.
The Company places its cash and temporary cash investments with financial
institutions. At times, such investments may be in excess of federally
insured limits.
5. Investments in Securities and Obligations from Short-Sale
Transactions
During the year ended June 30, 1996, all of the Company's securities were
classified as trading securities; no securities were classified as
held-to-maturity or available-for-sale. The Company recorded a net realized
gain of $663,000 and a net unrealized loss of $309,000 on investments for the
year ended June 30, 1996. For the year ended June 30, 1995, a net realized
loss of $399,000 and a net unrealized gain of $2,609,000 were recorded.
As part of its investment policies, the Company's investment portfolio may
include option instruments and may include a concentrated position in one or
more securities. As a result of this, the financial results may fluctuate
significantly and have larger fluctuations than with a more diversified
portfolio. In addition, the Company may invest in short-sale transactions of
trading securities. Short-sales can result in off-balance sheet risk, as
losses can be incurred in excess of the reported obligation if market prices
of the securities subsequently increase.
At June 30, 1996, the Company had two short investment positions totaling
$493,000 which were included in obligations from short-sale transactions.
Both short positions were closed subsequent to year-end, resulting in an
immaterial net loss.
6. Other Current Assets
Other current assets, totaling $878,000 at June 30, 1996, included a
receivable of $498,000 for proceeds from short sale transactions (see Note 5).
The proceeds were subsequently received on July 3, 1996. Also included in
other current assets at June 30, 1996, was restricted cash of $70,000,
representing amounts held in trust for payments under self insurance plans.
<PAGE>
7. Property, Plant and Equipment
<TABLE>
<CAPTION>
June 30,
1996
(Amounts in thousands)
<S> <C>
Land $ 113
Buildings 1,929
Machinery and equipment 2,730
Office and hotel furniture and fixtures 479
Construction in-progress 303
-------
5,554
Accumulated depreciation (996)
-------
$4,558
=======
</TABLE>
Total depreciation expense from continuing operations was $435,000 and $42,000
for the years ended June 30, 1996 and 1995, respectively.
8. Other Assets
Included in other assets of $315,000 at June 30, 1996, is $248,000 of goodwill
and other intangibles related to the acquisition of 80% of the outstanding
stock of a children's paint and novelty toy manufacturing company during
fiscal 1995. The goodwill and other intangibles are net of accumulated
amortization totaling $44,000 at June 30, 1996, and are being amortized on a
straight-line basis over ten years. The carrying value of goodwill is
periodically reviewed by the Company, and impairments, if any, are recognized
when expected future discounted cash flows derived from goodwill is less than
its carrying value. Related amortization expense was $29,000 and $15,000 for
the years ended June 30, 1996 and 1995, respectively.
9. Income Taxes
IRS Debt:
On October 13, 1995, the Company entered into an agreement in principle with
the IRS, effective October 1, 1995, revising the payment terms provided in its
settlement agreement with the IRS dated June 12, 1991. The new agreement
provided for a principal payment of $250,000, plus accrued interest for the
period July 1, 1995 through September 30, 1995, at the original stated rate,
and accrued interest for the period October 1, 1995 through December 31, 1995,
at the rate of 7.5% per annum, which was paid upon execution of the definitive
agreement on March 19, 1996. Subsequently, quarterly interest payments are
due beginning April 1, 1996 through October 1, 1997. Interest was paid and
accrued on the outstanding principal balance at the rate of 7.5% for the
period October 1, 1995 through March 31, 1996. The interest rate for April 1,
1996 through October 1, 1997 is being negotiated, under the terms of the
agreement, based upon NBI's ability to pay the statutory rate, but in no event
will the interest rate for this period exceed the lesser of the statutory rate
or 10%. The Company is paying interest on the scheduled payment dates based
upon the rate of 7.5% for this period until the negotiations are finalized.
The remaining principal balance is due in full on October 1, 1997.
In conjunction with the new agreement, the Company granted the IRS a security
interest in all of the capital stock of American Glass, Inc., as well as all
of the capital stock of NBI Properties, Inc. The security interest will
automatically terminate upon full payment by NBI of all principal and interest
owed to the IRS under the agreement. The agreement also provides for
accelerated principal payments to be made within forty-five days after the end
of any fiscal quarter in which NBI, Inc.'s unconsolidated cash and cash
equivalents, excluding restricted cash, exceed $1.3 million. The Company is
required to pay to the IRS fifty percent of the amount by which such cash and
cash equivalents exceed $1.3 million. Any such payment shall be applied to
and shall reduce the outstanding principal balance.
There is no accelerated principal amount payable in accordance with the
revised agreement based upon the Company's cash and cash equivalents at June
30, 1996. Furthermore, any other accelerated principal payments
<PAGE>
due under the new agreement within the next twelve months, based upon
subsequent quarter-end cash and cash equivalent positions, are not
determinable at June 30, 1996. Therefore, none of the principal balance due
is classified as current.
Income Tax Provision and Deferred Income Taxes:
The Company accounts for income taxes in conformity with FAS 109. Under the
provisions of FAS 109, a deferred tax liability or asset (net of a valuation
allowance) is provided in the financial statements by applying the provisions
of applicable tax laws to measure the deferred tax consequences of temporary
differences which result in net taxable or deductible amounts in future years
as a result of events recognized in the financial statements in the current or
preceding years.
For the years ended June 30, 1996 and 1995, the provision for income taxes is
included in the consolidated statements of operations as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
------ ------
(Amounts in thousands)
Continuing operations $ 172 $ --
Discontinued operations (benefit) (68) --
------ ------
$ 104 $ --
====== ======
</TABLE>
The provision for income taxes from continuing operations for the years ended
June 30, 1996 and 1995 consisted of:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
----- -----
(Amounts in thousands)
Federal:
Current $ -- $ --
Deferred 82 --
----- -----
82 --
----- -----
State and other:
Current 90 --
Deferred -- --
----- -----
90 --
----- -----
Total $ 172 $ --
===== =====
</TABLE>
In accordance with fresh-start accounting, which was adopted as of April 30,
1992, and as a result of the Company's reorganization under Chapter 11 of the
United States Bankruptcy Code, future utilization of any income tax benefit
from pre-reorganization net operating losses are not credited to the income
tax provision, but rather, reported as an addition to capital in excess of par
value.
The reconciliation of income taxes from continuing operations at the U.S.
federal statutory tax rate to the effective tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995
(Amounts in thousands)
<S> <C> <C>
Federal tax expense computed at 34% on income from
continuing operations before provision for income
taxes and cumulative effect of change in
accounting method $135 $ 265
State taxes, net of federal benefit 86 --
Change in the balance of the valuation
allowance for deferred tax assets and other (49) (265)
----- ------
Total tax provision for income taxes $172 $ --
===== ======
</TABLE>
<PAGE>
Significant components of the Company's deferred tax liabilities and assets
as of June 30, 1996 are as follows:
<TABLE>
<CAPTION>
1996
(Amounts in thousands)
<S> <C> <C>
Deferred tax assets:
Current
Other - net $ 499
Noncurrent
Net operating loss carryforwards 20,668
Interest portion of IRS Settlement amount 930
Capital loss carryforwards 529
Tax basis in subsidiaries 599
Other - net 340
--------
Total deferred tax assets 23,565
Valuation allowance for deferred tax assets (23,260)
--------
Net deferred tax assets 305
--------
Deferred tax liabilities:
Noncurrent
Other - net 90
Basis difference in fixed assets acquired
with Belle Vernon Motel acquisition 466
--------
Total deferred tax liabilities: 556
--------
Net deferred tax asset (liability) $ (251)
========
</TABLE>
The net change in the valuation allowance for the years ended June 30, 1996
and 1995 was an increase of $309,000 and $1,666,000, respectively.
The valuation allowance of $23,260,000 at June 30, 1996 was established
because, in the Company's assessment, it is more likely than not that the net
deferred tax assets will not be realized.
The tax loss carryforward at June 30, 1996 is approximately $61,000,000, of
which $18,000,000, $14,000,000, $14,000,000, $7,000,000, $4,000,000 $3,000,000
and $1,000,000 expire in fiscal years 2004, 2005, 2006, 2008, 2009, 2010 and
2011 respectively.
10. Accrued Liabilities
<TABLE>
<CAPTION>
1996
(Amounts in thousands)
<S> <C> <C>
Accrued interest $ 196
Payroll and related benefits and taxes 378
Acquired liabilities under previously self-insured
health and other benefit plans 210
Other 161
-----
$ 945
=====
</TABLE>
<PAGE>
11. Notes Payable and Short-term Borrowings
The following summarizes the Company's notes payable and short-term borrowings
outstanding at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C> <C>
June 30,
1996
--------
Revolving bank credit note of $2,000,000, due October 31, 1996, interest at
bank's prime rate (8.25% at June 30, 1996) plus 1 1/4% or less, depending
upon attainment of certain financial ratios as defined in the agreement;
collateralized by a first security interest in all accounts receivable,
inventories and personal property of the glass manufacturing company $ 1,247
8.75% bank note payable; payable in monthly installments of $8,333 through
July 1999; cross collateralized with the revolving credit note above 292
Other 139
-------
Total notes payable and short-term borrowings 1,678
Current portion (1,454)
-------
Long-term portion of notes payable $ 224
========
</TABLE>
The principal maturities of notes payable and short-term borrowings for each
of the fiscal years following June 30, 1996 are: 1997 - $1,454,000; 1998 -
$128,000; and 1999 - $96,000.
12. Postemployment Benefits
During fiscal 1995, the Company adopted the provisions of Statements of
Financial Accounting Standards No. 112, "Employers' Accounting For
Postemployment Benefits" ("FAS 112"). The cumulative effect as of July 1,
1994 of adopting this standard reduced net income by $271,000.
The Company provides health care, life insurance, and disability benefits for
eligible active employees. Prior to adoption of FAS No. 112, the Company
recognized and funded the cost of these benefits over the employees' working
lives, except for self-insured long-term disability costs which were
recognized monthly as the disability continued. FAS No. 112 requires the
Company to accrue the expected costs over the employee service period.
As required by the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), the Company allows terminated employees who wish to continue health
care coverage to pay the expected cost to be incurred, as determined by the
insurance company administering the claims. However, because the Company is
self-insured for health care costs for its corporate, Krazy Colors, Inc. and
AlphaNet employees, it is liable for any actual cost incurred in excess of the
expected costs. As of June 30, 1996, there were no such known amounts.
The Company's current life insurance and disability benefits are fully
insured. Accordingly, the Company has no further liability and no accrual is
needed. However, the Company previously had a disability benefit plan that
was self-insured, under which payments are still being made. In accordance
with FAS No. 112, the Company has accrued the present value of the expected
payments discounted at 10%, as of July 1, 1994, of $271,000, and recorded this
as a cumulative effect of change in accounting method. The expected payments
were calculated based upon the earlier of the expected duration of each
individual's disability or the time remaining until the individual reaches the
age of 65, at which time the benefits cease. The total liability outstanding
at June 30, 1996, is $234,000, of which $214,000 is classified as long-term.
<PAGE>
13. Commitments and Contingencies
Lease Commitments:
The Company's hotel operations leases the land supporting its hotel, under an
operating lease expiring in the year 2026, with an option to extend the lease
for an additional twenty-five years. The monthly lease payments are based
upon 3% of room and related revenue and 1% of other revenues of the hotel,
with a minimum annual rental of $8,000. Rent expense under this lease for the
period August 4, 1995, the hotel acquisition date, through June 30, 1996, was
$39,000.
The Company also leases various office facilities and equipment. The office
facilities and equipment leases from continuing operations have expiration
dates that extend through September 2000. Total rental expense for continuing
operations was $100,000 and $92,000 for the years ended June 30, 1996 and
1995, respectively.
The future minimum rental commitments for continuing operations for the next
five fiscal years, under non-cancellable leases, are: 1997 - $103,000; 1998 -
$41,000; 1999 - $27,000; 2000 - $23,000; and 2001 - $10,000.
The Company also has non-cancellable facility and equipment leases related to
its discontinued operations. However, it has no liability related to the
leases of its subsidiary, NBI, Ltd., that is in the process of voluntary
liquidation (see Note 3).
Other Commitments and Contingencies:
In conjunction with NBI's acquisition of a small children's paint and novelty
toy manufacturer in February 1995 (see Note 17), the stock purchase agreement
provided for royalty payments based upon gross margin performance. Royalties
are calculated based upon gross margin in excess of $150,000 in any calendar
year and will be earned at the rate of twenty percent when the gross margin is
greater than $150,000 and less than or equal to $300,000, twenty-five percent
when the gross margin is greater than $300,000 and less than or equal to
$450,000, and thirty percent when the gross margin is greater than $450,000.
No royalties were incurred during the fiscal years ended June 30, 1996 and
1995.
In connection with its franchise agreement, the Company's hotel operation has
committed to completion of approximately $1,000,000 in renovations to the
hotel during fiscal 1997. As of June 30, 1996, $129,000 of these improvements
had been started and are included in construction in progress. The Company's
hotel franchise agreement generally requires compliance with certain terms and
conditions which are subject to review by Holiday Inn. Under this agreement,
the Company has been notified of its noncompliance with the agreed upon
timetable related to the planned renovations. The outcome of such
noncompliance presently cannot be determined and no provision for any
liability that may result has been made in the financial statements.
14. Stockholders' Equity
The Company has authorized 20,000,000 shares of $.01 par value common stock.
At June 30, 1996, 10,001,270 shares were issued including 2,004,036 held in
treasury. Therefore, the Company had 7,997,234 shares issued and outstanding
at June 30, 1996, including 1,500,000 shares which are unregistered.
In March 1996, the Company issued 1,500,000 unregistered shares of its common
stock from shares held in treasury through a private placement stock offering.
The offering resulted in net proceeds of $1,047,000 which was used by the
Company first to pay obligations due to the IRS and then for operating capital
of the Company. Holders of at least 50% of the shares issued have the right
to demand registration of the shares after December 1, 1996. Holders also
have the right to have their shares registered at any time the Company
registers shares for its own purpose until December 31, 1999.
<PAGE>
In February 1995, the Company issued warrants to purchase 1.7 million shares
of its common stock at $.89 per share in conjunction with an acquisition.
(See Note 17.) These warrants are exercisable through December 31, 2002.
As of June 30, 1996, no warrants had been exercised.
15. Stock Options
The Employee Stock Option Plan was established pursuant to the Company's Plan
of Reorganization. At June 30, 1996, 900,000 shares were reserved under the
Employee Stock Option Plan. The employee options are exercisable for a period
of five years from the date of the grant. The options granted under this plan
prior to fiscal 1996 are intended to be non-qualified stock options. Those
issued subsequent to fiscal 1995 are intended to be incentive stock options.
Options to purchase 150,000 shares of stock are outstanding at June 30, 1996,
that were issued to directors of the Company during fiscal 1993. These
options were not issued pursuant to an existing stock option plan and were
immediately exercisable on the grant date. These options are exercisable for
a period of five years from the date of grant.
Options to purchase 400,000 shares of stock were issued to the Chief Executive
Officer during fiscal 1994. These options were not issued pursuant to an
existing stock option plan. These options vest over four years at 25% per
year with vesting continuing as long as the optionee is employed as Chief
Executive Officer.
At June 30, 1996, 550,000 shares were reserved for options issued outside of
the Stock Option Plan.
The following table summarizes, by number of shares, option transactions under
all plans:
<TABLE>
<CAPTION>
Employee Other Option Price
Plan Options Total Per Share Aggregate
(Amounts in
thousands)
<S> <C> <C> <C> <C> <C>
Outstanding July 1, 1994 431,000 550,000 981,000 $.25 - .77 $ 509
Granted 125,000 -- 125,000 .38 48
Exercised -- -- -- --
Forfeited (311,000) -- (311,000) .38 (118)
--------- ------- ---------- ------
Outstanding June 30, 1995 245,000 550,000 795,000 .25 - .77 439
Granted 360,000 -- 360,000 .88 316
Exercised -- -- -- --
Forfeited (3,500) -- (3,500) .38 (1)
--------- ------- ---------- ------
Outstanding June 30, 1996 601,500 550,000 1,151,500 $.25 - .88 $ 754
========= ======= ========== ======
Options exercisable
at June 30, 1996 216,375 350,000 566,375
========= ======= ==========
</TABLE>
16. Segment Information
With the business acquisitions completed during the first quarter of fiscal
1996, the Company now operates primarily in the glass manufacturing and hotel
operations industries. Both of these operations are located in southwestern
Pennsylvania. Previously, the Company operated primarily in the computer
industry. Those operations have been discontinued and reported separately
(see Note 3). The segment information presented below excludes amounts
related to general corporate activities.
<PAGE>
The Company's glass manufacturer sells its glass giftware primarily to
traditional and specialty retailers, manufacturers/wholesalers and the food
service market throughout the United States. L.E. Smith Glass Company
currently has one significant customer, a specialty retailer whose market is
the "home-party" business. Sales to this customer totaled approximately 26%
of NBI's consolidated revenues in fiscal 1996. In addition, this customer
constituted approximately 18% of the Company's consolidated accounts
receivable at June 30, 1996, while one other customer, a national retailer,
comprised another 16% of the accounts receivable balance.
In addition, the glass manufacturer purchases a majority of its raw materials
from only a few vendors. Management believes that other suppliers could
provide similar materials on comparable terms.
The Company had no significant customers or suppliers in fiscal 1995.
As of June 30, 1996, approximately 60% of the Company's employees were covered
by collective bargaining agreements expiring in fiscal 1999.
<TABLE>
<CAPTION>
Year ended
June 30,
1996 1995
(Amounts in thousands)
<S> <C> <C>
Revenue from continuing operations:
Glass manufacturing $ 9,500 $ --
======== =====
Hotel operations $ 1,795 $ --
======== =====
Other operations $ 472 $115
======== =====
Operating income (loss):
Glass manufacturing $ 1,285 $ --
======== =====
Hotel operations $ 159 $ --
======== =====
Other operations $ (135) $(69)
======== =====
Identifiable assets:
Glass manufacturing $ 6,240 $ --
======== =====
Hotel operations $ 2,062 $ --
======== =====
Other operations $ 592 $541
======== =====
Additions to property, plant and equipment:
Glass manufacturing $ 422 $ --
======== =====
Hotel operations $ 307 $ --
======== =====
Other operations $ 28 $ --
======== =====
Depreciation and amortization:
Glass manufacturing $ 343 $ --
======== =====
Hotel operations $ 80 $ --
======== =====
Other operations $ 36 $ 16
======== =====
</TABLE>
<PAGE>
17. Related Party Transactions
In February 1995, the Company entered into an agreement to acquire 80% of the
outstanding stock of a small children's paint and novelty toy manufacturing
company, effective as of January 1, 1995. Prior to this agreement the
Company's Chief Executive Officer (CEO) owned 55% of the outstanding stock of
the manufacturer. Under the purchase agreement, the Company paid $288,000 in
cash for the stock, including $158,000 paid to NBI's CEO. In addition, the
sellers are eligible to receive royalty payments based upon gross margin
performance in excess of specified amounts. (See Note 13.) NBI's CEO will
receive 55% of any such royalty payments. No royalties were incurred by the
Company during the fiscal years ended June 30, 1996 and 1995. In conjunction
with the purchase agreement, the sellers were issued warrants to purchase a
total of 1.7 million shares of NBI's common stock, including warrants to
purchase 935,000 shares issued to the Company's CEO, at a price of $.89 per
share. These warrants are exercisable through December 31, 2002.
In addition, in December 1994, the Company advanced $100,000 to the acquired
Company under the terms of a revolving line of credit, which expires on
December 31, 1996. The debt bears interest at 1% per month. A portion of the
funds advanced in December 1994 were used by the borrower to paydown $85,000
of an outstanding loan it had with NBI's CEO. The balance due under the line
of credit is eliminated in consolidation.
In November 1994, the Company loaned its CEO $350,000 under the terms of a
promissory note. The note provided for interest at the rate of 10% per annum
and was paid in full in March 1995.
During fiscal 1996 and 1995, the Company utilized a stock brokerage firm,
which is 100% owned by its CEO, to execute certain transactions on its behalf.
However, NBI uses another unrelated company to act as custodian and clearing
firm for its investment assets. Gross revenues earned by the brokerage firm
related to investment transactions by NBI in fiscal 1996 and 1995, totaled
$89,000 and $37,000 respectively, on purchase and sale transactions totaling
$26,988,000 and $6,249,000 before fees, respectively.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
On August 11, 1995, NBI, Inc., as approved by its Board of Directors,
dismissed the firm of Ernst & Young, LLP and on August 17, 1995, engaged the
firm of BDO Seidman, LLP as its principal accountant.
During the two fiscal years ended June 30, 1994, and the subsequent period
preceding the dismissal of Ernst & Young, LLP, there were no disagreements on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
The reports of Ernst & Young, LLP on the financial statements of the Company
at and for the years ended June 30, 1993 and 1994 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
The Company has received a letter from Ernst & Young, LLP addressed to the SEC
stating whether it agrees with the above statements. A copy of this letter,
dated August 17, 1995, was filed as Exhibit 16.1 to the related Form 8-K dated
August 11, 1995.
PART III
Items 9, 10, 11, and 12 are hereby incorporated by reference to the Annual
Meeting Proxy Statement to be filed pursuant to Regulation 14A.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3. Articles of Incorporation and Bylaws
a. Restated Certificate of Incorporation(5)
b. Restated Bylaws(5)
10. Material Contracts
a. Agreement in Principle dated October 13, 1995 between NBI, Inc. and the
Internal Revenue Service(5)
b. Belle Vernon Motel Corporation Land Lease Agreement(5)
c. Agreement between L.E. Smith Glass Company and The American Flint Glass
Workers' Union(5)
d. Stock Purchase Agreement with Romaine Gilmour and Rose B. Calderone
dated August 4, 1995(3)
e. Asset Purchase and Sale Agreement between Lawrence F. Ranallo, Trustee
in Bankruptcy of Pittsburgh Food & Beverage Company, Inc., L.E. Smith Glass
Company and American Glass, Inc. dated June 29, 1995(3)
f. Krazy Colors, Inc. Stock Purchase Agreement(2)
g. Krazy Colors, Inc. Shareholder Agreement(2)
h. Jay H. Lustig Warrant Certificate(2)
i. Krazy Colors, Inc. Revolving Line of Credit(2)
j. NBI, Inc. Employee and Director Stock Option Plan(1)
k. Form of NBI, Inc. Director Non-Qualified Stock Option Agreement(1)
l. Form of NBI, Inc. Chief Executive Officer Non-Qualified Stock Option
Agreement(1)
16. Letter on Change in Certifying Accountant(4)
21. Subsidiaries of Registrant
a. See Item 1 - Business, herein
<PAGE>
23. Consent of Independent Accountant(6)
27. Financial Data Schedules
a. For the year ended June 30, 1996(6)
b. Restated for the year ended June 30, 1995(6)
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter ended June 30,
1996.
_______________________________________
(1) Incorporated by reference to Registration Statement No. 33-73334.
(2) Incorporated by reference to the Company's report on Form 10-QSB for
the quarter ended December 31, 1994.
(3) Incorporated by reference to the Company's report on Form 8-K dated
August 4, 1995.
(4) Incorporated by reference to the Company's report on Form 8-K dated
August 14, 1995.
(5) Incorporated by reference to the Company's report on Form 10-KSB for
the year ended June 30, 1995.
(6) Filed herewith.
<PAGE>
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NBI, Inc.
September 30, 1996 By: /s/ JAY H. LUSTIG
Chairman of the Board
(Principal Executive Officer)
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.
/s/ MARJORIE A. COGAN Corporate Controller, Secretary September 30,
1996
Marjorie A. Cogan (Principal Financial and Accounting Officer)
/s/JAY H. LUSTIG Director September 30, 1996
Jay H. Lustig
/s/ MARTIN J. NOONAN Director September 30, 1996
Martin J. Noonan
Exhibit 23
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
NBI, Inc.
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 33-73334) of NBI, Inc. of our report dated
August 21, 1996, except for Note 3 which is as of August 27, 1996, relating to
the consolidated financial statements of NBI, Inc. appearing in the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1996.
BDO Seidman, LLP
Denver, Colorado
September 27, 1996
<PAGE>
Exhibit 27 a: Financial Date Schedule for the Year Ended June 30, 1996
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<CAPTION>
<C> <S>
[PERIOD-TYPE] 12-mos
[FISCAL-YEAR-END] Jun-30-1996
[PERIOD-START] Jul-01-1995
[PERIOD-END] Jun-30-1996
[CASH] 782
[SECURITIES] 0
[RECEIVABLES] 1,383
[ALLOWANCES] 83
[INVENTORY] 2,317
[CURRENT-ASSETS] 5,308
[PP&E] 5,554
[DEPRECIATION] 996
[TOTAL-ASSETS] 10,195
[CURRENT-LIABILITIES] 3,844
[BONDS] 6,051
[COMMON] 100
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 200
[TOTAL-LIABILITY-AND-EQUITY] 10,195
[SALES] 9,972
[TOTAL-REVENUES] 11,767
[CGS] 7,172
[TOTAL-COSTS] 8,445
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 125
[INTEREST-EXPENSE] 655
[INCOME-PRETAX] 397
[INCOME-TAX] 172
[INCOME-CONTINUING] 225
[DISCONTINUED] (137)
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 88
[EPS-PRIMARY] .01
[EPS-DILUTED] .01
</TABLE>
This schedule contains summary financial information extracted from the
consolidated financial statements of NBI, Inc. for the year ended June 30,
1996 and is qualified in its entirety by reference to such financial
statements.
<PAGE>
Exhibit 27b: Restated Financial Data Schedule for the Year Ended June 30,
1995
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<C> <S>
[PERIOD-TYPE] 12-mos
[FISCAL-YEAR-END] Jun-30-1995
[PERIOD-START] Jul-01-1994
[PERIOD-END] Jun-30-1995
[CASH] 1,931
[SECURITIES] 4,324
[RECEIVABLES] 371
[ALLOWANCES] 0
[INVENTORY] 196
[CURRENT-ASSETS] 7,213
[PP&E] 55
[DEPRECIATION] 0
[TOTAL-ASSETS] 7,557
[CURRENT-LIABILITIES] 2,717
[BONDS] 5,694
[COMMON] 100
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] (954)
[TOTAL-LIABILITY-AND-EQUITY] 7,557
[SALES] 115
[TOTAL-REVENUES] 115
[CGS] 95
[TOTAL-COSTS] 95
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 741
[INCOME-PRETAX] 785
[INCOME-TAX] 0
[INCOME-CONTINUING] 785
[DISCONTINUED] (997)
[EXTRAORDINARY] 0
[CHANGES] (271)
[NET-INCOME] (483)
[EPS-PRIMARY] (.07)
[EPS-DILUTED] (.07)
</TABLE>
This schedule contains summary financial information extracted from the
consolidated financial statements of NBI, Inc. for the year ended June 30,
1995 and is qualified in its entirety by reference to such financial
statements.
