<PAGE> 1
SECURITIES AND EXCHANGES COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
FOR QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
For the transition period from ________________ to __________________.
Commission file number 0-5260
GENERAL AUTOMATION, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter).
Delaware 95-2488811
-------- ----------
(State or other jurisdiction of (I.R.S. employer I.D. No.)
incorporation or organization)
17731 MITCHELL NORTH, IRVINE, CALIFORNIA 92714
-------------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (714) 250-4800
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
As of August 11,1995 there were 7,391,776 shares of common stock of the
Registrant outstanding.
<PAGE> 2
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30 September 30
1995 1994
-------- ------------
(Unaudited)
<S> <C> <C>
Assets
------
Current Assets:
Cash $ 420 $ 230
Accounts receivable, less allowances of
$614 and $688 respectively 3,271 9,144
Inventories 1,569 4,427
Prepaid expenses 230 409
------ ------
Total current assets 5,490 14,210
Long-term receivables 570 210
Property, plant and equipment, net of
accumulated depreciation and
amortization 1,346 1,698
Other assets 751 1,923
------ ------
Total Assets $8,157 $18,041
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30 September 30
1995 1994
-------- ------------
(Unaudited)
<S> <C> <C>
Liabilities
-----------
Current liabilities:
Accounts payable $ 1,711 $ 3,731
Deferred Revenue 1,413 1,373
Accrued income taxes 688
Other accrued liabilities 1,537 2,899
Notes payable and current
portion of long-term debt 1,504 2,794
-------- --------
Total current liabilities 6,165 11,485
-------- --------
Long-term debt, excluding current portion 1,445 1,453
Deferred credits 70
Minority interest - SGA Pacific Ltd. 1,787
-------- --------
Total Liabilities 7,610 14,795
-------- --------
SHAREHOLDERS EQUITY
--------------------
Common Stock par value $.10 per share
Authorized 30,000,000 shares;
issued and outstanding 7,391,776
at June 30, 1995 and
11,366,776 at September 30, 1994 739 1,137
Additional paid-in capital 42,521 42,420
Deficit (42,713) (40,457)
Translation adjustments 146
-------- --------
Total Shareholders' Equity 547 3,246
-------- --------
Total Liabilities and Shareholders' Equity $ 8,157 $ 18,041
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1995 1994 1995 1994
------------------ ------------------
<S> <C> <C> <C> <C>
Sales - Product $ 1,152 $5,005 $ 3,799 $15,228
SALES - SERVICE REVENUE 1,628 3,267 4,909 9,955
------- ------ ------- -------
Total 2,780 8,272 8,708 25,183
------- ------ ------- -------
COST AND EXPENSES:
Cost of sales - Product 1,308 2,964 3,667 8,779
Cost of sales - Service 1,121 2,568 3,515 7,497
Research and development 218 433 457 1,292
Selling and administrative 956 2,173 2,801 6,754
Other, net 173 113 254 272
------- ------ ------- -------
3,776 8,251 10,694 24,594
------- ------ ------- -------
OPERATING INCOME (LOSS) (996) 21 (1,986) 589
Interest income 1 30
Interest expense (111) (154) (321) (457)
INCOME/(LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS (1,106) (133) (2,277) 132
Provision for income taxes 10 286
Minority interests 72 548
------- ------ ------- -------
LOSS BEFORE EXTRAORDINARY INCOME (1,106) (215) (2,277) (702)
Extraordinary income 300 900
------- ------ ------- -------
NET INCOME (LOSS) $(1,106) $85 $(2,277) $ 198
PER SHARE - PRIMARY:
LOSS BEFORE
EXTRAORDINARY ITEMS $ (.15) $ (.02) $ (.28) $ (.06)
Extraordinary income .03 .08
------- ------ ------- -------
NET INCOME (LOSS) $ (.15) $ .01 $ (.28) $ .02
======= ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 5
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
June 30 June 30
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income (loss) $(2,277) $ 198
Adjustments to reconcile net income to
net cash provided by or (used) for operations:
Depreciation and amortization 260 929
Write down of income tax accrual (900)
Minority interest 548
Changes in assets, (increase)/decrease
and liabilities, increase/(decrease):
Accounts receivable (879) 3,337
Inventories 749 1,740
Prepaid expenses (56) 254
Accounts payable 415 (1,903)
Deferred revenue 1,172 (1,028)
Accrued income taxes 124
Accrued expense 586 (2,143)
------- -------
Cash flows provided by (used for) operating activities (30) 1,156
------- -------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
-------------------------------------------------------
Purchases of property, plant and equipment (1,299) (230)
Capitalized software (442)
Sale of equipment 456
Sale of SGA Pacific, Ltd., net of cash 1,045
------- -------
Net cash used for investing activities (254) (216)
------- -------
CASH FLOWS PROVIDED BY/(USED FOR) FINANCING ACTIVITIES:
-------------------------------------------------------
Proceeds from issuance of notes payable 1,460 622
Principal payments on notes (986) (1,947)
Principal payments on accrued taxes (133)
------- -------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 474 (1,458)
------- -------
Effect of exchange rates on cash (199)
-------
Increase (Decrease) in cash 190 (717)
Cash at beginning of period 230 1,166
------- -------
Cash at end of period $ 420 $ 449
======= =======
Cash paid during the period for:
Interest $ 321 $ 399
======= =======
Income taxes $ 0 $ 215
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
GENERAL AUTOMATION, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. FINANCIAL STATEMENTS:
The financial statements for the current year included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission and reflect all adjustments,
consisting of normal recurring adjustments, which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the Company's latest
annual report.
2. INVENTORIES ARE AS FOLLOWS: (IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
-------- -------------
<S> <C> <C>
Materials, subassemblies and service spares $1,406 $2,715
Work in process 163 297
Finished goods 0 1,415
------ ------
Total Inventories $1,569 $4,427
====== ======
</TABLE>
3. EXTRAORDINARY ITEMS:
The Company recognized extraordinary income for the three month period
ended June 30, 1994, of $300,000, and for the nine month period ended June 30,
1994, of $900,000, resulting from a decrease in the estimated Federal income
tax liability relating to a 1988 settlement agreement with the I.R.S., as
described in Note 6 to the consolidated financial statements included in the
Company's 1994 annual report on Form 10-K.
4. EARNINGS PER COMMON SHARE:
Primary earnings or loss per common share for the three and nine month
periods ended June 30, 1995 and 1994 is based on the weighted average of shares
outstanding, without inclusion of common stock equivalents, as such inclusion
would be anti-dilutive or dilution would be less than 3%.
Weighted average shares outstanding are 7,391,776 and 8,253,865 for the
three and nine month periods, respectively, ended June 30, 1995, and 11,366,776
for the three and nine month periods ended June 30, 1994.
6
<PAGE> 7
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL DATA
For a complete understanding of the financial analysis presented in
Item 2, please refer to the attached schedules:
A. Consolidated Sales
B. Consolidated Gross Margin
C. Consolidated Expenses
Effective in October, 1994, the Company's Pacific Basin subsidiaries in
Australia, New Zealand and Singapore were sold to Sanderson Technology Limited
for $2,000,000 in cash and notes, plus 4,100,000 common shares of the Company
which had been owned by Sanderson. The Company retired the shares on December
1, 1994. (See Notes 8 and 11 to the consolidated financial statements included
in the Company's 1994 annual report on Form 10-K).
In order to better analyze results for the three and nine month periods
ended June 30, 1995 and 1994, certain financial schedules have been prepared
with the two General Automation Group Business Segments, product and service,
reported separately. Within these two segments, Domestic (USA generated) and
Pacific Basin data are segregated.
SALES
Domestic product sales decreased $330,000 for the three month period
ended June 30, 1995, as compared to the same three month period last year,
primarily due to decreased Dealer and International revenues of $317,000 and
$13,000 respectively.
Domestic product sales decreased $520,000 for the nine month period
ended June 30, 1995, as compared to the same nine month period last year,
primarily due to decreased Dealer and International revenues of $388,000 and
$132,000 respectively.
The decrease in revenues experienced during the three month and
year-to-date periods are directly attributable to the decline in Dealer/VAR
orders for the Company's Advantage Series of processors and a two month delay
in the new product introduction of the Power Advantage line.
Domestic service revenues decreased $93,000 in the three month period
ended June 30, 1995 compared to last year. Service revenues on Company
manufactured systems continue to deteriorate, as older contracts are being
canceled at a faster rate than they can be replaced with contracts on new
equipment, which generally carry one year warranties and do not generate
service revenues. It is anticipated that additional service revenues will be
generated by GA s newly formed professional services group.
In March of 1995, General Automation, Inc. and SunRiver Data Systems,
Inc. signed a letter of intent to form a strategic partnership to consolidate
their PICK systems businesses into a single entity under the General Automation
name. The strategic partnership began operations effective May 22, 1995,
whereby existing SunRiver and General Automation resellers have access to
products and services of both firms.
7
<PAGE> 8
Management believes that in the future, the Company will see declining
revenues from its own manufactured hardware. The decline is planned to be
offset with the introduction and market acceptance of new hardware produced by
other manufacturers under OEM agreements. In addition, management has directed
attention and resources to developing direct open system solutions, in the
library management, service, and hospitality markets, to provide future sources
of revenue and profit.
GROSS MARGIN
The overall domestic gross margin percentage for products and service
decreased 8 percentage points for the three months ended June 30, 1995, and 5
percentage points for the nine months ended June 30, 1995, as compared with the
previous year. Product gross margins decreased 40 percentage points and 19
percentage points respectively, due to a large percentage of entry level
computer systems sales, which carry lower margins, low recognition of income on
vertical installations, and start up and overhead costs for the strategic
partnership in excess of strategic partnership revenues. Service revenue gross
margins increased 12 percentage points and 3 percentage points respectively,
due to reduced overhead costs resulting from the strategic partnership
agreement.
Company management believes that margins on vertical products will
improve as it gains greater experience in installing the systems, inasmuch as
the Company had little previous United States experience in either the Library
or The Service Advantage Software products.
EXPENSES
Domestic research and development expenses, including engineering,
increased $97,000 in the three month period ended June 30, 1995 and $13,000 in
the nine month period ended June 30, 1995 compared to last year. These
increased expenditures are a combination of strategic partnership start up and
engineering costs, and new product development coupled with the Company's
decision to greatly reduce the R & D investment in hardware in keeping with its
plans to market non-Company manufactured hardware products.
Domestic selling and administrative expenses increased $266,000 in the
three month period ended June 30, 1995, and $117,000 in the nine month period
ended June 30, 1995 compared to the same periods last year, due to strategic
partnership staff increases in the sales and marketing areas, increased use of
outside services and consultants for public relations, and an adjustment of
$150,000 to bad debt expense during the quarter ended June 30, 1994.
Other expenses increased $73,000 in the three months ended June 30,
1995, and $32,000 in the nine months ended June 30, 1995 compared to the same
periods last year in the U.S. These increases are a combination of increased
costs due to the strategic partnership, and decreased cost of amortization of
Goodwill ($27,000 and $82,000 for the three months and nine months ended June
30, 1994 respectively). Goodwill was being amortized on the purchase of SGA
Pacific, Limited (SGA) which was sold at the beginning of the current fiscal
year.
Domestic interest expense increased $14,000 for the three month period
ended June 30, 1995 compared with the same period in 1994 due to increased
borrowings. Interest expense for the nine month period ended June 30, 1995
increased $16,000 compared to the same period last year.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to operate on restricted cash resources.
Net cash consumed by operating activities for the nine months ended
June 30, 1995 was $30,000. Cash generated by increases in receivables,
decreases in inventory and increases in accounts payable netted $285,000.
Net cash of $254,000 was consumed by investing activities. The
purchase of the new building and equipment consumed $1,299,000, while the sale
of the Company's Pacific Basin operations provided $1,045,000.
Financing activities provided net cash of $474,000, through new notes
issued of $1,460,000, including a $1,000,000 note on the new building, offset
by net payments of debt of $986,000.
Currently, the Company has an agreement with a U.S. lender for a
revolving line of credit, not to exceed $800,000 plus monthly fees, which is
collateralized by domestic accounts receivable. The agreement is renewable at
nine month intervals. The interest rate is prime plus 6%, but not less than
14%, payable monthly. In addition, there are other monthly costs for
maintaining the open line of credit. Because the amount of borrowing is
dependent upon accounts receivable levels, varying levels of domestic activity
could preclude full utilization of the facility. Management believes that
these funds will be adequate for the short term; however, it is actively
seeking to secure a higher level of funding at a more competitive rate to
provide additional capital for expansion. At June 30, 1995, the balance of the
loan was $815,000. The line of credit contains various covenants and
restrictions. At June 30, 1995, the Company was in full compliance with all
covenants and restrictions.
9
<PAGE> 10
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED SALES - SCHEDULE A
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
June 30 June 30
1995 1994
------- -------
<S> <C> <C>
PRODUCTS:
Domestic $1,152 $1,482
Pacific Basin 0 3,523
------ ------
1,152 5,005
------ ------
SERVICE:
Domestic 1,628 1,721
Pacific Basin 0 1,546
------ ------
1,628 3,267
------ ------
TOTAL GROUP:
Domestic 2,780 3,203
Pacific Basin 0 5,069
------ ------
TOTAL GROUP SALES $2,780 $8,272
====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
--------------------
June 30 June 30
1995 1994
------- -------
<S> <C> <C>
PRODUCTS:
Domestic $3,799 $ 4,319
Pacific Basin 0 10,909
------ -------
3,799 15,228
------ -------
SERVICE:
Domestic 4,909 5,450
Pacific Basin 0 4,505
------ -------
4,909 9,955
------ -------
TOTAL GROUP:
Domestic 8,708 9,769
Pacific Basin 0 15,414
------ -------
TOTAL GROUP SALES $8,708 $25,183
====== =======
</TABLE>
10
<PAGE> 11
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED GROSS MARGIN - SCHEDULE B
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------
June 30, Pct. of June 30, Pct. of
1995 Sales 1994 Sales
--------- ------- -------- -------
<S> <C> <C> <C> <C>
PRODUCTS:
Domestic $(156) (13)% $ 398 27%
Pacific Basin 0 0% 1,643 47%
----- ---- ------ ---
(156) (13)% 2,041 41%
----- ------ ---
SERVICE:
Domestic 507 31% 319 19%
Pacific Basin 0 0% 380 25%
----- ------ ---
507 31% 699 21%
----- ---- ------ ---
TOTAL GROUP:
Domestic 351 13% 717 21%
Pacific Basin 0 2,023 40%
----- ------ ---
$ 351 13% $2,740 33%
===== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------------
June 30, Pct. of June 30, Pct. of
1995 Sales 1994 Sales
--------- ------- -------- -------
<S> <C> <C> <C> <C>
PRODUCTS:
Domestic $ 132 3% $1,013 22%
Pacific Basin 0 5,436 50%
------ ------ ---
132 3% 6,449 42%
------ ------
SERVICE:
Domestic 1,394 28% 1,339 25%
Pacific Basin 0 1,120 25%
------ ------ ---
1,394 28% 2,458 25%
------ ------
TOTAL GROUP:
Domestic 1,526 18% 2,351 23%
Pacific Basin 0 6,556 43%
------ ------ ---
$1,526 18% $8,907 35%
====== ======
</TABLE>
11
<PAGE> 12
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED COSTS AND EXPENSES - SCHEDULE C
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------
June 30, Pct. of June 30, Pct. of
1995 Sales 1994 Sales
--------- ------- -------- -------
<S> <C> <C> <C> <C>
RESEARCH AND DEVELOPMENT:
Domestic $ 218 8% $ 121 1%
Pacific Basin 0 0% 312 4%
------ ------
218 8% 433 5%
------ ------
SELLING AND ADMINISTRATIVE:
Domestic 956 34% 690 8%
Pacific Basin 0 0% 1,483 18%
------ --- ------
956 34% 2,173 26%
------ ------
OTHER EXPENSE:
Domestic 173 6% 100 1%
Pacific Basin 0 0% 13 0%
------ --- ------ ---
17 36% 11 31%
------ --- ------ ---
INTEREST:
Domestic 110 4% 96 1%
Pacific Basin 0 0% 58 1%
------ --- ------ ---
110 4% 154 2%
------ --- ------ ---
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------------
June 30, Pct. of June 30, Pct. of
1995 Sales 1994 Sales
--------- ------- -------- -------
<S> <C> <C> <C> <C>
RESEARCH AND DEVELOPMENT:
Domestic $ 457 5% $ 444 2%
Pacific Basin 0 0% 848 3%
------ --- ------ ---
457 5% 1,292 5%
------ ------
SELLING AND ADMINISTRATIVE:
Domestic 2,801 32% 2,684 11%
Pacific Basin 0 0% 4,070 16%
------ --- ------ ---
2,801 32% 6,754 27%
------ ------
OTHER EXPENSE:
Domestic 254 3% 222 1%
Pacific Basin 0 0% 50 0%
------ --- ------ ---
254 3% 272 1%
------ --- ------ ---
INTEREST:
Domestic 291 3% 275 1%
Pacific Basin 0 0% 182 1%
------ --- ------ ---
291 3% 457 2%
------ --- ------ ---
</TABLE>
12
<PAGE> 13
PART II OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENERAL AUTOMATION, INC.
DATE: August 11, 1995 By: /s/ John R. Donnelly
-------------------------
John R. Donnelly
Vice President, Finance
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 420
<SECURITIES> 0
<RECEIVABLES> 3,885
<ALLOWANCES> 614
<INVENTORY> 1,569
<CURRENT-ASSETS> 5,490
<PP&E> 3,542
<DEPRECIATION> 2,196
<TOTAL-ASSETS> 8,157
<CURRENT-LIABILITIES> 6,173
<BONDS> 0
<COMMON> 739
0
0
<OTHER-SE> (192)
<TOTAL-LIABILITY-AND-EQUITY> 8,157
<SALES> 3,799
<TOTAL-REVENUES> 8,708
<CGS> 3,665
<TOTAL-COSTS> 7,182
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 72
<INTEREST-EXPENSE> 291
<INCOME-PRETAX> (2,277)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,277)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,277)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
