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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended
September 30, 1995 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file Number 0-5260
GENERAL AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2488811
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17731 Mitchell North, California 92714
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 250-4800
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on which registered
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Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to
this Form 10-K. [ ]
The approximate aggregate market value of voting stock held by non-affiliates
of the registrant was $5,543,832 as of December 1, 1995.
The number of shares of the registrant's Common Stock, $.10 par value,
outstanding as of December 1, 1995 was 7,391,776.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on January 25, 1995 are incorporated by reference into
Part III hereof, to the extent indicated herein.
The Index to Exhibits appears on pages 23 - 25
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PART I
ITEM 1. BUSINESS
GENERAL
General Automation, Inc. ("GA" or the "Company"), incorporated in California in
1967 and reincorporated in Delaware in 1986, integrates systems, software and
services for application solutions. GA has positioned itself as a strong
service and support company offering open systems and complimentary software
products to a worldwide network of value-added resellers. GA's product lines
include a broad range of hardware platforms including Intel and Motorola
PowerPC based systems, coupled with efficient and cost effective application
environments, providing a full range of systems, complimentary operating
environments and high quality customer services.
The Company's headquarters, including manufacturing and integration, corporate
and administrative operations are located in Irvine, California. Engineering
and support personnel are located in Hauppauge, New York. GA also has service
and sales offices in various locations throughout the United States and has
established European sales offices in England.
The Company's products are sold in the United States through over 200 value
added resellers. In addition it sells its products in Europe, Canada, Mexico,
Central and South America, Guam, Taiwan, Australia, New Zealand, Singapore,
Hong Kong, Africa and the People's Republic of China through distributors and
value added resellers. The Company provides service and support throughout
North America to over 3,000 customers.
ASSOCIATION WITH SANDERSON ELECTRONICS PLC, SANDERSON TECHNOLOGIES, LTD., & SGA
PACIFIC LIMITED.
In January 1989, Sanderson Electronics PLC ("Sanderson") purchased notes
convertible to Common Stock ($1.75 million) and warrants which were exercised
and acquired approximately 49% of the then outstanding shares of the Company.
Sanderson has since reduced its holding to below 10% of the outstanding shares.
Sanderson is a United Kingdom-based developer and supplier of applications
software using the Pick Operating System and is a UK distributor for the
Company's products.
In September 1989, the Company and Sanderson announced the formation of SGA
Pacific Limited ("SGA") headquarted in Sidney, Australia. The Company held 51%
of the outstanding stock of SGA and Sanderson and management of SGA held 49%.
On November 10, 1994, the Company sold its 51% interest in SGA to Sanderson
Technologies, Ltd. For details of this transaction, see Acquisitions and
Divestitures (following) and Note 8 to the Financial Statements. This
transaction left Sanderson owning 442,588 shares of the Company's stock or
approximately 6% percent of the Company's outstanding shares.
In August 1995, GA and Sanderson Computers Pty Ltd. ("SCPL") entered into an
agreement whereby SCPL acquired GA's Zebra 2000 Library Systems business and
license rights to its Maxial hospitality software. These products have been
successfully sold outside the United States by SCPL. GA had not been able to
profitably sell these products in the US, with nearly 55% of its fiscal 1995
loss coming from these products. SCPL assumed the obligations of completing
the contracts in the backlog and providing on-going software support for all of
the customers. GA will receive certain cash payments and royalties from future
SCPL sales of the products. In addition to the Company's associations with
Sanderson and SGA set out above, both remain major distributors of the
Company's products with GA owning no shares in either firm.
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ACQUISITIONS AND DIVESTITURES
In June 1990, the Company sold 55% of its interest in its United Kingdom
subsidiary, General Automation, LTD. (GAL) to Sanderson Electronics, PLC for
loan forgiveness of $1,250,000, operating cash of $475,000 and 22.8% of the
outstanding shares of SGA giving the Company a 51% interest in SGA.
Subsequently, in January 1992, the Company sold its remaining 45% share of GAL
to Sanderson. See Note 8 to the Financial Statements included in this Form
10-K.
In January 1990, the Company acquired the assets, technology and customer base
of C.I.E. Systems, Inc. (C.I.E.) from the parent C.Itoh Electronics, Inc. for
$4,000,000. GA saw this as an opportunity to add additional sales volume to
its hardware and service business segments as both firms served the same
markets. The C.I.E products were fully integrated into the Company's existing
product lines.
In October 1992, the Company signed an agreement to form a holding company with
Krypton Group Ltd., Eurosystems GA Ltd. ("Eurosystems"), a UK corporation.
Under the terms of the agreement the Company received 61% of the common shares
of Eurosystems in exchange for its shares in General Automation France SA,
General Automation SA, (Belgium), and General Automation Italia SpA (Italy).
Krypton Group Ltd., ("Krypton"), a UK corporation, received 39% of the common
shares in exchange for its 100% share holding in Eurosystems Belgium SA and
Eurosystems SA (France), its 55% share holding in Eurosystems GmbH (Germany)
and its 85% share holding in Eurosystems Maintenance SA (France). The Company
considered that the formation of a holding company, which held the GA
subsidiaries in Belgium, France and Italy, had an enhanced prospect for growth
and stability through local management. Krypton already was in business in the
product areas served by these firms, and offered local support and direction.
On October 29, 1993, with retroactive effect to September 30, 1993, the Company
sold its 61% share holding in Eurosystems to Krypton for cash and a $990,000
note. Through fiscal 1995, Krypton has made $180,000 in payments. In 1994
payments were suspended by Krypton and a $240,000 reserve was set up in fiscal
year 1994. In 1995 Krypton filed for bankruptcy. The Company has entered into
an agreement which would allow GA to share equally in the profit of the
Eurosystems group of companies wholly owned by Future Systems Ltd, a newly
formed company in Great Britain and owned by the former Krypton management.
The Eurosystems Group has been profitable and management expects to receive
payment in full of the $570,000 carried in the balance sheet. Eurosystems
companies remain the distributors of the Company's products in Belgium, France
and Italy (see Note 8 to the accompanying Consolidated Financial Statements).
On November 10, 1994, the Company completed the sale of its 51% interest in SGA
Pacific, Ltd. to Sanderson Technologies Ltd. for $2,000,000 in cash and notes
receivable, plus 4,100,000 shares of the Company's common stock held by
Sanderson (see Note 8 to the Financial Statements.) The overall reduction in
the number of shares of GA stock held by Sanderson is not felt to be related to
or have any impact on the Company's objectives.
SGA Pacific, Ltd. (now Sanderson Pacific Ltd.) continues as a General
Automation dealer in Asia and the South Pacific for hardware and software
products.
Effective May 22, 1995, GA and SunRiver Data Systems entered into a strategic
partnership under which GA would acquire the former ADDS Pick based business.
This business had been acquired by SunRiver Data Systems from AT&T GIS in
December of 1994 along with a terminal business which complimented SunRiver's
existing business and which SunRiver retained. The acquisition broadened the
Company's product offerings to include the AT&T manufactured line of INTEL
based hardware platforms and the ADDS versions of the PICK application
environment software products known as Mentor and Mentor PRO. In addition,
over two thousand service customers were added to the Company's customer base.
This acquisition effectively doubles the Company's business base and revenues
worldwide while broadening the product offering which is expected to attract
new customers. In addition the
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Company's engineering and development as well as sales staff were more than
doubled. This increase in resources obviously provided greater customer base
penetration as well as providing more skills to be focused on new product
development. Under the terms of the acquisition agreement, the Company pays
royalties to SunRiver for a five year period starting at 12% of eligible
revenues with step decreases down to 7% during the fifth and final year.
PRODUCTS, CUSTOMERS AND MARKETING
GA is a leader in delivering cost-effective environments for
information-critical Pick applications. GA's core strength is in its
exceptional support and value-added services which are complimented by a line
of open systems and software products designed to encompass the needs of its
worldwide network of value-added resellers. GA has established strong
relationships with its value-added channel and enjoys an excellent reputation
for product quality and responsive services and support. Future growth will be
achieved by expanding the channel and enhancing the products and services
offered to the channel.
SERVICE AND SUPPORT
GA is a leader in providing quality service and technical support to thousands
of end users. The Company has been delivering highly skilled technical
services for over 28 years and has earned a reputation for excellent quality
and responsive service through an exceptional staff of service professionals.
The service business generates over half of GA's revenue and is a key reason
that customers with information critical applications choose to buy from GA.
GA offers three basic lines of service:
o Technical field service for the equipment sold by GA and those maintenance
agreements acquired through acquisitions of SunRiver Data Systems and
C.I.E. businesses.
o Software maintenance services of GA's operating environments. Additional
software support has been sold for complimentary operating environments
such as PICK, VMARK, Unidata, Unix, & AIX.
o Professional services is a new line of customer service introduced in 1995
that include: product training, system design and site preparation,
network configuration support, and disaster recovery programs. Contract
programming and consulting services are also offered with expertise in
PICK, C, C++, Visual Basic, Microsoft Access, COBOL, FORTRAN, and Pro-IV.
The professional services business is in its early stages but has proven to
be a very profitable venture for GA. This year GA closed several major
software consulting projects. Disaster recovery has proven to be a strong
area of interest, furnishing GA's end user customers with assistance in
developing disaster recovery plans as well as the assurance that systems
will be made available in the case of an emergency. With GA's move into the
open systems market, GA will be able to leverage those skills and offer
services to a larger more dynamic marketplace.
GA is further expanding its software maintenance services by providing end user
call management and application support services for GA dealers. This service
provides a central call handling and technical call screening facility and is
particularly attractive for those dealers who are of such a size that they
cannot afford to put the support staff in place to handle their after market
support effectively and at the same time continue to develop the application
products and expand their market. These services are not only profitable for
the Company but also leverage its technical staff while making the dealer more
successful.
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SYSTEM AND SOFTWARE PRODUCTS
1995 marked a key year for GA's penetration into the open systems market with
the introduction of two families of systems based on industry standard
architectures: the PowerPC Superscaler RISC processor and Intel Pentium(TM)
processor. To deliver these solutions, GA has entered into OEM and
distribution agreements with Groupe Bull for their enhanced multiprocessor
PowerPC-based servers and AT&T Global Information Service (GIS) for their high
performance multiprocessor Intel-based platforms.
These agreements were forged, because both Groupe Bull's and AT&T's products
and services compliment those offered by GA and feature:
o A broad range of system solutions starting at a low-end single processor
cost-effective entry level system through an eight-way multiprocessor
enterprise server.
o A commitment to offer products at a cost-effective discount, allowing GA to
move product successfully through the channel while allowing GA to achieve
its profitability goals.
o A complimentary service and support network that could be leveraged
worldwide to compliment the effective and growing services offered by GA.
o A strong investment in distributed processing, local area networks, and
wide area networks to ensure high connectivity solutions.
PowerPC Systems
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This year GA introduced a line for PowerPC symmetric multiprocessor systems
manufactured by Groupe Bull and Motorola. Called the PowerAdvantage(TM)
series, these computers offer excellent price/performance with a
state-of-the-art RISC CPU. The PowerAdvantage product family offers a price
competitive solution, with an entry system priced at $15,000 and high end
systems supporting over 1000 users. GA's goal is to double price-performance
every year, over the next three years. This will be achieved through higher
clock speeds as well as the evolution of the PowerPC processor from 601 to
604/603 and 620. In addition two new entry level systems priced under $80,000
will be introduced.
To deliver the PowerAdvantage systems, GA has entered into an OEM agreement
with Groupe Bull SA. Groupe Bull is a technology leader in multiprocessor
systems and the developer and supplier of the symmetric multiprocessor (SMP)
PowerPC system platform to IBM. GA's relationship with Bull ensures a supply
of high reliability, high performance systems, and a broad product range.
Intel Based Systems
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Through its acquisition of the SunRiver Data Systems PICK business, in May of
this year, GA began delivery of a line of single and multiprocessor
Intel-based servers. In September of this year, a distribution agreement was
signed with AT&T GIS under which the Company would purchase systems directly
from AT&T.
AT&T's System 3000 family offers a broad range of Microchannel computers.
Numerous upgradeable components make expanding these systems fast and simple.
AT&T is a leader in providing exceptional price/performance UNIX systems.
Future enhancements will incorporate the PCI and EISA I/O buses and will ensure
GA has a highly-competitive offering of Intel-based solutions.
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The 34XX and 35XX products are designed to provide expansion and
upgradeability. Future releases of these products by AT&T will offer:
o Faster Pentium CPU's
o Fast and Wide (20 MB/sec) SCSI
o New External RAID Disk Cabinets
o Clustering enhancements
o Quad processor boards
AT&T's product road map for future Intel based servers include:
o The S10 a new single processor entry system featuring a 90 MHz Pentium
processor, ECC memory, and a PCI/EISA I/O bus.
o The S40 a high performance 4-way symmetric multiprocessor server featuring
EISA, dual-PCI I/O buses and SCSI II support.
o The S15 a dual processor EISA/PCI Pentium system.
These systems feature high performance Pentium processors, ECC memory, PCI/ISA,
and Wide SCSI. Mid-range systems will offer support for multiple processors.
Proprietary Systems
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Since their introduction in 1983, GA micro-based multi-user computer systems
have evolved into a line of upgradeable high-performance, business-oriented
computer systems that were adaptable to the needs of individual end-users. The
Company continues to manufacture two product series, the A200 and the A500
which were introduced in fiscal year 1993 and are based on the motorola 680XX
CPU chip. The Company believes that the future revenues from these proprietary
products will continue to decline. The A200 and A500 product series generated
13% of the Company's revenues in 1995, 18% in 1994 and 23% in 1993. The Company
will continue to provide performance improvement up-grades for its older
proprietary products such as the 68040 80MHZ CPU, faster disk drives, and other
higher capacity storage devices as long as there is a demand from its customer
base.
Software
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The value-added channel serviced by GA is primarily based on re-sellers and
dealers whose information-critical applications are written to be compliant
with a multi-dimensional database environment standard. This standard is
supported by a collection of system software providers including Unidata,
VMARK, Pick Data Systems, Sequoia, and GA. Although implementations are
similar, GA has differentiated its product offering through enhanced system
administration, network integration, database interoperability, and
performance.
GA's multi-dimensional database environments can be run native on a system
architecture or in concert with an advanced operating system such as UNIX, AIX
and Windows NT. GA offers native and UNIX/AIX resident versions for the Intel
and PowerPC microprocessors.
The Intel-based native solution is marketed under the name Mentor PRO and is
sold as a software only solution designed to run on a wide selection of generic
PC type platforms. The Intel/Unix based solution is sold under the name Mentor
Operating Environment (MOE) and is delivered on the AT&T system platforms. The
PowerPC/AIX based solution is sold under the name Power95(TM) and is delivered
on the PowerAdvantage system series. Power95 is a derivative of R91(R), GA's
Motorola 680X0 native multi-dimensional database. Power95 was jointly
developed by GA and Groupe Bull. R91 was developed to run a native Motorola
680X0 architecture and features significant enhancements in terms of ease of
use, system administration, distributed processing, and PC network integration.
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The Pick Operating System, which GA's software products are modeled from and
are licensed to was designed as a database management operating system; it
supports hierarchical, flat and relational database files. The Company
believes that among the most distinctive characteristics of its operating
environment products are their relative ease of programming, an English-like
information management and retrieval language, and the speed they offer in the
handling of large and complex databases. They include an advanced,
database-oriented version of the popular BASIC programming language, with
automatic compilation and line-editing.
CUSTOMERS AND MARKETING
GA delivers its products and services through a strong international
value-added reseller channel with over 200 active dealers. Through GA's
acquisition of the SunRiver Data Systems business the channel has doubled in
size and offers cross-selling opportunities. A key focus for 1995 was to ensure
the successful integration of both SunRiver's and GA's dealer channels.
GA is selling into a $750 million segment of a larger $9 billion market. GA's
value-added resellers focus on key vertical markets such as healthcare,
finance, manufacturing, distribution, government, travel, and insurance. Around
18% of GA's product revenue comes from 30 major resellers and distributors
located outside of North America. To expand on that business, in 1995 the
Company formed a wholly owned subsidiary, GA Mentor Ltd. (GAML) headquartered in
the UK, and established a sales office to better service GA's customer in the
United Kingdom, France, Belgium, Italy, and Germany. GA also has strong
associations in the Asia Pacific area with resellers and distributors in
Australia, New Zealand, Singapore, Hong Kong, and Malaysia which GA services
out of the Irvine office.
GA's focus for growth includes the following elements:
o Working closely with GA's value-added resellers and dealers to make them
more successful and thus increase sales through GA.
o Offering complimentary services that enhance the resellers and dealers
business and increase revenues for them as well as GA.
o Expanding the value-added channel through an investment in marketing and
direct sales techniques. that leverage GA's products and service strengths.
o Strengthening GA's position in international markets.
From a marketing and sales standpoint GA has made a renewed commitment to
growth. In 1995 the Company increased its sales organization from three sales
representatives to six, complimented by adding key management in marketing and
marketing communications.
GA has focused on establishing a stronger corporate identity. GA's new
corporate look is reflected in a coordinated communications programs including
public relations, expanded marketing collateral, a customized dealer program,
direct mail and trade show participation. To properly target these programs,
GA has conducted extensive market research and established a dealer advisory
council. These investments are already paying off with expanded sales and new
dealers entering the program monthly.
MAXIAL SYSTEMS
The Maxial applications software package is a comprehensive suite of programs
designed to automate virtually every function of a modern hotel; this is known
in the hospitality industry as "property management." The Maxial package has
been installed in more than 100 hotels world-wide with a high degree of
acceptance in the Pacific Basin. The same success has not been achieved in the
United States however, where the competition for such systems has been
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much stronger. With only 13 systems installed in the US, effective August 28,
1995 the Company entered into an agreement with Sanderson Computers Inc. under
which the product will be licensed to Sanderson who will be responsible for the
sales and support for the product world-wide and will pay GA a royalty for
each system sold. The amount of revenues expected from this agreement are
uncertain at this time and are not expected to materially affect the position
of the Company other than to eliminate the losses previously experienced in
support of the product.
ZEBRA 2000 LIBRARY INFORMATION AND MANAGEMENT SYSTEM
The Zebra 2000 Advanced Library Management and Information System is a complete
library automation package providing a wide range of advanced features
including on-line public access catalog, circulation control, acquisitions,
requisitions, inventory, closed reserve, serials control and MARC data load and
output.
While acceptance of this product has been excellent in the Asia Pacific area
only a few systems were sold in the US resulting in significant losses from
operations to support the development and sales activities. Effective August
28, 1995 the Company entered into an agreement with Sanderson Computers, Inc.,
("SCI") under which SCI will be responsible for the sales and support for the
product world-wide. This product was licensed to GA by Sanderson Computers PTY
LTD initially in 1993 for sale in the US. As a result, the agreement will
provide no future revenues to the Company other than from service and product
purchased from GA by SCI as a GA reseller but will eliminate the losses
previously experienced.
SERVICE ADVANTAGE SYSTEM
The Service Advantage product is a full featured, fully integrated service
company management system and runs on GA native PICK systems as well as AIX and
UNIX based systems under Power95, Mentor Operating Environment (MOE) and VMARK.
The systems provide call handling and dispatch, job costing and bid/proposal
management, inventory control, purchasing, accounting and general ledger,
marketing and sales lead tracking (including scripted telemarketing), and
office automation functions to fully automate the service company operation.
The base product was originally developed by Service Automation Systems
("SAS"). SAS was acquired by Houston Data Center ("HDC") who sold the product
primarily to the heating, ventilating and air conditioning business sector. In
May, 1994, the Company acquired the rights to this product as an offset to an
uncollected receivable balance owed to the Company by HDC. The Company
received the non-exclusive right to market the product in all market sectors,
except the heating, ventilation and air conditioning sector which was sold to
another party.
The Company made the decision to focus its marketing and sales of this product
into the higher end service business, beginning with the telecommunications
industry. Such systems will typically sell in the $50K to $75K range. The
Company has completed the sale of two of these systems since May of 1994 and
has signed a contract to complete a third installation started by HDC. The
specific market size and growth rate is not known at this time.
In order for the Company to focus its management and capital resources on its
key business, a decision has been made to seek a licensee for this product in
the US market. It is expected that this transition will take place early in
calendar year 1996.
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FOREIGN OPERATIONS AND EXPORT SALES
The Company's export sales were approximately 8% in 1995 compared to 62% in
fiscal 1994, and 69% for 1993. In 1992, 1993 and 1994 the Company recognized
revenues from its majority owned subsidiary SGA Pacific Ltd. This subsidiary
has been sold effective November 10, 1994. These revenues were generated
through operations in Asia and the south Pacific. In future years, General
Automation expects to see a continuing relationship with SGA Pacific as a
distributor of GA products to the Pacific Basin and a source of royalty income
as they market and install the Maxial hospitality software, owned by the
Company. See Note 7 to the accompanying Financial Statements included in this
Form 10-K for additional information relating to the Company's international
operations, including financial information concerning operations by major
geographic areas.
RAW MATERIALS
Raw materials essential to the Company's business are purchased worldwide in
the ordinary course of business from numerous suppliers. The vast majority of
these materials are generally available, and no serious shortages or delays
have been encountered. Certain raw materials used in producing some of the
Company's products can be obtained only from a small number of suppliers.
Products are designed to use pre-tested and readily available components. Most
of these components are purchased from several suppliers and are subject to
blanket purchase orders. In those situations in which the Company purchases
components from a single supplier, it believes that alternative commercial
suppliers of such components are readily available. The Company purchases the
Motorola MC68030 and MC68040 microprocessors from several independent
distributors; however, if Motorola Corporation should discontinue manufacturing
such microprocessors (which it currently manufactures in at least two separate
manufacturing facilities), an event which the Company considers to be unlikely,
the Company's operations would be adversely affected. In recent years the
Company has experienced no significant difficulty in procurement of necessary
components.
The Company purchases computer systems from other manufacturers including AT&T
GIS in the US and Group Bull in France. Delays are possible in that the GA
orders from its Dealers/VARS may not match production queues at the factories.
The delays are expected to be minimal and not material to the planned Company
results.
COMPETITION
GA markets software, systems and service and therefore faces three types of
competitors. The leading software competitors are Pick Systems, VMARK
Software, and Unidata. These three US-based organizations do not sell system
solutions and focus entirely on software and software support. Pick Systems, a
privately held corporation headquartered in Irvine, California, is GA's primary
competitor on GA's native Intel-based operating environment. VMARK Software,
headquartered in Westboro, Massachusetts, and Unidata, located in Denver,
Colorado, offer UNIX resident database operating environments. GA's software
products offer greater functionality and performance, at competitive prices.
GA's primary system competitors are International Business Machines, Data
General, Digital Equipment Corporation, and Hewlett Packard. GA's key
differentiation is servicing an established dealer base who prefer GA's
software and service to that which is available on these competing platforms.
Since GA currently only offers service on GA delivered systems, GA's
competition for that service business is a handful of third party service
providers. These companies tend to compete on price offering inferior
technical support. With the new PowerPC and Intel-based solutions GA is
competing against system providers such as
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Wang, AT&T, and IBM. From a software support vantage point, support is
primarily limited to GA developed operating environments. GA competes with
GA's distributors, such as Monolith Corporation for dealer direct telephone
support; but is primarily the dominant support provider for GA developed
software solutions.
PRODUCT DEVELOPMENT
Because of rapid technological changes, the market in which the Company
competes requires continuous expenditures to develop and improve its products.
For fiscal 1995 the Company spent approximately $600K for product development.
In 1994 the Company spent approximately $1.8 million for product development.
For the years ended September 30, 1993 and 1992, the Company spent
approximately $1.7 million and $2.1 million respectively. The decrease in
R & D costs are primarily resultant from the Company's decision to partner with
Groupe Bull and AT&T for hardware systems rather than develop their own. This
strategy allows the Company to invest its R & D dollars into software and
support tools to better serve the market. Certain development costs relating to
computer software are capitalized in accordance with Statement No. 86 of the
Financial Accounting Standards Board; while all other costs associated with
product development are charged to operations as incurred.
PATENTS AND TRADEMARKS
The Company holds trademarks protecting its trade names and symbols. The
Company's major product line utilizes Pick software as its operating system.
The Company is authorized, on a non-exclusive basis, to use and sublicense the
use of the Pick software indefinitely, in accordance with the terms of a
license agreement. The Company does not rely upon and does not believe that
its success is dependent upon patent protection; rather, the Company believes
that its success is dependent upon the knowledge and experience of its
management and technical personnel and its ability to market its existing
products and to develop new products. Invalidation or cancellation of the Pick
license, however, could adversely impact the Company's business, although
management believes that there are alternative courses of action which could be
pursued.
MANUFACTURING AND SYSTEM INTEGRATION
The Company has moved rapidly from a manufacturing environment to a system
integration and configuration model. Basic systems are received from its
platform suppliers (Groupe Bull and AT&T) and are configured to the customers'
requirements. Software is loaded and the finished systems are thoroughly tested
prior to shipment. The Company currently performs these functions at its
Irvine, CA headquarters utilizing highly skilled system engineers and
technicians to insure product performance and quality.
MANUFACTURING
The Company has manufacturing facilities at its main location in Irvine,
California. Manufacturing processes are further enhanced by the purchase from
outside vendors of complete subassemblies for various portions of the products
and by coordinated engineering designs that allow common parts and processes
for a majority of the GA product line. The manufacturing facility was
operating at 75% capacity at September 30, 1995.
Manufacturing functions performed by GA include system assembly and
integration, QA and testing, and final preparation and packaging.
BACKLOG
GA computer orders from dealers and other customers generally specify delivery
dates of 30 days or less; the Company rarely receives an order that has
scheduled delivery dates beyond three months. Because of these
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ordering/delivery patterns, the backlog at the end of a period may appear to be
low and not a significant indicator of future revenues.
The compressed order-delivery cycle mentioned above, can result in
period-to-period fluctuations in the Company's revenues since it is dependent
upon short term orders which can be deferred or delayed by the dealers and
thereby dramatically influence the current period revenues.
At September 30, 1995 the Company had a manufacturing backlog of $1.5 million.
At September 30, 1994 and September 30, 1993, the manufacturing backlog was
$2.8 and $4.1 million, respectively. Almost all of which was attributed to its
recently divested SGA operations.
EMPLOYEES
The Company had approximately 115 employees at September 30, 1995. The Company
has never had a work stoppage and none of the Company's U.S. employees is
represented by a labor union.
GOVERNMENT REGULATIONS
The Company is subject to certain Federal, state and local provisions relating
to protection of the environment. The Company does not operate a type of
business whose activities are likely to require any special measures to ensure
compliance with those provisions. Accordingly, the Company does not believe
that any material capital expenditures will be required for compliance with
such provisions or that such provisions will have any material effect upon its
earnings or competitive position.
ITEM 2. PROPERTIES
In February 1995, the Company's executive offices and principal manufacturing
facilities were moved to a 20,000 square foot facility in Irvine, California,
which has been purchased by the Company (see Note 10 to the Financial
Statements). It is believed that this facility will serve the Company's
current and future needs.
At September 30, 1995 the Company had a remaining exposure of $75,000 under the
lease for the facility in Anaheim, California which previously served as the
Company's headquarters. As a precaution against the event that the property
could not be sublet, a $75,000 accrual was established on the books for this
exposure.
The move of the Company to its new Irvine, California location was dictated by
several factors: 1) The Anaheim facility was larger than needed under the
Company's current and anticipated business operations; the facility was built
by GA at a time when high-bay space was required in the manufacturing of
computers. This is no longer the case. 2) The cost of operating the facility
was approximately 50% higher than it would be in the new building; annualized,
this could total to nearly $75,000 in savings. 3) The new facility is in a
much more attractive and prosperous area, which offered greater security to the
Company's property and personnel. The relocation did not cause any material
disruption in the Company's operations.
The Company also leases space in ten (10) states, primarily for sales and
service offices.
For further information regarding lease commitments, see Note 10 to the
Financial Statements included in this Form 10-K.
11
<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal proceedings generally incidental to its
business. The ultimate disposition of these proceedings is not presently
determinable, but in the opinion of the Company, these proceedings will not
have a material effect on the business or financial position of the Company and
have been adequately provided for in the Financial Statements.
The Company has been named as one of three defendants in a lawsuit brought by
the owner of real property once leased and used by a division of the Company as
part of its operations. The plaintiff is seeking relief from alleged
environmental damages which may have occurred on the property before, during,
or after the time the Company leased the property. The extent of the damage,
if any, has not been determined at this time nor has the extent of the
Company's liability, if any, been established in relation to the other
defendants. All of the parties to the litigation are, under the direction of
the court, jointly funding testing to determine the contamination, and scope of
any required remedial effort. The Company has two of its insurance carriers
contributing to the Company's expenses in this matter.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The table below provides certain information regarding the selling price of the
Company's Common Stock for the two fiscal years ended September 30, 1995 and
September 30, 1994. The Company's Common Stock is listed on the American Stock
Exchange and is quoted under the symbol GA. The following table sets forth the
range of high and low prices for the Common Stock of the Company for the fiscal
quarter indicated, as reported by the American Stock Exchange.
<TABLE>
<CAPTION>
Sale Prices
---------------------
High Low
------ ------
<S> <C> <C>
Fiscal Year Ended September 30, 1995
Fourth Quarter $ 15/16 $ 1/2
Third Quarter $ 11/16 $ 7/16
Second Quarter $ 13/16 $ 7/16
First Quarter $ 7/8 $ 7/16
Fiscal Year Ended September 30, 1994
Fourth Quarter $ 5/8 $ 5/16
Third Quarter $ 3/4 $ 5/8
Second Quarter $1 7/16 $ 3/4
First Quarter $1 11/16 $ 11/16
</TABLE>
The approximate number of holders of record of Common Stock of the Company as
of December 1, 1995 was 956.
The Company has never paid a dividend on its Common Stock. The Board of
Directors reviews the financial condition of the Company periodically and
evaluates whether to declare dividends. Given the Company's present financial
condition and net operating losses in recent years, the Company does not expect
to pay any dividends in the forseeable future.
In determining whether a security warrants continued listing on the American
Stock Exchange (the "Exchange"), the Exchange does not rely on any precise
mathematical formula. Rather, it considers many factors, including the degree
of investor interest in the issuer of the security, the issuer's prospects for
growth, and whether the security has suitable characteristics for auction
market trading. The Rules of the Exchange provide, however, that the Exchange
will normally consider delisting a security if any one of a number of events
shall occur, including the following: (i) the issuer has stockholders' equity
of less than $4,000,000 and has sustained losses from continuing operations in
three of its four most recent fiscal years, or (ii) the security has traded for
a substantial period of time at a low price per share. The Company has
sustained losses in two of its last three fiscal years, and the Company's
stockholders' equity as of September 30, 1995, its most recent fiscal year-end,
was $771,000. Moreover, the Company's Common Stock has traded at less than
$1.00 per share during most of the preceding two fiscal years. The Company has
received notice that the Exchange has taken formal action to review the
continued listing of the Company's Common Stock; however, they have deferred
any delisting action. The Exchange's position was the result of senior Company
management's presentation and discussion with Exchange officials.
13
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended September 30
----------------------------------------------------------------
1995(7) 1994(6) 1993(5) 1992(1)(2) 1991(3)
------- ------- ------- ---------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Sales, net $14,269 $34,614 $42,878 $45,205 $48,647
------- ------- ------- ------- -------
Income (loss) from
operations (1,666) 1,300 (351) 42 1,756
------- ------- ------- ------- -------
Income (loss) before
extraordinary items (2,065) 427 (1,477) (964) 222
Extraordinary items 0 0 900 1,108 74
------- ------- ------- ------- -------
Net Income (loss) $(2,065) $ 427 $ (577) $ 144 $ 296
======= ======= ======= ======= =======
Per share-primary:
Income (loss) before
extraordinary items (.26) .04 (.13) (.08) .02
Extraordinary items 0 .08 .09 .01
------- ------- ------- ------- -------
Net income (loss) $ (.26) $ .04 $ (.05) $ .01 $ .03
======= ======= ======= ======= =======
Working capital $ (638) $ 2,725 $ 1,457 $ 3,450 $ 5,619
Total assets 10,484 18,041 22,456 23,618 29,368
Total debt 2,424 4,247 5,307 5,490 8,571
Shareholders' equity(5) $ 771 $ 3,246 $ 2,264 $ 3,442 $ 3,106
</TABLE>
(1) The Company closed its German subsidiary in the fourth quarter of
fiscal 1992. See Note 8 to the Financial Statements included in this
Form 10-K.
(2) The Company sold 55% of its share of General Automation, Ltd. (U.K.)
("GAL") to Sanderson Electronics, PLC, ("Sanderson") on June 30, 1990
and sold its remaining 45% of GAL to Sanderson on January 20, 1992.
During the period July 1, 1990, through January 20, 1992, while the
Company owned 45% of GAL, the Company accounted for its minority
interest in GAL on an equity basis. See Note 8 to the Financial
Statements included in this Form 10-K.
(3) On July 1, 1990, the Company purchased an additional 21.8% share of
SGA Pacific, Ltd. ("SGA") making the Company a 51.1% owner of SGA.
Since that time, the financial statements of SGA have been
consolidated with the results of the Company excluding 1995. See Note
8 to the Financial Statements included in this Form 10-K.
(4) No dividends have been paid on the Company's Common Stock during any
of the periods presented. See Item 5 (above) for discussion of
dividend restrictions.
(5) On October 29, 1993, with retroactive effect from September 30, 1993,
the Company divested its European operations. See Notes 7 and 8 to
the Financial Statements.
(6) On November 10, 1994, with retroactive effect from October 1, 1994,
the Company divested its Pacific Basin operations. See Notes 7 and 8
to the Financial Statements.
(7) On May 22, 1995, the Company acquired a similar product and services
in the Pick market from SunRiver Data Systems.
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported a net loss for the year ended September 30, 1995 in the
amount of $2,065,000, compared with a net income of $427,000 and net loss of
$577,000 for the years ended September 30, 1994 and 1993, respectively. The
fiscal 1995 loss is attributed to the Company's three vertical software
products which accounted to approximately 65% of the Company's losses, the
$400,000 in non-recurring expenses associated with the SunRiver acquisition,
and the late introduction of the Company's Power95 product line, which had been
scheduled for release in early Spring of 1995.
Sales
- -----
NET SALES
(In thousands)
<TABLE>
<CAPTION>
Year Ended September 30
------------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Product Revenues:
Domestic $ 7,020 $ 6,301 $ 5,759
Europe 3,313
SGA 14,983 12,077
------- ------- -------
7,020 21,284 21,149
------- ------- -------
Service Revenues:
Domestic 7,249 7,121 7,742
Europe 8,930
SGA 6,209 5,057
------- ------- -------
7,249 13,330 21,729
------- ------- -------
Total Sales $14,269 $34,614 $42,878
======= ======= =======
</TABLE>
The three-year table above shows a U.S. increase in revenues for products and a
modest increase in revenues in services over 1994. The instability experienced
in service revenues is due to the very aggressive pricing policies from our
competition. An additional factor is the maturation of our hardware products,
which, if not replaced by GA hardware, often leads to the service contract
being placed with another service organization. The increase in domestic
product revenues from 1994 to 1995 is due to the acquisition of the Pick
business from SunRiver and the introduction of new products late in 1995.
1995 vs. 1994
- -------------
Excluding revenue contributions by SGA in 1994, total sales increased $847,000
or 6.3% in 1995 over 1994. Product sales in the U.S. increased 11.4% or
$719,000, primarily through the acquisition of SunRiver Data Systems Products
(described in Acquisitions and Divestitures above) and the introduction of new
products late in the year. The revenue increases shown above were accomplished
without price increases; the intense nature of the competition prevents
aggressive upward pricing policies. The Company believes that the introduction
of new products will generate new sales but is unlikely to allow for enhanced
margins.
15
<PAGE> 16
Domestic service revenues increased $128,000 due to the acquisition of
SunRiver Data Systems service contracts offset by the termination of contracts
on older systems. Termination of contracts is a normal part of the business.
As computers grow older, they're no longer covered under contracts. Increased
competition has also caused some sales attrition. The addition of the SunRiver
Data Systems service contracts generated revenues of $553,000 during the last
four months of the year.
1994 vs. 1993
- -------------
Excluding revenue contributions by Eurosystems GA Ltd. in 1993, total sales
increased $3,979,000 or 13.0% in 1994 over 1993. Product sales in the U.S.
increased 9.4% or $542,000, primarily through library vertical sales. SGA's
product sales increase was $2,906,000, an increase of 24.1% over the prior
year, primarily attributable to increases in vertical sales, the largest of
which was the Singapore Port Award.
Excluding Eurosystems, service revenues increased $531,000. Domestically,
service revenues decreased $621,000 due to termination of contracts on older
systems, coupled with decreased sales of new systems. In the Pacific Basin,
service revenues increased $1,152,000 due to new installations of library,
Maxial, and other verticals.
Regarding Company manufactured computer sales, total revenues are expected to
continue to decline as the Company refocuses its efforts in other directions.
The addition of non-GA manufactured products to the Company's product
offerings, such as AT&T and Groupe Bull is expected to more than offset the
sales erosion of GA manufactured products, with the goal to increase the level
of earned profits through this higher volume.
The service segment of the Company provides help desk and on site service for
all GA systems at end user sites in the US and generated half of the Company's
revenues. This business is enjoying increasing revenues due to the acquisition
from SunRiver Data Systems. As the Company moves more into the distribution
of non-manufactured products, the domestic service organization will provide
service and software support for them.
For much of its history, GA has had significant foreign transactions, such
sales are conducted in U.S. dollars. Its foreign subsidiaries were subject to
foreign currency fluctuations, and such gains or losses recorded on a current
basis. GA no longer has foreign holdings subject to currency fluctuations,
thereby avoiding future currency risks.
The Company has approximately 3,500 service customers. The normal service
contract is for a year or more and invoiced in advance of the period in which
the service is to be performed. The pricing is done per a fixed price schedule
and calculated according to the equipment and or software to be maintained.
16
<PAGE> 17
GROSS MARGIN
GROSS MARGIN
(In thousands)
<TABLE>
<CAPTION>
Year Ended September 30
-----------------------------------------------------------
1995 1994 1993
----------------- ---------------- ----------------
% of % of % of
Amount Sales Amount Sales Amount Sales
------ ------ ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Products:
Domestic $ 518 7.4 $ 1,954 31.0 $ 2,404 41.7
Europe 1,373 41.4
SGA 7,567 50.5 6,019 49.8
------ ------- -------
518 7.4 9,521 44.7 9,796 46.3
------ ------- -------
Service and Support:
Domestic 2,285 31.5 1,773 24.9 1,785 23.1
Europe 3,944 44.2
SGA 1,751 28.2 1,315 26.0
------ ------- -------
2,285 31.5 3,524 26.4 7,044 32.4
------ ------- -------
Total Gross Margin $2,803 19.6 $13,045 37.7 $16,840 39.3
====== ======= =======
</TABLE>
GROSS MARGIN
1995 vs. 1994
- -------------
Excluding SGA, the Company's overall gross profit margin decreased 8.2% from
27.8% in fiscal 1994 to 19.6% in fiscal 1995. Gross margin percentages for
domestic products decreased 23.6%, while domestic service and support margins
increased 6.6% from prior year levels. The decrease in product margin was due
to vertical product losses and lower margins on non-GA manufactured computer
systems such as Groupe Bull and AT&T GIS. The increase in service and support
margin was due to the acquisition of the Pick business from SunRiver Data
Systems.
The Company believes that future gross margins in domestic service will
stabilize because of the large combined size of the GA and SunRiver Datasystems
customer base despite pressure from the increasingly competitive nature of that
business segment. To offset decreasing margins from computer hardware sales, it
anticipates increased margins from expanding sales of application software
solutions and non GA products. The aggregate effect of these trends is
expected to have a material impact on the Company's 1996 gross margin.
GA sells its hardware products through a nationwide dealer network, and dealers
sell to the end-users, pricing their products as the competition will allow.
Company pricing strategies in the past have been aimed at stimulating dealer
orders through pricing concessions; general price decreases or increases are
not the normal technique used by the Company. The dealers generally are
selling a system, complete with application software, in a "bundled" proposal,
as a turn-key sale. The direct competitive pressures facing the dealers are
more closely tied to the cost/benefit relationship of their proposal versus
those of other firms.
17
<PAGE> 18
1994 vs. 1993
- -------------
Excluding Eurosystems GA, Ltd. gross margin contributions increased $1,522,000
and remained at the same level as a percentage of net sales. Domestically,
product gross margins decreased from 41.7% to 31.0%, primarily due to lower
margins on vertical sales and a larger percentage of low-end, low profit
computer systems in the 1994 sales mix. In the Pacific Basin, a modest gross
margin percentage increase of 0.7% was achieved on much larger sales volume.
Domestic service margins increased 23.1% to 24.0% on a lower volume of revenue.
Service revenues in the Pacific Basin increased and an increase in gross margin
percentage of 26.0% to 28.2% was achieved.
NET PROFIT/(LOSS)
NET INCOME/(LOSS)
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
------- ----- -------
<S> <C> <C> <C>
Domestic $(2,065) $(318) $ 108
Europe (1,036)
SGA 745 351
------- ----- -------
Total Net Income/(LOSS) $(2,065) $ 427 $ (577)
======= ===== =======
</TABLE>
1995 vs 1994
- ------------
Excluding SGA, the net losses are ($2,065,000) and ($318,000) for 1995 and
1994, respectively. The 1994 loss is net of $900,000 of income resulting from
a decrease in estimated tax liabilities. The fiscal year 1995 loss includes
costs associated with the SunRiver Data Systems acquisition, heavy
investments in the vertical products and the later then planned entry of the
new products in the marketplace.
1994 vs. 1993
- -------------
The net income (loss) figures are materially impacted by the decreases in
estimated tax liabilities in these years. See Notes 6 and 9 to the Financial
Statements included in this Form 10-K.
18
<PAGE> 19
EXPENSES
EXPENSES
(In thousands)
<TABLE>
<CAPTION>
Year Ended September 30
-------------------------------------------------------------------
1995 1994 1993
----------------- ----------------- ---------------
% of % of % of
Amount Sales Amount Sales Amount Sales
------ ----- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Research and
Development:
Domestic $ 584 4.1 $ 575 1.7 $ 640 1.5
SGA 1,178 3.4 1,094 2.5
------ ---- ------- ---- ------ ----
584 4.1 1,753 5.1 1,734 4.0
------ ---- ------- ---- ------ ----
Selling and
Administrative:
Domestic 3,704 25.9 3,700 10.7 3,754 8.7
Europe 5,307 12.4
SGA 5,907 17.1 5,392 12.6
------ ---- ------- ---- ------ ----
3,704 25.9 9,607 27.8 14,453 33.7
------ ---- ------- ---- ------ ----
Other:
Domestic 181 1.3 300 0.9 91 0.2
Europe
SGA 85 0.2 (81) (0.2)
------ ---- ------- ---- ------ ----
181 1.3 385 1.1 10 0.0
------ ---- ------- ---- ------ ----
Interest:
GA 399 2.8 376 1.1 228 0.5
Europe 25 0.1
SGA 232 0.7 466 1.1
------ ---- ------- ---- ------ ----
399 2.8 608 1.8 719 1.7
------ ---- ------- ---- ------ ----
Total $4,868 34.1 $12,353 35.8 $16,916 39.4
====== ==== ======= ==== ======= ====
</TABLE>
Excluding SGA, Research and Development increased $9,000 from 1994 to 1995 as a
result of the SunRiver Data Systems activities. It is the belief of
management that expenditures will decline as the emphasis switches from
hardware to software products. In 1994, the expense increased $19,000.
Selling and administrative expense increased $4,000 from 1994 to 1995,
excluding SGA. Management expects to maintain the same level of expense in the
United States. Selling and administrative expense increased $461,000 from 1993
to 1994, excluding Eurosystems. In the Pacific Basin, Selling and
Administrative expenses increased $515,000 between 1993 and 1994, which is
attributable to expenses necessary to support increases in sales volume and
investments in personnel to gain additional sales. Management expects to
maintain the same level of expense in the United States. The sale of
Eurosystems to the minority shareholders eliminated the European expense, which
was $5,307,000 in 1993. (See note 8 to the accompanying Financial Statements).
19
<PAGE> 20
Excluding SGA, other expenses decreased $119,000 from 1994 to 1995 due to the
elimination of goodwill amortization caused by the sale of SGA. Other expense
increased $375,000 from 1993 to 1994. 1993 included credits of $309,000 from
amortization of credits from the advantageous purchase of the assets of C.I.E
in 1990.
Excluding SGA, interest expense increased $23,000 from 1994 to 1995 due to
higher levels of borrowing during portions of the year. Interest expense
decreased $86,000 from 1993 to 1994, excluding Eurosystems, due to continuing
decreases to the debt balance.
LIQUIDITY AND CAPITAL RESOURCES
The Company is operating on improved cash resources. During the Company's
fiscal 1995, the Company's cash receipts exceeded the total expenditures
excluding SGA. The Company has seen improvement in its cash position due to
the partnership with SunRiver Data Systems and expects the trend to continue,
augmented by sales of non GA manufactured products. These two factors are
expected to provide GA with the needed working capital to support future
operations. No plans have been made to seek new equity funds.
Net cash used for operating activities was $343,000. The major items
generating cash were a $563,000 reduction in inventories, a $1,662,000 increase
in accounts payable, and a $3,160,000 increase in advances from customers. The
major item consuming cash was a $3,846,000 increase in accounts receivable.
The remainder was provided by ongoing operations.
Net cash of $1,527,000 was used for investing activities in fiscal 1995 for
capitalized software development costs and additions to property, plant and
equipment.
Financing activities provided $1,741,000 from debt repayments of $1,407,000,
offset by new notes payable of $1,357,000 and $1,791,000 in proceeds from the
sale of SGA.
Currently, the Company has an agreement with a U.S. lender for a revolving line
of credit, not to exceed $800,000, which is collateralized by domestic accounts
receivable. The agreement is renewable at six month intervals. The interest
rate is prime plus 6%, payable monthly, with a minimum of 14%. In addition,
there are monthly collateral management fees charged 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 exceed the
Company's needs and is seeking less costly alternatives for temporary capital.
At September 30, 1995, the balance of the loan was $543,000. The line of
credit contains various covenants and restrictions; at September 30, 1995 the
Company was not in compliance with certain covenants, for which a waiver was
obtained from the lender. This non-compliance condition was the result of the
lender charging their management fees to the GA account, which then raised the
loan to $13,000 above the maximum calculated balance based on net collateral.
The situation was corrected the next business day.
On November 10, 1994, the Company completed the agreement for the sale of its
51% interest in SGA Pacific Ltd. to Sanderson Technology, Ltd. for $1,000,000
in cash which the Company received on November 14, 1994, a note in the amount
of $1,000,000 to be repaid over 24 months, bearing interest at 8%, plus
4,100,000 shares of the Company's Common Stock, which were retired.
As explained in Item 2 above, the Company has purchased a building in Irvine,
California. Eventually, the Company expects to experience a significant cost
savings, (approximately $75,000 annually) from the move. Until February, 1996,
the Company expects to be responsible for the monthly rent on the existing
Anaheim, California facility. During the period to February, 1996, the Company
expects an additional $75,000 outlay of cash, due to residual payments of rent,
all of which is provided for at September 30, 1995.
20
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedules on Page 26 of this report.
21
<PAGE> 22
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the directors and executive officers
of the Company, see the information appearing on pages 3 and 4 of the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held January 25,
1996 under the caption "Election of Directors" and on page 11 of the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held January 25
1995 under the caption "Compliance with Section 16(a) of the Securities
Exchange Act of 1934", which information is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
For information with respect to the compensation of certain executive
officers of the Company, see the information appearing on pages 7 and 8 of the
Company's Proxy Statement for the Annual Meeting of Stockholders to be held
January 25, 1996 under the caption "Executive Compensation", which information
is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information with respect to the security ownership of certain
beneficial owners and management of the Company, see the information appearing
on pages 6 and 7 of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held January 25, 1996 under the caption "Security Ownership
of Certain Beneficial Owners and Management", which information is incorporated
herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information with respect to certain relationships and related
transactions, see the information appearing on page 11 of the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held January 25, 1996
under the caption "Certain Relationships and Related Transactions", which
information is incorporated herein by reference.
22
<PAGE> 23
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See Index to Consolidated Financial Statements and Schedules on
Page 26 of this report.
(a) 2. Exhibits
3(a) Amended Certificate of Incorporation of the Company. (1)
3(b) By-Laws of the Company. (2)
10(a) Sample Dealer Agreement with Schedule. (3)
10(b) Pick License Agreement dated November 23, 1982, between
the Company and Pick Computer Works, Inc. (3)
10(c) Lease, dated March 28, 1991; between the Company and
Lincoln Properties Company. Premises: 1045 South East
Street, Anaheim, California, as amended. (4)
10(d) Form of Note Purchase and Warrant Agreement dated as of
June 17, 1987, between the Company and the Purchasers
thereof. (5)
10(e) Amendment dated May 18, 1989 to Note Purchase Agreement
dated June 17, 1987 between the Company and Paul Morigi &
Company. (10)
10(f) The following agreements by and between the Company and
Sanderson Electronics PLC, all dated as of January 6,
1989, except as indicated: Purchase Agreement; 15%
Convertible Senior Note in the principal amount of
$500,000; 15% Convertible Senior Note in the principal
amount of $1,250,000, dated as of January 24, 1989;
Pledge Agreement; Security Agreement; Common Stock Warrant
Agreement (2,837,388 shares of the Company's Common Stock);
Common Stock Warrant Agreement (2,500,000 shares); Common
Stock Warrant Agreement ("Mirror Rights Agreement"); and
Common Stock Registration Rights Agreement. (6)
10(g) Amendment dated July 28, 1989 to the following agreements
by and between the Company and Sanderson Electronics PLC:
15% Convertible Senior Note in the principal amount of
$500,000, dated as of January 6, 1989; 15% Convertible
Senior Note in the principal amount of $1,250,000, dated
as of January 24, 1989; Common Stock Warrant Agreement
dated as of January 6, 1989 pursuant to which the Notes
may be converted to 2,500,000 shares of the Company's
Common stock. (7)
10(h) Commitment Letter by and between General Automation, Ltd.
and Sanderson Computers (PPS) Limited for a Floating Rate
Unsecured Convertible Loan Stock. (8)
23
<PAGE> 24
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (Continued)
10(i) Articles of Association of SGA Pacific
Limited. (9)
10(j) The Company's 1991 Stock option Plan and
Directors' Stock Option Plan. (11)
10(k) Agreement for the sale and purchase of
49,951 ordinary shares in the capital of
Eurosystems GA Ltd. to Krypton Group
Ltd., and instrument constituting
$990,000 non-interest bearing loan note,
all dated October 28, 1993. (12)
10(l) Agreement relating to the Company's sale
of its 51% interest in SGA Pacific,
Limited to Sanderson Technology, Ltd.,
dated October 20, 1994. (13)
21 Subsidiaries of Registrant
23 Consent of Independent Accountants.
27 Financial Data Schedule.
(1) Filed as Exhibit 3(a) to the Company's 10-K dated as of
June 30, 1989, and by this reference incorporated herein.
(2) Filed as Exhibit No. 30 to the Company's Form 10-K dated
as of June 30, 1988, and by this reference incorporated.
(3) Filed as Exhibit No. 10 to the Company's Form S-1 as
filed on June 5, 1986, and by this reference incorporated
herein.
(4) Filed as Exhibit 10(d) to the Company's Form 10-K dated
as of September 30, 1992, and by this reference
incorporated herein.
(5) Filed as Exhibit B to the Company's Proxy Statement to
Shareholders dated October 14, 1987, and by this reference
incorporated herein.
(6) Filed as Exhibits to the Company's Current Report on Form
8-K dated as of January 6, 1989, and by this reference
incorporated herein.
(7) Filed as Exhibit 10(x) to the Company's Annual Report on
Form 10-K dated as of June 30, 1989, and by this reference
incorporated herein.
24
<PAGE> 25
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (Continued)
(8) Filed as Exhibit 10(y) to the Company's Annual Report on
Form 10-K dated as of June 30, 1989, and by this reference
incorporated herein.
(9) Filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K
dated as of June 30, 1989, and by this reference
incorporated herein.
(10) Filed as Exhibit 3(b) to the Company's Form 10-K dated as
of June 30, 1989, and by this reference incorporated
herein.
(11) Filed as Exhibits to the Company's Form S-8 as filed on
October 4, 1991, and by this reference incorporated herein.
(12) Filed as Exhibit to the Company's Form 8-K dated as of
November 12, 1993, and by this reference incorporated
herein.
(13) Filed as Exhibit to the Company's Form 8-K dated as of November 23,
1994, and by this reference incorporated herein.
25
<PAGE> 26
GENERAL AUTOMATION, INC.
And Subsidiaries
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Pages
-----
Report of Independent Accountants 27
Financial Statements:
Consolidated Balance Sheet - September 30, 1995 28 - 29
and 1994
Consolidated Statement of Operations for the
Three Years in the period ended
September 30, 1995. 30
Consolidated Statement of Shareholders' Equity 31
(Deficit) for the Three Years Ended
September 30, 1995.
Consolidated Statement of Cash Flows for the Three Years 32 - 33
in the period Ended September 30, 1995
Notes to Consolidated Financial Statements 34 - 50
26
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of Directors
of General Automation, Inc.:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of General Automation, Inc. and its subsidiaries at September 30, 1995
and 1994 and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 1995, in conformity with
generally accepted accounting principles. These consolidated 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Costa Mesa, California
December 19, 1995
27
<PAGE> 28
GENERAL AUTOMATION, INC.
And Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30
----------------------------------------
1995 1994
------ --------
<S> <C> <C>
Assets
- ------
Current Assets:
Cash $ 101 $ 230
Accounts receivable, net (Note 2) 5,679 9,144
Inventories (Note 2) 1,726 4,427
Prepaid expenses 185 409
------- -------
Total current assets 7,691 14,210
------- -------
Long-term receivable 570 210
Property, plant and equipment, net of
accumulated depreciation and
amortization (Note 2) 1,354 1,698
Other assets (Note 2) 869 1,923
------- -------
$10,484 $18,041
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 29
GENERAL AUTOMATION, INC.
And Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30
-------------------------------------
1995 1994
------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Accounts payable $ 2,959 $ 3,731
Advances from customers (Note 1) 3,401 1,373
Accrued income taxes (Note 6) 688
Other accrued expenses (Note 2) 850 2,899
Notes payable and current
portion of long-term
debt (Note 3) 1,119 2,794
------- -------
Total current liabilities 8,329 11,485
Long-term debt, excluding
current portion (Note 3) 1,305 1,453
Deferred credit 79 70
Minority interest - SGA
Pacific Ltd. (SGA) (Note 8) 1,787
Commitments and contingencies (Note 10)
Shareholders' Equity
Common stock par value $.10 per share;
Authorized 30,000,000 shares; issued
and outstanding 7,391,776 at
September 30,1995 and 11,366,776
September 30, 1994 739 1,137
Additional paid in capital 42,533 42,420
Accumulated deficit (42,501) (40,457)
Currency translation adjustments 146
-------- --------
Total shareholders' equity 771 3,246
-------- --------
$ 10,484 $ 18,041
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 30
GENERAL AUTOMATION, INC.
And Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Months Ended September 30
---------------------------------------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Sales - net - Product $ 7,020 $21,284 $21,149
Service revenue 7,249 13,330 21,729
-------- ------- -------
Total 14,269 34,614 42,878
-------- ------- -------
Costs and expenses:
Cost of sales - Product 6,502 11,763 11,353
- Service 4,964 9,806 14,685
Selling and administrative 3,704 9,607 14,453
Research and development 584 1,753 1,734
Loss on disposal of subsidiaries 994
Other, net 181 (385) 10
-------- ------- -------
15,935 33,314 43,229
-------- ------- -------
(Loss) income from
operations (1,666) 1,300 (351)
Interest income 35 41 146
Interest expense (434) (649) (865)
-------- ------- -------
(Loss) income before
income taxes, minority
interest and extraordinary
items (2,065) 692 (1,070)
(Benefit from) provision for
Income taxes (454) 190
Minority interest in income of SGA 719 217
-------- ------- -------
(Loss) income before
extraordinary items (2,065) 427 (1,477)
Extraordinary items (Note 9) 900
-------- ------- -------
Net (loss) income $ (2,065) $ 427 $ (577)
======== ======= =======
Earnings per share - primary:
(Loss) income before
extraordinary items $ (.26) $ (.04) $ (.13)
Extraordinary items .08
-------- ------- -------
Net (loss) income $ (.26) $ (.04) $ (.05)
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 31
GENERAL AUTOMATION, INC.
And Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION> Additional
Common Stock Paid-in Translation
Shares Amount Capital Deficit Adjustment
------ ------ ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1992 11,366,776 $1,137 $42,420 $(40,307) $ 192
Net loss (577)
Translation adjustments (601)
---------- ------ ------- -------- -----
Balance at September 30, 1993 11,366,776 1,137 42,420 (40,884) (409)
Net income 427
Translation adjustments 555
---------- ------ ------- -------- -----
Balance at September 30, 1994 11,366,776 1,137 42,420 (40,457) 146
Net loss (2,065)
Retired from Sale of SGA (4,100,000) (410) 113 21 (146)
Issued for legal settlement 125,000 12
---------- ------ ------- -------- -----
Balance at September 30, 1995 7,391,776 $ 739 $42,533 $(42,501) $ -0-
========== ====== ======= ======== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 32
GENERAL AUTOMATION, INC.
and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Twelve Months Ended September 30
-------------------------------------------------
1995 1994 1993
-------- ------ ---------
<S> <C> <C> <C>
Cash flows (used for) provided by
operating activities:
Net (loss) income $(2,065) $ 427 $ (577)
Adjustments to reconcile net
(loss) income to net
cash (used for) provided by
operations:
Depreciation and amortization 355 1,328 1,057
Minority interest in income of SGA 719 217
Changes in balance sheet items, net of
dispositions
Accounts receivable (3,846) (1,461) (1,711)
Inventories 563 233 1,125
Prepaid expenses (11) 11 (131)
Other assets 79 155 (415)
Accounts payable 1,662 978 1,760
Advances from customers 3,160 (371) 157
Accrued income taxes (512) (441)
Other accrued expenses (240) (534) 216
------ ------ ------
Net cash (used for) provided by operating
activities (343) 973 1,257
------ ------ ------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 33
GENERAL AUTOMATION, INC.
and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Twelve Months Ended September 30
-------------------------------------------
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Cash flows (used for)
investing activities:
Purchases of property, plant and
equipment (1,328) (431) (556)
Capitalized software (178) (410) (374)
Investment in subsidiary (21)
------- ------- -------
Net cash (used for)
investing activities (1,527) (841) (930)
------- ------- -------
Cash flows provided by (used for)
financing activities:
Proceeds from issuance of notes payable 1,357 940 1,848
Principal payments on notes payable (1,407) (2,000) (1,835)
Principal payments on accrued taxes (133) (200)
Proceeds from sale of SGA Pacific 1,791
------- ------- -------
Net cash provided by (used for)
financing activities 1,741 (1,193) (187)
------- ------- -------
Effect of exchange rates on cash 125 15
------ ------- -------
Increase (decrease) in cash (129) (936) 155
Cash at beginning of period 230 1,166 1,011
------ ------- -------
Cash at end of period $ 101 $ 230 1,166
====== ======= =======
Cash paid during the period for:
Interest $ 452 $ 1,042 $ 659
====== ======= =======
Income taxes $ $ 133 $ 691
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 34
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Description of the Company and Summary of Significant Accounting Policies:
DESCRIPTION OF THE COMPANY
The Company is engaged in the development, design and sale of computer software
and hardware and related field support services.
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
all of its wholly and majority-owned subsidiaries. All significant
intercompany transactions and accounts have been eliminated.
Revenue Recognition
- -------------------
Revenues for sales of products are recognized as shipped. Revenue is not
recognized on product sales if significant obligations remain or collectibility
is in doubt. Revenues for maintenance service contracts are recognized on a
monthly basis ratably over the period of the contracts. Cash payments received
and billings in advance of revenue recognition are deferred (Advances from
customers) and recognized as earned. Vertical installations (Library, Service
Advantage, etc.) revenues are recognized on the percentage of completion
method.
Warranties
- ----------
All products, except the lowest-end models, carry a one year warranty, during
which all maintenance labor and parts are covered. The Company carries
adequate reserves to cover any anticipated charges of this nature.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market.
Cost elements include material, labor and factory overhead. Market is
considered to be selling price, less allowance for normal selling expenses.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization are provided over the estimated useful lives of
the assets using the straight-line method. Estimated useful lives are as
follows:
<TABLE>
<S> <C>
Building 30 years
Machinery and equipment 3-7 years
Furniture and fixtures 3-7 years
Leasehold improvements Lease term or asset life, whichever is less
Customer service spare parts 7 years
</TABLE>
The estimated useful life of customer service spare parts is adjusted to
reflect actual usage
34
<PAGE> 35
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
1. Description of the Company and Summary of Significant Accounting Policies,
Continued
Expenditures that materially increase the asset life are capitalized and
ordinary maintenance and repairs are charged to operations as incurred. The
difference between cost of purchased companies and fair value of net assets
acquired is amortized using the straight-line method over 5 years.
Capitalized Software
- --------------------
All capitalized software development costs are amortized on a straight-line
basis over the remaining estimated economic life of the product, generally
three to five years. The costs capitalized are those incurred after the
Company has determined the technical feasibility of a software project. The
project amortization does not commence until after the general release of the
product and are included in the cost of sales.
Equity Investments
- ------------------
The Company accounted for its minority interest in investees on the equity
method, under which the Company recognize its pro-rata share of net income as
reported by the investees, after adjusting for the effects of intercompany
transactions.
Foreign Currency Translation
- ----------------------------
The assets and liabilities for the Company's international subsidiaries are
translated into US Dollars using current exchange rates. Income statement
items are generally translated at average exchange rates prevailing during the
period. The resulting translation adjustments are recorded in the currency
translation adjustments account in shareholders' equity. Foreign currency
transaction gains and losses are included in net income.
Income Taxes
- ------------
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), Accounting for Income Taxes. The
adoption of FAS 109 changes the Company's method of accounting for income taxes
from the deferred method (APB 11) to an asset and liability approach.
Previously, the Company deferred the past tax effects of timing differences
between financial reporting and taxable income. The asset and liability
approach requires the recognition of deferred tax liabilities and assets for
the expected future tax consequences of temporary differences between the
carrying amounts and tax bases of other assets and liabilities. Adoption of
FAS 109 resulted in no material adjustment to the statement of operations.
Earnings Per Common Share
- -------------------------
Earnings or loss per share are based on the weighted average number of shares
outstanding without inclusion of common stock equivalents if such inclusion
would be antidilutive.
Weighted average shares used in the earnings or loss per share calculations for
the years ended September 30, 1995, 1994 and 1993 are 8,036,572, 11,366,776 and
11,366,776, respectively.
35
<PAGE> 36
Reclassifications
- -----------------
Certain reclassifications have been made to the 1994 financial statements to
conform to the 1995 presentation.
36
<PAGE> 37
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
2. Composition of Certain Balance Sheet Accounts (in thousands):
Accounts receivable consist of:
<TABLE>
<CAPTION>
September 30
------------------------------------
1995 1994
--------- --------
<S> <C> <C>
Trade receivables $6,007 $9,757
Due from related parties 116 75
------ ------
6,123 9,832
Less allowance for doubtful accounts (444) (688)
------ ------
$5,679 $9,144
====== ======
Inventories are summarized as follows:
September 30
----------------------------------
1995 1994
------ ------
Materials, subassemblies and spare parts $1,498 $2,715
Work in process 157 297
Finished goods 71 1,415
------ ------
$1,726 $4,427
====== ======
</TABLE>
37
<PAGE> 38
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
2. Composition of Certain Balance Sheet Accounts (in thousands):
The major classes of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
September 30
----------------------------------
1995 1994
--------- --------
<S> <C> <C>
Land and building $ 1,256
Machinery and equipment 2,064 $ 3,346
Furniture and fixtures 200 1,798
Leasehold improvements 50 451
------- -------
3,570 5,595
Less accumulated depreciation
and amortization (2,216) (3,897)
------- -------
$ 1,354 $ 1,698
======= =======
</TABLE>
Depreciation and amortization expense for the years ended September 30, 1995,
1994 and 1993 amounted to $60, $528 and $577, respectively.
Other assets comprise:
<TABLE>
<CAPTION>
September 30
---------------------------
1995 1994
------- --------
<S> <C> <C>
Computer software costs $1,612 $ 4,403
Goodwill 551
Other 67 44
------ --------
1,679 4,998
Less accumulated
amortization (810) (3,075)
------ --------
$ 869 $ 1,923
====== ========
</TABLE>
During the years ended September 30, 1995, 1994 and 1993 the Company
capitalized $178, $410 and $374 of software and development costs,
respectively, and $295, $678 and $654 of such costs were amortized to cost of
sales, respectively.
Other accrued expenses consist of the following:
<TABLE>
<CAPTION>
September 30
-------------------------
1995 1994
------ -------
<S> <C> <C>
Accrued payroll 429 $1,305
Accrued taxes other than income 95 150
Other 326 1,444
---- ------
$850 $2,899
==== ======
</TABLE>
38
<PAGE> 39
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars and thousands)
3. Notes Payable and Long-Term Debt:
Notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
September 30
-----------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Note redeemable due March, 1995
bearing interest at 10%, monthly
payments of $150,000
plus interest beginning December, 1994 -- $ 550
Note payable maturing January, 1997
bearing interest at 15%, monthly payments
of $31,192 beginning August, 1995 $ 450 500
Payable for purchase of Maxial Systems, Inc.,
described below, monthly payments of
$6,800, 13% interest 195 245
Notes payable to States relating to taxes
maturing August, 1995 through March, 1999
bearing interest 12%, monthly
payments of $22,640 241 468
Note payable to Sanderson Electronics
PLC, due September 30, 1994 bearing
interest at LIBOR plus 2.5% -- 704
Mortgage payable to National Bank of
Southern California beginning November, 1994
bearing interest at prime + 1%, monthly
payments of $8,445 995 --
Lines of credit:
Bank overdraft facilities, SGA Pacific
Ltd, bearing interest at Australia
prime + 1.65% -- 481
Continental Business Credit, bearing
interest at prime plus 6%, renewable
every six months 543 711
Bank of New Zealand, due on 30 day call
notice at New Zealand prime + 1.65%
to 2.75% -- 588
------ ------
2,424 4,247
Less amounts due in one year 1,119 2,794
------ ------
$1,305 $1,453
====== ======
</TABLE>
39
<PAGE> 40
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
3. Notes Payable and Long-Term Debt, Continued:
Payment requirements on principal balances at September 30, 1995 are
approximately as follows: (in thousands) for the twelve month periods ending
September 30, 1996 - $1,119, 1997 - $233, 1998 - $92, 1999 - $14, 2000 - $10.
In conjunction with the purchase of Maxial Systems, Inc. in 1986, the Company
entered into a revised note agreement with Robert Kramer. The note is
collateralized by the assets of the Company and was issued to complete the
obligations of the Company in the purchase. The note provides for 48 monthly
payments of $7, of which 13 have been made at September 30, 1995. At September
30, 1995 the total remaining payments were $238, less imputed interest,
bringing the present value of the note to $195.
In June 1987, the Company completed a private placement of $1,050 unsecured
redeemable notes due June 1992. Repayment of one note in the amount of $550 was
completed in fiscal 1995. The second note has total remaining payments at
September 30, 1995 of $499 less imputed interest, bringing the present value of
the note to $450. Monthly payments are $31.
In March 1991, an agreement was reached with a domestic lender for a line of
credit collateralized by all current domestic trade accounts receivable. The
maximum borrowing limit is $800 with interest at prime plus 6% with a minimum
rate of 14%. At September 30, 1995 the total owed on this line was $543. The
agreement is renewable at six month intervals. The line includes various
covenants and restrictions; at September 30, 1995 the Company was not in
compliance with certain covenants, for which a waiver was obtained from the
lender.
The Company purchased a building in Irvine, California, on November 16, 1994,
which serves as the Company's corporate offices. The purchase price was
$1,200, less a down payment of $200 leaving a financed balance of $1,000.
Monthly payments for the first twenty-four months are guaranteed to remain at
$8 each. Annual interest is based on prime, plus 1%. Monthly payments will be
adjusted annually for changes to the prime rate. At the end of ten years, a
balloon payment of approximately $917 will be due.
4. Employee Benefit Plans:
The Company has a profit sharing 401K plan covering substantially all of its
domestic employees. Eligible employees may contribute 2% to 12% of their
compensation up to the maximum dollar amount allowed by the IRS. The Company
has agreed to contribute from profits in amounts equal to 50% of each
employee's contribution up to 3% of the employee's compensation. The Company
may elect to, although it is not obligated to, make contributions in years when
it has no profits. Contributions for the periods ended September 30, 1995,
September 30, 1994 and September 30, 1993 were $78, $65 and $65, respectively.
40
<PAGE> 41
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
5. Stock Options
In February 1991, the shareholders of the Company adopted the 1991 Stock Option
Plan and the 1991 Directors' Stock Option Plan. The Board of Directors of the
Company authorized the grant of options to current employees and directors of
the Company, which were exercisable through December 31, 1994. Employees and
directors who held options under previous plans were given the right to retain
those options or accept the options under the 1991 Plans, in which case their
existing options would be canceled. Options under the 1991 Plans were priced in
excess of the market price of approximately $0.625 on the date of
authorization. All such option holders accepted the options offered under the
1991 Plans, and all options to acquire common stock of the Company were
consolidated under the 1991 Plans. In April, 1994, the shareholders of the
company adopted an amendment to the 1991 Stock Option Plan increasing the
shares of Common Stock reserved for issuance thereunder from 900,000 to
1,300,000. The shareholders, at the same time, adopted an amendment to the
1991 Directors' Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 100,000 to 200,000, and to modify
certain provisions concerning non-discretionary stock option grants.
<TABLE>
<CAPTION>
Number of Option Price
Shares Per Share
--------- -----------
<S> <C> <C>
1991 PLANS
- ----------
Outstanding at September 30, 1992 863,000 $0.75
Granted -0-
Exercised -0-
Terminated (23,000)
---------
Outstanding at September 30, 1993 840,000 $0.75
Granted 513,000
Exercised -0-
Terminated (210,000)
---------
Outstanding at September 30, 1994 1,143,000 $0.75
Granted 300,000
Exercised -0-
Terminated (25,000)
---------
Outstanding at September 30, 1995 1,418,000 $0.75
=========
</TABLE>
All remaining 1,418,000 options granted under the 1991 Plan are exercisable at
September 30, 1995. Under the amended 1991 Plan an additional 82,000 shares
have been reserved for future grants. All outstanding options have been
granted at $0.75 per share.
41
<PAGE> 42
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
6. Income Taxes:
Effective October 1, 1993, the Company adopted the provision of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires a liability approach for computing deferred income taxes. Deferred
income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to
reduce deferred tax assets to amounts which are more likely than not to be
realized. The provision for income taxes is the payable or refundable amount
for the period plus or minus the change during the period in deferred tax
assets and liabilities.
The cumulative effect of adopting Statement 109, as of October 1, 1993 did not
change net income. As permitted under the Statement, prior years' financial
statements have not been restated.
The provision (benefit) for income taxes for each of the three fiscal years in
the period ended September 30, 1995 consists of the following:
<TABLE>
<CAPTION>
Year Ended
September 30
-------------------------
1995 1994 1993
---- ----- -----
(in thousands)
<S> <C> <C> <C>
Current:
Domestic $ -- $(900) --
Foreign -- $ 446 $190
------- ----- ----
-- (454) 190
------- ----- ----
Deferred:
Domestic -- --
Foreign -- -- --
------- ----- ----
$ -- $(454) $190
------- ----- ----
</TABLE>
Reasons for differences between income tax expense and the amount computed by
applying the federal statutory income tax rate to income (loss) before income
taxes and extraordinary income are as follows:
42
<PAGE> 43
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
6. Income Taxes, Continued:
<TABLE>
<CAPTION>
Year Ended
September 30
------------------------------------------
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Tax (benefits) provision
calculated at Federal
statutory rate $ (702) 235 $(385)
Tax benefits not provided
on losses of domestic
and foreign operations (405) 414 915
Foreign operations taxed
at other than federal
statutory rate (205) (284)
Amortization of goodwill 53 60 (56)
Reduction in estimated taxes due
under 1989 IRS settlement (900)
Income from sale of foreign subsidiary 1,054
Other (58)
------ ----- -----
(Benefit) provision at effective tax rate $ -- $(454) $ 190
====== ===== =====
</TABLE>
No deferred taxes were recorded for the period ended September 30, 1995 and
September 30, 1994. For the years ended September 30, 1993, there were $72 in
deferred taxes recorded from European operations.
At September 30, 1995, the Company has domestic net operating loss
carryforwards for financial reporting and tax purposes of approximately $45,000
and $53,000 respectively, expiring primarily during the years 1997 through
2010. The tax net operating loss carryforwards could be limited due to a
possible greater than 50% ownership change that may have occurred.
On May 19, 1989, the Company and the IRS executed a revised agreement relating
to tax deficiencies assessed for years 1974 to 1981, the terms and conditions
of which include the following:
Beginning on June 5, 1989, the Company began paying $17 per month
over a 60 month period. The IRS applied such payments totaling
$1,000 against the Company's assessed liability for interest.
The Company completed the payment schedule in May, 1994.
43
<PAGE> 44
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
6. Income Taxes, Continued:
The remaining amount of the obligation, representing statutory
additions and interest, was set at $2.8 million. This amount was to
be offset on a dollar-for-dollar basis by the Company via a written
waiver of 50% of the net operating loss carryforwards (NOLs) allowable
for each taxable year in which a profit was realized. Such offset
will continue until such time that the $2.8 million is fully satisfied
or the Federal income tax return for fiscal 1994 has been filed by the
Company with the IRS, whichever is earlier. Any portion of the total
$2.8 million which remains unsatisfied following the filing date of
the fiscal 1994 Federal income tax return will be satisfied by waiving
an additional amount of NOLs equivalent to the remaining tax balance
of the $2.8 million.
The IRS has replaced the lien against all the assets of the Company with a lien
on certain trademarks and technology of the Company. The lien should have been
released subsequent to receipt of the last payment by the IRS in May, 1994.
This release was not obtained until November, 1995.
At September 30, 1994, 1993 and 1992, the Company revised its estimated tax
liability relating to the $2.8 million fixed portion of the revised IRS
settlement agreement. Based upon projected operating results, management
determined that approximately $1 million each year of the estimated tax
liability would be satisfied by the end of fiscal year 1994 by waiver of unused
NOL carryovers and not from financial assets. Accordingly, the September 30,
1994 tax liability accounts of the Company reflect this change in accounting
estimate, which has been reflected as an extraordinary item in the Consolidated
Statement of Operations, $1,000 in 1992 and $900 in 1993. In 1994 the
adjustment of $900 is included in the provision for income taxes.
Deferred tax assets as of September 30, 1995, relate to the following:
<TABLE>
<CAPTION>
Deferred Tax Assets
------------------------------------
Current Long-Term
------- ---------
<S> <C> <C>
Inventory reserve 82
Warranty Reserve 16
Vacation accrual 117
Allowance for bad debts 151
Accrued royalties 32
NOL carryforward 2,379
Foreign Tax Credits
---- ------
Total 398 2,379
Valuation Allowance (398) (2,379)
---- ------
Net 0 0
==== ======
</TABLE>
44
<PAGE> 45
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
7. Segment Information:
The Company operates in one business segment. Operations include the design,
manufacture, sales and service of computer systems and computer products. In
1995, essentially all of the Company's operations were within the United
States.
Information concerning the Company's operations by geographic area for 1994
and 1993 is as follows:
<TABLE>
<CAPTION>
Twelve Months Ended September 30, 1994
-------------------------------------------------------------
United Pacific Elimina-
States Basin tions Total
(In thousands)
<S> <C> <C> <C> <C>
Net sales to
customers $13,422 $21,192 $34,614
Inter-area sales 575 $ (575)
------- ------- ------ -------
Total net sales $13,997 $21,192 $ (575) $34,614
------- ------ -------
Segment operating
income $ 741 $ 2,148 $ 2,889
------- ------- ------ -------
Interest expense, net (608)
Corporate expenses (1,589)
-------
Income before income
taxes and minority interests $ 692
=======
Identifiable assets $ 6,655 $11,982 $ (596) $18,041
------- ------- ------ -------
Identifiable
liabilities $ 5,110 $ 7,942 $1,743 $14,795
------- ------- ------ -------
</TABLE>
45
<PAGE> 46
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
7. Segment Information, Continued:
<TABLE>
<CAPTION>
Twelve Months Ended September 30, 1993
----------------------------------------------------------------------------
United Pacific Elimina-
States Europe Basin tions Total
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales to
customers $13,501 $12,243 $17,134 $42,878
Inter-area sales 827 37 $ (864)
------- ------- ------- ------- -------
Total net sales $14,328 $12,280 $17,134 $ (864) $42,878
------- ------- ------- ------- -------
Segment operating
income (loss) $ 473 $ (718) $ 929 684
------- ------- ------- -------
Interest expense, net (719)
Corporate expenses (1,035)
-------
Loss before income
taxes minority interests
and extraordinary income $(1,070)
=======
Identifiable assets $ 8,213 $ 5,700 $ 9,772 $(1,229) $22,456
------- ------- ------- ------- -------
Identifiable
liabilities $ 4,916 $ 4,649 $ 7,404 $ 3,223 $20,192
------- ------- ------- ------- -------
</TABLE>
Sales and transfers between geographic areas are made with reference to
prevailing market prices and at prices approximately equal to those charged to
unaffiliated distributors. Operating income is revenue less related costs and
operating expenses, including other income and expense, but excluding interest
and corporate expenses.
Identifiable assets are those assets of the Company that are identified with
operations in each geographic area.
No single customer or group of related customers or total export sales
accounted for as much as 10% of consolidated sales during any of the periods
presented.
8. Acquisitions and Dispositions:
Effective October 1, 1989, the Company acquired a 29.3% interest in SGA Pacific
Limited (SGA), a distributor of the Company's products in Australia, New
Zealand and Asia in exchange for the stock of the Company's wholly-owned
subsidiaries in Singapore and Hong Kong, and for cash of $38. The total
consideration, which is the aggregate of the Company's historical basis in the
stock exchanged and the cash, amounted to $243.
46
<PAGE> 47
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
8. Acquisitions and Dispositions, Continued:
On July 1, 1990, the Company purchased an additional 21.8% interest in SGA from
Sanderson Electronics, PLC, for $875. As the Company became a majority (51.1%)
stockholder, SGA's operations have been consolidated with the Company from July
1, 1990. On November 10, 1994, with retroactive effect from October 1, 1994,
the company sold its 51% share of SGA Pacific, Ltd. to Sanderson Technology,
Ltd. In consideration, Sanderson Technology Ltd. paid the Company $1,000 in
cash, $1,000 in a 24 month note, plus transferred 4,100,000 shares of the
Company's common shares back to the Company, which were retired. This brought
Sanderson's interest in the Company down to under 10%. The sale was not
recorded as a profit due to the related party nature of the transaction.
However, the estimated gain of $3.1 million will be taxable on the fiscal 1995
tax return. It is expected that most of $1.1 million due in Federal income
taxes will be offset by net operating loss carryforwards.
In October, 1992, the Company signed an agreement to form a holding company,
Eurosystems GA Ltd. (Eurosystems), a UK corporation. Under the terms of the
agreement, the Company received 61% of the common shares of Eurosystems in
exchange for its shares in General Automation France SA, General Automation SA
(Belgium), and General Automation Italia SpA (Italy). Krypton Group Ltd., a UK
corporation received 39% of the common shares in exchange for its 100%
shareholding in Eurosystems Belgium SA and Eurosystems SA (France), its 55%
shareholding in Eurosystems GmbH (Germany) and its 85% shareholding in
Eurosystems Maintenance SA (France). The Company accounted for this
transaction as a purchase, with related acquisition adjustments first reflected
in the Company's quarter ended December 31, 1992.
In March, 1993, Eurosystems GA, Ltd. sold its shares of Eurosystems GmbH
(Germany) to the minority shareholders of the German subsidiary for DM3,000
(approximately $1,863). Because this event was related to the initial purchase
in October, 1992, the Company determined that the proper recording of its share
of the gain on the transaction was be to offset the gain of $251 against the
goodwill established at the time of the acquisition.
On October 29, 1993, with retroactive effect from September 30, 1993, the
Company sold its 61% share of Eurosystems to the minority shareholders of
Eurosystems (Krypton Group Ltd.) for $750. A loss of $994 related to this
disposition is included in the 1993 consolidated statement of operations. The
terms included a note receivable in the amount of $750 if paid by December 31,
1993, or $795, including $45 interest if paid before March 31, 1994. If not
repaid by March 31, 1994, the note is repayable in 33 monthly installments of
$30. The note was not paid by March 31, 1994 and after receiving six monthly
installments, payments were suspended by Krypton. For fiscal year 1994, the
Company set up a reserve against the $810 balance remaining. In 1995 Krypton
filed for bankruptcy. The Company has entered into an agreement which would
allow GA to share equally in the Eurosystems group of companies wholly owned by
Future Systems, Ltd. a newly formed Company in Great Britain and owned by the
former Krypton management. The Eurosystems Group has been profitable and
management expects to receive the $570 carried in the balance sheet.
47
<PAGE> 48
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
8. Acquisitions and Dispositions, Continued:
Unaudited Proforma condensed financial information of the Company for fiscal
year 1994 as if the divestitures of Eurosystems GA, Ltd. and SGA Pacific,
Limited had occurred as of the beginning of fiscal year 1993:
<TABLE>
<CAPTION>
Unaudited Proforma Balance Sheet
--------------------------------
At September 30, 1994
--------------------------------
<S> <C>
Cash $1,063
Accounts and notes receivable 2,820
Inventory 2,318
Other current assets 174
------
6,375
Long-term portion of
notes receivable 710
Other assets 1,049
------
Total assets $8,134
======
Accounts payable $1,297
Other current liabilities 1,396
Notes payable 1,742
------
4,435
------
Long-term debt 732
Other non-current liabilities
Deferred income 70
Shareholders' equity 2,897
------
Total liabilities and
shareholders' equity $8,134
======
Net book value per share,
based on 7,266,776 shares,
after retirement of
4,100,000 shares $ 0.40
======
</TABLE>
48
<PAGE> 49
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
8. Acquisitions and Dispositions, Continued:
<TABLE>
<CAPTION>
Unaudited Proforma Statement of Operations
--------------------------------------------------
For the Year Ended September 30, 1994
---------------------------------------------------
<S> <C>
Sales, net $14,572
Income (loss) from
operations (842)
Net income (loss) $ (318)
Per share-primary:
Income (loss) before
extraordinary income $ (0.40)
Extraordinary items
-------
$ (0.40)
=======
</TABLE>
9. Extraordinary Income:
Extraordinary income for the year ended September 30, 1993 included $1,000 from
a decrease in estimated tax liabilities as described in Note 6.
10. Commitments and Contingencies:
The Company leases certain facilities and equipment under operating leases.
Lease rental expense for the periods ended September 30, 1995, September 30,
1994 and September 30, 1993 were approximately $305, $1,367 and $1,786,
respectively.
As of September 30, 1995, the minimum rental commitments required under
existing noncancellable operating leases, some of which provide for future
increases in minimum rentals, are (in thousands) as follows:
<TABLE>
<CAPTION>
Amount
------
<S> <C>
1996 $144
1997 5
1998 0
1999 0
----
$149
====
</TABLE>
49
<PAGE> 50
GENERAL AUTOMATION, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Dollars in thousands)
10. Commitments and Contingencies, Continued:
The Company is a defendant in various lawsuits and claims which have arisen in
the course of its business. While it is not possible to predict with certainty
the outcome of such litigation and claims, it is the opinion of Company
management, based in part on consultations with counsel, that the liability of
the Company, if any, arising from the ultimate disposition of any or all such
lawsuits and claims has been adequately provided for in the consolidated
financial statements of the Company.
The Company is currently a party to a lease agreement for its former corporate
headquarters in Anaheim through February, 1996. The Company does not expect to
sub-lease the building through the remainder of the lease term. Approximately
$75 has been accrued for losses anticipated with this transaction.
The Company has been named as one of three defendants in a lawsuit brought by
the owner of real property once leased and used by a division of the Company as
part of its operations. The plaintiff is seeking relief from alleged
environmental damages which may have occurred on the property before, during,
or after the time the Company leased the property. The extent of the damage,
if any, has not been determined at this time nor has the extent of the
Company's liability, if any, been established in relation to the other
defendants. All of the parties to the litigation are, under the direction of
the court, jointly funding testing to determine the contamination, and scope of
any required remedial effort. The Company has two of its insurance carriers
contributing to the Company's expenses in this matter.
50
<PAGE> 51
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.
GENERAL AUTOMATION, INC.
Date: December 28, 1995 By: /s/ John R. Donnelly
-----------------------
John R. Donnelly
Vice President, and
Chief Financial 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.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------ ------------------------ ----
<S> <C>
/s/ Lawrence Michels Chairman of the Board December 28, 1995
- -------------------------
Lawrence Michels
/s/ leonard N. Makenzie Vice Chairman of the Board December 28, 1995
- -------------------------
Leonard N. Mackenzie
/s/ Robert D. Bagby President, Chief Executive Officer December 28, 1995
- -------------------------
Robert D. Bagby
/s/ Robert M. McClure Director December 28, 1995
- -------------------------
Robert M. McClure
/s/ Paul Morigi Director December 28, 1995
- -------------------------
Paul Morigi
/s/ Philip T. Noden Director December 28, 1995
- -------------------------
Philip T. Noden
</TABLE>
51
<PAGE> 52
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Pages
------- ----------- ------------
<S> <C> <C>
3(a) Amended Certificate of Incorporation of the Company. (1)
3(b) By-Laws of the Company. (2)
10(a) Sample Dealer Agreement with Schedule. (3)
10(b) Pick License Agreement dated November 23, 1982, between
the Company and Pick Computer Works, Inc. (3)
10(c) Lease, dated March 28, 1991; between the Company and
Lincoln Properties Company. Premises: 1045 South East
Street, Anaheim, California, as amended. (4)
10(d) Form of Note Purchase and Warrant Agreement dated as of
June 17, 1987, between the Company and the Purchasers thereof. (5)
10(e) Amendment dated May 18, 1989 to Note Purchase Agreement
dated June 17, 1987 between the Company and Paul Morigi &
Company. (10)
10(f) The following agreements by and between the Company and
Sanderson Electronics PLC, all dated as of January 6, 1989, except
as indicated: Purchase Agreement; 15% Convertible Senior Note in
the principal amount of $500,000; 15% Convertible Senior Note in
the principal amount of $1,250,000, dated as of January 24, 1989;
Pledge Agreement; Security Agreement; Common Stock Warrant
Agreement (2,837,388 shares of the Company's Common Stock); Common
Stock Warrant Agreement (2,500,000 shares); Common Stock Warrant
Agreement ("Mirror Rights Agreement"); and Common Stock
Registration Rights Agreement. (6)
10(g) Amendment dated July 28, 1989 to the following agreements by
and between the Company and Sanderson Electronics PLC: 15%
Convertible Senior Note in the principal amount of $500,000, dated
as of January 6, 1989; 15% Convertible Senior Note in the
principal amount of $1,250,000, dated as of January 24, 1989;
Common Stock Warrant Agreement dated as of January 6, 1989
pursuant to which the Notes may be converted to 2,500,000 shares
of the Company's Common stock. (7)
10(h) Commitment Letter by and between General Automation, Ltd.
and Sanderson Computers (PPS) Limited for a Floating Rate
Unsecured Convertible Loan Stock. (8)
10(i) Articles of Association of SGA Pacific Limited. (9)
10(j) The Company's 1991 Stock option Plan and Directors' Stock Option
Plan. (11)
10(k) Agreement for the sale and purchase of 49,951 ordinary
shares in the capital of Eurosystems GA Ltd. to Krypton Group
Ltd., and instrument constituting $990,000 non-interest bearing
loan note, all dated October 28, 1993. (12)
10(l) Agreement relating to the Company's sale of its 51% interest in
SGA Pacific, Limited to Sanderson Technology, Ltd., dated
October 20, 1994. (13)
21 Subsidiaries of Registrant
23 Consent of Independent Accountants.
27 Financial Data Schedule.
</TABLE>
- -----------------
(1) Filed as Exhibit 3(a) to the Company's 10-K dated as of
June 30, 1989, and by this reference incorporated herein.
(2) Filed as Exhibit No. 30 to the Company's Form 10-K dated
as of June 30, 1988, and by this reference incorporated.
(3) Filed as Exhibit No. 10 to the Company's Form S-1 as
filed on June 5, 1986, and by this reference incorporated
herein.
(4) Filed as Exhibit 10(d) to the Company's Form 10-K dated
as of September 30, 1992, and by this reference
incorporated herein.
(5) Filed as Exhibit B to the Company's Proxy Statement to
Shareholders dated October 14, 1987, and by this reference
incorporated herein.
(6) Filed as Exhibits to the Company's Current Report on Form
8-K dated as of January 6, 1989, and by this reference
incorporated herein.
(7) Filed as Exhibit 10(x) to the Company's Annual Report on
Form 10-K dated as of June 30, 1989, and by this reference
incorporated herein.
(8) Filed as Exhibit 10(y) to the Company's Annual Report on
Form 10-K dated as of June 30, 1989, and by this reference
incorporated herein.
(9) Filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K
dated as of June 30, 1989, and by this reference
incorporated herein.
(10) Filed as Exhibit 3(b) to the Company's Form 10-K dated as
of June 30, 1989, and by this reference incorporated
herein.
(11) Filed as Exhibits to the Company's Form S-8 as filed on
October 4, 1991, and by this reference incorporated herein.
(12) Filed as Exhibit to the Company's Form 8-K dated as of
November 12, 1993, and by this reference incorporated
herein.
(13) Filed as Exhibit to the Company's Form 8-K dated as of November 23,
1994, and by this reference incorporated herein.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF GENERAL AUTOMATION, INC.
General Automation, Inc. owns the issued and outstanding securities of the
following corporations as indicated:
<TABLE>
<CAPTION>
% Thereof Owned
by Applicant
Name Corporation Jurisdiction
- --------- --------------- -----------------
<S> <C> <C>
GA Mentor Ltd. 100% United Kingdom
GA Capital Ltd. 100% United Kingdom
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-43158 and No. 33-79038) of our report dated
December 19, 1995 appearing on page 27 of General Automation, Inc.'s Annual
Report on Form 10-K for the year ended September 30, 1995.
PRICE WATERHOUSE LLP
Costa Mesa, California
December 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 6,123
<ALLOWANCES> 444
<INVENTORY> 1,726
<CURRENT-ASSETS> 7,691
<PP&E> 3,570
<DEPRECIATION> 2,216
<TOTAL-ASSETS> 10,484
<CURRENT-LIABILITIES> 8,329
<BONDS> 0
<COMMON> 739
0
0
<OTHER-SE> 771
<TOTAL-LIABILITY-AND-EQUITY> 10,484
<SALES> 7,020
<TOTAL-REVENUES> 14,269
<CGS> 6,502
<TOTAL-COSTS> 11,466
<OTHER-EXPENSES> 4,373
<LOSS-PROVISION> 96
<INTEREST-EXPENSE> 399
<INCOME-PRETAX> (2,065)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,065)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,065)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
