<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A (AMENDMENT NO. 1)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
FOR QUARTERLY PERIOD ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
For the transition period from to .
----------------- -----------------
Commission file number 0-5260
GENERAL AUTOMATION, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2488811
- ---------------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. employer I.D. No.)
incorporation or organization)
17731 MITCHELL NORTH, IRVINE, CALIFORNIA 92714
- ---------------------------------------- -------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (714) 250-4800
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
As of January 31, 1996 there were 7,391,776 shares of common stock of
the Registrant outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1995
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 52 $ 101
Accounts receivable, less allowances of
$778 and $444 respectively 7,161 5,679
Inventories 2,053 1,726
Prepaid expenses 333 185
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Total current assets 9,599 7,691
Long-term receivables 570 570
Property, plant and equipment, net of
accumulated depreciation and
amortization 1,358 1,354
Other assets 770 869
------- -------
TOTAL ASSETS $12,297 $10,484
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1995
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(UNAUDITED)
<S> <C> <C>
Liabilities
Current liabilities:
Accounts payable $ 3,007 $ 2,959
Deferred revenue 4,911 3,401
Other accrued liabilities 957 850
Notes payable and current
portion of long-term debt 1,178 1,119
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Total current liabilities 10,053 8,329
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Long-term debt, excluding current portion 1,190 1,305
Deferred credits 79 79
-------- --------
Total Liabilities 11,322 9,713
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Shareholders' Equity
Common stock par value $.10 per share
Authorized 30,000,000 shares;
issued and outstanding 7,391,776
at both December 31, 1995 and
September 30, 1995 739 739
Additional paid-in capital 42,533 42,533
Deficit (42,297) (42,501)
-------- --------
Total Shareholders' Equity 975 771
-------- --------
Total Liabilities and Shareholders' Equity $ 12,297 $ 10,484
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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DECEMBER 31,
------------------
1995 1994
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<S> <C> <C>
Sales - Product $2,272 $1,519
Sales - Service revenue 3,279 1,634
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Total 5,551 3,153
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Costs and expenses:
Cost of sales - Product 2,024 1,258
Cost of sales - Service 2,164 1,193
Research and development 223 121
Selling and administrative 872 889
Other, net (12) 64
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5,271 3,525
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Operating income 280 (372)
Interest income 1 17
Interest expense (77) (106)
------ ------
Income/(loss) before income taxes 204 (461)
Provision for income taxes 0 0
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Net income/(loss) $ 204 $ (461)
====== ======
Per Share-Primary:
Net Income/(loss) $ 0.03 $(0.05)
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
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DECEMBER 31, DECEMBER 31,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ 204 $ (461)
Adjustments to reconcile net income to net cash
provided by or (used) for operations:
Depreciation and amortization 15 84
Changes in assets, (increase)/decrease
and liabilities, increase/(decrease):
Accounts receivable (1,482) (719)
Inventories (327) 220
Prepaid expenses (148) (22)
Other assets 99
Accounts payable 48 (173)
Deferred revenue 1,510 189
Accrued expense 107 349
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Cash flows provided by (used for) operating activities 26 (533)
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Cash flows (used for) provided by investing activities:
Purchases of property, plant and equipment (18) (1,249)
Sale of SGA Pacific, Ltd. 1,045
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Net cash used for investing activities (18) (204)
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Cash flows (used for) provided by financing activities:
Proceeds from issuance of notes payable 267 1,138
Principal payments on notes (324) (400)
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Net cash (used for) provided by financing activities (57) 738
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Decrease in cash (49) 1
Cash at beginning of period 101 230
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Cash at end of period $ 52 $ 231
======= =======
Cash paid during the period for:
Interest $ 77 $ 119
======= =======
Income taxes $ 0 $ 0
======= =======
</TABLE>
The accompanying notes are an integral part of these statements
5
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GENERAL AUTOMATION, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. FINANCIAL STATEMENTS:
The financial statements for the current year included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments, consisting of normal recurring adjustments, which, in the opinion
of management, are necessary for a fair statement of the results of the interim
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the Company's latest
annual report.
2. INVENTORIES ARE AS FOLLOWS: (IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
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<S> <C> <C>
Materials, subassemblies and service spares $1,777 $1,498
Work in process 138 157
Finished goods 138 71
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Total Inventories $2,053 $1,726
====== ======
</TABLE>
3. EARNINGS PER COMMON SHARE:
Primary earnings or loss per common share for the three month periods
ended December 31, 1995 and 1994 is based on the weighted average of shares
outstanding, without inclusion of common stock equivalents, as such inclusion
would be anti-dilutive or dilution would be less than 3%.
Weighted average shares outstanding are 7,391,776 for the three month
period ended December 31, 1995, and 9,985,255 for the three month period ended
December 31, 1994.
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<PAGE> 7
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL DATA
SUMMARY
- -------
The Company's marked improvement during the first quarter of FY 1996
over the same period in FY 1995 is the result of several management decisions
to re-focus the Company into the areas where the Company has the resources and
good reputation, which offers the greatest opportunity for sustained
profitability. In addition to the actions set out in the three following
paragraphs, the Company strengthened its management team to implement the new
strategies which has resulted in six consecutive months of profit improvement
and significant revenue gains; further, the Company introduced new systems and
Power95 software products which have had acceptance in the marketplace.
Effective in October 1, 1994, the Company's Pacific Basin subsidiaries
in Australia, New Zealand and Singapore were sold to Sanderson Technology
Limited for $2,000,000 in cash and notes, plus 4,100,000 common shares of the
Company which had been owned by Sanderson. The Company retired the shares on
December 1, 1994. (See Note 8 to the consolidated financial statements
included in the Company's 1995 Annual Report on Form 10-K). Accordingly, the
financial statements presented in this filing do not include Pacific Basin
data. The two General Automation Group Business Segments, product and service,
have been reported separately in the financial statements above and reflect the
same data which had been segregated as Domestic (USA generated) data on
schedules A, B, and C in prior filings.
Effective May 22, 1995, the Company and SunRiver Data Systems ("SRDS")
entered into a strategic partnership under which the Company acquired the Pick
based business. The acquisition broadened the Company's hardware and software
product offerings as well as adding over 2,000 service customers to its
customer base and effectively doubled the Company's worldwide business and
revenue base. (See "ACQUISITIONS AND DIVESTITURES" in the Company's 1995
Annual Report on Form 10-K).
Effective August 28, 1995 the Company entered into an agreement with
Sanderson Computers, Inc. ("SCI") under which SCI will be responsible for the
world-wide sales and support of both the Maxial applications software package
and the Zebra 2000 Advanced Library Management and Information System. Under
the terms of the agreement, SCI will pay a royalty to the Company for each
Maxial system sold (the Zebra 2000 system was licensed to the Company by
Sanderson Computers PTY LTD and will provide no future revenues.) 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 these products.
7
<PAGE> 8
SALES
- -----
Product sales increased $753,000 for the three month period ended
December 31, 1995, as compared to the same three month period last year,
primarily due to increased Dealer and International revenues from the strategic
partnership with SunRiver Data Systems.
Service revenues increased $1,645,000 in the three month period ended
December 31, 1995 compared to last year primarily due to the strategic
partnership with SunRiver Data Systems. Service revenues on Company
manufactured systems continue to deteriorate, as older contracts are being
canceled at a faster rate than they can be replaced with contracts on new
equipment, which generally carry one year warranties and do not generate
service revenues. Service revenues of $95,000 were generated by GA's newly
formed professional services group, which utilizes existing personnel to offer
hardware and software consulting services.
Management believes that in the future, the Company will see declining
revenues from its own manufactured hardware. The decline is planned to be
offset with the introduction of new hardware produced by other manufacturers
under OEM agreements. The new hardware was introduced in September, 1995 and
for the three month period ended December 31, 1995, sales of non-GA
manufactured hardware increased $60,000 over the same period last year.
GROSS MARGIN
- ------------
The overall gross margin percentage for products and service increased
2 percentage points for the three months ended December 31, 1995, as compared
with the corresponding period of the previous year. Product gross margins
decreased 6 percentage points, due to a large percentage of entry level
computer systems sales, which carry lower margins, low recognition of income on
vertical installations, and increased overhead costs due to the partnership
with SunRiver Data Systems. Service revenue gross margins increased 7
percentage points, due to increased revenues in excess of increased overhead
costs resulting from the strategic partnership agreement.
EXPENSES
- --------
Research and development expenses, including engineering, increased
$102,000 in the three month period ended December 31, 1995 compared to the same
period last year. These increased expenditures are a combination of new
technical staff and new product development costs.
Selling and Administrative expenses decreased $17,000 in the three
month period ended December 31, 1995 compared to the same period last year, due
to staff reductions and decreased use of outside services and consultants
offset by strategic partnership staff increases in the sales and marketing
areas.
Other expenses decreased $76,000 in the three months ended December
31, 1995, compared to the same period last year. This decrease is a
combination of increased costs due to
8
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the strategic partnership, offset by gains on the disposal of assets from the
Company's previously occupied Anaheim facility. During the quarter, the
Company incurred costs associated with the strategic partnership with SunRiver
such as loaned labor from SunRiver, space rental, fees for AT&T interface, and
travel and per diem expenses. These costs are non recurring.
Domestic interest expense decreased $29,000 for the three month period
ended December 31, 1995 compared with the same period in 1994 due to decreased
borrowings resulting from increased cash flows from strategic partnership
billings.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company continues to operate on improved cash resources.
Net cash provided by operating activities for the three months ended
December 31, 1995 was $26,000. Cash of $1,957,000 was consumed by increases in
receivables, inventory and prepaid expenses while increases in deferred revenue
and accrued expenses generated $1,617,000.
The Company's liquidity needs are met through receivable collections
and asset-based loans. Through these two vehicles, we have met our supplier's
requirements and have been able to continue the debt retirement efforts begun
in 1994. The Company is in the process of seeking a new line of credit,
perhaps as high as $1,000,000, which is based on a more normal lending basis
and at a lower cost. The continued profitability of the Company is the key
element in obtaining this new line of credit. This new line would then be
available for the Company to expand the business; management does not envision
it being required for the current operations.
Net cash of $18,000 was consumed by investing activities attributable
to the purchase of fixed assets.
Financing activities consumed net cash of $57,000, through new notes
issued of $267,000 to finance insurance premiums, offset by net payments of
debt of $324,000.
Currently, the Company has an agreement with a U.S. lender for a
revolving line of credit, not to exceed $800,000 plus monthly fees, which is
collateralized by domestic accounts receivable. The agreement is renewable at
six month intervals. The interest rate is prime plus 6%, but not less than
14%, payable monthly. In addition, there are other monthly costs for
maintaining the open line of credit. Because the amount of borrowing is
dependent upon accounts receivable levels, varying levels of domestic activity
could preclude full utilization of the facility. Management believes that
these funds will be adequate. However, it is actively seeking to secure
funding at a more competitive rate to provide additional capital for
expansion. At December 31, 1995, the balance of the loan was $418,000 and the
available level for borrowing was $173,000. The line of credit contains
various covenants and restrictions. At December 31, 1995, the Company was in
full compliance with all covenants and restrictions.
The accounts receivable balance at December 31, 1995 was $7,161,000,
an increase of $1,482 from September 30, 1995. This growth is primarily due to
the $1,317,000 increase in
9
<PAGE> 10
annual billings by the Company on the previously held SunRiver contracts.
These contracts are billed forty-five days prior to the customer's anniversary
date. The Company records revenue on a monthly amortized basis; the annualized
portion of the unpaid receivables when compared to current period revenues can
result in a higher than normal "days outstanding" profile.
ITEM 5. OTHER INFORMATION
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 action, including the plaintiff, are
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 legal expenses associated with this matter.
However, such contribution is being made under a reservation of rights. Until
the testing results are available to determine the environmental damages, if
any, the Company has not recorded a liability for any financial exposures
attributed to the Company for remedial efforts.
10
<PAGE> 11
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENERAL AUTOMATION, INC.
DATE: April 29, 1996 By: /s/ JOHN R. DONNELLY
---------------------------
John R. Donnelly
Vice President, Finance
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERNALLY
PREPARED FOR 3 MONTHS ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-Q FOR PERIOD ENDED DECEMBER 31, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 52
<SECURITIES> 0
<RECEIVABLES> 7,939
<ALLOWANCES> 778
<INVENTORY> 2,053
<CURRENT-ASSETS> 9,599
<PP&E> 3,589
<DEPRECIATION> 2,231
<TOTAL-ASSETS> 12,297
<CURRENT-LIABILITIES> 10,053
<BONDS> 1,190
<COMMON> 739
0
0
<OTHER-SE> 236
<TOTAL-LIABILITY-AND-EQUITY> 12,297
<SALES> 2,272
<TOTAL-REVENUES> 5,551
<CGS> 2,024
<TOTAL-COSTS> 4,188
<OTHER-EXPENSES> 1,083
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> 204
<INCOME-TAX> 0
<INCOME-CONTINUING> 204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 204
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
