<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 JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
For the transition period from ________________ to __________________.
Commission file number 0-5260
GENERAL AUTOMATION, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-2488811
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. employer I.D. No.)
incorporation or organization)
17731 MITCHELL NORTH, IRVINE, CALIFORNIA 92714
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (714) 250-4800
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of June 30, 1996 there were 8,103,376 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>
JUNE 30, SEPTEMBER 30,
1996 1995
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash $ 213 $ 101
Accounts receivable, less allowances of
$558 and $444 respectively 4,635 5,679
Inventories 1,931 1,726
Prepaid expenses 531 185
------ -------
Total current assets 7,310 7,691
Long-term receivables 570 570
Property, plant and equipment, net of
accumulated depreciation and amortization 1,374 1,354
Other assets 619 869
------ -------
TOTAL ASSETS $9,873 $10,484
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
----------- -------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES
- -----------
Current liabilities:
Accounts payable $ 2,347 $ 2,959
Deferred revenue 1,845 3,401
Other accrued liabilities 1,002 850
Accrued income taxes 125 0
Notes payable and current
portion of long-term debt 736 1,119
-------- --------
Total current liabilities 6,055 8,329
-------- --------
Long-term debt, excluding current portion 1,087 1,305
Deferred credits 79 79
-------- --------
Total Liabilities 7,221 9,713
-------- --------
SHAREHOLDERS' EQUITY
- --------------------
Common stock par value $.10 per share
Authorized 30,000,000 shares;
issued and outstanding 8,103,376
at June 30, 1996 and 7,391,776
at September 30, 1995 810 739
Additional paid-in capital 43,001 42,533
Deficit (41,159) (42,501)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 2,652 771
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,873 $ 10,484
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1996 1995 1996 1995
------ ------ ------- -------
<S> <C> <C> <C> <C>
SALES - PRODUCT $2,978 $1,152 $ 7,567 $ 3,799
SALES - SERVICE REVENUE 4,313 1,628 11,562 4,909
------ ------ ------- -------
Total 7,291 2,780 19,129 8,708
------ ------ ------- -------
COSTS AND EXPENSES:
Cost of sales - Product 2,574 1,308 6,595 3,667
Cost of sales - Service 2,300 1,121 6,789 3,515
Research and development 406 218 899 457
Selling and administrative 1,139 956 3,106 2,801
Other, net 71 173 87 254
------ ------ ------- -------
6,490 3,776 17,476 10,694
------ ------ ------- -------
OPERATING INCOME/(LOSS) 801 (996) 1,653 (1,986)
Interest income 16 1 24 30
Interest expense (61) (111) (210) (321)
------ ------ ------- -------
INCOME/(LOSS) BEFORE INCOME TAXES 756 (1,106) 1,467 (2,277)
Provision for income taxes 125 0 125 0
------ ------ ------- -------
NET INCOME/(LOSS) $ 631 $(1,106) $ 1,342 $(2,277)
====== ======= ======= =======
PER SHARE-PRIMARY:
NET INCOME/(LOSS) $ 0.08 $ (0.15) $ 0.18 $ (0.28)
====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
---------------------------
JUNE 30, JUNE 30,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
NET INCOME/(LOSS) $1,342 $(2,277)
Adjustments to reconcile net income to net cash
provided by or (used) for operations:
Gain from disposal of assets (55)
Depreciation and amortization 47 260
Changes in assets, (increase)/decrease
and liabilities, increase/(decrease):
Accounts receivable 1,044 (879)
Inventories (205) 749
Prepaid expenses (346) (56)
Other assets 250
Accounts payable (612) 415
Deferred revenue (1,556) 1,172
Accrued expense 277 586
------ -------
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES 186 (30)
------ -------
CASH FLOWS (USED FOR) PROVIDED BY INVESTING ACTIVITIES:
- -------------------------------------------------------
Purchases of property, plant and equipment (67) (1,299)
Sale of SGA Pacific, Ltd. 1,045
------ -------
NET CASH USED FOR INVESTING ACTIVITIES (67) (254)
------ -------
CASH FLOWS (USED FOR) PROVIDED BY FINANCING ACTIVITIES:
- -------------------------------------------------------
Proceeds from issuance of common stock 539
Proceeds from issuance of notes payable 276 1,460
Proceeds from disposal of assets 55
Principal payments on notes (877) (986)
------ -------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (7) 474
------ -------
Increase in cash 112 190
Cash at beginning of period 101 230
------ -------
Cash at end of period $ 213 $ 420
====== =======
Cash paid during the period for:
Interest $ 210 $ 321
====== =======
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.
Effective April 1, 1996, the Company changed its accounting for service
contract billings related to SunRiver Data Systems (refer to "Acquisitions and
Divestitures" in the Company's 1995 Annual Report on Form 10-K for further
discussion regarding this strategic partnership). Prior to this change, the
renewal of annual maintenance contracts was recorded at the point the customer
was billed. Based on recent renewal experience, the Company changed its
accounting policy to delay the recording of the annual maintenance contract
until the customer has agreed to the renewal of the annual maintenance
contract. The effect of this change was to decrease net accounts receivable and
deferred revenue by approximately $1.6 million as of June 30, 1996 compared to
September 30, 1995.
2. INVENTORIES ARE AS FOLLOWS: (IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
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<S> <C> <C>
Materials, subassemblies and service spares $1,759 $1,498
Work in process 123 157
Finished goods 49 71
------ ------
Total Inventories $1,931 $1,726
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</TABLE>
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3. EARNINGS PER COMMON SHARE:
Primary earnings or loss per common share for the three month periods
ended June 30, 1996 and 1995 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 7,741,860 and 7,508,136 for the
three and nine month periods ended June 30, 1996, and 7,391,776 and 8,253,865
for the three and nine month periods ended June 30, 1995.
7
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GENERAL AUTOMATION, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
DATA
SUMMARY
The Company continued to improve during the third quarter of FY 1996
compared to the same period in FY 1995. For the nine months current year to
date, the Company recorded revenues of over $19,000,000 and profits of
$1,342,000. This performance reflects the various management actions taken in
early 1995 to re-focus the Company into areas where it had the expertise and
resources, and which offered the greatest opportunity for sustained
profitability. In addition to the actions set out in the two following
paragraphs, the Company strengthened its management team by adding functional
management in the areas of service, sales, and engineering. Further, the Company
introduced new systems and Power95 software products late in FY 1995 which have
gained acceptance in the marketplace.
During the third quarter, the Company completed the first anniversary of
the strategic partnership entered into with SunRiver Data Systems ("SRDS").
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). The Company has not experienced seasonal fluctuations or business cycle
vacillations, and the success of the partnership can be seen in the resulting
improved profits.
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, which
amounted to $752,000 for the nine months ended June 30, 1995.
SALES
Product sales increased $1,826,000 (159%) and $3,768,000 (99%) for the
three and nine month periods ended June 30, 1996, as compared to the same three
and nine month periods last year, primarily due to increased Dealer and
International revenues from the market acceptance of non-GA manufactured system
hardware with Power 95 software, and the strategic partnership with SunRiver
Data Systems. The non-GA manufactured systems are purchased from NCR and
Groupe Bull in France under Original Equipment Manufacturer (OEM) agreements.
8
<PAGE> 9
Service revenues increased $2,685,000 (165%) and $6,653,000 (136%) for the
three and nine month periods ended June 30, 1996 compared to last year
primarily due to the strategic partnership with SunRiver Data Systems. Service
revenues on Company manufactured systems continue to decrease 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. This decrease is in part, countered through the
Company's newly formed professional services group which generated revenues of
$55,000 for the quarter and $250,000 year to date. The professional services
group utilizes existing personnel to offer hardware and software consulting
services.
Management believes that in the future, the Company will continue to see
declining revenues from its own manufactured proprietary hardware. The decline
is planned to be offset with increased sales generated from new hardware
produced by other manufacturers under OEM agreements with Bull Groupe and NCR.
The new hardware was introduced in September, 1995 and for the three and nine
month periods ended June 30, 1996, sales of non-GA manufactured hardware
increased $1,038,000 and $1,893,000, respectively, over the same periods last
year.
GROSS MARGIN
The consolidated gross margin percentage for products and service increased
21 percentage points and 13 percentage points for the three and nine month
periods ended June 30, 1996 as compared with the corresponding periods of the
previous year. Product gross margins increased 27 percentage points and 9
percentage points for the same three and nine month periods. This increase is
largely due to the increased sales volume in relation to fixed costs. Service
revenue gross margins increased 16 percentage points and 13 percentage points
for the three and nine month periods respectively, due to increased revenues in
excess of increased overhead costs resulting from the strategic partnership
agreement.
EXPENSES
Research and development expenses, including engineering, increased
$188,000 and $442,000 during the three and nine month periods ended June 30,
1996, respectively, compared to the same period last year. These increased
expenditures are the result of the consolidation of engineering functions
attendant to the strategic partnership.
Selling and Administrative expenses increased $183,000 and $305,000 during
the three and nine month periods ended June 30, 1996, respectively, compared to
the same period last year. As a percent of sales, the expense levels have
decreased from 34.4% to 15.6% for the quarter and from 32.2% to 16.3% year to
date. This improvement reflects the strong cost controls which the Company
utilizes.
Other expenses decreased $102,000 and $167,000 during the three and nine
month periods ended June 30, 1996, compared to the same period last year. The
decrease for the three
9
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and nine month periods is due to costs associated the strategic partnership
which are included in cost of sales for the current fiscal year, rather than
being classified as other expense for the same period last year.
Interest expense decreased $50,000 and $111,000 for the three and nine
month periods ended June 30, 1996 compared with the same periods in 1995 due to
decreased borrowings resulting from increased cash flows and the twelve
consecutive profitable months.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to operate on improved cash resources.
The Company's liquidity needs are met through receivable collections and
asset-based loans. Through these two vehicles, the Company has met its
supplier's requirements and has been able to continue the debt retirement effort
begun in 1994. The Company's leverage position has improved dramatically, now
standing at 2.7 times equity. As of September 30, 1995, this ratio was ten to
one. The Company is in the process of seeking a new line of credit, as high as
$1,000,000, based on more normal lending terms 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 provided by operating activities for the nine months ended June
30, 1996 was $186,000. Cash of $2,719,000 was consumed by increases in
inventory and prepaid expenses and decreases in accounts payable and deferred
revenue; while decreases in accounts receivable and other assets and an increase
in accrued expenses generated $1,571,000.
Net cash of $67,000 was consumed by investing activities for the purchase
of fixed assets.
Financing activities consumed net cash of $7,000, through new notes issued
of $276,000 to finance annual insurance premiums, offset by net payments of
debt totaling $877,000. Employees exercised stock options which generated cash
of $539,000.
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 for the short term, however, it is actively
seeking to secure funding at a more competitive rate to provide additional
capital for expansion. At June 30, 1996, the balance of the loan was $344,000.
The Line of credit contains various covenants and restrictions. At June 30,
1996, the Company was in full compliance with all covenants and restrictions.
10
<PAGE> 11
The accounts receivable balance at June 30, 1996 was $4,635,000, a decrease
of $1,044,000 from September 30, 1995. This decrease is primarily due to the
change in Balance Sheet presentation described in the notes to the Financial
Statements offset by an increased volume of product shipments during the period.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 contributions are 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
effort
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
On May 20, 1996, the Registrant filed Form 8-K regarding certain
management changes.
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: July 23, 1996 By: /s/ JOHN R. DONNELLY
---------------------------
John R. Donnelly
Vice President, Finance
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERNALLY
PREPARED FOR NINE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 213
<SECURITIES> 0
<RECEIVABLES> 5,193
<ALLOWANCES> 558
<INVENTORY> 1,931
<CURRENT-ASSETS> 7,310
<PP&E> 3,637
<DEPRECIATION> 2,263
<TOTAL-ASSETS> 9,873
<CURRENT-LIABILITIES> 6,055
<BONDS> 0
810
0
<COMMON> 0
<OTHER-SE> 1,842
<TOTAL-LIABILITY-AND-EQUITY> 9,873
<SALES> 7,567
<TOTAL-REVENUES> 19,129
<CGS> 6,595
<TOTAL-COSTS> 13,384
<OTHER-EXPENSES> 3,921
<LOSS-PROVISION> 147
<INTEREST-EXPENSE> 210
<INCOME-PRETAX> 1,467
<INCOME-TAX> 125
<INCOME-CONTINUING> 1,342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,342
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
