<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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 92614
- ---------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (949) 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. No Yes X
--- ---
As of August 6, 1998 there were 9,332,641 shares of common stock of the
Registrant outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
RESTATED
---------------------------------
DECEMBER 31 SEPTEMBER 30
1997 1997
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 333,000 $ 797,000
Accounts receivable, less allowances of
$352 and $309 respectively 5,810,000 5,492,000
Due from related parties 54,000 56,000
Inventories 4,499,000 4,999,000
Prepaid expenses 1,256,000 839,000
Deferred tax asset (2,000) 0
------------ ------------
Total current assets 11,950,000 12,183,000
Long-term receivables 244,000 570,000
Property, plant and equipment, net of
accumulated depreciation and amortization 2,328,000 2,431,000
Goodwill, net of amortization 6,506,000 7,085,000
Other assets 2,526,000 1,994,000
------------ ------------
TOTAL ASSETS $ 23,554,000 $ 24,263,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
RESTATED
-----------------------------------
DECEMBER 31 SEPTEMBER 30
1997 1997
------------- --------------
<S> <C> <C>
LIABILITIES
Current liabilities:
Bank line of credit $ 1,884,000 $ 1,884,000
Accounts payable 5,112,000 3,671,000
Deferred revenue 4,624,000 5,013,000
Other accrued liabilities 2,065,000 2,243,000
Notes payable and current
maturities of long-term debt 4,985,000 5,495,000
------------ ------------
Total current liabilities 18,670,000 18,306,000
------------ ------------
Long-term debt, excluding current portion 3,203,000 3,269,000
Total Liabilities 21,873,000 21,575,000
------------ ------------
SHAREHOLDERS' EQUITY
Common stock par value $.10 per share
Authorized 30,000,000 shares;
issued and outstanding 9,252,591
at December 31, 1997 and 9,232,591
at September 30, 1997 924,000 923,000
Additional paid-in capital 45,539,000 45,516,000
Deficit (44,737,000) (43,672,000)
Translation adjustment (45,000) (79,000)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 1,681,000 2,688,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,554,000 $ 24,263,000
============ ============
</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)
<TABLE>
<CAPTION>
RESTATED
--------------------------------
FOR THE THREE MONTHS ENDED
--------------------------------
DECEMBER 31 DECEMBER 31
1997 1996
----------- -----------
<S> <C> <C>
SALES - PRODUCT $ 2,570,000 $ 2,909,000
SALES - SERVICE REVENUE 5,673,000 6,589,000
----------- -----------
Total 8,243,000 9,498,000
----------- -----------
COSTS AND EXPENSES:
Cost of sales - Product 2,050,000 2,311,000
Cost of sales - Service 3,638,000 3,697,000
Selling and administrative 2,493,000 2,321,000
Research and development 619,000 993,000
Amortization of goodwill 418,000 330,000
Other, net (1,000) 58,000
----------- -----------
9,217,000 9,710,000
----------- -----------
OPERATING (LOSS)/INCOME (974,000) (212,000)
Interest income 2,000 13,000
Interest expense (93,000) (65,000)
----------- -----------
(LOSS)/INCOME BEFORE INCOME TAXES (1,065,000) (264,000)
Provision for income taxes 0 91,000
----------- -----------
$(1,065,000) $ (355,000)
=========== ===========
NET (LOSS) INCOME PER SHARE:
Basic $ (0.12) $ (0.04)
Fully diluted $ (0.12) $ (0.04)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 9,252,156 8,861,430
Fully diluted 9,252,156 8,861,430
</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
(Unaudited)
<TABLE>
<CAPTION>
RESTATED
----------------------------------
FOR THE THREE MONTHS ENDED
----------------------------------
DECEMBER 31 DECEMBER 31
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
NET (LOSS)/INCOME $(1,065,000) $ (355,000)
Adjustments to reconcile net income (loss) to
net cash cash provided by (used
in) operating activities:
Gain from disposal of assets (70,000)
Depreciation and amortization 873,000 460,000
Deferred taxes
Changes in assets and liabilities:
(Increase)decrease:
Receivable (167,000) (3,012,000)
Inventories 379,000 (2,280,000)
Prepaid expenses (417,000) (749,000)
Other assets 63,000 (1,957,000)
Increase (decrease):
Accounts payable 1,441,000 776,000
Deferred revenue (538,000) 731,000
Accrued expense (178,000) 1,361,000
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 391,000 (5,095,000)
CASH FLOWS (USED IN) INVESTING ACTIVITIES:
Acquisitions 0
Purchase of property, plant and equipment (44,000) (1,309,000)
Proceeds from disposal of assets (278,000)
Capitalized software costs 0
Investment in subsidiaries 0
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (322,000) (1,309,000)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of common stock 24,000 1,875,000
Proceeds from issuance of notes 219,000 5,719,000
Principal payments on notes payable (810,000) (961,000)
Proceeds from sale of SGA Pacific 0 0
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (567,000) 6,633,000
----------- -----------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 34,000 0
(Decrease) increase in cash (464,000) 229,000
Cash at beginning of period 797,000 119,000
----------- -----------
Cash at end of period 333,000 348,000
=========== ===========
Cash paid during the period for:
Interest $ 93,000 $ 65,000
=========== ===========
Income taxes 0 0
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE> 6
GENERAL AUTOMATION, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - INVENTORY
Inventories consists of the following at December 31, 1997:
Material and purchased sub-assemblies $2,400,598
Support systems, spare parts and subassemblies, net 1,438,789
Work in process 414,058
Finished goods 620,224
----------
Less: Reserves 374,677
----------
$4,498,983
==========
NOTE 2 - DEFERRED REVENUE
Revenues for sales and the associated cost of goods sold are recognized when
product is shipped and no significant obligation remains. Revenues for
maintenance service contracts are recognized on a monthly basis ratable over the
period of the contracts. Cash payments received and billings in advance of
revenue recognition are recorded as a liability "advances from customers" and
recognized as revenue is earned.
NOTE 3 - USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with general
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 4 - INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring items) considered
necessary for a fair presentation have been included. Operating results for the
interim period are not necessarily indicative of the results that may be
expected for the fiscal year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K.
6
<PAGE> 7
NOTE 5 - EARNINGS PER SHARE
The Financial Accounting Standard Board has issued Statement No. 128, "Earnings
per Share" which supersedes APB Opinion No. 15. Statement No. 128 requires the
presentation of basic and diluted earnings per share amounts. Diluted per share
amounts assume the conversion, exercise or issuance of all potential common
stock instruments unless the effect is to reduce a loss or increase the income
per common share from continuing operations. The Company has adopted Statement
No. 128 for the periods ended December 31, 1997. All prior earnings per share
amounts have been restated to conform to the new Statement.
The weighted average number of common shares and common share equivalents
outstanding during the period used to compute basic and diluted earnings per
share is as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Weighted average common shares used in
computation of basic earnings per share 9,252,156 8,861,430
Effect of dilutive securities:
Common stock options * *
Weighted average common and common share
equivalents used in computation of
diluted earnings per share 9,252,156 8,861,430
- -----------------
*Excluded since the effect is antidilutive
</TABLE>
7
<PAGE> 8
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
AMENDED FORM 10-Q
Previous SEC filings have reported that an internal audit disclosed errors in
financial statements in prior years which require restatement. Errors found were
noted as the result of on-going bookkeeping procedures and accounting software
problems which affected those years and the quarter ended December 31, 1997.
Those procedures and software issues have subsequently been corrected. This
report amends the original Form 10-Q for the period ended December 31, 1997 to
reflect the correction of those errors. For the year ended September 30, 1997
and the period ended December 31, 1996, those comparative financial results are
being presented as if those financial statements have been restated to correct
the above mentioned errors.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The discussion in this document contains trend analysis and other forward
looking statements within the meaning of Section 27A of the Securities Act of
1933 as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results could differ materially from those projected in the
forward-looking statements throughout this document.
(1) MATERIAL CHANGES IN FINANCIAL CONDITION:
The cash position of the Company at the three months ended December 31, 1997 had
fallen to $333,000 from $797,000 at the year ended September 30, 1997; a 58%
decline. This sharp decline was due primarily to the payment of principal
payments on notes of $810,000 reflected in the statement of cash flows for the
same period. Management is also mindful of the 38% increase in accounts payable
outstanding at December 31, 1997 compared to September 30, 1997, which reflects
the generally illiquid condition of the Company at the quarter ended December
31, 1997. The Company's working capital deficit of $6.7 million at December 31,
1997 increase from a $6.1 million deficit at September 30, 1997.
With a clear need to improve the deficit working capital and liquidity position
of the Company, management continues to seek avenues of raising cash and better
utilizing non-income producing assets. As reported in previous Form 8-K filings,
the Company borrowed a net $860 thousand in May 1998, proceeds of which are used
for working capital. The Company is also continuing efforts to negotiate
converting short-term trade debt to long-term debt, and working with large
debtors related to the business entity acquisitions in 1995 and 1996 to
restructure that debt to a form which should improve the capital and liquidity
of the Company. At the period ended December 31, 1997 there can be no assurances
these negotiations will be successful.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS:
For the three months ended December 31, 1997 the Company had reported a net loss
of $478,000 versus a profit of $136,000 for the three months ended December 31,
1996 in the original Form 10-Q. Those results of operations have been restated
to reflect losses of $1.1 million and $355 thousand for the period ended
December 31, 1997 and 1996, respectively. The loss in fiscal 1998
8
<PAGE> 9
is attributed largely to the decline of over 13% in revenues; predominantly
service contract revenues. Management has determined the drop in revenues was
due to the expiration of certain service contracts on older systems which were
replaced by upgraded equipment and software which require less maintenance costs
for the customer, as well as lackluster shipments of product for the three
months ended December 31, 1997. The increase in administrative costs was caused
by a first quarter use of certain technical consultants, some increase in legal
costs due to direct expensing of these costs in fiscal 1997 versus charges to an
accrual account in fiscal 1996, and a write off of certain long term
receivables. Also, management noted the 8% decline in the gross margin related
to service revenues for the three months ended December 31, 1997 compared to the
same period ended December 31, 1996, which was largely attributable to an
increase in amortization costs associated with the cost of sales.
HIGHLIGHTS OF AMENDED FINANCIAL RESULTS
The following table discloses certain key financial results as originally
reported compared to the restated results:
<TABLE>
<CAPTION>
DEC 97-PREVIOUS DEC 97 RESTATED DEC 96-PREVIOUS DEC 96-RESTATED
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
TOTAL ASSETS 23,551 23,554 N/A N/A
TOTAL LIABILITIES 18,192 21,873 N/A N/A
SHAREHOLDER EQUITY 5,359 1,681 N/A N/A
REVENUES 8,830 8,243 10,044 9,498
NET INCOME(LOSS) (478) (1,065) 136 (355)
</TABLE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
N/A
9
<PAGE> 10
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K None.
Exhibit 27 -- Financial Data Schedule
SIGNATURES
Pursuant to the requirements 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.
Registrant
/s/ Jane M. Christie August 14, 1998
- ------------------------------------------ ---------------
Jane Christie Date
President and Chief Executive Officer
/s/ Richard N. Nance August 14, 1998
- ------------------------------------------ ---------------
Richard H. Nance Date
Vice President and Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERNALLY
PREPARED FOR THREE MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR PERIOD ENDED DECEMBER 31, 1997.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 333,000
<SECURITIES> 0
<RECEIVABLES> 6,216,000
<ALLOWANCES> 352,00
<INVENTORY> 4,499,000
<CURRENT-ASSETS> 11,950,000
<PP&E> 2,516,000
<DEPRECIATION> 188,000
<TOTAL-ASSETS> 23,554,000
<CURRENT-LIABILITIES> 18,670,000
<BONDS> 0
0
0
<COMMON> 924,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 23,554,000
<SALES> 2,750,000
<TOTAL-REVENUES> 5,673,000
<CGS> 2,050,000
<TOTAL-COSTS> 5,688,000
<OTHER-EXPENSES> 3,424,000
<LOSS-PROVISION> 105,000
<INTEREST-EXPENSE> 91,000
<INCOME-PRETAX> (1,065,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,065,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,065,000)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
