<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the quarterly period ended September 30, 1997
---------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-12382
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Perceptronics, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 95-2577731
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
21010 Erwin Street, Woodland Hills, CA 91367
---------------------------------------------
(Address of principal executive offices)
(818)884-7470
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 No X
---------- ---------
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock: $.001 par value, outstanding at September 30, 1997:
4,469,287
Transitional Small Business Disclosure Format (Check one):
Yes No X
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INDEX
PERCEPTRONICS, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
(a) Consolidated condensed balance sheets, Perceptronics, Inc. and
subsidiary, September 30, 1997 and March 31, 1997.
(b) Consolidated condensed statements of operations, Perceptronics, Inc.
and subsidiary, three and six months ended September 30, 1997 and
1996.
(c) Consolidated condensed statements of cash flows, Perceptronics, Inc.
and subsidiary, six months ended September 30, 1997 and 1996.
(d) Notes to consolidated condensed financial statements.
Item 2. Management's discussion and analysis of financial condition and
results of operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PERCEPTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
Sept. 30, 1997 March 31, 1997
-------------- --------------
CURRENT ASSETS
Cash and short-term investments .. . . . . . . $ 5,993 $ 135,318
Restricted cash .. . . . . . . . . . . . . . . - 35,742
Receivables
Billed - Note C.. . . . . . . . . . . . . . 302,159 326,636
Unbilled - Note C . . . . . . . . . . . . . 516,602 1,647,894
Other receivables . . . . . . . . . . . . . 40,578 40,454
Inventory - Note D . . . . . . . . . . . . . . 186,355 186,355
Prepaid expenses . . . . . . . . . . . . . . . 37,817 221,919
----------- -----------
TOTAL CURRENT ASSETS .. . . . . . . . . . . 1,089,504 2,594,318
EQUIPMENT & LEASEHOLD IMPROVEMENTS, at cost. . . 740,855 706,746
Less accumulated depreciation and
amortization . . . . . . . . . . . . . . . 700,940 695,134
----------- -----------
39,915 11,612
DEFERRED SOFTWARE DEVELOPMENT . . . . . . . . .
Net of Amortization of $275,879 September 30, 1997,
$271,442 March 31, 1997. . . . . . . . . . . . . 4,437 8,874
DEFERRED TAXES.. . . . . . . . . . . . . . . . . 932,566 932,566
OTHER ASSETS.. . . . . . . . . . . . . . . . . . 23,715 39,045
----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . $ 2,090,137 $ 3,586,415
----------- -----------
----------- -----------
See notes to consolidated condensed financial statements
3
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PERCEPTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(continued)
Sept. 30, 1997 March 31, 1997
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current Portion of long term debt. . . . . . . $ 39,173 $ 124,307
Short term loans payable . . . . . . . . . . . 50,000 1,587,569
Accounts payable . . . . . . . . . . . . . . . 967,604 834,491
Accrued compensation . . . . . . . . . . . . . 194,846 150,341
Notes to officers and directors. . . . . . . . 4,000 4,000
Advance from customers.. . . . . . . . . . . . - 35,742
Other accrued liabilities. . . . . . . . . . . 199,409 236,730
----------- -----------
TOTAL CURRENT LIABILITIES . . . . . . . . . 1,455,032 2,973,180
LONG TERM DEBT
Long term debt, net of current portion . . . . 419,317 438,306
COMMITMENTS & CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock - par value $.001 . . . . . . . . 4,469 4,469
Additional paid-in capital.. . . . . . . . . . 12,231,218 12,231,218
Retained deficit . . . . . . . . . . . . . . . (12,019,899) (12,060,758)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY. . . . . . . . . 215,788 174,929
----------- -----------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY.. . . . . . . . . . . . . . . . . $ 2,090,137 $ 3,586,415
----------- -----------
----------- -----------
See notes to consolidated condensed financial statements
4
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PERCEPTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
TOTAL REVENUES . . . . . . . . . . . . . . . . . $ 568,800 $ 565,970 $ 1,547,409 $ 1,221,480
COST AND EXPENSES
Cost of sales . . . . . . . . . . . . . . . . 390,766 458,723 1,045,742 1,087,200
General and administrative . . . . . . . . . . 201,440 171,463 374,813 423,284
Research and development . . . . . . . . . . . - 7,145 - 8,402
------------ ------------ ----------- ------------
TOTAL COST AND EXPENSES . . . . . . . . . . . . 592,206 637,331 1,420,555 1,518,886
INCOME (LOSS) FROM OPERATIONS. . . . . . . . . . (23,406) (71,361) 126,854 (297,406)
Interest expense. . . . . . . . . . . . . . 3,844 24,447 84,395 59,647
------------ ------------ ----------- ------------
INCOME (LOSS) BEFORE
INCOME TAXES . . . . . . . . . . . . . . . (27,250) (95,808) 42,459 (357,053)
Income taxes . . . . . . . . . . . . . . . 800 - 1,600 -
------------ ------------ ----------- ------------
NET INCOME (LOSS). . . . . . . . . . . . . . . . $ (28,050) $ (95,808) $ 40,859 $ (357,053)
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Net income (loss) per common
and common equivalent share-Note F. . . . . . $ (.01) $ (.03) $ .01 $ (.09)
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Weighted average common and
common equivalent shares - Note F. . . . . . . . 4,471,568 4,041,365 4,471,063 4,063,897
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
</TABLE>
See notes to consolidated condensed financial statements
5
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PERCEPTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months
Ended September 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).. . . . . . . . . . . . . . $ 40,859 $ (357,053)
Non-cash items included in income:
Depreciation and amortization. . . . . . . . 10,243 74,681
(Increase) decrease in:
Receivables . . . . . . . . . . . . . . . . 1,155,645 324,878
Inventory . . . . . . . . . . . . . . . . . - 38,790
Prepaid expenses . . . . . . . . . . . . . . 184,102 (5,297)
Other assets . . . . . . . . . . . . . . . . 15,330 (300)
Increase (decrease) in:
Accounts payable . . . . . . . . . . . . . . 133,113 (114,000)
Accrued compensation . . . . . . . . . . . . 44,505 9,443
Other accrued liabilities . . . . . . . . . (37,321) 107,498
Advance from customer. . . . . . . . . . . . (35,742) (268,300)
--------- --------
NET CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES . . . . . . . . . . . . 1,510,734 (189,660)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital additions. . . . . . . . . . . . . . . (34,109) -
--------- --------
NET CASH FLOWS (USED) BY INVESTING
ACTIVITIES.. . . . . . . . . . . . . . . . (34,109) -
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments of export financing . . . . . . . (1,537,569) -
Settlement of note payable . . . . . . . . . . (500,000) -
Proceeds from new long term debt . . . . . . . 400,000 -
Principal payments on debt . . . . . . . . . . (4,123) (37,072)
--------- --------
NET CASH FLOWS (USED) BY FINANCING
ACTIVITIES . . . . . . . . . . . . . . . . . (1,641,692) (37,072)
DECREASE IN CASH AND CASH EQUIVALENTS. . . (165,067) (226,732)
CASH AND CASH EQUIVALENTS
AT THE BEGINNING OF THE PERIOD . . . . . 171,060 317,778
--------- --------
CASH AND CASH EQUIVALENTS
AT THE END OF THE PERIOD . . . . . . . . . $ 5,993 $ 91,046
--------- --------
--------- --------
CASH PAID DURING THE PERIOD
Interest . . . . . . . . . . . . . . . . . . . $ 64,833 $ 4,626
Income taxes . . . . . . . . . . . . . . . . . $ 1,600 $ -
See notes to consolidated condensed financial statements
6
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PERCEPTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE A. UNAUDITED, CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
The unaudited, condensed, consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and
include all adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for the interim periods presented.
All such adjustments are, in the opinion of management, of a normal recurring
nature. Results for the six and three month periods ended September 30, 1997
are not necessarily indicative of the operating results to be expected for the
full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with general accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-KSB for the year ended March 31, 1997.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern. However, the Company has sustained
substantial operating losses in recent years. In addition, the Company has
used substantial amounts of working capital in its operations. Further at
September 30, 1997, current liabilities exceed current assets by $366,000.
The Company is continuing to have difficulty in meeting its obligations as
they become due. Payments to vendors, totaling approximately $750,000 at
October 31, 1997 were past due and a number of vendors are requiring cash
in advance or on delivery terms for goods and services. The Company's
average monthly cash receipts have been sufficient to meet current operating
requirements but not sufficient to allow the company to make satisfactory
progress towards liquidating its past due obligations. In order to conserve
cash, management has reduced staff, employee benefits, and other operating
expenditures. Even if the Company overcomes its short-term liquidity
problems, the ability of the Company to successfully cut costs and generate
sufficient revenues to produce adequate positive cash flows cannot be
predicted. The Company's consolidated financial statements do not include
any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of liabilities
that may result from the possible inability of the Company to continue as a
going concern.
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
Perceptronics, Inc., (the "Company") designs, develops and manufactures
computer-based simulation systems for training and decision support.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Perceptronics, Inc., (the "Company") and its wholly owned
subsidiary. All significant intercompany transactions and balances have been
eliminated.
CASH EQUIVALENTS: All highly liquid investments maturing in three months or
less when purchased are considered as cash equivalents.
INVENTORY: Inventory is stated at cost, which is not in excess of market.
Cost is determined principally by the first-in, first-out method.
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EQUIPMENT AND LEASEHOLD IMPROVEMENTS: Equipment and leasehold improvements
are stated at cost. Depreciation of equipment is provided for by the
straight-line method over their estimated useful lives, which range from 3 to
5 years. Amortization of leasehold improvements is provided for by the
straight-line method over the shorter of the useful lives or the terms of the
leases.
SOFTWARE DEVELOPMENT COSTS: Software development costs are stated at the
lower of cost or net realizable value. Such costs are amortized on a
product-by-product basis, commencing when a product is available for general
release to customers. The annual amortization expense is the greater of the
amount computed using the straight-line method over the remaining estimated
economic life of the product.
REVENUE RECOGNITION: All sales were recorded using the
percentage-of-completion (cost to cost) method of accounting. Under this
method, sales are recorded as costs (including general and administrative
expenses) are incurred, plus a portion of the profit expected to be realized
on each contract in the ratio that costs incurred to date bear to total
estimated cost at completion. General and administrative expenses in excess
of rates billed on contracts are recorded in the period incurred. Costs
related to anticipated future losses on contracts are accrued and charged to
expense in the period when the losses are identified.
INCOME TAXES: Provisions for federal and state income taxes are calculated
on reported financial statement income based on the current tax law. Such
provisions differ from the amounts currently payable because certain items of
income and expense, known as temporary differences, are recognized in
different tax periods for financial reporting purposes than for income tax
purposes. Deferred income taxes are the result of the recognition of tax
benefits that management expects to realize from the utilization of net
operating loss carryforwards. The amounts recorded are net of a valuation
allowance and represent management's estimate of the amount that is more
likely than not to be realized.
PER SHARE DATA: Per share data is based upon the weighted average number of
shares of common stock and dilutive common stock equivalents outstanding
using the treasury stock method.
NOTE C. RECEIVABLES
Billed receivables at March 31, 1997 and September 30, 1997 are $326,636 and
$302,159 respectively. These balances represent amounts that have been
invoiced on commercial and United States Government contracts that remain
unpaid at the end of the respective periods.
Unbilled receivables at March 31, 1997 and September 30, 1997 are $1,647,894
and $516,602 respectively. These balances represent amounts recognized under
the percentage-of-completion method of accounting that have not been billed
because of the billing terms of the contracts.
The amount of contract retention included in unbilled receivables was
$96,000 at March 31, 1997 and $164,302 at September 30, 1997.
NOTE D. INVENTORY
A summary of the components of inventory follows:
SEPT. 30, 1997 March 31, 1997
-------------- ---------------
Raw materials and component parts $186,355 $186,355
-------- --------
$186,355 $186,355
-------- --------
-------- --------
8
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NOTE E - LONG TERM DEBT
Long-term debt included the following at September 30 and March 31, 1997:
<TABLE>
<CAPTION>
Sept. 30, 1997 March 31, 1997
<S> <C> <C>
Note Payable - Small Business Administration, secured by
Company assets, payable in monthly installments of $782
including interest at 4% per annum, due November 2004. $ 57,980 $ 60,739
Note Payable - Small Business Administration, secured by
company assets, payable in monthly installments of $278
including interest at 8% per annum, due December 1997. 510 1,874
Unsecured Note Payable - Lockheed Martin Fairchild (LMF)
resulting from PGTS contract settlement. - 500,000
Note Payable - Bank guaranteed by Small Business
Administration, secured by company assets, payable
in monthly installments of $4,374 including interest
at prime rate plus 2.75 percentage points, due
November 2002. 200,000 -
Note Payable - Export customer bearing interest
at 12% annually payable monthly $2,000, principal
to be repaid by September 1999. 200,000 -
----------- ---------
458,490 562,613
Current portion of long-term notes payable 39,173 124,307
----------- ---------
$ 419,317 $ 438,306
----------- ---------
----------- ---------
</TABLE>
On September 30, 1997 the Company reached a settlement with Lockheed Martin
Fairchild to pay $500,000 to discharge the note in full including accrued
interest. The funds required to discharge the Lockheed Martin Fairchild
unsecured promissory note were obtained from other lenders. The Company
entered into a $200,000 note with a bank which is guaranteed by SBA which
bears interest at prime interest rate plus 2.75 percentage points with
principal and interest payable monthly amortizing over five years. The
Company also entered into a $200,000 note with an export customer that bears
interest at 12 percent and is to be repaid in September 1999 or possibly
earlier with proceeds from the final payment on the $1.5 million TOW PGTS
contract expected to occur by June 1998. The Company funded $100,000 of the
settlement from operating cash flow.
9
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Maturities of long-term debt are as follows:
September 30,
1998 $ 39,173
1999 240,756
2000 45,013
2001 49,751
2002 55,025
Thereafter 28,773
------------
$ 458,490
------------
------------
NOTE F. NET INCOME PER SHARE
The calculation of net income per share was determined by dividing net income
by the weighted average common and common equivalent shares outstanding when
dilutive. Primary earnings per share approximates diluted earnings per share
for all periods presented.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share"
which, when adopted, will replace the current methodology for calculating and
presenting earnings per share. Under SFAS No. 128, primary earnings per
share will be replaced with a presentation of basic earnings per share and
fully diluted earnings per share will be replaced with diluted earnings per
share. Basic earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share is
computed similarly to fully diluted earnings per share. The statement will
be effective beginning in the Company's third quarter ended December 31,
1997, and accordingly, the financial statements for such quarter will include
a restatement of historical earnings per share to conform to the requirements
of SFAS No. 128. Management does not expect that the presentation required
by SFAS No. 128 to materially differ from the current presentation of
earnings per share.
10
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Item 2. Management's discussion and analysis of financial condition and results
of operations.
GENERAL
Perceptronics, Inc., (the "Company") designs, develops and manufactures
computer-based simulation systems for training and decision support. These
systems include both hardware and software. The Company's simulators are
used to train personnel in the use of various military and commercial
equipment, including weapons, vehicles and aircraft. In the decision support
area, the Company's computer software and systems are used to enhance command
and control operations, for process modeling and simulation, and for
management of concurrent engineering activities in product development and
manufacturing. Much of the Company's business is in the foreign defense
industry where the Company has built an international reputation.
RESULTS OF OPERATIONS
NET SALES. Net sales for the six months ended September 30, 1997 increased
by $326,000 or 27% compared to the comparable six month period in the
subsequent fiscal year. Sales of training simulator systems increased
$404,000 or 59% as a result of increased export sales of TOW PGTS simulator
systems. Simulation network technology sales decreased $129,000 or 26% as a
result of reduced activity on U. S. Government cost reimbursable contracts.
Science technology and software product sales increased $50,000 primarily due
to a contract for design of a medication dispenser monitoring device. Net
sales for the three months ended September 30, 1997 increased by $3,000 or
0.5% compared to the comparable three month period in the subsequent fiscal
year. Sales of training simulator systems were lower by $95,000 or 24% in
the current three month period primarily the result of an export contract for
TOW PGTS systems spare parts during the comparable three month period in the
prior fiscal year. Simulation network technology sales were higher by
$65,000 or 43% as a result of increased activity on U.S. Government cost
reimbursable contracts. Science technology and software product sales
increased $33,000 primarily due to the contract noted above. Sales during
the three month period ended September 30, 1997 were adversely affected by
delays in obtaining export financing needed to accelerate production of TOW
PGTS training systems. The export financing was obtained early in October
1997.
COST OF SALES. Cost of sales for the six months ended September 30, 1997
decreased 4%. Cost of sales as a percentage of sales decreased to 68% for
the six month period from 89% in the comparable six month period in the prior
fiscal year. The decrease in cost of sales as a percentage of sales in the
six month period resulted from the increased sales of higher margin foreign
contracts and the reduced sales of lower margin government contracts. Cost
of sales for the three months ended September 30, 1997 decreased 15%, as a
result of improved profit margins on contracts in process. Cost of sales as a
percentage of sales decreased to 69% for the three month period from 81% in
the comparable three month period in the prior fiscal year.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 17% in the three month period and decreased 12% in the six month
period compared to comparable periods in the prior fiscal year. The
increase in the three month period was primarily the result of management and
administrative employees not working on direct contracts to the extent they
did in prior periods, thus a larger portion of their salaries were allocated
to general and administrative expense.
INTEREST EXPENSE. Interest expense decreased 84% to $4,000 in the three
month period because there was no export financing outstanding during the
period. During the six month period ended September 30, 1997 interest expense
increased 42% to $84,000 as a result of export financing that was repaid in
June 1997.
BACKLOG. The Company's firm contract backlog was $4.8 million at September
30, 1997, compared to $2.4 million at September 30, 1996. The term "firm
contract backlog" refers to the aggregate revenue remaining under contracts
held by the Company and includes both funded and unfunded
11
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amounts. Included in the September 30, 1997 backlog is a contract with the
Egyptian government for TOW PGTS training systems, $3.0 million, which was
signed in July 1997. The Egyptian contract is currently being reviewed by
the U. S. Government who is involved in funding the contract. Because of the
anticipated timing of receipt of the approval, a substantial portion of the
Egyptian contract will not be realized during this fiscal year. All other
contracts in the September 30, 1997 backlog are funded and all contracts in
the September 30, 1996 backlog were funded.
LIQUIDITY AND CAPITAL RESOURCES.
With cash balances of $6,000 at September 30, 1997, the Company's principal
source of liquidity is cash flow generated by operations. The Company had
negative working capital of $366,000 at September 30, 1997, compared to
negative working capital of $379,000 at March 31, 1997. The Company has
experienced severe liquidity problems and continues to have difficulty in
meeting its obligations as they come due. At October 31, 1997, payments to
vendors totaling $750,000 are past due and are being liquidated as positive
cash flow permits. The lack of sufficient working capital continues to
restrict the Company's ability to expand its revenue base. See Note A of the
Notes to Consolidated Financial Statements which is hereby incorporated
herein by reference.
The Company's short-term strategy is to increase its domestic and foreign
defense contract revenue base in order to generate sufficient cash flow for
operations and to reduce outstanding current liabilities. The Company's
long-term strategy will continue to focus on the development of commercial
products derived from the Company's defense related technology and expertise
in order to reduce the Company's dependence on defense contracts. The
Company's ability to pursue its long-term strategy will depend on generating
sufficient cash flow from operations to finance new product development.
There can be no assurance that this strategy will be successful. The Company
is exploring alternative sources for financing as well as potential business
combinations in order to meet the short and long-term objectives.
With respect to the current export contracts for TOW PGTS training systems,
the Company plans to utilize an export credit facility similar to export
financing on previous contracts. In October 1997, an export credit facility
was obtained from a commercial lender in the amount of $833,000. The credit
facility is guaranteed by the U.S. Small Business Administration (SBA) and
borrowings occur on the credit facility as work progresses on the contract.
The borrowings bear interest at 3.0 points above prime rate and are secured
by a lien placed on the Company's general assets. The Company presently has
applied for a similar export credit facility from the same commercial lender
which would be guaranteed by the California Export Finance Office (CEFO) to
fund additional work. The Company is also exploring various financing
options related to the anticipated start of the Egypt contract.
On September 30, 1997, the Company reached a settlement with Lockheed Martin
Fairchild to pay $500,000 to discharge an unsecured note payable with a face
value of $1,225,000 that resulted from a contract settlement in fiscal year
1995. The funds required to discharge the Lockheed Martin Fairchild
unsecured promissory note were obtained from other lenders. The Company
entered into a $200,000 note with a bank which is guaranteed by the SBA which
bears interest at prime interest plus 2.75 percentage points with principal
and interest payable monthly amortizing over five years. The Company also
entered into a $200,000 note with an export customer that bears interest at
12 percent annually and is to be repaid in September 1999 or possibly earlier
with proceeds from the final payment of a $1.5 million TOW PGTS contract
expected to occur by June 1998. The Company funded $100,000 of the
settlement from operating cash flow.
12
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PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) The following exhibits are filed herewith:
10.1 Loan agreement and note dated September 23, 1997 between the
Company and The Pacific Bank.
10.2 Promissory note dated September 22, 1997 between the Company
and Applied Controls Technology.
11.1 Computation of Earnings Per Share.
27 Financial Data Schedules.
(b) The Registrant filed no report on Form 8-K during the quarter ended
September 30, 1997.
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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.
Perceptronics, Inc.
---------------------------------
Registrant
Date: November 12, 1997 /s/ ROBERT E. ANDERSON
------------------- ---------------------------------
Robert E. Anderson
Senior Vice President Finance
(Principal Financial & Accounting
Officer)
14
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INDEX TO EXHIBITS
10.1 Loan agreement and note dated September 23, 1997 between the
Company and The Pacific Bank.
10.2 Promissory note dated September 22, 1997 between the Company
and Applied Controls Technology.
11.1 Computation of Earnings Per Share.
27 Financial Data Schedules.
15
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Exhibit 10.1
SBA AUTHORIZATION AND LOAN AGREEMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOAN NUMBER
DELTA 155 873 40 06 LA
U.S. Small Business Administration
Los Angeles District Office
330 North Brand, Suite #120
Glendale, CA 91203-2304
Lender:
The Pacific Bank, N.A.
350 Primrose Road
Burlingame, CA 94010
Your request dated AUGUST 5, 1997 for SBA to guarantee SEVENTY-FIVE
percent (75%) of a loan in the amount of $200,000 to be made by Lender
to PERCEPTRONICS, INC., 21010 ERWIN STREET, WOODLAND HILLS, CA 91367
is hereby approved pursuant to Section 7a of the Small Business Act
as amended.
1. THE FOLLOWING FORMS ARE HEREWITH ENCLOSED:
1.A One original of SBA Form 147, Note, to be signed by the Borrower.
1.B Copies of the SBA Form 1050 Settlement Sheet are to be completed and
executed by Lender and Borrower to reflect each disbursement. Prompt
reporting of disbursements is necessary.
1.C SBA Form 159 Compensation Agreement shall be executed by Borrower, its
representative and Lender, and returned to SBA if either Borrower or
Lender has employed and compensated an agent or representative
(including an attorney, accountant, packager or other consultant) in
connection with the Borrower's loan application. If no such fees have
been charged, please write "None" and return the Form to SBA Finance
Division.
1.D The original copy of this Authorization shall be executed prior to first
disbursement and retained in loan file by the Lender. Additional SBA
Forms required, if any, are itemized below.
1.E SBA Form 148 - Guaranty (one set(s)
1.F SBA Form 155 - Standby Agreement (one set)
1.G SBA Form 160 - Corporate Resolution to Borrow
<PAGE>
Borrower: Perceptronics, Inc.
Page 2
1.K SBA Form 722 - Equal Employment Opportunity Poster: Borrower will post
in its place of business SBA Form 722, Equal Opportunity Poster, where
it will be clearly visible to employees, applicants for employment, and
members of the general public.
2. THIS AUTHORIZATION IS SUBJECT TO:
2.A Provisions of the Guaranty Agreement between Lender and SBA, dated April
1, 1996, and any Supplemental Guaranty Agreement between Lender and SBA.
2.B.01 First disbursement of the loan being made not later than THREE (3)
months, and no disbursement being made later than SIX (6) months, from
the date of this Authorization, unless such time is extended pursuant to
prior written consent by SBA.
2.C Receipt by Lender of satisfactory evidence that there has been no
unremedied adverse change since the date of the Application, or since
any of the preceding disbursements, in the financial or any other
condition of Borrower, which would warrant withholding or not making any
such disbursement or any further disbursement.
2.D The representations made by Borrower in its loan application, the
requirements or conditions set forth in Lender's application form,
including the supporting documents thereto, the conditions set forth
herein and any future conditions imposed by Lender (with prior SBA
approval).
2.E Notwithstanding any other provisions of this Authorization, the Lender
may use its own form(s) in lieu of standard SBA forms, except for SBA
Form 147, Note; and SBA Form 148, Guaranty; SBA Form 159, Compensation
Agreement; and SBA Form 1050, Settlement Sheet. Lender may use
computer-generated replications of these four mandated SBA Forms, as
long as they are exact reproductions of these SBA Forms. Lender will be
held responsible for any errors or omissions.
2.F Borrower and Guarantors, if any, acknowledge that in accordance with 13
CFR Part 101, they are not entitled to and hereby waive the right to
claim or assert any immunities or defenses, including but not limited to
any right of subrogation and/or contribution against SBA, which may be
available under local law, to defeat, modify, or otherwise limit their
obligation to repay any monies advanced by Lender to Borrower pursuant
to the terms of this Loan Authorization.
3. TERMS OF LOAN:
3.A Repayment term, interest rate(s), and maturity.
Repayment terms contained in the executed SBA Form 147 Note shall
conform to the following paragraphs:
3.A.04 Installments, including principal and interest, each in the amount of
FOUR THOUSAND THREE HUNDRED SEVENTY FOUR dollars ($4,374), commencing
one month(s) from date of fifth day of the first month after first
disbursement and continuing due and payable monthly thereafter until
FIVE years from the date of fifth day of the first month after first
disbursement when the full unpaid balance of principal and interest
shall become due and payable. Each installment shall be applied to
interest accrued as of date of receipt and the balance, if any, to
principal.
<PAGE>
Borrower: Perceptronics, Inc.
Page 3
THIS IS A VARIABLE INTEREST RATE NOTE. Interest on unpaid principal
shall accrue at the initial rate of ELEVEN AND ONE QUARTER percent
(11.25%) per annum. Commencing on the first calendar day of the
calendar month following first disbursement, and monthly thereafter,
the interest rate shall increase or decrease to TWO AND THREE QUARTERS
percent (2.75%) above the Prime Rate in effect on the first business
day of the month, as published in the Money Rates Section of THE WALL
STREET JOURNAL.
NOTE: The amount of the monthly payment shown above is based upon the
prime interest rate as of the date of the receipt of the loan
application by SBA of EIGHT AND ONE HALF percent (8.50%) plus a spread
of TWO AND THREE QUARTERS percent (2.75%).
The amount of the monthly installments of principal and interest
required herein shall be increased or decreased, as appropriate, to an
amount necessary to amortize principal remaining unpaid as of the date
of the change in the interest rate over the remaining term of this Note.
The Lender shall give the Borrower written notice of any change in the
interest rate of this Note and of any change (either an increase or
decrease) in the amount of the principal and interest installments
required herein within thirty (30) days after the effective date of any
such change.
If the Borrower shall be in default in payment due on the indebtedness
herein and the Small Business Administration (SBA) purchases its
guaranteed portion of said indebtedness, the rate of interest on both
the guaranteed and unguaranteed portion herein shall become fixed at the
rate in effect as of the first date of uncured default. If the Borrower
shall not be in default in payment when SBA purchases its guaranteed
portion, the rate of interest on both the guaranteed and unguaranteed
portion shall be fixed at the rate in effect as of the date of purchase
by SBA.
LATE CHARGE: If a payment is more than 10 days late, Borrower will be
charged 5.0% of the unpaid portion of the regularly scheduled payment.
(Late fee may not exceed 5.0% and may not be charged to SBA if SBA
purchases the loan pursuant to its guaranty.)
3.B USE OF PROCEEDS OF LOAN AS FOLLOWS:
3.B.10 Approximately $200,000 for debt repayment to LORAL FAIRCHILD.
3.C COLLATERAL
3.C.05 SECOND security interest to be taken by Financing Statement and
Security Agreement in all of the following personal property,
now owned or hereafter acquired, wherever located, and proceeds
therefrom:
3.C.05.a Machinery, Equipment and Furniture
3.C.05.b EXCLUDING Titled Motor Vehicles
3.C.05.d Inventory
3.C.05.e Accounts
<PAGE>
Borrower: Perceptronics, Inc.
Page 4
3.C.05.f General Intangibles
3.C.05.g Chattel Paper
3.C.05.h Documents
3.C.05.n Said security interest subject to lien(s) in favor of US SMALL
BUSINESS ADMINISTRATION against ALL BUSINESS ASSETS in the amount of
approximately $360,000.
3.C.10 Guaranty on SBA Form 148 executed by GERSHON WELTMAN
4. TO FURTHER INDUCE SBA TO GUARANTEE THIS LOAN, BORROWER AGREES TO THE
FOLLOWING CONDITIONS DURING THE TERM OF THIS LOAN:
4.A Execution of all documents required in Item 1 above.
4.A.01 If this is an "Eligible Passive Company" loan, all references to
"Borrower" in Section 4 of this Authorization and Loan Agreement also
apply to "Operating Company," where appropriate.
4.B Reimbursable Expenses
Borrower will, on demand, reimburse Lender for any and all expenses
incurred, or which may be hereafter incurred, by Lender from time to
time in connection with or by reason of Borrower's application for, and
the making and administration of the loan.
4.C Books, Records and Reports
Borrower will at all times keep proper books of account in a manner
satisfactory to Lender and/or SBA. Borrower hereby authorizes Lender or
SBA to make or cause to be made, at Borrower's expense and in such
manner and at such times as Lender or SBA may require, (a) inspections
and audits of any books, records and paper in the custody or control of
Borrower or others, relating to Borrower's financial or business
conditions, including the making of copies thereof and extracts
therefrom, and (b) inspections and appraisals of any of Borrower's
assets. Borrower will furnish to Lender for the 12 month period ending
DECEMBER 31, 1997 and QUARTERLY thereafter (no later than 3 months
following the expiration of any such period) and at such other times and
in such form as Lender may prescribe, Borrower's financial and operating
statements. Borrower hereby authorizes all Federal, State and municipal
authorities to furnish reports of examinations, records, and other
information relating to the conditions and affairs of Borrower and any
desired information from reports, returns, files, and records of such
authorities upon request therefore by Lender or SBA.
4.C.03 The Borrower's financial and operating statements required in
Paragraph 4.C herein shall include annual financial statements
reviewed by an independent public accountant submitted within
ninety (90) days of the close of Borrower's fiscal year.
4.C.04 If loan is not closed within four months from date of the
Authorization, Borrower shall furnish Lender current, signed
financial statements for the business, each principal and each
guarantor.
<PAGE>
Borrower: Perceptronics, Inc.
Page 5
4.D Borrower shall not execute any contracts for management consulting
services without prior approval of Lender.
4.E Distributions and Compensation -
A. If Borrower is a corporation, the written consent of the Lender is
required to declare or pay any dividends or make any distribution
upon its capital stock, or purchase or retire any capital stock.
Lender's approval is also required if a corporate borrower intends
to consolidate, or merge with another company, or give any
preferential treatment, make any advance, directly or indirectly,
by way of loan, gift, bonus, or otherwise, to any company, directly
or indirectly, controlling or affiliated with or controlled by
corporate Borrower, or any other company, or to any officer,
director or employee of Borrower, or of any such company.
B. If Borrower is a limited liability company, partnership or
individual, Lender's approval is required to make any distribution
of assets of the business of Borrower, except for reasonable
compensation for services, or give any preferential treatment, make
any advance, directly or indirectly, by way of loan, gift, bonus or
otherwise, to any partner or any of its employees, or to any
company, directly or indirectly controlling or affiliated with or
controlled by borrower, or any other company.
Regardless of the Borrower's structure or business form, Borrower
will not, without prior consent of Lender, (a) pledge, mortgage or
otherwise encumber in any manner whatsoever any of Borrower's
present or after acquired property or assets, (b) borrow money or
obtain a loan from any person, corporation or any other source, (c)
make any investments in other business or real property, (d) make
or guarantee any advances or loans made to others, (e) incorporate,
if presently a partnership, limited liability company, or sole
proprietorship, and (f) sell a substantial part, or all of its
assets.
4.F OTHER PROVISIONS
4.F.03 SBA Form 147 Note shall be executed by PERCEPTRONICS, INC. (a
corporation) by those corporate officers so authorized in a
Resolution of Board of Directors. (SBA Form 160 may be used for
this corporate resolution.)
4.F.05 Borrower to execute SBA Form 159, Compensation Agreement, prior to
first disbursement.
4.F.08 Borrower will post in its place of business SBA Form 722 Equal
Opportunity Poster where it will be clearly visible to employees,
applicants for employment, and members of the general public.
4.F.09 Prior to first disbursement, the Lender must be in receipt of
evidence of the kind described below from an independent
authoritative source which is sufficient to indicate to the Lender
that the property is not in a special flood hazard area (SFHA).
"Property" is defined as the asset(s) financed as a part of the SBA
financial assistance and/or other collateral deemed necessary by
the SBA. If such evidence is not provided to the Lender, the
borrower must obtain, and maintain, a standard Flood Insurance
Policy or other appropriate special flood hazard insurance in
amounts and coverages equal to the lesser of (1) the insurable
value of the property or (2) the maximum amount of coverage
available. Borrower can show that special flood hazard insurance
has been
<PAGE>
Borrower: Perceptronics, Inc.
Page 6
acquired by submitting a copy of the policy or providing evidence
of premium payment for the appropriate coverage to a licensed
insurance agent. Borrower will not be eligible for any future
disaster assistance or SBA business loan assistance if special
flood hazard insurance is not maintained as stipulated herein
throughout the entire term of this loan.
As evidence that the property is not located within a special
flood hazard area subject to flooding, mudslides or erosions, the
Lender may rely upon a determination of special flood hazard area
status by the borrower's property & casualty insurance company,
real estate appraiser, title insurance company, a local government
agency or other authoritative source acceptable to SBA which would
ordinarily have knowledge of the special flood hazard area status
for the property.
Any such flood insurance obtained shall name Lender as Mortgagee or
Loss Payee and providing that the interests of the Mortgagee or
Loss Payee shall not be impaired or invalidated by an act of
neglect of the owner/insured. Insurance policy shall refer to the
SBA loan number.
4.F.10 Borrower and/or owners of the collateral shall provide and maintain
fire, lightning and extended coverage for the maximum insurable
amount on all real and personal property taken as collateral,
naming Lender as Mortgagee or Loss Payee and providing that the
interests of the Mortgagee or Loss Payee shall not be impaired or
invalidated by an act of neglect of the owner/insured. Insurance
policy shall refer to the SBA loan number.
4.F.12 Prior to first disbursement, Borrower must furnish to Lender a copy
of a lease indicating a term for at least the term of the loan for
premises located at 21010 ERWIN STREET, WOODLAND HILLS, CA 91367.
For Eligible Passive Company loans: 1) options for renewal are
acceptable if exercisable exclusively by the operating small
business concern; and 2) lease between the Eligible Passive Company
and the Operating Company must be subordinated to Lender's
mortgage, trust deed lien, or other security interest on the
property.
4.F.14 Agreement by WEGMANN & COMPANY, Standby Creditor, to postpone all
rights to collect the indebtedness owed by PERCEPTRONICS, Inc.,
Standby Debtor, in the amount of $50,000. (A copy of the Standby
Debtor's Note or other written evidence of the indebtedness owed to
Standby Creditor shall be attached to the Agreement). (SBA Form
155, Standby Agreement, may be used for this Agreement.)
4.F.14.a Standby Debtor may pay and the Standby Creditor may accept
payment of interest at an interest rate not to exceed NINE
percent (9%) per annum, until such time as Lender or SBA
issues written notice that no future payments may be made by
Standby Debtor or accepted by Standby Creditor.
4.F.24 Prior to first disbursement, Borrower shall furnish to Lender an
Employer Identification Number issued by the Internal Revenue
Service.
4.F.25 Prior to any disbursement on account of this loan, Borrower shall
submit satisfactory evidence to Lender that Borrower is
incorporated in the State of CALIFORNIA and that it has the right
to transact business in said State and that it is in good standing
with the Secretary of State.
<PAGE>
Borrower: Perceptronics, Inc.
Page 7
4.F.26 Prior to or at the time of the first disbursement, Borrower
shall provide Lender with satisfactory evidence that it is
duly licensed.
4.F.45 Lender to remit its check for the SBA guaranty fee in the amount
of $4,500, to SBA within 90 days from the date of this
Authorization and Loan Agreement. The check, identified by the SBA
loan number, must be forwarded to the U. S. Small Business
Administration, P.O. Box 748, Denver, Colorado 80259. Lender may
charge this guaranty fee to the Borrower; only after Lender has
paid the fee to SBA and the initial disbursement has been made on
the loan. The fee may be part of the loan proceeds.
Lender agrees to pay an ongoing guaranty fee equal to one-half of
one percent per annum on the guaranteed portion of the outstanding
balance. This fee shall be paid by the lender following the receipt
of a payment from the borrower. The fee may not be charged to the
borrower and shall be received by the SBA-designated fiscal and
transfer agent by the third day of the month (or the next business
day thereafter, if the third is not a business day), following
receipt of a scheduled payment is a two business day grace period
after the due date. Lender agrees to report the status of all of
its SBA guaranteed loans on a monthly basis using SBA Form 1502 or
an acceptable electronic format.
4.F.46 Prepayment penalty fees as a condition to this loan are prohibited;
provided, however, that pursuant to the terms of SBA Form 147,
Note, Borrower is required to provide Lender with written notice of
intent to prepay part or all of this loan at least 3 weeks prior to
the anticipated prepayment date. A prepayment is any payment made
ahead of schedule that exceeds 20% of the then outstanding
principal balance. If borrower makes a prepayment and fails to give
at least 3 weeks advance notice of intent to prepay, then Borrower
shall be required to pay Lender 3 weeks interest on the unpaid
principal as of the date preceding such prepayment.
4.F.47 Such other terms and conditions which Lender may set forth which
are not inconsistent with the provisions of this Authorization.
4.F.48 Borrower certifies that at the time it submitted its Loan
Application it was and shall continue to be current on all Federal
and State withholding taxes, payroll taxes, sales taxes, and
similar funds held in trust.
4.F.50 Borrower acknowledges and understands that the funding of this loan
is conditioned upon the real property offered as collateral and/or
the business premises ("the Property") being free from
contamination by any Hazardous Substance and that if such
contamination is present or reasonably appears to be present, the
loan may be funded or canceled at any time in the sole discretion
of Lender and/or SBA. If the loan is canceled in whole or in part,
Borrower agrees to release Lender and/or SBA from all liability. As
used in this Loan Authorization, the term "contamination" means the
presence of any Hazardous Substance at a level in excess of that
permitted or allowed by local, state or federal laws and
regulations.
4.F.50.a For purpose of this Loan Authorization, the term "Hazardous
Substance" means: (i) any substance, product, waste or other
material of any nature whatsoever which is or becomes listed,
regulated, or addressed pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601, et seq., ("CERCLA"); the Hazardous
<PAGE>
Borrower: Perceptronics, Inc.
Page 8
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.;
the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., ("RCRA"); the Toxic Substances Control
Act, 15 U.S.C. Sub-section 2601 et seq.; the Clean Water Act,
33 U.S.C. Sub-section 1251 et seq.; the California Hazardous
Waste Control Act, Health and Safety Code Sub-section 25100
et seq.; the California Hazardous Substance Account Act, Health
and Safety Code Sub-section 25330 et seq.; the California Safe
Drinking Water and Toxic Enforcement Act, Health and Safety
Code Sub-section 25249.5 et seq.; California Health and Safety
Code Sub-section 25280 et seq., (Underground Storage of
Hazardous Substances); the California Hazardous Waste
Management Act, Health and Safety Code Sub-section 25170.1 et
seq.; California Health and Safety Code Sub-section 25501 et
seq., (Hazardous Materials Release Response Plans and
Inventory); or the California Porter-Cologne Water Quality
Control Act, Water Code Sub-section 13000 et seq., all as
amended, or any other federal, state or local statute, law,
ordinance, resolution, code, rule, regulation, order or decree
regulating, relating to, or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste,
substance, or material, as now or at any time hereafter in
effect; (ii) any substance, product, waste or other material
of any nature whatsoever which may give rise to liability
under any of the above statutes or under any statutory or
common law theory based on negligence, trespass, intentional
tort, nuisance or strict liability or under any reported
decisions of a state or federal court; (iii) petroleum or
crude oil other than petroleum and petroleum products which
are contained within regularly operated motor vehicles; and
(iv) asbestos.
4.F.51 Borrower represents, warrants and acknowledges that: (1) at the
time it submitted its loan application it was and shall continue to
be in compliance with all local, state, and federal laws and
regulations pertaining to Hazardous Substances; (2) Borrower has no
knowledge of any contamination from Hazardous Substances of any
real or personal property pledged as collateral for this loan which
is in violation of any such laws and regulations; (3) Borrower
assumes full responsibility for all costs incurred in any clean-up
involving Hazardous Substances and agrees to indemnify Lender and
SBA against payment of any such costs (Borrower may be required by
Lender and/or SBA to execute a separate indemnification agreement);
(4) until full repayment of the loan, Borrower shall promptly
notify Lender and SBA if it knows, suspects or believes there may
be any Hazardous Substance in or around the real property securing
this loan or if Borrower and/or such property are subject to any
investigation by any Governmental agency pertaining to any
Hazardous Substance.
4.F.52 Prior to first disbursement, Lender shall make a field visit to the
site of all commercial real estate to be taken as collateral and
shall obtain from Borrower (and owner if the loan is for the
purchase of real estate) an executed Environmental Questionnaire
and Disclosure Statement. Lender shall review the Statement and
determine whether there is reason to believe that Hazardous
Substances are present on the Property. If Lender makes such a
determination, it shall advise SBA before any disbursement of loan
proceeds. At the sole discretion of SBA and/or Lender, Borrower may
be required, at Borrower's sole expense, to obtain a Phase I
Environmental Risk Site Assessment and/or additional environmental
reports or assessments satisfactory to SBA and/or Lender.
4.F.60 Borrower certifies that no principal who owns 50% of the voting
interest of the company is delinquent more than 60 days under the
terms of any (a) administrative order, (b) court order, or (c)
repayment agreement that requires payment of child support.
<PAGE>
Borrower: Perceptronics, Inc.
Page 9
5. PARTIES AFFECTED.
This Agreement shall be binding upon Lender, Borrower and each of their
successors and assigns. No provision stated herein shall be waived
without the prior written consent of SBA.
SMALL BUSINESS ADMINISTRATION
Administrator, Aida Alvarez
By: /s/ Richard Jones
---------------------------------------------
Name: RICHARD JONES
-------------------------------------------
Title: CHIEF FINANCE DIVISION
------------------------------------------
Date: SEPTEMBER 18, 1997
-------------------------------------------
Acceptance by Lender and Borrower and Guarantors, if any
In consideration of the SBA guaranty of the loan to be advanced by Lender to
Borrower, the undersigned hereby acknowledge that they have received a copy and
understand the terms and conditions of this Loan Authorization, and agree to
perform in accordance therewith.
LENDER
Name: The Pacific Bank, N.A.
By: /s/ Robert Holden
---------------------------------------------
Robert Holden, Vice President
Date:
-------------------------------------------
BORROWER
Name: Perceptronics, Inc.
By: /s/ Gershon Weltman
---------------------------------------------
Gershon Weltman, CEO
Date: 9-24-97
-------------------------------------------
GUARANTORS (INDIVIDUAL)
<PAGE>
DMB Approval No. 3245-0201
U.S. Small Business Administration
SBA LOAN NUMBER
DELTA1558734006LA
NOTE
SAN FRANCISCO. CA
--------------------
(City and State)
(Date): September 23, 1997
$ 200,000.00
For value received, the undersigned promises to pay to the order of THE
PACIFIC BANK, N.A. at its office in the city of BURLINGAME, state of
CALIFORNIA, or at holder's option, at such other place as may be
designated from time to time by the holder TWO HUNDRED THOUSAND & 00/100
DOLLARS, with interest on unpaid principal computed from the date of
each advance to the undersigned at the rate of (Initial) 11.250 per cent
per annum, payment to be made in installments as follows:
Installments, including principal and interest, each in the amount of Four
Thousand Three Hundred Seventy Four Dollars ($4,374.00) commencing one
month(s) from date of fifth day of the first month after first disbursement
and continuing due and payable monthly thereafter until five years from the
date of fifth day of the first month after first disbursement when the full
unpaid balance of principal and interest shall become due and payable. Each
installment shall be applied to interest accrued as of date of receipt and
the balance, if any, to principal.
THIS A VARIABLE INTEREST RATE NOTE. Interest on unpaid principal shall accrue
at the initial rate of eleven and one quarter percent (11.25%) per annum.
Commencing on the first calendar day of the calendar month following first
disbursement, and monthly thereafter, the interest rate shall increase or
decrease to two and three quarters percent (2.75%) above the Prime Rate in
effect on the first business day of the month, as published in the Money
Rates Section of The Wall Street Journal.
NOTE: The amount of the monthly payment shown above is based upon the prime
interest rate as of the date of the receipt of the loan application by SBA of
Eight and One-Half percent (8.50%) plus a spread of two and three quarters
percent (2.75%).
The amount of monthly installments of principal and interest required herein
shall be increased or decreased, as appropriate, to an amount necessary to
amortize principal remaining unpaid as of the date of the change in the
interest rate over the remaining term of this Note.
The Lender shall give the Borrower written notice of any change in the
interest rate of this Note and of any change (either an increase or decrease)
in the amount of the principal and interest installments required herein
within thirty (30) days after the effective date of any such change.
If the Borrower shall be in default in payment due on the indebtedness herein
and the Small Business Administration (SBA) purchases its guaranteed portion
of said indebtedness, the rate of interest on both the guaranteed and
unguaranteed portion herein shall become fixed at the rate in effect as of
the first date of uncured default. If the Borrower shall not be in default in
payment when SBA purchases its guaranteed portion, the rate of interest on
both the guaranteed and unguaranteed portion shall be fixed at the rate in
effect as of the date of purchase by SBA.
LATE CHARGE: If a payment is more than 10 days late, Borrower will be charged
5.0% of the unpaid portion of the regularly scheduled payment. (Late fee may
not exceed 5.0% and may not be charged to SBA if SBA purchases the loan
pursuant to it guaranty.)
If this Note contains a fluctuating interest rate, the notice provision is
not a precondition for fluctuation (which shall take place regardless of
notice). Payment of any installment of principal or interest owing on this
Note may be made prior to the maturity date thereof without penalty.
Borrower shall provide lender with written notice of intent to prepay part or
all of this loan at least three (3) weeks prior to the anticipated prepayment
date. A prepayment is any payment made ahead of schedule that exceeds twenty
(20) percent of the then outstanding principal balance. If borrower makes a
prepayment and fails to give at least three weeks advance notice of intent to
prepay, then, notwithstanding any other provision to the contrary in this
Note or any other document, borrower shall be required to pay lender three
weeks interest on the unpaid principal as of the date preceding such
prepayment.
The term "Indebtedness" as used herein shall mean the indebtedness evidenced
by this Note, including principal, interest, and expenses, whether
contingent, now due, or hereafter to become due, and whether heretofore or
contemporaneously herewith or hereafter contracted. The term "Collateral" as
used in this Note shall mean any funds, guaranties, or other property or
rights therein of any nature whatsoever or the proceeds thereof which may
have been, are, or hereafter may be, hypothecated, directly or indirectly by
the undersigned or others, in connection with, or as security for, the
Indebtedness or any part thereof. The Collateral, and each part thereof,
shall secure the indebtedness and each part thereof. The covenants and
conditions set forth or referred to in any and all instruments of
hypothecation constituting the Collateral are hereby incorporated in this
Note as covenants and conditions of the undersigned with the same force and
effect as though such covenants and conditions were fully set forth herein.
The Indebtedness shall immediately become due and payable, without notice or
demand, upon the appointment of a receiver or liquidator, whether voluntary
or involuntary, for the undersigned or for any of its property, or upon the
filing of a petition by or against the undersigned under the provisions of
any state insolvency law or under the provisions of the Bankruptcy Reform Act
of 1978, as amended, or upon the making by the undersigned of an assignment
for the benefit of its creditors. Holder is authorized to declare all or any
part of the
<PAGE>
09-23-1997 PROMISSORY NOTE Page 2
(Continued)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Indebtedness immediately due and payable upon the happening of any of the
following events: (1) Failure to pay any part of the Indebtedness when due;
(2) nonperformance by the undersigned of any agreement with, or any condition
imposed by, Holder or Small Business Administration (hereinafter called
"SBA"), with respect to the Indebtedness; (3) Holder's discovery of the
undersigned's failure in any application of the undersigned to Holder or SBA
to disclose any fact deemed by Holder to be material or of the making therein
or in any of the said agreements, or in any affidavit or other documents
submitted in connection with said application or the Indebtedness, of any
misrepresentation by, on behalf of, or for the benefit of the undersigned;
(4) the reorganization (other than a reorganization pursuant to any of the
provisions of the Bankruptcy Reform Act of 1978, as amended) or merger or
consolidation of the undersigned (or the making of any agreement therefor)
without the prior written consent of Holder; (5) the undersigned's failure
duly to account, to Holder's satisfaction, at such time or times as Holder
may require, for any of the Collateral, or proceeds thereof, coming into the
control of the undersigned; or (6) the institution of any suit affecting the
undersigned deemed by Holder to affect adversely its interest hereunder in
the Collateral or otherwise. Holder's failure to exercise its rights under
this paragraph shall not constitute a waiver thereof.
Upon the nonpayment of the Indebtedness, or any part thereof, when due,
whether by acceleration or otherwise, Holder is empowered to sell, assign,
and deliver the whole or any part of the Collateral at public or private
sale, without demand, advertisement, or notice of the time or place of sale
or of any adjournment thereof, which are hereby expressly waived. After
deducting all expenses incidental to or arising from such sale or sales,
Holder may apply the residue of the proceeds thereof to the payment of the
Indebtedness, as it shall deem proper, returning the excess, if any, to the
undersigned. The undersigned hereby waives all right of redemption or
appraisement whether before or after sale.
Holder is further empowered to collect or cause to be collected or otherwise
to be converted into money all or any part of the Collateral, by suit or
otherwise, and to surrender, compromise, release, renew, extend, exchange, or
substitute any item of the Collateral in transactions with the undersigned or
any third party, irrespective of any assignment thereof by the undersigned,
and without prior notice to or consent of the undersigned or any assignee.
Whenever any item of the Collateral shall not be paid when due, or otherwise
shall be in default, whether or not the Indebtedness, or any part thereof,
has become due, Holder shall have the same rights and powers with respect to
such item of the Collateral as are granted in this paragraph in case of
nonpayment of the Indebtedness, or any part thereof, when due. None of the
rights, remedies, privileges, or powers of Holder expressly provided for
herein shall be exclusive, but each of them shall be cumulative with and in
addition to every other right, remedy, privilege, and power now or hereafter
existing in favor of Holder, whether at law or equity, by statute or
otherwise.
The undersigned agrees to take all necessary steps to administer, supervise,
preserve, and protect the Collateral; and regardless of any action taken by
Holder, there shall be no duty upon Holder in this respect. The undersigned
shall pay all expenses of any nature, whether incurred in or out of court,
and whether incurred before or after this Note shall become due at its
maturity date or otherwise, including but not limited to reasonable
attorney's fees and costs, which Holder may deem necessary or proper in
connection with the satisfaction of the Indebtedness or the administration,
supervision, preservation, protection of (including, but not limited to, the
maintenance of adequate insurance) or the realization upon the Collateral.
Holder is authorized to pay at any time and from time to time any or all of
such expenses, add the amount of such payment to the amount of the
Indebtedness, and charge interest thereon at the rate specified herein with
respect to the principal amount of this Note.
The security rights of Holder and its assigns hereunder shall not be impaired
by Holder's sale, hypothecation, or rehypothecation of any note of the
undersigned or any item of the Collateral, or by any indulgence, including
but not limited to (a) any renewal, extension, or modification which Holder
may grant with respect to the Indebtedness or any part thereof, or (b) any
surrender, compromise, release, renewal, extension, exchange, or substitution
which Holder may grant in respect of the Collateral, or (c) any indulgence
granted in respect of any endorser, guarantor, or surety. The purchaser,
assignee, transferee, or pledgee of this Note, the Collateral, and guaranty,
and any other document (or any of them), sold, assigned, transferred,
pledged, or repledged, shall forthwith become vested with and entitled to
exercise all the powers and rights given by this Note and all applications of
the undersigned to Holder or SBA, as if said purchaser, assignee, transferee,
or pledgee were originally named as Payee in this Note and in said
application or applications.
This promissory note is given to secure a loan which SBA is making or in
which it is participating and, pursuant to Part 101 of the Rules and
Regulation of SBA (13 C.F.R. 101.1(d)), this instrument is to be construed
and (when SBA is the Holder or a party in interest) enforced in accordance
with applicable federal law.
BORROWER:
PERCEPTRONICS, INC.
By: /s/ Gershon Weltman
--------------------------------------------------
DR. GERSHON WELTMAN, CHIEF EXECUTIVE OFFICER
Note.-- Corporate applicants must execute Note, in corporate name, by duly
authorized officer, and seal must be affixed and duly attested; together with
signature of a general partner.
<PAGE>
Exhibit 10.2
THIS NOTE HAS BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THIS NOTE MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE
HOLDER OF THIS NOTE HAS DELIVERED TO THE COMPANY AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT SUCH A TRANSFER WOULD NOT RESULT IN A
VIOLATION OF THE SECURITIES ACT OF 1933, OR UNLESS THIS NOTE HAS BEEN REGISTERED
UNDER SAID ACT.
PROMISSORY NOTE
$200,000.00 September 22, 1997
For value received, Perceptronics, Inc., a Delaware corporation (the
"Company"), promises to pay to Applied Controls Technology at 27525 Newhall
Ranch Road Unit 4, Valencia CA 91355 (the "Lender"), or at such other address as
Lender shall from time to time designate in writing, the sum of TWO HUNDRED
THOUSAND DOLLARS ($200,000.00 U.S.) on September 23, 1999.
The Company shall have the right, from time to time, to prepay the
principal amount of the Note in whole or in part without premium or penalty. The
Company will pay interest on the outstanding principal on a monthly basis, based
on an annual percentage rate of 12% per year, with the first interest payment
due and payable 30 days after the date of this Note.
Upon written demand of the Lender, the Company shall be required to prepay
$51,032 of the Note with any proceeds received in connection with the second
shipment, and $148,968 of the Note with any proceeds received in connection with
the final 10% withhold, of the current subcontract between the Lender and the
Company for the manufacture and delivery of Precision Gunnery Training Systems
("PGTS") intended for resale to the Kingdom of Saudi Arabia.
The Company agrees to pay all costs of collection and enforcement,
including reasonable attorney's fees, of the Lender in attempting to enforce the
payment of the Note. This Note shall be governed by, and construed in accordance
with, the laws of the State of California, U.S.A., except choice of law rules
shall not apply.
PERCEPTRONICS, INC.,
BY: /s/ Gershon Weltman
----------------------------------------
Gershon Weltman, Ph.D.
Chief Executive Officer (Corporate Seal)
<PAGE>
EXHIBIT 11.1
PERCEPTRONICS, INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter ended September 30 Six months ended September 30
-------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ (28,050) $ (95,808) $ 40,859 $ (357,053)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PRIMARY
Average shares outstanding 4,469,287 3,863,732 4,469,287 3,863,732
Net effect of dilutive stock
options and warrants based
on the treasury stock method
using average market price 2,281 177,633 1,776 200,165
---------- ---------- ---------- ----------
TOTAL 4,471,568 4,041,365 4,471,063 4,063,897
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PRIMARY PER SHARE
AMOUNT $ (.01) $ (.03) $ .01 $ (.09)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
FULLY DILUTED ** ** ** **
</TABLE>
** Not required because dilution is less than 3%
See notes to consolidated condensed financial statements
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 5,993
<SECURITIES> 0
<RECEIVABLES> 859,339
<ALLOWANCES> 0
<INVENTORY> 186,355
<CURRENT-ASSETS> 1,089,504
<PP&E> 740,855
<DEPRECIATION> 700,940
<TOTAL-ASSETS> 2,090,137
<CURRENT-LIABILITIES> 1,455,032
<BONDS> 419,317
0
0
<COMMON> 4,469
<OTHER-SE> 211,319
<TOTAL-LIABILITY-AND-EQUITY> 2,090,137
<SALES> 1,547,409
<TOTAL-REVENUES> 1,547,409
<CGS> 1,045,742
<TOTAL-COSTS> 1,420,555
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,395
<INCOME-PRETAX> 42,459
<INCOME-TAX> 1,600
<INCOME-CONTINUING> 40,859
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,859
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
