- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 0-15885
NATIONAL DATACOMPUTER, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-2942832
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification #)
900 Middlesex Turnpike, Bldg. 5
Billerica, Ma. 01821
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (508)663-7677
---------------------------------------------
Indicate by check mark whether the registrant has filed all reports required to
be filed by section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 31, 1996.
COMMON STOCK, $0.02 PAR VALUE 4,677,743
(Title of each class) (number of shares)
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
BALANCE SHEET
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March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Asset
Current Assets:
Cash $ 78,886 $ 470
Accounts receivable. less allowance for doubtful accounts 756,231 1,198,894
Inventories 1,106,485 1,292,336
Notes receivable 50,268 -
Other current assets 39,664 17,132
---------------- ----------------
Total current assets 2,031,534 2,508,832
Property and equipmet, net 148,366 145,853
---------------- ----------------
$ 2,179,900 $ 2,654,685
================ ================
Liabilities and stockholders' deficit
Current Liabilities:
Current portion of long-term debt $ 10,477 $ 6,572
Accounts payable 426,547 333,991
Accrued payroll and related taxes 281,465 287,736
Accrued professional fees 114,495 275,013
Accrued rent and utilities 67,226 125,984
Accrued expenses - other 418,484 418,100
Deferred revenues, current portion 598,026 608,571
Deferred compensation 55,059 55,059
---------------- ----------------
Total current liabilities 1,971,779 2,111,026
Long-term debt 437,841 442,970
Deferred revenues 267,540 267,540
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2,677,160 2,821,536
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Stockholders' deficit:
Preferred stock, $0.01 par value; 20 shares authorized;
0 shares issued and outstanding at 3/31/96 and 12/31/95 - -
Common stock, $0.02 par value; 10,000,000 shares authorized;
4,677,743 shares issued and outstanding at 3/31/96 and 12/31/95 93,555 93,555
Capital in excess of par value 9,438,978 9,438,978
Accumulated deficit (9,678,524) (9,297,847)
Notes receivable - employees (351,269) (351,269)
Preferred stock subscription receivable (50,268)
---------------- ----------------
Total stockholders' deficit (497,260) (166,851)
---------------- ----------------
$ 2,179,900 $ 2,654,685
================ ================
The accompany notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF OPERATIONS
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First Fiscal Quarter Ended
March 31 1996 March 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues
Net product revenue $ 1,061,532 $ 1,711,009
Service and other revenue 265,619 316,198
------------------- ----------------------
1,327,151 2,027,207
Cost of sales and services 611,288 830,976
------------------- ----------------------
715,863 1,196,231
------------------- ----------------------
Operating expenses:
Research and development 279,557 200,619
Selling, general and administrative 803,549 769,570
------------------- ----------------------
1,083,106 970,189
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Income (loss) from operation (367,243) 226,042
Other income (expense):
Other income 5 381
Interest expense (13,438) (13,794)
------------------- ----------------------
Net income (loss) $ (380,676) $ 212,629
=================== ======================
Net income (loss) per share $ (0.08) $ 0.06
Weighted average shares and dilutive
shares equivalents outstanding 4,677,743 3,542,672
------------------- ----------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
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March 31, March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (380,677) $ 212,629
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 10,527 13,623
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 442,663 (330,826)
Decrease in inventories 185,851 156,204
(Increase) in other current assets (22,532) (110,943)
(Decrease) increase in accounts payable 92,556 (71,286)
Increase (decrease) in accrued expenses
and deferred compensation (226,387) 39,119
(Decrease) in deferred revenues (10,545) (7,374)
----------------- ------------------
Net cash provided by (used for) operating activities 91,456 (98,854)
----------------- ------------------
Cash flow from investing activities:
Purchase of property and equipment (13,040) (16,709)
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Net cash used for investing activities (13,040) (16,709)
----------------- ------------------
Cash flow from financing activities
Equity investment - (6,234)
----------------- ------------------
Net cash used in financing activities - (6,234)
----------------- ------------------
Net increase (decrease) in cash 78,416 (121,797)
Cash at beginning of year 470 148,294
----------------- ------------------
Cash at end of period $ 78,886 $ 26,497
================= ==================
The accompanying notes are an integral part of these financial statements
</TABLE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
In the opinion of Management, the accompanying unaudited financial statements
include all adjustments and normal recurring accruals necessary to present
fairly the financial position, results of operations and changes in financial
position.
ORGANIZATION
National Datacomputer, Inc. (the "Company") designs, develops, manufactures,
markets, and services a line of hand-held battery powered microprocessor-based
data collection products and computers and associated peripherals for use in
mobile operations.
EARNINGS PER SHARE
The computations of earnings (loss) per share are based on the weighted average
number of common shares outstanding; common equivalent shares are not included
as the effect of such would be considered anti-dilutive.
INVENTORIES
<TABLE>
<CAPTION>
Inventories consisted of: March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Raw Materials $ 239,635 $ 279,885
Work-in-process 458,332 535,316
Finished goods 408,518 477,135
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Total $1,106,485 $1,292,336
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</TABLE>
Inventories are stated at the lower of cost (first-in, first-out) or
market.
REVENUE RECOGNITION:
The company generally recognizes revenues for product upon shipment. Service
revenue is recognized ratably over the contractual period.
RESEARCH AND DEVELOPMENT AND COMPUTER SOFTWARE DEVELOPMENT COSTS
The statement of Financial Accounting Standards No. 86 ("SFAS-86") states that
the software development costs incurred after the establishment of technological
feasibility and up to the general release of the software should be capitalized
and written off over a three year period. These costs include coding, testing
and product quality assurance. The Company has charged all these costs to
operations as incurred. In the first quarter ended March 31, 1995, $103,614 was
capitalized and included in the Balance Sheet under "Other Assets". This figure
was expensed by December 31, 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere herein.
RESULTS OF OPERATIONS
Quarter ended March 31, 1996 compared with quarter ended March 31, 1995
Revenues decreased 35% to $1,327,151 for the "First Quarter 1996" from
$2,027,207 for the "First Quarter 1995". The decrease in revenue was caused by
decreased sales of the Company's Datacomputers, due primarily to a delay in the
penetration of the Bakery market awaiting completion of installation and
training at several Bakery customers. The Company expects that for the fiscal
year ending December 31, 1996 results in the Bakery market will show excellent
results, as well as continued accelerated growth in the Beer market. Since
entering into an agreement with Anheuser-Busch in March 1993, which selected the
Company as one of two hand-held manufacturers authorized to sell their products
to Anheuser-Busch distributors, sales have been increasing each year at a rate
of approximately 30%. The Company expects that sales to Anheuser-Busch will
continue to grow over the near term.
Sales of the Company's ICAL 100 showed a decrease of 31% from 1995 to
1996. Revenues generated by the ICAL 100 are almost exclusively from current
customers who wish to continue to use their installed base of ICAL devices. The
Company intends to support the ICAL product line, but believes that current
trends of increasing processing power in and decreasing costs of small portable
computers such as the Company's Datacomputers will make the ICAL line less
attractive to users in the future. As a result, the Company expect sales of the
ICAL 100 to decrease in the future.
Service and other revenues decreased to $265,619 in the First Quarter
1996 from $316,198 in the First Quarter of 1995, a decrease of 16%. The Company
expects that service and other revenues will begin to rise over the next several
years as the Company's installed base of hand-held computers continues to
expand.
Costs and operating expenses decreased to $1,694,394 in 1996 from
$1,801,165 in 1995, a decrease of 6%. As a percentage of sales, costs and
operating expenses increased to 128% in 1996 from 89% in 1995. The Company
expects that costs and operating expenses will decrease as a percentage of sales
over the next several years, primarily as a results of increased sales without a
proportional increase in operating costs, because the current level of operating
expenses is projected to support a higher level of sales than achieved in 1995.
Research and development expenses decreased to $279,557 in 1996 from
$304,233 in 1995, (In the first quarter of 1995, $103,614 of the $304,233 was
capitalized
under SFAS-86 and was included in balance sheet under "Other Assets"). As a
percentage of sales, research and development expenses increased to 21% in 1996
from 15% in 1995. The percentage increase was due to the 35% decrease in revenue
compared to the 8% decrease in research and development expenses. The Company
expects to fund research and development effort to enhance current products and
to develop future products.
Selling, general and administrative expenses increased to $803,549 in
1996 from $769,570 in 1995, an increase of 4%. As a percentage of sales,
selling, general and administrative expenses increased to 61% in 1996 from 38%
in 1995. The increase is primarily due to increases in salaries of the Company's
sales and marketing staff and the creation of new positions. The Company expects
that selling, general and administrative expenses goinnng forward will decrease
as a percentage of sales due to anticipated increased sales without proportional
increases in selling, general and administrative expenses.
The Company's operating loss for the First Quarter 1996 was $367,243
compared to an operating income of $226,042 in First Quarter 1995. This reflects
the decrease in the Company's sales and the increase in expenses discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has financed its activities primarily from the
sale of equity to third parties, cash flow from operations, and a working
capital line of credit. In the First quarter of 1996, operating cash flow was
positive, despite operating losses, due to a substantial decrease in accounts
receivable. In the First quarter 1995, operating cash flow was negative due to
an increase in accounts receivable as a result of increased sales and
capitalization of software development .
At March 31, 1996, the Company had a working capital line of credit
from a bank in the amount of $500,000. The Company's borrowing at March 31, 1996
was $440,000. Borrowings under this line of credit are collateralized by all of
the assets of the Company. In the past, such indebtnness was also collateralized
by certain certificates of deposit in the amount of $440,000 provided to the
bank by Norman Mackinnon, the Company's President.
SUBSEQUENT EVENTS
On April 26, 1996, the Company completed a $3,000,000 private equity
placement, through the issuance of convertible preferred stock. Based on current
projections, the Company believes that the equity financing, which generated net
cash proceeds of approximately $2,640,000, will enable to meet capital
requirements for at least the next twelve to twenty four months. Part of the
proceeds was used to pay-off the $440,000 due under the line of credit. As a
result of this payment, the bank returned the certificates of deposits to Mr.
Mackinnon, and terminated Mr. Mackinnon's obligations to personnally guarantee
this line of credit.
On April 26, 1996, the Company announced that Malcom Bibby had been
elected President and CEO by the Board of Directors. Norman Mackinnon, former
President and Chairman, will retain the Chairmanship. Dr. Bibby joined the Board
in January, 1996 and was also consulting with the Company for the last several
months. Dr. Bibby served as President of LXE, Inc., a diversified wireless data
communications product company, from 1983 to December 1993. During his tenure,
LXE, Inc.'s revenues grew from $600,000 to $63,000,000. Dr. Bibby, akso has
extensive experience in both hardware and software product development. Dr.
Bibby holds a Bachelor of Science degree and a Ph.D, both in Electrical
Engineering, from the University of Liverpool and an MBA from the University of
Chicago.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not presently involved in any material pending
litigation.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K:
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL DATACOMPUTER, INC.
May 3, 1996 /s/ Norman Mackinnon
---------------------
Norman Mackinnon
Chairman
May 3, 1996 /s/ Gerald S. Eilberg
---------------------
Gerald S. Eilberg
Vice President, Finance and Administration
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 78,886
<SECURITIES> 0
<RECEIVABLES> 845,676
<ALLOWANCES> (89,445)
<INVENTORY> 1,106,485
<CURRENT-ASSETS> 89,932
<PP&E> 1,243,673
<DEPRECIATION> (1,095,307)
<TOTAL-ASSETS> 2,179,900
<CURRENT-LIABILITIES> 1,971,779
<BONDS> 705,381
0
0
<COMMON> 93,555
<OTHER-SE> (590,815)
<TOTAL-LIABILITY-AND-EQUITY> 2,179,900
<SALES> 0
<TOTAL-REVENUES> 1,327,151
<CGS> 611,288
<TOTAL-COSTS> 1,083,106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,433
<INCOME-PRETAX> (380,676)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (380,676)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
