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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 JUNE 30, 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 (IRS Employer
incorporation 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1996.
COMMON STOCK, $0.02 PAR VALUE 4,802,512
(Title of each class) (number of shares)
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
BALANCE SHEET
====================================================================================================================================
June 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 2,104,691 $ 470
Accounts receivable, less allowance for doubtful accounts 1,161,934 1,198,894
Inventories 1,265,387 1,292,336
Other current assets 47,246 17,132
--------------------- ---------------------
Total current assets 4,579,258 2,508,832
Property and equipment, net 135,788 145,853
--------------------- ---------------------
$ 4,715,046 $ 2,654,685
===================== =====================
Liabilities and stockholders' equity (deficit) Current Liabilities:
Current portion of long-term debt $ 2,081 $ 6,572
Account payable 259,372 333,991
Accrued payroll and related taxes 149,894 287,736
Accrued professional fees 23,287 275,013
Accrued rent and utilities 94,749 125,984
Accrued expenses - other 333,067 418,100
Deferred revenues, current portion 575,910 608,571
Deferred compensation 45,742 55,059
--------------------- ---------------------
Total current liabilities 1,484,102 2,111,026
Long-term debt 3,781 442,970
Deferred revenues 267,540 267,540
--------------------- ---------------------
1,755,423 2,821,536
--------------------- ---------------------
Stockholders' equity (deficit)
Preferred stock, Series A convertible, $0.001 par value; 20 shares
authorized; 0 shares issued and outstanding at 6/30/96 and 12/31/95 $ - $ -
Preferred stock, $0.001 par value; 50,000 shares authorized;
0 shares issued and outstanding at 6/30/96 and 12/31/95
Preferred stock, Series B convertible $0.001 par value; 4,200 shares
authorized; 4,200 and 0 shares issued and outstanding at 6/30/96 and
12/31/95 3,701,916 -
Common stock, $0.02 par value; 10,000,000 shares authorized;
4,802,512 and 4,677,743 shares issued and outstanding at
June 30, 1996 and December 31, 1995, respectively. 96,050 93,555
Capital in excess of par value 9,430,100 9,438,978
Accumulated deficit (9,917,174) (9,297,847)
Notes receivable - employees (351,269) (351,269)
Preferred stock subscription receivable - (50,268)
--------------------- ---------------------
Total stockholders' equity (deficit) 2,959,623 (166,851)
--------------------- ---------------------
$ 4,715,046 $ 2,654,685
===================== =====================
</TABLE>
The accompanying notes are an integral part
of these financial statements
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF OPERATIONS
====================================================================================================================================
Second Fiscal Quarter Cumulative Six Months
Ended Ended
------------------------------------------ --------------------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Net product revenue $ 1,393,645 $ 1,661,684 2,455,177 $ 3,461,532
Service and other revenue 243,346 264,152 508,965 491,511
--------------------- ----------------- --------------- -----------------
1,636,991 1,925,836 2,964,142 3,953,043
Cost of sales and services 769,885 793,733 1,381,173 1,624,710
--------------------- ----------------- --------------- -----------------
867,106 1,132,103 1,582,969 2,328,333
--------------------- ----------------- --------------- -----------------
Operating expenses:
Research and development 283,174 217,844 562,731 418,462
Selling, general and administrative 783,677 853,014 1,587,226 1,622,581
--------------------- ----------------- --------------- -----------------
1,066,851 1,070,858 2,149,957 2,041,043
--------------------- ----------------- --------------- -----------------
Income (loss) from operation (199,745) 61,245 (566,988) 287,290
Other income (expense):
Other income 5,770 468 5,775 850
Interest expense (4,676) (20,890) (18,114) (34,684)
--------------------- ----------------- --------------- -----------------
Net income (loss) $ (198,651) $ 40,823 (579,327) $ 253,456
===================== ================= =============== =================
Net income (loss) per share $ (0.04) $ 0.01 (0.12) $ 0.07
===================== ================= =============== =================
Weighted average shares and dilutive
shares equivalent outstanding 4,761,379 3,476,498 4,719,561 3,495,919
===================== ================= =============== =================
</TABLE>
The accompanying notes are an integral part
of these financial statements
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
====================================================================================================================================
FOR THE SIX MONTHS ENDED
June 30, June 30,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (579,327) $ 253,458
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 14,148 34,262
Gain on sale of property and equipment (1,389)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 36,960 (691,516)
(Increase) decrease in inventories 26,949 385,907
(Increase) decrease in other current assets (30,114) (352,674)
(Decrease) increase in accounts payable (74,619) (89,307)
(Decrease) increase in accrued expenses
and deferred compensation (558,555) 319,943
(Decrease) increase in deferred revenues (32,661) 43,358
----------------- ------------------
Net cash provided by (used for) operating activities (1,198,608) (96,569)
----------------- ------------------
Cash flow from investing activities:
Purchase of property and equipment (4,843) (30,200)
Proceeds from sale of property and equipment 2,149 -
----------------- ------------------
Net cash used for investing activities (2,694) (30,200)
----------------- ------------------
Cash flow from financing activities:
Proceeds from preferred stock, net of issuance costs 3,701,916 -
Repayment of borrowings (440,278) -
Investment receivable 50,268 -
Stock offering cost (6,383) (6,237)
----------------- ------------------
Net cash provided by (used for) finincing activities 3,305,523 (6,237)
----------------- ------------------
Net increase (decrease) in cash and cash equivalent 2,104,221 (133,006)
Cash at beginning of year 470 148,294
----------------- ------------------
Cash and cash equivalent at end of period $ 2,104,691 $ 15,288
================= ==================
</TABLE>
The accompanying notes are an integral part
of these financial statements
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.
Weighted average common shares and share equivalent outstanding:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
1. Shares attributable to common stock outstanding 4,761,379 2,628,523 4,719,561 2,367,135
2. Shares attributable to convert preferred stock outstanding 0 189,780 0 451,168
3. Shares attributable to common stock options and
warrants pursuant to APB 15, paragraph 38(a) 0 658,195 0 677,616
--------- --------- --------- ---------
Weighted average common shares and diutive share
equivalent outstanding 4,761,379 3,476,498 4,719,561 3,495,919
</TABLE>
INVENTORIES
Inventories consisted of:
June 30, December 31,
1996 1995
------ ---------
Raw Materials $ 274,049 $ 279,885
Work-in-process 524,153 535,316
Finished goods 467,185 477,135
---------- ----------
Total $1,265,387 $1,292,336
---------- ----------
Inventories are stated at the lower of cost (first-in, first-out) or
market.
2
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. During the first six months ended June 30, 1995,
$202,062 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
SECOND QUARTER ENDED JUNE 30, 1996 COMPARED WITH SECOND QUARTER ENDED
JUNE 30, 1995
Revenues decreased 15% to $1,636,991 for the "Second Quarter 1996" from
$1,925,836 for the "Second 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 endorsed to sell their products to
Anheuser-Busch distributors, sales in the Beer market have been increasing each
year at a rate of approximately 30%.
Costs and operating expenses decreased to $1,836,736 in 1996 from
$1,864,591 in 1995, a decrease of 1.5% for the "Second Quarter 1995". As a
percentage of sales, costs and operating expenses increased to 112% in 1996 from
97% 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, since the
current level of operating expenses is projected to support a higher level of
sales than achieved in 1995.
3
Research and development expenses decreased to $283,174 in the second
quarter of 1996 from $316,292 for the same period in 1995. (In the second
quarter of 1995, $98,448 of the $316,292 was capitalized under SFAS-86 and was
included in the Balance Sheet under "Other Assets"). As a percentage of sales,
research and development expenses increased to 17% in 1996 from 16% for the same
period in 1995. The Company expects to continue to fund research and development
efforts to enhance current products and to develop future products.
Selling, general and administrative expenses decreased to $783,677 in
the second quarter of 1996 from $853,014 in the second quarter of 1995, a
decrease of 8%. As a percentage of sales, selling, general and administrative
expenses increased to 48% in 1996 from 44% in 1995. The increase is primarily
due to the creation of new positions in the Company's sales and marketing staff.
The Company expects that selling, general and administrative expenses going
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 second quarter of 1996 was
$198,651 compared to an operating income of $40,823 for the second quarter of
1995. This reflects the decrease in the Company's sales and the increase in
expenses discussed above.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30,
1995
Revenues for the first six months of 1996 decreased 25% to $2,964,142
from $3,953,043 for the same period in 1995. The current period includes sales
to each of the following markets: Bakery, Beer, Dairy, Office Coffee, Uniform
and Inventory Services.
Costs and operating expenses for the first six months of 1996 decreased
to $3,531,130 from $3,665,753 in 1995, a decrease of 3.7%. As a percentage of
sales, costs and operating expenses increased to 112% in 1996 from 97% 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 result of
increased sales without a proportional increase in operating costs.
Research and development expenses decreased to $562,731 in the first
six months of 1996 from $620,524 for the same period in 1995. (In the first six
months of 1995, $202,062 of the $620,524 was capitalized under SFAS-86 and was
included in the Balance Sheet under "Other Assets"). As a percentage of sales,
research and development expenses increased to 19% in 1996 from 16% for the same
period in 1995. The Company expects to maintain ongoing Hardware and Software
programs necessary to enhance current products and to develop future products.
4
Selling, general and administrative expenses decreased to $1,587,226 in
the first six months of 1996 from $1,622,851 in 1995, a decrease of 2%. As a
percentage of sales, selling, general and administrative expenses increased to
54% in 1996 from 41% in 1995. The increase is primarily due to the creation of
new positions in the Company's sales and marketing staff. Travel expenses also
rose significantly in sales and marketing as the sales staff increased contact
with potential customers nationwide. The Company expects that selling, general
and administrative expenses going forward will decrease as a percentage of sales
due to anticipated increased sales without proportional increases in selling,
general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
During the first 6 months of 1996, the Company successfully completed
two private equity placements, under Regulation S, through the issuance of
convertible preferred stock. The first equity placement closed on April 26,
1996, at which time the Company issued 3,000 shares of "Series B Convertible
Preferred Stock" with net proceeds of $2,683,000. The second equity placement
was completed on June 28, 1996, with the sale of 1,200 shares of "Series B
Convertible Preferred Stock" with net proceeds of $1,018,000.
The proceeds were used to fund the operating loss of $579,327 for the
first six months of 1996 and payment of liabilities. 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, (the
Company former President). In the first 6 months of 1995, the negative cash flow
of $96,569 from operations was due to an increase in accounts receivable as a
result of increased sales and capitalization of software development.
The Company manages its working capital and, based on current
projections, believes that the above equity financing will enable the Company to
meet working capital requirements for at least the next twelve to twenty-four
months.
PREFERRED CONVERTIBLE STOCK
The holders of shares of Series B Convertible Preferred Stock are
entitled to receive, in addition to any dividend, interest equal to eight
percent (8%) per annum of the stated value of such Series B Convertible
Preferred Stock. Such interest will accrue from the Original Issuance Date, and
shall be payable, in cash or Common Stock, on a quarterly basis, commencing with
the fiscal quarter ended June 30, 1996. Payment of interest due hereunder with
respect to those shares of Series B Convertible Preferred Stock that remain
issued and outstanding at the end of each of the Company's fiscal quarter shall
be made within 15 business days after the filing with the SEC of the applicable
report.
5
At the end of June 30, 1996, the Company has accrued interest in the
amount of $40,000, which was recorded as a reduction of retained earnings.
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
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 also consulted with the Company for 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, also 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - KSB
None
6
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.
July 11, 1996 /s/ Malcolm M. Bibby
-----------------------------------------------
Malcolm M. Bibby
President
July 11, 1996 /s/ Gerald S. Eilberg
-----------------------------------------------
Gerald S. Eilberg
Vice President, Finance and Administration
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 2,104,691 470
<SECURITIES> 0 0
<RECEIVABLES> 1,251,064 1,288,339
<ALLOWANCES> (89,130) (89,445)
<INVENTORY> 1,265,387 1,292,336
<CURRENT-ASSETS> 47,246 17,132
<PP&E> 1,232,512 1,229,648
<DEPRECIATION> (1,096,724) (1,083,795)
<TOTAL-ASSETS> 4,715,046 2,654,685
<CURRENT-LIABILITIES> 1,484,102 2,111,026
<BONDS> 271,321 710,510
0 0
0 0
<COMMON> 96,050 93,555
<OTHER-SE> 2,863,573 (260,406)
<TOTAL-LIABILITY-AND-EQUITY> 4,715,046 2,654,685
<SALES> 0 0
<TOTAL-REVENUES> 2,964,142 0
<CGS> 1,381,173 0
<TOTAL-COSTS> 2,149,957 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,339 0
<INCOME-PRETAX> (579,327) 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (579,327) 0
<EPS-PRIMARY> (0.12) 0
<EPS-DILUTED> (0.12) 0
</TABLE>
