- --------------------------------------------------------------------------------
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 SEPTEMBER 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 Identification #)
incorporation or organization)
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 September 30, 1996.
COMMON STOCK, $0.02 PAR VALUE 4,952,616
(Title of each class) (number of shares)
NATIONAL DATACOMPUTER, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
ITEM 1. FINANCIAL STATEMENTS:
Statement of Operations
Three and nine months ended Sept 30, 1996 and 1995............... 3
Balance Sheet
September 30, 1996 and December 31, 1995......................... 4
Statement of Cash Flows
Nine months ended September 30, 1996 and 1995.................... 5
Notes to Financial Statements...................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS......................................... 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.................................................. 10
ITEM 2. Changes in Securities.............................................. 10
ITEM 3. Defaults upon Senior Securities.................................... 10
ITEM 4. Submissions of Matters to a Vote of Security Holders............... 10
ITEM 5. Other Information.................................................. 10
ITEM 6. Exibits and Reports on Form 8 - K.................................. 10
SIGNATURES.................................................................. 11
2
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Third Fiscal Quarter Cumulative Nine Months
Ended Ended
-------------------------------------- ---------------------------------
Sept 30 Sept 30 Sept 30 Sept 30
1996 1995 1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Net product revenue $ 870,124 $ 1,284,449 $ 3,325,301 $ 4,745,982
Service and other revenue 266,804 208,327 775,769 699,837
-------------- --------------- -------------- ------------
1,136,928 1,492,776 4,101,070 5,445,819
Cost of sales and services 585,867 784,915 1,967,040 2,409,623
-------------- --------------- -------------- ------------
551,061 707,861 2,134,030 3,036,196
-------------- --------------- -------------- ------------
Operating expenses:
Research and development 363,868 200,911 926,599 619,372
Selling, general and administrative 870,744 761,156 2,457,970 2,383,735
-------------- --------------- -------------- ------------
1,234,612 962,067 3,384,569 3,003,107
-------------- --------------- -------------- ------------
Income (loss) from operation (683,551) (254,206) (1,250,539) 33,089
Other income (expense):
Other income 17,009 262 22,783 1,112
Interest expense (2,538) (21,839) (20,651) (56,524)
-------------- --------------- -------------- ------------
Net loss $ (669,080) $ (275,783) $ (1,248,407) $ (22,323)
============== =============== ============== ============
Adjusted net loss per share $ (0.15) $ (0.08) $ (0.29) $ (0.01)
============== =============== ============== ============
Weighted average shares and dilutive
shares equivalent outstanding 4,920,611 3,318,216 4,786,598 2,684,162
============== =============== ============== ============
The accompanying notes are an integral part
of these financial statements
</TABLE>
3
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
BALANCE SHEET
- ----------------------------------------------------------------------------------------------------------------------------------
Sept 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,530,155 $ 470
Accounts receivable, less allowance for doubtful accounts 971,253 1,198,894
Inventories 1,389,869 1,292,336
Other current assets 42,236 17,132
---------------------- ---------------------
Total current assets 3,933,513 2,508,832
Property and equipment, net 214,428 145,853
---------------------- ---------------------
$ 4,147,941 $ 2,654,685
====================== =====================
Liabilities and stockholders' equity (deficit) Current Liabilities:
Current portion of long-term debt $ 71,508 $ 6,572
Account payable 209,903 333,991
Accrued payroll and related taxes 179,007 287,736
Accrued professional fees 67,651 275,013
Accrued rent and utilities 63,823 125,984
Accrued expenses - other 366,870 418,100
Deferred revenues, current portion 569,757 608,571
Deferred compensation 45,742 55,059
---------------------- ---------------------
Total current liabilities 1,574,261 2,111,026
Long-term debt 26,307 442,970
Deferred revenues 267,540 267,540
---------------------- ---------------------
1,868,108 2,821,536
---------------------- ---------------------
Stockholders' equity (deficit)
Preferred stock, Series A convertible, $0.001 par value; 20 shares
authorized; 0 shares issued and outstanding at 9/30/96 and 12/31/95 $ - $ -
Preferred stock, $0.001 par value; 50,000 shares authorized;
0 shares issued and outstanding at 9/30/96 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 9/30/96
and 12/31/95 3,685,206 -
Common stock, $0.02 par value; 10,000,000 shares authorized;
4,952,616 and 4,677,743 shares issued and outstanding at
September 30, 1996 and December 31, 1995, respectively. 99,052 93,555
Capital in excess of par value 9,517,098 9,438,978
Accumulated deficit (10,670,254) (9,297,847)
Notes receivable - employees (351,269) (351,269)
Preferred stock subscription receivable - (50,268)
---------------------- ---------------------
Total stockholders' equity (deficit) 2,279,833 (166,851)
---------------------- ---------------------
$ 4,147,941 $ 2,654,685
====================== =====================
The accompanying notes are an integral part
of these financial statements
</TABLE>
4
<TABLE>
<CAPTION>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
Sept 30, Sept 30,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) (1,248,407) $ (22,323)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 41,631 51,634
Gain on sale of property and equipment (1,780)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 227,641 (490,834)
(Increase) decrease in inventories (97,533) 67,162
(Increase) decrease in other current assets (25,104) (354,470)
(Decrease) increase in accounts payable (124,088) (41,670)
(Decrease) increase in debt (7,784)
(Decrease) increase in accrued expenses
and deferred compensation (522,799) (453,090)
(Decrease) increase in deferred revenues (38,814) 149,550
----------------- -------------------
Net cash provided by (used for) operating activities (1,797,037) (1,094,041)
----------------- -------------------
Cash flow from investing activities:
Purchase of property and equipment (17,741) (26,042)
Proceeds from sale of property and equipment 5,650 -
----------------- -------------------
Net cash used for investing activities (12,091) (26,042)
----------------- -------------------
Cash flow from financing activities:
Proceeds from preferred stock, net of issuance costs 3,685,206 1,517,627
Repayment of borrowings (440,278) -
Proceeds from issuance of stock 50,000 -
Investment receivable 50,268 -
Stock offering cost (6,383) -
----------------- -------------------
Net cash provided by (used for) finincing activities 3,338,813 1,517,627
----------------- -------------------
Net increase (decrease) in cash and cash equivalent 1,529,685 397,544
Cash at beginning of year 470 148,294
----------------- -------------------
Cash and cash equivalent at end of period 1,530,155 $ 545,838
================= ===================
The accompanying notes are an integral part
of these financial statements
</TABLE>
5
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
Inventories consisted of: September 30, December 31,
1996 1995
----------- -----------
Raw Materials $ 301,008 $ 279,885
Work-in-process 575,716 535,316
Finished goods 513,145 477,135
---------- ----------
Total $1,389,869 $1,292,336
---------- ----------
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. During the first nine months ended September 30, 1995,
$327,112 was capitalized and included in the Balance Sheet under "Other Assets".
This figure was expensed by December 31, 1995.
6
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
THIRD QUARTER ENDED SEPTEMBER 30, 1996 COMPARED WITH THIRD QUARTER
ENDED SEPTEMBER 30, 1995.
Revenues decreased 24% to $1,136,928 for the "Third Quarter 1996" from
$1,492,776 for the "Third 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 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%.
Service and other revenues increased to $266,804 in the Third Quarter
1996 from $208,327 in the Third Quarter of 1995, an increase of 28%. The Company
expects that service and other revenues will continue to rise over the next
several years as the Company's installed base of hand-held computers continues
to expand.
Costs and operating expenses increased to $1,820,479 in 1996 from
$1,746,982 in 1995, an increase of 4%. As a percentage of sales, costs and
operating expenses increased to 160% in 1996 from 117% 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.
Research and development expenses increased to $363,868 in 1996 from
$325,961 in 1995, (In the third quarter of 1995, $125,050 of the $325,961 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 32% in 1996 from 22% for the same period in 1995. The Company expects to
continue funding research and development effort to enhance current products and
to develop future products.
Selling, general and administrative expenses increased to $870,744 in
the third quarter of 1996 from $761,156 in the third quarter of 1995, an
increase of 14%. As a percentage of sales, selling, general and administrative
expenses increased to 77% in 1996 from 51% in 1995. The increase is primarily
due to creation of new positions in the
7
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 Third Quarter of 1996 was $669,080
compared to an operating loss of $275,783 for the same period in 1995. This
reflects the decrease in the Company's sales and the increase in expenses
discussed above.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1995.
Revenues for the first nine months of 1996 decreased 25% to $4,101,070
from $5,445,819 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.
Cost and operating expenses for the first nine months of 1996 decreased
to $5,351,609 from $5,412,730 in 1955, a decrease of 1%. As a percentage of
sales, costs and operating expenses increased to 130% in 1996 from 99% 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 proportional increase in operating costs.
Research and development expenses decreased to $926,599 in the first
nine months of 1996 from $946,484 for the same period in 1995. (In the first
nine months of 1995 $327,112 of the $946,484 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 23% in 1996 from 17% 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.
Selling, general and administrative expenses increased to $2,457,970 in
the first nine months of 1996 from $2,383,735 in 1995, an increase of 3%. As a
percentage of sales, selling, general and administrative expenses increased to
60% in 1996 from 44% in 1995. The increase is primarily due to 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.
8
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1996, the Company successfully
completed two private 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 $2,667,000. 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 $1,248,407 for the
first nine months of 1996 and payment of liabilities. Part of the proceeds were
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).
The capital lease relates to capital equipment leased during the third
quarter of 1996 in the amount of $96,335. The lease has a term of 4 years, with
monthly payments of $2,957 due through 2000.
In the first nine months of 1995, the negative cash flow from
operation was due to an increase in accounts receivable, as a result of
increased sales, and the capitalization of software development.
The Company manages its working capital and, based on current
projections, believes that the current 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 dividends, 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.
At the end of September 30, 1996, the Company has accrued interest in
the amount of $124,000, which was recorded as a reduction of retained earnings.
Also at the end of September 30, 1996, $40,000 of the accrued interest was paid
to the holders with the issuance of Common Stock.
9
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
(a) Exibits
(27) Financial Data Schedule.
(b) Form 8-K was filed on 9/16/96.
10
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.
/s/ Malcolm M. Bibby
November 13, 1996 --------------------------------
Malcolm M. Bibby
President
/s/ Gerald S. Eilberg
November 13, 1996 --------------------------------
Gerald S. Eilberg
Vice President, Finance and Administration
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 1,530,155 470
<SECURITIES> 0 0
<RECEIVABLES> 1,069,670 1,288,339
<ALLOWANCES> (98,417) (89,445)
<INVENTORY> 1,389,869 1,292,336
<CURRENT-ASSETS> 42,236 17,132
<PP&E> 1,329,610 1,229,648
<DEPRECIATION> (1,115,182) (1,083,795)
<TOTAL-ASSETS> 4,147,941 2,654,685
<CURRENT-LIABILITIES> 1,574,261 2,111,026
<BONDS> 293,847 710,510
0 0
0 0
<COMMON> 99,052 93,555
<OTHER-SE> 2,180,781 (260,406)
<TOTAL-LIABILITY-AND-EQUITY> 4,147,941 2,654,685
<SALES> 0 0
<TOTAL-REVENUES> 4,101,070 0
<CGS> 1,967,040 0
<TOTAL-COSTS> 3,384,569 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 20,651 0
<INCOME-PRETAX> (1,248,407) 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,248,407) 0
<EPS-PRIMARY> (0.29) 0
<EPS-DILUTED> (0.29) 0
</TABLE>
