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 QUARTERLY PERIOD ENDED: MARCH 30, 1997
COMMISSION FILE NUMBER 0-15885
NATIONAL DATACOMPUTER, INC.
(Name of Small Business Issuer 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
---------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15 (d) of the Securities and Exchange Act of 1934 during the past 12
months (or for 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 March 30, 1997.
COMMON STOCK, $0.08 PAR VALUE 1,251,925
(Title of each class) (number of shares)
NATIONAL DATACOMPUTER, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
ITEM 1. FINANCIAL STATEMENTS:
Balance Sheet as of
March 30, 1997 and December 29,1996................. 3
Statement of Operations
for the three months ended
March 30, 1997 and March 31, 1996........... 4
Statement of Changes in
Shareholders' Equity for the three
months ended March 30, 1997....................... 5
Statement of Cash Flows
for the three months ended
March 30, 1997 and March 31, 1996.......... 6
Notes to Financial Statements........................ 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS.......................... 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................. 11
ITEM 2. Changes in Securities......................................... 11
ITEM 3. Defaults upon Senior Securities............................... 11
ITEM 4. Submissions of Matters to a Vote of Security Holders.......... 11
ITEM 5. Other Information............................................. 11
ITEM 6. Exhibits and Reports on Form 8 - K............................ 11
SIGNATURES............................................................. 12
NATIONAL DATACOMPUTER, INC.
BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 30, December 29,
1997 1996
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,516,862 $ 722,285
Accounts receivable, net of allowance for doubtful accounts 1,029,047 621,037
Inventories 1,452,834 1,479,153
Other current assets 177,233 153,741
--------------- ---------------
Total current assets 4,175,976 2,976,216
Property and equipment, net 226,870 234,530
--------------- ---------------
$ 4,402,846 $ 3,210,746
=============== ===============
Liabilities and stockholders' equity
Current Liabilities:
Current obligations under capital lease $ 12,430 $ 21,424
Accounts payable 241,128 125,454
Accrued payroll and related taxes 134,392 171,104
Accrued professional fees 68,218 48,732
Accrued rent and utilities 35,040 54,429
Accrued expenses - other 158,837 274,423
Accrued interest on preferred stock 183,000 84,000
Deferred revenues, current portion 725,892 678,625
Deferred compensation 45,742 45,742
--------------- ---------------
Total current liabilities 1,604,679 1,503,933
Convertible debt 250,000 -
Obligation under capital lease 121,128 114,828
Deferred revenues 75,143 75,143
--------------- ---------------
2,050,950 1,693,904
--------------- ---------------
Stockholders' equity
Preferred stock, Series A convertible, $0.001 par value; 20 shares
authorized; 0 shares issued and outstanding at March 30, 1997 and
December 29, 1996 - -
Preferred stock, Series B convertible $0.001 par value; 4,200 shares
authorized; 4,200 shares issued and outstanding at March 30, 1997
and December 29, 1996, respectively (liquidating preference of $4,200,000) 3,685,206 3,685,206
Preferred stock, Series C convertible $0.001 par value; 900 shares
authorized; 900 and 0 shares issued and outstanding at March 30, 1997,
and December 29, 1996, respectively (liquidating preference of $900,000) 881,583 -
Preferred stock, Series D convertible $0.001 par value; 350 shares
authorized; 350 and 0 shares issued and outstanding at March 30, 1997,
and December 29, 1996, respectively (liquidating preference of $350,000) 343,000 -
Common stock, $0.08 par value; 5,000,000 shares authorized; xxxxxxx and
1,251,925 shares issued and outstanding at March 30, 1997 and
December 29, 1996, respectively 100,154 100,154
Capital in excess of par value 9,755,957 9,755,957
Accumulated deficit (11,945,765) (11,548,437)
Unamortized stock compensation (116,970) (124,769)
Notes receivable - employees (351,269) (351,269)
Preferred stock subscription receivable - -
--------------- ---------------
Total stockholders' equity 2,351,896 1,516,842
--------------- ---------------
$ 4,402,846 $ 3,210,746
=============== ===============
</TABLE>
The accompanying notes are an integral part
of these financial statements
3
NATIONAL DATACOMPUTER, INC.
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First Fiscal Quarter Ended
March 30, 1997 March 31, 1996
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues
Net product revenue $ 1,243,464 $ 1,061,532
Service and other revenue 291,974 265,619
------------------------- -------------------------
1,535,438 1,327,151
Cost of sales and services 821,625 832,985
------------------------- -------------------------
713,813 494,166
------------------------- -------------------------
Operating expenses:
Research and development 377,290 279,557
Selling, general and administrative 631,105 581,852
------------------------- --------------------------
1,008,395 861,409
------------------------- -------------------------
Loss from operations (294,582) (367,243)
Other income (expense):
Interest income 1,735 5
Interest expense (5,481) (13,438)
------------------------- -------------------------
Net loss $ (298,328) $ (380,676)
========================= =========================
Net income (loss) per share $ (0.32) $ (0.33)
========================= =========================
Weighted average shares and dilutive
shares equivalent outstanding 1,251,925 1,169,436
========================= =========================
</TABLE>
The accompanying notes are an integral part
of these financial statements
4
NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREFERRED STOCK SERIES B PREFERRED STOCK SERIES C PREFERRED STOCK SERIES D
----------------------------------------------------------------------------
NET ISSUANCE NET ISSUANCE NET ISSUANCE
SHARES PRICE SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 4,200 $ 3,685,206
Net loss
Issuance of preferred stock 900 881,583 350 343,000
Interest on preferred stock
Amortization of stock compensation
-------- ------------ -------- ---------- --------- ----------
Balance at March 30, 1997 4,200 $ 3,685,206 900 $ 881,583 35 $ 343,000
======== ============ ======== ========== ========= ==========
</TABLE>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------
CAPITAL IN NOTES UNAMORTIZED TOTAL
PAR EXCESS RECEIVABLE STOCK ACCUMULATED STOCKHOLDERS'
SHARES VALUE OF PAR VALUE EMPOLYEES COMPENSATION DEFICIT EQUITY (DEFICIT)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 1,251,925 $ 100,154 $ 9,755,957 $ (351,269)$ (124,769) $ (11,548,437) $1,516,842
Net loss (298,328) ($298,328)
Issuance of preferred stock $1,224,583
Interest on preferred stock (99,000) ($99,000)
Amortization of stock compensation 7,799 $7,799
----------- ---------- ------------- ----------- ------------ ------------- ------------
Balance at March 30, 1997 1,251,925 $ 100,154 $ 9,755,957 $ (351,269)$ (116,970)$ (11,945,765)$ 2,351,896
=========== ========== ============= =========== ============ ============= ============
</TABLE>
The accompanying notes are an integral part
of these financial statements
5
NATIONAL DATACOMPUTER, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 30, 1997 March 31, 1996
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (298,328) $ (380,677)
Adjustments to reconcile net income (loss) to net
cash (used for) provided by operating activities:
Depreciation and amortization 25,622 10,527
Amortization of stock compensation 7,799 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (408,010) 442,663
(Increase) decrease in inventories 26,319 185,851
(Increase) decrease in other current assets (23,492) (22,532)
(Decrease) increase in accounts payable 115,674 92,556
(Decrease) increase in accrued expenses
and deferred compensation (152,201) (226,387)
(Decrease) increase in deferred revenues 47,267 (10,545)
------------------- -------------------
Net cash (used for) provided by operating activities (659,350) 91,456
------------------- -------------------
Cash flows from investing activities:
Purchases of property and equipment (10,242) (13,040)
------------------- -------------------
Net cash used for investing activities (10,242) (13,040)
------------------- -------------------
Cash flows from financing activities:
Proceeds from issuance of preferred stock, net of issuance costs 1,224,583 -
Proceeds from issuance of convertible note 250,000
Payments of obligations under capital lease (10,414) -
------------------- -------------------
Net cash provided by financing activities 1,464,169 0
------------------- -------------------
Net increase (decrease) in cash and cash equivalents 794,577 78,416
Cash and cash equivalents at beginning of period 722,285 470
------------------- -------------------
Cash and cash equivalents at end of period $ 1,516,862 $ 78,886
=================== ===================
Supplemental Cash Flow Information:
Cash paid for interest $ 5,416 $ -
Non-cash investing and financing activities:
Accrued Interest on Series B preferred stock charged to
Accumulated deficit 99,000 -
Purchase of property and equipment under capital lease 7,720 -
</TABLE>
The accompanying notes are an integral part
of these financial statements
6
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements, which are for interim
periods, do not include all disclosures provided in the annual financial
statements. These unaudited financial statements should be read in
conjunction with the financial statements and the footnotes thereto
contained in the Annual Report on Form 10-KSB for the year ended December
29, 1996 of National Datacomputer, Inc. (the "Company"), as filed with the
Securities and Exchange Commission.
INTERIM PERIODS
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements. The
results of operations for the three months ended March 30, 1997 are not
necessarily indicative of the results to be expected for the full year.
REVENUE RECOGNITION
The company recognizes revenues for products upon shipment. Estimated
installation, training and warranty costs are accrued at the time of
shipment. Service revenue is recognized ratably over the contractual
periods.
EARNINGS PER SHARE
Per share data was computed by dividing net loss as adjusted by the
preferred dividend by the weighted average number of common shares
outstanding during the period; common equivalent shares are not included
as the effect of such would be considered anti-dilutive.
RESEARCH AND DEVELOPMENT AND COMPUTER SOFTWARE DEVELOPMENT COSTS
Research and Development costs, other than software development costs,
have been charged to operations as incurred. Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed", requires the
capitalization of certain computer software development costs
7
incurred after technological feasibility is established. No software
development costs have been capitalized at March 30, 1997 or March 31,
1996.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, ("SFAS 128"),
"Earnings per Share", effective for fiscal years ending after December 15,
1997. Management has determined that there will be no impact of the
adoption of SFAS 128 on the Company's reported results of operations for
the periods presented. The future adoption of SFAS 128 will have no effect
on the Company's financial position or cash flows.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 30, DECEMBER 29,
1997 1996
---------------------- ----------------------
<S> <C> <C>
Raw Material $ 345,599 $ 351,860
Work-in-process 582,194 592,741
Finished goods 525,014 534,552
---------------------- ----------------------
Total $1,452,834 $1,479,153
====================== ======================
</TABLE>
Inventories are stated at the lower of cost (first-in, first-out) or
market
4. CONVERTIBLE PREFERRED STOCK AND PROMISSORY NOTES
In March 1997, the Company designated and sold 900 and 350 shares of
Series C and Series D Convertible Preferred Stock, respectively, for net
proceeds of $881,583 and $343,000, respectively. The Series C and Series D
Convertible Preferred Stock have voting, dividend preference, liquidating
preference, mandatory conversion and Company redemption terms similar to
those of the Company's existing Series B Convertible Preferred Stock. The
Series C and Series D Convertible Preferred Stock are convertible into
shares of common stock at a price of $3.20 and $2.74 per share,
respectively. Holders of the Series C and Series D Convertible Preferred
Stock are also entitled to receive interest at a rate of 6% per annum on
the stated value of the preferred stock.
At the same time, the Company also issued $250,000 of Convertible
Promissory Notes to the same investors as the Series C and Series D
Convertible Preferred Stockholders. These notes bear interest at the rate
of 6% annum, mature in March
8
1998 and are convertible into shares of the Company's common stock at a
price of $2.74 per share.
ITEM 2.
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
THREE MONTHS ENDED MARCH 30, 1997 COMPARED TO THREE MONTHS ENDED MARCH
31, 1996.
Total revenues in the first quarter of fiscal year 1997 were $1,535,438
compared to $1,327,151 in the prior comparable quarter, an increase of 16%.
Revenue from equipment sales increased by approximately $180,000 to $1,243,464
during the three months ended March 30, 1997, compared to $1,061,532 during the
prior comparable quarter. The increase is due to improved product performance
and broader sales coverage. Service and other revenues for the current quarter
were $291,974 compared to $265,619 for the previous comparable quarter. The
Company expects that service and other revenues will continue to rise as the
Company's installed base of hand-held computers continues to expand.
Cost of sales and services decreased by approximately $11,000 from
$832,985 during the three months ended March 31, 1996 to $821,625 during the
current three months. As a percentage of net revenues, cost of sales and
services decreased to 54% during the three months ended March 30, 1997 from 63%
during the prior comparable period. The decrease in both absolute dollars and as
a percentage of net revenues is primarily attributable to lower cost of
materials, and lower field support cost due to the Company's quality programs
instituted in the last year.
Research and development expenses during the three months ended March
30, 1997 were $377,290 an increase of approximately $98,000 compared to $279,557
during the prior comparable quarter. The increase is due to the Company's
continued effort to enhance its current products while developing future
products.
Selling, general and administrative expenses during the three months
ended March 30, 1997 were $631,105 an increase of approximately $49,000 compared
to $581,851 during the prior comparable period. The increase is due primarily to
increased market
9
research and lead generation programs, plus increase in legal and professional
fees associated with the Company's filing and listing on NASDAQ stock market.
Interest expense was $5,481 for the three months of 1997 as compared to
$13,438 for the prior comparable period. The decrease resulted from the
repayment of the Company's working capital line of credit.
As a result, the Company incurred a net loss of $298,328 during the
three months ended March 30, 1997, compared to a net loss of $380,676 during the
three months ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalent totaled $1,516,862 at March 30, 1997 compared
to $722,285 at December 29, 1996. The increase in cash and cash equivalent was
due primarily to cash generated from the sale of Convertible Preferred Stock and
the issuance of Convertible Promissory Notes, which netted proceeds of
$1,474,583 (Note 4). The increase in cash was partially offset by a net loss of
$298,328, in addition to an increase in accounts receivable of $408,010.
The Company currently has no outstanding commitments for capital
expenditures. The Company's primary requirements for capital will be the cost of
systems sold, strategic acquisitions, marketing and sales costs associated with
the Company's expansion into new target markets and general and administrative
expenses associated with the Company's plan for expansion.
10
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) Exhibits
(27) Financial Data Schedule.
(b) Form 8-K was filed on February 26, 1997, describing the
Company's private placement of Series C and D Convertible
Preferred Stock and a Convertible Promissory Note. The
following financial statements were filed as part of this
report on Form 8-K:
(i) Unaudited balance sheet as of January 26, 1997,
(ii) unaudited statement of operations for the one month
ended January 26, 1997,
(iii) unaudited statement of cash flow for the one month ended
January 26, 1997, and
(iv) unaudited statement of stockholders' equity as of
January 26, 1997.
11
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 9, 1997 ________________________________
Malcolm M. Bibby
President
May 9, 1997 ________________________________
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-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 1,516,862
<SECURITIES> 0
<RECEIVABLES> 1,127,221
<ALLOWANCES> (98,174)
<INVENTORY> 1,452,834
<CURRENT-ASSETS> 177,233
<PP&E> 1,410,016
<DEPRECIATION> (1,183,146)
<TOTAL-ASSETS> 4,402,846
<CURRENT-LIABILITIES> 1,604,679
<BONDS> 446,271
0
0
<COMMON> 100,154
<OTHER-SE> 2,251,742
<TOTAL-LIABILITY-AND-EQUITY> 4,402,846
<SALES> 1,535,438
<TOTAL-REVENUES> 1,535,438
<CGS> 821,625
<TOTAL-COSTS> 1,006,660
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,481
<INCOME-PRETAX> (298,328)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (298,328)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
