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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 QUARTERLY PERIOD ENDED: MARCH 31, 1999
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 (978)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 31, 1999.
COMMON STOCK, $0.08 PAR VALUE 2,597,592
- ----------------------------- ---------
(Title of each class) (number of shares)
<PAGE>
NATIONAL DATACOMPUTER, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. FINANCIAL STATEMENTS:
Balance Sheet as of March 31, 1999 (unaudited)
and December 31,1998...............................................3
Statement of Operations for the three months ended March 31, 1999
and March 31, 1998 (unaudited).....................................4
Statement of Stockholders' Equity for the three months ended
March 31, 1999 (unaudited).........................................5
Statement of Cash Flows
for the three months ended
March 31, 1999 and March 31, 1998 (unaudited).............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...................................................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. Exhibits and Reports on Form 8 - K..................................10
SIGNATURES...................................................................11
2
<PAGE>
NATIONAL DATACOMPUTER, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 129,611 $ 491,174
Accounts receivable, net of allowance for doubtful accounts 1,203,848 1,048,315
Inventories 1,649,005 1,516,306
Other current assets 50,166 31,493
--------------- ---------------
Total current assets 3,032,630 3,087,288
Fixed assets, net 195,498 205,508
--------------- ---------------
$ 3,228,128 $ 3,292,796
=============== ===============
Liabilities and stockholders' equity
Current Liabilities:
Current obligations under capital lease $ 32,697 $ 44,198
Accounts payable 490,738 356,866
Accrued payroll and related taxes 113,657 78,224
Accrued expenses - other 176,584 218,264
Accrued interest on preferred stock - 6,125
Deferred revenues, current portion 573,668 552,334
--------------- ---------------
Total current liabilities 1,387,344 1,256,011
Obligations under capital lease 25,754 25,754
Deferred revenues 6,143 6,143
--------------- ---------------
1,419,241 1,287,908
--------------- ---------------
Stockholders' equity
Preferred stock, Series A convertible, $0.001 par value; 20 shares
authorized; 0 shares issued and outstanding at March 31, 1999 and
December 31, 1998 - -
Preferred stock, Series B convertible $0.001 par value; 4,200 shares
authorized, issued and outstanding (liquidating preference of $4,200,000) 3,685,206 3,685,206
Preferred stock, Series C convertible $0.001 par value; 900 shares
authorized, issued and outstanding (liquidating preference of $900,000) 834,370 834,370
Preferred stock, Series D convertible $0.001 par value; 350 shares
authorized, issued and outstanding (liquidating preference $350,000) 324,639 324,639
Preferred stock, Series E convertible $0.001 par value; 500 shares
authorized; 500 and 0 shares issued and outstanding at March 31, 1999 and
December 31, 1998, respectively (liquidating preference of $500,000) 273,880 273,880
Preferred stock, Series F convertible $0.001 par value; 175 shares
authorized; 175 and 0 shares issued and outstanding at March 31, 1999 and
December 31, 1998, respectively (liquidating preference of $175,000) 137,500 118,750
Common stock, $0.08 par value; 5,000,000 shares authorized; 2,597,592 and
2,276,850 shares issued and outstanding at March 31, 1999 and December 31,
1998, respectively 207,807 182,148
Capital in excess of par value 11,054,619 10,998,903
Accumulated deficit (14,304,692) (14,000,566)
Unamortized stock compensation (53,173) (61,173)
Notes receivable - employees (351,269) (351,269)
-------------- --------------
Total stockholders' equity 1,808,887 2,004,888
--------------- ---------------
$ 3,228,128 $ 3,292,796
=============== ===============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
First Fiscal Quarter Ended
-----------------------------------------------
March 31, March 31,
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues
Net product revenue $ 662,030 $ 471,141
Service and other revenue 392,668 430,612
--------------------- ---------------------
1,054,698 901,753
Cost of sales and services 601,046 574,262
--------------------- ---------------------
453,652 327,491
--------------------- ---------------------
Operating expenses:
Research and development 242,905 206,021
Selling, general and administrative 407,959 477,622
--------------------- ---------------------
650,864 683,643
--------------------- ---------------------
Loss from operations (197,212) (356,152)
Other income (expense):
Interest expense (2,414) (25,692)
--------------------- ---------------------
Net loss $ (199,626) $ (381,844)
===================== =====================
Calculation of net loss per common share and dilutive share equivalent:
Net loss $ (199,626) $ (381,844)
Preferred stock preferences (123,250) (363,351)
--------------------- ---------------------
Net loss attributable to common
shareholders $ (322,876) $ (745,195)
===================== =====================
Basic and diluted net loss per share $ (0.13) $ (0.46)
===================== =====================
Weighted average shares 2,537,859 1,628,332
===================== =====================
</TABLE>
The accompanying notes are an integral part
of these financial statements
4
<PAGE>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<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 31, 1998 4,200 $3,685,206 900 $834,370 350 $324,639
Net loss
Issuance of preferred stock
Interest on preferred stock (Note 7)
Issuance of common stock
in satisfaction of accrued
interest
Amortization of stock compensation
Discounted conversion rate on
Preferred Stock
Amortization of discounted
conversion rate on Preferred
Stock
Adjustment for fractional shares
----- ---------- --- -------- --- --------
Balance at March 31, 1999 4,200 $3,685,206 900 $834,370 350 $324,639
===== ========== === ======== === ========
</TABLE>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Preferred Stock Series E Preferred Stock Series F Common Stock
------------------------ ------------------------ -----------------------
Net issuance Net issuance Par
Shares price Shares price Shares value
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 500 $273,880 175 $118,750 2,276,850 $182,148
Net loss
Issuance of preferred stock
Interest on preferred stock (Note 7)
Issuance of common stock
in satisfaction of accrued
interest 320,742 25,659
Amortization of stock compensation
Discounted conversion rate on
Preferred Stock
Amortization of discounted
conversion rate on Preferred
Stock 18,750
Adjustment for fractional shares
--- -------- --- -------- --------- --------
Balance at March 31, 1999 500 $273,880 175 $137,500 2,597,592 $207,807
=== ======== === ======== ========= ========
</TABLE>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Capital in Notes Unamortized Total
excess receivable stock Accumulated stockholders'
of par value empolyees compensation deficit equity
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $10,998,903 ($351,269) ($61,173) ($14,000,566) $2,004,888
Net loss (199,626) ($199,626)
Issuance of preferred stock
Interest on preferred stock (Note 7) (104,500) ($104,500)
Issuance of common stock
in satisfaction of accrued
interest 74,466 $100,125
Amortization of stock compensation 8,000 $8,000
Discounted conversion rate on
Preferred Stock
Amortization of discounted
conversion rate on Preferred
Stock (18,750)
Adjustment for fractional shares
----------- -------- ------- ----------- ----------
Balance at March 31, 1999 $11,054,619 ($351,269) ($53,173) ($14,304,692) $1,808,887
=========== ======== ======= =========== ==========
The accompanying notes are an integral part
of these financial statements
5
</TABLE>
<PAGE>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
March 31, March 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (199,626) $ (381,844)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation 20,373 28,713
Amortization of stock compensation 8,000 8,000
Amortization of deferred debt issuance costs
and debt discount - 18,789
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (155,533) 562,226
Increase in inventories (132,699) (277,755)
Increase in other current assets (18,673) (18,915)
Increase in accounts payable 133,872 9,029
Decrease in accrued expenses
and deferred compensation (12,372) (46,679)
Increase in deferred revenues 21,334 139,038
---------------------- ----------------------
Net cash (used for) provided by operating activities (335,324) 40,602
---------------------- ----------------------
Cash flows from investing activities:
Purchases of fixed assets (10,363) -
---------------------- ----------------------
Net cash used for investing activities (10,363) 0
---------------------- ----------------------
Cash flows from financing activities:
Proceeds from issuance of preferred stock and warrants,
net of issuance costs - 487,880
Principal payment on convertible debt - (75,000)
Payment of interest on preferred stock (4,375) -
Principal payments on obligations under capital lease (11,501) (12,061)
---------------------- ----------------------
Net cash (used for) provided by financing activities (15,876) 400,819
---------------------- ----------------------
Net increase (decrease) in cash and cash equivalents (361,563) 441,421
Cash and cash equivalents at beginning of year 491,174 208,731
---------------------- ----------------------
Cash and cash equivalents at end of year $ 129,611 $ 650,152
====================== ======================
Supplemental Cash Flow Information:
Cash paid for interest $ 12,914 $ 9,422
Non cash investing and financing activities:
Accrued interest on preferred stock charged to
accumulated deficit 104,500 102,750
Common stock issued in satisfaction of interest on
preferred stock 100,125 -
</TABLE>
The accompanying notes are an integral part
of these financial statements.
6
<PAGE>
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
31, 1998 of National Datacomputer, Inc., 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 and recurring
nature) necessary for a fair presentation of the financial statements. The
results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year.
REVENUE RECOGNITION
The Company recognizes revenues for products upon shipment at the time
of delivery to the customer, provided that the Company has no remaining
significant service obligations that are essential to the functionality of
the product delivered, collectibility is considered probable, and the fees
are fixed and determinable.
Revenue from installation and training is recognized upon completion of
the project. Service revenue is recognized ratably over the contractual
periods.
7
<PAGE>
LOSS PER SHARE
Net loss per share is computed under SFAS No. 128, "Earnings Per
Share." Basic loss per share is computed by dividing net loss, after
deducting certain amounts associated with the Company's preferred stock,
by the weighted average number of common shares outstanding for the
period. Diluted earnings per share is computed using the weighted average
number of common shares outstanding and gives effect to all dilutive
common share equivalents outstanding during the period.
Interest payable to preferred stockholders, the fair value of
inducements to convert preferred stock into common stock, and any
discounts implicit in the conversion terms upon issuance of preferred
stock are added to the net loss to determine the amount of net loss
attributable to common stockholders.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingencies at the date of the financial statements, and
the reported results of operations during the reporting period. Actual
results could differ from these estimates.
3. INVENTORIES
Inventories consist of the following: MARCH 31, DECEMBER 31,
1999 1998
-------------- --------------
Raw Material $ 461,294 $ 424,173
Work-in-process 795,767 731,730
Finished goods 391,944 360,403
-------------- --------------
Total $1,649,005 $1,516,306
============== ==============
Inventories are stated at the lower of cost (first-in, first-out) or
market.
8
<PAGE>
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 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH
31, 1998.
Total revenues in the first quarter of fiscal year 1999 were
$1,054,698 compared to $901,753 in the prior comparable quarter, an increase of
17%. The increase in revenue was attributable to an increase in sales of units
of the Company's Datacomputers.
Cost of sales and services, as a percentage of net revenues decreased
in the first quarter of fiscal 1999 to 57% from 64% in the first quarter of the
prior fiscal year. The decrease is primarily attributable to a higher percentage
of peripheral sales in the first quarter of fiscal 1998 which carry a lower
margin.
Research and development expenses were 23% of net revenues in the first
quarter of both fiscal year 1999 and 1998. Actual research and development
spending increased by 18% in absolute dollars to $242,905 in the first quarter
of fiscal 1999, from $206,021 for the same period in 1998. The increased
spending was due to the addition of development personnel associated with the
development of new and enhanced products.
Selling, general and administrative expenses as a percentage of net
revenues for the first quarter of fiscal 1999 decreased to 39% from 53% in the
first quarter of the prior fiscal year. Actual selling, general and
administrative spending decreased by 15% in absolute dollars to $407,959 in the
first quarter of fiscal 1999, from $477,622 for the same period in 1998. The
lower level of costs resulted primarily from a decrease in sales personnel costs
and professional fees.
The Company's operating loss was $197,212 for the first quarter of
fiscal 1999, compared to an operating loss of $356,152 in the first quarter of
the prior fiscal year. The decreased loss was primarily attributable to the
decrease in the expenses as discussed above.
9
<PAGE>
Interest expenses was $2,414 in the first quarter of fiscal 1999,
compared to $25,692 in the same quarter of the prior fiscal year. This decrease
resulted primarily from the amortization in the first quarter of 1998 of
approximately $16,000 to interest expense related to the discount on the
convertible debt obtained in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had cash of $129,611 and a current ratio
of 2.2:1. The Company anticipates that available cash, together with cash flow
from anticipated operations, will be sufficient to meet its working capital
needs for the remainder of fiscal 1999. However, unanticipated adverse results
of operations could impact anticipated cash flows and, as a result, there can be
no assurance that the Company will not be required to raise additional capital
or that the Company will be able to raise additional capital on favorable terms,
if at all.
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
(11) Statement Re: Computation of Per Share Earnings (Loss).
(27) Financial Data Schedule.
10
<PAGE>
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
May 17, 1999 --------------------------------
Malcolm M. Bibby
President
/s/ Gerald S. Eilberg
May 17, 1999 --------------------------------
Gerald S. Eilberg
Vice President, Finance and Administration
Chief Financial Officer
11
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS (Loss)
National Datacomputer, Inc.
Statement recomputation of net income (loss) per common share
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------- -----------
<S> <C> <C>
Net loss, as reported $ (199,626) $ (381,844)
Preferred stock preference items:
Warrant $ (214,000)
Discount inherent in conversion terms of Series C
convertible preferred stock upon issuance $ (25,958)
Discount inherent in conversion terms of Series D
convertible preferred stock upon issuance $ (20,644)
Discount inherent in conversion terms of Series F
convertible preferred stock upon issuance $ (18,750) -
Interest on Series B, C, D and F convertible preferred stock $ (104,500) $ (102,750)
----------- -----------
Total preferred stock preference item $ (123,250) $ (363,352)
Net loss attributable to common stockholders $ (322,876) $ (745,196)
Weighted average shares outstanding:
A. Shares attributable to common stock outstanding 2,537,859 1,628,332
B. Shares attributable to convertible preferred stock outstanding - -
C. Shares attributable to common stock options and warrants
pursuant to APB 15, paragraph 38 (a) - -
----------- -----------
Weighted average shares outstanding 2,537,859 1,628,332
=========== ===========
Net loss per share $ (0.13) $ (0.46)
=========== ===========
Note: Due to the Company's net loss, no exercises of options or conversions of
preferred stock have been assumed, all such items would be
anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 129,611
<SECURITIES> 0
<RECEIVABLES> 1,350,448
<ALLOWANCES> (146,600)
<INVENTORY> 1,649,005
<CURRENT-ASSETS> 50,166
<PP&E> 1,636,484
<DEPRECIATION> (1,440,986)
<TOTAL-ASSETS> 3,228,128
<CURRENT-LIABILITIES> 1,387,344
<BONDS> 31,897
0
5,255,595
<COMMON> 207,807
<OTHER-SE> (3,654,515)
<TOTAL-LIABILITY-AND-EQUITY> 3,228,128
<SALES> 662,030
<TOTAL-REVENUES> 1,054,698
<CGS> 601,046
<TOTAL-COSTS> 601,046
<OTHER-EXPENSES> 650,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,414
<INCOME-PRETAX> (199,626)
<INCOME-TAX> 0
<INCOME-CONTINUING> (199,626)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (199,626)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
