================================================================================
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, 2000
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 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 (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, 2000.
COMMON STOCK, $0.08 PAR VALUE 4,379,466
- ----------------------------- ---------
(Title of each class) (number of shares)
================================================================================
<PAGE>
NATIONAL DATACOMPUTER, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
ITEM 1. UNAUDITED INTERIM FINANCIAL STATEMENTS:
Balance Sheets as of March 31, 2000 (unaudited)
and December 31,1999.....................................3
Statements of Operations for the three months ended
March 31, 2000 and 1999(unaudited).......................4
Statement of Stockholders' Equity for the three
months ended March 31, 2000 (unaudited)..................5
Statements of Cash Flows
for the three months ended
March 31, 2000 and 1999 (unaudited)......................6
Notes to Unaudited Interim Financial Statements...........7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS...............................8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.................................................10
ITEM 2. Changes in Securities.............................................10
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
2
<PAGE>
NATIONAL DATACOMPUTER, INC.
BALANCE SHEETS
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,073,956 $ 664,917
Accounts receivable, net of allowance for doubtful accounts 769,206 1,116,509
Inventories 1,334,190 1,322,153
Other current assets 12,215 8,328
------------ ------------
Total current assets 3,189,567 3,111,907
Fixed assets, net 164,552 148,658
------------ ------------
$ 3,354,119 $ 3,260,565
Liabilities and stockholders' equity ============ ============
Current Liabilities:
Current obligations under capital lease $ 19,285 $ 28,134
Accounts payable 248,439 273,364
Accrued payroll and related taxes 117,036 89,134
Accrued expenses - other 101,626 156,968
Deferred revenues, current portion 571,874 503,356
------------ ------------
Total current liabilities 1,058,260 1,050,956
Deferred revenues 15,270 41,307
------------ ------------
1,073,530 1,092,263
Stockholders' equity ------------ ------------
Preferred stock, Series A convertible, $0.001 par value; 20 shares
authorized; 0 shares issued and outstanding at March 31, 2000 and December 31, 1999 -- --
Preferred stock, Series B convertible $0.001 par value; 4,200 shares
authorized; 2,400 and 4,200 issued and outstanding at March 31, 2000 and December 31,
1999 respectively (liquidating preference of $2,400,000 and $4,200,000 respectively) 2,105,832 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, issued and outstanding (liquidating preference $500,000) 273,880 273,880
Preferred stock, Series F convertible $0.001 par value; 175 shares
authorized, issued and outstanding (liquidating preference $175,000) 175,000 175,000
Common stock, $0.08 par value; 5,000,000 shares authorized; 4,379,466 and 3,540,477
shares issued and outstanding at March 31, 2000 and December 31, 1999, respectively 350,356 283,237
Capital in excess of par value 12,899,949 11,291,814
Accumulated deficit (14,310,995) (14,319,402)
Unamortized stock compensation (21,173) (29,173)
Notes receivable - employees (351,269) (351,269)
------------ ------------
Total stockholders' equity 2,280,589 2,168,302
------------ ------------
$ 3,354,119 $ 3,260,565
============ ============
</TABLE>
The accompanying notes are an integral part
of these unaudited intertim financial statements.
3
<PAGE>
NATIONAL DATACOMPUTER, INC.
STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
- ----------------------------------------------------------------------------------------
First Fiscal Quarter Ended
---------------------------------
March 31, March 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Revenues
Net product revenue $ 896,496 $ 662,030
Service and other revenue 363,207 392,668
----------- -----------
1,259,703 1,054,698
Cost of sales and services 619,251 601,046
----------- -----------
640,452 453,652
----------- -----------
Operating expenses:
Research and development 173,668 242,905
Selling, general and administrative 364,826 407,959
----------- -----------
538,494 650,864
----------- -----------
Income (loss) from operations 101,958 (197,212)
Other income (expense):
Interest income 3,386 --
Interest expense (1,057) (2,414)
----------- -----------
Net income (loss) $ 104,287 $ (199,626)
=========== ===========
Calculation of net income (loss) per common share and dilutive share equivalent:
Net income (loss) $ 104,287 $ (199,626)
Preferred stock preferences (95,880) (123,250)
----------- -----------
Net income (loss) attributable to common
shareholders $ 8,407 $ (322,876)
=========== ===========
Basic and diluted net income (loss) per share $ 0.00 $ (0.13)
=========== ===========
Weighted average shares 4,128,018 2,537,859
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these unaudited interim 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, 1999 4,200 $ 3,685,206 900 $ 834,370 350 $ 324,639
Net income -- -- -- -- -- --
Conversion of preferred stock (1,800) (1,579,374) -- -- -- --
Interest on preferred stock -- -- -- -- -- --
Issuance of common stock
in satisfaction of accrued
interest -- -- -- -- -- --
Amortization of stock compensation -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 2000 2,400 $ 2,105,832 900 $ 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
-------------------------- -------------------------- ----------------------------------------
Capital in
Net issuance Net issuance Par excess
Shares price Shares price Shares value of par value
----------- ------------ ----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 500 $ 273,880 175 $ 175,000 3,540,477 $ 283,237 $ 11,291,814
Net income -- -- -- -- -- -- --
Conversion of preferred stock -- -- -- -- 656,934 52,555 1,526,819
Interest on preferred stock -- -- -- -- -- -- --
Issuance of common stock
in satisfaction of accrued
interest -- -- -- -- 182,055 14,564 81,316
Amortization of stock compensation -- -- -- -- -- -- --
----------- ------------ ----------- ------------ ---------- ------------ ------------
Balance at March 31, 2000 500 $ 273,880 175 $ 175,000 4,379,466 $ 350,356 $ 12,899,949
=========== ============ =========== ============ ========== ============ ============
</TABLE>
NATIONAL DATACOMPUTER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (continued)
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
Notes Unamortized Total
receivable stock Accumulated stockholders'
employees compensation deficit equity
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1999 ($ 351,269) ($ 29,173) ($14,319,402) $ 2,168,302
Net income -- -- 104,287 104,287
Conversion of preferred stock -- -- -- --
Interest on preferred stock -- -- (95,880) (95,880)
Issuance of common stock
in satisfaction of accrued
interest -- -- -- 95,880
Amortization of stock compensation -- 8,000 -- 8,000
------------ ------------ ------------ ------------
Balance at March 31, 2000 ($ 351,269) ($ 21,173) ($14,310,995) $ 2,280,589
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these unaudited interim financial statements
5
<PAGE>
NATIONAL DATACOMPUTER, INC.
STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------
First Fiscal Quarter Ended
----------------------------
March 31, March 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 104,287 $ (199,626)
Adjustments to reconcile net income (loss) to net
cash used for operating activities:
Depreciation 17,526 20,373
Amortization of stock compensation 8,000 8,000
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 347,303 (155,533)
Increase in inventories (12,037) (132,699)
Increase in other current assets (3,887) (18,673)
(Decrease) increase in accounts payable (24,925) 133,872
(Decrease) in accrued expenses
and deferred compensation (27,440) (12,372)
Increase in deferred revenues 42,481 21,334
----------- -----------
Net cash provided by (used for) operating activities 451,308 (335,324)
----------- -----------
Cash flows from investing activities:
Purchases of fixed assets (33,420) (10,363)
----------- -----------
Net cash used for investing activities (33,420) (10,363)
----------- -----------
Cash flows from financing activities:
Payment of interest on preferred stock -- (4,375)
Principal payments on obligations under capital lease (8,849) (11,501)
----------- -----------
Net cash used for financing activities (8,849) (15,876)
----------- -----------
Net increase (decrease) in cash and cash equivalents 409,039 (361,563)
Cash and cash equivalents at beginning of year 664,917 491,174
----------- -----------
Cash and cash equivalents at end of year $ 1,073,956 $ 129,611
=========== ===========
Supplemental Cash Flow Information:
Cash paid for interest $ 1,057 $ 12,914
Non cash investing and financing activities:
Accrued interest on preferred stock charged to
accumulated deficit 95,880 104,500
Common stock issued in satisfaction of interest on
preferred stock 95,880 100,125
</TABLE>
The accompanying notes are an integral part
of these unaudited interim financial statements.
6
<PAGE>
NATIONAL DATACOMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
National Datacomputer, Inc. (the "Company") designs, manufactures,
sells and services computerized systems used to automate the collection,
processing and communication of information related to product sales,
distribution, and inventory control. The Company's product and services
include data communication networks, application-specific software,
hand-held computers and related peripherals, associated training and
support services.
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, 1999 of National Datacomputer, Inc., as filed with the Securities and
Exchange Commission.
INTERIM PERIODS
In the opinion of the Company, the accompanying unaudited interim
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,
2000 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>
EARNINGS PER SHARE
Net income (loss) per share is computed under SFAS No. 128, "Earnings
Per Share." Basic net income (loss) per share is computed by dividing net
income (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 net income (loss) 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 subtracted from the net income (loss) to determine the amount of
net income (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.
RECLASSIFICATION
Certain amounts in 1999 have been reclassified to conform to the 2000
presentation.
3. INVENTORIES
Inventories consist of the following: MARCH 31, DECEMBER 31,
2000 1999
------------ --------------
Raw Material $ 685,642 $ 701,198
Work-in-process 293,594 163,930
Finished goods 354,954 457,025
------------ --------------
Total $1,334,190 $1,322,153
============ ==============
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, 2000 COMPARED TO THREE MONTHS ENDED MARCH
31, 1999.
Total revenues in the first quarter of fiscal year 2000 were $1,259,703
compared to $1,054,698 in the prior comparable quarter, an increase of 19%. 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 revenues, decreased in
the first quarter of fiscal 2000 to 49% from 57% in the first quarter of the
prior fiscal year. The improved gross margin resulted from ongoing cost-control
measures in production and the mix of product sales.
Research and development expenses as a percentage of revenues for the
first quarter of fiscal 2000 decreased to 14% from 23% in the first quarter of
the prior fiscal year. Actual research and development spending decreased by 29%
in absolute dollars to $173,668 in the first quarter of fiscal 2000, from
$242,905 for the same period in 1999. As previously stated in the Company's
10-KSB for the year ended December 31, 1999, the decrease in expenditures
reflects the Company's plan to concentrate on allocating a higher percentage of
its product development effort to enhance and refine existing hardware and
software products.
Selling, general and administrative expenses as a percentage of
revenues for the first quarter of fiscal 2000 decreased to 29% from 39% in the
first quarter of the prior fiscal year. Actual selling, general and
administrative spending decreased by 11% in absolute dollars to $364,826 in the
first quarter of fiscal 2000, from $407,959 for the same period in 1999. The
lower level of costs resulted primarily from a decrease in marketing costs and
legal fees.
The Company's operating income was $101,958 for the first quarter of
fiscal 2000, compared to an operating loss of $197,212 in the first quarter of
the prior fiscal year. The increased income was primarily attributable to the
decrease in the expenses as discussed above.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash of $1,073,956 and a current
ratio of 3.0:1. 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 2000. 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
On March 2, 2000, the Company filed a complaint in Middlesex Superior
Court for the Commonwealth of Massachusetts against Infos International, Inc.
and Infos Group, Inc. (the "Defendants"). The complaint contains claims for
breach of contract, misappropriation of trade secrets and confidential
information, intentional interference with contractual relations and violations
of Chapter 93 and 93A. The action arises out of a series of agreements between
the parties for a potential merger, joint sales agreement and the development of
various mobile and/or handheld computerized information and data collection
systems. The complaint seeks both damages (of an unspecified amount) and
injunctive relief with respect to certain confidential information and trade
secrets of the Company which the Company alleges are now being used by
Defendants in connection with their sales and production of computerized data
collection products. On March 31, 2000, Defendants filed a counterclaim against
the Company seeking an unspecified amount of damages. The Defendants allege
breach of contract, misappropriation and violation of Chapter 93 and 93A arising
out of the same agreements identified in the Company's complaint. The action is
still in its early stages, and discovery has not yet been served or conducted.
The Company believes it has meritorious defenses to the allegations
raised in the Defendant's counterclaims.
ITEM 2. CHANGES IN SECURITIES
On March 21, 2000, the Company issued 656,934 shares of its Common
Stock, par value $.08 per share (the "Shares"), to RBB Bank AG ("RBB Bank") upon
the conversion by RBB Bank of 1,800 shares of the Company's Series B Convertible
Preferred Stock at a conversion price of $2.74 per share. No underwriters were
involved in the transaction. The Company relied upon Section 4(2) of the
Securities Act of 1933, as amended, because the transaction did not involve any
public offering by the Company.
10
<PAGE>
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.
11
<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.
May 12, 2000 /s/ Malcolm M. Bibby
--------------------------------
Malcolm M. Bibby
President
May 12, 2000 /s/ Gerald S. Eilberg
--------------------------------
Gerald S. Eilberg
Vice President, Finance and Administration
Chief Financial Officer
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,
2000 1999
----------- -----------
<S> <C> <C>
Net income (loss), as reported $ 104,287 $ (199,626)
Preferred stock preference items:
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 $ (95,880) $ (104,500)
----------- -----------
Total preferred stock preference item $ (95,880) $ (123,250)
Net income (loss) attributable to common stockholders $ 8,407 $ (322,876)
Weighted average shares outstanding:
A. Shares attributable to common stock outstanding 4,128,018 2,537,859
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 4,128,018 2,537,859
=========== ===========
Net income (loss) per share $ 0.00 $ (0.13)
=========== ===========
</TABLE>
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> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,073,956
<SECURITIES> 0
<RECEIVABLES> 781,706
<ALLOWANCES> (12,500)
<INVENTORY> 1,334,190
<CURRENT-ASSETS> 3,189,567
<PP&E> 1,683,253
<DEPRECIATION> (1,518,701)
<TOTAL-ASSETS> 3,354,119
<CURRENT-LIABILITIES> 1,058,260
<BONDS> 15,270
0
3,713,721
<COMMON> 350,356
<OTHER-SE> (1,783,488)
<TOTAL-LIABILITY-AND-EQUITY> 3,354,119
<SALES> 1,259,703
<TOTAL-REVENUES> 1,259,703
<CGS> 619,251
<TOTAL-COSTS> 619,251
<OTHER-EXPENSES> 538,494
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,329)
<INCOME-PRETAX> 104,287
<INCOME-TAX> 0
<INCOME-CONTINUING> 104,287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,287
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
