U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended May 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-18253
NDC Automation, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 56-1460497
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
3101 Latrobe Drive, Charlotte, North Carolina 28211-4849
(Address of principal executive offices)
(704) 362-1115
(Issuer's telephone number)
N/A
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___No___
APPLICABLE ONLY TO CORPORATE ISSUERS
As of June 15, 1996, there were 3,453,451 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes___; No X
This document contains 20 pages. The Exhibit Index is located on page 15.
<PAGE>
I N D E X
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3- 4
May 31, 1996 (Unaudited) and November 30, 1995 5
Condensed Consolidated Statements of Operations
Three and six months ended May 31, 1996 and May 31, 1995 6
(Unaudited)
Condensed Consolidated Statements of Cash Flows
Six months ended May 31, 1996 and May 31, 1995
(Unaudited)
Notes to Condensed Consolidated Financial Statements 7 -8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
(a) Exhibits -- Press Releases and other Exhibits 13
(b) Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NDC AUTOMATION, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
(Unaudited)
- ----------------------------------------------------------------------------------------------------
ASSETS (Note 4)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 520,470 $ 164,781
Accounts receivables, net 1,009,578 1,203,137
Inventories 1,354,542 1,929,649
Costs and estimated earnings in excess of
billings on uncompleted contracts 95,997 123,260
Prepaid expenses and other assets 38,195 31,333
- ----------------------------------------------------------------------------------------------------
Total current assets $ 3,018,782 $ 3,452,160
- ----------------------------------------------------------------------------------------------------
OTHER ASSETS $ 16,281 $ 16,281
- ----------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures and office equipment, 408,113 389,709
Machinery and equipment 371,512 371,512
Software 104,416 103,557
Vehicles 36,729 30,754
- ----------------------------------------------------------------------------------------------------
$ 2,347,393 $ 2,322,155
Less accumulated depreciation 1,043,928 964,600
- ----------------------------------------------------------------------------------------------------
$ 1,303,465 $ 1,357,555
- ----------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS $ 207,441 $ 258,454
- ----------------------------------------------------------------------------------------------------
====================================================================================================
$ 4,545,969 $ 5,084,450
====================================================================================================
</TABLE>
Note: The Condensed Balance sheet at November 30, 1995 has been taken from the
Audited Consolidated Financial Statements at that date.
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
(Unaudited)
- --------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Note payable, bank $ 1,002,273 $ 644,375
Current maturities of long- term debt (Note 4) 65,818 288,324
Accounts payable and accrued expenses;
including affiliates $ 42,040 at 1996
and $25,104 at 1995 522,555 1,002,574
Billings in excess of costs and estimated
earnings on uncompleted contracts 122,086 277,527
Deferred income taxes 12,216 12,216
- --------------------------------------------------------------------------------------------------------------
Total current liabilities $ 1,724,948 $2,225,016
- --------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 4 ) $ 1,136,861 $ 1,170,311
- --------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES $ 16,613 $ 16,613
- --------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share
authorized 1,000,000 shares; no shares issued $ - $ -
Common stock, par value $.01 per share;
11,000,000 shares authorized
at 1996 and 1995; 3,453,451 shares
Issued at 1996 and 1995 34,534 34,534
Additional paid-in capital 4,211,566 4,211,566
Accumulated deficit (2,578,553) (2,573,590)
- --------------------------------------------------------------------------------------------------------------
$ 1,667,547 $ 1,672,510
==============================================================================================================
$ 4,545,969 $ 5,084,450
==============================================================================================================
</TABLE>
4
<PAGE>
NDC AUTOMATION, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 1,465,721 $ 2,749,939 $ 2,953,895 $ 4,247,170
Cost of goods sold 878,123 1,630,694 1,800,232 2,604,017
- -------------------------------------------------------------------------------------------------------------------------
Gross profit $ 587,598 $1,119,245 $ 1,153,663 $ 1,643,153
- --------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 180,764 $ 192,971 $ 343,444 $ 446,334
General and administrative 384,804 838,375 702,335 1,673,842
Research and development 605 56,083 3,943 97,254
- --------------------------------------------------------------------------------------------------------------------------
$ 566,173 $1,087,429 $ 1,049,722 $ 2,217,430
- --------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 21,425 $ 31,816 $ 103,941 $ (574,277)
- --------------------------------------------------------------------------------------------------------------------------
Net interest income (expense):
Interest income $ - $ 2,450 $ - $ 4,933
Interest expense (57,879) (168,412) (108,904) (325,713)
- --------------------------------------------------------------------------------------------------------------------------
$ (57,879) $ (165,962) $ (108,904) $ (320,780)
- --------------------------------------------------------------------------------------------------------------------------
Loss before income taxes $ (36,454) $ (134,146) $ (4,963) $ (895,057)
Federal and state income taxes (Note 2) - 39,451 - 49,160
- --------------------------------------------------------------------------------------------------------------------------
Net loss $ (36,454) $ (173,597) $ (4,963) (944,217)
==========================================================================================================================
Weighted average number of common
shares outstanding 3,453,451 2,902,514 3,453,451 2,902,514
- --------------------------------------------------------------------------------------------------------------------------
Loss per common share (Note 3) $ (0.01) $ (0.06) $ (0.00) $ (0.33)
==========================================================================================================================
Dividends per common share $ - $ - $ - $ -
==========================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
NDC AUTOMATION, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
May 31, May 31,
1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET CASH PROVIDED BY ( USED IN)
OPERATING ACTIVITIES $ 278,673 $ 1,586,313
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Proceeds from sale of property and equipment $ - $ 3,782
Purchase of property and equipment (25,238) (32,113)
- ----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING
ACTIVITIES $ (25,238) $ (28,331)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (payments) on revolving credit agreement $ 357,898 $ (1,357,500)
Principal payments on long-term borrowings (255,956) (76,203)
- ----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $ 101,942 $ (1,433,703)
- ----------------------------------------------------------------------------------------------------------------------
Effect of foreign currency exchage rates changes
on cash and cash equivalents $ 312 $ (18,731)
- ----------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents $ 355,689 $ 105,548
Cash and cash equivalents:
Beginning 164,781 256,037
- ----------------------------------------------------------------------------------------------------------------------
Ending $ 520,470 $ 361,585
======================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for :
Interest $ 93,342 $ 311,232
Income taxes $ - $ (470,515)
======================================================================================================================
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
6
<PAGE>
NDC AUTOMATION, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
The unaudited internal condensed consolidated financial statements and related
notes have been prepared by NDC Automation, Inc. (the "Company"), without audit
pursuant to the rules and regulations of the Securities and Exchange Commission.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the consolidated financial
position, results of operations and changes in cash flows at May 31, 1996, and
for all periods presented, have been made.
The condensed consolidated financial statements at May 31, 1995 include the
accounts of the Company and its wholly-owned subsidiaries, NDC Technology
Australia PTY Ltd. and NDC Laser AB. The two subsidiaries were sold November 30,
1995; accordingly, the May 31, 1996 financial statements include only the
Company's accounts. All material inter-company balances and transactions have
been eliminated in consolidation.
The functional currency for the Company's foreign operations is the applicable
local currency. The translation of the foreign currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using a weighted
average exchange rate during the period.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the Company's audited consolidated
financial statements and notes thereto for the fiscal year ended November 30,
1995. The results of operations for the three and six months ended May 31, 1996
are not necessarily indicative of the operating results for the full year.
Note 2. Income Taxes
The Company did not recognize any tax benefits in 1996 domestically for its
current loss as all prior taxes have been recognized in the previous financial
statements and utilization of operating loss carryforwards in the future are not
assured. Income tax expense of $49,160 for the six months ended May 31, 1995 is
due primarily to income taxes of one of its foreign subsidiaries.
Note 3. Loss per Common Share
Loss per common share is computed by dividing net loss applicable to common
shareholders by the weighted average common shares outstanding. Options issued
pursuant to the Stock Option Plans which are normally considered common stock
equivalents, have been excluded, as their inclusion does not dilute the
computation beyond the 3% materiality test or their exercise price was above the
market price for substantially all of three consecutive months as required.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Pledged Assets, Notes Payable, Bank and Long-Term Debt
The Company has the following notes payable to a bank at May 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Line of credit for $1,050,000 with interest at prime plus 4.00%. Advances under
the line of credit will not exceed the lesser of 1) $1,050,000 or 2) the sum of 80% of
the Company's current accounts receivable, plus 40% of the book value of its current
inventory. The line of credit also contains certain financial covenants to which the
Company must adhere. The line will be lowered to $900,000 commencing June 28, 1996.
The termination date of the line is November 29, 1996.(1),(2) $ 1,002,273
===================================================================================================================
Long-term debt consists of the following at May 31, 1996:
Mortgage note payable to a bank, based on a 7.75% fixed rate. Original principal
balance to be repaid in fifty-nine (59) consecutively monthly principal and
interest payments of $13,057, with one final payment of approximately $1,025,936
due on February 10, 1998. The note is collaterized by the Company's land and
building with a carrying value of $1,082,212. The loan also contains certain
financial covenants to which the Company must adhere. $ 1,202,679
Less current maturities:
Mortgage $ 65,818
- -------------------------------------------------------------------------------------------------------------------
$ 1,136,861
===================================================================================================================
</TABLE>
(1) The prime rate at May 31,1996 was 8.25%.
(2) The line of credit is secured by a first priority security interest in the
Company's accounts receivable, inventory, software and patents.
Maturities of long-term debt at May 31, 1996 are as follows:
Maturities
of
Year Ending Long-term
May 31 Debt
- --------------------------------------------------------------------------------
1997 $ 65,818
1998 1,136,861
1999 -
- --------------------------------------------------------------------------------
$1,202,679
================================================================================
8
<PAGE>
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the condensed consolidated financial statements (including the notes
thereto) presented elsewhere herein.
Overview
The Company derives virtually all of its revenues from the sale of hardware,
software and engineering services in connection with projects incorporating its
Automated Guided Vehicle (AGV) control technology and from the sale of its
products. For the past several fiscal years, the Company's net revenues from AGV
systems, vehicles and technology have been derived primarily from sales to
customers serving two industries -- textiles and newspaper publishing. Net
revenues in 1995 and during 1996, however, have been less concentrated in these
industries as the newspaper industry itself has undergone contraction and the
Company has focused its sales efforts away from the textile industry during the
Schlafhorst, Inc. arbitration proceedings. The Company's results of operations
can be expected to continue to depend substantially upon the capital expenditure
levels in those industries and in other industries that it may enter. In
addition, during 1995 and early 1996, net revenues derived from RFID products
and services have generally declined due to increased competition among RFID
suppliers and the decreased demand from the North American automobile industry,
which is the primary market for the sale of its RFID systems. The net revenues
in RFID were primarily derived from after market sales to existing customers in
1995. The Company assigned the exclusive distribution agreement and
manufacturing rights back to Statec Technologies SA, the Company's supplier of
such products, in March of 1996.
Due to the long sales cycle involved, uncertainties in timing of projects
and the large percentage that the dollar amount of a typical project usually
bears to the Company's historical and current quarterly and annual net revenues,
the Company has experienced, and may be expected to continue to experience,
substantial fluctuations in its quarterly and annual results of operations.
The Company sells its products and services primarily in two ways. Vehicles,
technology and other products and services may be sold in a "project" that
becomes an integrated AGV system. "Projects" are undertaken by the Company in
cooperation with its customers. The primary business is to sell hardware,
software and services to be sold as standard items, with less involvement by the
Company in overall system design. The Company generally would recognize lower
net revenue but would enjoy a higher gross profit margin percentage in selling
standard items, in each case compared to the sale of a project, due to the
inclusion in project sales of other vendors' products and services with margins
generally lower than the Company's own products and services. Between any given
accounting periods, the levels of and mixture of standard item sales and project
sales can cause considerable variance in net revenues, gross profit, gross
profit margin, operating income and net income.
Revenues from standard item sales are recognized upon shipment, while
revenues from project sales are recognized under the "percentage of completion"
method. Under this method, with respect to any particular customer contract,
revenues are recognized as costs incurred relative to each major segment of the
project. Although the percentage of completion method will ordinarily smooth out
over time the net revenue and profitability effects of large projects, such
method nevertheless subjects the Company's results of operations to substantial
fluctuations dependent upon the progress of work on project segments. Such
segments can differ markedly from one another in amount and in gross profit
margin.
Project contracts are billed upon attainment of certain "milestones." The
Company grants payment terms of 30 to 90 days to its customers. It typically
receives a cash advance ranging from 10% to 20% of the total contract amount.
Bills are thereafter delivered as milestones are reached. Upon delivery of the
project, the customer typically reserves a "retainage" of 10% to 20% pending
system acceptance.
Notwithstanding the receipt by the Company of cash advances and periodic
payments upon reaching project milestones, the Company requires external
financing for its costs and estimated earnings in excess of billings on
uncompleted contracts, inventories, receivables and other assets.
The Company's backlog consists of all amounts contracted to be paid by
customers but not yet recognized as net revenues by the Company.
9
<PAGE>
RESULTS OF OPERATIONS
The table below shows (a) the relationship of income and expense items
relative to net revenues, and (b) the change between the comparable prior period
and current period, for the three-month and nine-month periods ended May 31,
1996 and 1995, respectively. This table should be read in the context of the
Company's condensed consolidated statements of income presented elsewhere
herein:
<TABLE>
<CAPTION>
Percentage of Change
Period to Period
Percentage of Net Revenues Increase(Decrease)
- --------------------------------------------------- -------------------------------------------- ----------------------
Three Six
Months Months
Three Months Six Months Ended Ended May
Ended Ended May 31, 31,
May 31, May 31, May 31, May 31, 1995 to 1995 to
1996 1995 1996 1995 1996 1996
% % % % % %
- --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues 100.0 100.0 100.0 100.0 (46.7) (30.5)
Cost of Goods Sold 59.9 59.3 60.9 61.3 (46.2) (30.9)
- --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Gross Profit
40.1 40.7 39.1 38.7 (47.5) (29.8)
- --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Operating expenses:
Selling
12.3 7.0 11.6 10.5 (6.3) (23.1)
General and administrative
26.3 30.5 23.8 39.4 (54.1) (58.0)
Research and development
0.0 2.0 0.1 2.3 (98.9) (95.9)
- --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
38.6 39.5 35.5 52.2 (47.9) (52.7)
- --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)
1.5 1.2 3.6 (13.5) (32.7) (118.1)
Net interest expense:
(3.9) (6.0) (3.7) (7.6) (65.1) (66.1)
- --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Loss before income taxes
(2.4) (4.8) (0.1) (21.1) (72.8) (99.4)
Federal and state income taxes (benefit) - 1.4 - 1.2 (100.0) (100.0)
=================================================== ========== ========== ========== ========== ========== ==========
Net Loss (2.4) (6.2) (0.1) (22.3) (79.0) (99.5)
=================================================== ========== ========== ========== ========== ========== ==========
</TABLE>
Quarter ended May 31, 1996 Compared to the Quarter Ended May 31, 1995
Net revenues decreased by $1,284,218 or 46.7% from $2,749,939 in the earlier
period to $1,465,721 in the latter period. The primary reason for the decrease
was that the Company had a lower opening backlog at February 28, 1996 compared
to the prior year.
Cost of goods sold decreased from $1,630,694 to $878,123 or 46.2% due primarily
to lower net revenues in 1996. As a percentage of net revenues, cost of goods
sold was comparable to 1996. Gross profit decreased by $531,647 or 47.5% from
$1,119,245 to $587,598, while gross profit as a percentage of net revenues
decreased to 40.7%, from 40.1% due to the same factor.
Selling expenses decreased from $192,971 to $180,764, or 6.3% due primarily to
lower show and personnel expenses during 1996 compared to 1995. General and
administrative expenses decreased from $838,375 to $384,804, or 54.1% due to
lower legal and associated expenses related to the resolution of the
Schlafhorst, Inc. arbitration case and large overhead reductions due to the
Company's restructuring in the last quarter of 1995. During the last quarter in
1995, the Company sold its foreign subsidiaries, NDC Laser was sold to Netzler &
Dahlgren Co. A.B. and NDC Technologies Australia was sold to an officer of the
Australian company. The Company also sold its laser technology to Netzler and
Dahlgren Co. A.B. This allowed the Company to significantly reduce its
depreciation and amortization expense in 1996. General and administrative
expenses are expected to be significantly lower in 1996 compared to 1995. As a
percentage of net revenues, general and administrative expenses decreased from
30.5% to 26.3%.
10
<PAGE>
Primarily as a result of the foregoing, operating income decreased by $10,391 or
32.7% from $31,816 in the earlier period to $21,425 in the latter period.
Net interest expense decreased from $165,962 to $57,879, a decrease of $108,083.
The net decrease is primarily due to lower borrowings compared to the prior year
due to a significant cash receipt from the settlement of the Schlafhorst, Inc.
arbitration case in the fourth quarter of 1995 and the reduction of current debt
resulting from the Company's restructuring.
Loss before income taxes decreased by $97,692 from $134,146 to a loss of
$36,454, due primarily to the foregoing factors.
The Company did not recognize any tax benefits in 1996 domestically for its
current loss as all prior taxes have been recognized in the previous financial
statements and utilization of operating loss carryforwards in the future are not
assured. The income tax expense in 1995 is due primarily to income taxes of one
of its foreign subsidiaries.
Primarily as a result of the foregoing, net loss decreased by $137,143 from
$173,597 to a net loss of $36,454.
Backlog. Backlog consists of all amounts contracted to be paid by customers but
not yet recognized as net revenues by the Company. At May 31, 1996, the Company
had a backlog of approximately $1,450,000 compared to approximately $2,700,000
one year earlier. Substantial fluctuations in backlog are considered normal due
to the size of AGV system contracts. Substantial fluctuations in the industry
makeup of the Company's backlog also are considered normal.
Six Months Ended May 31, 1996 Compared to Six Months Ended May 31, 1995
Net revenues decreased by $1,293,275, or 30.5%, from $4,247,170 in the earlier
period to $2,953,895 in the latter period.
Cost of goods sold decreased from $2,604,017 to $1,800,232, or 30.9%, due
primarily to the lower level of net revenues. As a percentage of net revenues,
cost of goods sold decreased from 61.3% to 60.9%. Gross profit decreased by
$489,490, or 29.8%, from $1,643,153 to $1,153,663, while gross profit as a
percentage of net revenues increased from 38.7% to 39.1%.
Selling expenses decreased from $446,334 to $343,444, or 23.1% due to lower
show, personnel and general selling expenses. General and administrative
expenses decreased from $1,673,842 to $702,335, or 58%, primarily due to the
Company's restructuring.
Primarily as a result of the foregoing, the operating income for the period was
$103,941 compared to an operating loss of $574,277 the prior year.
Net interest expense decreased from $320,780 to $108,904, a decrease of 66.1%.
The decrease is primarily due to decreased borrowing needs compared to the prior
year.
Loss before income taxes decreased by $890,094, or 99.4%, from $895,057, to
$4,963 due primarily to the foregoing factors.
The Company did not recognize any tax benefits in 1996 domestically for its
current loss as all prior taxes have been recognized in the previous financial
statements and utilization of operating loss carryforwards in the future are not
assured. Income tax expense in 1995 of $49,160 is due primarily to income taxes
of one of its foreign subsidiaries.
Primarily as a result of the foregoing, the net loss decreased by $939,254, or
99.5%, from $944,217 to a net loss of $4,963.
Liquidity and Capital Resources.
The Company experiences needs for external
sources of financing to support its working capital, capital expenditures and
acquisition requirements when such requirements exceed its cash generated from
operations in any particular fiscal period. The amount and timing of external
financing requirements depend significantly upon the nature, size, number and
timing of projects and contractual billing arrangements with customers relating
to project milestones. The Company has relied upon bank financing under a
revolving working capital facility, as well as long-term debt and capital leases
and proceeds of its public offerings, to satisfy its external financing needs.
During the six months ended May 31, 1996 net cash provided by operating
activities was $278,673. The Company reduced its inventory by $575,107 during
the six month period ending May 31, 1996 which allowed it to create
11
<PAGE>
operating cash flows to reduce current liabilities.
The Company continues to operate with the line of credit under modified
financial covenants and cash collateral accounts. The net effect of the cash
collateral accounts gives the lender the authority to monitor the Company's
outgoing cash flows. As of June 15, 1996 the Company had $340,924 available
under the current borrowing base calculation. The Company's present line of
credit was extended initially from March 31, 1996 to May 31, 1996 at a lending
rate of prime plus 3 1/2%. The line was then further extended to November 29,
1996. The new terms of the extension includes 1) an increase in the interest
rate to prime plus 4% per annum, 2) the percentage of inventory against which
financing is available was reduced to 40% from 50% and 3) the available facility
was lowered to a maximum of $1,050,000 from May 31, 1996 through June 27, 1996
and then lowered to $900,000 from June 28, 1996 and thereafter. The Company has
entered into discussions with other lenders to replace the current primary
lender. The Company has no assurance that such line will be replaced by a new
lender.
As of May 31, 1996, the Company had successfully negotiated the return of
certain excess inventory to Netzler & Dahlgren, thereby reducing excess
inventory back to normal operating levels. In addition, the Company eliminated
its note payable of $200,000 to Netzler & Dahlgren by reducing such inventory as
well as providing engineering services and products to Netzler & Dahlgren. The
Company believes that its working capital of $1,293,834 at May 31, 1996 is
adequate for it current operations. However, management believes the working
capital may be inadequate should the Company not secure a suitable long-term
line of credit arrangement.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders of the Company was held on May 10,
1996.
(b) The following individuals were elected directors of the Company:
Goran P. R. Netzler
Ralph Dollander
Jan H. L. Jutander
Richard Schofield
T. Randolph Whitt
(c) Other matters voted upon and voting were as follows:
(i) Ratification of the selection of McGladrey & Pullen, LLP by the Board
of Directors as the Company's independent auditors.
For Abstain Against
3,113,484 2,750 26,067
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits --
Copy of Seventh Amendment to the amended and restated loan
agreement.
Press Releases:
1. Line of Credit Renewed
(b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NDC AUTOMATION, INC.
(Registrant)
BY: \s\ Ralph Dollander
Ralph Dollander
President
Date: 7/2/96
BY: \s\ Claude Imbleau
Claude Imbleau
VP - Finance & Administration
(Chief Financial Officer)
Date: 7/2/96
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EXHIBIT INDEX
The following documents are included in this Form 10-QSB as an Exhibit:
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Designation Number
Under Item 601 of
Exhibit Number Regulation S-K Page
Exhibit Description Number
- ------------------ --------------------- ------------------------------------------------------------ -----------
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(A) Exhibits:
1. 10 Copy of Seventh Amendment dated May 31,1996 to the amended 16 - 19
and restated Loan Agreement between the Company and ----------
NationsBank of North Carolina, N.A.
2. 99 Press Release Announces Line of Credit received with bank. 20
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SEVENTH AMENDMENT
This Seventh Amendment (the "Seventh Amendment") entered into as of May
31, 1996 by and between NDC Automation, Inc. (the "Borrower"), a corporation
organized and existing under the laws of the State of Delaware, and having its
principal place of business in Charlotte, North Carolina, and NationsBank, N.A.
(formerly doing business as NationsBank, N.A. (Carolinas) and as NationsBank of
North Carolina, N.A.), a national banking association, (the "Bank") organized
and existing under the laws of the United States and having offices in
Charlotte, North Carolina.
INTRODUCTORY STATEMENT
A. The Borrower and the Bank are parties to, among other things, an
Amended and Restated Loan Agreement dated July 28, 1994 (the "Restated Loan
Agreement"), as amended as of November 30, 1994, as of December 19, 1994, as of
March 31, 1995, as of August 30, 1995, as of November 30, 1995 and as of March
31, 1996.
B. Borrower has requested and the Bank has agreed to amend the Agreement
in the respects set forth herein.
NOW, THEREFORE, in consideration of $10.00 and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
AGREEMENT
1. Amendment of the Agreement. The Agreement is amended as follows:
(a) Article I - Definitions.
(i) Section 1.01 shall be amended such that the definition of the
term "Borrowing Base" shall mean the sum of: (i) eighty percent (80%)
of Eligible Receivables and (ii) forty percent (40%) of Eligible
Inventory.
(ii) Section 1.01 shall be amended such that the term "Facility A
Amount" means: (a) $1,050,000 from May 31, 1996 through June 27, 1996
and (b) $900,000 from June 28, 1996 and thereafter.
(iii) Section 1.01 shall be amended such that the term
"Termination Date" shall mean November 29, 1996.
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(b) Article II - Facility A Loans.
(i) Section 2.03 is amended in its entirety so that such section
now reads as follows:
2.03 Interest Rate. The outstanding principal balance of the
Facility A Loans shall bear interest at the Prime Rate plus 4.00% per
annum.
2. Collateral Audit. The Bank may in its sole discretion retain a professional
consultant (the "Consultant") to review the financial records and operations of
the Borrower and to audit the collateral for the Borrower's obligations to the
Bank. The Borrower shall cooperate fully with the Consultant, which cooperation
shall include, but shall not be limited to, allowing the Consultant full access
to the Borrower's financial and business records and allowing the Consultant
reasonable opportunities to observe the Borrower's operations and to inspect,
examine and verify the collateral for Borrower's obligations to the Bank. The
Borrower shall reimburse the Bank for the Bank's cost of retaining the
Consultant upon demand therefor by the Bank.
3. Extension Fee. Simultaneously with the execution of this Seventh
Amendment, the Borrower shall pay to the Bank for the Bank's own account a
Termination Date extension fee in the amount of $9,000.
4. Waivers and Release of Claims. As additional consideration to the
execution, delivery, and performance of this Seventh Amendment and to induce the
Bank to enter into this Seventh Amendment, the Borrower represents and warrants
that (a) the Borrower knows of no defenses, counterclaims or rights of setoff to
the payment of any indebtedness of the Borrower to the Bank, and (b) the
Borrower for itself, its Subsidiaries, their respective representatives, agents,
officers, directors, employees, shareholders, and successors and assigns, hereby
fully, finally, completely, generally and forever releases, discharges, acquits,
and relinquishes the Bank and its respective representatives,
agents, officers, directors, employees, shareholders, and successors and
assigns, from any and all claims, actions, demands, and causes of action of
whatever kind or character, whether joint or several, whether known or unknown,
for any and all injuries, harm, damages, penalties, costs, losses, expenses,
attorneys' fees, and/or liability whatsoever and whatever incurred or suffered
by any of them prior to the execution of this Seventh Amendment related to any
indebtedness of the Borrower to the Bank under the Original Loan Documents of
the Amended Loan Documents. Notwithstanding any provision of this Seventh
Amendment or any other Amended Loan Document or Original Loan Document, this
Section shall remain in full force and effect and shall survive the delivery of
this Seventh Amendment and the making, extension, renewal, modification,
amendment or restatement of any thereof.
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5. Representations and Warranties. The Borrower hereby represents and
warrants to the Bank that as of the date hereof the Restated Loan Agreement has
been reexamined and:
(a) The representations and warranties made by the Borrower in Article
VIII thereof are true on and as of the date hereof;
(b) The Borrower has the power and authority to enter into this Seventh
Amendment and to perform its obligations herein and has by proper corporate
action duly authorized the execution and delivery of this Seventh Amendment
and ratified and affirmed the enforceability of the other Amended Loan
Documents;
(c) Neither the execution and delivery of this Seventh Amendment, nor
the performance of the obligations herein violates or will violate any law
or governmental order, conflicts or will conflict with any provision of any
charter document or bylaw of the Borrower or any material term or provision
of any agreement or instrument to which the Borrower is a party or by which
the Borrower is bound, or constitutes or will constitute a breach of or a
default under any such agreement or instrument; and
(d) No consent, approval or authorization of, or filing, registration
or qualification with, any governmental authority on the part of the
Borrower is required as a condition to the execution, delivery or
performance of this Seventh Amendment by the Borrower.
6. Full Force and Effect. The Restated Loan Agreement, as amended hereby,
is hereby confirmed to continue in full force and effect. All terms defined in
the Restated Loan Agreement and not defined herein shall have the meaning herein
as in the Restated Loan Agreement.
7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
8. Expenses. Upon demand therefor, the Borrower shall pay all out-of-pocket
expenses incurred by the Bank in connection with the negotiation, drafting and
execution of the transaction set forth herein, plus all unpaid out-of-pocket
expenses otherwise due under the Loan Documents, all including, without
limitation, reasonable fes and expenses of the Bank's counsel.
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IN WITNESS WHEREOF, the parties have executed this Seventh Amendment all
this of the day and year first above written.
NDC AUTOMATION, INC.
ATTEST:
By \s\ Tom Watson BY \s\ of Claude Imbleau
Claude Imbleau, Vice President
Title Secretary
(Corporate Seal)
NATIONSBANK, N.A.
ATTEST:
By (\s\ of Assistant Secretary) By (\s\ of John C. Calabrese)
Title Asst. Secretary John C. Calabrese, Vice
President
(Corporate Seal)
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FOR IMMEDIATE RELEASE
May 31, 1996
NDC AUTOMATION, INC.
ANNOUNCES LINE OF CREDIT RENEWED WITH BANK
Charlotte, NC, May 31, 1996, NDC Automation,Inc. ( OTC Bulletin Board
Symbol "AGVS") announced that it's line of credit with NationsBank, N. A. has
been extended for another six (6) month period. The Borrowing Agreement was
amended as follow:
1) The new termination date shall be November 29,1996.
2) Inventory financing will be reduced to 40% from 50%, of
eligible inventory, while retaining 80% accounts receivable
financing.. .
3) The interest rate shall increase to prime plus 4.00%, from
prime plus 3 1/2% per annum.
4) The available facility will be lowered from a maximum of
$1,200,000 to a maximum of $1,050,000 from May 31,1996 through
June 27,1996 and $900,000 from June 28, 1996 and thereafter.
Management is pleased the agreement has been renewed with terms which
are adequate for the Company's current financing needs.
NDC Automation,Inc. was formed in 1982 to acquire, develop, Market, and
sell hardware, software, and engineering services incorporated into and used to
control automatic and laser guided vehicle systems.
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For further information contact:
Ralph Dollander or Gayle Hentz
President Investor Relations
704/362-1115
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