<PAGE>
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 February 28, 1997
[ ] 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 (I.R.S. Employer Identification No.)
incorporation or organization)
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 March 14, 1997, there were 3,453,451 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes___; No X
This document contains 26 pages. The Exhibit Index is located on page 16.
<PAGE>
I N D E X
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Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
February 28, 1997 (Unaudited) and November 30, 1996 3-4
Condensed Statements of Operations
Three months ended February 28, 1997 and February 29, 1996
(Unaudited) 5
Condensed Statements of Cash Flows
Three months ended February 28, 1997 and February 29, 1996
(Unaudited) 6
Notes to Condensed Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial 10-13
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
(a) Exhibits -- Press Releases and other Exhibits
(b) Reports on Form 8-K
SIGNATURES 15
2
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NDC AUTOMATION, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, November 30,
1997 1996
(UNAUDITED)
- -----------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Note 4)
CURRENT ASSETS
Cash and cash equivalents $ 263,589 $ 399,501
Accounts receivables, net 845,312 1,526,390
Inventories 1,062,044 1,126,398
Costs and estimated earnings in excess of
billings on uncompleted contracts 79,184 49,277
Prepaid expenses and other assets 42,074 51,935
----------- ----------
Total current assets $2,292,203 $3,153,501
------------ ----------
OTHER ASSETS $ 21,281 $ 21,281
------------ ----------
PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures and office equipment, 228,542 226,559
Machinery and equipment 153,572 153,572
Software 102,650 102,650
Vehicles -- 23,629
------------ ----------
$1,911,387 $1,933,033
Less accumulated depreciation 704,908 693,234
---------------- ----------
$1,206,479 $1,239,799
------------- ----------
INTANGIBLE ASSETS $ 119,758 $ 142,213
------------ ----------
$3,639,721 $4,556,794
============= ==========
</TABLE>
Note: The Condensed Balance sheet at November 30, 1996 has been taken from the
Audited Financial Statements at that date.
See Notes to Condensed Financial Statements
3
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<TABLE>
<CAPTION>
February 28, November 30,
1997 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $ 362,748 $ 847,217
Current maturities of long- term debt (Note 4) 1,154,224 68,410
Accounts payable and accrued expenses;
including affiliates $260,887 at 1997
and $422,050 at 1996 534,416 702,305
Billings in excess of costs and estimated
earnings on uncompleted contracts 67,104 118,657
----------- -----------
Total current liabilities $ 2,118,492 $ 1,736,589
----------- -----------
LONG-TERM DEBT (Note 4 ) $ - $ 1,102,264
----------- -----------
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 1997 and 1996; 3,453,451 shares
were issued at 1997 and 1996, respectively 34,534 34,534
Additional paid-in capital 4,211,566 4,211,566
Accumulated deficit (2,724,871) (2,528,159)
----------- -----------
$ 1,521,229 $ 1,717,941
----------- -----------
$ 3,639,721 $ 4,556,794
=========== ===========
</TABLE>
4
<PAGE>
NDC AUTOMATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
February 28, February 29,
1997 1996
- ------------------------------------------------------------------------------
Net revenues $ 991,953 $ 1,488,174
Cost of goods sold 593,832 922,109
-------------- -----------
Gross profit $ 398,121 $ 566,065
----------- ----------
Operating expenses:
Selling $ 153,500 $ 162,680
General and administrative 377,676 317,531
Research and development -- 3,338
--------------- -----------
$ 531,176 $ 483,549
--------------- -----------
Operating income (loss) $ (133,055) $ 82,516
---------------- -----------
Net interest income (expense):
Interest income $ -- $ --
Interest expense (63,657) (51,025)
--------------- -----------
$ (63,657) $ (51,025)
--------------- -----------
Income (loss) before income taxes $ (196,712) $ 31,491
Federal and state income taxes (Note 2) -- --
--------------- -----------
Net income (loss) $ (196,712) $ 31,491
=============== ===========
Weighted average number of common
shares outstanding 3,453,451 3,453,451
--------------- -----------
Earnings (loss) per common share (Note 3) $ (0.06) 0.01
================ ===========
Dividends per common share $ -- $ --
=============== ===========
See Notes to Condensed Financial Statements
5
<PAGE>
NDC AUTOMATION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 351,107 $ 46,733
------------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment $ 5,035 $ --
Purchase of property and equipment (2,121) (18,658)
------------ ---------
NET CASH PROVIDED BY ( USED IN)
INVESTING ACTIVITIES $ 2,914 $ (18,658)
------------ ---------
CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (payments) on credit agreement $(484,469) $ 321,180
Principal payments on long-term borrowings (16,450) (227,405)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $(500,919) $ 93,775
----------- ---------
Effect of foreign currency exchange rates changes
on cash and cash equivalents $ 10,986 $ 328
------------ ---------
Increase (decrease) in cash and cash equivalents $(135,912) $ 122,178
Cash and cash equivalents:
Beginning 399,501 164,781
------------ ---------
Ending $ 263,589 $ 286,959
============ =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for :
Interest $ 71,499 $ 37,030
Income taxes $ -- $ --
============ =========
</TABLE>
See Notes to the Condensed Financial Statements
6
<PAGE>
NDC AUTOMATION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1.
The unaudited internal condensed 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 financial position, results of
operations and changes in cash flows at February 28, 1997, and for all periods
presented, have been made.
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 financial statements be
read in conjunction with the Company's audited financial statements and notes
thereto for the fiscal year ended November 30, 1996. The results of operations
for the three months ended February 28, 1997 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 1997 for its current loss as
all prior taxes were recognized in the previous financial statements and
utilization of operating loss carryforwards in the future are not assured to be
realized. The Company did not record a provision for income taxes in 1996 as the
Company utilized its operating loss carryforward to offset taxable income.
NOTE 3. EARNINGS (LOSS) PER COMMON SHARE:
Earnings (loss) per common share is computed by dividing net income (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 all of three consecutive
months .
7
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 4. PLEDGED ASSETS, NOTE PAYABLE, BANK AND LONG-TERM DEBT
The Company has the following note payable to a Bank at February 28, 1997:
<TABLE>
<S> <C>
The Loan Agreement allows the Company to borrow up to $1,250,000 and bears
interest at the lender's prime rate plus 1.50% per annum for the first $450,000
outstanding and prime plus 2.75% per annum for amounts in excess of $450,000.
The Company's loan outstanding shall not exceed the lesser of (a) U.S.
$1,250,000 or (b) 80% of qualified accounts receivable plus 50% of all Eligible
Inventory (as defined in the loan agreement) with a $400,000 cap on loans based
on Eligible Inventory. The loan agreement is further secured by 1) an
Inventory Repurchase Agreement and 2) a $450,000 irrevocable Letter of Credit
issued by a Swedish Bank. Netzler & Dahlgren Co. AB (NDCab) is obligated to
repay the Letter of Credit Bank any funds it disburses under the Letter of
Credit. The Company is ultimately responsible to repay to NDCab for any amounts
it pays in reimbursing the Letter of Credit Bank. The Repurchase Agreement
guarantees that NDCab will repurchase on certain conditions up to $400,000 worth
of inventory, thereby providing funds to pay lender should the Company be in
default on its loan obligations. The termination date of the Loan Agreement is
April 1, 1998 or upon demand by the Bank. (1)(2) $362,748
================================================================================== ================ =================
Long-term debt consists of the following at February 28, 1997:
Mortgage note payable to a bank, based on a 7.75% fixed rate. Original principal
balance to be repaid in fifty-nine (59) consecutive monthly principal and
interest payments of $13,057, with one final payment of approximately $1,083,660
due on February 10, 1998. The note is collaterized by the Company's land and
building with a carrying value of $ 1,051,228 The loan also contains certain
financial covenants to which the Company must adhere. As of February 28, 1997,
the Company obtained waivers for certain financial covenants as specified by
the Mortgage note agreement. $ 1,154,224
Less current maturities: 1,154,224
- ---------------------------------------------------------------------------------- ---------------- -----------------
$ --
================================================================================== ================ =================
</TABLE>
(1) The prime rate at February 28, 1997 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 intangibles.
Maturities of long-term debt at February 28, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ending
February 28
- ------------------- ---------------------------------------------------------------------------------- -----------------
<S> <C>
1998 $ 1,154,224
1999
=================== ================================================================================== =================
$ 1,154,224
=================== ================================================================================== =================
</TABLE>
8
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 5. REASSIGNMENT OF STATEC EXCLUSIVE DISTRIBUTION AGREEMENT
On February 21, 1996 the Company and Statec Technologies, SA ("Statec") entered
into a letter of understanding under which the Company reassigned to Statec the
exclusive distribution and manufacturing rights for North America effective
March 1, 1996. The assignment was contingent upon Statec making the following
payments for a total of $183,000, excluding inventory. The payments required
were as follows:
(bullet} A down payment of $15,000 was due March 1, 1996
(bullet) Twenty-eight (28) monthly installments of $6,000 each, commenced
March 1, 1996 for a total of $168,000.
(bullet) Statec was to repurchase all NDCA inventory related to Statec
products at the Company's net book value plus $15,000. All the
inventory was to be repurchased on or before November 30, 1996.
The transfer permitted the Company to reduce associated fixed overhead expenses
with the sale of such products and allowed the Company to focus solely on its
AGVS product line.
As of January 31, 1997 Statec was in default under the agreement by not
repurchasing the inventory worth $71,272 and had not paid the agreed monthly
installments of $6,000 since December 1996. There remained a total number of 19
unpaid installment equaling $114,000. In February of 1997, the Company was
notified that Statec became subject to a court-ordered liquidation proceeding
under French law. On March 27, 1997, the Company received $47,884 for the
repurchase of all NDCA inventory related to Statec products and $20,000 per the
Supplemental Agreement ( see exhibit 1 herein) between the Company and Statec.
The amounts paid were approved by the French court and terminate all obligations
from Statec to the Company per the Supplemental Agreement.
9
<PAGE>
ITEM 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
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. Prior to
1996 the Company was also actively involved in the sale of Radio Frequency
Identification (RFID) products. In years prior to 1995 the Company's net
revenues from AGV systems, vehicles and technology were derived primarily from
sales to customers serving two industries -- textiles and newspaper publishing.
Net revenues since 1995 however have been less concentrated in these industries.
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 1996, the Company
refocused its sales efforts to existing Original Equipment Manufacturers (OEM)
and system integrators in the AGV systems industry. This strategy significantly
reduces the potential of selling systems to end users as the Company wants
to avoid competing with its potential customers. The Company believes it must
convert several OEM and system integrators away from their AGV technology to
the Company's technology to increase its present market share. Such technology
transfers can take one to several years before the Company will recognize
revenues from such relationships. Such customers must also replace in volume
and margin what the Company could otherwise obtain selling direct to end users.
There can be no assurances that such a strategy will be successful in the
short or long term. The Company assigned the exclusive distribution agreement
and manufacturing rights back to Statec Technologies SA, the Company's supplier
of such RFID products in March of 1996 (see note 5 of the Condensed Financial
Statement).
Due to the long sales cycle involved, uncertainties in timing of projects,
and the large dollar amount 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. The primary business is to sell hardware,
software and services as standard items, with less involvement by the Company in
overall system design. The Company generally would recognize lower net revenue
but would realize 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 are 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.
10
<PAGE>
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.
RESULTS OF OPERATIONS
The table below shows (a) the relationship of income and expenses relative
to net revenues, and (b) the change between the comparable prior period and
current period. This table should be read in the context of the Company's
condensed statements of operations presented elsewhere herein.
<TABLE>
<CAPTION>
Percentage of Change
Period to Period
Percentage of Net Revenues Increase (Decrease)
------------------------------------------------------------------
Three Months Ended
For the Three Months Ended February 29, 1996
Feburary 28, 1997 Feburary 29, 1996 to Feburary 28, 1997
% % %
------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues 100.0 100.0 (33.3)
Cost of goods sold 59.9 62.0 (35.6)
- -------------------------------------------------------------------------------------------------
Gross profit 40.1 38.0 (29.7)
Operating expenses:
Selling 15.5 10.9 (5.6)
General and administrative 38.0 21.4 18.9
Research and development - 0.2 (100.0)
--------------------------------------------------------
53.5 32.5 9.8
--------------------------------------------------------
Operating income (loss) (13.4) 5.5 *
Net interest expense 6.4 3.4 24.8
---------------------------------------------------------
Income (loss) before income taxes (19.8) 2.1 *
Income taxes - - NA
- -------------------------------------------------------------------------------------------------
Net income (loss) (19.8) 2.1 *
=================================================================================================
</TABLE>
=======================================
* Because the data changes from negative to positive, or from positive to
negative, the percentage of change is not meaningful.
11
<PAGE>
QUARTER ENDED FEBRUARY 28 1997, COMPARED TO THE QUARTER ENDED FEBRUARY 29, 1996
Net revenues decreased by $496,221, or 33.3% from $1,488,174 in the earlier
period to $991,953 in the latter period. The Company ceased to distribute its
RFID product line in March of 1996 which contributed to approximately $100,000
in lower revenue in 1997 compared to 1996. In 1997 engineering revenue decreased
by approximately $70,000 and revenues from non-standard items also decreased by
approximately $320,000 as the Company focused away from project related revenues
compared to 1996. The lower opening backlog in 1997 also contributed to lower
revenues in 1997 compared to 1996.
Cost of goods sold decreased from $922,109 to $593,832, or 35.6% as a percentage
of net revenues, cost of goods sold decreased from 62.0% to 59.9% due to a
product and service mix that emphasized standard items more than projects. Gross
profit decreased by $167,944, or 29.7% from $566,065 to $398,121, while gross
profit as a percentage of revenues increased from 38.0% to 40.1%, due to the
same factors.
Selling expenses decreased from $162,680 to $153,500, or 5.6% despite attending
a major trade show in 1997 while such expenses were not incurred until the
second quarter of 1996 when comparing the prior year. The extra selling expense
was absorbed by reduction of personnel cost. General and administrative expenses
increased from $317,531 to $377,676, or 18.9% due to legal and training expenses
and a higher provision for bad debt expenses . As a percentage of net revenues,
general and administrative expenses increased from 21.4% to 38.0%. The large
increase as a percentage is primarily due to lower revenues in 1997 and the
provision for bad debts. Management expects its general and administrative
expenses ,for the remainder of the year, to be similar to such period expenses
incurred in 1996.
Primarily as a result of the foregoing, operating results decreased by $215,571
from an operating income of $82,516 to an operating loss of $133,055.
The net interest expense increased from $51,025 to $63,657. The net increase is
primarily due to bank fees associated with obtaining a loan agreement with a new
lender. Borrowings in 1997 were lower compared to the prior year due to
significant cash receipts for the period when compared to the prior period.
Income before income taxes decreased by $228,203 from an income of $31,491 to a
loss before income taxes of $196,712 due primarily to the foregoing factors.
The Company did not recognize any tax benefits in 1997 for its current loss as
all prior taxes were recognized in the previous financial statements and
utilization of operating loss carryforwards in the future are not assured to be
realized. The Company did not record a provision for income taxes in 1996 as the
Company utilized its operating loss carryforward to offset taxable income.
Primarily due to lower revenues in 1997 combined with the increased expenses as
described above the Company incurred a net loss $196,712 in 1997 compared to net
income of $31,491 in 1996.
BACKLOG. Backlog consists of all amounts contracted to be paid by customers but
not yet recognized as net revenues by the Company. At February 28, 1997, the
Company had a backlog of approximately $1,100,000 compared to approximately
$1,675,000 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.
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, and private offerings, to satisfy its external financing
needs.
During the three months ended February 28, 1997 net cash provided by operating
activities was $351,107. The primary reason for the positive cash flow by
operating activities was that the Company significantly reduced its account
receivable balance from November 30, 1996. The positive cash flow from operating
activities allowed the Company to further reduce its Note payable to its
primary lender.
12
<PAGE>
The Company entered into a new Inventory and Accounts Receivable Loan and
Security Agreement ("Loan Agreement") February 28, 1997 with the National Bank
of Canada and National Canada Business Corp.(herein collectively called the
"Lender"). The Loan Agreement allows the Company to borrow up to a maximum of
$1,250,000. The new agreement provides for a 66 2/3% increase in potential
available credit compared to the maximum available credit of $750,000 under the
prior credit arrangement with NationsBank, N.A.
Loans made under the new Loan Agreement are evidenced by a demand promissory
Note. The Loan Agreement allows the Company to borrow pursuant a borrowing
formula which is secured by Company's personal property as collateral. The
Company's outstanding loan amount at any one time shall not exceed the lesser of
(a) U.S $1,250,000 or (b) 80% of qualified accounts receivable (as defined in
the Loan Agreement) plus 50% of all Eligible Inventory (as defined in the Loan
Agreement) with a $400,000 cap on loans based on Eligible Inventory. The
borrowed funds will bear interest at the lender's prime rate plus 1.5% per annum
for the first $450,000 outstanding and prime plus 2.75% per annum for amounts
outstanding in excess of $450,000. The Loan Agreement is further secured by
1) an Inventory Repurchase Agreement and 2) a $450,000 irrevocable Letter of
Credit issued by a Swedish Bank. Netzler & Dahlgren Co. AB (NDCab) is obligated
to repay the Letter of Credit Bank any funds it disburses under the Letter of
Credit. The Company is ultimately responsible to repay to NDCab for any amounts
it pays in reimbursing the Letter of Credit Bank. The Repurchase Agreement
guarantees that NDCab will repurchase from the Company on certain conditions
up to $400,000 worth of inventory, thereby providing funds to pay the lender
should the Company default on its loan obligations.
The loan agreement provides for a demand note; such demand rights allows the
lender, at its discretion, to demand payment upon written notice to the Company.
The termination date of the Agreement is April 1, 1998 or upon demand by
the Bank.
The five year balloon payment of approximately $1,083,660 on the Mortgage note
is due February 10, 1998. Per Generally Accepted Accounting Principles the
entire amount must be disclosed as a current liability since it is due within
twelve months of February 28, 1997. Relations with the mortgage lender are good
and management will begin negotiating with the mortgage lender to renew the
existing mortgage for another five year term. As soon as an agreement can be
made, assuming the terms of the new agreement are similar to the present
mortgage, the Company will be able to classify the new balloon payment as a
long-term debt.
13
<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
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
1. Supplemental Agreement Between Statec Technologies SA. And NDC
Automation, Inc. dated March 17,1997
2. Copy of Purchase order from HK Systems and NDC Automation, Inc.
dated February 20,1997
Press Releases:
.
1. Announces signing of purchase order for a Laser Guided Vehicle
System
(b) Reports on Form 8-K
1. New banking arrangement with Bank of Canada
(incorporated by reference to report on Form 8K dated
March 11,1997)
14
<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
(Chief Executive Officer)
BY: /s/ Claude Imbleau
Claude Imbleau
VP - Finance & Administration
(Chief Financial Officer)
Date: April 11, 1997
___________________
15
<PAGE>
EXHIBIT INDEX
The following documents are included in this Form 10-QSB as an Exhibit:
<TABLE>
<CAPTION>
Designation
Under
Exhibit Number Item 601 of
Number Regulation S-K Page
Exhibit Description Number
- ------------------ --------------------- -------------------------------------------------- -----------
(A) Exhibits:
<S> <C> <C> <C>
1. 10.1 Supplemental Agreement Between Statec Technologies SA. and 17-23
NDC Automation, Inc. dated March 17,1997
2. 10.2 Copy of Purchase order from HK Systems and NDC Automation, 24-25
Inc. dated February 20,1997
3. 10.3 New Banking arrangement with Bank of Canada (incorporated by
reference to report on Form 8K dated March 11, 1997)
4. 99 Announces signing of purchase order for a Laser Guided 26
Vehicle System with HK Systems
5. 27 Financial Data Schedule
</TABLE>
16
<PAGE>
SUPPLEMENTAL AGREEMENT
This SUPPLEMENTAL AGREEMENT ("Agreement") is made and entered into by and
between STATEC TECHNOLOGIES, S.A., a French limited liability company with
offices located in Gif-sur-Yvette, France ("STATEC") and NDC Automation, Inc., a
Delaware, U.S.A. corporation with principal offices located in Charlotte, North
Carolina, U.S.A. ("NDCA").
WHEREAS, the parties hereto made and entered into a "Termination and
Release Agreement" (the "First Agreement") dated and effective as of March 1,
1996; and
WHEREAS, STATEC has encountered financial problems and has filed for
reorganization under the bankruptcy laws of France in the Orleans [France] Court
of Appeal (the "French Court"); and
WHEREAS, the parties wish to modify some of STATEC's obligations pursuant
to the First Agreement, contingent upon the express approval of the French
Court.
NOW THEREFORE, in consideration of these premises and the covenants
contained herein, the parties hereto agree as follows:
AGREEMENT
Article 1. Revision of Paragraph 2.1
The parties acknowledge and agree that STATEC has paid to NDCA the sum of
fifty-four thousand dollars ($54,000.00) pursuant to paragraph 2.1 of the First
Agreement. STATEC shall pay to NDCA the additional sum of twenty thousand
dollars ($20,000.00) immediately upon approval of this Agreement by the French
Court. Upon the performance in full of all of STATEC's obligations hereunder,
NDCA shall waive, release and discharge STATEC from the balance of its payment
obligations under paragraph 2.1 of the First Agreement. This waiver, release and
discharge shall become effective automatically, without further action by NDCA.
Article 2. Acknowledgment of Discharge of Paragraph 2.2
NDCA acknowledges that STATEC has performed in full under paragraph 2.2 First
Agreement.
Article 3. Revision of Article 3
3.1 The parties acknowledge and agree that STATEC has not purchased
any inventory as required by Article 3 of the First Agreement.
17
<PAGE>
3.2 STATEC shall and hereby does purchase and NDCA shall and hereby does
sell and convey to STATEC those items of inventory listed and described on
Schedule 1, attached hereto simultaneously with the execution and delivery by
STATEC of this Agreement.
Immediately upon the approval of this Agreement by the French Court, STATEC
shall pay to NDCA the sum of thirty-five thousand dollars ($35,000) as payment
in full for those items of inventory.
3.3 No later than April 30, 1997, STATEC shall purchase the remaining
inventory, which is listed and described on Schedule 2, attached hereto. The
purchase price for such inventory shall be twelve thousand, eight hundred
eighty-four dollars ($12,884.00), which shall be paid in full prior to or at
delivery of such inventory. All inventory sold to STATEC hereunder is sold AS
IS, WHERE IS. All inventory sold by NDCA hereunder may be delivered to STATEC
Technologies, Inc., a corporation with offices located in Cornelius, North
Carolina.
3.4 All payments required by this Article 3 shall be in U.S. dollars and in
immediately available funds. All payments must be accompanied by a duly-signed
order of the French Court approving this Agreement and authorizing the payment
of the purchase price. STATEC shall diligently use its best efforts to obtain
the approval of this Agreement by the French Court as soon as practicable after
the execution of this Agreement.
3.5 Upon the performance in full of STATEC's obligations under this Article
3, NDCA shall waive, release and discharge STATEC from its obligations under
Article 3 of the First Agreement.
Article 4. Waiver and Release
4.1 Each party shall and hereby does waive, release, and remise any and all
claims which either may have against the other, whether known or unknown,
absolute or contingent, which relate to or arise out of the "Agreements" (as
defined in the First Agreement) or any other matter, excepting only claims
arising out of this Agreement and, if STATEC fails to perform in full hereunder
for any reason, the First Agreement, from the beginning of time to the effective
date of this Agreement.
4.2 In order to induce NDCA to make and enter into this Agreement STATEC
shall procure the waiver and release of the following related persons and
entities, to be evidenced by their signature to the Waiver and Release which
follows this Agreement, and NDCA shall likewise release them: STATEC
Technologies, Inc., a North Carolina corporation and Dominique Saulnier.
Article 5. Ratification of First Agreement
This Agreement shall supplement and not replace the provisions of the First
Agreement, and if either party breaches any of the provisions of this Agreement,
the terms of the First
-2-
18
<PAGE>
Agreement shall remain valid and enforceable against it. Except as supplemented
hereby, the terms of the First Agreement are hereby ratified and confirmed.
Article 6. General
6.1 This Agreement shall be governed and controlled by the laws of North
Carolina.
6.2 NDCA represents and warrants that this Agreement has been authorized
and approved by its Board of Directors. STATEC represents and warrants that this
Agreement has been authorized and approved by all persons and bodies required by
French law and its internal governing agreements and charter and that it will
obtain approval by the French Court and that neither the execution nor the
performance by it of this Agreement and its obligations hereunder shall violate
the terms of any other agreement to which STATEC is a party or any law, order,
judgment or decree binding on STATEC.
6.3 This Agreement shall become effective upon execution; provided that no
waiver or release by NDCA contained herein shall become effective until STATEC
has performed all of its obligations hereunder in full.
6.4 This Agreement, together with the First Agreement, expresses the
complete agreement of the parties hereto with respect to its subject matter, all
other prior and contemporaneous agreements, understandings, statements and
course of delivery being merged herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the signatures of their duly authorized representative, as of the date
indicated.
NDC AUTOMATION, INC. STATEC TECHNOLOGIES, S.A.
By: /s/ Ralph Dollander By: /s/ Dominique Saulnier
Name: Ralph Dollander Name: Dominique Saulnier
Title: President and CEO Title: President, Director General
Date: March 10, 1997 Date: March 17th, 1997
WAIVER AND RELEASE
The undersigned Dominique Saulnier is the owner of STATEC Technologies, s.a. The
undersigned STATEC Technologies Inc. is a subsidiary of STATEC Technologies,
s.a. In recognition of the intent of NDCA and STATEC to dissolve and discharge
all agreements, obligations, rights and liabilities arising out of or relating
to their prior agreements and relationships (except for the Agreement which
immediately precedes this Waiver and Release and the First Agreement defined and
referred to therein), in order to induce NDCA to make an enter into such
Agreement and in consideration of the releases given by NDCA hereunder,
-3-
19
<PAGE>
STATEC Technologies, Inc. and Dominique Saulnier hereby waive, release, remise
and forever discharge any and all claims, liabilities and causes of action,
whether known or unknown, actual or contingent, which any of them may now or
hereafter have or assert arising from the beginning of time through the date of
the execution hereof, against NDC Automation, Inc., its predecessor companies,
or NDC Netzler et Dahlgren Company A.B., and their respective successors,
assigns, stockholders, officers, directors and employees.
In consideration of the foregoing releases, NDC Automation, Inc., for
itself and its predecessor companies, and NDC Netzler et Dahlgren Company AB
each hereby waives, releases remises and forever discharges any and all claims,
liabilities and causes of action, whether known or unknown, actual or contingent
which either of them may now or hereafter have or assert, arising from the
beginning of time through the date of the execution hereof, against Dominique
Saulnier or STATEC Technologies, Inc.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
respective signatures below.
STATEC TECHNOLOGIES, INC.
By: /s/ Charles F. Chandek
Name: Charles F. Chandek
Title: President/CEO
Date: March 11, 1997
Dominique Saulnier
Date: March 17, 1997
(Signatures continued on following page.
-4-
20
<PAGE>
NDC AUTOMATION, INC.
By: /s/ Ralph Dollander
Name: Ralph Dollander
Title: President & CEO
Date: March 10, 1997
NDC NETZLER ET DAHLGREN
COMPANY AB
By: /s/ Goran Netzler
Name: Goran Netzler
Title: President & CEO
Date: March 17, 1997
-5-
21
<PAGE>
SCHEDULE 1
NDC INVENTORY LISTING OF STATEC PRODUCTS
Description Quantity Unit Price Total Value (U.S.$) Statec.SA
PLSl253CN24P 1 1193.00 1193.00 0
Cl5G01 19 63.00 1197.00 1197.00
DCS85--LS1C2 2 384.00 768.00 768.00
M870--2K 22 46.50 1023.00 1023.00
M850R564 60 74.00 4440.00 0
M850RS64 40 74.00 2960.00 2960.00
M850RS64 46 74.00 3404.00 3404.00
M850RS2K 24 73.333 1760.00 1760.00
M850RS2K 20 80.00 1600.00 0
M870--64 10 50.00 500.00 500.00
M870--2K 12 37.00 444.00 444.00
M8500RT-64 40 138.175 5527.00 0
M8500RT-64 50 108.00 5400.00 5400.00
RWX8ND 1 76.00 76.00 76.00
KDX80---S2C2PP 9 615.00 5535.00 5535.00
RWX870-D-- 28 165.00 4620.00 4620.00
RWX870R 6 243.00 1458.00 1458.00
PPS850--DLS2C2 11 375.00 4125.00 4125.00
PPS850-DSS2C2 3 380.00 1140.00 1140.00
Mounting plate
RWX 10 44.00 440.00 440.00
KDX PH BASE PHX 1 124.00 124.00 0
DCS 1 5C24P 1 150.00 150.00 150.00
TOTALS $47.884.00 $35.000.00
22
<PAGE>
SCHEDULE 2
NDC INVENTORY LISTING OF STATEC PRODUCTS
Description Quantity Unit Price Total Value (U.S.$) STI
PLS1253CN24P 1 1193.00 1193.00 1193.00
C15G01 19 63.00 1197.00 0
DCS85--LS1C2 2 384.00 768.00 0
M870--2K 22 46.50 1023.00 0
M850RS64 60 74.00 4440.00 4440.00
M850RS64 40 74.00 2960.00 0
M850RS64 46 74.00 3404.00 0
M850RS2K 24 73.333 1760.00 0
M850RS2K 20 80.00 1600.00 1600.00
M870--64 10 50.00 500.00 0
M870--2K 12 37.00 444.00 0
M8500RT--64 40 138.175 5527.00 5527.00
M8500RT64 50 108.00 5400.00 0
RWX8--D 1 76.00 76.00 0
RWX870--D-- 28 165.00 4620.00 0
RWX870R 6 243.00 1458.00 0
PPS850--DLS2C2 11 375.00 4125.00 0
PPS850--DSS2C2 3 380.00 1140.00 0
Mounting plate
RWX 10 44.00 440.00 0
KDX PH BASE PHX 1 124.00 124.00 124.00
DCS 1 5C24P 1 150.00 150.00 0
TOTALS $47.884.00 $12.884.00
23
<PAGE>
PURCHASE ORDER
HK SYSTEMS P.O. NUMBER PAGE
HARNISCHFEGER ENGINEERS 240223-00 01
P.O. BOX 1512 P.O. DATE ORDER TYPE CHANGE/CANCEL
MILWAUKEE, WI 53201-1512 11/26/96 DROP CHANGE
PHONE (414) 860-7000 FAX (414) 860-7011 SHIP 02/20/97
Mail invoice to above address
ATTN: ACCOUNTS PAYABLE
409125
ORDERED SHIP
FROM TO
NDC Automation Chrysler Corp
3101 Latrobe Drive 4015 Belvidere Assy. Plant
Charlotte, NC 28211 3000 West Chrysler Drive
Belvidere, IL 61008
<TABLE>
<CAPTION>
ACKNOWLEDGEMENT CONFIRMING
TERMS REQUIRED BELOW ORDER FOB SHIP VIA COL/PPD
NET 60 YES YES DEST/ BEST WAY PPD
P.P.ADD SURFACE
LINE QUANTITY U/M OUR ITEM NUMBER YOUR ITEM NUMBER UNIT PRICE REQUIRED CHANGE
NUMBER ORDERED DESCRIPTION COMMENTS DATE CANCEL
______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
001 1 LO ORIGINAL P.O. DATED 11/26/96 .000 04/15/97 CHANGE
CHANGE ORDER #1 DATED 02/20/97 EXTENDED PRICE .000
002 1 LO PROVIDE ALL ENGINEERING, 547000.000 04/15/97
MATERIALS, LABOR, FABRICATION, EXTENDED PRICE 547,000.000
ASSEMBLY, PAINTING, SOFTWARE,
LICENSES, MATERIAL, LABOR,
EQUIPMENT, SHIPPING FOB
PROJECT SITE, UNLOADING, SAFE
STAGING, INSTALLATION, AND
PROJECT MANAGEMENT SERVICES
FOR A WIRELESS AGV SYSTEM
WITH FOUR (4) SIDELOAD
VEHICLES FOR THE FINISH PANEL
AS/RS EXPANSION FOR CHRYSLER,
BELIVDERE, IL PROJECT.
003 1 LO REAL TIME GRAPHICS 13500.000 04/15/97
EXTENDED PRICE 13,500.000
004 1 LO BATTERY HANDLING EQUIPMENT 28981.000 04/15/97
EXTENDED PRICE 28,981.000
005 1 LO ALL WORK TO BE IN ACCORDANCE .000 04/15/97
WITH HK SYSTEMS STANDARD EXTENDED PRICE .000
SUBCONTRACT AGREEMENT
240223-00 AND APPENDIX 'A'.
_________________________________________________________________________________________________________
COMMENTS
DROP SHIP ORDER - SEND BILL TO ADDRESS AT TOP OF FORM
TAX EXEMPT CC: S. HUNTER, C. PANKOP
CONFIRMING VERBAL ORDER
MATERIAL NOT RECEIVED S030819-4605
ACCEPTED BY: /s/ MIKE THORNTON BUYER /s/ DAVID A KLING
-------------------- DAVID A KLING
/s/ RALPH DOLLANDER
</TABLE>
24
<PAGE>
PURCHASE ORDER
HK SYSTEMS P.O. NUMBER PAGE
HARNISCHFEGER ENGINEERS 240223-00 02
P.O. BOX 1512 P.O. DATE ORDER TYPE CHANGE/CANCEL
MILWAUKEE, WI 53201-1512 11/26/96 DROP CHANGE
PHONE (414) 860-7000 FAX (414) 860-7011 SHIP 02/20/97
Mail invoice to above address
ATTN: ACCOUNTS PAYABLE
409125
ORDERED SHIP
FROM TO
NDC Automation Chrysler Corp
3101 Latrobe Drive 4015 Belvidere Assy. Plant
Charlotte, NC 28211 3000 West Chrysler Drive
Belvidere, IL 61008
<TABLE>
<CAPTION>
ACKNOWLEDGEMENT CONFIRMING
TERMS REQUIRED BELOW ORDER FOB SHIP VIA COL/PPD
NET 60 YES YES DEST/ BEST WAY PPD
P.P.ADD SURFACE
LINE QUANTITY U/M OUR ITEM NUMBER YOUR ITEM NUMBER UNIT PRICE REQUIRED CHANGE
NUMBER ORDERED DESCRIPTION COMMENTS DATE CANCEL
______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
006 1 LO CHANGE ORDER #1 .000 02/14/97 NEW
TERMS AND CONDITIONS ARE EXTENDED PRICE .000
AMENDED PER ATTACHED HKS
LETTERS TO NDC DATED
02/03/97 AND 02/13/97.
TOTAL EXT PRICE 589,481.000
_________________________________________________________________________________________________________
COMMENTS
DROP SHIP ORDER - SEND BILL TO ADDRESS AT TOP OF FORM
TAX EXEMPT CC: S. HUNTER, C. PANKOP
CONFIRMING VERBAL ORDER
MATERIAL NOT RECEIVED S030819-4605
ACCEPTED BY: /s/ MIKE THORNTON BUYER /s/ DAVID A KLING
-------------------- DAVID A KLING
/s/ RALPH DOLLANDER
</TABLE>
25
<PAGE>
FOR IMMEDIATE RELEASE
March 19, 1997
NDC AUTOMATION, INC.
ANNOUNCES SIGNING OF PURCHASE ORDER FOR
A LASER GUIDED VEHICLE SYSTEM
Charlotte, NC, March 19,1997, NDC Automation, Inc. ( OTC Bulletin Board
"AGVS" ) acknowledged a purchase order from H.K. Systems, Inc., of New Berlin,
WI, a systems integrator, providing automated material handling systems to end
users.
The order is for Lazerway - Laser Guided Vehicle (LGV) controls hardware,
software, engineering services and related equipment totaling approximately
$589,000. The LGV system is to be installed at a large stamping facility
operated by a major automotive manufacturer in the United States.
NDC President, Ralph Dollander states " This order confirms NDC's role as a
supplier of AGV technology to leading OEMs and system integrators in the
material handling industry. We are pleased to work with HK Systems on a project
for such a prominent end user."
NDC Automation, Inc. sells hardware, software and engineering services
which are incorporated into and used to control laser and other Automatic Guided
Vehicle Systems (AGVS). NDC's sales are targeted to OEMs and system integrators,
which buy technology solutions from the Company and incorporate them into their
material handling systems for the industries in which they specialize.
###
For further information contact:
Claude Imbleau Ralph Dollander
V. P. Finance President
26
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 263,589
<SECURITIES> 0
<RECEIVABLES> 925,312
<ALLOWANCES> 80,000
<INVENTORY> 1,062,044
<CURRENT-ASSETS> 2,292,203
<PP&E> 1,911,387
<DEPRECIATION> 704,908
<TOTAL-ASSETS> 3,639,721
<CURRENT-LIABILITIES> 2,118,492
<BONDS> 0
0
0
<COMMON> 34,534
<OTHER-SE> 1,486,695
<TOTAL-LIABILITY-AND-EQUITY> 3,639,721
<SALES> 991,953
<TOTAL-REVENUES> 991,953
<CGS> 593,832
<TOTAL-COSTS> 593,832
<OTHER-EXPENSES> 531,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,657
<INCOME-PRETAX> (196,712)
<INCOME-TAX> 0
<INCOME-CONTINUING> (196,712)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,712)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
