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 29, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-18253
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NDC Automation, Inc.
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(Exact name of small business issuer as specified in its charter)
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Delaware 56-1460497
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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3101 Latrobe Drive, Charlotte, North Carolina 28211-4849
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(Address of principal executive offices)
(704) 362-1115
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(Issuer's telephone number)
N/A
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(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 31, 2000, there were 3,586,451 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes [ ]; No [X]
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I N D E X
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
February 29, 2000 (Unaudited) and November 30, 1999 3-4
Condensed Statements of Operations
Three months ended February 29, 2000 and February 28, 1999
(Unaudited) 5
Condensed Statements of Cash Flows
Three months ended February 29, 2000 and February 28, 1999
(Unaudited) 6
Notes to Condensed Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial 10-15
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
(a) Exhibits -- Press Releases and other Exhibits
(b) Reports on Form 8-K
SIGNATURES 17
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2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NDC AUTOMATION, INC.
CONDENSED BALANCE SHEETS
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FEBRUARY 29, November 30,
2000 1999
(UNAUDITED)
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ASSETS (Note 4)
CURRENT ASSETS
Cash and cash equivalents $ - $ 45,240
Accounts receivable, net 1,216,223 1,882,293
Inventories 519,146 366,365
Costs and estimated earnings in excess of
billings on uncompleted contracts 9,974 35,024
Prepaid expenses and other assets 65,181 51,592
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Total current assets $ 1,810,524 $ 2,380,514
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PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures and office equipment, 183,905 168,505
Machinery and equipment 63,415 63,415
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$ 1,673,943 $ 1,658,543
Less accumulated depreciation 667,748 646,867
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$ 1,006,195 $ 1,011,676
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$ 2,816,719 $ 3,392,190
===================================================================================================================
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Note: The Condensed Balance sheet at November 30, 1999 has been taken from the
Audited Financial Statements at that date.
See Notes to Condensed Financial Statements
3
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FEBRUARY 29, November 30,
2000 1999
(UNAUDITED)
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable, bank (Note 4) $ 133,323 $ 168,153
Current maturities of long- term debt (Note 4) 1,021,001 1,087,740
Accounts payable and accrued expenses;
including amounts owed to affiliates of $520,241 at 2000
and $416,581 at 1999 1,267,653 1,475,974
Billings in excess of costs and estimated
earnings on uncompleted contracts 209,633 209,272
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Total current liabilities $ 2,631,610 $ 2,941,139
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LONG-TERM DEBT (Note 4 ) $ - $ -
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share
authorized 1,000,000 shares; no shares issued $ - $ -
Common stock, par value $.01 per share;
11,000,000 shares authorized
at 2000 and 1999; 3,586,451 shares
were issued at 2000 and 1999 35,864 35,864
Additional paid-in capital 4,260,236 4,260,236
Accumulated deficit (4,110,991) (3,845,049)
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$ 185,109 $ 451,051
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$ 2,816,719 $ 3,392,190
==================================================================================================================
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4
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NDC AUTOMATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
FEBRUARY 29, February 28,
2000 1999
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Net revenues $ 977,398 $ 932,029
Cost of goods sold 673,802 575,881
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Gross profit $ 303,596 $ 356,148
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Operating expenses:
Selling $ 143,495 $ 191,759
General and administrative 371,801 258,479
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$ 515,296 $ 450,238
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Operating loss $ (211,700) $ (94,090)
Net interest expense (54,242) (62,686)
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Loss before income taxes $ (265,942) $ (156,776)
Federal and state income taxes (Note 2) - -
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Net loss $ (265,942) $ (156,776)
================================================================================================================
Weighted average number of common
shares outstanding 3,586,451 3,453,451
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Loss per common share - basic (Note 3) $ (0.07) $ (0.05)
Loss per common share - diluted (Note 3) $ (0.07) $ (0.05)
================================================================================================================
Dividends per common share $ - $ -
================================================================================================================
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See Notes to Condensed Financial Statements
5
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NDC AUTOMATION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended
FEBRUARY 29, February 28,
2000 1999
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 57,954 $ (37,029)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment $ (15,400) $ (13,354)
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NET CASH USED IN
INVESTING ACTIVITIES $ (15,400) $ (13,354)
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CASH FLOW FROM FINANCING ACTIVITIES
Borrowings (payments) on credit agreement $ (34,830) $ 71,213
Principal payments on long-term borrowings (66,739) (50,522)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $ (101,569) $ 20,691
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Effect of foreign currency exchage rate changes
on cash and cash equivalents $ 13,775 $ 7,752
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Decrease in cash and cash equivalents $ (45,240) $ (21,940)
Cash and cash equivalents:
Beginning 45,240 62,923
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Ending $ - $ 40,983
=====================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 45,316 $ 62,753
=====================================================================================================================
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See Notes to the Condensed Financial Statements
6
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NDC AUTOMATION, INC.
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 29, 2000, 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, 1999. The results of operations
for the three months ended February 29, 2000 are not necessarily indicative of
the operating results for the full year.
NOTE 2. INCOME TAXES
The Company did not recognize any income tax benefits in 1999 and 2000 for its
current losses 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.
NOTE 3. LOSS PER COMMON SHARE:
The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS
No.128) Earnings Per Share, which supersedes APB Opinion No. 15. SFAS No. 128
requires the presentation of earnings per share by all entities that have common
stock or potential common stock, such as options, warrants, and convertible
securities, outstanding that trade in a public market. Basic per share amounts
are computed, generally, by dividing net income or loss by the weighted-average
number of common shares outstanding. Diluted per share amounts assume the
conversion, exercise, or issuance of all potential common stock instruments
unless the effect is antidilutive, thereby reducing a loss or increasing the
income per common share. The Company had options outstanding to purchase a total
of 134,092 and 81,777 shares of common stock, respectively, at a
weighted-average exercise price of varying amounts. The inclusion of those
potential common shares in the calculation of diluted loss per share would have
an antidilutive effect. Therefore, basic and diluted loss per share amounts are
the same in 2000 and 1999.
7
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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 29, 2000:
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Note Payable Agreement that allows the Company to borrow up to $1,250,000 and
bears interest at the lender's prime rate plus 2.75% per annum . The Company's
loan outstanding shall not exceed the lesser of (a) U.S. $1,250,000 or (b) 80%
of i) Qualified Accounts receivable (as defined in the Loan Agreement) that are
non-project Qualified Accounts and ii) Qualified Accounts that are project
Qualified Accounts (as defined in the Loan Agreement) plus 50% of all eligible
inventory, but in no event shall (A) Inventory Value be in excess of $300,000
and (B) Inventory Value and Qualified Accounts that are project Qualified
Accounts be 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 any amounts it
pays in reimbursing the Letter of Credit Bank . The Repurchase Agreement
guarantees that NDCab will repurchase on certain conditions up to $300,000 worth
of inventory, thereby providing funds to pay lender should the Company be in
default on its loan obligations. The Loan Agreement terminates upon demand by
the Bank or January 31,
2001. (1)(2) $ 133,323
====================================================================================================================
Long-term debt consists of the following at February 29, 2000:
Mortgage note payable to a bank, based on a 9.5% fixed rate. Original principal
balance of $1,013,484 to be repaid in twelve (12) consecutive monthly principal
and interest payments of $13,912, with one final payment of approximately
$939,666 due on June 16, 2000 . The note is collaterized by the Company's land
and building with a carrying value of $927,278. The loan also contains certain
financial covenants to which the Company must adhere. As of November 30, 1999
the Company obtained waivers for certain financial covenants as
specified by the Mortgage note agreement. $ 959,343
Note payable to Netzler & Dahlgren Co AB, based on a 16.0% fixed rate. Original
principal balance to be repaid in twenty-four (24) consecutive monthly principal
payments of 133,529 Swedih Krona, or approximately US$16,757 depending on the
exchange rate at time of payment, plus interest. The note is collaterized by the
Company's land and building with a carrying value of $927,278. 61,658
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$ 1,021,001
Less current maturities: 1,021,001
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$ -
====================================================================================================================
(1) The prime rate at February 29, 2000 was 8.75 %
(2) The line of credit is secured by a first priority security interest in the
Company's accounts receivable, inventory and software.
Maturities of long-term debt at February 29, 2000 are as follows:
Year Ending
February 28
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2001 $ 1,021,001
2002 -
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$ 1,021,001
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8
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NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 5. CONTINUED OPERATIONS
In recent years the Company has suffered operating losses. This has left the
Company with limited equity and negative working capital. The Company is also
not in compliance with covenants of certain debt arrangements. This raises
substantial doubt about the Company's ability to continue as a going concern.
Management has made plans in regards to these matters to develop an operating
plan that will increase revenues and minimize losses. This plan includes a
reorganization of present resources to support the following:
o Establish and develop strategic alliances with selected customers
o Pursue AGV system business in selected market niches
o Grow the distribution business by adding new supplementary products
o Expand the aftermarket sales business
The Company is also exploring raising additional equity to assist in reaching
its goals.
Although the Company believes that its strategic plans will permit it to meet
its 2000 working capital needs, there can be no assurance that the Company can
successfully meet the objectives of such plans.
9
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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. In prior
years 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 derived from
other industries, e.g. automotive, CD manufacturing, food and paper. 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. During 1996 and for the first three quarters
of 1997, the Company refocused its sales efforts to existing original equipment
manufacturers (OEMs) and system integrators in the AGV systems industry. Such
OEMs and system integrators have historically sold products to end users to whom
the Company occasionally had direct sales. In September of 1997, however, the
Company began to again pursue AGV system sales in selected market niches to
supplement revenues obtained from sales to OEMs and system integrators.
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 can 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. Another way 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 component
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
components. Such components 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 30% 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.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
STRATEGY DIVERSIFICATION: The Company is continuing to pursue a strategy of
diversification to explore various ways to increase revenues and minimize
losses. These approaches include the following:
o Establish and develop strategic alliances with selected customers
o Pursue AGV system business in selected market niches such as entertainment
and Teach-in
o Grow the distribution business by adding supplementary products
o Expand the aftermarket sales business
Positive results from this diversification in terms of new business and
increased bookings and backlog have been noted in 1999, and the Company intends
to continue this strategy actively. However, there can be no assurance that
these approaches will continue to be successful.
RAYMOND CORPORATION: In December, 1999, negotiations were finalized with
the Raymond Corporation, a leading manufacturer of industrial trucks commonly
known as "forklift trucks", with regard to a co-operation agreement whereby the
Company assumes the responsibility for Raymond's installed base of AGV systems
in North America. The Agreement was implemented during the first quarter of
Fiscal year 2000.
FORWARD-LOOKING STATEMENTS: This report (including information included or
incorporated by reference herein) contains certain forward-looking statements
with respect to the financial condition, results of operation, plans,
objectives, future performance and business of the Company.
These forward-looking statements involve certain risk and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities:
a) Revenues from end user systems sales, new OEMs and new niches may be lower
than expected or delayed.
b) New product lines of the Company (Thrige, Netzler & Dahlgren (Teach-in),
Powerway) may not be well received in the North American industrial truck
market or AGV market, thereby restricting growth opportunities for the
Company.
c) The Company might be unable to raise the additional working capital needed,
directly or through a business combination, to finance the current business
strategy, which would have a serious impact on the Company's ability to
sell its current and future products, as well as to satisfy existing
banking requirements.
d) General economic or business conditions, either nationally or in the
markets in which the Company is doing business, may be less favorable than
expected resulting in, among other things, a deterioration of market share
or reduced demand for its products.
11
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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.
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Percentage of Change
Period To Period Increase
Percentage of Net Revenues (Decrease)
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Three Months Ended
For the Three Months Ended February 28, 1999
February 29, 2000 February 28,1999 to February 29, 2000
% % %
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Net revenues 100.0 100.0 4.9
Cost of goods sold 68.9 61.8 17.0
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Gross profit 31.1 38.2 14.8
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Operating expenses:
Selling 14.7 20.6 (25.2)
General and administrative 38.0 27.7 43.8
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48.3 14.5
52.7
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Operating loss (21.6) (10.1) 125.0
Net interest expense 5.6 6.7 (13.5)
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Loss before income taxes (27.2) (16.8) 69.6
Income taxes - - -
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Net loss (27.2) (16.8) 69.6
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12
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QUARTER ENDED FEBRUARY 29, 2000 COMPARED TO THE QUARTER ENDED FEBRUARY 28, 1999
Net revenues increased by $45,369 or 4.9% from $932,029 in the earlier period to
$977,398 in the latter period. Even with the percentage increase in revenues,
management realizes that its present bookings and backlog of new business may
not be enough to generate the necessary cash flows and earnings to operate
profitably. Management believes that its marketing and sales activities will
help achieve its operating goals (see note 5).
Cost of goods sold increased from $575,881 to $673,802, or 17.0% due to
increased volume of business, engineering cost and project third party cost,
while as a percentage of net revenues cost of goods sold increased from 61.8% to
68.9% . Gross profit decreased by $52,552, or 14.8% from $356,148 to $303,596
primarily due to greater engineering cost in 2000 compared to the prior year.
Gross profit as a percentage of revenues decreased from 38.2% to 31.1%.
Selling expenses decreased from $191,759 to $143,495, or 25.2% primarily due to
a major trade show being attended during the first quarter of 1999 compared to
the current year when a similar show will be attended in the second quarter.
General and administrative expenses increased from $258,479 to $371,801, or
43.8% compared to the prior year. The increase is primarily due to following: 1)
approximately $35,000 of cost relating to severance cost upon the expiration of
the former president contract 2) approximately $30,000 increase in
administrative personnel related cost 3) approximately $20,000 in computer
maintenance relating to Y2K 4) an approximate $10,000 increase in rent relating
to a new test facility, and 5) other increases in general & administrative
expenses compared to the prior year.
Primarily as a result of the foregoing, operating loss increased by $117,610
from $94,090 in 1999 to an operating loss of $211,700 in 2000.
The net interest expense decreased from $62,686 to $54,242 primarily due to
lower bank fees.
The Company did not recognize any tax benefits in 1999 and 2000 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.
Primarily due to lower gross margins and increased general and administrative
expenses in 2000 as described above the Company incurred a net loss of $265,942
in 2000 compared to net loss of $156,776 in 1999.
BACKLOG. Backlog consists of all amounts contracted to be paid by customers but
not yet recognized as net revenues by the Company. At February 29, 2000, the
Company had a backlog of approximately $1,625,000 compared to approximately
$930,000 one year earlier.
13
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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 29, 2000 net cash provided by operating
activities was $57,954. However, as of February 29, 2000 the Company had been
delaying payments of approximately $200,000 in trade payables to Netzler &
Dahlgren due to cash not being available under the current line of credit. There
can be no assurances that Netzler & Dahlgren will continue to accept such
delayed payments from the Company, which would severely affect the Company's
ability to meet it financial obligations.
The Company entered into an Inventory and Accounts Receivable Loan and Security
Agreement ("Loan Agreement") on February 28, 1997 with the National Bank of
Canada and National Canada Business Corp. (herein collectively called the
"Lender"). The Loan Agreement was amended and restated on April 30, 1999 and
allows the Company to borrow up to a maximum of $1,250,000. Loans made under the
new Loan Agreement are evidenced by a demand promissory Note. The Loan Agreement
allows the Company to borrow pursuant to a borrowing formula which is secured by
the 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 i) Qualified Accounts receivable (as defined in the Loan Agreement) that
are non-project Qualified Accounts and ii) Qualified Accounts that are project
Qualified Accounts plus 50% of all eligible inventory ( as defined in the Loan
Agreement) , but in no event shall (A) Inventory Value be in excess of $300,000
and (B) Inventory Value and Qualified Accounts that are project Qualified
Accounts be in excess of $450,000. The borrowed funds will bear interest at the
Lender's prime rate plus 2.75% per annum. 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 $300,000 worth of inventory, thereby providing funds to pay the Lender should
the Company default on its loan obligations.
The lender, at its discretion, may demand payment upon written notice to the
Company. The maturity date has been extended to January 31, 2001, or upon demand
by the Bank. The extension was approved when Netzler & Dahlgren extended its
$450,000 irrevocable Letter of Credit to the Bank through February 28, 2001. To
further secure Netzler & Dahlgren for providing the Letter of Credit the Company
entered into a Reimbursement Agreement under which the Company granted to
Netzler and Dahlgren a mortgage interest in the Company's land and building;
such collateral is a junior lien to the primary mortgage lender's security
interest.
The Company's strategy depends heavily on securing project business to grow.
Such business is traditionally not financed by the banking community due to
perceived risk associated with such jobs. In addition, in 1999 the Company was
informed by the lender that unless the Company's assets or equity were
significantly higher and the Company could show consistent earnings that such
project receivable financing would not be readily available. Under the present
banking relationship the Company can realistically only borrow approximately
$250,000 for such project receivables when the availability needed for inventory
is taken into account. At the end of February 2000 the Company had approximately
$840,000 of such project receivables which could not be fully utilized by the
present borrowing formulae. By not being able to fully utilize its project
assets for the line of credit, the Company experiences negative cash flows until
such cash is received from the customer. Due to the above factors the Company
delayed payments of approximately $200,000 to its affiliate Netzler & Dahlgren
so not to exceed current borrowing maximums from the demand promissory note.
Such past due payable is accruing interest at 16% per annum. The Company was
current at February 29, 2000 on the Note payable to Netzler & Dahlgren.
During May 1999, the mortgage loan maturity date was extended for thirteen
months from May 16, 1999 to June 16, 2000. The interest rate on the note
remained at 9.5%, and the combined principal and interest monthly payment of
$13,912 was also unchanged. The Company has made all payments on a timely basis
on the mortgage.
14
<PAGE>
There are no assurances that the deficiency in the cash flow will not worsen if
the Company does not generate enough new business. The Company had been
exploring the possibility of raising additional equity capital, or subordinated
debt, either directly or possibly through a business combination, in order to
improve its financial position, its independence and have the working capital to
address potential growth opportunities. Management currently believes that its
present working capital needs are close to or greater than $1.5 million. The
Company will continue to pursue equity and/or debt financing, unless revenues
that can be financed by the banking community increase substantially to
consistently provide earnings for the Company. There can be no assurance that
the Company will be successful in raising the additional capital or subordinated
debt to improve its financial position. The Company's ability to continue as a
going concern would be adversely affected if such equity and/or debt financing
is not obtained in the near future or if revenues do not increase to
consistently provide earnings for the Company.
15
<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 -
None
Press Releases:
.
None
(b) Reports on Form 8-K
None
16
<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/ Claude Imbleau
--------------------
Claude Imbleau
Chief Operating Officer
Chief Financial Officer
Date: April 13, 2000
--------------
17
<PAGE>
EXHIBIT INDEX
The following documents are included in this Form 10-QSB as an Exhibit:
Designation Number
Under Item 601 of
Exhibit Number Regulation S-K Exhibit Description Page Number
- --------------------------------------------------------------------------------
(A) Exhibits:
1. 27 Financial schedule 19
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-2000
<PERIOD-START> DEC-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,286,223
<ALLOWANCES> 70,000
<INVENTORY> 519,146
<CURRENT-ASSETS> 1,810,524
<PP&E> 1,673,943
<DEPRECIATION> 667,748
<TOTAL-ASSETS> 2,816,719
<CURRENT-LIABILITIES> 2,631,610
<BONDS> 0
0
0
<COMMON> 35,864
<OTHER-SE> 149,245
<TOTAL-LIABILITY-AND-EQUITY> 2,816,719
<SALES> 977,398
<TOTAL-REVENUES> 977,398
<CGS> 673,802
<TOTAL-COSTS> 673,802
<OTHER-EXPENSES> 515,296
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,242
<INCOME-PRETAX> (265,942)
<INCOME-TAX> 0
<INCOME-CONTINUING> (265,942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (265,942)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
