-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R+IS84TAMuh8UgXGo3EztIMbSXd0WYEddP0A8+iKVPcDD1pgzmJTPKM2CUpObQcd NmZBpdLqypfHWS5IaqLAYg== 0000950168-96-001854.txt : 19961010 0000950168-96-001854.hdr.sgml : 19961010 ACCESSION NUMBER: 0000950168-96-001854 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961009 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NDC AUTOMATION INC CENTRAL INDEX KEY: 0000859621 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 561460497 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18253 FILM NUMBER: 96641354 BUSINESS ADDRESS: STREET 1: 3101 LATROBE DRIVE CITY: CHARLOTTE STATE: NC ZIP: 28211 BUSINESS PHONE: 7043621115 10QSB 1 10QSB #45761.1 NDC AUTOMATION, INC. 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 August 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 (I.R.S. Employer of incorporation or organization) 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 September 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 17 pages. The Exhibit Index is located on page 15. I N D E X
Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets August 31, 1996 (Unaudited) and November 30, 1995 3 - 4 Condensed Consolidated Statements of Operations Three and nine months ended August 31, 1996 and August 31, 1995 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows Nine months ended August 31, 1996 and August 31, 1995 (Unaudited) 6 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 PART I. FINANCIAL INFORMATION Item 1. Financial Statements NDC AUTOMATION, INC. CONDENSED BALANCE SHEETS
AUGUST 31, November 30, 1996 1995 (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS (Note 4) CURRENT ASSETS Cash and cash equivalents $ 153,232 $ 164,781 Accounts receivables, net 913,975 1,203,137 Inventories 1,332,473 1,929,649 Costs and estimated earnings in excess of billings on uncompleted contracts 94,479 123,260 Prepaid expenses and other assets 50,852 31,333 - ------------------------------------------------------------------------------------------------------------------------------------ Total current assets $2,545,011 $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, 391,694 389,709 Machinery and equipment 371,512 371,512 Software 103,557 103,557 Vehicles 36,729 30,754 - ------------------------------------------------------------------------------------------------------------------------------------ $2,330,115 $2,322,155 Less accumulated depreciation 1,056,884 964,600 - ------------------------------------------------------------------------------------------------------------------------------------ $1,273,231 $1,357,555 - ------------------------------------------------------------------------------------------------------------------------------------ INTANGIBLE ASSETS $ 181,600 $ 258,454 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== $4,016,123 $5,084,450
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
AUGUST 31, November 30, 1996 1995 (UNAUDITED) - -------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable, bank $ 651,045 $ 644,375 Current maturities of long- term debt (Note 4) 67,101 288,324 Accounts payable and accrued expenses; including amounts owed to affiliates of $125,757 at 1996 and $25,104 at 1995 392,771 1,002,574 Billings in excess of costs and estimated earnings on uncompleted contracts 233,564 277,527 Deferred income taxes -- 12,216 - -------------------------------------------------------------------------------------------------------------- Total current liabilities $ 1,344,481 $ 2,225,016 - -------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT (Note 4 ) $ 1,119,730 $ 1,170,311 - -------------------------------------------------------------------------------------------------------------- DEFERRED INCOME TAXES $ -- $ 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 (2,694,188) (2,573,590) - -------------------------------------------------------------------------------------------------------------- $ 1,551,912 $ 1,672,510 ============================================================================================================== $ 4,016,123 $ 5,084,450 ==============================================================================================================
4 NDC AUTOMATION, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended AUGUST 31, August 31, AUGUST 31, August 31, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------------------------- Net revenues $ 1,144,829 $ 1,817,270 $ 4,098,724 $ 6,064,440 Cost of goods sold 782,217 1,334,460 2,582,449 3,938,477 - ----------------------------------------------------------------------------------------------------------------------- Gross profit $ 362,612 $ 482,810 $ 1,516,275 $ 2,125,963 - ----------------------------------------------------------------------------------------------------------------------- Operating expenses: Selling $ 144,820 $ 103,727 $ 488,264 $ 550,061 General and administrative 319,169 1,036,837 1,021,504 2,710,679 Research and development -- 47,000 3,943 144,254 - ----------------------------------------------------------------------------------------------------------------------- $ 463,989 $ 1,187,564 $ 1,513,711 $ 3,404,994 - ----------------------------------------------------------------------------------------------------------------------- Operating income (loss) $ (101,377) $ (704,754) $ 2,564 $ (1,279,031) - ----------------------------------------------------------------------------------------------------------------------- Net interest income (expense): Interest income $ -- $ 1,605 $ -- $ 6,539 Interest expense (43,087) (202,575) (151,991) (528,289) - ----------------------------------------------------------------------------------------------------------------------- $ (43,087) $ (200,970) $ (151,991) $ (521,750) - ----------------------------------------------------------------------------------------------------------------------- Loss before income taxes $ (144,464) $ (905,724) $ (149,427) $ (1,800,781) Federal and state income taxes (benefit) (Note 2) (28,829) 24,122 (28,829) 73,282 - ----------------------------------------------------------------------------------------------------------------------- Net loss $ (115,635) $ (929,846) $ (120,598) $ (1,874,063) ======================================================================================================================= 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) $ (0.03) $ (0.32) $ (0.03) $ (0.65) ======================================================================================================================= Dividends per common share $ -- $ -- $ -- $ -- =======================================================================================================================
See Notes to Condensed Consolidated Financial Statements 5 NDC AUTOMATION, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended AUGUST 31, August 31, 1996 1995 - ---------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 284,187 $ 1,179,403 - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment $ -- $ 3,782 Purchase of property and equipment (31,004) (51,186) - ---------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES $ (31,004) $ (47,404) - ---------------------------------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Net borrowings (payments) on revolving credit agreement $ 6,670 $ (984,500) Principal payments on long-term borrowings (271,804) (90,847) - ---------------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES $(265,134) $(1,075,347) - ---------------------------------------------------------------------------------------------------------------------- Effect of foreign currency exchage rates changes on cash and cash equivalents $ 402 $ (13,101) - ---------------------------------------------------------------------------------------------------------------------- Increase in cash and cash equivalents $ (11,549) $ 43,551 Cash and cash equivalents: Beginning 164,781 256,037 - ---------------------------------------------------------------------------------------------------------------------- Ending $ 153,232 $ 299,588 ====================================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for : Interest $ 140,741 $ 511,854 Income taxes $ -- $ (454,011) ======================================================================================================================
See Notes to the Condensed Consolidated Financial Statements 6 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 August 31, 1996, and for all periods presented, have been made. The condensed consolidated financial statements at August 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 August 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 nine months ended August 31, 1996 are not necessarily indicative of the operating results for the full year. NOTE 2. INCOME TAXES The Company recognized a tax benefit of $28,829 in 1996 domestically for its current loss by reducing its deferred tax liability. Income tax expense of $73,282 for the nine months ended August 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 . 7 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 August 31, 1996:
Line of credit for $900,000 with interest at prime plus 4.00%. Advances under the line of credit will not exceed the lesser of 1) $900,000 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 termination date of the line is November 29, 1996.(1),(2) $ 651,045 ======================================================================================================== Long-term debt consists of the following at August 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 $1,071,884. The loan also contains certain financial covenants to which the Company must adhere. $1,186,831 Less current maturities: Mortgage $ 67,101 - -------------------------------------------------------------------------------------------------------- $1,119,730 ========================================================================================================
(1) The prime rate at August 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 August 31, 1996 are as follows: Maturities of Year Ending Long-term August 31 Debt - -------------------------------------------------------------------------------- 1997 $ 67,101 1998 1,119,730 1999 - - -------------------------------------------------------------------------------- $1,186,831 ================================================================================ 8 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 concentrated in other industries as the newspaper industry itself has undergone contraction and the Company has focused its sales efforts away from the textile industry during and subsequent to 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 to OEM customers, 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 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. 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 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 August 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:
Percentage of Change Period to Period Percentage of Net Revenues Increase(Decrease) - --------------------------------- ------------------------------------------------------ --------------------------- Three Nine Months Months Three Months Nine Months Ended Ended Ended Ended August 31, August 31, August 31, August 31, August 31, August 31, 1995 to 1995 to 1996 1995 1996 1995 1996 1996 % % % % % % - --------------------------------- ------------- ------------- ------------- ------------- ------------- ------------- Net Revenues 100.0 100.0 100.0 100.0 (37.0) (32.4) Cost of Goods Sold 68.3 73.4 63.0 64.9 (41.4) (34.4) - --------------------------------- ------------- ------------- ------------- ------------- Gross Profit 31.7 26.6 37.0 35.1 (24.9) (28.7) - --------------------------------- ------------- ------------- ------------- ------------- Operating expenses: Selling 12.6 5.7 11.9 9.1 39.6 (11.2) General and administrative 27.9 57.1 24.9 44.7 (69.2) (62.3) Research and development - 2.6 0.1 2.4 (100.0) (97.3) - --------------------------------- ------------- ------------- ------------- ------------- 40.5 65.4 36.9 56.2 (60.9) (55.5) - --------------------------------- ------------- ------------- ------------- ------------- Operating income (loss) (8.8) (38.8) 0.1 (21.1) (85.6) (100.2) Net interest expense: (3.8) 11.1 (3.7) 8.6 (78.6) (70.9) - --------------------------------- ------------- ------------- ------------- ------------- Loss before income taxes (12.6) (49.9) (3.6) (29.7) (84.0) (91.7) Federal and state income taxes (benefit) (2.5) 1.3 (0.7) 1.2 (219.5) (139.3) - --------------------------------- ------------- ------------- ------------- ------------- Net Loss (10.1) (51.2) (2.9) (30.9) (87.6) (93.6) ================================= ============= ============= ============= =============
QUARTER ENDED AUGUST 31, 1996 COMPARED TO THE QUARTER ENDED AUGUST 31, 1995 Net revenues decreased by $672,441 or 37.0% from $1,817,270 in the earlier period to $1,144,829 in the latter period. The primary reasons for the decrease was that the Company had a lower opening backlog at May 31, 1996 compared to the prior year and due to the sale of its two subsidiaries the Company recognized no revenues in 1996 from NDC Laser AB and NDC Technology Australia PTY Ltd. Cost of goods sold decreased from $1,334,460 to $782,217 or 41.4% due primarily to lower net revenues in 1996. As a percentage of net revenues, cost of goods sold was lower compared in 1996 due to a higher mix of standard product sales and engineering services compared to the prior year. During the current quarter ended the Company wrote-down $45,000 of inventory due to obsolescence. Gross profit decreased by $120,198 or 24.9% from $482,810 to $362,612, while gross profit as a percentage of net revenues increased to 31.7%, from 26.6% again due to a higher mix of standard product sales and engineering services. Selling expenses increased from $103,727 to $144,820 or 39.6% due primarily to an Australian grant received during the third quarter of 1995 while no such grant was received in 1996. General and administrative expenses decreased from $1,036,837 to $319,169, or 69.2% 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. In 1995 the Company incurred personnel severance expenses of approximately $370,000 associated with the restructuring. 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 10 Australian company. The Company also sold its laser technology to Netzler and Dahlgren Co. A.B.. These developments 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 57.1% to 27.9%. Primarily as a result of the foregoing, the operating loss decreased by $603,377 or 85.6% from $704,754 in the earlier period to $101,377 in the latter period. Net interest expense decreased from $200,970 to $43,087, a decrease of $157,883. 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 $761,260 from $905,724 to a loss of $144,464, due primarily to the foregoing factors. The Company recognized a tax benefits in 1996 domestically for its current loss by reducing its deferred tax payable. 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 $814,211 from $929,846 to a net loss of $115,635. BACKLOG. Backlog consists of all amounts contracted to be paid by customers but not yet recognized as net revenues by the Company. At August 31, 1996, the Company had a backlog of approximately $1,200,000 compared to approximately $2,400,000 one year earlier. The Company announced the receipt of an order for approximately $585,000 in September of 1996. 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. NINE MONTHS ENDED AUGUST 31, 1996 COMPARED TO NINE MONTHS ENDED AUGUST 31, 1995 Net revenues decreased by $1,965,716, or 32.4%, from $6,064,440 in the earlier period to $4,098,724 in the latter period. Approximately $850,000 of revenues were received from its subsidiaries in 1995 , the subsidiaries where sold November 30,1995 thereby providing no revenues for 1996. Cost of goods sold decreased from $3,938,477 to $2,582,449, or 34.4 %, due primarily to the lower level of net revenues. As a percentage of net revenues, cost of goods sold decreased from 64.9% to 63.0%. Gross profit decreased by $609,688, or 28.7%, from $2,125,963 to $1,516,275, while gross profit as a percentage of net revenues increased from 35.1% to 37.0%. Selling expenses decreased from $550,061 to $488,264, or 11.2% due to lower show, personnel and general selling expenses. General and administrative expenses decreased from $2,710,679 to $1,021,504, or 62.3%, primarily due to the Company's restructuring. Primarily as a result of the foregoing, the operating income for the period was $2,564 compared to an operating loss of $1,279,031 the prior year. Net interest expense decreased from $521,750 to $151,991, a decrease of 70.9%. The decrease is primarily due to decreased borrowing needs compared to the prior year. Loss before income taxes decreased by $1,651,354, or 91.7%, from $1,800,781, to $149,427 due primarily to the foregoing factors. The Company recognized a tax benefits of $28,829 in 1996 by applying its current loss against its deferred tax liability. Income tax expense in 1995 of $73,282 is due primarily to income taxes of one of its foreign subsidiaries. Primarily as a result of the foregoing, the net loss decreased by $1,753,465, or 93.6%, from $1,874,063 to a net loss of $120,598. 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 11 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 nine months ended August 31, 1996 net cash provided by operating activities was $284,187. The Company reduced its inventory by $597,176 during the nine month period ending August 31, 1996 which allowed it to create 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 September 30, 1996 the Company had $375,575 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. The Company eliminated its note payable of $200,000 to Netzler & Dahlgren by successfully negotiating the return of certain excess inventory at cost to such company. Furthermore, the Company returned additional inventory at cost to Netzler & Dahlgren to reduce inventory back to a normal operating level and reduce current accounts payable to the affiliate. The Company believes that its working capital of $1,200,530 at August 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 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 -- Press releases: 1. Announces receipt of order from Munck Automation Technology, Inc. 2. Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K None. 13 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: Oct. 8, 1996 BY: /s/ Claude Imbleau Claude Imbleau VP - Finance & Administration (Chief Financial Officer) Date: Oct. 8, 1996 14 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 Page Exhibit Description Number - ------------------ --------------------- ------------------------------------------------------------ ----------- 1. 99 Press release announces receipt of order from Munck 16 Automation Technology, Inc. 2. 27 Financial Data Schedule 17
15 EX-99 2 EXHIBIT 99 (PRESS RELEASE) FOR IMMEDIATE RELEASE SEPTEMBER 24, 1996 NDC AUTOMATION, INC. ANNOUNCES RECEIPT OF A PURCHASE ORDER FOR A LASER GUIDED VEHICLE SYSTEM CHARLOTTE, NC, SEPTEMBER 24, 1996, NDC AUTOMATION, INC. ( OTC BULLETIN BOARD "AGVS") received a purchase order from Munck Automation Technology, Inc., of Newport News, VA, an original equipment manufacturer ( OEM) providing automated material handling systems to end users. The order is for Laser Guided Vehicle (LGV) controls hardware , software and engineering services totaling approximately $585,000. The Lazerway system will be installed in an automated manufacturing facility which produces CD disks . NDC President Mr. Ralph Dollander states " This order is significant as we continue to pursue qualified OEM's and system integrators who can incorporate Laser guidance technology into their systems to end users. Munck Automation Technology, Inc. is such a company." NDC Automation, Inc. sells hardware, software, and engineering services incorporated into and used to control laser and other Automatic Guided Vehicle Systems (AGVS). NDC's sales are targeted to OEM's 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: Gayle Hentz Ralph Dollander Investor Relations President 16 EX-27 3 EXHIBIT 27
5 0000859621 NDC AUTOMATION, INC. 9-MOS NOV-30-1996 DEC-01-1996 AUG-31-1996 153,232 0 958,975 45,000 1,332,473 2,545,011 2,330,115 1,056,884 4,016,123 1,344,481 0 0 0 34,534 1,517,378 4,016,123 4,098,724 4,098,724 2,582,449 2,582,449 1,513,711 0 (151,991) (149,427) (28,829) (120,598) 0 0 0 (120,598) (.03) (.03)
-----END PRIVACY-ENHANCED MESSAGE-----