-----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, PMuzUNQjvVaPR3yTGdSOgpPicnFURtbBKrJ6ieriF1jsTRx/et+A4engktrFm5Td Q6+dlZSo21JmwKEuxPC1rw== 0000950168-96-001208.txt : 19960708 0000950168-96-001208.hdr.sgml : 19960708 ACCESSION NUMBER: 0000950168-96-001208 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960705 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: 96591519 BUSINESS ADDRESS: STREET 1: 3101 LATROBE DRIVE CITY: CHARLOTTE STATE: NC ZIP: 28211 BUSINESS PHONE: 7043621115 10QSB 1 NDC AUTOMATION, INC. 10-QSB U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to Commission file number 0-18253 NDC Automation, Inc. (Exact name of small business issuer as specified in its charter) Delaware 56-1460497 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 3101 Latrobe Drive, Charlotte, North Carolina 28211-4849 (Address of principal executive offices) (704) 362-1115 (Issuer's telephone number) N/A (Former name, former address, and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes___No___ APPLICABLE ONLY TO CORPORATE ISSUERS As of June 15, 1996, there were 3,453,451 shares of common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes___; No X This document contains 20 pages. The Exhibit Index is located on page 15. I N D E X Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets 3- 4 May 31, 1996 (Unaudited) and November 30, 1995 5 Condensed Consolidated Statements of Operations Three and six months ended May 31, 1996 and May 31, 1995 6 (Unaudited) Condensed Consolidated Statements of Cash Flows Six months ended May 31, 1996 and May 31, 1995 (Unaudited) Notes to Condensed Consolidated Financial Statements 7 -8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 (a) Exhibits -- Press Releases and other Exhibits 13 (b) Reports on Form 8-K 13 SIGNATURES 14 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements NDC AUTOMATION, INC. CONDENSED BALANCE SHEETS
May 31, November 30, 1996 1995 (Unaudited) - ---------------------------------------------------------------------------------------------------- ASSETS (Note 4) CURRENT ASSETS Cash and cash equivalents $ 520,470 $ 164,781 Accounts receivables, net 1,009,578 1,203,137 Inventories 1,354,542 1,929,649 Costs and estimated earnings in excess of billings on uncompleted contracts 95,997 123,260 Prepaid expenses and other assets 38,195 31,333 - ---------------------------------------------------------------------------------------------------- Total current assets $ 3,018,782 $ 3,452,160 - ---------------------------------------------------------------------------------------------------- OTHER ASSETS $ 16,281 $ 16,281 - ---------------------------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT Land $ 300,000 $ 300,000 Building and improvements 1,126,623 1,126,623 Furniture, fixtures and office equipment, 408,113 389,709 Machinery and equipment 371,512 371,512 Software 104,416 103,557 Vehicles 36,729 30,754 - ---------------------------------------------------------------------------------------------------- $ 2,347,393 $ 2,322,155 Less accumulated depreciation 1,043,928 964,600 - ---------------------------------------------------------------------------------------------------- $ 1,303,465 $ 1,357,555 - ---------------------------------------------------------------------------------------------------- INTANGIBLE ASSETS $ 207,441 $ 258,454 - ---------------------------------------------------------------------------------------------------- ==================================================================================================== $ 4,545,969 $ 5,084,450 ====================================================================================================
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
May 31, November 30, 1996 1995 (Unaudited) - -------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable, bank $ 1,002,273 $ 644,375 Current maturities of long- term debt (Note 4) 65,818 288,324 Accounts payable and accrued expenses; including affiliates $ 42,040 at 1996 and $25,104 at 1995 522,555 1,002,574 Billings in excess of costs and estimated earnings on uncompleted contracts 122,086 277,527 Deferred income taxes 12,216 12,216 - -------------------------------------------------------------------------------------------------------------- Total current liabilities $ 1,724,948 $2,225,016 - -------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT (Note 4 ) $ 1,136,861 $ 1,170,311 - -------------------------------------------------------------------------------------------------------------- DEFERRED INCOME TAXES $ 16,613 $ 16,613 - -------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, par value $.01 per share authorized 1,000,000 shares; no shares issued $ - $ - Common stock, par value $.01 per share; 11,000,000 shares authorized at 1996 and 1995; 3,453,451 shares Issued at 1996 and 1995 34,534 34,534 Additional paid-in capital 4,211,566 4,211,566 Accumulated deficit (2,578,553) (2,573,590) - -------------------------------------------------------------------------------------------------------------- $ 1,667,547 $ 1,672,510 ============================================================================================================== $ 4,545,969 $ 5,084,450 ==============================================================================================================
4 NDC AUTOMATION, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended May 31, May 31, May 31, May 31, 1996 1995 1996 1995 - -------------------------------------------------------------------------------------------------------------------------- Net revenues $ 1,465,721 $ 2,749,939 $ 2,953,895 $ 4,247,170 Cost of goods sold 878,123 1,630,694 1,800,232 2,604,017 - ------------------------------------------------------------------------------------------------------------------------- Gross profit $ 587,598 $1,119,245 $ 1,153,663 $ 1,643,153 - -------------------------------------------------------------------------------------------------------------------------- Operating expenses: Selling $ 180,764 $ 192,971 $ 343,444 $ 446,334 General and administrative 384,804 838,375 702,335 1,673,842 Research and development 605 56,083 3,943 97,254 - -------------------------------------------------------------------------------------------------------------------------- $ 566,173 $1,087,429 $ 1,049,722 $ 2,217,430 - -------------------------------------------------------------------------------------------------------------------------- Operating income (loss) $ 21,425 $ 31,816 $ 103,941 $ (574,277) - -------------------------------------------------------------------------------------------------------------------------- Net interest income (expense): Interest income $ - $ 2,450 $ - $ 4,933 Interest expense (57,879) (168,412) (108,904) (325,713) - -------------------------------------------------------------------------------------------------------------------------- $ (57,879) $ (165,962) $ (108,904) $ (320,780) - -------------------------------------------------------------------------------------------------------------------------- Loss before income taxes $ (36,454) $ (134,146) $ (4,963) $ (895,057) Federal and state income taxes (Note 2) - 39,451 - 49,160 - -------------------------------------------------------------------------------------------------------------------------- Net loss $ (36,454) $ (173,597) $ (4,963) (944,217) ========================================================================================================================== Weighted average number of common shares outstanding 3,453,451 2,902,514 3,453,451 2,902,514 - -------------------------------------------------------------------------------------------------------------------------- Loss per common share (Note 3) $ (0.01) $ (0.06) $ (0.00) $ (0.33) ========================================================================================================================== Dividends per common share $ - $ - $ - $ - ==========================================================================================================================
See Notes to Condensed Consolidated Financial Statements 5 NDC AUTOMATION, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended May 31, May 31, 1996 1995 - ---------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY ( USED IN) OPERATING ACTIVITIES $ 278,673 $ 1,586,313 - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS USED IN INVESTING ACTIVITIES Proceeds from sale of property and equipment $ - $ 3,782 Purchase of property and equipment (25,238) (32,113) - ---------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES $ (25,238) $ (28,331) - ---------------------------------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Net borrowings (payments) on revolving credit agreement $ 357,898 $ (1,357,500) Principal payments on long-term borrowings (255,956) (76,203) - ---------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ 101,942 $ (1,433,703) - ---------------------------------------------------------------------------------------------------------------------- Effect of foreign currency exchage rates changes on cash and cash equivalents $ 312 $ (18,731) - ---------------------------------------------------------------------------------------------------------------------- Increase in cash and cash equivalents $ 355,689 $ 105,548 Cash and cash equivalents: Beginning 164,781 256,037 - ---------------------------------------------------------------------------------------------------------------------- Ending $ 520,470 $ 361,585 ====================================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for : Interest $ 93,342 $ 311,232 Income taxes $ - $ (470,515) ======================================================================================================================
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 May 31, 1996, and for all periods presented, have been made. The condensed consolidated financial statements at May 31, 1995 include the accounts of the Company and its wholly-owned subsidiaries, NDC Technology Australia PTY Ltd. and NDC Laser AB. The two subsidiaries were sold November 30, 1995; accordingly, the May 31, 1996 financial statements include only the Company's accounts. All material inter-company balances and transactions have been eliminated in consolidation. The functional currency for the Company's foreign operations is the applicable local currency. The translation of the foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the fiscal year ended November 30, 1995. The results of operations for the three and six months ended May 31, 1996 are not necessarily indicative of the operating results for the full year. Note 2. Income Taxes The Company did not recognize any tax benefits in 1996 domestically for its current loss as all prior taxes have been recognized in the previous financial statements and utilization of operating loss carryforwards in the future are not assured. Income tax expense of $49,160 for the six months ended May 31, 1995 is due primarily to income taxes of one of its foreign subsidiaries. Note 3. Loss per Common Share Loss per common share is computed by dividing net loss applicable to common shareholders by the weighted average common shares outstanding. Options issued pursuant to the Stock Option Plans which are normally considered common stock equivalents, have been excluded, as their inclusion does not dilute the computation beyond the 3% materiality test or their exercise price was above the market price for substantially all of three consecutive months as required. 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 4. Pledged Assets, Notes Payable, Bank and Long-Term Debt The Company has the following notes payable to a bank at May 31, 1996:
Line of credit for $1,050,000 with interest at prime plus 4.00%. Advances under the line of credit will not exceed the lesser of 1) $1,050,000 or 2) the sum of 80% of the Company's current accounts receivable, plus 40% of the book value of its current inventory. The line of credit also contains certain financial covenants to which the Company must adhere. The line will be lowered to $900,000 commencing June 28, 1996. The termination date of the line is November 29, 1996.(1),(2) $ 1,002,273 =================================================================================================================== Long-term debt consists of the following at May 31, 1996: Mortgage note payable to a bank, based on a 7.75% fixed rate. Original principal balance to be repaid in fifty-nine (59) consecutively monthly principal and interest payments of $13,057, with one final payment of approximately $1,025,936 due on February 10, 1998. The note is collaterized by the Company's land and building with a carrying value of $1,082,212. The loan also contains certain financial covenants to which the Company must adhere. $ 1,202,679 Less current maturities: Mortgage $ 65,818 - ------------------------------------------------------------------------------------------------------------------- $ 1,136,861 ===================================================================================================================
(1) The prime rate at May 31,1996 was 8.25%. (2) The line of credit is secured by a first priority security interest in the Company's accounts receivable, inventory, software and patents. Maturities of long-term debt at May 31, 1996 are as follows: Maturities of Year Ending Long-term May 31 Debt - -------------------------------------------------------------------------------- 1997 $ 65,818 1998 1,136,861 1999 - - -------------------------------------------------------------------------------- $1,202,679 ================================================================================ 8 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements (including the notes thereto) presented elsewhere herein. Overview The Company derives virtually all of its revenues from the sale of hardware, software and engineering services in connection with projects incorporating its Automated Guided Vehicle (AGV) control technology and from the sale of its products. For the past several fiscal years, the Company's net revenues from AGV systems, vehicles and technology have been derived primarily from sales to customers serving two industries -- textiles and newspaper publishing. Net revenues in 1995 and during 1996, however, have been less concentrated in these industries as the newspaper industry itself has undergone contraction and the Company has focused its sales efforts away from the textile industry during the Schlafhorst, Inc. arbitration proceedings. The Company's results of operations can be expected to continue to depend substantially upon the capital expenditure levels in those industries and in other industries that it may enter. In addition, during 1995 and early 1996, net revenues derived from RFID products and services have generally declined due to increased competition among RFID suppliers and the decreased demand from the North American automobile industry, which is the primary market for the sale of its RFID systems. The net revenues in RFID were primarily derived from after market sales to existing customers in 1995. The Company assigned the exclusive distribution agreement and manufacturing rights back to Statec Technologies SA, the Company's supplier of such products, in March of 1996. Due to the long sales cycle involved, uncertainties in timing of projects and the large percentage that the dollar amount of a typical project usually bears to the Company's historical and current quarterly and annual net revenues, the Company has experienced, and may be expected to continue to experience, substantial fluctuations in its quarterly and annual results of operations. The Company sells its products and services primarily in two ways. Vehicles, technology and other products and services may be sold in a "project" that becomes an integrated AGV system. "Projects" are undertaken by the Company in cooperation with its customers. The primary business is to sell hardware, software and services to be sold as standard items, with less involvement by the Company in overall system design. The Company generally would recognize lower net revenue but would enjoy a higher gross profit margin percentage in selling standard items, in each case compared to the sale of a project, due to the inclusion in project sales of other vendors' products and services with margins generally lower than the Company's own products and services. Between any given accounting periods, the levels of and mixture of standard item sales and project sales can cause considerable variance in net revenues, gross profit, gross profit margin, operating income and net income. Revenues from standard item sales are recognized upon shipment, while revenues from project sales are recognized under the "percentage of completion" method. Under this method, with respect to any particular customer contract, revenues are recognized as costs incurred relative to each major segment of the project. Although the percentage of completion method will ordinarily smooth out over time the net revenue and profitability effects of large projects, such method nevertheless subjects the Company's results of operations to substantial fluctuations dependent upon the progress of work on project segments. Such segments can differ markedly from one another in amount and in gross profit margin. Project contracts are billed upon attainment of certain "milestones." The Company grants payment terms of 30 to 90 days to its customers. It typically receives a cash advance ranging from 10% to 20% of the total contract amount. Bills are thereafter delivered as milestones are reached. Upon delivery of the project, the customer typically reserves a "retainage" of 10% to 20% pending system acceptance. Notwithstanding the receipt by the Company of cash advances and periodic payments upon reaching project milestones, the Company requires external financing for its costs and estimated earnings in excess of billings on uncompleted contracts, inventories, receivables and other assets. The Company's backlog consists of all amounts contracted to be paid by customers but not yet recognized as net revenues by the Company. 9 RESULTS OF OPERATIONS The table below shows (a) the relationship of income and expense items relative to net revenues, and (b) the change between the comparable prior period and current period, for the three-month and nine-month periods ended May 31, 1996 and 1995, respectively. This table should be read in the context of the Company's condensed consolidated statements of income presented elsewhere herein:
Percentage of Change Period to Period Percentage of Net Revenues Increase(Decrease) - --------------------------------------------------- -------------------------------------------- ---------------------- Three Six Months Months Three Months Six Months Ended Ended May Ended Ended May 31, 31, May 31, May 31, May 31, May 31, 1995 to 1995 to 1996 1995 1996 1995 1996 1996 % % % % % % - --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- Net Revenues 100.0 100.0 100.0 100.0 (46.7) (30.5) Cost of Goods Sold 59.9 59.3 60.9 61.3 (46.2) (30.9) - --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- Gross Profit 40.1 40.7 39.1 38.7 (47.5) (29.8) - --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- Operating expenses: Selling 12.3 7.0 11.6 10.5 (6.3) (23.1) General and administrative 26.3 30.5 23.8 39.4 (54.1) (58.0) Research and development 0.0 2.0 0.1 2.3 (98.9) (95.9) - --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- 38.6 39.5 35.5 52.2 (47.9) (52.7) - --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- Operating income (loss) 1.5 1.2 3.6 (13.5) (32.7) (118.1) Net interest expense: (3.9) (6.0) (3.7) (7.6) (65.1) (66.1) - --------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- Loss before income taxes (2.4) (4.8) (0.1) (21.1) (72.8) (99.4) Federal and state income taxes (benefit) - 1.4 - 1.2 (100.0) (100.0) =================================================== ========== ========== ========== ========== ========== ========== Net Loss (2.4) (6.2) (0.1) (22.3) (79.0) (99.5) =================================================== ========== ========== ========== ========== ========== ==========
Quarter ended May 31, 1996 Compared to the Quarter Ended May 31, 1995 Net revenues decreased by $1,284,218 or 46.7% from $2,749,939 in the earlier period to $1,465,721 in the latter period. The primary reason for the decrease was that the Company had a lower opening backlog at February 28, 1996 compared to the prior year. Cost of goods sold decreased from $1,630,694 to $878,123 or 46.2% due primarily to lower net revenues in 1996. As a percentage of net revenues, cost of goods sold was comparable to 1996. Gross profit decreased by $531,647 or 47.5% from $1,119,245 to $587,598, while gross profit as a percentage of net revenues decreased to 40.7%, from 40.1% due to the same factor. Selling expenses decreased from $192,971 to $180,764, or 6.3% due primarily to lower show and personnel expenses during 1996 compared to 1995. General and administrative expenses decreased from $838,375 to $384,804, or 54.1% due to lower legal and associated expenses related to the resolution of the Schlafhorst, Inc. arbitration case and large overhead reductions due to the Company's restructuring in the last quarter of 1995. During the last quarter in 1995, the Company sold its foreign subsidiaries, NDC Laser was sold to Netzler & Dahlgren Co. A.B. and NDC Technologies Australia was sold to an officer of the Australian company. The Company also sold its laser technology to Netzler and Dahlgren Co. A.B. This allowed the Company to significantly reduce its depreciation and amortization expense in 1996. General and administrative expenses are expected to be significantly lower in 1996 compared to 1995. As a percentage of net revenues, general and administrative expenses decreased from 30.5% to 26.3%. 10 Primarily as a result of the foregoing, operating income decreased by $10,391 or 32.7% from $31,816 in the earlier period to $21,425 in the latter period. Net interest expense decreased from $165,962 to $57,879, a decrease of $108,083. The net decrease is primarily due to lower borrowings compared to the prior year due to a significant cash receipt from the settlement of the Schlafhorst, Inc. arbitration case in the fourth quarter of 1995 and the reduction of current debt resulting from the Company's restructuring. Loss before income taxes decreased by $97,692 from $134,146 to a loss of $36,454, due primarily to the foregoing factors. The Company did not recognize any tax benefits in 1996 domestically for its current loss as all prior taxes have been recognized in the previous financial statements and utilization of operating loss carryforwards in the future are not assured. The income tax expense in 1995 is due primarily to income taxes of one of its foreign subsidiaries. Primarily as a result of the foregoing, net loss decreased by $137,143 from $173,597 to a net loss of $36,454. Backlog. Backlog consists of all amounts contracted to be paid by customers but not yet recognized as net revenues by the Company. At May 31, 1996, the Company had a backlog of approximately $1,450,000 compared to approximately $2,700,000 one year earlier. Substantial fluctuations in backlog are considered normal due to the size of AGV system contracts. Substantial fluctuations in the industry makeup of the Company's backlog also are considered normal. Six Months Ended May 31, 1996 Compared to Six Months Ended May 31, 1995 Net revenues decreased by $1,293,275, or 30.5%, from $4,247,170 in the earlier period to $2,953,895 in the latter period. Cost of goods sold decreased from $2,604,017 to $1,800,232, or 30.9%, due primarily to the lower level of net revenues. As a percentage of net revenues, cost of goods sold decreased from 61.3% to 60.9%. Gross profit decreased by $489,490, or 29.8%, from $1,643,153 to $1,153,663, while gross profit as a percentage of net revenues increased from 38.7% to 39.1%. Selling expenses decreased from $446,334 to $343,444, or 23.1% due to lower show, personnel and general selling expenses. General and administrative expenses decreased from $1,673,842 to $702,335, or 58%, primarily due to the Company's restructuring. Primarily as a result of the foregoing, the operating income for the period was $103,941 compared to an operating loss of $574,277 the prior year. Net interest expense decreased from $320,780 to $108,904, a decrease of 66.1%. The decrease is primarily due to decreased borrowing needs compared to the prior year. Loss before income taxes decreased by $890,094, or 99.4%, from $895,057, to $4,963 due primarily to the foregoing factors. The Company did not recognize any tax benefits in 1996 domestically for its current loss as all prior taxes have been recognized in the previous financial statements and utilization of operating loss carryforwards in the future are not assured. Income tax expense in 1995 of $49,160 is due primarily to income taxes of one of its foreign subsidiaries. Primarily as a result of the foregoing, the net loss decreased by $939,254, or 99.5%, from $944,217 to a net loss of $4,963. Liquidity and Capital Resources. The Company experiences needs for external sources of financing to support its working capital, capital expenditures and acquisition requirements when such requirements exceed its cash generated from operations in any particular fiscal period. The amount and timing of external financing requirements depend significantly upon the nature, size, number and timing of projects and contractual billing arrangements with customers relating to project milestones. The Company has relied upon bank financing under a revolving working capital facility, as well as long-term debt and capital leases and proceeds of its public offerings, to satisfy its external financing needs. During the six months ended May 31, 1996 net cash provided by operating activities was $278,673. The Company reduced its inventory by $575,107 during the six month period ending May 31, 1996 which allowed it to create 11 operating cash flows to reduce current liabilities. The Company continues to operate with the line of credit under modified financial covenants and cash collateral accounts. The net effect of the cash collateral accounts gives the lender the authority to monitor the Company's outgoing cash flows. As of June 15, 1996 the Company had $340,924 available under the current borrowing base calculation. The Company's present line of credit was extended initially from March 31, 1996 to May 31, 1996 at a lending rate of prime plus 3 1/2%. The line was then further extended to November 29, 1996. The new terms of the extension includes 1) an increase in the interest rate to prime plus 4% per annum, 2) the percentage of inventory against which financing is available was reduced to 40% from 50% and 3) the available facility was lowered to a maximum of $1,050,000 from May 31, 1996 through June 27, 1996 and then lowered to $900,000 from June 28, 1996 and thereafter. The Company has entered into discussions with other lenders to replace the current primary lender. The Company has no assurance that such line will be replaced by a new lender. As of May 31, 1996, the Company had successfully negotiated the return of certain excess inventory to Netzler & Dahlgren, thereby reducing excess inventory back to normal operating levels. In addition, the Company eliminated its note payable of $200,000 to Netzler & Dahlgren by reducing such inventory as well as providing engineering services and products to Netzler & Dahlgren. The Company believes that its working capital of $1,293,834 at May 31, 1996 is adequate for it current operations. However, management believes the working capital may be inadequate should the Company not secure a suitable long-term line of credit arrangement. 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders (a) The annual meeting of shareholders of the Company was held on May 10, 1996. (b) The following individuals were elected directors of the Company: Goran P. R. Netzler Ralph Dollander Jan H. L. Jutander Richard Schofield T. Randolph Whitt (c) Other matters voted upon and voting were as follows: (i) Ratification of the selection of McGladrey & Pullen, LLP by the Board of Directors as the Company's independent auditors. For Abstain Against 3,113,484 2,750 26,067 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits -- Copy of Seventh Amendment to the amended and restated loan agreement. Press Releases: 1. Line of Credit Renewed (b) Reports on Form 8-K None. 13 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NDC AUTOMATION, INC. (Registrant) BY: \s\ Ralph Dollander Ralph Dollander President Date: 7/2/96 BY: \s\ Claude Imbleau Claude Imbleau VP - Finance & Administration (Chief Financial Officer) Date: 7/2/96 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 - ------------------ --------------------- ------------------------------------------------------------ ----------- (A) Exhibits: 1. 10 Copy of Seventh Amendment dated May 31,1996 to the amended 16 - 19 and restated Loan Agreement between the Company and ---------- NationsBank of North Carolina, N.A. 2. 99 Press Release Announces Line of Credit received with bank. 20
15 EX-10 2 EXHIBIT 10 SEVENTH AMENDMENT This Seventh Amendment (the "Seventh Amendment") entered into as of May 31, 1996 by and between NDC Automation, Inc. (the "Borrower"), a corporation organized and existing under the laws of the State of Delaware, and having its principal place of business in Charlotte, North Carolina, and NationsBank, N.A. (formerly doing business as NationsBank, N.A. (Carolinas) and as NationsBank of North Carolina, N.A.), a national banking association, (the "Bank") organized and existing under the laws of the United States and having offices in Charlotte, North Carolina. INTRODUCTORY STATEMENT A. The Borrower and the Bank are parties to, among other things, an Amended and Restated Loan Agreement dated July 28, 1994 (the "Restated Loan Agreement"), as amended as of November 30, 1994, as of December 19, 1994, as of March 31, 1995, as of August 30, 1995, as of November 30, 1995 and as of March 31, 1996. B. Borrower has requested and the Bank has agreed to amend the Agreement in the respects set forth herein. NOW, THEREFORE, in consideration of $10.00 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: AGREEMENT 1. Amendment of the Agreement. The Agreement is amended as follows: (a) Article I - Definitions. (i) Section 1.01 shall be amended such that the definition of the term "Borrowing Base" shall mean the sum of: (i) eighty percent (80%) of Eligible Receivables and (ii) forty percent (40%) of Eligible Inventory. (ii) Section 1.01 shall be amended such that the term "Facility A Amount" means: (a) $1,050,000 from May 31, 1996 through June 27, 1996 and (b) $900,000 from June 28, 1996 and thereafter. (iii) Section 1.01 shall be amended such that the term "Termination Date" shall mean November 29, 1996. 16 (b) Article II - Facility A Loans. (i) Section 2.03 is amended in its entirety so that such section now reads as follows: 2.03 Interest Rate. The outstanding principal balance of the Facility A Loans shall bear interest at the Prime Rate plus 4.00% per annum. 2. Collateral Audit. The Bank may in its sole discretion retain a professional consultant (the "Consultant") to review the financial records and operations of the Borrower and to audit the collateral for the Borrower's obligations to the Bank. The Borrower shall cooperate fully with the Consultant, which cooperation shall include, but shall not be limited to, allowing the Consultant full access to the Borrower's financial and business records and allowing the Consultant reasonable opportunities to observe the Borrower's operations and to inspect, examine and verify the collateral for Borrower's obligations to the Bank. The Borrower shall reimburse the Bank for the Bank's cost of retaining the Consultant upon demand therefor by the Bank. 3. Extension Fee. Simultaneously with the execution of this Seventh Amendment, the Borrower shall pay to the Bank for the Bank's own account a Termination Date extension fee in the amount of $9,000. 4. Waivers and Release of Claims. As additional consideration to the execution, delivery, and performance of this Seventh Amendment and to induce the Bank to enter into this Seventh Amendment, the Borrower represents and warrants that (a) the Borrower knows of no defenses, counterclaims or rights of setoff to the payment of any indebtedness of the Borrower to the Bank, and (b) the Borrower for itself, its Subsidiaries, their respective representatives, agents, officers, directors, employees, shareholders, and successors and assigns, hereby fully, finally, completely, generally and forever releases, discharges, acquits, and relinquishes the Bank and its respective representatives, agents, officers, directors, employees, shareholders, and successors and assigns, from any and all claims, actions, demands, and causes of action of whatever kind or character, whether joint or several, whether known or unknown, for any and all injuries, harm, damages, penalties, costs, losses, expenses, attorneys' fees, and/or liability whatsoever and whatever incurred or suffered by any of them prior to the execution of this Seventh Amendment related to any indebtedness of the Borrower to the Bank under the Original Loan Documents of the Amended Loan Documents. Notwithstanding any provision of this Seventh Amendment or any other Amended Loan Document or Original Loan Document, this Section shall remain in full force and effect and shall survive the delivery of this Seventh Amendment and the making, extension, renewal, modification, amendment or restatement of any thereof. 17 5. Representations and Warranties. The Borrower hereby represents and warrants to the Bank that as of the date hereof the Restated Loan Agreement has been reexamined and: (a) The representations and warranties made by the Borrower in Article VIII thereof are true on and as of the date hereof; (b) The Borrower has the power and authority to enter into this Seventh Amendment and to perform its obligations herein and has by proper corporate action duly authorized the execution and delivery of this Seventh Amendment and ratified and affirmed the enforceability of the other Amended Loan Documents; (c) Neither the execution and delivery of this Seventh Amendment, nor the performance of the obligations herein violates or will violate any law or governmental order, conflicts or will conflict with any provision of any charter document or bylaw of the Borrower or any material term or provision of any agreement or instrument to which the Borrower is a party or by which the Borrower is bound, or constitutes or will constitute a breach of or a default under any such agreement or instrument; and (d) No consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Borrower is required as a condition to the execution, delivery or performance of this Seventh Amendment by the Borrower. 6. Full Force and Effect. The Restated Loan Agreement, as amended hereby, is hereby confirmed to continue in full force and effect. All terms defined in the Restated Loan Agreement and not defined herein shall have the meaning herein as in the Restated Loan Agreement. 7. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 8. Expenses. Upon demand therefor, the Borrower shall pay all out-of-pocket expenses incurred by the Bank in connection with the negotiation, drafting and execution of the transaction set forth herein, plus all unpaid out-of-pocket expenses otherwise due under the Loan Documents, all including, without limitation, reasonable fes and expenses of the Bank's counsel. 18 IN WITNESS WHEREOF, the parties have executed this Seventh Amendment all this of the day and year first above written. NDC AUTOMATION, INC. ATTEST: By \s\ Tom Watson BY \s\ of Claude Imbleau Claude Imbleau, Vice President Title Secretary (Corporate Seal) NATIONSBANK, N.A. ATTEST: By (\s\ of Assistant Secretary) By (\s\ of John C. Calabrese) Title Asst. Secretary John C. Calabrese, Vice President (Corporate Seal) 19 EX-99 3 EXHIBIT 99 FOR IMMEDIATE RELEASE May 31, 1996 NDC AUTOMATION, INC. ANNOUNCES LINE OF CREDIT RENEWED WITH BANK Charlotte, NC, May 31, 1996, NDC Automation,Inc. ( OTC Bulletin Board Symbol "AGVS") announced that it's line of credit with NationsBank, N. A. has been extended for another six (6) month period. The Borrowing Agreement was amended as follow: 1) The new termination date shall be November 29,1996. 2) Inventory financing will be reduced to 40% from 50%, of eligible inventory, while retaining 80% accounts receivable financing.. . 3) The interest rate shall increase to prime plus 4.00%, from prime plus 3 1/2% per annum. 4) The available facility will be lowered from a maximum of $1,200,000 to a maximum of $1,050,000 from May 31,1996 through June 27,1996 and $900,000 from June 28, 1996 and thereafter. Management is pleased the agreement has been renewed with terms which are adequate for the Company's current financing needs. NDC Automation,Inc. was formed in 1982 to acquire, develop, Market, and sell hardware, software, and engineering services incorporated into and used to control automatic and laser guided vehicle systems. ### ================================================================================ For further information contact: Ralph Dollander or Gayle Hentz President Investor Relations 704/362-1115 20 -----END PRIVACY-ENHANCED MESSAGE-----