-----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, Dcl7rtV2EyHtFv5zbJXVHsVAnaThhsZFEZCleFBZWzid9obmRcV3zou1Y6z0VMlt BE78ZW1EN468fcP3Zw2eBg== 0000950168-97-001814.txt : 19970710 0000950168-97-001814.hdr.sgml : 19970710 ACCESSION NUMBER: 0000950168-97-001814 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970709 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: 97637772 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, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to Commission file number 0-18253 NDC Automation, Inc. (Exact name of small business issuer as specified in its charter) Delaware 56-1460497 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3101 Latrobe Drive, Charlotte, North Carolina 28211-4849 (Address of principal executive offices) (704) 362-1115 (Issuer's telephone number) N/A (Former name, former address, and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes___No___ APPLICABLE ONLY TO CORPORATE ISSUERS As of June 15, 1997, there were 3,453,451 shares of common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes___; No X This document contains 21 pages. The Exhibit Index is located on page 16 . I N D E X
Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets 3- 4 May 31, 1997 (Unaudited) and November 30, 1996 5 Condensed Statements of Operations Three and Six months ended May 31, 1997 and May 31, 1996 6 (Unaudited) Condensed Statements of Cash Flows Six months ended May 31, 1997 and May 31, 1996 (Unaudited) Notes to Condensed 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 14 Item 2. Changes in Securities 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 (a) Exhibits -- Press Releases and other Exhibits 14 (b) Reports on Form 8-K 14 SIGNATURES 15
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements NDC AUTOMATION, INC. CONDENSED BALANCE SHEETS May 31, November 30, 1997 1996 (Unaudited) - ------------------------------------------------------------------------- ASSETS (Note 4) CURRENT ASSETS Cash and cash equivalents $ 145,545 $ 399,501 Accounts receivables, net 935,865 1,526,390 Inventories 1,003,796 1,126,398 Costs and estimated earnings in excess of billings on uncompleted contracts 93,937 49,277 Prepaid expenses and other assets 49,074 51,935 - ------------------------------------------------------------------------- Total current assets $2,228,217 $3,153,501 - ------------------------------------------------------------------------- OTHER ASSETS $ 21,281 $ 21,281 - ------------------------------------------------------------------------- PROPERTY AND EQUIPMENT Land $ 300,000 $ 300,000 Building and improvements 1,126,623 1,126,623 Furniture, fixtures and office equipment, 229,948 226,559 Machinery and equipment 153,572 153,572 Software 102,650 102,650 Vehicles -- 23,629 - ------------------------------------------------------------------------- $1,912,793 $1,933,033 Less accumulated depreciation 734,888 693,234 - ------------------------------------------------------------------------- $1,177,905 $1,239,799 - ------------------------------------------------------------------------- INTANGIBLE ASSETS $ 97,303 $ 142,213 - ------------------------------------------------------------------------- $3,524,706 $4,556,794 ========================================================================= Note: The Condensed Balance sheet at November 30, 1996 has been taken from the Audited Financial Statements at that date. See Notes to Condensed Financial Statements 3
May 31, November 30, 1997 1996 (Unaudited) - --------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable, bank $ 457,395 $ 847,217 Current maturities of long- term debt (Note 4) 61,590 68,410 Accounts payable and accrued expenses; including affiliates $266,126 at 1997 and $422,050 at 1996 514,359 702,305 Billings in excess of costs and estimated earnings on uncompleted contracts 54,257 118,657 - --------------------------------------------------------------------------------------- Total current liabilities $ 1,087,601 $ 1,736,589 - --------------------------------------------------------------------------------------- LONG-TERM DEBT (Note 4 ) $ 1,075,105 $ 1,102,264 - --------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, par value $.01 per share authorized 1,000,000 shares; no shares issued $- $- Common stock, par value $.01 per share; 11,000,000 shares authorized at 1997 and 1996; 3,453,451 shares Issued at 1997 and 1996 34,534 34,534 Additional paid-in capital 4,211,566 4,211,566 Accumulated deficit (2,884,100) (2,528,159) - --------------------------------------------------------------------------------------- $ 1,362,000 $ 1,717,941 - --------------------------------------------------------------------------------------- $ 3,524,706 $ 4,556,794 =======================================================================================
4 NDC AUTOMATION, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended MAY 31, May 31, MAY 31, May 31, 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------------- Net revenues $ 1,219,782 $ 1,465,721 $ 2,211,735 $ 2,953,895 Cost of goods sold 749,706 878,123 1,343,538 1,800,232 - ---------------------------------------------------------------------------------------------------- Gross profit $ 470,076 $ 587,598 $ 868,197 $ 1,153,663 - ---------------------------------------------------------------------------------------------------- Operating expenses: Selling $ 194,043 $ 180,764 $ 347,543 $ 343,444 General and administrative 398,111 384,804 775,787 702,335 Research and development -- 605 -- 3,943 - ---------------------------------------------------------------------------------------------------- $ 592,154 $ 566,173 $ 1,123,330 $ 1,049,722 - ---------------------------------------------------------------------------------------------------- Operating income (loss) $ (122,078) $ 21,425 $ (255,133) $ 103,941 - ---------------------------------------------------------------------------------------------------- Net interest income (expense): Interest income $ -- $ -- $ -- $ -- Interest expense (37,151) (57,879) (100,808) (108,904) - ---------------------------------------------------------------------------------------------------- $ (37,151) $ (57,879) $ (100,808) $ (108,904) - ---------------------------------------------------------------------------------------------------- Loss before income taxes $ (159,229) $ (36,454) $ (355,941) $ (4,963) Federal and state income taxes (Note 2) -- -- -- -- - ---------------------------------------------------------------------------------------------------- Net loss $ (159,229) $ (36,454) $ (355,941) $ (4,963) =================================================================================================== Weighted average number of common shares outstanding 3,453,451 3,453,451 3,453,451 3,453,451 - ---------------------------------------------------------------------------------------------------- Loss per common share (Note 3) $ (0.05) $ (0.01) $ (0.10) $ (0.00) =================================================================================================== Dividends per common share $ -- $ -- $ -- $ -- ===================================================================================================
See Notes to the Condensed Financial Statements 5 NDC AUTOMATION, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended MAY 31, May 31, 1997 1996 - ----------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 164,421 $ 278,673 - ----------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment $ 5,035 $ - Purchase of property and equipment (3,527) (25,238) - ----------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES $ 1,508 $ (25,238) - ----------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Net borrowings (payments) on revolving credit agreement $(389,822) $ 357,898 Principal payments on long-term borrowings (33,979) (255,956) - ----------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $(423,801) $ 101,942 - ----------------------------------------------------------------------------------------- Effect of foreign currency exchage rates changes on cash and cash equivalents $ 3,916 $ 312 - ----------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents $(253,956) $ 355,689 Cash and cash equivalents: Beginning 399,501 164,781 - ----------------------------------------------------------------------------------------- Ending $ 145,545 $ 520,470 ========================================================================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for : Interest $ 113,620 $ 93,342 Income taxes $ - $ - =========================================================================================
See Notes to the Condensed Financial Statements 6 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 May 31, 1997, and for all periods presented, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these condensed financial statements be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended November 30, 1996. The results of operations for the three months ended May 31, 1997 are not necessarily indicative of the operating results for the full year. Note 2. Income Taxes The Company did not recognize any tax benefits in 1997 for its current loss as all prior taxes were recognized in the previous financial statements and utilization of operating loss carryforwards in the future are not assured to be realized. 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 all of three consecutive months. 7 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 May 31, 1997:
The Loan Agreement allows the Company to borrow up to $1,250,000 and bears interest at the lender's prime rate plus 1.50% per annum for the first $450,000 outstanding and prime plus 2.75% per annum for amounts in excess of $450,000. The Company's loan outstanding shall not exceed the lesser of (a) U.S. $1,250,000 or (b) 80% of qualified accounts receivable plus 50% of all Eligible Inventory (as defined in the loan agreement) with a $400,000 cap on loans based on Eligible Inventory. The loan agreement is further secured by 1) an Inventory Repurchase Agreement and 2) a $450,000 irrevocable Letter of Credit issued by a Swedish Bank. Netzler & Dahlgren Co. AB (NDCab) is obligated to repay the letter of credit bank any funds it disburses under the Letter of Credit. The Company is ultimately responsible to repay to NDCab for any amounts it pays in reimbursing the Letter of Credit Bank . The Repurchase Agreement guarantees that NDCab will repurchase on certain conditions up to $400,000 worth of inventory, thereby providing funds to pay lender should the Company be in default on its loan obligations. The termination date of the Loan Agreement is April 1, 1998 or upon demand by the Bank. (1)(2) $ 457,395 =============================================================================================================================== Long-term debt consists of the following at May 31, 1997: Mortgage note payable to a bank, based on a 9.5% fixed rate. Original principal balance to be repaid in twenty-three (23) consecutive monthly principal and interest payments of $13,912, with one final payment of approximately $1,007,403 due on May 16, 1999. The note is collaterized by the Company's land and building with a carrying value of $ 1,040,900 The loan also contains certain financial covenants to which the Company must adhere. As of May 31, 1997, the Company obtained waivers for certain financial covenants as specified by the Mortgage note agreement. $ 1,136,695 Less current maturities: 61,590 - ------------------------------------------------------------------------------------------------------------------------------- $ 1,075,105 ===============================================================================================================================
(1) The prime rate at May 31, 1997 was 8.50% (2) The line of credit is secured by a first priority security interest in the Company's accounts receivable, inventory, software and intangibles. Maturities of long-term debt at May 31, 1997 are as follows: Year Ending May 31, - --------------------------------------------------- 1998 $ 61,590 1999 1,075,105 ==================================================== $ 1,136,695 ==================================================== 8 NOTES TO CONDENSED FINANCIAL STATEMENTS Note 5. Reassignment of Statec Exclusive Distribution Agreement On February 21, 1996 the Company and Statec Technologies, SA ("Statec") entered into a letter of understanding under which the Company reassigned to Statec the exclusive distribution and manufacturing rights for North America effective March 1, 1996. The assignment was contingent upon Statec making the following payments for a total of $183,000, excluding inventory. The payments required were as follows: o A down payment of $15,000 was due March 1, 1996 o Twenty-eight (28) monthly installments of $6,000 each, commenced March 1, 1996 for a total of $168,000. o Statec was to repurchase all NDCA inventory related to Statec products at the Company's net book value plus $15,000. All the inventory was to be repurchased on or before November 30, 1996. The transfer permitted the Company to reduce associated fixed overhead expenses with the sale of such products and allowed the Company to focus solely on its AGVS product line. As of January 31, 1997 Statec was in default under the agreement by not repurchasing the inventory worth $71,272 and had not paid the agreed monthly installments of $6,000 since December 1996. There remained a total number of 19 unpaid installment equaling $114,000. In February of 1997, the Company was notified that Statec became subject to a court-ordered liquidation proceeding under French law. On March 27, 1997, the Company received $47,884 for the repurchase of all NDCA inventory related to Statec products and $20,000 per the Supplemental Agreement between the Company and Statec. The amounts paid were approved by the French court and terminate all obligations from Statec to the Company per the Supplemental Agreement. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the financial statements (including the notes thereto) presented elsewhere herein. Overview The Company derives virtually all of its revenues from the sale of hardware, software and engineering services in connection with projects incorporating its Automated Guided Vehicle (AGV) control technology. Prior to 1996 the Company was also actively involved in the sale of Radio Frequency Identification (RFID) products. In years prior to 1995 the Company's net revenues from AGV systems, vehicles and technology were derived primarily from sales to customers serving two industries -- textiles and newspaper publishing. Net revenues since 1995 however have been less concentrated in these industries. The Company's results of operations can be expected to continue to depend substantially upon the capital expenditure levels in those industries and in other industries that it may enter. In addition, during 1996, the Company refocused its sales efforts to existing Original Equipment Manufacturers (OEM) and system integrators in the AGV systems industry. This strategy significantly reduces the potential of selling systems to end users as the Company wants to avoid competing with its potential customers. The Company believes it must convert several OEM and system integrators away from their AGV technology to the Company's technology to increase its present market share. Such technology transfers can take one to several years before the Company will recognize revenues from such relationships. Such customers must also replace in volume and margin what the Company could otherwise obtain selling direct to end users. There can be no assurances that such a strategy will be successful in the short or long term. In any event, the Company believes it must continue to expose end users to the Company's products by means of trade shows and industry advertising. Due to the long sales cycle involved, uncertainties in timing of projects, and the large dollar amount a typical project usually bears to the Company's historical and current quarterly and annual net revenues, the Company has experienced, and may be expected to continue to experience, substantial fluctuations in its quarterly and annual results of operations. The Company sells its products and services primarily in two ways. Vehicles, technology and other products and services may be sold in a "project" that becomes an integrated AGV system. The primary business is to sell hardware, software and services as standard items, with less involvement by the Company in overall system design. The Company generally would recognize lower net revenue but would realize a higher gross profit margin percentage in selling standard items, in each case compared to the sale of a project, due to the inclusion in project sales of other vendors' products and services with margins generally lower than the Company's own products and services. Between any given accounting periods, the levels of and mixture of standard item sales and project sales can cause considerable variance in net revenues, gross profit, gross profit margin, operating income and net income. Revenues from standard item sales are recognized upon shipment, while revenues from project sales are recognized under the "percentage of completion" method. Under this method, with respect to any particular customer contract, revenues are recognized as costs are incurred relative to each major segment of the project. Although the percentage of completion method will ordinarily smooth out over time the net revenue and profitability effects of large projects, such method nevertheless subjects the Company's results of operations to substantial fluctuations dependent upon the progress of work on project segments. Such segments can differ markedly from one another in amount and in gross profit margin. Project contracts are billed upon attainment of certain "milestones." The Company grants payment terms of 30 to 90 days to its customers. It typically receives a cash advance ranging from 10% to 20% of the total contract amount. Bills are thereafter delivered as milestones are reached. Upon delivery of the project, the customer typically reserves a "retainage" of 10% to 20% pending system acceptance. 10 Notwithstanding the receipt by the Company of cash advances and periodic payments upon reaching project milestones, the Company requires external financing for its costs and estimated earnings in excess of billings on uncompleted contracts, inventories, receivables and other assets. The Company's backlog consists of all amounts contracted to be paid by customers but not yet recognized as net revenues by the Company. RESULTS OF OPERATIONS The table below shows (a) the relationship of income and expense items relative to net revenues, and (b) the change between the comparable prior period and current period, for the three-month and six-month periods ended May 31, 1997 and 1996, respectively. This table should be read in the context of the Company's condensed statements of income presented elsewhere herein:
Percentage of Change Period to Period Percentage of Net Revenues Increase (Decrease) - ----------------------------------------------------------------------------------------------- Three Three Three Months Six Months Months Months Ended Ended Ended Ended May 31, May 31, May 31, May 31, May 31, May 31, 1997 1996 1997 1996 1996 1996 % % % % % % - ------------------------------ --------- --------- --------- --------- --------- --------- Net Revenues 100.0 100.0 100.0 100.0 (16.8) (25.1) Cost of Goods Sold 61.5 59.9 60.7 60.9 (14.6) (25.4) - ------------------------------ --------- --------- --------- --------- --------- --------- Gross Profit 38.5 40.1 39.3 39.1 (20.0) (24.7) - ------------------------------ --------- --------- --------- --------- --------- --------- Operating expenses: Selling 15.9 12.3 15.7 11.6 7.4 1.1 General and administrative 32.6 26.3 35.1 23.8 3.5 10.5 Research and development - - - 0.1 (100.0) (100.0) - ------------------------------ --------- --------- --------- --------- --------- --------- 48.5 38.6 50.8 35.5 4.6 7.0 - ------------------------------ --------- --------- --------- --------- --------- --------- Operating income (loss) (10.0) 1.5 (11.5) 3.6 * * Net interest expense: (3.0) (3.9) (4.6) (3.7) (35.8) (7.4) - ------------------------------ --------- --------- --------- --------- --------- --------- Loss before income taxes (13.0) (2.4) (16.1) (0.1) 336.8 7071.9 Federal and state income taxes (benefit) - - - - NA NA ============================== ========= ========= ========= ========= ========= ========= Net Loss (13.0) (2.4) (16.1) (0.1) 336.8 7071.9 ============================== ========= ========= ========= ========= ========= =========
* Because the data changes from negative to positive, or from positive to negative, the percentage of change is not meaningful. Quarter ended May 31, 1997 Compared to the Quarter Ended May 31, 1996 Net revenues decreased by $245,939 or 16.8% from $1,465,721 in the earlier period to $1,219,782 in the latter period. The contributing factors which resulted in lower revenues were a low opening backlog at February 28, 1997 and the Company's continued focus on strategic sales alliances with Original Equipment Manufacturers (OEM) and system integrators exclusively rather than occasionally dealing direct with end users as in prior years. Cost of goods sold decreased from $878,123 to $749,706 or 14.6% due primarily to lower net revenues in 1997. As a percentage of net revenues, cost of goods sold was comparable to 1996. Gross profit decreased by $117,522 or 20.0% from $587,598 to $470,076, while gross profit as a percentage of net revenues decreased to 38.5% from 40.1% due to the same factor. 11 Selling expenses increased from $180,764 to $194,043, or,7.4%, due primarily to higher advertising and marketing expenses during 1997 compared to 1996. General and administrative expenses increased from $384,804 to $398,111, or 3.5% due primarily to additional engineering training expenses. As a percentage of net revenues, general and administrative expenses increased from 26.3% to 32.6%. Primarily as a result of the foregoing, operating income decreased by $143,503 from $21,425 in the earlier period to an operating loss of $122,078 in the latter period. Net interest expense decreased from $57,879 to $37,151, a decrease of $20,728. The net decrease is primarily due to lower borrowings compared to the prior year. Loss before income taxes increased by $122,775 from $36,454 to a loss of $159,229, due primarily to the foregoing factors. The Company did not recognize any tax benefits in 1997 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. Primarily as a result of the foregoing, net loss increased by $122,775 from $36,454 to a net loss of $159,229. 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, 1997, the Company had a backlog of approximately $830,000 compared to approximately $1,450,000 one year earlier. Although substantial fluctuations in backlog are considered normal due to the size of AGV system contracts, the present low backlog is primarily the result of the Company's focus away from sales to end users, which sales had in prior years constituted a sizable portion of the Company's revenues and backlog.. Substantial fluctuations in the industry makeup of the Company's backlog also are considered normal. Six Months Ended May 31, 1997 Compared to Six Months Ended May 31, 1996 Net revenues decreased by $742,160, or 25.1%, from $2,953,895 in the earlier period to $2,211,735 in the latter period. The decline is primarily due to the Company's marketing and sales strategy to target OEM customers and system integrators only versus selling directly to end users. Cost of goods sold decreased from $1,800,232 to $1,343,538, or 25.4%, due primarily to the lower level of net revenues. As a percentage of net revenues, cost of goods sold decreased from 60.9% to 60.7%. Gross profit decreased by $117,522, or 24.7%, from $1,153,663 to $868,197, while gross profit as a percentage of net revenues increased from 39.1% to 39.3%. Selling expenses increased from $343,444 to $347,543, or 1.1% . General and administrative expenses increased from $702,335 to $775,787, or 10.5%, primarily due to increased expenses relating to personnel and a higher provision for bad debts compared to the prior year. Primarily as a result of the foregoing, the operating loss for the period was $255,133 compared to an operating income of $103,941 the prior year. Net interest expense decreased from $108,904 to $100,808, a decrease of 7.4%. The decrease is primarily due to lower borrowings in the current year compared to the prior year. Loss before income taxes increased by $350,978, from a loss of $4,963 in 1996, to a loss of $355,941 due primarily to the foregoing factors. The Company did not recognize any tax benefits in 1997 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. Primarily as a result of the foregoing, the net loss increased by $350,978, from $4,963 to a net loss of $355,941. 12 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 six months ended May 31, 1997 net cash provided by operating activities was $164,421. The primary reason for the positive cash flow by operating activities was that the Company significantly reduced its account receivable balance from November 30, 1996 by collections. The positive cash flow from operating activities allowed the Company to further reduce its Note payable to its primary lender by $389,822. The Company entered into a new Inventory and Accounts Receivable Loan and Security Agreement ("Loan Agreement") February 28, 1997 with the National Bank of Canada and National Canada Business Corp. (herein collectively called the "Lender"). The Loan Agreement allows the Company to borrow up to a maximum of $1,250,000. The new agreement provides for an increase in potential available credit compared to the maximum available credit of $750,000 under the prior credit arrangement with NationsBank, N.A. Loans made under the new Loan Agreement are evidenced by a demand promissory Note. The Loan Agreement allows the Company to borrow pursuant a borrowing formula which is secured by Company's personal property as collateral. The Company's outstanding loan amount at any one time shall not exceed the lesser of (a) U.S $1,250,000 or (b) 80% of qualified accounts receivable ( as defined in the Loan Agreement) plus 50% of all eligible inventory ( as defined in the Loan Agreement) with a $400,000 cap on loans based on eligible inventory. The borrowed funds will bear interest at the Lender's prime rate plus 1.5% per annum for the first $450,000 outstanding and prime plus 2.75% per annum for amounts outstanding in excess of $450,000. The Loan Agreement is further secured by 1) an Inventory Repurchase Agreement and 2) a $450,000 irrevocable Letter of Credit issued by a Swedish bank. Netzler & Dahlgren Co. AB (NDCab) is obligated to repay the letter of credit bank any funds it disburses under the Letter of Credit. The Company is ultimately responsible to repay to NDCab for any amounts it pays in reimbursing the letter of credit bank. The Repurchase Agreement guarantees that NDCab will repurchase from the Company on certain conditions up to $400,000 worth of inventory, thereby providing funds to pay the Lender should the Company default on its loan obligations. The lender, at its discretion, may demand payment upon written notice to the Company . The maturity date of the Agreement is April 1, 1998 or upon demand earlier by the Bank. During May 1997, the Mortgage Loan maturity date was extended from February 10, 1998 to May 16,1999. The interest rate on the note was increased to 9.5% from 7.75% . The combined principle and interest monthly payment was changed to $13,912 compared to $13,057 per the prior agreement. The above transaction increases the Company's working capital per generally accepted accounting principles. 13 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 April 25, 1997. (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 3,219,501 4,265 32,555 (ii) Ratification of 1997 stock option plan. For Abstain Against 2,200,824 985,437 70,060 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Mortgage Note modification Agreement Press Releases: None (b) Reports on Form 8-K None. 14 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: July 9,1997 BY: /s/ Claude Imbleau Claude Imbleau VP - Finance & Administration (Chief Financial Officer) Date: July 9,1997 15 EXHIBIT INDEX The following documents are included in this Form 10-QSB as an Exhibit:
Designation Number Under Item 601 of Page Exhibit Number Regulation S-K Exhibit Description Number - --------------- -------------- ------------------------------------------------------------------------------ ------- (A) Exhibits: 1. 10 North Carolina Note Modification Agreement between First Citizens Bank & Trust 17-21 Company and NDC Automation, Inc. dated May 16,1997. 2. 27 Financial schedule 22
16 EX-10 2 EXHIBIT 10 EXHIBIT 10 FIRST-CITIZENS BANK & TRUST COMPANY North Carolina Note Modification Agreement May 16, 1997 Account# Future Obligation $1,136,695.60 Obligator# 41730 Current Obligation # 17616 Outstanding Principal Balance as of the Date of this Agreement The Parties to this Note Modification Agreement (this "Agreement") are: o First Citizens Bank & Trust Company ("Lender"), the current owner and holder of the Note and secured party under the terms of each instrument which secures repayment of the Note. o The following parties (collectively, the "Borrower," whether one or more), each of whom is obligated under the terms of the Note as an original maker or as one who has assumed the obligations of an original maker: NDC Automation, Inc. o The following parties (collectively, the "Guarantor" whether one of more), if any, each of whom is obligated as a surety, guarantor or endorser of the Note: - -------------------------------------------------------------------------------- ORIGINAL NOTE - -------------------------------------------------------------------------------- This Agreement modifies, amends and supplements that note (the "Note") identified as follows: Original amount of Note $1,387,000.00 Original date of Note February 17, 1993 Original payee: The original payee of the Note was First Citizens Bank & Trust Company, unless the following blank is completed, in which case the original payee was: Original maker(s): The original makers(s) of the Note was/were the Borrower(s) identified in this Agreement unless the following blank is completed, in which case the original maker(s) was/were the following. - -------------------------------------------------------------------------------- Borrower has requested that the Note and other Loan Documents be modified. Lender has agreed to the modifications, subject to the terms and provisions of this Agreement. For and in consideration of the premises, the parties to this Agreement agree that the terms of the Note identified above and all other Loan Documents executed in connection therewith are modified, amended and supplemented as of the date of the Agreement (unless otherwise specified) to effect the following changes to the loan transaction: (Complete applicable sections. Sections not completed are deleted.) 1. REPAYMENT OF THE INDEBTEDNESS EVIDENCED BY THE NOTE. The outstanding principal balance on the Note shall be payable, with interest (and with credit insurance premiums, if applicable) as follows: Interest Rate: Interest shall accrue on the outstanding principal balance (Complete Section A or B or C) (A) At the rate of 9.50 percent per annum. (B) At the rate of______ percent per annum above (or below, if checked) the Prime Rate established from the time to time by First Citizens Bank & Trust Company (the "Index Rate"), not to exceed a maximum total rate of ________percent per annum nor fall below a minimum total rate of _______percent per annum. Unless otherwise checked below, increases or decreases in the total 17 rate due to changes in the Index Rate shall become effective on the calendar day each such change in the Index Rate occurs. Increases or decreases in the total rate due to changes in the Index Rate shall be effective on the first day of the calendar month following the month in which such change in the Index Rate occurs. If multiple changes in the Index Rate during a calendar month, the Index Rate on the last day of the calendar month shall be applicable. (C) See Note Modification Agreement Addendum for interest rate provisions, the terms and provisions of which are incorporated herein by reference. Payment Terms: (Complete Section A or B or C.) (A) Amortizing Payments. The outstanding principal balance and accrued interest (and credit insurance premiums, if applicable shall be payable in 23 equal consecutive monthly (monthly, quarterly, semi-annually, etc.) payments of $ 13,911.64 each commencing on June 16, 1997 (the "Regular Payment Commencement Date") and on the same day of each such calendar period thereafter and one final payment of the balance due on May 16, 1999 (hereinafter referred to as "Maturity"), unless sooner paid. The payment amount specified includes principal and interest (and credit insurance premiums, if applicable). Prior to the Regular Payment Commencement Date, interest on the outstanding principal balance (and credit insurance premiums, if applicable) shall be payable____________(monthly, quarterly, semi-annually, etc.) beginning and consecutively on the same day of each such calendar period thereafter until the Regular Payment Commencement Date. (B) Principal Payment Terms. The outstanding principal balance shall be: (Complete Section 1 or 2 or 3) (1) Payable in one single payment on _______________________ (hereafter referred to as "Maturity). (2) Payable in ______________equal consecutive _______________(monthly, quarterly, semi-annually, etc.) payments of $__________each commencing on __________________and on the same day of each such calendar period thereafter and one final payment of the balance due on _____________________(hereafter referred to as "Maturity"), unless sooner paid. (3) Payable on demand. (Note: This option is available only for letter of credit). Interest and Insurance Premium Payment Terms: In addition to the principal payment(s) identified above, interest on the outstanding principal balance (and credit insurance premiums, if applicable) shall be (Complete Section 1 or 2). (1) Payable in full on demand (if the Note contains a call provision or is payable on demand) or at Maturity, whichever first occurs. (2) Payable ________________ (monthly, quarterly, semi-annually. etc.) beginning _________________and consecutively on the same day of each such calendar period thereafter, with any accrued but unpaid interest (and credit insurance premiums, if applicable) due and payable in full on demand (if the Note contains a call provision or is 18 payable on demand) or at Maturity, whichever first occurs. (C) Other. See Note Modification Agreement Addendum for payment terms the terms and provisions of which are incorporated herein by reference. 2. CALL PROVISION. At any time after __________________Lender has the right and option to "call" the Note due and payable and to demand payment in full of the entire unpaid principal balance due under the Note, together with all interest and other charges then accrued hereunder. 3. MODIFICATION FEE. A loan modification fee of $ 2,840.00 is due and payable to Lender upon the signing of this Agreement. 4. COLLATERAL. All collateral securing the Note shall remain as collateral for the Note as modified by this Agreement unless expressly released by Lender. The following ADDITIONAL collateral and/or instruments is/are being given to secure repayment of the Note. 5. OTHER MODIFICATIONS: ALL OF THE "ADDITIONAL PROVISIONS" APPEARING ON THE REVERSE SIDE OF THIS AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE AND ARE A MATERIAL PART OF THIS AGREEMENT. IN WITNESS WHEREOF, (i) each individual signing this Agreement has hereunto set his or her hand and adopted as his or her seal the word "SEAL" set forth beside his or her name, intending this to be a sealed instrument, (ii) Lender has caused this Agreement to be executed in its name by a person or persons duly authorized, and (iii) each other entity has caused this Agreement to be executed in its name by a person or persons duly authorized and, if a corporation, its corporate seal to be affixed hereto, otherwise having adopted the word "SEAL" set forth beside its name as its seal, intending this to be a sealed instrument, all by authority duly given and alias of the date of this Agreement. - -------------------------------------------------------------------------------- BUSINESS ENTITY INDIVIDUALS - -------------------------------------------------------------------------------- NDC AUTOMATION, INC.________________(SEAL) __________________________________ BY _/s/ Ralph G. Dollander__________(SEAL) __________________________________ TITLE President ____________________(SEAL) __________________________________ BY /s/ Claude Imbleau_____________(SEAL) __________________________________ TITLE _CFO__________________________(SEAL) __________________________________ - -------------------------------------------------------------------------------- 19 See Signature Addendum for additional signatures of Borrower(s) and Guarantor(s) - -------------------------------------------------------------------------------- INSURANCE DISCLOSURE - -------------------------------------------------------------------------------- Credit insurance is not required to obtain credit and will not be provided unless I sign and agree to pay the additional cost. I want the following insurance. Type Premium ___ Credit Life $___________________ ___ Joint Credit Life $___________________ ___ Credit Disability/Accident TOTAL $___________________ & Health ("A&H") (Available only on Borrower A) ________________________________________________________________________________ Borrower A Age/DOB ________________________________________________________________________________ Borrower B (Joint Life Only) Age/DOB - ------------------------------------------------------ Note: Credit insurance is available only for an individual borrower and co-borrowers - it is NOT available for guarantors or endorsers. Credit insurance is not available for directors or officers of corporations, partners or limited partners of partnerships, or managers or members of limited liability companies unless such persons sign individually as makers or co-makers on the Note. A&H Insurance is not available for commercial purpose loans. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO CREDIT INSURANCE - -------------------------------------------------------------------------------- I do not desire any credit insurance. I request the cancellation of any credit insurance presently in force for my loan and the refund of any unearned premium. ________________________________________________________________________________ Borrower A ________________________________________________________________________________ Borrower B - -------------------------------------------------------------------------------- PROPERTY INSURANCE If I am required to have property insurance for this loan, I may furnish it through existing policies I own or I may obtain it through any insurer authorized to transact insurance business in this state. If I get the insurance through Lender. I will pay $___________________ for a policy period of ___________________ months. AGREED: FIRST CITIZENS BANK & TRUST COMPANY (SEAL) BY: /s/ Tim Ignasher___________________________________ Sales Associate # 18869 Bldg. # 030 - -------------------------------------------------------------------------------- 20 Additional Provisions of Note Modification 1. DEFINITION OF TERMS: References to "First Citizens Bank & Trust Company" include any financial institution merged with and into First Citizens Bank & Trust Company. The term "Note" as used in this Agreement referred to the original Note identified on the front of this Agreement. The Note, an instruments executed to secure repayment of the Note, all loan commitment letters and loan agreements, and all other loan documents executed in connection With the loan transaction evidenced by the Note are collectively referred to in this Agreement as the Loan Documents." The terms "Note" and "Loan Documents" include any prior renewals, extensions or modifications thereof. 2. PRIME RATE: The Lender's "Prime Rate ` of interest, as, that term is used in this Agreement, means that rate established from time to time by Lender and identified as such within Lender's offices.. The term "Prime Rate" shall be used as a mean's of identifying a rate of interest index and not as a representation by Lender that the Prime Rate is necessarily the lowest or most favorable rate of interest offered to borrowers by Lender generally, and no Borrower or Guarantor shall have any claim or right of action based on such premise. 3. VARIABLE RATE: Notwithstanding any other provision of the Note or this Agreement, if the interest rate increases during the remaining term of the loan, Lender may (1 ) increase the amount of the periodic payment to have the loan fully amortized at Maturity, (2) extend the Maturity, or (3) require the resulting increase to be paid at Maturity, or any combination of the foregoing, all in Lender's discretion as determined from time to time by Lender. (Except that if this loan is subject to the federal Truth in Lending Act and its implementing regulations, the foregoing shall not be enforced in conflict with the disclosures given pursuant thereto.). 4. LATE CHARGE: Unless the principal and interest are repayable in one single payment, there shall be a late charge of 4% of the unpaid balance or any payment past due for 15 days or more. If this is a modification of a "PayAnyDay" loan (i.e., a loan under which payments are not past due until the last day of the calendar month in which a payment is due, then a payment will be considered "late" for purposes of assessing a late charge if a payment is made after the last day of the calendar month in which it is due. 5. FUTURE MODIFICATIONS: Any subsequent modifications, Extensions or renewals of the Note or any of the other Loan Documents may, at Lender's option, be made on Lender's standard forms. Such forms may identity Lender as the original lender, payee on the Note, beneficiary of any deed of trust, and secured party in any security instrument, notwithstanding the fact that First Citizens Bank & Trust Company may not have been designated as the original payee or secured party in the original Loan Documents. 6. SECURITY INSTRUMENTS: This Agreement amends, modifies, and supplements any instrument given to secure repayment of the Note to reflect the changes to the loan transaction described herein. (in addition, each instrument given to secure repayment of the Note is hereby amended by adding the Following language thereto: "The terms or the Note evidencing the indebtedness secured by this instrument may be modified from time to time by agreement between the parties obligated thereon and the holder of the Note, including, but not limited to, a modification to increase (the interest rate, to change the payment and/or payment schedule, to change the maturity dale, and/or to extend time for the payment of such indebtedness and such Note as so modified shall continue to be secured hereby and with a priority as or the date of this instrument (or, if this instrument has been recorded, as of the date of recordation), regardless of whether any such modification is reduced to writing or recorded." 7. NOTE MODIFICATION AGREEMENT ADDENDUM: Any Note Modification Agreement Addendum incorporated into this Agreement by reference shall be fully binding on each Borrower and Guarantor, jointly and severally, when signed or initialed by or on behalf of any one or more of the Borrowers. 8. LOAN DOCUMENTS: All of the Loan Documents are hereby modified, amended and supplemented to the extent necessary to effect the changes to the loan transaction specified in this Agreement. The terms of the Note and all other Loan Documents remain unchanged and in full force and effect, except as modified by this Agreement. 9. LIABILITY OF PARTIES: The Note, as modified by this Agreement, shall be the joint and several obligation of each Borrower, regardless of whether such Borrower was an original maker of the Note. Each Guarantor (whether surety, guarantor or endorser) consents to the terms of this Agreement and agrees to be bound by the terms of this Agreement as a part of the Guarantor's continuing obligation. Sureties, guarantors and endorsers who do not sign this Agreement will nonetheless be bound by the terms of this Agreement as a part of their continuing obligation. This Agreement shall not release or diminish the liability of any surety, guarantor or endorser. 10. MISCELLANEOUS: This Agreement shall be binding upon, and inure to the benefit of, the parties to this Agreement and their successors-in-interest. This Agreement is not a novation, rather, it constitutes a modification to the (terms of an existing contractual relationship between the parties and is not intended as a cancellation of the original debt or the creation of a new debt. The parties to this instrument confirm and ratify the terms of the Note and all other Loan Documents, as modified by this Agreement. 21 EX-27 3 FDS -- NDC AUTOMATION, INC.
5 0000859621 NDC AUTOMATION, INC. 6-MOS NOV-30-1997 DEC-01-1996 MAY-31-1997 145,545 0 1,000,865 65,000 1,003,796 2,228,217 1,912,793 734,888 3,524,706 1,087,601 0 0 0 34,534 1,327,466 3,524,706 2,211,735 2,211,735 1,343,538 1,343,538 1,123,330 0 100,808 (355,941) 0 (355,941) 0 0 0 (355,941) (0.10) (0.10)
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