0001021408-01-507834.txt : 20011010 0001021408-01-507834.hdr.sgml : 20011010 ACCESSION NUMBER: 0001021408-01-507834 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010831 FILED AS OF DATE: 20011009 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NDC AUTOMATION INC CENTRAL INDEX KEY: 0000859621 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] 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: 1754299 BUSINESS ADDRESS: STREET 1: 3101 LATROBE DR CITY: CHARLOTTE STATE: NC ZIP: 28211 BUSINESS PHONE: 7043621115 10QSB 1 d10qsb.txt NDC AUTOMATION / TRANSBOTICS CORP. U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 2001 -------------------------------------------------------------------------------- [_] 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) 3400 Latrobe Drive, Charlotte, North Carolina 28211 -------------------------------------------------------------------------------- (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 August 31, 2001, there were 3,586,451 shares of common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes___; No X --- I N D E X
Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets August 31, 2001 (Unaudited) and November 30, 2000 3-4 Condensed Statements of Operations Three and Nine months ended August 31, 2001 and August 31, 2000 (Unaudited) 5 Condensed Statements of Cash Flows Nine months ended August 31, 2001 and August 31, 2000 (Unaudited) 6 Notes to Condensed Financial Statements 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Changes in Securities and use of proceeds 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 (a) Exhibits -- Press Releases and other Exhibits 17 (b) Reports on Form 8-K 17 SIGNATURES 18
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements NDC AUTOMATION, INC. CONDENSED BALANCE SHEETS
August 31, November 30, 2001 2000 (Unaudited) ------------------------------------------------------------------------------------------------------------------ ASSETS (Note 4) CURRENT ASSETS Cash and cash equivalents $ 19,130 $ 4,767 Accounts receivables, net 773,385 833,481 Inventories 358,538 371,723 Costs and estimated earnings in excess of billings on uncompleted contracts 128,440 39,968 Prepaid expenses and other assets 65,573 41,108 ------------------------------------------------------------------------------------------------------------------ Total current assets $ 1,345,066 $ 1,291,047 ------------------------------------------------------------------------------------------------------------------ PROPERTY AND EQUIPMENT Land $ - $ 300,000 Building and improvements - 1,126,623 Furniture, fixtures and office equipment, 123,323 148,143 Machinery and equipment 80,334 79,021 ------------------------------------------------------------------------------------------------------------------ $ 203,657 $ 1,653,787 Less accumulated depreciation 85,087 640,724 ------------------------------------------------------------------------------------------------------------------ $ 118,570 $ 1,013,063 ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------ $ 1,463,636 $ 2,304,110 ==================================================================================================================
Note: The Condensed Balance sheet at November 30, 2000 has been taken from the Audited Financial Statements at that date. See Notes to Condensed Financial Statements 3
August 31, November 30, 2001 2000 (Unaudited) ------------------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable, bank (Note 4) $ - $ 293,082 Current maturities of long-term debt (Note 4) 228,892 369,858 Accounts payable and accrued expenses; including affiliates $172,516 at 2001 and $121,075 at 2000 564,143 763,772 Billings in excess of costs and estimated earnings on uncompleted contracts 301,939 182,610 Income Tax payable 9,000 - ------------------------------------------------------------------------------------------------------------------ Total current liabilities $ 1,103,974 $ 1,609,322 ------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT (Note 4) $ - $ 988,702 ------------------------------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT) 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 2001 and 2000; 3,586,451 shares issued at 2001 and 2000 35,864 35,864 Additional paid-in capital 4,260,236 4,260,236 Accumulated deficit (3,936,438) (4,590,014) ------------------------------------------------------------------------------------------------------------------ $ 359,662 $ (293,914) ------------------------------------------------------------------------------------------------------------------ $ 1,463,636 $ 2,304,110 ==================================================================================================================
4 NDC AUTOMATION, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended August 31, August 31, August 31, August 31, 2001 2000 2001 2000 ------------------------------------------------------------------------------------------------------------------------------ Net revenues $ 1,319,630 $ 1,040,700 $ 4,189,687 $ 3,598,462 Cost of goods sold 892,958 867,375 2,581,470 2,646,568 ------------------------------------------------------------------------------------------------------------------------------ Gross profit $ 426,672 $ 173,325 $ 1,608,217 $ 951,894 ------------------------------------------------------------------------------------------------------------------------------ Net gain from sale of real property (Note 5) $ - $ - $ 581,023 $ - ------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Selling $ 139,444 $ 182,077 $ 489,471 $ 545,168 General and administrative 315,576 326,068 898,272 1,006,538 Research and development 6,950 - 80,562 - ------------------------------------------------------------------------------------------------------------------------------ $ 461,970 $ 508,145 $ 1,468,305 $ 1,551,706 ------------------------------------------------------------------------------------------------------------------------------ Operating income (loss) $ (35,298) $ (334,820) $ 720,935 $ (599,812) Net interest income(expense): Interest income 2,092 - 4,613 - Interest expense (7,569) (68,130) (62,972) (171,394) ------------------------------------------------------------------------------------------------------------------------------ (5,477) (68,130) (58,359) (171,394) ------------------------------------------------------------------------------------------------------------------------------ Income (Loss) before income taxes $ (40,775) $ (402,950) $ 662,576 $ (771,206) Federal and state income taxes (Note 2) 9,000 - 9,000 - ------------------------------------------------------------------------------------------------------------------------------ Net Income ( Loss) $ (49,775) $ (402,950) $ 653,576 $ (771,206) ============================================================================================================================== Weighted average number of common shares outstanding 3,586,451 3,586,451 3,586,451 3,586,451 ------------------------------------------------------------------------------------------------------------------------------ Income (Loss) per common share - basic (Note 3) $ (0.01) $ (0.11) $ 0.18 $ (0.22) Income (Loss) per common share - diluted (Note 3) $ (0.01) $ (0.11) $ 0.18 $ (0.22) ============================================================================================================================== Dividends per common share $ - $ - $ - $ - ==============================================================================================================================
See Notes to the Condensed Financial Statements 5 NDC AUTOMATION, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended August 31, August 31, 2001 2000 --------------------------------------------------------------------------------------------- NET CASH USED IN OPERATING ACTIVITIES $ (138,811) $ (704,107) --------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment $ 1,603,825 $ - Purchase of property and equipment (32,406) (88,456) --------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES $ 1,571,419 $ (88,456) --------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Net borrowings (payments) on revolving credit agreement $ (293,082) $ 325,139 Principal payments on long-term borrowings (1,129,668) (160,871) Proceeds from current and long-term borrowings 606,047 --------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ (1,422,750) $ 770,315 --------------------------------------------------------------------------------------------- Effect of foreign currency exchange rates changes on cash and cash equivalents $ 4,505 $ (5,852) --------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents $ 14,363 $ (28,100) Cash and cash equivalents: Beginning 4,767 45,240 --------------------------------------------------------------------------------------------- Ending $ 19,130 $ 17,140 ============================================================================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for: Interest $ 70,479 $ 160,403 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. d/b/a Transbotics Corporation (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 cash flows at August 31, 2001, 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, 2000. The results of operations for the nine months ended August 31, 2001 are not necessarily indicative of the operating results for the full year. Note 2. Income Taxes The Company did not recognize any income tax benefits or expense in 2000. The Company has recorded income taxes in the current year related to temporary differences that resulted from the sale of the building during March 2001 (see Note 5). The Company continues to have loss carryforwards that are not assured to be realized. Note 3. Earnings (loss) per common share: The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS No.128) Earnings Per Share, which supersedes APB Opinion No. 15. SFAS No. 128 requires the presentation of earnings per share by all entities that have common stock or potential common stock, such as options, warrants, and convertible securities, outstanding that trade in a public market. Basic per share amounts are computed, generally, by dividing net income or loss by the weighted-average number of common shares outstanding. Diluted per share amounts assume the conversion, exercise, or issuance of all potential common stock instruments unless the effect is antidilutive, thereby reducing a loss or increasing the income per common share. The Company had options outstanding at August 31, 2001 and August 31, 2000 to purchase a total of 90,617 and 134,092 shares of common stock, respectively, at a weighted-average exercise price of varying amounts. The inclusion of those potential common shares in the calculation of diluted loss per share would have an antidilutive effect. Therefore, basic and diluted loss per share amounts are the same in 2001 and 2000. 7 NOTES TO CONDENSED FINANCIAL STATEMENTS Note 4. Pledged Assets, Note Payable, Bank and Long-Term Debt Note payable to Netzler & Dahlgren Co AB, based on a 4.50% fixed rate from November 30, 2000 until March 31, 2001 and then 9.0% fixed rate from April 1, 2001 thru June 30, 2002. Balance to be repaid in consecutive monthly principal payments of 238,103 Swedish Krona starting April 1, 2001, or approximately US$24,269 depending on the exchange rate at time of payment, plus interest. The note was collaterized by the Company's land and building until the sale as per Note 5, since the sale the Note is collaterized by the Company's accounts receivable. $ 228,892 ------------------------------------------------------------------------------- 228,892 Less current maturities: 228,892 ------------------------------------------------------------------------------- $ - =============================================================================== 8 NOTES TO CONDENSED FINANCIAL STATEMENTS Note 5. Sale of land and building The Company closed on the sale of the land and building in March 2001 for $1,600,000 and realized a gain of $581,023 after deducting moving expenses of approximately $30,000. Proceeds from the sale were used to retire the the mortgage debt and the Company's bank credit line. The pay off of the credit line permitted the termination of Netzler & Dahlgren Letter of Credit to the bank. NDCA also applied approximately $80,000 from the sale proceeds against current payables to Netzler & Dahlgren. Further, the Company receivables will be pledged to Netzler and Dahlgren to secure its note receivable from the Company until its note is paid in full. To replace its existing facility, the Company entered into a five year lease agreement at 3400 Latrobe Drive for a 13,000 square foot facility costing approximately $11,000 per month. Note 6. Continued operations In the past years the Company has suffered operating losses but currently has an operating income. This left the Company with a deficit and negative working capital prior to the sale of its land and building (see Note 5). Due to the losses, lender contacts have indicated that it would take time for the Company to reestablish a line of credit. This raises substantial doubt about the Company's ability to continue as a going concern. Management has made the following actions in an attempt to increase revenues and minimize losses. . Establish and develop strategic alliances with selected customers . Pursue AGV system business in selected market niches . Grow the distribution business by adding new supplementary products . Expand the aftermarket sales business The Company has been successful during the first nine months of the 2001 year with bookings in excess of $ 5 million. The Company continues to explore raising additional equity and/or debt to ensure the viability of its operations and potential growth opportunities. There can be no assurance that the Company can successfully meet the objectives of any such activities. 9 Note 7. Commitments At August 31, 2001, the Company had no outstanding forward exchange contracts. These contracts are purchased as needed from time to time to hedge identifiable foreign currency commitments. The Company leases property and equipment under long-term operating leases expiring on various dates through April, 2006. In March 2001 the Company entered into a long term lease for its current facility. The monthly expense for this facility is currently $10,664 but will increase 4% on each anniversary date until the lease expires. The Company presently has a total rental expense of $15,773 per month. Minimum rental commitments under long-term operating leases at August 31, 2001 were as follows: 2001 $ 48,774 2002 191,288 2003 161,491 2004 159,857 2005 163,913 2006 71,029 ============ $ 796,352 ============ The Company has an employment contract with the President which provides for a minimum annual base salary of $110,000. The base salary is subject to annual reviews. The contract expires on March 1, 2002. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the financial statements (including the notes thereto) presented elsewhere herein. Overview The Company derives virtually all of its revenues from the sale of hardware, software and engineering services in connection with projects incorporating its Automated Guided Vehicle (AGV) control technology. In prior years the Company's net revenues from AGV systems, vehicles and technology were derived primarily from sales to customers serving a limited number of industries - automotive, food and paper, textiles and newspaper publishing. 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. Due to the long sales cycle involved, uncertainties in timing of projects, and the large dollar amount a typical project usually bears to the Company's historical and current quarterly and annual net revenues, the Company has experienced, and can be expected to continue to experience, substantial fluctuations in its quarterly and annual results of operations. The Company sells its products and services primarily in two ways. Vehicles, technology and other products and services may be sold in a "project" that becomes an integrated AGV system. The other way is to sell hardware, software and services as standard items, with less involvement by the Company in overall system design. The Company generally would recognize lower net revenue but would realize a higher gross profit margin percentage in selling standard items, in each case compared to the sale of a project, due to the inclusion in project sales of other vendors' products and services with margins generally lower than the Company's own products and services. Between any given accounting periods, the levels of and mixture of standard item sales and project sales can cause considerable variance in net revenues, gross profit, gross profit margin, operating income and net income. Revenues from standard item sales are recognized upon shipment, while revenues from project sales are recognized under the "percentage of completion" method. Under this method, with respect to any particular customer contract, revenues are recognized as costs are incurred relative to each major component of the project. Although the percentage of completion method will ordinarily smooth out over time the net revenue and profitability effects of large projects, such method nevertheless subjects the Company's results of operations to substantial fluctuations dependent upon the progress of work on project components. Such components can differ markedly from one another in amount and in gross profit margin. Project contracts are billed upon attainment of certain "milestones." The Company grants payment terms of 30 to 90 days to its customers. It typically receives a cash advance ranging from 10% to 30% of the total contract amount. Bills are thereafter delivered as milestones are reached. Upon delivery of the project, the customer typically reserves a "retainage" of 10% to 20% pending system acceptance. Notwithstanding the receipt by the Company of cash advances and periodic payments upon reaching project milestones, the Company requires external financing for its costs and estimated earnings in excess of billings on uncompleted contracts, inventories, receivables and other assets. The Company's backlog consists of all amounts contracted to be paid by customers but not yet recognized as net revenues by the Company. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS ================================================================================ Strategy diversification: Management has taken the following actions in an attempt to increase revenues and minimize losses: . Establish and develop strategic alliances with selected customers . Pursue AGV system business in selected market niches . Grow the distribution business by adding supplementary products . Expand the aftermarket sales business The Company continues to explore raising additional equity and/or debt to ensure the viability of its operations and potential growth opportunities. (See Liquidity and Capital Resources for further information). Forward-looking statements: This report (including information included or incorporated by reference herein) contains certain forward-looking statements with respect to the financial condition, results of operation, plans, objectives, future performance and business of the Company. These forward-looking statements involve certain risk and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: a) Revenues from end user systems sales, new OEMs and new niches may be lower than expected or delayed. b) The Company might be unable to raise the additional working capital needed, directly or through a business combination, to finance the current business strategy. c) General economic or business conditions, either nationally or in the markets in which the Company is doing business, may be less favorable than expected resulting in, among other things, a deterioration of market share or reduced demand for its products. 12 RESULTS OF OPERATIONS The table below shows (a) the relationship of income and expense items relative to net revenues, and (b) the change between the comparable prior period and current period, for the three-month and nine month periods ended August 31, 2001 and 2000, 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 Months Nine Months Months Nine Months Ended Ended Ended Ended August 31, August 31, August 31, August 31, August 31, August 31, 2001 2000 2001 2000 2000 to 2001 2000 to 2001 % % % % % % ----------------------------------------------------------------------------------------------------------------------- Net Revenues 100.0 100.0 100.0 100.0 26.8 16.4 Cost of Goods Sold 67.7 83.4 61.6 73.5 2.9 (2.5) ---------------------------------------------------------------------------------------------------------------------- Gross Profit 32.3 16.6 38.4 26.5 146.2 68.9 ---------------------------------------------------------------------------------------------------------------------- Net gain on sale of real property - - 13.9 - NA NA ---------------------------------------------------------------------------------------------------------------------- Operating expenses: Selling 10.6 17.5 11.7 15.1 (23.4) (10.2) General and administrative 23.9 31.3 21.4 28.0 (3.2) (10.8) Research and development .5 - 1.9 - NA NA ---------------------------------------------------------------------------------------------------------------------- 35.0 48.8 35.0 43.1 (9.1) (5.4) ---------------------------------------------------------------------------------------------------------------------- Operating income (loss) (2.7) (32.2) 17.3 (16.6) (89.5) * Net interest expense: (0.4) (6.5) (1.4) (4.8) (92.0) (65.9) ---------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes (3.1) (38.7) 15.9 (21.4) (89.9) * Federal and state income taxes (benefit) .7 - .2 - - - ---------------------------------------------------------------------------------------------------------------------- Net Income (loss) (3.8) (38.7) 15.7 (21.4) (89.9) * =======================================================================================================================
* Because the data changes from negative to positive, or from positive to negative, the percentage of change is not meaningful. Quarter ended August 31, 2001 compared to the Quarter Ended August 31, 2000 Net revenues increased by $278,930 or 26.8% from $1,040,700 in the earlier period to $1,319,630 in the latter period. The increase is primarily due to the increased project AGV system sales compared to the prior year. Cost of goods sold increased from $867,375 to $892,958 or 2.9% due primarily to higher revenues. As a percentage of net revenues, cost of goods sold decreased to 67.7% compared to 83.4% in 2000. Gross profit increased by $253,347 or 146.2% from $173,325 to $426,672, while gross profit as a percentage of net revenues increased to 32.3% from 16.6% due to the lower cost on third party purchases in projects in current year compared to the prior year and better margins on its engineering revenues. The Company also experienced lower cost for goods that were imported due to a strong US dollar. Selling expenses decreased from $182,077 to $139,444 or 23.4% primarily due to lower personnel and travel expenses compared to the prior year. General and administrative expenses decreased from $326,068 to $315,576, or 3.2% compared to the prior year. As a percentage of net revenues, general and administrative expenses 13 decreased from 31.3% to 23.9%. The Company continued to invest in the development of new products to expand its product line in the current quarter while no such investments were made in the prior year. Primarily as a result of the foregoing, operating loss decreased by $299,522 from an operating loss of $334,820 in the earlier period to an operating loss of $35,298 in the latter period. Net interest expense decreased from $68,130 to $5,477, a decrease of $62,653. The repayment of the mortgage loan and line of credit in March 2001 significantly lowered the borrowings compared to the prior year resulting in the decline. Income tax expense of $9,000 is due to limitations on the utilization of the net operating loss carryforward. The Company continues to have loss carryforwards that are not assured to be realized. Primarily due to higher gross profit on revenues and the sale of the land and building as described above the Company had a net loss of $49,775 in the three months ended 2001 compared to a net loss of $402,950 in same period of 2000. Backlog. Backlog consists of all amounts contracted to be paid by customers but not yet recognized as net revenues by the Company. At August 31, 2001, the Company had a backlog of approximately $2,060,000 compared to approximately $775,000 one year earlier. Quoting activity for the Company remains good, but there can be no assurances that such activity will result in firm business for the Company. 14 Nine Months Ended August 31, 2001 compared to Nine Months Ended August 31, 2000 Net revenues increased by $591,225, or 16.4%, from $3,598,462 in the earlier period to $4,189,687 in the latter period. The increase is primarily due to the increased project AGV system sales compared to the prior year. Cost of goods sold decreased from $2,646,568 to $2,581,470, or 2.5%, due primarily to lower cost on components in the current year compared to the prior year. The Company also experienced lower cost for goods that were imported due to a strong US dollar. As a percentage of net revenues, cost of goods sold decreased from 73.5% to 61.6%. Gross profit increased by $656,323 or 68.9%, from $951,894 to $1,608,217, while gross profit as a percentage of net revenues increased from 26.5% to 38.4%. The Company closed on the sale of its land and building in March 2001 for $1,600,000 and realized a gain of $581,023 after deducting moving expenses of approximately $30,000 which significantly improved the Company's liquidity (see Note 5). The new location is 3400 Latrobe Drive, Charlotte, NC, 28211. In the new location, the Company is combining all its operations for testing, development, manufacturing and distribution to improve its operating efficiencies. Selling expenses decreased from $545,168 to $489,471 in 2001 due to lower personnel and travel cost. General and administrative expenses decreased from $1,006,538 to $898,272, or 10.8% compared to the prior year. The decrease is primarily due to the following : approximately $35,000 of non recurrent costs relating to the severance payments upon the expiration of the former president's contract in the prior year, $20,000 of nonrecurrent cost in computer maintenance relating to Y2K issues, and other decreases in general & administrative expenses compared to the prior year. The Company continued to invest in the development of new AGV products to expand its product line in the current quarter while no such investments were made in the prior year. Primarily as a result of the foregoing, the operating income for the period was $720,935 compared to an operating loss of $599,812 the prior year. Net interest expense decreased from $171,394 to $58,359, a decrease of 65.9%. The repayment of the mortgage loan and line of credit in March 2001 significantly lowered the borrowings compared to the prior year resulting in the decline. Income tax expense of $9,000 is due to limitations on the utilization of the net operating loss carryforward. The Company continues to have loss carryforwards that are not assured to be realized. Primarily due to the sale of the land and building, higher gross profit and lower general and administrative expenses as described above, the Company's net income increased by $1,424,782 from a net loss of $771,206 in the nine month ended 2000 to a net income of $653,576 in the same period of 2001. 15 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 and private offerings to satisfy its external financing needs. During the nine months ended August 31, 2001 net cash used in operating activities was $138,811. The Company had been operating under adverse liquidity conditions due to negative shareholders' equity and negative working capital through the first quarter of the year. To improve its liquidity the Company sold its office property located at 3101 Latrobe Drive in March 2001 (see note 5) for $1,600,000 and realized a net gain of $581,023. Proceeds from the sale were used to retire the debt from the Company's mortgage lender (First Citizens Bank) in an amount of approximately $885,000, and the Company's bank credit line with Summit Business Capital Corporation (formerly known as National Bank of Canada) was fully paid in an amount of approximately $100,000. The pay off of the credit line permitted the termination of the Letter of Credit given by Netzler & Dahlgren in favor of Summit Business Capital Corporation. NDCA also applied approximately $80,000 from the sale proceeds against current payables to Netzler & Dahlgren. The Company was current at August 31, 2001 on its Note payable to Netzler & Dahlgren. The Company's receivables were pledged to Netzler & Dahlgren to secure its note receivable from the Company. Such pledge is to remain until its note is paid in full. During the fourth quarter of 2000, the Company renegotiated its license agreement with Netzler & Dalgren. The new agreement, dated November 30, 2000, expands the Company's territory to sell to end-users worldwide and to continue to sub-license the technology in North America, but on a non-exclusive basis rather than on an exclusive basis as in prior years. In addition, the note payable to Netzler & Dahlgren of $606,046 has been restructured with the interest lowered from 16% to 9% per annum to improve the Company's ability to repay the debt. Netzler & Dahlgren has indicated to the Company that Netzler & Dahlgren's financial exposure to the Company must be reduced by timely payment of the current note. To ensure prompt payments, the Company must remain profitable or raise additional equity and/or debt to refinance the Note. There are no assurances that the deficiency in the cash flow will not reoccur. The Company had been exploring and continues to explore the possibility of raising additional equity capital or subordinated debt, either directly or possibly through a business combination, in order to improve its financial position and have the working capital to address potential growth opportunities. Management believes that its working capital is currently adequate due to the gains realized in the second quarter of 2001. There can be no assurances that the Company will be successful in maintaining its profitability or raising the additional capital or subordinated debt that may be necessary for the Company's operations. The Company's ability to continue as a going concern would be adversely affected if the Company is not able to consistently improve its working capital and liquidity. 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities and use of proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 1. NDC Automation, Inc. signs representation agreement with RonI LLC Press Releases: 1. NDC Automation, Inc. does business as Transbotics Corporation (b) Reports on Form 8-K None 17 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NDC AUTOMATION, INC. (Registrant) BY: /s/ Claude Imbleau ----------------------------- Claude Imbleau President & CEO BY: /s/ Beverly Love ----------------------------- Beverly Love Controller Date: October 9, 2001 18 EXHIBIT INDEX The following documents are included in this Form 10-QSB as an Exhibit: Designation Number Under Exhibit Item 601 of Page Number Regulation S-K Exhibit Description Number -------------------------------------------------------------------------------- (A) Exhibits: -------------- 1. 10.1 Agreement with RonI LLC 20-24 2. 99.1 NDC changes name to Transbotics 25 19 EX-10.1 3 dex101.txt REPRESENTATION AGREEMENT Exhibit 10.1 REPRESENTATION AGREEMENT BEWEEN TRANSBOTICS CORPORATION AND RonI LLC This agreement (the "Agreement"), entered into as of September 7, 2001 is between TRANSBOTICS Corporation ("TRANSBOTICS") formerly NDC Automation, Inc. doing business at 3400 Latrobe Drive, Charlotte, NC 28211, and RonI LLC. ("RonI") doing business at 9311D Monroe Road, Charlotte NC 28270. Whereas: TRANSBOTICS supplies certain Automated Guided Vehicle System ("AGVS") controls hardware, software and engineering services, excluding any products or services of TRANSBOTICS discontinued after the date hereof, (the "Products") and other proprietary designs. RonI distributes ergonomic lifters and automated equipment under proprietary designs using the trade name Lift-o-Flex and Flex-o-matic. Under this Agreement, TRANSBOTICS will provide engineering, design, supply, implementation and support of AGV Systems, unless otherwise agreed. Under this Agreement, RonI will provide marketing and sales of AGV Systems through their distribution network, unless otherwise agreed. A. Agreement: TRANSBOTICS appoints RonI as an authorized sales representative for Transbotics. RonI accepts such appointment and agrees to act as TRANSBOTICS's representative throughout the term of this Agreement. As to RonI's sale of Products to any customers of the Products, the parties hereto will agree on the handling of such sales on a job-by-job basis. In the case of business opportunities in other areas outside its distribution network, the handling of such opportunities will be handled on a case-to-case basis. Both parties hereto will use their best efforts to promote sales of Products at competitive prices and to inform each other of business opportunities for mutual benefit under this Agreement. B. Covenants of TRANSBOTICS: Pursuant to RonI's written orders for Products, subject to the terms and conditions as mutually agreed between the Parties from case to case (which Terms and Conditions shall supplement but not amend the terms set forth in this agreement), TRANSBOTICS will supply products and any other equipment that is accepted and confirmed by both parties for the sale through RonI according to the timeline agreed to by RonI and TRANSBOTICS. Pursuant to RonI's written orders for Products, subject to the terms and conditions as mutually agreed between the parties from case to case, TRANSBOTICS will provide engineering services for the implementation and support of Products. TRANSBOTICS will set all prices to RonI for the Products that RonI elects to purchase from TRANSBOTICS. TRANSBOTICS agrees to hold RonI, its officers, employees, and agents harmless from and against and indemnify RonI for all liability, loss, costs, expenses or damages caused by reason of any defects in design and manufacture of the Products (except as to those Products designed and manufactured by RonI). TRANSBOTICS is to place RonI on its liability and product liability insurance policy as and additional insured, except for claims arising out of faulty design ---------------------------------------------- or manufacture of RonI's products. TRANSBOTICS will also provide RonI with a --------------------------------- copy of the certificate of workmen's compensation insurance. Upon acceptance and confirmation by TRANSBOTICS, TRANSBOTICS warrants to RonI that TRANSBOTICS's products will comply with all specifications established by RonI's customer. Such warranty shall last for the duration of RonI's warranty ("maximum one year") to its customer pertaining to TRANSBOTICS's equipment. C. Covenants of RonI: RonI shall market and sell the Products as supplied by TRANSBOTICS. All other mechanical equipment that TRANSBOTICS supplies will be marketed on an application per application basis. RonI will use their best efforts to 20 generate sales for TRANSBOTICS. RonI may provide installation services as agreed with TRANSBOTICS and will have sole authority to quote and set the equipment sales price and the installation price as to the Products to the Customers. No representation, warranty, or other commitment by RonI in connection with such re-sales in excess of the terms and conditions agreed between the Parties from case to case will be binding on TRANSBOTICS without its prior written approval. RonI will provide launch support for the Products to the Customers. RonI agrees to fully perform all of its obligations to its customers under contracts for the sales of Products. RonI will work as a team with TRANSBOTICS for all launch support. Launch support is presence of a qualified technician during a time period, to be specified by the customer, at the initial production use of the device. RonI will provide after sales support, including warranty service, to the Customers, and bill the Customers direct for non-warranty services. Warranty service shall be handled in accordance with the warranty terms and procedures agreed upon between the Parties. RonI agrees to hold TRANSBOTICS, its officers, employees, and agents harmless from and against and indemnity TRANSBOTICS, its officers, employees, and agents for all liability, loss, costs, expenses or damages caused by reason of any neglect in installation or service of the Products covered by this Agreement, or the making by RonI of any representation or warranty in excess of those permitted or authorized by TRANSBOTICS under this Agreement or under the terms and conditions agreed between the Parties from case to case, except for claims ----------------- arising out of faulty design or manufacture of TRANSBOTICS products. RonI is to ------------------------------------------------------------------- place TRANSBOTICS on its liability and product liability insurance policy as an additional insured, except for claims arising out of faulty design manufacture ---------------------------------------------------------- of TRANSBOTICS products. RonI will also provide TRANSBOTICS with a copy of the ----------------------- certificate of workmen's compensation insurance. Upon termination of this Agreement, any proprietary information (including trade secrets) developed, owned of licensed by RonI prior to and/or during this Agreement shall remain the exclusive property of RonI. Any proprietary information (including trade secrets) developed by TRANSBOTICS prior to and/or during this Agreement shall remain the exclusive property of TRANSBOTICS. TRANSBOTICS retains the elusive right title worldwide to any improvement, invention, copyright, patent, trade secret or other intellectual property developed or arising from the Products in connection with the parties' performance under this Agreement (a "Development"). Intellectual property in RonI's equipment that interfaces with TRANSBOTICS's products shall belong exclusively to RonI. Intellectual property in TRANSBOTICS's products that interfaces with RonI's equipment shall belong exclusively to TRANSBOTICS. No license is granted by TRANSBOTICS to RonI regarding any Development, and RonI waives and releases, and hereby assigns to TRANSBOTICS, any and all copyright, patent other proprietary right that RonI may hereafter have, directly or indirectly, to any such Development. RonI will market the Products under such product names, trademarks and logos as may be directed by TRANSBOTICS and will identify all Products as those of TRANSBOTICS. TRANSBOTICS will not use RonI's and RonI will not use TRANSBOTICS's trade or service marks without prior written consent of the other party. In the case of technology, equipment or solutions being jointly developed by the two parties and/or in case one party wishes to manufacture on behalf of the other, the terms and conditions for such events shall be agreed upon in a separate agreement. Agreement shall survive the execution of this Agreement and shall continue in full force and effect until the later of the date of the termination of this Agreement or the completion of the parties' obligations hereunder. Notwithstanding anything to the contrary in this paragraph, the following paragraphs shall survive expiration or termination of this Agreement: Fourth paragraph of Section B, Sixth and Seventh paragraph of Section C, Section F, Section K, Section L, Section N and Section O. In addition, all obligations of each party that have accrued prior to termination or that are of a continuing nature will survive such termination. RonI shall notify TRANSBOTICS promptly in writing of any adverse or unexpected results or any actual or potential damage, claim or lawsuit relevant to a Product and, if and to the extent requested by TRANSBOTICS in writing, RonI shall suspend distribution of any Product. RonI will also promptly notify TRANSBOTICS of any infringement of any trademarks, copyrights, patents or other proprietary rights relating to the Products. RonI's failure to give notice to TRANSBOTICS will not affect TRANSBOTICS's obligation under this Agreement, unless TRANSBOTICS can demonstrate actual prejudice rising from the failure to give notice. D. Term of this Contract: This Agreement is for two (2) years commencing on the date first above written and will automatically be renewed year to year unless either party gives at least 90 days written notice of termination. (See Section E). 21 E. Termination: Either party may terminate this Agreement after the two years' initial term for any reason, with at least 90 days prior written notice at any time after such initial term. In addition, this Agreement may be terminated by either party for cause immediately by written notice upon the occurrence of any of the following events: (i) if the other party ceases to do business, or otherwise terminates its business operations; (ii) if the other party breaches any material provision of this Agreement and fails to fully cure such breach within 30 days of its receipt of written notice describing the breach; (iii) if the other party becomes insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against the other; (iv) in case of TRANSBOTICS's termination, misuse of any trademark or logo of TRANSBOTICS; (v) in case of change of control or ownership of the other party, except in the event Gunnar Lofgren remain in control of RonI; or (vi) in case of competitor of one party acquires an equity position exceeding ten (10) percent of the other party. Termination is not the sole remedy under this Agreement and, whether or not termination is effected, all other legal, equitable and contractual remedies will remain available. F. Dispute: Any dispute or controversy which may arise between the parties hereto out of or in relation to or in connection with this Agreement will be submitted to arbitration in the defending party's state, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, before a maximum of three (3) arbitrators appointed pursuant to such rules, and that determination of such arbitrators shall be final, binding and conclusive on the parties. Judgment upon the award of the arbitration may be entered by and court of competent jurisdiction. G. Notice Notice under this Agreement shall be sent in writing by U.S. Mail certified or registered, with return receipt requested, to: Transbotics Corporation 3400 Latrobe Drive Charlotte, NC 28211 Or to: RonI LLC 9311D Monroe Road Charlotte, NC 28270 H. Force Majeure: TRANSBOTICS will not be held responsible or liable for delays in delivery Products where forces outside their control affect the situation, such as fire, war, and other acts of god. In the event of a Product shortage, TRANSBOTICS shall have the right to allocate its available Products among its distributors and other customers (including itself) in such manner, as TRANSBOTICS considers advisable, as long as TRANSBOTICS meets it's agreed upon timeline. I. Entire Agreement: This Agreement, together with the Exhibits hereto, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements with respect to matters provided for herein. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the parties hereto. J. Non Assignable: This Agreement, or any part hereof, shall not be assignable, whether by operation of law otherwise, by either party hereto without the prior written consent of the other party. Any such assignment without consent will be null, void and of no force or effect. K. Exclusive Business Entities: Nothing in this Agreement is intended to be construed so as to constitute RonI and TRANSBOTICS as partners or joint ventures, or either party hereto as the employee, agent, franchisee or legal representative of the other party. The 22 parties hereto expressly understand and agree that RonI is an independent contractor in the performance of each and every part of this Agreement, is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith. TRANSBOTICS is in no matter associated with or otherwise connected with the actual performance of this Agreement on the part of RonI, nor with RonI's employment of other persons or incurring of other expenses. L. Representation or Warranties: RonI agrees not to make any representations or warranties relating to TRANSBOTICS's products other that those expressly set forth in this Agreement without TRANSBOTICS's prior written approval. TRANSBOTICS warrants only to RonI that the Products shipped to RonI by TRANSBOTICS will confirm to the warranties and representations set forth in the terms and conditions agreed between the Parties from case to case. TRANSBOTICS MAKES NO OTHER WARRANTIES WITH RESPECT TO THE PRODUCTS AND DISCLAIMS ALL OTHER WARRANTIES EXPRESS OR IMPLIED INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. M. Conflicting Terms: RonI's purchase orders or mutually agreed change orders shall be subject to all provisions of this Agreement, whether or not the purchase order or change order so states. Except as otherwise agreed by the parties in writing after the date of this Agreement, all purchases of Products from TRANSBOTICS by RonI are subject only to the terms and conditions agreed between the Parties from case to case, notwithstanding any conflicting term herein or in any purchase order of RonI. 23 N. Limited Liability; Waiver: Neither party will be liable for and each party hereby waives and releases any claims against the other party for any indirect, special, incidental, punitive, contingent, or consequential damages, including lot sales, revenues or profit, loss or return of or damage to product, loss of facilities, inventory, work-in-process, or time and materials, or loss of prospective economic advantage, arising from any performance or failure to perform under this Agreement. Notwithstanding the above, neither party waives the right to claim reimbursement by the other party for damage claims of the customer, if customer's claims arise out of the failure to perform by the other party. O. Covenant not to compete: During the term of this Agreement, RonI agrees not to manufacture, market, distribute or sell any other products identical or similar to the Products. P. General: This Agreement will not create any right in or obligation to any third party. This Agreement will be governed by and construed in accordance with the internal laws of the State of North Carolina, without regard to the principles of conflicts of laws thereof. If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be limited or eliminated to the maximum extent possible and this Agreement shall otherwise remain in full force and effect and enforceable. IN WITNESS WHEREOF, each party hereto has caused this Agreement to be executed on its behalf by a duly authorized officer as of the day and year first above written. TRANSBOTICS: RONI: TRANSBOTICS CORPORATION. RONI, LLC BY: ___/s/ Claude Imbleau BY: __/s/ Gunnar Lofgren Claude Imbleau Gunnar Lofgren President President 24 EX-99.1 4 dex991.txt IMMEDIATE RELEASE Exhibit 99.1 FOR IMMEDIATE RELEASE NDC AUTOMATION, INC. DOING BUSINESS AS TRANSBOTICS CORPORATION Charlotte, NC, August 10, 2001, NDC Automation, Inc. (OTC Bulletin Board "AGVS.OB"), www.ndca.com, announced that it is now doing business under ------------ the name "Transbotics Corporation". A formal amendment to its Articles of Incorporation affecting such name change will be submitted to the Shareholders for their approval at the next annual meeting in May 2002. "The new name will assist us in creating a unique identity as we continue to expand the services we offer to our existing customers and potential market" says Claude Imbleau President of NDC Automation, Inc. Our specialty for over 20 years is Automatic Guided Vehicle (AGV) systems or Transportation Robots, with an emphasis on complete customer satisfaction through quality products and a professional staff. Transbotics provides consulting, engineering services and distributes an integrated package of controls technology for creating and servicing AGV systems, generally utilized in material handling applications. Transbotics locally distributes through its Distribution Group the AGV controls, motors, batteries, chargers as well as other related products. Additionally, through the Systems Group we provide turnkey AGV material handling solutions to end-users and to system integrators. The Laserway(R) AGV controls, hardware and software, are designed for optimal flexibility and accuracy and are well suited for a broad range of vehicle types. Our AGV vehicles and other products and services range from market unique standard off-the-shelf products, to engineered to order designs and solutions for optimal customer flexibility. ### For further information contact: Claude Imbleau, President and CEO 704/362-1115 25