General
Automation reports restated financial results
Following the discovery and correction of a programming error in their deferred
revenue accounting system, which had led to overstatement of income in previous
accounting periods, General Automation has announced that it has completed its
reassessment of its results for fiscal years ending 30 September 1995, 1996
and 1997 and reported restated results to the SEC in Form 10-K/A, dated 21 August
1998. The restated results show:
- 1997: a restated loss of $514,000 representing $0.06 per share, on
revenues of $36 million. Previously, GA had reported net income of $502,000.
- 1996: restated net income of $275,000 representing $0.03 per share,
on revenues of $24 million. Previously, GA had reported net income of $1.4
million.
- 1995: a restated loss of $1.7 million representing $0.21 per share,
on revenuesof $14 million. Previously, GA had reported a loss of $2 million.
Other recent announcements from GA include the filing of its restated first
quarter and delayed second quarter results:
- First Quarter: a restated loss of $1 million representing $0.12 per
share, on revenues of $8.2 million for the three months ended 31 December
1997. Over the equivalent period in 1997, there was a restated loss of $355,000
on revenues of $9.5 million.
- Second Quarter: a loss of $1.73 million representing $0.19 per share,
on revenues of $7.4 million for the period ended 31 March 1998. Over the equivalent
period in 1997, there was a restated loss of $543,000 on revenues of $9.1
million.
- Third Quarter: a loss of $1.6 million representing $0.18 per share,
on revenues of $7.5 million for the period ended 30 June 1998. Over the equivalent
period in 1997, there was a restated loss of $414,000 on revenues of $8.7
million.
This represents a total loss of $4.4m over the nine months to 30 June 1998.
The company stated that this figure includes $2.2m in non-cash charges of amortization
and goodwill and $800,000 in one-time charges taken in the third quarter.
The 10-K/A filing was accompanied by an independent auditor’s report which
expressed reservations about the company’s ability to continue to operate as
a going concern. The report stated that General Automation "has incurred operating
losses in two of the last three years, has a working capital deficit and a deficit
tangible net worth." In addition:
- The company has yet to secure an alternative lender after Comerica Bank
reduced its credit line to $2.2 million from $5 million, and demanded settlement
in full for the credit facility. At the end of the third quarter, the outstanding
balance of the credit line stood at $1.8 million. Negotiations with a substitute
lender are underway, but if they are not successful, the company’s ongoing
operations would be adversely affected.
- The company is in default on $8.4 million of obligations undertaken in 1995
and 1996 relevant to the acquisition of Sequoia Enterprise Systems and Boundless
Technologies. Again, the company is undertaking renegotiation of the terms
of the acquisitions to cure the defaults, but there are no guarantees of success.
- The company’s stock remains suspended on the American Stock Exchange whilst
the Exchange reviews the company’s eligibility for continued listing.
To bolster the financial standing of the company, GA’s management has outlined
a four-point plan and submitted it with the 10-K/A filing. The plan comprises:
- Refinancing of GA’s corporate headquarters, now completed, proceeeds of
which have yielded working capital of $860,000;
- Restructuring of $1.5 million of short-term debt to a note payable, due
in monthly instalments over a two year period;
- Consolidation of certain US operations from the Massachusetts facility to
Irvine, reducing general administrative expenses by $900,000;
- Renegotiation of the terms of acquisitions made in 1995 and 1996, which
will have significant impact on the ongoing operations of the company.
Much of the decline in revenue has been attributed to aging service contracts,
with the trend expected to continue through fiscal 1998, although strategies
are being put in place by management to reverse the trend through the acquisition
of existing contract portfolios and increased sales in this sector.
"General Automation has and is acting responsibly to take the steps necessary
to adjust our expenses to be in line with expected revenues," said Jane Christie,
President and CEO of GA. These adjustments include the consolidation outlined
above, reduced labour costs and moves to reduce third-party service expenses
by an estimated $1.5 million per annum.
"Our product sales forecasts continue to look promising for the fourth quarter
and we believe we are finding ways to increase our business through the addition
of new software contracts as well as third-party servicing opportunities," Christie
added.
General Automation,
Inc
17731 Mitchell North
Irvine
California CA 92614
Tel: +(800) 854 0140
Fax: +(949) 752 6777
http://www.genauto.com
Last Updated: 31
October 1998