ubject:
NUKO INFORMATION SYSTEMS INC /CA/ (NASDAQ:NUKO) files SEC Form 10-Q
Date:
Fri, 14 Nov 1997 21:38:43 -0800 (PST)
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News Alert from EDGAR Online via Quote.com
Topic: Nuko Information Sys Inc (Del)
Quote.com News Item #4552381
Headline: NUKO INFORMATION SYSTEMS INC /CA/ (NASDAQ:NUKO) files SEC Form 10-Q
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated as a result of certain factors, including those set forth in Item 5
of this report and in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
NET SALES AND NET LOSS
Net sales for the third quarter are $0.2 million compared to $4.3
million for the same period in 1996. The decline in sales results from a
substantial change in the marketplace away from those originally
anticipated by the Company, and the relatively long delay in re-focusing
it on more promising markets. Sales for the nine month period ended
September 30, 1997 are $4.3 million compared to $6.9 million for the
same period in the prior year. Sales for the quarter included shipment
of the Company's Highlander products. The net loss for the quarter is
$9.8 million or $0.72 per share, compared to a net loss of $2.7 million
or $0.26 per share for the same period in 1996. The net loss for the
nine month period ended September 30, 1997 is $20.6 million or $1.75 per
share compared to a loss of $9.0 million or $0.95 per share for the same
period in 1996. Net losses reflect the Company's write-down of
inventory, increased bad debt reserve, as well as its continued
investment in research and development and operations.
COST OF SALES
Cost of sales for the third quarter of 1997 was $5.3 million compared to
$2.9 million for the same period in 1996. Cost of sales for the nine
month period ended September 30, 1997 was $9.3 million compared to $4.5
million for the same period in the prior year. Cost of sales for the
third quarter reflects a $4.2 million write down of inventory, due to
lower anticipated sales volumes over the near term and a reserve against
possible obsolescence, plus unabsorbed manufacturing overhead.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expenses for the third quarter of 1997 were
$1.7 million compared to $1.5 million for the same period in 1996.
Research and development expenses for the nine months ended September
30, 1997 were $5.4 million, compared to $5.3 million for the same period
in the prior year. The research and development expenses reflect the
Company's commitment to invest in the development and enhancement of the
Company's family of product lines.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the third quarter of
1997 were $2.7 million compared to $2.6 million for the same period in
1996. Expenses for the nine month period ended September 30, 1997 were
$7.4 million compared to $6.5 million for the same period in the prior
year. The increase in expenses was primarily related to an increase in
bad debt reserves and legal expenses, partially offset by on-going cost
reduction efforts.
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation (Cont'd.)
RECENT ACCOUNTING PRONOUNCEMENTS
During February 1997, the Financial Accounting Standards Board (FASB)
issued Statement No. 128, "Earnings per Share" (SFAS No. 128) which
establishes standards for computing and presenting earnings per share
(EPS) more comparable to international standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the diluted EPS
computation. The Company is studying the impact of the adoption of SFAS
No. 128, which is effective for the financial statements issued for
periods ending after December 15, 1997, will have on its EPS
calculation.
On July 1, 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). This
statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general purpose financial statements. This
statement is effective for fiscal years beginning after December 15,
1997, with earlier application permitted.
The FASB has issued Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information"
(SFAS 131), which supersedes SFAS 14 "Financial Reporting for Segments
of a Business Enterprise". SFAS 131 changes current practice under SFAS
14 by establishing a new framework on which to base segment reporting
and also requires interim reporting of segment information. SFAS 131 is
effective for fiscal years beginning after December 31, 1997, with
earlier application encouraged. The Statement's interim reporting
disclosures would not be required in the first year of adoption, but
would commence in the first quarter immediately subsequent to the first
year in which the company provides year end disclosure.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through debt and
equity financing. At September 30, 1997, the Company's ending balance of
cash and cash equivalents was $0.7 million which reflects a decrease of
$1.5 million from the December 31, 1996 balance. The Company had working
capital of approximately $(3.9) million, representing a decrease of $8.0
million from the Company's working capital at December 31, 1996. During
the quarter, the Company used cash to funds its operating requirements.
In October 1996, the Company obtained a $6.0 million line of credit with
Silicon Valley Bank. The line of credit was renewed on June 10, 1997 for
a period of one year. At September 30, 1997, the Company was in breach
of the net worth covenant, there were no amounts outstanding under the
Silicon Valley Bank Line of Credit.
The Company has long term debt consisting of lease agreements for the
purpose of financing the acquisition of general furnishings, computers
and manufacturing equipment. The unpaid long term balance of these
obligations was approximately $0.1 million and $0.03 million at
September 30, 1997 and December 31, 1996, respectively.
12
While the Company completed private placements in the third quarter of
fiscal 1997 of $3.4 million, and had warrants exercised for $1.8
million, the Company believes that it needs to raise additional
financing during the fourth quarter in order to meet its requirements
for the quarter. In addition, the Company believes that it will need to
raise financing beyond its fourth quarter of fiscal 1997 requirements in
order to implement its 1998 Operating Plan. The Company intends to
actively pursue additional debt or equity financing from institutional
or corporate investors, funding opportunities from strategic partners
and through additional private placements. There can be no assurance
that the Company will be able to obtain such financing on acceptable
terms or at all. Failure to obtain such additional capital could have a
materially adverse effect on the Company. See "Item 5. Other Information
- RISK FACTORS - Indispensable Need for Capital/ Report of Independent
Accountants Regarding Ability to Continue as a Going Concern" and " -
Additional Capital Requirements".
13
NUKO Information Systems, Inc.
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