General Automation’s Net Worth Too Low : Exchange Delists Computer Firm
General Automation Inc., an ailing Anaheim computer maker, said Tuesday that its stock will no longer be traded on NASDAQ’s National Market System because the company’s net worth fell below the required $375,000. General Automation’s net worth, or shareholder equity, was $275,000 at the end of January.
General Automation officials said the company, which lost $974,000 on revenues of $13.5 million in the second quarter ended Jan. 26, is appealing to NASDAQ’s board of governors for reinstatement. The review is expected to be completed in July. NASDAQ stands for the National Assn. of Securities Dealers Automated Quotations.
Meanwhile, trading in the company’s common stock will be executed by several market makers, including Advest Inc. of Hartford, Conn., and Bateman Eichler, Hill Richards Inc. and Morgan, Olmstead, Kennedy & Gardner, both of Los Angeles.
NASDAQ’s action to drop General Automation from its stock quote system followed an April 26 administrative hearing in Chicago. Company officials submitted written answers to the hearing officer’s questions but said they were unable to make an oral presentation to the committee because of “last-minute developments in several urgent and ongoing business matters.”
Perry Peregoy, NASDAQ’s qualifications manager, said in a phone interview Tuesday that the staff discovered the company’s net worth problem by reviewing financial reports filed with the Securities and Exchange Commission. Peregoy said that in order to be re-listed, a company dropped from the NASDAQ system must bring its net worth up to $1 million. The $375,000 level is only considered adequate for maintaining the listing, he said.
“General Automation’s position is that the company’s stability and progress should be gauged by a broader measure than simple shareholder equity,” said General Automation in a statement released Tuesday. “Over the past several years, debt has been reduced by over $30 million, new products introduced and successfully marketed, non-mainstream assets redeployed, and management and operations restructured for greater efficiency worldwide.”
Officials at Orange County’s largest publicly traded computer company said these matters, as well as “the prospect of an eventual restoration of a higher shareholder equity level,” should have been considered by NASDAQ before the company was dropped from the list.
For the first six months of its 1985 fiscal year, General Automation lost $2.2 million, in contrast to a profit of $505,000 in the year-earlier period. First-half revenues fell 18% to $30 million from $36.5 million. The losses would have been greater had the company not included a $1.2-million gain from the sale of its power supply division in the quarterly results.
When the results were released, Chairman Leonard Mackenzie blamed the decline in performance on poor sales in the company’s computer parts division, particularly the printed circuit board division.
In addition to the current soft market for computers and their parts, General Automation incurred a series of production errors in 1984 that caused the company to scrap a substantial number of expensive products.
