SCIENCE/TECHNOLOGY : MAI Describes Its Serious Liquidity Problems’ to SEC
MAI Systems Corp., which lost $49.4 million for the nine months ended June 30, has begun to suffer “serious liquidity problems,” according to a filing with the Securities and Exchange Commission in mid-August.
During the last two years, the company has stopped making its own minicomputers and now packages its software with other manufacturers’ computers to sell to specific industries. That transition has sent its fortunes south during the recession.
The company blamed a $25.6-million, third-quarter loss on costs of the transition, including a $13-million charge to cover the costs of closing a plant and severance payments for 800 laid-off workers.
In addition, the company is combining its U.S. and Canadian sales operations and has sold its credit union software business.
Sales were hurt in the quarter ended June 30 because the company was late in making payments to suppliers, who delayed their shipments of material or sued the company to collect payment.
MAI Chairman Bennett S. LeBow, who controls 81% of MAI’s stock, has expanded the company’s credit line and secured a temporary deferral on $6 million in payments to banks until Sept. 30. But the company said it does not expect to generate enough cash to make even the delayed $6-million payment and is in the process of asking for an extension until March, 1992, as well as other concessions from lenders.
MAI said there is no assurance it will succeed in postponing the debt payments or negotiating new credit terms. The company said it is considering selling some assets to reduce the debt.
As of June 30, the company had a working capital deficit of $85 million, contrasted with a capital surplus of $6.2 million on Sept. 30, 1990. Its current liabilities were $95.7 million on June 30, compared to $37.8 million six months earlier.
The company has reached its limit on available bank credit, the filing said, and it expects to use all of the $9.7 million in cash on hand to fund its continuing operations.
LeBow’s holding company, New York-based BGLS Inc., has made several loans to the company this year and has agreed to contribute additional capital if the company’s minimum net worth slips below levels required by lenders.