General Automation Posts Revised Losses
After months of financial uncertainty, General Automation Inc. on Friday released three years’ worth of restated financial results that show a combined loss nearly 10 times as large as previously reported.
In addition, an independent auditor’s report on the Irvine software support service, filed with the Securities and Exchange Commission, found that the larger deficit raises “substantial doubt about the company’s ability to continue as a going concern.”
“We have a lot of work to do to get ourselves back on track,” said Richard Nance, the company’s chief financial officer. “We have a plan in place to do that.”
It largely entails refinancing the company’s corporate headquarters, restructuring its short-term debt and renegotiating the terms of two acquisitions made in 1995.
General Automation, which has about 160 employees, doesn’t plan any layoffs, Nance said.
For the fiscal years 1995-97, the company said it lost about $1.9 million, up dramatically from the $198,000 in losses it first reported for that period.
Earlier this year, General Automation said it would reexamine its financial results after its outside accounting firm cited possible errors.
The difference pushed the company’s net worth below zero, and shareholders’ equity fell to -$1.6 million as of June 30.
The company’s current financial troubles are rooted in General Automation’s in-house auditing practices, Nance said. That, in turn, caused the company to overstate its income and results of operations.
The mistakes were first discovered this spring, as the high-tech company was upgrading its internal accounting software program, Nance said. Small discrepancies in financial records began to emerge.
Upon investigation, staff members discovered that the company had made a coding mistake when it created its original accounting program and was mistakenly treating some items as deferred revenue, Nance said. When the error was realized, the company had accumulated about $4 million in hidden losses over five years.
In mid-May, the company asked the SEC for an extension to file its second-quarter report. Soon after, the American Stock Exchange halted the trading of its stock.
The exchange is considering whether to delist General Automation. In the next few weeks, the company is scheduled to meet with exchange staff to discuss the steps it will take to become compliant with the market’s minimum trading requirements.
In the restated financial results, the company reported a net loss of $514,000, or six cents a share, for the fiscal year ended Sept. 30, 1997; a net gain of $275,000, or 3 cents a share, for fiscal year 1996; and a net loss of $1.7 million, or 21 cents a share, for fiscal year 1995.
The company had previously reported a $502,000 gain, or 5 cents a share, for fiscal year 1997; a net gain of $1.4 million, or 18 cents a share, for fiscal year 1996; and a net loss of $2 million, or 26 cents a share, for fiscal year 1995.
General Automation also reported new annual revenue for the three-year period. For fiscal year 1997, revenue was $36 million, down from the previously reported $36.8 million; $23.7 million for fiscal 1996, down from an earlier report of $25.5 million; and $14.4 million for fiscal 1995, up from $14.3 million as first stated.
