General Automation Stalled.
Jeffrey Caspari
I have been a huge supporter of General Automation and feel it is only fair
to bring news of import (both good and bad) to this group's attention.
It has been about 2 months since General Automation determined that a
program error caused the possible overstatement of income and results from
prior periods.
They have also:
1. Changed CFO's
2. Changed Accounting Firms
3. Lost their line of credit with their bank
4. Had their stock trading halted on the American Exchange, symbol (GA)
Other aspects of their operations have been somewhat unclear. For
instance, it is still unclear to me whether the acquisition of NCE has ever
been consummated.
In my view, these items do not portray a stable growing organization.
These financial problems should have been resolved with greater dispatch
and the investors updated with progress reports.
Though I am a GA VAR, I always have the best interest of my clients as my
priority. So I have a problem at this time installing new GA systems.
Before the SEC begins a complete investigation (none is scheduled to my
knowledge) or a class action suit is started it is imperative that GA
disclose the exact nature of their problem. We need to know whether the
CFO or Accounting firm's departure was involved in the discovery of the
error(s), the exact restatement of earnings and projections and the status
of the NCE acquisition for a start.
In my (non-legal) opinion it is conceiveable that a significant liability
might exist to redress those who bought stock while under the influence of
misinformation.
Let's see how this unfolds and how quickly it is resolved.
--
Jeffrey Caspari
Quality Software Systems, Inc.
140 Route 303
Valley Cottage, NY 10989
(914) 268-2195
e-mail: q...@mail.idt.net
http://www.qss-2000.com
Steve Brown
>Hi Group,
>I have been a huge supporter of General Automation and feel it is only fair
>to bring news of import (both good and bad) to this group's attention.
>
>It has been about 2 months since General Automation determined that a
>program error caused the possible overstatement of income and results from
>prior periods.
>They have also:
> 1. Changed CFO's
> 2. Changed Accounting Firms
I believe these occurred prior to the public disclosure of the "program error."
So, it *does* make one wonder who found what *and* when.
> 3. Lost their line of credit with their bank
> 4. Had their stock trading halted on the American Exchange, symbol (GA)
5. Refinanced their house, err, facilities. Pay attention to this one. GA stated
that they gained ~$850,000 in working capital in a press release they wrote
about the time of the disclosure. If they are not profitable from operations,
then look for them to take advantage of the booming OC real estate market
where aggressive lenders are willing to book 125% of value. My guess is
that the original $850k in working capital would be consumed by now and
in a last-ditch effort to stay afloat, GA will seek yet another refinancing deal
just to have *some* working capital. But after you owe 125% of value,
what-you-gonna-do-then?
>Other aspects of their operations have been somewhat unclear. For
>instance, it is still unclear to me whether the acquisition of NCE has ever
>been consummated.
What's always seemed unclear to me is how you can employ some of the
top 5 "dream team" (cover of Spectrum magazine) software developers
yet still publicly characterize yourself as "Service is our business." ;-)
(see GA's Judi Uttal's post of 04/09/1998. Search for complete article at:
www.dejanews.com).
>In my view, these items do not portray a stable growing organization.
IMO, poop may roll downhill, but responsibility rises to the top.
>These financial problems should have been resolved with greater dispatch
>and the investors updated with progress reports.
One can only speculate that this may *not* have been a one-time
write off but rather, an ongoing operational loss. If so, it may mean
misrepresentation of the facts.
>Though I am a GA VAR, I always have the best interest of my clients as my
>priority. So I have a problem at this time installing new GA systems.
>
>Before the SEC begins a complete investigation (none is scheduled to my
>knowledge) or a class action suit is started it is imperative that GA
>disclose the exact nature of their problem. We need to know whether the
>CFO or Accounting firm's departure was involved in the discovery of the
>error(s), the exact restatement of earnings and projections and the status
>of the NCE acquisition for a start.
>
>In my (non-legal) opinion it is conceiveable that a significant liability
>might exist to redress those who bought stock while under the influence of
>misinformation.
Clearly, knowingly misrepresenting facts is illegal (scam) and a definitely
a clear SEC violation.
>Let's see how this unfolds and how quickly it is resolved.
Theme to jeopardy...
Steve Brown
sjb...@axdev.com
Thomas J. Packert
[SNIP]
>>In my (non-legal) opinion it is conceiveable that a significant liability
>>might exist to redress those who bought stock while under the influence of
>>misinformation.
>Clearly, knowingly misrepresenting facts is illegal (scam) and a definitely
>a clear SEC violation.
Surely, it is a good reason to keep your company private ehh? (Sarcasm intended!)
Tom Packert
tom at phase1systems dot com
The BUG War - The secret to winning the BUG WAR in
Window, is simply to legalize all of the operations
that cause all the illegal operation problems!
Doug Dumitru
speculation, so I thought I would jump in here with what real
information that I am aware of. It should be noted that none of this
information is from "official" GA sources. GA is actually quite
limited in what they can disclose because of various SEC rules.
The aspect of earnings that is being restated (as I understand it) has
to do with the statement of liabilities coming from service contracts
that can be cancelled. When GA sells a service contract for a
one-year period, the customer has the option of cancelling the service
contract before the year expires and getting a partial refund for the
remaining period of the service contract. The accounting then works
like this. When the service contract is entered, this is income for
the entire period. But there is also a potential liability for those
customers that will not run the service contract to the completion of
the term. It was this potential liability that was not reported. If
during the period a customer did actually terminate a contract, then
that liability was being reported but this is technically in the wrong
accounting period because it should have been at least estimated in
the period where the service contract was written.
The botton line is that this "accounting irregularity" does not
involve cash, but the statement of earnings which is different than
the amount of money in the bank.
In terms of GA losing their line of credit, the GA announcement on
this stated that the reason was that there market capitalization fell
below the agreed on amount in their line of credit. I suspect that
this was probably a fallout of their stock halting on AMEX (my
assumption here not based on any information fro GA).
In terms of GA refinancing their building, my understanding is that GA
bought the building quite a bit below market value, so they probably
had quite a bit of "real" equity there.
Regarding why GA is taking so long to work this out, I suspect the
real concern here is the auditors being worried about getting sued.
Remeber that it is the auditors that had signed off on the existing
method of accounting in terms of support contracts and cancelations.
When you hire an outside auditor, you pay them to essentially certify
that your accounting practices are sound. If something goes wrong and
you did not intentionally try to deceive the auditors, then it is the
auditors and not the company that can be left is a legal lurch.
And finally, if someone is sued by shareholders or whatever, it is as
likely to be the auditors as GA. At least the auditors have deeper
pockets to collect from.
One last point. In all of these on-going issues, I have not heard of
a mass exodus from GA either forced or voluntary. Are people leaving
GA? Is GA downsizing to cut operating expenses? I am not in a great
position to know this, but I have not seen too many overt signs. Yes,
GA does owe people money (but so do a lot of other companies), but I
do not see rats deserting a sinking ship (at least yet).
Doug Dumitru
Modular Software Corporation
Doug Dumitru (do...@modsoft.com) http://modsoft.com
----------------------------------------------------------
Modular Software Corporation Ph: (949) 831-4774
24872 Nellie Gail Road Fax: (949) 831-6860
Laguna Hills, CA 92653 USA
David Ruggiero
concerning GA's recent financial travails. Full disclosure at the
outset: I do occasional contract OS work for GA (as I do for other Pick
vendors). All of the following is my opinion only, based on information
gleaned from conversations with people both inside and outside GA.
Nothing should be taken as some sort of official GA position, of course.
do...@modsoft.com (Doug Dumitru) writes:
>The aspect of earnings that is being restated (as I understand it) has
>to do with the statement of liabilities coming from service contracts
>that can be cancelled. When GA sells a service contract for a
[good discussion of the deferred service-revenue issue, excised for length]
>The botton line is that this "accounting irregularity" does not
>involve cash, but the statement of earnings which is different than
>the amount of money in the bank.
Yes. The important point is that this is a purely bookkeeping issue,
related to the arcane rules under which a publicly traded company reports
certain classes of revenue, assets, and liabilities. It does not involve
fraud, or missing funds, or misstated [actual] income, or anything else
that would impact a business not bound by a pretty strict set of accounting
procedures mandated by AMEX and the SEC.
In fact, if GA has to restate past income downward, they'd actually be
due a cash _refund_ from the IRS and/or their past partners (SunRiver and
TexasMicro, who are paid for the companies they sold GA partly on the basis
of GA's actual performance).
>In terms of GA losing their line of credit, the GA announcement on
>this stated that the reason was that there market capitalization fell
>below the agreed on amount in their line of credit. I suspect that
>this was probably a fallout of their stock halting on AMEX (my
>assumption here not based on any information fro GA).
This happened before the stock halt; it could be due to any number of
factors (e.g., their bank reviewing all of its loan portfolios and deciding
not to renew a certain number of the 'marginal' ones).
>In terms of GA refinancing their building, my understanding is that GA
>bought the building quite a bit below market value, so they probably
>had quite a bit of "real" equity there.
This is what I understand, also (as well as the value of the capital
improvements they've put into it over the years). To me, the refinancing is
a pretty canny move - certainly it's a cheaper way to get quick operating
income than an unsecured line of credit, and it's little different in
principle than you or me taking out a home equity loan.
>Regarding why GA is taking so long to work this out, I suspect the
>real concern here is the auditors being worried about getting sued.
>Remeber that it is the auditors that had signed off on the existing
>method of accounting in terms of support contracts and cancelations.
>When you hire an outside auditor, you pay them to essentially certify
>that your accounting practices are sound. If something goes wrong and
>you did not intentionally try to deceive the auditors, then it is the
>auditors and not the company that can be left is a legal lurch.
>And finally, if someone is sued by shareholders or whatever, it is as
>likely to be the auditors as GA. At least the auditors have deeper
>pockets to collect from.
Bingo.
</personal opinion mode even more heavily ON>
The former auditors (a Very Big Accounting Firm) really seem from outside
appearances to have blown it badly regarding their work with GA, and if
that turns out to be true, GA's shareholders will have every right and
expectation to sue them to kingdom come. They're likely hemming, hawing,
and stalling as long as they possibly can until some sort of angle that
gets them partially or completely off the hook appears. GA would love to
put this behind them ASAP (being delisted, for whatever the reason, does
not exactly help your sales force present you to a potential customer as a
stable and trouble-free corporate enterprise), but their former auditors
likely have a very agenda in the matter.
Rumor is that this whole thing came about when GA's new CFO said, "something
is fishy here", and spent a month or more of independent work to ferret
out why the previous auditor's figures didn't make sense. That's important
to understand: this whole thing was initiated _by GA_, not by the new
auditors, or AMEX, or the SEC, or the banks, or anything else outside the
company. And once these kind of irregularities are uncovered, if you're a
public company, you basically have no choice but to tell the SEC you're
not going to be able to file a quarterly 10-K, and the stock exchange then
has no alternative but to temporarily halt trading in your stock until you
clear things up.
>One last point. In all of these on-going issues, I have not heard of
>a mass exodus from GA either forced or voluntary. Are people leaving
>GA? Is GA downsizing to cut operating expenses? I am not in a great
>position to know this, but I have not seen too many overt signs. Yes,
>GA does owe people money (but so do a lot of other companies), but I
>do not see rats deserting a sinking ship (at least yet).
I have not heard of any layoffs or even any departures from GA in the
past few months (at least among the subset of people I know in the
company). (There were some people in the old Sequoia office in Marlboro,
Mass, who were let go when they moved all hardware operations and repair
to Irvine last month, but that had been in the works for a long, long
time before all this.)
It's unfortunate that rumors (often aided in their dissemination by
less-than-ethical salesman from competing companies) have for so long been
a way of life in our little backwater of the computing business. If I had
a buck for every time in the past few years I've heard that GA, or Pick
Systems, or JAC, or some other Multivalue-based company, was on the verge
of closing its doors, I could have already retired in fine style.
--
David Ruggiero
Osiris Technical Services
Seattle, WA
www.halcyon.com/osiris
MIS
couldn't explain why we kept crashing do to self inflicted gfe's within the
abs. Get out now.
Jeffrey Caspari wrote:
> Hi Group,
> I have been a huge supporter of General Automation and feel it is only fair
> to bring news of import (both good and bad) to this group's attention.
>
> It has been about 2 months since General Automation determined that a
> program error caused the possible overstatement of income and results from
> prior periods.
> They have also:
> 1. Changed CFO's
> 2. Changed Accounting Firms
> 3. Lost their line of credit with their bank
> 4. Had their stock trading halted on the American Exchange, symbol (GA)
>
> Other aspects of their operations have been somewhat unclear. For
> instance, it is still unclear to me whether the acquisition of NCE has ever
> been consummated.
>
> In my view, these items do not portray a stable growing organization.
> These financial problems should have been resolved with greater dispatch
> and the investors updated with progress reports.
>
> Though I am a GA VAR, I always have the best interest of my clients as my
> priority. So I have a problem at this time installing new GA systems.
>
> Before the SEC begins a complete investigation (none is scheduled to my
> knowledge) or a class action suit is started it is imperative that GA
> disclose the exact nature of their problem. We need to know whether the
> CFO or Accounting firm's departure was involved in the discovery of the
> error(s), the exact restatement of earnings and projections and the status
> of the NCE acquisition for a start.
>
> In my (non-legal) opinion it is conceiveable that a significant liability
> might exist to redress those who bought stock while under the influence of
> misinformation.
>
> Let's see how this unfolds and how quickly it is resolved.
>
Dave Thomas
MIS wrote in message <35B4F57A...@cmacms.com>...
>We jumped ship and bought pick d3 when their one part time Mentor engineer
>couldn't explain why we kept crashing do to self inflicted gfe's within the
>abs. Get out now.
Yea, right. Like D3 is a benchmark of stability.
Besides, Pick Systems is rumored to have lost a recent court battle with the
IRS to the tune of 10 million dollars. I dont know if its true, but it came
from a few good sources. Also, if Pick was not getting cash from companies
such as GA for using the Pick data-model, I doubt they could turn a profit.
>
Mark Pick
Pick Systems. As an heir/owner of Pick Systems - I find your post totally
ridiculous. You couldn't be farther from the truth!
Long live the pick data model.
-Mark Pick
Dave Thomas <dg...@gte.net> wrote in message
6p61cb$m9q$1...@news-1.news.gte.net...
Richard Ginsburg
what's going on to kick the doomsayers in their keys...
--
Richard Ginsburg can be reached at:
e-mail...: mailto:fawn...@bellsouth.net
internet.: http://www.fawnridge.com
telephone: 561.488.4815
fax......: 561.488.3821
Only the finest software is called COMPASS.
Mark Pick wrote in message ...
Keyser Soze
dont have an opinion on it.
As far as the stability of D3, thats not a "ridiculous" post. Let me know
when it come out of beta.
Dave