U.S.SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[FEE REQUIRED]
For the fiscal year ended November 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[NO FEE REQUIRED]
For the transition period from to
Commission file number 0-18253
NDC AUTOMATION, INC.
(Name of small business issuer in its charter)
Delaware 56-1460497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3101 Latrobe Drive, Charlotte, North Carolina 28211-4849
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (704) 362-1115
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Exchange Act:
.01 Par Value Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
[X]
State issuer's revenues for its most recent fiscal year: $ 6,142,954.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $973,543, based upon the closing sales price of Common Stock on
OTC Bulletin Board on January 31, 1997 of $0.46875 per share.
As of January 31, 1997, 3,453,451 shares of Registrant's Common Stock, par
value $.01 per share, were outstanding.
Portions of the Registrant's Annual Report to the security holders filed
pursuant to Rule 14a-3(b) under the Securities Exchange Act of 1934 are
incorporated by reference in Part II, Items 6 and 7. In addition, portions of
the Registrant's definitive proxy statement for the 1997 Annual Meeting of
Shareholders to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 are incorporated by reference in Part III, Items 9, 10, 11
& 12.
Transitional Small Business Disclosure Format (check one): Yes No X
This document contains 66 pages. The Exhibit Index is located on Page 13.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
NDC Automation, Inc. conducts the business previously carried on by
Netzler and Dahlgren Company Technologies, Inc. ("NDCT"), NDC Systems, Inc.
("NDCS"), and another company also called NDC Automation, Inc. ("NDCA") (all
collectively referred to hereunder as the "Company").
NDCT was founded in 1982 as the North American affiliate of NDC, Netzler &
Dahlgren Co. AB ("Netzler & Dahlgren"), a Swedish Company. NDCT's strategy was
to acquire or license European control technologies and products, and to
enhance, modify, and otherwise adapt them for use by customers in North America.
In 1984, NDCS was organized to market radio frequency identification
technology products.
Automation Technologies, Inc. ("ATI") was formed in 1985, but did not
engage in the active conduct of business.
In 1987, NDCA was formed to provide standard hardware and software packages
for Original Equipment Manufacturers (OEM) to expand applications of automatic
guided vehicle systems ("AGVS") and RFID technologies into industries that
traditionally did not use such technologies.
Effective December 1, 1987, NDCT, NDCS, and NDCA were all merged into ATI.
The surviving corporation changed its name to NDC Automation, Inc. The effect
of the merger was to combine the business activities of three separate, but
market-related, companies into a single, integrated enterprise. The Company
became a Delaware corporation in December 1989 through a merger entered into for
the purpose of changing the Company's state of incorporation. At that time its
sole subsidiary was N/S Technology, Inc., an inactive North Carolina corporation
which was dissolved in 1994.
On March 28, 1990, the Companyis successfully completed its Initial Public
Offering netting $1,996,598 to improve its financial position.
On June 30, 1991, the Company acquired all of the common stock of
Southeastern Software Developers, Inc. ("SSDI"), a South Carolina corporation,
from its shareholders for stock in the Company and cash. SSDI developed and
owned proprietary control and monitoring software used primarily in the textile
industry. The Company has essentially absorbed the operations of SSDI and
dissolved SSDI's corporate charter in 1996.
Effective July 1, 1992, the Company acquired for cash and stock all of the
outstanding shares of NDC Technology Australia PTY Ltd. ("NDCTA"), a company
formed to acquire, develop, market, and sell hardware, software and engineering
services incorporated into and used to control AGVS in the international market.
NDCTA was sold on November 30, 1995 to its managing director.
On June 22, 1993, the Company purchased the assets of AutoNavigator AB
("ANAB"), of Lulea, Sweden. A subsidiary of the Company, NDC Laser AB ("NDC
Laser"), was formed to produce and distribute ANAB's laser device and related
software, enhancing the Company's know-how. NDC Laser was sold November 30,
1995 to NDC AB.
During the fiscal year ending November 30, 1996, the Company discontinued
its marketing and distribution of the radio frequency identification products to
primarily focus on its AGVS business. The Company also refocused its marketing
and sales of AGVS equipment to OEM customers and system suppliers and away from
end-users. The Company's strategy is to ensure that it does not compete with
its existing and potential customers.
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BUSINESS OF THE ISSUER
The Company's core business is to be a leading supplier of controls
hardware, software, engineering services and other components that are
incorporated into automated guided vehicles ("AGV's" or "vehicles") and into
systems that incorporate one or more such vehicles ("AGV systems"). AGV's are
driverless, computer-controlled vehicles that are programmed to transport
materials through designated pickup and delivery routines within a particular
facility (usually a manufacturing or distribution facility) and to transmit
information concerning system status, inventory tracking and system controls to
a system controller. In 1996, sales of AGV related products and services have
accounted for almost all of the Company's net revenues compared to 89% in prior
years.
The Company's AGV system products and services have been used in a variety
of industries, including textiles, automotive, newspaper publishing and
electronics. These control products are designed to be of such general
applicability as to be incorporated into many kinds of material handling
vehicles. Consequently, they are used not only in custom-designed AGV vehicles
and systems, but also to automate conventional material handling equipment such
as forklifts and pallet jacks.
The Company markets a laser guidance AGV control system, Lazerway(TM), which
is viewed by management as superior to the traditional "wire guidepath"
technology for controlling the direction of an AGV. Management believes that
this laser technology, which permits the end user to alter the guidepaths of
AGV's without changes in its facility, will allow the Company to penetrate new
markets and attract new partners.
The Companyis philosophy is to sell its hardware, software and engineering
services to Original Equipment Manufacturer (OEM) customers, i.e. manufacturers
of AGVs, AGV systems and other vehicles that can be equipped for automation for
the full satisfaction of the end-users' needs. The Company will sell such
services through regular distribution or as a sub-contractor to such OEM
customers. However, the Company may supply, from time to time, an end user only
in circumstances where an OEM customer or system supplier is not available to
implement or support the system.
The Company was incorporated in North Carolina in 1987 and reincorporated
in Delaware in 1989, although its predecessors had been in existence since 1982.
Its principal office is located at 3101 Latrobe Drive, Charlotte, North
Carolina, 28211, and its telephone number is (704) 362-1115.
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STRATEGY
The Company's mission is to strengthen its core business through active
marketing, distribution and support of AGV system control technology,
engineering and related products through sales to AGV manufacturers, material
handling system integrators and other equipment manufacturers who typically
integrate the Company's products into system products for sale to the actual
users of AGV systems.
The Company is focusing its marketing efforts on its laser technology,
Lazerway(TM), towards OEM customers as well as to existing users of AGV
systems for up-grading and retrofitting purposes.
The Company has divested itself of all previous acquisitions to focus on
its core business in North America. The Company's strategy is to increase
awareness of its AGV technology among end users while creating new relationships
with existing AGV suppliers and system suppliers to distribute the products or
systems to potential end users. As part of the strategy, the Company intends to
pursue undeveloped potential markets to the end users through OEM distribution
relationships. The Company believes that its focus on laser technology rather
than on wire technology can give it an advantage in the existing and future
market place. The primary focus of such sales effort will be to provide
products and services to OEM customers and system suppliers while eliminating
system sales to end users. The above strategy in the near term may, however,
lower revenues as the Company reduces its sales of non-standard products that it
typically sold in providing an entire AGV systems to customers. The Company
receives a higher margin, however, on its standard AGV product revenues compared
to its non-standard product revenues, while limiting its risk exposure (see Part
II, item 6 of this report).
The Company also intends to pursue other but related product lines that can
be distributed to its targeted customers to supplement its existing AGV
business. This should allow the Company to grow, while making the Company less
dependent on its present product lines. There can be no assurance, however,
that this strategy will meet management's objectives for growth.
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AUTOMATED GUIDED VEHICLE SYSTEMS
GENERAL
AGV's are driverless, computer-controlled vehicles that are programmed to
transport materials through designated pickup and delivery routines within a
particular facility (usually a manufacturing or distribution facility) and to
transmit system status, inventory tracking and control and other information.
In many manufacturing and distribution processes, material handling needs are
met by roller tables, conveyors, manually operated vehicles and other
conventional methods. The vehicles can be rerouted within the constraints
imposed by the particular system. The Company's AGV system products and services
have been used in a variety of industries, e.g. warehousing, textiles, newspaper
publishing and electronics. Control systems and technology supplied by the
Company are used for guidance and control of AGV systems in numerous existing
production facilities.
The vehicles can be made to move and stop, load and unload, and perform
other functions. The AGV's load handling equipment is adapted to the type and
weight of the material that it handles and may consist of a roller table,
forklift, mechanical arm or other device. The vehicle's wheel and drive
configurations vary, depending upon the degree of maneuverability required
within the manufacturing or distribution facility.
Automatic guided vehicles can be guided between pick-up and delivery points
by several methods. The traditional method is an inductive loop, called a wire
guidepath, which is embedded in the floor of the facility when the AGV system is
installed. The vehicles in an AGV system are equipped with a sensor and guidance
equipment that cause them to follow the guidepath. Because the installation of a
wire guidepath requires cutting a channel in the floor of the facility, the wire
guidepath method makes rerouting of AGV's less flexible. Moreover, this method
of installation of the system makes it inappropriate for clean room environments
and certain other applications.
An alternative, new vehicle guidance method uses laser technology, which
eliminates the need for extensive facility reconfiguration upon installation.
The laser guidance technology employs a rotating laser beam emitted from a
vehicle to sweep the room and calculate angles to detected reflectors. The data
gathered in this manner is used by the vehicle's computer to determine its
location and progress towards its destination. The vehicle can be rerouted
remotely by computer. Management believes that the Company's new laser guidance
is superior to traditional technology because it permits the end user to alter
the designated routines of AGV's without extensive reconfiguration or facility
changes.
The end users of AGV systems typically are firms that need to move objects
by vehicle within a single manufacturing or distribution facility. For example:
A US Army facility uses vehicles to transport nuclear waste.
A significant number of newspapers, including twelve in North America, use
AGV systems incorporating the Company's products to move paper rolls and
finished editions through their printing plants.
A computer work station manufacturer uses an AGV system incorporating the
Company's products to move component assemblies, parts, work-in-process and
finished goods through its plant.
The Company offers 62 standard items of equipment and 41 standard software
products to its customers for their use and incorporated into AGV systems for
end users. These control products are designed to be of such general
applicability as to be useful in many kinds of material handling vehicles.
Consequently, they are used not only in custom-designed AGV vehicles and
systems, but also to upgrade conventional material handling equipment such as
forklifts and pallet jacks.
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AGV systems are custom-designed by system houses and OEM's, and occasionally
by end users, to satisfy the material handling needs of an end user's
facilities. The more complex AGV systems perform several functions and are
controlled by highly sophisticated computer software. These systems track and
maintain the flow of materials through an entire manufacturing or distribution
process. In doing so, they use numerous vehicles to move parts and assemblies
through the various operations necessary to produce the finished product. The
AGV system's own computers provide host production computers with the
information necessary for management to make real-time production decisions.
THE MASTER LICENSE AGREEMENT
The Company's AGV system products and services incorporate technology
licensed by, and products purchased from, Netzler and Dahlgren Co. AB ("Netzler
& Dahlgren"), as well as technology that it has acquired or developed itself. In
accordance with the Master License Agreement dated December 1, 1987, the Company
receives Netzler & Dahlgren's AGV technology, hardware, software, know-how and
consulting services. The Master License Agreement provides that the Company has
the exclusive rights to commercially and technically utilize, apply and
sublicense Netzler & Dahlgren's AGV system control technology and to sell its
AGV system products in North America. Ongoing use by the Company of AGVS
technology unavailable from Netzler & Dahlgren, however, would allow Netzler &
Dahlgren to terminate the Company's exclusive rights.
On November 30, 1995, the Company sold its laser technology to Netzler &
Dahlgren and extended the Master License Agreement. The amended agreement
continues to allow the Company to distribute the Netzler & Dahlgren laser
technology exclusively in North America. The Master License Agreement further
provides that any enhancements or improvements of existing technology sponsored
or developed by one party shall be the property of the original developer
(subject to a royalty-free grant back to the other party for marketing outside
the owner's territory). The agreement was extended for ten (10) years and will
expire on December 1, 2005 and is subject to automatic two year extensions
unless and until one party, in compliance with certain procedures, notifies the
other of its intention to terminate the agreement. It provides for payment of a
10% royalty on license fees received by the Company with respect to AGV system
technology. It also provides for the sale of products at prices determined
annually. Royalties are due 30 days following receipt of payment by the Company.
During the fiscal year ended November 30, 1996, the Company incurred no
royalties to Netzler & Dahlgren with respect to technology licenses and
purchased an aggregate of $1,049,324 of hardware, software and engineering
consulting services.
RESOLUTION OF SCHLAFHORST, INC. ARBITRATION
The Company had a working agreement with Schlafhorst, a leading textile
industry OEM. Schlafhorst, domiciled in Germany but with offices in Charlotte,
North Carolina, supplies equipment to the yarn manufacturing sector of the
textile industry. Its agreement with the Company terminated on August 18, 1994.
Under that agreement, the Company was developing and supplying to Schlafhorst a
complete AGV system product line to be integrated with equipment manufactured
and marketed by Schlafhorst.
In August 1993, Schlafhorst and the Company agreed in principle to modify
their working agreement to increase involvement by Schlafhorst in the completion
of existing projects. The parties also agreed in principle that Schlafhorst
would increase its long-term participation in textile automation projects using
the Company's AGV system control technology and equipment. During September
1993, the Company entered into an exclusive know-how license agreement with
Schlafhorst for the laser technology. In February 1994, Schlafhorst acquired an
AGV system manufacturer based in Michigan that relies on chemical guidepath
technology.
5
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In April 1994, Schlafhorst filed a demand against the Company for
arbitration with the American Arbitration Association. Schlafhorst claimed that
it was entitled to a refund of approximately $1,000,000 on account of the
alleged failure of a system sold by the Company to Schlafhorst to meet a March
31, 1994 throughput test at the facilities of Schlafhorst's customer. The
Company disagreed with Schlafhorst as to the results and proper interpretation
of the throughput test and asserted claims against Schlafhorst in the
arbitration proceeding in excess of $31,500,000, plus punitive damages and
treble damages. The Company and Schlafhorst submitted their claims and disputes
to non-binding mediation, which did not result in a settlement. In December
1994, Schlafhorst submitted an additional claim in this proceeding, which claim
sought to terminate all Project Agreements entered into by and between
Schlafhorst and the Company and to recover all sums paid by Schlafhorst to the
Company under all the Project Agreements, for a total claim of $8,501,483 (which
included the initial Schlafhorst claim) plus costs, attorneys' fees and
interest. The arbitration began on March 1, 1995 and was completed June 22,
1995. The American Arbitration Association announced on July 24, 1995 that a
$2,132,066 award was to be paid to the Company by Schlafhorst. The award was
subsequently paid in early September, 1995. In addition to the award, the
Company was entitled to retain inventory set aside under "cost and estimated
earnings in excess of billings on uncompleted contracts" for Schlafhorst
projects. The net effect of the award on the Company's consolidated
statement of operations was a reduction of cost of goods sold of
approximately $150,000 for the quarter ended August 31, 1995.
In a related matter, in June 1994 the Company filed a lawsuit against
Schlafhorst alleging misappropriation of trade secrets and unfair deceptive
trade practices. The Company asserted that Schlafhorst misappropriated
confidential computer software belonging to the Company. The Company sought an
injunction barring Schlafhorst from using or divulging the software and
requiring Schlafhorst to return all copies of the software to the Company. These
claims were in addition to those which the Company has asserted against
Schlafhorst in their arbitration proceedings described above. The Company has
settled its previously described lawsuit against Schlafhorst, Inc. and
Schlafhorst's counterclaim with respect to trade secrets and related matters.
Neither party admitted any liability with respect to any of the allegations of
the complaint or counterclaim.
As a result of the foregoing, the Company experienced cash flow
difficulties, restructured bank debt and arranged deferred payment terms with
its existing major creditors. The Schlafhorst proceedings raised substantial
doubt about the Company's ability to continue as a going concern. The receipt
of the award and completion of recent transactions (see Part I of the Business
Development and Part II Item 6 as described herein) greatly alleviated working
capital needs for the Company.
RFID PRODUCTS
RFID products are attached to materials at an early stage of production and
accompany those materials throughout a manufacturing or distribution process,
using radio waves to transmit information specific to such material.
RFID products are used in the automobile, manufacturing and electronics
industries. RFID products are also used in access control systems to identify
people for security and other purposes.
RFID products simplify manufacturing and distribution processes by
decentralizing processing and decision-making functions, thereby reducing the
processing requirements of the host computer. Such products offer both item
identification and data management capabilities. Although RFID products are
sometimes used in AGV systems, the application of such products is not limited
to such systems.
Increased competition and decreased demand from the North American
automobile industry generally have resulted in declining net revenues for the
Company's RFID product line. On March 1, 1996, the Company reassigned its
distribution and manufacturing rights to Statec subject to monthly cash payments
by Statec to the Company. For the fiscal years ended November 30, 1996, 1995
and 1994, RFID product sales accounted for approximately 3%, 11%, and 9%,
respectively, of the Company's net revenues.
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CUSTOMERS
A substantial portion of the Company's business in any given year is
derived from a limited number of customers, although the identity of those
customers varies somewhat from year to year. For the fiscal year ended November
30, 1996, orders from the three largest customers accounted for 10.9%, 8.7%
and 7.7% of the Company's net revenues. For fiscal 1995, orders from the three
largest customers accounted for 13.2%, 12.8% and 11.5% of the Company's net
revenues. For fiscal 1994, orders from the three major customers
accounted for 14.0%, 7.8% and 7.5% of the Company's net revenues.
End users of the Company's products and services are reached by the
Company's sales through system suppliers and OEM's .
The Company's system supplier and OEM customers include 17 firms that
acquire the Company's products under various types of agreements. Under the
terms of such agreements, the system supplier can obtain hardware, software and
access the Company's specific AGV system know-how.
AGV system products and services sold to system suppliers, OEM's and
Netzler & Dahlgren as a group accounted for approximately 75%, 37% and
60% of the Company's net revenues in the fiscal years ended
November 30, 1996, 1995 and 1994, respectively. For the fiscal year
ended November 30, 1996, such customers accounted for approximately
$4.6 million in net revenues.
The Company sold also in 1996 its AGV system products and services
directly to end users to incorporate such components and equipment into AGV
systems suitable for their particular needs. These end users often are major
manufacturing concerns experienced in the application of sophisticated material
handling systems for in-house use. The two primary reasons for system sales to
end users are that no suitable OEM supplier can be identified or the need for
the Company to maintain its application know-how. AGV system products and
services sold to end users accounted for approximately 22%, 52% and 31% of the
Company's net revenues in the fiscal years ended November 30, 1996, 1995 and
1994, respectively.
MARKETING
The Company's marketing strategy is to promote the advantages of its AGV
control technology to the whole market, particularly its laser guidance
Lazerway(TM). The technology consists of a family of products, both hardware
and software, capable of being incorporated into a broad variety of systems
while preserving the identity and independence of the system supplier. The
Company sales and distribution efforts are directed toward its OEM customers and
system suppliers only. However, to increase demand for the products and services
of the AGV suppliers, the Company's marketing program targets North American end
users, system suppliers and OEMs. These firms add value and supply finished
products to end users. In its approach to certain prospective customers, the
Company will suggest a teamed technology arrangement. In such an arrangement,
the Company will work with its OEM customer to integrate the Company's
products and services with their equipment. The goal is to fashion a
material movement system that will satisfy the end user's particular
needs. Such technology once installed can be maintained by factory
floor technicians and has been used in more than 1000 AGV systems with over
6,000 vehicles (composed of as few as one vehicle and as many
as 50 vehicles) .
The Company's marketing program is led by its President, and implemented by
its Marketing Manager and Sales Group, who are responsible for developing
relationships with system suppliers, OEM's, distributors and manufacturers'
representatives. The Company attends the major trade shows held by the
materials handling industry and advertises in various industry publications.
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Although the Company actively markets all of its products and services, a
substantial part of its business is unsolicited. For example, a potential end
user of the Company's products might solicit requests for proposals from more
than one system supplier. A system supplier will incorporate the features of the
Company's products and services in the technical specifications of its bid, in
which case the pricing of its bid would reflect the cost of such products and
services. It is not unusual for several system suppliers or OEMs to incorporate
features of the Company's products and services into their bids, thus enhancing
the likelihood that such products and services will be included in the AGV
system finally selected by the end user. The bidding process takes, on the
average, three months to one year for completion. The design, manufacture and
installation of AGV systems utilizing the Company's products and services
require an additional six to twelve months.
BACKLOG
Backlog consists of all amounts contracted to be paid by customers but not
yet recognized as net revenues by the Company. At November 30, 1996, the
Company had a backlog of approximately $780,000 compared to $1,415,000 total
backlog one year earlier. Substantial fluctuations in backlog are considered
normal due to the size of AGV system contracts. Substantial fluctuations in the
industry makeup of the Company's backlog also are considered normal.
PATENTS AND PROPRIETARY INFORMATION
The Company has obtained marketing and manufacturing rights to control
technology, components, equipment and know-how developed by Netzler & Dahlgren,
and the Company is not permitted to apply for any patent thereon. Product
developments sponsored and funded by the Company are the property of the Company
and may be patented by the Company. The Company owns and licenses various
patents and trademarks with varying expiration dates.
Management believes that the Company's strong ability to modify and adapt
its products to changing applications is just as significant to the maintenance
of its competitive position as is the protection afforded by its own patents and
trademarks.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are designed to
complement existing products and services and not to innovate radically
different technologies. Management relies upon Netzler & Dahlgren to innovate
technology to which the Company would be entitled according to the terms of the
Master License Agreement.
The Company expensed $3,942 in fiscal 1996, $141,220 in fiscal 1995, and
$113,356 in fiscal 1994 for research and development, all relative to AGV
systems.
INVENTORY
The Company purchases considerable amounts of hardware and software from
Netzler & Dahlgren. The lead time required for such purchases averages
approximately sixteen weeks. Other manufactured products inventoried by the
Company require similar lead times. Due to the long lead times required, a
general increase in the volume of business can relate to increased inventory
levels. In 1996 inventories decreased due to the sale of inventories awarded
back to the Company related to the Schlafhorst dispute and to the return of
such inventory back to the manufacturer.
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COMPETITION
The material handling industry is highly competitive, and technologies are
changing rapidly. The Company is the major supplier in North America of AGV
system control technology, products and services designed to be incorporated
into vehicles manufactured by others. Management believes that the flexibility
and functionality of its controls and technology offer a competitive advantage
relative to the technology of system suppliers and OEM's that produce controls
and vehicles only for use in their own AGV systems. There can be no assurance
that this competitive advantage will continue.
In summary, competition is derived much less from non-OEM companies
supplying AGV control technology, than from the continuing reliance by OEM's on
their own internally designed AGVS technology.
While the Company endeavors continually to improve and upgrade its product
and service offerings, there can be no assurance that other firms having greater
financial resources for research, development and marketing will not develop
products with characteristics superior to the Company's products or that render
the Company's products obsolete.
The Master License Agreement as amended provides that the Company has the
exclusive right to distribute in North America the control technology and
products supplied to it by Netzler & Dahlgren. As companies begin to increase
their international business, AGV suppliers and OEMs based outside North America
that distribute Netzler & Dahlgren products are not subject to limitations on
their ability to compete with the Company's customers for end user sales in
North America. The results of operations and business outlook of the Company
would be affected adversely if Netzler & Dahlgren and its customers outside
North America were to sell products incorporating laser technology in the
Company's actual or potential markets. The Company, however, may also increase
its sales if its customers or potential customers begin to sell internationally.
EMPLOYEES
The Company presently employs 28 persons full-time. None of the Company's
employees is a party to a collective bargaining agreement. The Company considers
its employee relations to be excellent.
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ITEM 2. PROPERTIES
The Company owns the premises that it occupies at 3101 Latrobe Drive in
Charlotte. A bank holds a mortgage on the property in an original amount of
$1,387,000, of which $1,170,674 was outstanding at November 30, 1996. The
productive capacity of the building is approximately 13,000 square feet, all of
which is currently utilized for executive offices, engineering, distribution and
administration.
The Company ceased leasing the building that houses its demonstration and
testing in February of 1997. This facility incorporated approximately 3,000
square feet of warehouse and office space.
The Company is seeking additional financing to expand its existing facility.
Until such time, however, management believes that the Company's facilities are
adequate to meet its present needs.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock previously traded on the National Association of
Securities Dealers, Inc. ("NASDAQ") National Market under the symbol "AGVS". The
Company's common stock began trading on the OTC Bulletin Board in November,
1995. As of November 30, 1996, 3,453,451 of the Company's 11,000,000 authorized
shares of Common Stock were issued and outstanding.
Trading in the Company's securities commenced on March 28, 1990. The table
below indicates quarterly high and low bid and asked information for the years
ended November 30, 1996 and 1995, respectively, as provided to the Company by
NASDAQ and OTC Bulletin Board. The quotations reflect inter-dealer prices,
without dealer mark-up, mark-down, or commission, and may not represent actual
transactions.
The approximate number of holders of record of common stock of the Company
as of December 31, 1996 was 175.
Market Price per Share
------------------------------------------------------------
1996 1995
------------------------------------------------------------
High ^ Low ^ High Low
Quarter Ended Bid Ask Bid Ask Bid Ask Bid Ask
- ------------------------------------------------------------------------------
February 29 5/8 7/8 3/8 15/32 1 9/16* 1*
May 31 1 1/16 1 5/16 3/8 1/2 1 9/16* 7/8*
August 31 5/8 7/8 1/4 1/2 2 5/8* 1 1/8*
November 30 5/8 3/4 1/4 3/8 1 1/2* 7/16^ 13/16^
===============================================================================
* Prior to the quarter ended November 30, 1995, the Company's stock traded on
the NASDAQ National Market System.
^ November 21, 1995, the Company's stock began trading on the OTC
Bulletin Board.
The Company has never paid any cash dividends and has no present intention
to declare or pay cash dividends. The Company intends to retain any
earnings which it may realize in the foreseeable future to finance the
development and expansion of its business.
11
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information under the captions "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Registrant's Annual Report
to the security holders furnished to the Commission under Rule 14a-3(b) of the
Securities Exchange Act of 1934 (a copy of which is included in the
exhibits hereto) is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements in the Registrant's Annual Report to the security
holders furnished to the Commission under Rule 14a-3(b) of the Securities
Exchange Act of 1934 (a copy of which is included in the exhibits
hereto) are incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information under the captions "Election of Directors", "Management" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
Registrant's definitive Proxy Statement are incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information under the captions "Compensation of Directors" and
"Executive Compensation" in the Registrant's definitive Proxy Statement are
incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of
Management and Others" in the Registrant's definitive proxy statement is
incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Certain Transactions" in the
Registrant's definitive proxy statement is incorporated herein by reference.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K
None filed in 4th quarter
12
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
3.1(a)* Certificate of Incorporation of the Company (incorporated
by reference to Exhibit 3.1 to the Company's Form 10-K for the
fiscal year ended November 30, 1990 (the 1990 Form 10-K).
(b)* Certificate of Amendment dated May 27, 1993 (incorporated by
reference to Exhibit 3.1 to the Company from S-1 dated August
27, 1993).
3.2* Bylaws of the Company (incorporated by reference to Exhibit
3.2 to the Company's 1990 Form 10-K).
4.1* Form of Common Stock certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement (No.
33-32925) on Form S-18 (the Form S-18)).
10.1(a)* Profit Sharing Plan and Trust Agreement dated April 1,
1983, as amended (incorporated by reference to Exhibit 10.1 to
the Company's 1990 Form 10-K).
(b)* Nonstandardized Code 401(k) Profit Sharing Plan (incorporated by
reference to Exhibit 10.48 to the Company's 1990 Form 10-K).
(c)* Adoption Agreement #004 Nonstandard Code 401(k) Profit Sharing
Plan dated October 26, 1992 (incorporated by reference to
Exhibit 10.1(b) to the Company's Form 10-K for the fiscal year
ended November 30, 1992 (the 1992 Form 10-K)).
10.2(a)* Master License Agreement dated December 1, 1987 (the Master
License Agreement) between Netzler & Dahlgren and the Company
(incorporated by reference to Exhibit 10.2 to the Form S-18).
(b)* Letter Amendment dated March 28, 1990 between the Company and
Netzler & Dahlgren, amending the Master License Agreement
(incorporated by reference to Exhibit 10.2(b) to the Company's
1990 Form 10-K).
(c)* Amendment to Master License Agreement dated May 31, 1990
between the Company and Netzler & Dahlgren, amending the Master
License Agreement (incorporated by reference to Exhibit 10.2(c)
to the Company's 1990 Form 10-K).
(d)* Agreement dated October 18,1993 between the Company and Apogeum
AB regarding Conveyance of Laser Know-How and Rights
(incorporated by reference to exhibit 10.2(D) 1994 form 10KSB).
(e)* Restated Master License Agreement dated November 30, 1995
between the Company and Netzler and Dahlgren Co. AB
(incorporated by reference to exhibit 10.2(e) 1995 form 10KSB).
10.3(a)* Agreement of Understanding dated January 21, 1990 between
the Company, Statec S.A., Angro et El srl., Valtronic Holdings
SA, Valtronic France SA, Mr. Dominique Saulnier, personally and
on behalf and for the account of Mrs. C. Saulnier, his wife
(incorporated by reference to Exhibit 10.3(a) to the Company's
1990 Form 10-K).
(b)* License Agreement dated April 6, 1987 between Dominique Saulnier
and NDC Systems, Inc. (incorporated by reference to Exhibit
10.3(b) to the Form S-18).
(c)* Sole Distributorship Agreement dated January 21, 1990 between
Statec Technologies, S.A. and NDC Automation, Inc. (incorporated
by reference to Exhibit 10.3(c) to the Company's 1990 Form
10-K).
13
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
(d)* Letter of understanding between the Company and Statec
Technologies SA dated February 21, 1996 to reassigning exclusive
distribution for North America back to Statec (incorporated by
reference to exhibit 10.3(d) 1995 form 10KSB).
(e)* Termination and Release Agreement between the Company and Statec
Technologies, S.A. effective March 1, 1996 (incorporated by
reference to exhibit 2 of the Company's February 29, 1996
10QSB).
10.4(a)* Agreement dated June 20, 1989 between the Company and
Schabmuller GmbH (incorporated by reference to Exhibit 10.4 to
the Form S-18).
(b)* Exclusive Distribution Agreement dated February 9, 1995 between
the Company and Schabmuller GmbH (incorporated by reference to
exhibit 10.4(b) to the Company's 1994 form 10-KSB).
10.5(a)* Know-How, Firmware and Documentation License Agreement
dated November 30,1990 between the Company and Production
Machinery Corporation (incorporated by reference to Exhibit
10.8(a) to the Company's Form 10-K for the fiscal year ended
November 30, 1991 (the 1991 Form 10-K)).
10.6(a)* Agreement dated January 1, 1991 between Clark Material
Handling Company (a business unit of Clark Equipment Company)
and the Company (incorporated by reference to Exhibit 10.16 to
the Company's 1990 Form 10-K).
(b)* Development Contract dated April 24, 1991 between the Company
and Control Science, Inc. (incorporated by reference to Exhibit
10.16(b) to the Company's 1991 Form 10-K).
10.7(a)* Know-How License Agreement dated May 30, 1984 between
Netzler and Dahlgren Company Technologies, Inc. and FMC
Corporation, MHS Division (incorporated by reference to Exhibit
10.17(a) to the Form S-18).
(b)* Requirements Supply Agreement dated May 30, 1984 between Netzler
and Dahlgren Company Technologies, Inc. and FMC Corporation, MHS
Division (incorporated by reference to Exhibit 10.17(b) to the
Form S-18).
(c)* Software License Agreement dated May 30, 1984 between Netzler
and Dahlgren Company Technologies, Inc. and FMC Corporation, MHS
Division (incorporated by reference to Exhibit 10.17(c) to the
Form S-18).
10.8* Employment Contract between Ralph G. Dollander and the Company.
(incorporated by reference to exhibit 10.14, 1995 form 10KSB).
10.9(a)* NDC Automation, Inc. 1990 Stock Option Plan, as adopted
October 10, 1990 (incorporated by reference to Exhibit 10.47(a)
to the Company's 1990 Form 10-K).
(b)* Form of Stock Option Agreement (incorporated by reference to
Exhibit 10.47(b) to the Company's 1990 Form 10-K).
10.10(a)* Form of Stock Purchase Agreement dated July 1, 1992 between
the Company and NDC Technologies International, Ltd.
(incorporated by reference to Exhibit 10.50 to the Company's
1992 Form 10-K).
(b)* Agreement to purchase corporate stock of NDC Technologies
Australia Pty, Ltd. dated November 30, 1995 between the Company
and Tommy Hessler. (incorporated by reference to Exhibit
10.18(b) to the Company's 1995 Form 10-KSB).
14
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
10.11(c )* Guaranty and Pledge Agreement between Tommy Hessler and
the Company dated November 30, 1995. (incorporated by reference
to Exhibit 10.18 (c ) to the Company's 1995 Form 10-KSB).
(d)* Promissory Note dated November 30, 1995 between the Company and
NDC Technology Australia Pty. Ltd. (incorporated by reference to
Exhibit 10.18(d) to the Company's 1995 Form 10-KSB).
10.12* Promissory Note from the Company to First Citizens Bank & Trust
Company (incorporated by reference to Exhibit 10.56 to the
Company's 1992 Form 10-K).
10.13(a)* Amended and restated Loan Agreement dated July 28, 1994
between the Company and NationsBank of North Carolina, N.A.
(incorporated by reference to Exhibit 4 to the Company's August
31, 1994 Form 10-QSB).
(b)* First amendment dated November 30, 1994 modifying the amended
and restated Loan Agreement dated July 28, 1994 between the
Company and NationsBank of North Carolina, N.A. (incorporated by
reference to exhibit 10.25(b) to the Company's 1994 form 10KSB).
(c)* Second Amendment dated December 19, 1994 modifying the amended
and restated Loan Agreement dated July 28, 1994 between the
Company and NationsBank of North Carolina, N.A. (incorporated by
reference to exhibit 10.25(c) to the Company's 1994 form 10KSB).
(d)* Copy of First Amendment to the amended and restated Loan
Agreement between the Company and NationsBank of North Carolina,
N.A. dated November 30, 1994 (incorporated by reference to
exhibit 1 of the Company's February 28, 1995 10QSB).
(e)* Third Amendment dated March 31, 1995 modifying the amended and
restated loan agreement dated July 28, 1994 between the Company
and NationsBank of North Carolina, N.A. (incorporated by
reference to exhibit 2 of the Company's February 28, 1995 Form
10QSB).
(f)* Fourth Amendment dated August 30, 1995 to the amended and
restated Loan Agreement, between the Company and NationsBank of
North Carolina, N.A. (incorporated by reference to exhibit 1 of
the Company's August 31, 1995 10QSB).
(g)* Fifth Amendment dated November 30, 1995 to the amended and
restated loan agreement between the Company and NationsBank of
North Carolina, N.A. (incorporated by reference to exhibit
10.25(g) to the Company's 1995 form 10KSB).
(h)* First Amendment dated November 30, 1995 to the amended
collateral assignment between the Company and NationsBank of
North Carolina, N.A. (incorporated by reference to exhibit
10.25(h) to the Company's 1995 form 10KSB).
(i)* Sixth Amendment dated March 31, 1996 to amended and restated
Loan Agreement between the Company and NationsBank of North
Carolina, N.A. (incorporated by reference to exhibit 1 to the
Company's February 29, 1996 form 10QSB).
(j)* Seventh Amendment dated May 31, 1996 to the amended and restated
Loan Agreement between the Company and NationsBank of North
Carolina, N.A. (incorporated by reference to the Company's
May 31, 1996 form 10QSB).
(k) Eighth Amendment dated November 29, 1996 to the amended and
restated Loan Agreement between the Company and NationsBank of
North Carolina, N.A.
10.14 Commitment letter dated December 18, 1996 for a revolving line
of credit of $1,250,000 to be provided by National Canada
Business Corp's to the Company.
15
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
10.15(a)* Asset Purchase Agreement dated June 22, 1993 between the
Company and AutoNavigator AB (ANAB) (incorporated by reference
to Exhibit 10.32 (a) to the Company's August 27, 1993 Form S-1).
(b)* Agreement relating to Patent Licenses and Other Intellectual
Property dated June 22, 1993 between the Company and Kalevi
Hyyppa, Slipvagen 13 A, 951 56 Lulea, Sweden (incorporated by
reference to Exhibit 10.32 (b) to the Company's August 27, 1993
Form S-1).
(c)* Purchase agreement dated November 30, 1995 between the Company
and Netzler and Dahlgren Co. AB for NDC Laser AB and all
tangible and intangible rights to the techology. (incorporated
by reference to exhibit 10.30(c ), 1995 Form 10KSB).
(d)* Consent of Kalevi Hyypa (the "inventor") for the sale of NDC
laser and related assets between the Company and Netzler &
Dahlgren Co. AB dated November 24, 1995. (incorporated by
reference to exhibit 10.30(d), 1995 Form 10KSB).
10.16* Know-How, Firmware and Documentation License Agreement and
Requirements Supply Agreement dated May 21, 1993 between the
Company and Pulver Systems, Inc. (incorporated by reference to
Exhibit 10.32 to the Company's November 30, 1993 Form 10-KSB).
10.17* Agreement dated November 30, 1995 between the Company and
Netzler and Dahlgren Co. AB for future marketing and support
activites (incorporated by reference to exhibit 10.37, 1995 Form
10KSB).
10.18 Development and Demonstration Agreement dated January 31, 1997
between the Company, Hyster Company and Mentor AGVS, Inc.
11.1 Computation of Earnings Per Share for November 30, 1996.
13. Company's 1996 annual report.
23.3 Consent of McGladrey & Pullen, LLP to the incorporation by
reference in this Form 10-KSB.
27. Financial Data Schedule
99.1* United States Letters Patent for Optical Navigation System for
an Automatic Guided Vehicle, and Method (Patent No. 4,626,132;
Date of Patent 08/15/89) (incorporated by reference to Exhibit
28.1 to the Form S-18).
99.2* United States Patent for Method and Apparatus for Providing
Destination and Vehicle Function Information to an Automatic
Guided Vehicle (Patent No. 4,780,817; Date of Patent 10/25/88)
(incorporated by reference to Exhibit 28.2 to the Form S-18).
99.3* United States Patent and Trademark Office Notice of Recordation
of Assignment Document for Automatic Guided Vehicle Traffic
Control System and Method (Document Date 02/19/88) (incorporated
by reference to Exhibit 28.3 to the Form S-18).
99.4* Canadian Letters Patent for Apparatus and Method for Optical
Guidance System for Automatic Guided Vehicle (Patent No.
1,236,132; Date of Patent 05/17/88) (incorporated by reference
to Exhibit 28.4 to the Form S-18).
16
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
(A) Exhibits:
Exhibit No. Description
99.7* United States Certificate of Registration of Trademark NDC
(No. 1,360,353; Date of Registration 09/17/85) (incorporated by
reference to Exhibit 28.7 to the Form S-18).
99.8* United States Certificate of Registration of Trademark SENS-
O-GUIDE (No. 1,360,354; Date of Registration 09/17/85)
(incorporated by reference to Exhibit 28.8 to the Form S-18).
99.9* Canadian Certificate of Registration Trademark MAGIC POINT
(No. 331696; Date of Registration 09/04/87) (incorporated by
reference to Exhibit 28.9 to the Form S-18).
99.10* United States Certificate of Registration of Trademark MAGIC
POINT (No. 1,417,335; Date of Registration 11/18/86)
(incorporated by reference to Exhibit 28.10 to the Form S-18).
99.11* United States Certificate of Registration of Trademark ESCORT
(No. 1,468,835; Date of Registration 12/15/87) (incorporated by
reference to Exhibit 28.11 to the Form S-18).
(Bullet) Certain of the exhibits to this Report, indicated by an asterisk, are
hereby incorporated by reference to other documents on file with the
Commission, with which they are filed in fact, to be a part hereof
as of their respective dates.
(B) Reports on Form 8-K
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NDC AUTOMATION, INC.
Registrant
By: /s/ Ralph G. Dollander
_______________________________
Ralph G. Dollander
President
Chief Executive Officer, Director
By: /s/ Claude Imbleau
_______________________________
Claude Imbleau
Vice President Finance
Chief Financial Officer
Date: February 24, 1997 Chief Accounting Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and date
indicated.
By: /s/ Goran P. R. Netzler
________________________________
Goran P. R. Netzler
Chairman of the Board of Directors
By: /s/ Ralph G. Dollander
________________________________
Ralph G. Dollander
President
Chief Executive Officer, Director
By: /s/ Jan H. L. Jutander
________________________________
Jan H. L. Jutander
Director
By: /s/ Richard D. Schofield
_______________________________
Richard D. Schofield
Director
By: /s/ T. Randolph Whitt
_______________________________
T. Randolph Whitt
Date: February 24, 1997 Director
18
EIGHTH AMENDMENT
This Eighth Amendment (the "Eighth Amendment") entered into as of November
29, 1996 by and between NDC Automation, Inc. (the "Borrower"), a corporation
organized and existing under the laws of the State of Delaware, and having its
principal place of business in Charlotte, North Carolina, and NationsBank, N.A.
(successor-in-interest to NationsBank, N.A. (Carolinas) and to NationsBank of
North Carolina, N.A.), a national banking association, (the "Bank") organized
and existing under the laws of the United States and having offices in
Charlotte, North Carolina.
INTRODUCTORY STATEMENT
A. The Borrower and the Bank are parties to, among other things, an
Amended and Restated Loan Agreement dated July 28, 1994 (the "Restated Loan
Agreement"), as amended as of November 30, 1994, as of December 19, 1994, as of
March 31, 1995, as of August 30, 1995, as of November 30, 1995, as of March 31,
1996 and as of May 31, 1996.
B. Borrower has requested and the Bank has agreed to amend the Restated
Loan Agreement in the respects set forth herein.
NOW, THEREFORE, in consideration of $10.00 and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
AGREEMENT
1. Amendment of the Agreement. The Restated Loan Agreement is amended
as follows:
(a) Article I - Definitions.
Section 1.01 is hereby amended such that the definition of
the term "Borrowing Base" means the sum of: (a) eighty percent (80%)
of Eligible Receivables and (b) the lesser of (x) forty percent (40%)
of Eligible Inventory or (y) $300,000.
(i) Section 1.01 is hereby amended such that the definition of
the term "Eligible Receivables" means all accounts receivables of the
Borrower except (i) those which are 90 days or more past due or more
than 150 days from invoice date; (ii) those arising from sales to
Affiliates; (iii) those from sales to customers located outside of
the United States of America except for such customers specifically
approved in writing by
-19-
<PAGE>
the Bank; (iv) those which the Bank in its reasonable discretion and
in accordance with its customary criteria determines to be ineligible,
and (v) those receivables that are project receivables.
(ii) Section 1.01 is hereby amended such that the term "Facility
A Amount" means $750,000.
(iii) Section 1.01 is hereby amended such that the term
"Termination Date" means February 28, 1997.
(b) Article II - Facility A Loans.
(i) Section 2.03 is amended in its entirety so that such
section now reads as follows:
2.03 Interest Rate. The outstanding principal
balance of the Facility A Loans shall bear interest at
the Prime Rate plus 3.25% per annum.
(c) Exhibit 9.02(c)(ii).
Exhibit 9.02(c)(ii) of the Restated Loan Agreement, the "Form of
Borrowing Base Report" is hereby amended to reflect that "Receivables
from Projects" shall no longer qualify as Eligible Receivables.
2. Letter of Credit. Simultaneously with the execution of this Eighth
Amendment, as additional security for the Borrower's obligations to the Bank
under the Amended Loan Documents, the Borrower shall cause Nordbanken AB to
issue a $450,000 standby letter of credit (the "Standby Letter of Credit")
for the benefit of the Bank. The Standby Letter of Credit shall be in the
form of that attached hereto as Exhibit A.
3. Extension Fee. The Borrower shall pay to the Bank for the Bank's own
account a Termination Date extension fee in the amount of $7,500, provided,
however, that such extension fee (a) shall not be due and payable until February
28, 1997 and (b) shall be waived by the Bank if the Borrower satisfies all of
its other obligations to the Bank under the Amended Loan Documents on or before
the Termination Date, including but not limited to payment in full of the
outstanding balance of principal and accrued interest on the Facility A Note.
4. Waivers and Release of Claims. As additional consideration to the
execution, delivery, and performance of this Eighth Amendment and to induce
the Bank to enter into this Eighth Amendment, the Borrower represents and
warrants that (a) the Borrower knows of no defenses, counterclaims or rights
of setoff to the payment of any indebtedness of the Borrower to the Bank,
-20-
<PAGE>
and (b) the Borrower for itself, its Subsidiaries, their respective
representatives, agents, officers, directors, employees, shareholders, and
successors and assigns, hereby fully, finally, completely, generally and forever
releases, discharges, acquits, and relinquishes the Bank and its respective
representatives, agents, officers, directors, employees, shareholders, and
successors and assigns, from any and all claims, actions, demands, and causes of
action of whatever kind or character, whether joint or several, whether known or
unknown, for any and all injuries, harm, damages, penalties, costs, losses,
expenses, attorneys' fees, and/or liability whatsoever and whatever incurred
or suffered by any of them prior to the execution of this Eighth Amendment
related to any indebtedness of the Borrower to the Bank under the Original
Loan Documents or the Amended Loan Documents. Notwithstanding any provision of
this Eighth Amendment or any other Amended Loan Document or Original Loan
Document, this Section shall remain in full force and effect and shall survive
the delivery of this Eighth Amendment and the making, extension, renewal,
modification, amendment or restatement of any thereof.
5. Representations and Warranties. The Borrower hereby represents and
warrants to the Bank that as of the date hereof the Restated Loan Agreement has
been reexamined and:
(a) The representations and warranties made by the Borrower
in Article VIII thereof are true on and as of the date hereof;
(b) The Borrower has the power and authority to enter into this
Eighth Amendment and to perform its obligations herein and has by proper
corporate action duly authorized the execution and delivery of this
Eighth Amendment and ratified and affirmed the enforceability of the
other Amended Loan Documents;
(c) Neither the execution and delivery of this Eighth Amendment, nor
the performance of the obligations herein violates or will violate any law
or governmental order, conflicts or will conflict with any provision of any
charter document or bylaw of the Borrower or any material term or provision
of any agreement or instrument to which the Borrower is a party or by which
the Borrower is bound, or constitutes or will constitute a breach of or a
default under any such agreement or instrument; and
(d) No consent, approval or authorization of, or filing, registration
or qualification with, any governmental authority on the part of the
Borrower is required as a condition to the execution, delivery or
performance of this Eighth Amendment by the Borrower.
-21-
<PAGE>
6. Full Force and Effect. The Restated Loan Agreement, as amended
hereby, is hereby confirmed to continue in full force and effect. All terms
defined in the Restated Loan Agreement and not defined herein shall have the
meaning herein as in the Restated Loan Agreement.
7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
8. Expenses. Upon demand therefor, the Borrower shall pay all out-of-
pocket expenses incurred by the Bank in connection with the negotiation,
drafting and execution of the transaction set forth herein, plus all unpaid
out-of-pocket expenses otherwise due under the Amended Loan Documents, all
including, without limitation, reasonable fees and expenses of the Bank's
counsel.
IN WITNESS WHEREOF, the parties have executed this Eighth Amendment all
this of the day and year first above written.
NDC AUTOMATION, INC.
ATTEST:
By /s/ Ralph Dollander By /s/ Claude Imbleau
Claude Imbleau, Vice President
Title CEO
(Corporate Seal)
NATIONSBANK, N.A.
ATTEST:
By /s/ Carol A. Warner By /s/ John C. Calabrese
John C. Calabrese, Vice President
Title Assistant Secretary
(Corporate Seal)
-22-
<PAGE>
LOC.ID:CLT INCOMING SWIFT MSG-707 TEMPLATE-35895870 12/23/96
{1:F01NABKUS33ACHA1612776729}
{2:O7071504961223NBBKSEGGAXXX3901356
FROM:
NORDBANKEN
VAESTRA HAMNGATAN 16
403 17 GOTEBORG
GOTEBORG
{4:
09612230904N} {4:
** 20 SENDING BANKS REFERENCE
:20:3330/IR007354GBG
** 21 RECEIVING BANKS REFERENCE
:21:NONREF
** 31C DATE OF ISSUE/TRANSFER OF THE CREDIT
:31C:961218
** 30 DATE OF AMENDMENT
:30:961223
:26E:1
** 59 BENEFICIARY (BEFORE THIS AMENDMENT)
:59:NATIONSBANK NA
PO BOX 120
CHARLOTTE NC 28255
USA
** 31E NEW DATE OF EXPIRY
:3???970328
** NARATIVE
:79:Charges : ALL CHARGES ARE FOR APPLICANTS ACCOUNT
Instructions to the bank : DELETE: RECEIPT OF
ADVISING BANK'S TELEX OR SWIFT INSERT: RECEIPT OF
NATIONSBANK'S N.A., CHARLOTTE TELEX OR SWIFT
** 72 BANK TO BANK INFORMATION
:72:SUBJECT TO ICC 1993 REVISION.
PUBLICATION NO. 500.
*
PLEASE ADVISE BENEFICIARY BY PHONE
- -}{5:{MAC:13E73E22}
{CHK:32937C583B41}}
*** L/C ISSUE NOT FOUND TO CREATE AMENDMENT ***
-23-
<PAGE>
LOC.ID:CLT INCOMING SWIFT MSG-700 TEMPLATE-35495310 12/19/96
{1:F01NABKUS33ACHA1611772165}{2:O7001504961219NBBKSEGGAXXX3899355
FROM:
NORDBANKEN
VAESTRA HAMNGATAN 16
403 17 GOTEBORG
GOTEBORG
{4:
09612190904N}{4:
** 27 SEQUENCE OF TOTAL
:27:1/1
**40 FORM OF DOCUMENTARY CREDIT
:40A:IRREVOCABLE
** 20 DOCUMENTARY CREDIT NUMBER
:20:3330/IR007354GBG
** 31C DATE OF ISSUE OF THE D/C
:31C:961219
** 31D DATE AND PLACE OF EXPIRY
:31D:970301NATIONSBANK NA
** 50 APPLICANT
:50:NDC NETZLER O DAHLGREN CO AB
429 80 SARO
** 59 BENEFICIARY
:59:NATIONSBANK NA
PO BOX 120
CHARLOTTE NC 28255
USA
** 32B CURRENCY CODE, AMOUNT
:32B:USD450000,
** 39 AMOUNT SPECIFICATION
:39B: UP TO
** 41 AVAILABLE WITH...BY...
:41D:NATIONSBANK NA CHARLOTTE
BY PAYMENT
** 42 DRAFTS AT ... DRAWN ON ...
:42C:sight
88 42 DRAFTS AT ... DRAWN ON ...
:42D:advising bank
** 46 DOCUMENTS REQUIRED
:46A:
+WRITTEN STATEMENT ISSUED BY NATIONSBANK N.A., CHARLOTTE, USA
EVIDENCING THAT NATIONSBANK N.A., CHARLOTTE HAS NOT RECEIVED
PAYMENT FROM NDC AUTOMATION, INC., 3101 LATROBE DRIVE, CHARLOTTE,
NC 28211 USA UNDER NATIONSBANK N.A. REF 822154-315 AND THAT THE
AMOUNT OF USD ..... (MAX USD 450.000,00) IS NOW DUE
** 47 ADDITIONAL CONDITIONS
:47A:
PARTIAL DRAWINGS ARE ALLOWED
.
THIS IS A STAND BY LETTER OF CREDIT
** 1B CHARGES
:???:ALL CHARGES OF BANKS OTHER THAN
THE ISSUING BANK ARE FOR THE
-24-
<PAGE>
AMOUNT OF THE BENEFICIARY
** 49 CONFIRMATION INSTRUCTIONS
:49:WITHOUT
** 78 INSTRUCTIONS TO THE PAYING/ACCEPTING/NEGOTIATING BANK
:78:
UPON OUR RECEIPT OF ADVISING BANK'S TESTED TELEX OR SWIFT
EVIDENCING THAT NATIONSBANK N.A., CHARLOTTE HAS NOT RECEIVED
PAYMENT FROM NDC AUTOMATION, INC., 3101 LATROBE DRIVE, CHARLOTTE,
NC 28211 USA UNDER NATIONSBANK N.A. REF 822154-315 AND THE AMOUNT
OF USD ...... (MAX USD 450.000,00) IS NOW DUE, WE WILL PAY TO
ADVISING BANK AS INSTRUCTED VALUE TWO WORKING DAYS LATER.
** 72 BANK TO BANK INFORMATION
:72:IF THIS L/C EXPIRES DURING AN INTER
RUPTION OF BUSINESS AS DESCRIBED IN
ART 17 WE HEREBY SPECIFICALLY AGREE
TO EFFECT PAYMENT IF THIS L/C IS
DRAWN AGAINST WITHIN 30 DAYS AFTER
OF THE RESUMPTION OF BUSINESS.
- -}{5:{MAC:AA5F1FC8}{CHK:08A84908FDC4}}
*** RECORD 354953100000000000 WRITTEN TO FILE LCOLOC ***
-25-
(logo) NATIONAL CANADA Two First Union Center
BUSINESS CORP. Suite 2020
A NATIONAL BANK Charlotte, NC 28282
OF CANADA SUBSIDIARY Telephone: (704) 372-0783
Fax: (704) 335-0570
December 11, 1996
Mr. Ralph Dollander
President
NDC Automation, Inc.
3101 Latrobe Drive
Charlotte, NC 28211-4849
Dear Mr. Dollander:
Pursuant to our recent conversations and based on National Canada Business
Corp.'s (NCBC) review of historical and financial information provided on
NDC Automation, Inc. (hereinafter the "Borrower"), NCBC is pleased to offer the
following financing proposal. Note: NCBC's funding of this proposed loan is
conditioned upon: (i) the completion of a prefinance survey by NCBC, with the
findings of that survey being acceptable to NCBC, ii) the final approval of
NCBC's senior loan committee and iii) documentation of the loan described
herein in a manner acceptable to NCBC.
1. NCBC proposes a $1,250,000.00 revolving line of credit (the "Line"). The
Line will be secured by a first and otherwise unencumbered lien on Borrower's
accounts receivable, inventory, and a $450,000.00 stand-by letter of credit
issued by a Bank acceptable to NCBC. This will be an "On Demand" loan.
2. The cost of the Line to Borrower will be calculated as follows: i) the
interest rate charged on the daily funded debt balance drawn under the Line
will float at (a) National Bank of Canada's Prime Rate (currently 8.25%) +
1.50% and will be due monthly in arrears on that portion of the funded debt
covered by the $450,000.00 stand-by letter of credit and (b) National Bank of
Canada's Prime Rate (currently 8.25%) + 2.75% on the remaining portion of the
funded debt and will be due monthly, in arrears, ii) a Transaction Fee
calculated as 1.00% of the Line amount will be due at funding and annually
thereafter, such annual fee will be reduced to 0.50% of the Line amount
during those years in which the audited year-end results of the prior year
reports profitable operations, iii) a $500.00 monthly Servicing Fee will be due
the first day of each month, in advance and iv) a Field Exam Fee calculated at
$500.00 per in-office day, plus associated expenses, will be due in arrears.
(Note: Field Exams are normally done on a quarterly basis and take two to
three days of in-office time.)
-26-
<PAGE>
NDC Automation, Inc.
Page 2
3. NCBC proposes advance rates on pledged collateral as follows:
i) Eighty percent (80%) on Eligible Accounts Receivable. Eligible Accounts
Receivable are generally described as those created in the ordinary course
of business in which NCBC has a first perfected security interest, that are
less than ninety (90) days old from invoice date, not subject to offset, not
due from a related party, not a foreign account receivable, not subject to
the "50% Rule" and not otherwise deemed to be ineligible by NCBC. NCBC's
total advance on the Project Division Accounts Receivable will not exceed
$300,000.00.
ii) Fifty percent (50%) on Qualified Inventory. Qualified Inventory is
generally described as raw materials and finished goods in which NCBC has
a first perfected security interest, that is not over stocked, obsolete or
otherwise deemed to be unqualified by NCBC. NCBC's total advance on
Qualified Inventory will not exceed $400,000.00.
4. Collections will be received through a financial institution lockbox/blocked
account to be mutually agreed upon and deposited into a NCBC cash collateral
account. NCBC will collect moneys on the date received in the lockbox/blocked
account and credit Borrower's loan balance for those moneys on the date
received. NCBC will assess a three (3) days float charge on moneys so applied.
5. An Inventory Buy-back Agreement, acceptable to NCBC, will be required on
inventory supplied by Netzler & Dahlgren Co. AB.
6. Reporting procedures acceptable to NCBC related to changes in accounts
receivable, inventory and loan balances will be implemented.
7. NCBC will require monthly company prepared financial statements and annual
CPA audited financial statements.
8. Field examinations will be scheduled as determined by NCBC [approximately
every ninety (90) days].
9. All legal fees, filing fees and other direct costs incurred by NCBC will be
for Borrower's account.
10. Landlord waivers and/or mortgagee waivers acceptable to NCBC will be
obtained for any premises where Borrower's collateral is located.
-27-
<PAGE>
NDC Automation, Inc.
Page 3
11. In the event that Borrower's loan is repaid in full and NCBC is required to
release its security interest in pledged collateral prior to the passage of
three (3) full years from the initial funding date of the Line, a Prepayment
Premium will become due from Borrower payable to NCBC. The amount of such
Prepayment Premium, should prepayment occur within the first year following
funding, will be calculated as two percent (2.00%) of the Line amount. If
repayment occurs during the second year following funding, the Prepayment
Premium will be calculated as one percent (1.0%) of the Line amount.
To accept this proposal, please sign in the space provided and return this
originally executed letter to NCBC no later than December 18, 1996. Under
normal circumstances, NCBC expects to have internal loan approval by January
31, 1997. Include with this letter a deposit check for $10,000.00. This deposit
will be: i) returned upon funding of the loan proposed herein, ii) returned,
less NCBC's direct out-of-pocket expenses should NCBC be unable to issue its
commitment or iii) retained by NCBC as full compensation for its efforts in this
matter should NCBC issue its commitment for a loan substantially as described
herein and Borrower choose not to close and find the loan by February 27, 1997.
NCBC is pleased to be able to make this proposal and looks forward to
providing you with working capital to meet your financing needs. We hope this
will be the start of a long and mutually beneficial relationship. Please feel
free to call at (704) 372-0783 with any questions.
Sincerely,
/s/ Gregg Simpson
Gregg Simpson
Vice President
Accepted this 18th day of December, 1996
NDC Automation, Inc.
/s/ Ralph Dollander
Ralph Dollander, President
-28-
<PAGE>
DEVELOPMENT AND DEMONSTRATION AGREEMENT
This document sets forth the agreement of the parties hereto for the
development of an automated, laser guided vehicle ("AGV") system and the
use of the AGV system by the parties as a demonstration unit.
1. DEVELOPMENT. Hyster Company ("Hyster"), NDC Automation, Inc. ("NDC") and
Mentor AGVS, Inc. ("AGVS") shall jointly develop a laser guided demonstration
AGV system. Hyster shall supply its current model Hyster AGV tow tractor.
NDC shall supply a NDC Lazerway laser kit that is compatible with and can
be installed in and used with the Hyster tow tractor. AGVS shall provide
software and engineering to integrate the two tractor and laser kit and shall
assemble a fully functioning laser guided demonstration AGV system. The
integration and assembly of the tow tractor, laser kit and software shall
occur at AGVS's facilities in Mentor, Ohio. The developed AGV system will then
be used by Hyster, NDC and AGVS as a demonstration unit with their respective
customers. On termination of this agreement, AGVS shall dismantle and segregate
the goods of each party that make up the AGV system and return them to their
respective owners. No party hereto shall charge any other party any amount for
the supplying of the goods or the performance of the services covered by this
agreement.
2. TITLE; ENCUMBRANCES. Title to the goods supplies by each party shall
remain solely and exclusively in the supplying party. Each party may install
labels or other markings or identification to the goods it supplies,
identifying the goods as belonging to that party. None of the parties shall
permit or allow to attach or continue any lien, security interest or other
encumbrance on or against the goods of another party.
3. USE OF DEMONSTRATION UNIT. The parties will cooperate to mutually schedule
the use of the demonstration AGV system by each of them. The contemplation
is that the demonstration AGV system will be shared equally by the parties
during the term of this agreement.
4. TERM. This agreement shall terminate on November 30, 1997. The agreement
may be terminated earlier by any one of the parties, but only if (a) that
party cannot perform its obligations under the agreement for technical reasons,
or (b) another party, after notice and failure to cure within 30 days of receipt
of notice from the terminating party, is in default or breach of its
obligations under this agreement or fails to perform in accordance with any
time schedule mutually agreed to by all the parties.
5. FREIGHT AND RISK OF LOSS. The cost of freight to ship the goods to AGVS
for integration and assembly shall be borne by the party to whom the
goods belong. During the demonstration phase of this agreement, the party
shipping the AGV system to another party shall be responsible for and pay the
DEVELOPMENT AND DEMONSTRATION AGREEMENT - Page 1
- 29 -
<PAGE>
related freight charges. Freight charges to return the goods of each party on
termination of this agreement shall be borne by the party to whom the goods
are returned in accordance with this agreement. As between the parties, each
party shall bear the risk of loss to the goods which that party has supplied
for the demonstration AGV system, from whatever cause, subject, however, to
the indemnity provisions set forth below.
6. INFORMATION AND DOCUMENTS. Each party shall supply engineering, technical
and product information and documents reasonably needed by the parties for
the development and demonstration of the AGV system. The parties acknowledge
that this information and documents are valuable assets of the party supplying
the same. Except for such information and documents that are a matter of
public record, in the public domain or lawfully obtained from another source
by a non-supplying party, no party shall, during the term of this agreement
or after its termination, disclose to any person or entity, other than its
own employees on a need to know basis, and shall hold in confidence such
information or documents as may be supplied to it, without the prior written
consent of the supplying party. All such information and documents shall be the
sole and exclusive property of the supplying party and shall be returned by
the non-supplying parties, together with all copies thereof, to the supplying
party immediately on the termination of this agreement. The parties agree that
it would be difficult to measure the damage to a supplying party from any
breach by a non-supplying party of the foregoing provisions on confidentiality,
and that monetary damages would be an inadequate remedy for any such breach.
Accordingly, if any non-supplying party breaches or takes steps preliminary to
breaching these confidentiality provisions, the supplying party shall be
entitled, in addition to all other remedies it may have at law or in equity,
to an injunction or other appropriate orders to restrain any such breach,
without showing or proving any actual damages have been sustained by the
supplying party.
7. INDEMNITY. Each party to this agreement agrees to indemnify, defend and
hold harmless the other parties hereto from and against any and all loss,
damage, injury, liability (including strict tort liability), cost and expense
(including attorneys' fees), claims and suits, of whatsoever nature or cause,
(a) resulting from or arising out of any default in or breach of this
agreement by the indemnifying party, any conduct, act or omission of the
indemnifying party in the performance of its obligations under this
agreement or the indemnifying party's assembly, use, possession, maintenance,
repair or demonstration of the AGV system, or (b) resulting from or arising
out of any defects in materials or workmanship of the goods or services
supplied or provided by the indemnifying party in connection with the
performance of this agreement. The foregoing includes, without limitation,
injury (including death) or damage to the person or property of the
indemnifying party, the indemnified parties or any third party, and their
respective employees, agents, officers and contractors.
DEVELOPMENT AND DEMONSTRATION AGREEMENT - Page 2
- 30 -
<PAGE>
8. SALE OF DEMONSTRATION AGV SYSTEM. The demonstration AGV system may be sold
or otherwise disposed of during the term of this agreement, whether to one of
the parties hereto or to a fourth party, only with the consent of all the
parties hereto. Prior to accepting any fourth party offer to purchase or
otherwise acquire the demonstration AGV system, the disposing party shall obtain
agreement from the other two parties hereto as to the portion of the proceeds
of disposition to be paid to each party and the terms of payment. The proceeds
of any resulting disposition shall be paid by the disposing party to the other
two in accordance with such agreement.
9. COMPLIANCE WITH LAWS. Goods supplied hereunder by each party shall comply
with all mandatory design and construction specifications of applicable laws
and any rules, regulations orders or the like adopted thereunder. In the
performance of any services hereunder each party shall likewise comply with
all applicable laws and any rules, regulations, orders or the like adopted
thereunder, including without limit social security and income tax withholding
laws, workers' compensation, unemployment compensation laws, safety and health
laws, environmental laws and building codes. Each party to this agreement shall
indemnify, defend and hold harmless the other parties hereto from and against
all claims, suits and actions and any resulting damages, fines, penalties,
expenses (including attorneys' fees) and costs resulting from any failure
of the indemnifying party to comply with the requirements of this paragraph.
10. ENTIRE AGREEMENT. This agreement is the full, final and complete expression
of the agreement of the parties relating to its subject matter. It supersedes
and replace all prior contracts, purchase orders and other agreements
relating thereto, which shall be of no further force or effect. This contract
may only be amended in a writing signed by all parties hereto.
In Witness Whereof, the parties have executed this agreement as of the 31st
day of January, 1997.
MENTOR AGVS, INC. NDC AUTOMATION, INC.
/s/ Michael Urban /s/ Ralph Dollander
By By
Michael Urban Ralph Dollander
Title Vice President Title President
HYSTER COMPANY
/s/ Gary E. Sirianni
By
Gary E. Sirianni
Title Manager, Warehouse Technology Group
DEVELOPMENT AND DEMONSTRATION AGREEMENT - Page 3
- 31 -
Exhibit 11.1
NDC AUTOMATION, INC
COMPUTATION OF EARNINGS PER SHARE
For The Year Ended November 30, 1996
<TABLE>
<CAPTION>
FULLY
PRIMARY DILUTED
EPS EPS
------------------------
<S> <C> <C> <C> <C> <C>
NUMBER OF SHARES Exercise
UNDERLYING OUTSTANDING # shares Price
------------------------
OPTIONS: 90 plan 63,233 $ 0.79167 $ 50,059.67 $ 50,059.67
93 Plan 84,100 $ 1.56000 $131,196.00 $ 131,196.00
Gunnar Lofgren
options 30,000 $ 1.44190 $ 43,257.00 $ 43,257.00
------------
177,333
------------ --------------------------
PROCEEDS UPON EXERCISE
OF OPTIONS $224,512.67 $ 224,512.67
--------------------------
NUMBER OF SHARES UNDERLYING
OUTSTANDING WARRANTS: 0 0
EXERCISE PRICE PER SHARE $ 0.00 $ 0.00
PROCEEDS UPON EXERCISE
OF WARRANTS $ 0.00 $ 0.00
---------------------------
TOTAL PROCEEDS $224,512.67 $ 224,512.67
MARKET PRICE OF COMMON STOCK
AVERAGE DURING THE
PERIOD ENDED November 30, 1996 $ 0.75
CLOSING AT November 30, 1996 $ 0.75
SHARES THAT COULD BE
REPURCHASED WITH TOTAL PROCEEDS
299,350
------------
299,350
-----------
EXCESS OF SHARES UNDERLYING
OPTIONS/WARRANTS OVER SHARES
THAT COULD BE REPURCHASED
(122,017)
(122,017)
COMMON STOCK EQUIVALENT SHARES 0 0
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,453,451 3,453,451
---------------------------
TOTAL AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 3,453,451 3,453,451
---------------------------
NET INCOME $ 45,431 $ 45,431
---------------------------
EARNINGS PER SHARE $0.0132 $0.0132
---------------------------
32
<PAGE>
</TABLE>
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
========================================================================================================================
95 to 96 94 to 95
At or For Year Ended November 30 1996 1995 1994 % Change % Change
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
- ------------------------------------------------------------------------------------------------------------------------
Net revenues $6,142,954 $ 7,851,147 $ 9,472,585 (21.8) (17.1)
Net gain from restructuring of operations $ - $ 366,764 $ - NA NA
Operating income (loss) $ 195,496 $(1,586,140) $(1,387,147) * 14.3
Income (loss) before income taxes (benefit) $ 16,602 $(2,246,272) $(2,223,165) * 1.0
Net income (loss) $ 45,431 $(2,344,163) $(1,624,194) * 44.3
Weighted average common shares outstanding 3,453,451 2,904,322 2,829,691 18.9 2.6
- ------------------------------------------------------------------------------------------------------------------------
Per Share Data^
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ .01 $ (.81) $ (.57) * 42.1
Cash dividends $ - $ - $ - NA NA
Stockholders' equity $ .50 $ .48 $ 1.20 4.2 (59.6)
- ------------------------------------------------------------------------------------------------------------------------
Financial Position
- ------------------------------------------------------------------------------------------------------------------------
Assets $4,556,794 $ 5,084,450 $13,188,231 (10.4) (61.4)
Working capital $1,416,912 $ 1,227,144 $ 1,935,720 15.5 (36.6)
Property and equipment $1,239,799 $ 1,357,555 $ 2,125,692 (8.7) (36.1)
Long-term debt, less current maturities $1,102,264 $ 1,170,311 $ 1,258,855 (5.8) (7.0)
Stockholders' equity $1,717,941 $ 1,672,510 $ 3,476,378 2.7 (51.9)
- ------------------------------------------------------------------------------------------------------------------------
Number of employees 28 29 48
Number of stockholders approx. 1200 approx. 1200 approx. 1200
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Because the data changes from negative to positive, the percentage of change
is not meaningful.
^ Earnings (loss) per share, assuming full dilution, are equivalent to earnings
(loss) per common share.
================================================================================
INDEX
Financial Summary 1
Letter to Shareholders 2
Selected Financial Data 4
Management's Discussion and Analysis 5
Independent Auditor's Report 11
Balance Sheets 12
Statements of Operations 14
Statements of Stockholders' Equity 15
Statements of Cash Flows 16
Notes to the Financial Statements 18
Shareholder Information 32
Directors and Officers 32
Page 1
33
<PAGE>
DEAR FELLOW SHAREHOLDER:
In 1996, we accomplished our primary goal for the Company; namely, to put a stop
to the losses and return the Company to profitability. NDC Automation is in a
turnaround mode.
I am pleased to report to you that the Company is considerably healthier today
than a year ago in almost every respect despite reduced revenues; our financial
situation is stronger with an improved balance sheet, reduced fixed expenses and
a commitment for a new banking relationship; our human resources are better
trained and better motivated ; our goals, markets and strategies are clearly
defined and documented in a 3-year revolving Business Plan ; our image and
reputation among our customers and users has improved .
Some of the important events started in 1996 and continuing today include the
following:
(Bullet) We established a working relationship with Munck Autech of Newport
News, a well-known manufacturer of automated material handling
equipment, and are supplying control products and engineering services
to them for two AGV projects, one in the textile industry and one in
the fast growing CD manufacturing industry.
(Bullet) We entered into a three-party agreement with The Hyster Company, the
leading US manufacturer of industrial trucks, and Mentor AGVS, a long
time partner of ours, for the manufacture and engineering of a demo
vehicle equipped with NDC laser navigation controls, Lazerway(TM). We
recently received our first order from Hyster for controls for a
project with the US Postal Service.
(Bullet) We have received an order from Rapistan Demag, the largest material
handling equipment manufacturer in the world, to supply NDC controls
and engineering services for the retrofitting of an installed AGV
system at a Ford facility.
(Bullet) We commissioned a Charlotte market research company to execute an
extensive market survey to evaluate our image, the market's awareness
and perception of NDC and other facts relating to our technology. This
survey has provided us with invaluable information for our future
marketing strategy and communication program.
We have won a few important battles but not the war. Many challenges have yet to
be overcome in order to grow our business and to strengthen the value of your
investment as a shareholder. The main objective for 1997 is to firmly establish
our company as the leading supplier of components and technology to providers of
Automatic Guided Vehicle Systems ( AGVS ) and Industrial Trucks in the North
American market. To do this successfully, we will consistently search for and
offer the best solutions to our customers' needs at the best possible value in
order to maximize their satisfaction.
Page 2
34
<PAGE>
NDC AB in Sweden, an affiliated company and main supplier of products and
technology to the Company, is continuously investing large resources in research
and development in order to improve the efficiency and benefits of its
products. One such development is the "Teach-In", a concept that will allow
operators of industrial trucks a greater level of freedom and flexibility than
exist in the market today. To lessen the dependence on a few dominating product
areas, the Company is actively exploring with existing and potential suppliers
new business opportunities to expand its present product lines to its primary
markets.
Finally, some comments on a more personal note. I strongly believe that our
company has an important role to play in the markets we are addressing, namely
to contribute to an increased level of automation in the handling and
transportation of materials in North American industries, without which their
global competitiveness will be substantially impaired. Our experience,
resources, products and technologies put us in an unique position to do this. We
are still, however, in a turn-around situation and in a transition phase from
being more of a system supplier to becoming a focused distributor of products
and services to OEM customers and material handling systems integrators . Such
transitions usually take some time and require consistent execution of a
long-term strategy before momentum is gained and growth is achieved. I
appreciate your understanding and ask you to share the confidence I have in a
brighter and more profitable future.
I am excited about the opportunities that lie ahead and I thank you for your
continued interest and support.
Sincerely yours ,
/s/ RALPH DOLLANDER
Ralph Dollander
President and CEO
Page 3
35
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
=======================================================================================================================
At or For Year Ended November 30
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net revenues $ 6,142,954 $ 7,851,147 $ 9,472,585 $ 15,267,479 $ 11,147,089
Cost of goods sold 3,864,393 5,597,305 6,214,318 8,993,742 5,795,227
- -----------------------------------------------------------------------------------------------------------------------
Gross profit $ 2,278,561 $ 2,253,842 $ 3,258,267 $ 6,273,737 $ 5,351,862
- -----------------------------------------------------------------------------------------------------------------------
Net gain from restructuring of operations $ - $ 366,764 $ - $ - $ -
- -----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 656,537 $ 776,907 $ 517,884 $ 667,039 $ 693,134
General and administrative 1,422,586 3,288,619 4,014,174 3,601,896 2,472,703
Research and development 3,942 141,220 113,356 224,418 178,738
Public stock offering expense - - - 247,078 -
- -----------------------------------------------------------------------------------------------------------------------
$ 2,083,065 $ 4,206,746 $ 4,645,414 $ 4,740,431 $ 3,344,575
- -----------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 195,496 $ (1,586,140) $ (1,387,147) $ 1,533,306 $ 2,007,287
- -----------------------------------------------------------------------------------------------------------------------
Net interest income (expense):
Interest income $ 7,771 $ 9,025 $ 32,417 $ 15,681 $ 22,120
Interest expense (186,665) (669,157) (868,435) (311,013) (390,235)
- -----------------------------------------------------------------------------------------------------------------------
$ (178,894) $ (660,132) $ (836,018) $ (295,332) $ (368,115)
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (benefit) $ 16,602 $(2,246,272) $ (2,223,165) $ 1,237,974 $ 1,639,172
Federal and state income taxes (benefit) (28,829) 97,891 (598,971) 475,047 611,442
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 45,431 $(2,344,163) $ (1,624,194) $ 762,927 $ 1,027,730
=======================================================================================================================
Weighted average number of
common shares outstanding 3,453,451 2,904,322 2,829,691 2,553,837 2,482,578
=======================================================================================================================
Earnings (loss) per common share:* $ .01 $ (.81) $ (.57) $ .30 $ .41
=======================================================================================================================
Cash dividend declared per common share $ - $ - $ - $ - $ -
=======================================================================================================================
Balance Sheets Data:
Working capital $ 1,416,912 $ 1,227,144 $ 1,935,720 $ 2,268,784 $ 1,773,345
Total assets $ 4,556,794 $ 5,084,450 $ 13,188,231 $ 14,481,806 $ 7,933,042
Long-term debt, less current maturities $ 1,102,264 $ 1,170,311 $ 1,258,855 $ 1,509,051 $ 1,419,956
Total liabilities $ 2,838,853 $ 3,411,940 $ 9,711,853 $ 10,346,333 $ 5,234,866
Stockholders' equity $ 1,717,941 $ 1,672,510 $ 3,476,378 $ 4,135,473 $ 2,698,176
</TABLE>
* Earnings (loss) per share - assuming full dilution are equivalent to earnings
(loss) per common share.
Page 4
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction with
the financial statements (including the notes thereto) presented elsewhere
herein.
Overview
The Company derives virtually all of its revenues from the sale of
hardware, software and engineering services in connection with projects
incorporating its Automated Guided Vehicle (AGV) control technology. Prior to
1996 the Company was also actively involved in the sale of Radio Frequency
Identification (RFID) products. In years prior to 1995 the Company's net
revenues from AGV systems, vehicles and technology were derived primarily from
sales to customers serving two industries -- textiles and newspaper publishing.
Net revenues since 1995 however have been less concentrated in these industries.
The Company's results of operations can be expected to continue to depend
substantially upon the capital expenditure levels in those industries and in
other industries that it may enter. In addition, during 1996, the Company
refocused its sales efforts to existing Original Equipment Manufacturers (OEM)
and system integrators in the AGV systems industry. This significantly reduces
the potential of selling systems to end users as the Company wants to avoid
competing with its potential customers. To be successful the Company must
convert several OEM and system integrators away from their AGV technology to the
Company's technology. Such technology transfers and agreements can take one to
several years before the Company will recognize revenues from such
relationships. Such customers must also replace in volume and margin what the
Company could otherwise obtain selling direct to end users. There can be no
assurances that such a strategy will be successful in the short or long term.
The net revenues in RFID were primarily derived from after market sales to
existing customers in 1995. The Company assigned the exclusive distribution
agreement and manufacturing rights back to Statec Technologies SA, the Company's
supplier of such products in March of 1996.
Due to the long sales cycle involved, uncertainties in timing of projects,
and the large dollar amount a typical project usually bears to the Company's
historical and current quarterly and annual net revenues, the Company has
experienced, and may be expected to continue to experience, substantial
fluctuations in its quarterly and annual results of operations.
The Company sells its products and services primarily in two ways.
Vehicles, technology and other products and services may be sold in a "project"
that becomes an integrated AGV system. The primary business is to sell hardware,
software and services as standard items, with less involvement by the Company
in overall system design. The Company generally would recognize lower
net revenue but would realize a higher gross profit margin percentage in selling
standard items, in each case compared to the sale of a project, due to the
inclusion in project sales of other vendors' products and services with margins
generally lower than the Company's own products and services. Between any given
accounting periods, the levels of and mixture of standard item sales and project
sales can cause considerable variance in net revenues, gross profit, gross
profit margin, operating income and net income.
Revenues from standard item sales are recognized upon shipment, while
revenues from project sales are recognized under the "percentage of completion"
method. Under this method, with respect to any particular customer contract,
revenues are recognized as costs are incurred relative to each major segment of
the project. Although the percentage of completion method will ordinarily smooth
out over time the net revenue and profitability effects of large projects, such
method nevertheless subjects the Company's results of operations to substantial
fluctuations dependent upon the progress of work on project segments. Such
segments can differ markedly from one another in amount and in gross profit
margin.
Project contracts are billed upon attainment of certain "milestones." The
Company grants payment terms of 30 to 90 days to its customers. It typically
receives a cash advance ranging from 10% to 20% of the total contract amount.
Bills are thereafter delivered as milestones are reached. Upon delivery of the
project, the customer typically reserves a "retainage" of 10% to 20% pending
system acceptance.
Page 5
37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Notwithstanding the receipt by the Company of cash advances and periodic
payments upon reaching project milestones, the Company requires external
financing for its costs and estimated earnings in excess of billings on
uncompleted contracts, inventories, receivables and other assets.
The Company's backlog consists of all amounts contracted to be paid by
customers but not yet recognized as net revenues by the Company.
Restructuring
During 1995 the Company continued to incur significant losses. Such losses
at the end of the third quarter had reduced the Company's working capital to
only $521,261, a level which was too low for current operations. The working
capital issue caused the Company's management to evaluate certain Company
changes in an effort to reduce overhead and improve working capital. The changes
not only were attendant to address working capital issues, but were designed to
address the following concerns: 1) satisfy existing banking relationships 2)
return operations to profitability 3) satisfy current vendors payable 4) remain
in compliance with NASD listing requirements, and 5) focus management on its
primary AGVS market in North America.
The following highlights major restructuring developments:
Sale of certain intangible assets related to Company's laser technology. On
November 30, 1995, the Company sold certain intangible and tangible assets
related to its laser technology for $1,000,000 to Netzler & Dahlgren, an
affiliated company. The Company's present structure does not lend itself to
manufacturing and research and development activities. It has for the most part
relied on Netzler & Dahlgren for the research and development of AGVS products
it offers to its market. The Company's present financial condition prevented it
from investing adequately in the continued development of the laser product it
owned. The sale of such products to Netzler & Dahlgren accomplished four
objectives for the Company: 1) significantly increased working capital due to
the agreed sell price (see Notes 9 and 14 of the Financial Statements) 2)
ensured continued research and development by a vendor with adequate resources
3) continued access and distribution of the technology for the Company's market
due to the existing Master License Agreement between the companies and 4)
reduced overhead expenses by approximately $500,000 annually going forward.
Sale of Australian operation. On November 30, 1995, the Company sold its
Australian subsidiary for minimum consideration to the subsidiary's head
engineer who had been an officer since its inception. The Company, after
evaluating the present lack of profitability from the Australian operations and
potential growth for its products in that market, concluded that the cost versus
benefit was not as great compared to equivalent time spent by management on the
North American market versus the Australian market. The primary goal of the
transaction was to reduce approximately $300,000 of annual costs forward. The
Company did not want to completely eliminate operations in Australia as existing
customers require continued engineering support in that area. The sale of the
subsidiary ensured that such support would continue in that area.
Other product lines. The Company also evaluated other product lines during this
process. It concluded that with new products from Netzler & Dahlgren, the
Computer Integrated Manufacturing (CIM) software from Southeastern Software
Developers Inc. (SSDI) for the textile industry and CIM software from the
Australian subsidiary were less important to the Company's growth; therefore, it
eliminated the overhead costs associated with those products.
Assignment of Statec Distribution Agreement. Effective March 1, 1996, the
Company reassigned the exclusive distribution and manufacturing rights in North
America for the Statec RFID product line back to the manufacturer. The agreement
for such an assignment provides for payments to the Company aggregating $183,000
plus the cost of inventory will be paid by Statec.
Page 6
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
As of January 31, 1997 Statec was in default under the agreement by not
paying or repurchasing the inventory worth $71,272 and had not paid the agreed
installments of $6,000 monthly since December 1996. There remain a total number
of 19 unpaid installment equaling $114,000. In February of 1997, the Company was
notified that Statec became subject to a court-ordered liquidation proceeding
under French law. The Company plans to vigorously pursue its creditor claims in
such proceedings (see Note 13 of the Financial Statements).
Debt to Equity. The above transactions, however, did not completely increase
working capital to a level acceptable to the Company's banks and creditors. In
response to such parties' concerns on this issue, the Company effected a debt to
equity conversion of $550,000 in the aggregate priced at $1 of debt per share to
increase working capital and bring vendors current (see Note 11 of the Financial
Statements).
With the completion of the transactions above the Company achieved a working
capital of $1,227,144 as of November 30, 1995 which was adequate for current
operations.
RESULTS OF OPERATIONS
The table below shows the relationship of income and expense items relative
to net revenues for the fiscal years ended November 30, 1996, 1995 and 1994,
respectively.
Percentage of Change
Period to Period
Percentage of net Revenues Increase (Decrease)
- --------------------------------------------------------------------------------
Year Ended Year Ended
For year Ended November 30, November 30,
1996 1995 1994 1995 to 1996 1994 to 1995
- --------------------------------------------------------------------------------
Net Revenues 100.0% 100.0% 100.0% (21.8)% (17.1)%
Cost of goods sold 62.9 71.3 65.6 (31.0) (9.9)
- -------------------------------------------------------------------------------
Gross profit 37.1 28.7 34.4 1.1 (30.8)
Restructuring gain - 4.7 - (100.0) NA
- -------------------------------------------------------------------------------
Operating expenses:
Selling 10.7 9.9 5.4 (15.5) 50.0
General and administrative 23.1 41.9 42.4 (56.7) (18.1)
Research and development 0.1 1.8 1.2 (97.2) 24.6
- -------------------------------------------------------------------------------
33.9 53.6 49.1 (50.5) (9.4)
- -------------------------------------------------------------------------------
Operating income (loss) 3.2 (20.2) (14.7) * 14.3
Net interest expense 2.9 8.4 8.8 (72.9) (21.0)
- -------------------------------------------------------------------------------
Income (loss) before income
taxes (benefit) 0.3 (28.6) (23.5) * 1.0
Income Tax (benefit) (0.4) 1.2 (6.3) * 116.3
- -------------------------------------------------------------------------------
Net income (loss) 0.7% (29.9)% (17.2)% *% 44.3%
===============================================================================
* Because the data changes from negative to positive, or from positive to
negative, the percentage of change is not meaningful.
Page 7
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal Year Ended November 30, 1996 Compared To Fiscal Year Ended November 30,
1995.
Net revenues decreased by $ 1,708,193 or 21.8 %, from $7,851,147 for the
fiscal year ended November 30, 1995 to $6,142,954 for the fiscal year ended
November 30, 1996. The primary reason for the decrease in 1996 compared to 1995
is that the Company recognized no revenues in 1996 from its two subsidiaries NDC
Laser AB (NDCL) and NDC Australia PTY Ltd.(NDCTA), which were sold November
30,1995. The Company ceased to distribute its RFID product line in March of 1996
which also contributed to the Company realizing lower net revenues in 1996
compared to 1995 (see Note 13 of the Financial Statements).
Cost of goods sold decreased from $5,597,305 to $3,864,393, or 31.0%, due
primarily to the decreased level of net revenues. As a percentage of net
revenues, cost of goods sold decreased to 62.9% compared to 71.3% the prior
year, due to a lower percentage of non-standard product revenues and lower
engineering costs. Gross profit increased by $24,719, or 1.1%, from $2,253,842
to $2,278,561 due to the same factors.
Selling expenses decreased from $776,907 to $656,537, or 15.5% primarily
due to decreases in show, personnel and general selling expenses. The
elimination of the Company's two subsidiaries NDCL and NDCTA also contributed to
lowering selling expenses. General and administrative expenses decreased from
$3,288,619 to $1,422,586, or 56.7%. The lower general and administrative
expenses were the result of reductions in personnel, depreciation and
amortization, litigation expenses and a general across the board cutback of
expenses from the Company's restructuring in November of 1995. The Company's
sale of NDCL and NDCTA eliminated approximately $800,000 of fixed expenses for
the Company in 1996.
Primarily as a result of the foregoing, the operating income increased by
$1,781,636, from a loss of $1,586,140 to a income of $195,496.
Net interest expense decreased from $660,132 to $178,894, a decrease of
72.9%. The decrease is primarily due to reduced borrowing needs arising from
lower inventory levels, a significant cash receipt from the settlement of the
Schlafhorst arbitration case in the fourth quarter of 1995, and the reduction
of current debt resulting from the Company's restructuring.
Income before income taxes increased by $2,262,874 , from a loss of
$2,246,272, to an income of $16,602 due primarily to the foregoing factors.
The Company realized an income tax benefit of $28,829 in 1996 by applying
its current tax loss against its deferred tax liability. Income tax expense in
1995 of $97,891 was primarily due to income taxes of one of its subsidiaries.
Primarily as a result of the foregoing, net income increased by $2,389,594,
from a loss of $2,344,163 to a net income of $45,431.
Backlog
Backlog consists of all amounts contracted to be paid by customers but not
yet recognized as net revenues by the Company. At November 30, 1996, the Company
had a backlog of approximately $780,000 compared to approximately $1,415,000 one
year earlier. Substantial fluctuations in backlog are considered normal due to
the size of AGV system contracts. Substantial fluctuations in the industry
makeup of the Company's backlog also are considered normal.
Page 8
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal Year Ended November 30, 1995 Compared To Fiscal Year Ended November 30,
1994.
Net revenues decreased by $1,621,438 or 17.1%, from $9,472,585 for the
fiscal year ended November 30, 1994 to $7,851,147 for the fiscal year ended
November 30, 1995. The arbitration during 1995 created uncertainty in the market
place as to whether the Company could continue as a going concern. In
management's opinion, this uncertainty adversely affected actual and potential
customers from placing orders with the Company resulting in lower backlog and
revenues in 1995. The RFID business was primarily replacement parts or additions
to existing facilities also limiting the potential for growth.
Cost of goods sold decreased from $6,214,318 to $5,597,305, or 9.9%, due
primarily to the decreased level of net revenues. As a percentage of net
revenues, cost of goods sold increased to 71.3% compared to 65.6% the prior
year, due to a higher percentage of non-standard product revenues, higher
engineering costs, cost overruns on existing projects and a write down of
certain inventory due to obsolescence. The net effect of the Schlafhorst
arbitration award resulted in a reduction of cost of goods sold of approximately
$150,000. Gross profit decreased by $1,004,425, or 30.8%, from $3,258,267 to
$2,253,842 due to the same factors.
The net gain from restructuring of operations of $366,764 in 1995 resulted
from the sale of certain assets related to its laser technology and the sale of
its two foreign subsidiaries, NDC Laser, AB. and NDC Australia PTY. Ltd. (see
Notes 9 and 14 of the Financial Statements).
Selling expenses increased from $517,884 to $776,907, or 50.0% primarily
due to increases in show, personnel and general selling expenses enabling the
Company to aggressively pursue new market areas. The receipt of export grants
from the Australian government were lower in 1995 compared to 1994. General and
administrative expenses decreased from $4,014,174 to $3,288,619, or 18.1%. The
lower general and administrative expenses were the result of reductions in
personnel, litigation expenses and a general across the board cutback of
expenses. The Company incurred additional costs of approximately $370,000 when
such reduction in expenses were made in the third quarter of 1995.
Primarily as a result of the foregoing, the operating loss increased by
$198,993, from $1,387,147 to a loss of $1,586,140.
Net interest expense decreased from $836,018 to $660,132, a decrease of
21.0%. The decrease is primarily due to reduced borrowing needs arising from the
Schlafhorst projects which created negative cash flows for the Company.
Loss before income taxes increased by $23,007 or 1.0%, from $2,223,165, to
a loss of $2,246,272 due primarily to the foregoing factors.
The Company incurred an income tax expense of $97,891 in spite of the above
losses compared to a benefit of $598,971 in 1994. The primary reason for the
1995 expense was the reduction of deferred tax assets whose realization is not
more likely than not. The Company was no longer able to carry back its 1995 year
loss as in the prior year due to the fact that the Company had received maximum
refunds available for income taxes previously paid in 1994.
Primarily as a result of the foregoing, net loss increased by $719,969, or
44.3%, from $1,624,194 to a net loss of $2,344,163.
Page 9
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company experiences needs for external sources of financing to support its
working capital, capital expenditures and acquisition requirements when such
requirements exceed its cash generated from operations in any particular fiscal
period. The amount and timing of external financing requirements depend
significantly upon the nature, size, number and timing of projects and
contractual billing arrangements with customers relating to project milestones.
The Company has relied upon bank financing under a revolving working capital
facility, as well as long-term debt and capital leases and proceeds of its
public and private offerings, to satisfy its external financing needs.
During the year ended November 30, 1996 net cash provided by operating
activities was $355,840. The Company reduced its inventory by $803,251 during
the year ending November 30, 1996 which allowed it to create operating cash
flows to reduce current liabilities. The significant reduction in inventory was
primarily due to successful negotiations with Netzler & Dahlgren in returning
$527,622 of excess inventory to Netzler & Dahlgren at the Company's cost.
The Company's net cash used in financing activities was $85,119. The Company
made timely principle payments of $237,961 towards its long-term borrowings
which were its mortgage payable, a note payable to a bank for $25,000 and a note
payable to Netzler & Dahlgren for $200,000. The line of credit borrowings
increased as of November 30, 1996 due to a large increase in receivables. The
line was significantly reduced as the receivables were collected in December of
1996 and January of 1997.
The Company continues to operate with its line of credit under modified
financial covenants and cash collateral accounts. The net effect of the
collateral accounts gives the bank the authority to monitor the Company's
outgoing cash flows. The Company's line of credit of $1,200,000 at prime plus 1
1/2% was extended initially from March 31, 1996 to May 31, 1996 and then later
to November 29, 1996 at a lending rate of prime plus 4% .With each extension the
line became smaller in availability and more restrictive as to the borrowing
base formula. The line was then further extended to February 28, 1997 to a
maximum of $750,000. The new borrowing base terms of the extension include 1) an
increase in the interest rate to prime plus 3.25% per annum 2) the percentage of
inventory against which inventory is available was reduced to 40% from 50% to a
maximum of $300,000 3) allowing only trade receivables that are not generated
from project invoicing to be included in the borrowing base calculations and 4)
an irrevocable standby letter of credit of $450,000 in additional collateral.
The Company's present line of credit is due to expire February 28, 1997. As of
February 15, 1997 the Company had $398,782 available under the current borrowing
base calculation. During the year ending November 30, 1996 the Company
consistently paid its vendors in a timely manner and honored all its loan
obligations. In December 1996, the Company obtained a commitment from a new
lender to replace the existing line to a maximum of $1,250,000 with more
favorable terms for the Company. The new lender must conclude their due
diligence on the Company before the line is approved and would make funds
available. The Company presently has no assurance that such line will be
approved.
The Company believes that its working capital of $1,416,912 at November 30, 1996
is adequate for its current operations.
The assets and liabilities of the Company are primarily monetary in nature and
changes in interest rates have a greater impact on the Company's performance
than do the effects of inflation.
Page 10
42
<PAGE>
Independent Auditor's Report
To the Board of Directors
NDC Automation, Inc.
Charlotte, North Carolina
We have audited the accompanying balance sheets of NDC Automation, Inc. as of
November 30, 1996 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended November 30, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NDC Automation, Inc. as of
November 30, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended November 30, 1996 in
conformity with generally accepted accounting principles.
/s/ McGLADREY & PULLEN, LLP
Charlotte, North Carolina
January 24, 1997
Page 11
43
<PAGE>
BALANCE SHEETS
================================================================================
November 30,
1996 1995
- --------------------------------------------------------------------------------
ASSETS (Note 5)
CURRENT ASSETS
Cash and cash equivalents (Note 15) $ 399,501 $ 164,781
Accounts receivable, net (Notes 2 and 6) 1,526,390 1,203,137
Inventories (Note 9) 1,126,398 1,929,649
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 3) 49,277 123,260
Prepaid expenses and other assets 51,935 31,333
- --------------------------------------------------------------------------------
Total current assets $3,153,501 $3,452,160
- --------------------------------------------------------------------------------
OTHER ASSETS $ 21,281 $ 16,281
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures, and office equipment 226,559 389,709
Machinery and equipment 153,572 371,512
Software (Note 14) 102,650 103,557
Vehicles 23,629 30,754
- --------------------------------------------------------------------------------
$1,933,033 $2,322,155
Less accumulated depreciation 693,234 964,600
- --------------------------------------------------------------------------------
$1,239,799 $1,357,555
- --------------------------------------------------------------------------------
INTANGIBLE ASSETS (Note 4) $ 142,213 $ 258,454
================================================================================
$4,556,794 $5,084,450
================================================================================
See Notes to Financial Statements
Page 12
44
<PAGE>
BALANCE SHEETS
<TABLE>
<CAPTION>
======================================================================================
November 30,
1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable, bank (Note 5) $ 847,217 $ 644,375
Current maturities of long-term debt (Note 5) 68,410 288,324
Accounts payable and accrued expenses;
including affiliates $422,050 at 1996
and $25,104 at 1995 (Note 9) 702,305 1,002,574
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 3) 118,657 277,527
Deferred income taxes (Note 7) - 12,216
- --------------------------------------------------------------------------------------
Total current liabilities $ 1,736,589 $ 2,225,016
- --------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 5) $ 1,102,264 $ 1,170,311
- --------------------------------------------------------------------------------------
DEFERRED INCOME TAXES (Note 7) $ - $ 16,613
- --------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 10 )
STOCKHOLDERS' EQUITY (Notes 11, 12 and 15)
Preferred stock, par value $.01 per share
authorized 1,000,000 shares; no shares issued $ - $ -
Common stock, par value $.01 per share;
11,000,000 shares authorized
at 1996 and 1995; 3,453,451 shares
were issued at 1996
and 1995, respectively 34,534 34,534
Additional paid-in capital 4,211,566 4,211,566
Accumulated deficit (2,528,159) (2,573,590)
- -------------------------------------------------------------------------------------
$ 1,717,941 $ 1,672,510
=====================================================================================
$ 4,556,794 $ 5,084,450
=====================================================================================
</TABLE>
Page 13
45
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
====================================================================================================
Years ended November 30,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues (Notes 6 and 9) $ 6,142,954 $ 7,851,147 $ 9,472,585
Cost of goods sold (Note 9) 3,864,393 5,597,305 6,214,318
- ----------------------------------------------------------------------------------------------------
Gross profit $ 2,278,561 $ 2,253,842 $ 3,258,267
- ----------------------------------------------------------------------------------------------------
Net gain from restructuring of operations (Notes 9 and 14 ) $ - $ 366,764 $ -
- ----------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 656,537 $ 776,907 $ 517,884
General and administrative (Notes 10 and 13) 1,422,586 3,288,619 4,014,174
Research and development 3,942 141,220 113,356
- ----------------------------------------------------------------------------------------------------
$ 2,083,065 $ 4,206,746 $ 4,645,414
- ----------------------------------------------------------------------------------------------------
Operating income (loss) $ 195,496 $(1,586,140) $ (1,387,147)
- ----------------------------------------------------------------------------------------------------
Net interest income (expense):
Interest income $ 7,771 $ 9,025 $ 32,417
Interest expense (Note 9) (186,665) (669,157) (868,435)
- ----------------------------------------------------------------------------------------------------
$ (178,894) $ (660,132) $ (836,018)
- ----------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ 16,602 $(2,246,272) $ (2,223,165)
Federal and state income taxes (benefit) (Note 7) (28,829) 97,891 (598,971)
- ----------------------------------------------------------------------------------------------------
Net income (loss) $ 45,431 $(2,344,163) $ (1,624,194)
====================================================================================================
Average shares outstanding: (Note 15)
Primary 3,453,451 2,904,322 2,829,691
Assuming full dilution 3,453,451 2,904,322 2,829,691
====================================================================================================
Primary earnings per common and
common equivalent shares (Note 15 ) $ .01 $ (.81) $ (.57)
====================================================================================================
Earnings per common share-
assuming full dilution (Note 15 ) $ .01 $ (.81) $ (.57)
====================================================================================================
Dividends per common share (Note 15 ) $ - $ - $ -
====================================================================================================
</TABLE>
See Notes to Financial Statements
Page 14
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<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
==============================================================================================================================
Years Ended November 30,
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
Amount Shares Amount Shares Amount Shares
<S> <C> <C> <C> <C> <C> <C>
Common Stock:
Balance, beginning $ 34,534 3,453,451 $ 29,024 2,902,514 $ 25,655 2,565,662
Stock options exercised (Note 12) - - 10 937 24 2,352
Issuance of common stock (Note 11) - - 5,500 550,000 3,345 334,500
==============================================================================================================================
Balance, ending $ 34,534 3,453,451 $ 34,534 3,453,451 $ 29,024 2,902,514
==============================================================================================================================
Additional Paid-in Capital:
Balance, beginning $ 4,211,566 $ 3,666,335 $2,729,412
Stock options exercised (Note 12) - 731 2,378
Issuance of common stock (Note 11) - 544,500 934,545
==============================================================================================================================
Balance, ending $ 4,211,566 $ 4,211,566 $3,666,335
==============================================================================================================================
Retained Earnings (Deficit):
Balance (deficit), beginning $(2,573,590) $ (229,427) $1,394,767
Net income (loss) 45,431 (2,344,163) (1,624,194)
==============================================================================================================================
Balance (deficit), ending $(2,528,159) $(2,573,590) $ (229,427)
==============================================================================================================================
Cumulative Currency Translation Adjustment:
Balance, beginning $ - $ 10,446 $ (14,361)
Adjustment for period - (10,446) 24,807
==============================================================================================================================
Balance, ending $ - $ - $ 10,446
==============================================================================================================================
==============================================================================================================================
Stockholders' Equity at November 30 $ 1,717,941 3,453,451 $ 1,672,510 3,453,451 $3,476,378 2,902,514
==============================================================================================================================
</TABLE>
See Notes to Financial Statements
Page 15
47
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
==========================================================================================================
Years ended November 30,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 45,431 $(2,344,163) $(1,624,194)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 149,107 403,996 466,215
Amortization 103,364 221,481 215,044
Amortization of unearned discount - (1,588) (3,325)
(Decrease) increase in provision for doubtful accounts (42,500) (149,332) -
Currency translation (gain) - (24,745) (10,973)
Loss (gain) on sale of property and equipment 20,630 3,634 (1,306)
Loss (gain) on foreign currency exchange rate (3,103) 5,123 -
Net restructuring gain - (366,764) -
Deferred income taxes (28,829) 98,502 (79,451)
Change in assets and liabilities:
(Increase) decrease in accounts receivable (280,753) 1,890,787 (991,418)
Decrease in licence fee receivable - 38,412 20,000
(Increase) decrease in inventories 803,251 (267,030) 646,674
(Increase) decrease in income tax receivable - 542,900 (356,421)
Decrease in costs and estimated earnings in
excess of billings on uncompleted contracts 73,983 4,407,306 906,941
(Increase) decrease in prepaid expenses
and other assets (20,602) (879) 37,597
(Increase) decrease in long-term receivables (5,000) (10,519) 7,329
Decrease in accounts payable
and accrued expenses (300,269) (2,159,168) (341,249)
Increase (decrease) in billings in excess of costs and
estimated earnings on uncompleted contracts (158,870) (950,271) 662,454
Decrease in income taxes payable - (55,828) (6,008)
- ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $355,840 $ 1,281,854 $ (452,091)
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment $ 1,941 $ 12,503 $ 5,202
Proceeds from the sales of subsidiaries and related assets - 1,000,000 -
Purchase of property and equipment (41,045) (66,418) (90,616)
- ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY ( USED IN)
INVESTING ACTIVITIES $(39,104) $ 946,085 $ (85,414)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
Page 16
48
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
====================================================================================================
Years ended November 30,
1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (payments) on revolving credit agreement $202,842 $(2,934,404) $(480,346)
Principle payments on long-term borrowings,
including capital lease obligations (287,961) (130,409) (474,716)
Proceeds from current and long-term borrowings - 200,000 -
Net proceeds from exercise of stock options
and common stock issued - 550,741 940,291
- ---------------------------------------------------------------------------------------------------
NET CASH USED IN
FINANCING ACTIVITIES $(85,119) $(2,314,072) $ (14,771)
- ---------------------------------------------------------------------------------------------------
Effect of foreign currencies exchange rate changes
on cash and cash equivalents $ 3,103 $ (5,123) $ -
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents $234,720 $ (91,256) $ (552,276)
Cash and cash equivalents:
Beginning 164,781 256,037 808,313
- ---------------------------------------------------------------------------------------------------
Ending $399,501 $ 164,781 $ 256,037
===================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments ( receipts) for :
Interest $187,614 $ 669,157 $ 887,773
Income taxes $ - $ (489,423) $(149,378)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Issuance of common stock - 550,741 -
- ---------------------------------------------------------------------------------------------------
$ - $ 550,741 $ -
===================================================================================================
</TABLE>
Page 17
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
The Company was formed to acquire, develop, market, and sell hardware, software
and engineering services that are incorporated into and used to control
automatic guided vehicle systems ("AGVS"). The Company also marketed and
distributed product identification devices using radio frequency identification
("RFID") technology. The Company markets its products and services to designers
of integrated automation systems, original equipment manufacturers, and end
users primarily within the North American continent. On July 1, 1992 the Company
purchased a wholly-owned subsidiary, NDC Technology Australia Pty. Ltd.
("NDCTA") which was formed for the same purposes as the Company but which
attempted to take advantage of the opportunities in the Pacific basin market
area. On June 22, 1993 the Company acquired the assets of AutoNavigator AB, a
Swedish manufacturer of laser guidance software and related equipment,
whereupon, a new subsidiary, NDC Laser AB ("NDC Laser") was formed to produce
and distribute these assets.
In an effort to focus the Company on its primary AGVS product line and its
business in North America, the Company sold certain intangible assets related to
its laser technology and its stock in NDC Laser and NDCTA on November 30, 1995.
In February of 1996 the Company reached an agreement with its primary supplier
of RFID equipment, Statec Technologies, S.A., to reassign the Company's
exclusive distribution and manufacturing rights for North America back to the
manufacturer. The effective date of the transfer was March 1, 1996. A summary of
the Company's significant accounting policies follows:
Principles of consolidation:
The consolidated financial statements as of and for the years ended November 30,
1995 and 1994, respectively include the accounts of the Company and its
wholly-owned subsidiaries, NDCTA and NDC Laser. All material intercompany
balances and transactions were eliminated in consolidation. The financial
statements for 1996 are not consolidated as both NDCTA and NDC Laser were sold
on November 30,1995.
Revenue recognition:
The Company recognizes revenue from the sales of commercial products as
shipments are made.
The Company recognizes revenues under long-term contracts on the percentage of
completion method, measured by the percentage of each component cost incurred to
date to estimated total component contract costs for each component in the
contract. Component costs include material, direct labor, subcontracts,
engineering overhead, and miscellaneous costs. Provisions for estimated losses
are made in the period in which they first become determinable.
"Costs and estimated earnings in excess of billings on uncompleted contracts"
represent revenue recognized in excess of amounts billed. "Billings in excess of
costs and estimated earnings on uncompleted contracts" represent billings in
excess of revenues recognized.
Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Page 18
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies (Continued)
Cash and cash equivalents:
For purposes of reporting the statements of cash flows, the Company considers
all cash accounts (see Note 15), and all highly liquid debt instruments
purchased with a maturity of three months or less, to be cash equivalents.
Inventories:
The inventories are priced at the lower of cost or market, with cost being
determined by the weighted average method. Inventories consist primarily of
parts for computerized material handling systems purchased from the affiliate
Netzler & Dahlgren and motor-in-wheel drive units purchased from Schabmuller
GMBH.
Property and equipment:
Property and equipment is stated at cost. Depreciation and amortization are
primarily computed using the straight-line method over the following useful
lives:
Years
Building and improvements 21-28
Furniture, fixtures and office equipment 4-7
Machinery and equipment 3-5
Software 3-5
Vehicles 3-5
When certain property and equipment are fully depreciated or amortized (and
cannot be resold), it is the Company's practice to write off the cost against
accumulated depreciation, or amortization, so that only costs not fully
depreciated are carried on the balance sheet. For the years ended November 30,
1996 and 1995, the Company has cumulatively written off $908 and $982,616 of
fully depreciated software, $221,543 and $39,780 of machinery and equipment, and
$193,955 and $142,379 of furniture and office equipment, respectively.
Foreign currency translation:
Payables to foreign companies that are denominated in foreign currencies are
translated at rates that approximate the year-end foreign exchange rates.
Resultant gains or losses are reflected in cost of goods sold. The costs of
items of foreign origin which are included in inventory have been translated at
historical exchange rates prevailing at the date of acquisition.
Forward exchange contracts are purchased to hedge general exposed foreign
currency net asset or liability positions. Gains and losses from forward
exchange contracts that are intended to hedge identifiable foreign currency
commitments are included in the measurement of the related foreign currency
transaction. Management may from time to time enter into speculative hedging
transactions depending on market conditions. Gains and losses from such hedges
are recognized in the determination of net income (loss) as exchange rates
fluctuate.
The functional currency for the Company's foreign operations is the applicable
local currency. The translation of the foreign currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using a weighted
average exchange rate during the period.
Page 19
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies (Continued)
Income taxes:
Provisions for income taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences, operating
losses, and tax credit carryforwards, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
Intangible assets:
The marketing and manufacturing rights are recorded at cost and are being
amortized by the straight-line method over ten years. NDC Laser rights and
product rights, patents and the Statec Technologies, S.A. ("Statec")
distribution agreement were also recorded at cost and were amortized by the
straight-line method over five, ten and ten years, respectively. The goodwill
recognized in the business acquisition of NDCTA represented the excess of the
cost of acquiring the company over the fair value of the net assets received at
the date of acquisition. Goodwill was amortized over a 20 year period using the
straight-line method.
The Company annually assesses the remaining unamortized amounts of such
intangible assets to determine if impairment has occurred. The Company has
written off the remaining unamortized goodwill related to NDCTA as the
subsidiary was sold November 30, 1995. The intangibles related to Statec were
fully amortized during 1995 except for the patent, marketing and manufacturing
rights; however, such rights, were written-off during 1996 as the Company and
Statec entered into an agreement which reassigned all the rights back to the
manufacturer in March of 1996 ( see Note 13 for recent developments).
Research and development costs:
Research and development costs are charged to expense when incurred and are
included in the statements of operations. However, certain qualifying expenses
after the research and development phase was completed were capitalized in
accordance with Financial Accounting Standard No. 86, "Computer Software to be
Sold, Leased or Otherwise Marketed".
Earnings (losses) per common share:
Primary earnings (losses) per common and common equivalent share are calculated
using the weighted average number of common shares outstanding during each year
and on the net additional number of shares which would be issuable upon the
exercise of employee stock options, assuming that the Company used the proceeds
received to purchase additional common shares at market value.
Fully diluted earnings (losses) per common and common equivalent share use the
same computations.
Page 20
52
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 2. Accounts Receivable
Accounts receivable consist of the following at November 30, 1996 and 1995,
respectively:
1996 1995
- ------------------------------------------------------------------------------
Trade and contract, including $0 retainages $ 1,550,632 $ 1,215,749
Less: Allowance for doubtful accounts (65,000) (87,500)
- ------------------------------------------------------------------------------
$ 1,485,632 $ 1,128,249
Other 36,515 72,500
Officers and employees 4,243 2,388
- ------------------------------------------------------------------------------
$ 1,526,390 $ 1,203,137
=============================================================================
Note 3. Costs and Estimated Earnings on Uncompleted Contracts
Costs and estimated earnings on uncompleted contracts consist of the following
at November 30, 1996 and 1995, respectively:
1996 1995
- ------------------------------------------------------------------------------
Costs incurred on uncompleted contracts $ 280,606 $ 1,104,414
Estimated earnings 155,075 407,251
- ------------------------------------------------------------------------------
435,681 $ 1,511,665
Less billings to date (505,061) (1,665,932)
- ------------------------------------------------------------------------------
$ (69,380) $ (154,267)
===============================================================================
Included in the accompanying balance sheets under the
following captions:
Included in the accompanying balance sheets under the following captions:
1996 1995
- ------------------------------------------------------------------------------
Costs and estimated earnings in excess of billings
on uncompleted contracts $ 49,277 $ 123,260
Billings in excess of costs and estimated earnings
on uncompleted contracts (118,657) (277,527)
- ------------------------------------------------------------------------------
$ (69,380) $ (154,267)
===============================================================================
Page 21
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 4. Intangible Assets
The Company had certain other intangible patents, marketing, and manufacturing
rights that had been acquired from Statec. These rights were to be returned to
Statec per the termination and release agreement between the Company and Statec
(see Note 13). Therefore during 1996 the Company removed such intangibles.
Product rights were purchased from Netzler & Dahlgren Co AB in 1993 to
compliment the technology acquired by the Company from Autonavigator AB. The NDC
Laser rights were sold to Netzler and Dahlgren on November 30, 1995 (see Notes 9
and 14) as part of restructuring the Company. Intangible assets at November 30,
1996 and 1995, respectively, consisted of the following:
1996 1995
- --------------------------------------------------------------------------
Marketing rights $ - $ 38,212
Manufacturing rights - 72,247
Patents - 25,000
Netzler & Dahlgren navigator card products rights 449,092 449,092
- --------------------------------------------------------------------------
449,092 $ 584,551
Less accumulated amortization 306,879 326,097
- --------------------------------------------------------------------------
$ 142,213 $ 258,454
==========================================================================
Note 5. Pledged Assets, Note Payable, Bank and Long-Term Debt
The Company has the following note payable to a bank at November 30, 1996:
Line of credit for $750,000 is with interest
at prime plus 3.25%. Advances under the line
of credit will not exceed the lesser of the
sum of 80% of the Company's current accounts
receivable that are not project receivables,
40% of the book value of its current
inventory to a maximum of $300,000. The line
is additionally secured by an irrevocable
standby letter of credit of $450,000. The
line of credit also contains
financial covenants to which the Company must
adhere. As of November 30,1996, the Company
was not in compliance with certain of these
covenants, however this credit facility is
being paid with funds from a new line of
credit. The termination date of the line
is February 28, 1997. (1)(2) In December 1996
the Company obtained a commitment from a new
lender to replace the existing line to a
maximum of $1,250,000. The new lender must
conclude its due diligence on the Company
before the loan is approved. $ 847,217
================================================================================
Long-term debt consists of the following at November 30, 1996:
Mortgage note payable to a bank, based on a
7.75% fixed rate. Original principal balance
to be repaid in fifty-nine (59) consecutive
monthly principal and interest payments of
$13,057, with one final payment of
approximately $1,083,660 due on February 10,
1998. The note is collaterized by the
Company's land and building with a carrying
value of $ 1,061,556 The loan also contains
certain financial covenants to which the
Company must adhere. As of November 30,1996,
the Company obtained waivers for certain
financial covenants as specified by
the line of credit agreement. $ 1,170,674
Less current maturities: 68,410
- --------------------------------------------------------------------------------
$ 1,102,264
================================================================================
(1) The prime rate at November 30, 1996 was 8.25%
(2) The line of credit is secured by a first priority security interest in the
Company's accounts receivable, inventory, software and intangibles.
Page 22
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 5. Pledged Assets, Note Payable, Bank and Long-Term Debt (continued)
Maturities of long-term debt at November 30, 1996 are as follows:
Year Ending
November 30
- -------------------------------------------------------------------------------
1997 $ 68,410
1998 1,102,264
===============================================================================
$ 1,170,674
===============================================================================
Note 6. Major Customers
Net revenues and accounts receivable as of and for the years ended November 30,
1996, 1995, and 1994, respectively, include sales to the following major
customers (each of which accounted for 10% or more of the total net revenues of
the Company for those years):
Amount of Net Revenues
Year Ended November 30,
Customer 1996 1995 1994
- -------------------------------------------------------------------------------
A $ * $ 1,033,991 $ *
B * 1,007,997 1,325,797
C * 903,210 *
D 666,457 * *
Accounts Receivable
November 30,
1996 1995 1994
- -------------------------------------------------------------------------------
A $ * $ 75,847 $ *
B * - 638,867
C * 143,710 *
D 76,448 * *
*Not a major customer.
Because of the nature of the Company's business, the major customers vary
between years. Company B is NDC, Netzler & Dahlgren Co. AB (see Note 9)
Page 23
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 7. Income Taxes
Income taxes (benefit) consist of the following components for the years ended
November 30, 1996, 1995, and 1994, respectively:
1996 1995 1994
- -------------------------------------------------------------------------------
Current $ - $ (611) $ (519,520)
Deferred $(28,829) 98,502 (79,451)
- -------------------------------------------------------------------------------
$(28,829) $ 97,891 $ (598,791)
===============================================================================
Net deferred tax assets (liabilities) consist of the following components as of
November 30, 1996 and 1995, respectively:
1996 1995
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Capitalized research and development cost $ - $ 28,000
Unrealized gain on foreign currency exchange - 829
- --------------------------------------------------------------------------------
$ - $ 28,829
- --------------------------------------------------------------------------------
Deferred tax assets:
Allowance for doubtful accounts $ 25,425 $ 34,230
Inventory valuation reserves 43,524 82,152
Capitalized cost in ending inventory 11,479 9,099
Net operating loss carryforward 803,195 790,698
General business credit carryforwards 206,547 220,069
Depreciation 162 11,670
Other reserves 6,063 -
Unrealized losses or foreign currency exchange 1,637 -
- --------------------------------------------------------------------------------
$ 1,098,032 $ 1,147,918
Less valuation allowance 1,098,032 1,147,918
- --------------------------------------------------------------------------------
Net deferred tax liabilities $ - $ ( 28,829)
================================================================================
The net deferred tax assets (liabilities) mentioned above have been classified
on the accompanying Balance Sheets as of November 30, 1996 and 1995,
respectively, as follows:
1996 1995
- -------------------------------------------------------------------------------
Current liabilities $ - $ (12,216)
Non-current liabilities - (16,613)
================================================================================
$ - $ (28,829)
===============================================================================
Page 24
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 7. Income Taxes (continued)
The changes in the valuation allowance for the years ended November 30, 1996,
1995 and 1994 were $(49,886), $845,970 and $301,948, respectively. The valuation
reserve is the result of management's determination that the Company may not be
able to generate sufficient future taxable income to realize the recorded
deferred tax assets.
A reconciliation of the statutory income tax to the income tax expense (benefit)
included in the Statements of Operations is as follows:
<TABLE>
<CAPTION>
Years Ended November 30,
1996 1995 1994
- --------------------------------------------------------------------------------------------------
% of % of % of
Dollar Pre-tax Dollar Pre-tax Dollar Pre-tax
Amount Income Amount Income Amount Income
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income
tax (benefit) $ 5,645 34.0 $ (763,427) (34.0) $ (755,876) (34.0)
Increase (decrease) in
taxes resulting from:
State income taxes 1,873 11.3 (61,423) (2.7) (113,279) (5.1)
Changes in valuation allowance (49,886) (300.5) 845,970 37.7 301,948 13.6
General business tax credits - - - - (45,407) (2.0)
Other 13,529 (81.6) 76,771 3.4 13,643 .6
=================================================================================================
$ (28,829) (173.6) $ 97,891 4.4 $ (598,971) (26.9)
=================================================================================================
</TABLE>
Page 25
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 8. Profit Sharing Plan
The Company has a profit sharing plan, the contributions to which are
discretionary.
The Company established a 401(k) profit sharing plan during 1990 to which both
the Company and eligible employees may contribute. The Company may, at its
discretion, match the participant's contribution quarterly, up to a maximum of
$700 per plan year. The Company's contribution for the years ended November 30,
1996, 1995 and 1994 amounted to $18,550, $0, and $0, respectively.
Note 9. Related Party Transactions
The Company is related to NDC, Netzler & Dahlgren Co. AB (Netzler & Dahlgren)
through common ownership (see Note 11).
Netzler & Dahlgren is the Company's largest supplier of AGVS control technology.
Accordingly, the Company's success is dependent upon its ability to obtain such
products on a timely basis. Although the Company has entered into a written
agreement with Netzler & Dahlgren for the supply of such products, there can be
no assurance that this company will continue to fulfill its obligations under
the agreement.
On December 1, 1987, the Company signed a ten (10) year master license agreement
with Netzler & Dahlgren to purchase certain products at prices stipulated in the
agreement. The Master License Agreement was set to expire December 1, 1997, and
provided for certain royalty payments based on 10% of revenues on license fee
contracts entered into after November 30, 1987. On November 30, 1995, the
Company entered into a restated Master License Agreement which resulted in an
additional ten year term through November 30, 2005.
On November 30, 1995 the Company sold certain intangibles related to its laser
technology and its stock in NDC Laser to Netzler & Dahlgren for $1,000,000. The
net effect of the sale caused the Company to immediately increase working
capital and realize a restructuring gain on the transaction (see Note 14). As
part of the sales price the Company receives contingent laser fees from Netzler
& Dahlgren for the years ending 1996, 1997 and 1998. For the year ending
November 30, 1996 the Company earned and netted against trade payables $174,750
in laser fees to Netzler & Dahlgren.
At November 30, 1995, trade payables were converted to a note payable due to
Netzler & Dahlgren in the amount of $200,000. The maturity date was May 31, 1996
and accrued interest of 10 1/2% annually. The note payable was fully paid during
1996.
Page 26
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 9. Related Party Transactions (Continued)
The Company had the following transactions with Netzler & Dahlgren for the years
ended November 30, 1996, 1995, and 1994, respectively:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Sales $ 261,199 $ 1,007,997 $ 1,325,797
===================================================================================================
Purchases of hardware, software & engineering services $ 1,049,324 $ 737,375 $ 550,000
===================================================================================================
Interest expense $ - $ 279,540 $ 428,717
===================================================================================================
Litigation support expense $ - $ - $ 233,000
===================================================================================================
</TABLE>
For the years ended November 30, 1996, 1995, and 1994, royalties expense was $0,
$500, and $1,250, respectively. During 1996 the Company returned for full credit
$527,622 worth of inventory to Netzler & Dahlgren to improve its liquidity
position.
Note 10. Commitments
At November 30, 1996, the Company had no outstanding forward exchange contracts.
These contracts are purchased as needed to hedge identifiable foreign currency
commitments.
The Company leases property and equipment under operating leases expiring on
various dates through August, 2001. Rental expense, including rent for
facilities rented on a month-to-month basis, was $38,514, $201,183, and $303,064
for the years ended November 30, 1996, 1995, and 1994, respectively.
Minimum rental commitments under long-term operating leases at November 30, 1996
were as follows:
1997 $ 70,935
1998 27,429
1999 14,103
2000 8,227
2001 5,008
-----------------
$ 125,702
=================
The Company has an employment contract with the President which provides for a
minimum annual base salary of $120,000 plus $12,000 being contributed to a
retirement plan. The base salary is subject to annual reviews. The contract
expires on March 1, 1999.
Note 11. Issuance of Common Stock
On November 30, 1995, the Company issued 550,000 shares of its common stock, par
value $.01 per share by converting $550,000 of debt payable to Netzler &
Dahlgren (see Note 9) to equity shares. The price for the shares sold was $1.00
per share and the shares are restricted pursuant to Rule section 144 promulgated
under the Securities Act of 1933.
On March 25, 1994, the Company sold 334,500 shares of its common stock, par
value $.01 per share in an offering executed pursuant to Regulation S
promulgated by the Securities and Exchange Commission. These shares could not be
transferred or sold in the U.S. or to U.S. persons (as defined in Regulation S)
until May 5, 1994. The net proceeds to the Company from the sale of the shares
was $937,890 (after deducting discounts and other offering expenses). The
Company applied an estimated $186,000 of such proceeds to repay seller financing
provided to purchase Autonavigator AB's assets. The Company applied the
remainder of such proceeds to working capital and other general corporate needs.
Page 27
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 12. Stock Option Plans
On October 10, 1990, the Compensation Committee of the Board of Directors
adopted the NDC Automation, Inc. 1990 Stock Option Plan ("the 90 Plan"), the
adoption of which was ratified by the shareholders at the annual meeting held on
April 10, 1991. In September 1992, the Company registered up to 178,613 shares
of common stock for issuance. On October 23, 1993, the Compensation Committee of
the Board of Directors adopted the NDC Automation, Inc. 1993 Stock Option Plan
("the 93 Plan"), the adoption of which was ratified by the shareholders at the
annual meeting held on May 5, 1994. On December 7, 1996 , the Compensation
Committee of the Board of Directors adopted The NDC Automation, Inc. 1997 Stock
Option Plan ("the 97 Plan"), to be ratified by the shareholders at the annual
meeting to be held April 25, 1997.
Options to purchase 174,375 shares of common stock were granted pursuant to the
90 Plan and are available for exercise upon achievement by the Company of
certain financial performance targets set by the Board of Directors on an annual
basis. The options will be exercisable for a term of ten years, commencing on
the date of the grant at an exercise price of $.7917 to $1.56 for new employees.
The 93 Plan authorized 100,000 options to purchase common stock, of which
100,000 were granted and are available for exercise upon achievement by the
Company of certain financial performance targets set by the Board of Directors
on an annual basis. On October 24, 1994, the 93 Plan options were repriced with
approval by the Compensation Committee at an exercise price of $1.56. On
November 30, 1995 as part of his termination package, 30,000 options were
issued to Mr. Lofgren at a price of 1.4419. These options with a price in excess
of fair value were approved by the Board of Directors and are not part of any
formal Stock Option Plan. Such options are exercisable without restriction.
The 97 Plan authorized 225,000 options to purchase common stock, of which
210,000 were granted and are available for exercise upon achievement by the
Company of certain financial performance targets set by the Board of
Directors on an annual basis.
Of the 274,375 total shares of common stock granted, the Compensation Committee
granted to the Company's current and former executive officers options to
purchase 120,375 shares of common stock at an exercise price of $.7917 for the
90 Plan, 18,000 shares of common stock for the 93 Plan at an exercise price of
$1.56, and 75,000 shares of common stock were granted January, 1997 for the 97
plan at an exercise price of $.50 . The exercise price of the options granted is
based on the fair market value of the common stock for the five business days
preceding the date of the grant.
Transactions involving the plans at November 30, 1996 and 1995, respectively,
are summarized as follows:
STOCK OPTIONS 1996 1995
- -----------------------------------------------------------
Outstanding, December 1 160,929 176,209
Granted - 30,000
Canceled (13,596) (44,343)
Exercised - (937)
- -----------------------------------------------------------
Outstanding, November 30 147,333 160,929
===========================================================
Exercisable, November 30 147,333 97,929
===========================================================
The exercise price per share of options outstanding at November 30, 1996 for the
90 Plan is $.7917 to $1.56 and for the 93 Plan is $1.4419 to $1.56. The exercise
price per share of exercisable options for the 90 and 93 plan at November 30,
1996 is $.7917 to $1.56.
Page 28
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 13. Reassign back Statec Exclusive distribution agreement
On February 21, 1996 the Company and Statec entered into a letter of
understanding under which the Company reassigned to Statec the exclusive
distribution and manufacturing rights for North America effective March 1, 1996.
The assignment was contingent upon Statec making the following payments for a
total of $183,000, excluding inventory. The payments required were as follows:
(Bullet) A down payment of $15,000 was due March 1, 1996
(Bullet) Twenty-eight (28) monthly installments of $6,000 each, commenced March
1, 1996 for a total of $168,000.
(Bullet) Statec was to repurchase all NDCA inventory related to Statec products
at the Company's net book value plus $15,000. All the inventory was to
be repurchased on or before November 30, 1996.
The transfer permitted the Company to reduce associated fixed overhead expenses
with the sale of such products and allowed the Company to focus solely on its
AGVS product line.
As of January 31, 1997 Statec was in default under the agreement by not paying
or repurchasing the inventory worth $71,272 and had not paid the agreed
installments of $6,000 monthly since December 1996. There remains a total number
of 19 unpaid installment equaling $114,000. In February of 1997, the Company was
notified that Statec became subject to a court-ordered liquidation proceeding
under French law. The Company plans to vigorously pursue its creditor claims in
such proceedings .
Note 14. Net Gain From Restructuring of Operations
On November 30, 1995, the Company sold certain intangible assets related to its
laser technology and its stock in NDC Laser and NDCTA (see Notes 4 and 9). In
addition, the Company also reduced its activities with the CIM products acquired
from SSDI (a former subsidiary) resulting in the write-off of the remaining
carrying value of such software. The transactions described above resulted in a
net gain from restructuring of operations for the year ended November 30, 1995
as follows:
Gain on sale of NDC Laser rights $ 595,941
Gain on sale of NDC Laser stock 4,317
Loss on sale of NDCTA stock (99,996)
Write-off of the remaining unamortized
portion of goodwill related to the
business acquisition of NDCTA (41,273)
Write-off of the remaining carrying
value of CIMTEX software (92,225)
-------
$ 366,764
=======
There were no restructuring activities for the years ended November 30, 1996 and
1994.
Page 29
61
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 15. Restricted Cash and Credit Risk
Under the Company's line of credit agreement, the Company's cash disbursements
are controlled and approved by the bank. Cash received by the Company is
deposited into bank-monitored cash collateral accounts where cash funds are used
to pay down the bank line of credit. Daily cash operating requirements of the
Company are then funded through advances under the borrowing base formula of the
line of credit (see Note 5).
Note 16. Reclassification
Certain amounts in the consolidated financial statements for 1995 and 1994 have
been reclassified to conform with classifications used in the November 30, 1996
financial statements. These reclassifications had no effect on 1995 and 1994 net
loss or accumulated deficit.
Note 17. FASB Statements And Proposed Regulations
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of financial Standards No. 107,
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value
amounts have been determined by the Company using available market information
and valuation methodologies described below. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein may not be indicative of the amounts
the Company could realize in a current market exchange. The use of different
market assumptions or valuation methodologies may have a material effect on the
estimated fair value amounts.
The carrying values of accounts and notes receivable, accounts payable, note
payable and line-of-credit borrowings approximate their fair values due to the
short-term maturities of these instruments. The carrying values of notes
receivable and long-term debt approximate fair values at November 30, 1996 due
to rates being at current market rates.
The FASB has issued Statement No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, which has not
been adopted by the Company as of November 30, 1996. FASB Statement No. 121 is
effective for fiscal years beginning after December 15, 1995. FASB Statement No.
121 establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used for long-lived assets and certain identifiable intangibles to be
disposed of. Under the guidelines of the new standard, the Company will be
required to review long-lived assets and certain identifiable intangibles to be
held for impairment whenever events or changes in circumstances, as outlined in
Statement No. 121, indicate that the carrying amount of an asset may not be
recoverable. If these events or changes in circumstances indicate that the
carrying amount of an asset that an entity expects to hold and use may not be
recoverable, the Company shall estimate the future cash flows expected to result
from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows is less than the carrying amount of the asset, the
Company shall recognize an impairment loss in accordance with the Statement. The
Company has determined that there will be no material impact of FASB Statement
No. 121 on the financial statements.
The Company has adopted Financial Accounting Standards Board Statement No.123
ACCOUNTING FOR STOCK-BASED COMPENSATION FASB No.123, requires that the Company
account for its stock based compensation plan using a fair value based method
which measures compensation cost at the grant date based upon the value of
awards, which is then recognized over the vesting period. The accounting
requirements of the statement apply to awards to employees entered into in
fiscal years that begin after December 15, 1995 and to transactions with
non-employees entered into after December 15, 1995. The Statement allows and the
Company has elected to continue to use APB Opinion No. 25 ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES to measure compensation cost, but is required to disclose
the pro forma effects on net income and earnings per share to reflect the
difference between the compensation cost applying APB Opinion No. 25 and the
related cost measured by the fair value method defined in the statement for all
awards beginning after December 15, 1994.
Page 30
62
<PAGE>
SHAREHOLDERS INFORMATION
For your convenience, NDC Automation, Inc.'s financial information may be
obtained from the Internet through the EDGAR filing system, such information is
made available to the public. To assist our shareholders in retrieving financial
information (such as 10QSB, 10KSB, Proxy, 8K's, etc.) in a more timely manner
please follow the instructions below:
ADDRESS: http://www.sec.gov\
Select: SEARCH the EDGAR Archives
Type in the block, NDC and hit ENTER
Select document desired.
Page 31
63
<PAGE>
SHAREHOLDER INFORMATION
===============================================================================
<TABLE>
<CAPTION>
<S> <C>
ANNUAL MEETING DIRECTORS
The annual meeting will be held at 10:00 am, Friday,
April 25, 1997, at NDC Automation's Corporate offices Goran P.R. Netzler
in Charlotte, North Carolina. Chairman of the Board of Directors, NDC Automation, Inc.
President
SHAREHOLDER RELATIONS Netzler and Dahlgren Co. AB
A copy of NDC's Annual Report
and form 10-KSB, which is filed with the Securiries and Exchange Ralph Dollander
Commission, will be sent to any shareholder upon President
written request to Manager-Investor Relations NDC Automation, Inc.
NDC Automation, Inc.,
3101 Latrobe Drive Jan H.L. Jutander
Charlotte, North Carolina 28211-4849 Vice President, Operation
Netzler and Dahlgren Co. AB
CORPORATE OFFICES
NDC Automation, Inc. Richard D. Schofield
3101 Latrobe Drive Director
Charlotte, North Carolina 28211-4849
T. Randolph Whitt
(704) 362-1115 Telephone Director
(704) 364-4039 Facsimile President, Hitchner Whitt & Co.,P.A.
STOCK EXCHANGE LISTINGS OFFICERS
Over the Counter: OTC Bulletin Board
OTC Symbol: "AGVS" Ralph Dollander
President
TRANSFER AGENT Chief Executive Officer
First Citizens bank
Raleigh, North Carolina Claude Imbleau
Vice President, Finance and Administration
LEGAL COUNSEL Chief Financial Officer
Parker, Poe, Adams and Bernstein, LLP
Charlotte, North Carolina E. Thomas Watson
Secretary, NDC Automation, Inc.
Shumaker, Loop and Kendrick, LLP Partner
Charlotte, North Carolina Parker, Poe, Adams and Bernstein LLP
AUDITORS
McGladrey & Pullen, LLP
Charlotte, North Carolina
</TABLE>
================================================================================
COMMON STOCK DATA
Market Price Per Share
1996 1995
------------------------------------------------------------
Quarter Ended High Low High Low
Bid^ Ask^ Bid^ Ask^ Bid Ask Bid Ask
- -------------------------------------------------------------------------------
February 29 5/8 7/8 3/8 15/32 1 9/16* 1*
May 31 1 1/16 1 5/16 3/8 1/2 1 9/16* 7/8*
August 31 5/8 7/8 1/4 1/2 2 5/8* 1 1/8*
November 30 5/8 3/4 1/4 3/8 1 1/2* 7/16^ 13/16^
===============================================================================
* Prior to the quarter ended November 30, 1995, the Company's stock traded on
the NASDAQ National Market System.
^On November 21, 1995 the Company began trading on the OTC Bulletin Board.
Page 32
64
<PAGE>
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in this Form 10-KSB of our
report dated January 24, 1997 which appears on page 11 of the 1996 Annual
Report to Shareholders of NDC Automation, Inc.
/S/ McGLADREY & PULLEN, LLP
Charlotte, North Carolina
February 25, 1997
Page 33
65
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000859621
<NAME> NDC AUTOMATION, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1996
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