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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, 1997 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
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Commission file number 0-18253
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NDC AUTOMATION, INC.
(Name of small business issuer in its charter)
Delaware 56-1460497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3101 Latrobe Drive, Charlotte, North Carolina 28211-4849
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(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
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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: $4,076,897
The aggregate market value of the voting stock held by non-affiliates
of the Registrant was $387,308, based upon the closing sales price of Common
Stock on OTC Bulletin Board on January 31, 1998 of $0.1875 per share.
As of January 31, 1998, 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 1998 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
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<PAGE>
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 ("OEMs") 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 Company's successfully completed its initial public
offering netting $1,996,598 to improve its financial position for potential
growth opportunities.
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.
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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 1997, sales of AGV related products and services have
accounted for almost all of the Company's net revenues as it did in 1996.
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 or other non-wire technologies 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. For further
information regarding AGVS, see "AUTOMATED GUIDED VEHICLE SYSTEMS" below.
The Company's philosophy is to sell its hardware, software and engineering
services to 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 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 will pursue business
direct with end-users where a qualified OEM or system integrator is not
available for the application.
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 that distribute the products or
systems to end users. As part of the strategy, the Company intends to pursue
potential markets of 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. In
addition the company intends to expand its business by approaching the
industrial truck market with new product lines in 1998. Further recent
developments include:
o An agreement was recently signed with Thrige Electic for NDCA to
exclusively represent Thrige in sales of its electric motors to the North
American Market.
o Netzler & Dahlgren are developing a new product called Laserway Teach-In
for the industrial truck market. Laserway Teach-in simplifies the layout
and programming of driving routes and loading positions, and can be used
by customer personnel. No computer skills are needed in using the product.
This product should open many new markets and applications for the
Company's technology.
The Company also intends to pursue other but related product lines such as
batteries and chargers 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 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 of the
facility .
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 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. In many instances customers incorporate NDCA products
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 OEMs, 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, as amended
November 30, 1995, 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, 1997, the Company incurred no
royalties to Netzler & Dahlgren with respect to technology licenses and
purchased an aggregate of $689,059 of hardware, software and engineering
consulting services.
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, 1997, orders from the three largest customers accounted for 15.0%, 14.5% and
8.8% of the Company's net revenues. For fiscal 1996, orders from the three
largest customers accounted for 10.8%, 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.
End users of the Company's products and services are reached by the
Company's sales through system suppliers and OEMs .
The Company sold products to 33 system supplier and OEM customers in 1997
that acquire the Company's products under various types of agreements. Depending
on 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, OEMs and Netzler
& Dahlgren as a group accounted for approximately 76%, 75% and 37% of the
Company's net revenues in the fiscal years ended November 30, 1997, 1996 and
1995, respectively. For the fiscal year ended November 30, 1997, such customers
accounted for
5
<PAGE>
approximately $3.1 million in net revenues.
The Company also sold in 1997 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 for certain end
users or the need for the Company to maintain its application know-how. AGV
system products and services sold directly to end users accounted for
approximately 24%, 22% and 52% of the Company's net revenues in the fiscal years
ended November 30, 1997, 1996 and 1995, 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 . To increase demand for the products and services of the AGV
suppliers, the Company's current 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. This approach has been
used in more than 1000 AGV systems with over 7,000 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, OEMs, distributors and manufacturers'
representatives. The Company attends the major trade shows held by the materials
handling industry and advertises in various industry publications.
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, 1997, the Company
had a backlog of approximately $415,000 compared to $780,000 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.
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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 $0 in fiscal 1997, $3,942 in fiscal 1996, and $141,220
in fiscal 1995 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.
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 OEMs 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 OEMs 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
7
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technology in the Company's actual or potential markets.
Employees
The Company presently employs 25 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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<PAGE>
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 $1,107,077 was outstanding at November 30, 1997. 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 space.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
9
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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, 1997, 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, 1997 and 1996, 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 February 17, 1998 was 175. The Company believes that there are
approximately 1,200 owners of beneficial interest of the Company's common stock.
<TABLE>
<CAPTION>
Market Price per Share
--------- --------- --------- --------- --------- --------- --------- ---------
1997 1996
--------- --------- --------- --------- --------- --------- --------- ---------
High Low High Low
Quarter Ended Bid Ask Bid Ask Bid Ask Bid Ask
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
February 28 11/16 13/16 9/32 11/32 5/8 7/8 3/8 15/32
May 31 13/32 17/32 9/32 3/8 1 1/16 1 5/16 3/8 1/2
August 31 31/32 1 1/32 5/16 3/8 5/8 7/8 1/4 1/2
November 30 13/16 15/16 1/4 3/8 5/8 3/4 1/4 3/8
===================================== ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
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.
10
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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
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<TABLE>
<CAPTION>
Item 13. Exhibits and Reports on Form 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
<S> <C>
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).
(f)* Letter dated September 10, 1997 from Netzler and
Dahlgren Co. AB to Company pertaining to direct
sales to end users as defined by the Master
License Agreement (incorporated by reference to
Exhibit 1 of the August 31, 1997 Form 10QSB).
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).
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Item 13. Exhibits and Reports on Form 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
<S> <C>
10.3 (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).
(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).
(f)* Supplemental Agreement between Statec Technologies SA and NDC Automation, Inc. dated
march 17, 1997 ( incorporated by reference to exhibit 1 of the Company's February 28,
1997 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).
(c) Distributorship Agreement dated February 19, 1998 between the Company and
Schabmulerr Gmbh .
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)).
(b) Technology License Agreement dated January 30, 1998 between the Company and Mentor
AGVS
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).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Item 13. Exhibits and Reports on Form 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
<S> <C>
10.7 (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).
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 (a)* 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).
(b)* North Carolina Note Modification Agreement dated
May 16, 1997 between the Company and First
Citizens Bank & Trust Company (incorporated by
reference to exhibit 1 to the Company's May 31,
1997 Form 10QSB).
10.13 (a)* 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.
(b)* Inventory and accounts receivable loan and
security agreement dated February 28, 1997 between
the Company and National Bank of Canada and
National Canada Business Corp. (incorporated by
reference to report on form 8K dated March 11,
1997)
10.14 (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).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Item 13. Exhibits and Reports on Form 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
<S> <C>
10.14 (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).
10.15* 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).
10.16* 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).
10.17* Development and Demonstration Agreement dated January 31, 1997 between the Company,
Hyster Company and Mentor AGVS, Inc. (incorporated by reference to exhibit 10.18 to
the November 30, 1996 10KSB)
10.18 Agreement for sales representation dated January 30, 1998 between the Company and
Thrige Electric.
10.19* Copy of purchase order from HK systems to the Company dated February 20, 1997
(incorporated by reference to the February 28, 1997 10QSB)
10.20* Strategic Alliance Agreement between the Company and Munck Automation Technology,
Inc. dated October 6, 1997 (incorporated by reference to report on Form 8K dated
October 16, 1997).
10.21 Press release dated February 13, 1998 announcing purchase order from KMH Systems to
the Company
11.1 Computation of Earnings Per Share for November 30, 1997.
13. Company's 1997 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).
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Item 13. Exhibits and Reports on Form 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
<S> <C>
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).
99.5* United States Letters Patent for Automatically Guided Vehicle Having Steering
Mechanism for Enabling Vehicle to Follow Guidance Wire (Patent No. 4,729,449;
Date of Patent 03/08/88) (incorporated by reference to Exhibit 28.5 to the Form S-18).
99.6* United States Letters Patent for Apparatus and Method for Optical Guidance System for
Automatic Guided Vehicle (Patent No. 4,626,995; Date of Patent 12/02/86) (incorporated
by reference to Exhibit 28.6 to the Form S-18).
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).
</TABLE>
* 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
1. Resignation of Director, Mr. T. Randolph Whitt (incorporated by reference
to report on Form 8K dated September 11, 1997).
2. Strategic Alliance Agreement between the Company and Munck Automation
technology, Inc. dated October 6, 1997 (incorporated by reference to report
on Form 8K dated October 16, 1997).
16
<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 Dollander
---------------------------------------
Ralph G. Dollander
President
Chief Executive Officer, Director
By: /s/ Claude Imbleau
-------------------------------------
Claude Imbleau
Vice President Finance
Chief Financial Officer
Date: February 24,1998 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 Netzler
-------------------------------------
Goran P. R. Netzler
Chairman of the Board of Directors
By: /s/ Ralph Dollander
------------------------------------
Ralph G. Dollander
President
Chief Executive Officer, Director
By: /s/ Jan Jutander
------------------------------------
Jan H. L. Jutander
Director
By: /s/ Richard D Schofield
------------------------------------
Richard D. Schofield
Director
Date: February 24, 1998
17
<PAGE>
EXHIBIT 10.4 (c)
***: CERTAIN MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES EXCHANGE
COMMISSION.
DISTRIBUTORSHIP AGREEMENT
BETWEEN
NDC AUTOMATION, INC.
AND
SCHABMULLER GmbH
This DISTRIBUTORSHIP AGREEMENT ("Agreement") is made and entered into
by and between NDC AUTOMATION, INC. a Delaware, U.S.A. corporation with its
principal place of business in Charlotte, North Carolina ("DISTRIBUTOR"), and
Schabmuller GmbH, a German company with its principal place of business in
Berching-Sollngriesbach ("COMPANY").
STATEMENT OF BACKGROUND, PURPOSE AND INTEREST
COMPANY manufactures low voltage motors and drives and related
accessories and equipment and sells these items throughout the world.
DISTRIBUTOR's main business is to sell controls and navigation technology and to
provide engineering for the design and implementation of automatic guided
vehicle systems, primarily to OEM manufacturers in North America. DISTRIBUTOR
and COMPANY have had a business relationship under another Distribution
Agreement, which has been terminated to replace it with this agreement (the
"Agreement"). The purpose of this Agreement is to set forth the terms and
conditions whereby DISTRIBUTOR acts as the exclusive distributor for COMPANY in
North America.
THEREFORE, in consideration of these premises, the covenants herein
given and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
A G R E E M E N T
1. APPOINTMENT AS DISTRIBUTOR. COMPANY hereby appoints DISTRIBUTOR to be its
exclusive Distributor for COMPANY's "Products" (as hereinafter defined)
within the "Territory" (as hereinafter defined) for the "Term" (as herein
defined) of
1
<PAGE>
this Agreement and subject to its terms. As used herein, "Products" shall
mean "Motor-In-Wheel-Drives" for all applications, except for class 1,2 and
3 electric trucks. The Products are listed in Exhibit 1 (subject to
change), attached hereto and incorporated herein by reference, plus such
other products as the parties may hereafter agree to add to Exhibit 1.
"Territory" shall mean the countries of North America (Canada, Mexico and
the U.S.A.). The "Term" of this Agreement shall mean the period of time
defined in paragraph 7.1 herein.
2. OBLIGATIONS OF DISTRIBUTOR.
2.1 DISTRIBUTOR shall use its best commercial efforts to sell
and to promote sales of Products and to protect and promote
the good name and best interests of COMPANY and the Products
throughout the Territory.
2.2 DISTRIBUTOR may promote or distribute the products of
other companies and otherwise represent other companies, with
the exception of products which are identical or similar to
Products as listed in Exhibit 1. Nothing in this Agreement
shall be construed to prevent DISTRIBUTOR from selling its own
products. However, Distributor commits not to enter into
direct competition with his customers or enter into any other
business that would prevent Distributor from meeting his
obligations under this Agreement.
2.3 DISTRIBUTOR shall purchase and resell Products for its own
account and its own risk. However, the Parties acknowledge the
fact that direct sales by COMPANY to customers in the
Territory with commission to DISTRIBUTOR may be necessary in
certain cases in order to obtain a contract. In such cases,
the Parties agree to negotiate in good faith the terms and
conditions for such direct sales. As guidelines for such
negotiations, DISTRIBUTOR's normal commission for direct sales
by COMPANY shall be ***.
2.4 DISTRIBUTOR shall pay for all Products ordered from
COMPANY in accordance with the prices, terms of payment and
other terms and conditions of sale which are attached hereto
as Exhibit 2***. COMPANY warrants that such prices, terms of
payment and the terms and conditions of sale are no less
favorable than those in effect for other similarly situated
distributors of Products elsewhere in the world. Unless
otherwise agreed, the terms of payment for all Products shall
be net sixty (60) days from date of invoice.
2
<PAGE>
2.5 DISTRIBUTOR shall maintain a proper place of business
including offices, demonstration, test and repair space,
maintenance and spare parts storage. DISTRIBUTOR shall
maintain the capability to demonstrate the operation of
Products.
2.6 DISTRIBUTOR shall maintain an inventory of Products and
spare parts adequate to meet routine commercial demand without
delay and shall provide spare parts, training and maintenance
services to its customers upon their request.
2.7 DISTRIBUTOR shall employ and train skilled technical and
other personnel sufficient to promptly and efficiently
discharge its responsibilities hereunder.
2.8 DISTRIBUTOR shall provide normal after-sales services to
its customers. Subject to paragraph 4.2 of this Agreement,
DISTRIBUTOR may provide warranty service to its customers.
DISTRIBUTOR may charge its customers for all such services
except for those covered by its warranty or COMPANY's
warranty, in either case, if any.
2.9 DISTRIBUTOR shall, at its own expense, advertise and
promote the Products for sale within the Territory.
2.10 DISTRIBUTOR commits to provide COMPANY with periodic
reports as follows:
(i) Once a year, a market/sales plan with sales budget
for next year
(ii) Twice a year, a general market report
(iii) Four times a year, a review and up-date of sales
forecast
(iv) Visit reports
3. OBLIGATIONS OF COMPANY.
3.1 COMPANY shall not appoint or support any other
representative or other distributor of Products within the
Territory. COMPANY shall not sell Products directly to other
persons or entities within the Territory or without the
Territory for resale into the Territory, except for sales to
COMPANY's OEM customers who incorporate Products into their
equipment for export into the Territory. ***
3
<PAGE>
3.2 COMPANY shall provide training, free of charge (except for
travel expenses), to DISTRIBUTOR's personnel at mutually
agreed times and places. COMPANY shall provide price lists,
technical bulletins, material safety data sheets and other
technical information to DISTRIBUTOR as reasonably necessary
for the promotion, sale and servicing of the Products at no
cost to DISTRIBUTOR as long as it is standard/available
material.
4. PRODUCT QUALITY, WARRANTIES, AND REPRESENTATIONS.
4.1 COMPANY warrants to DISTRIBUTOR that, at the time of
delivery, all goods sold shall conform in all material aspects
to all technical specifications and all descriptions of
function or performance contained in documents provided to
DISTRIBUTOR by COMPANY and further warrants that all goods
sold shall be free from defects in material or workmanship for
a period of twelve (12) months of operation or fifteen (15)
months following delivery, whichever occurs first. COMPANY, at
its election, shall repair or replace any Product which fails
to meet the foregoing warranty which DISTRIBUTOR reports to it
within fifteen (15) months after delivery.
In no event shall COMPANY be responsible for any damage or
failure caused by failure to properly store Products, poor or
inadequate maintenance, normal wear, improper use, abuse,
power fluctuations, failure of electrical power, other
utilities or environmental controls, non-dedicated circuits,
or unauthorized attachments to or modification of the
Products.
DISTRIBUTOR is not authorized to give on COMPANY's behalf any
representation or warranty as to the Products and DISTRIBUTOR
shall itself make no representation or warranty more extensive
than the warranty granted herein.
THIS WARRANTY IS EXPRESSLY IN LIEU OF ANY OTHER EXPRESS OR
IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND IS
IN LIEU OF ANY OTHER OBLIGATION ON THE PART OF COMPANY.
WAIVER OF CONSEQUENTIAL DAMAGES:
THE PARTIES AGREE THAT UNDER NO CIRCUMSTANCES
4
<PAGE>
SHALL THE OTHER PARTY BE LIABLE FOR INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, FOR LOST PROFITS, INJURY TO
PERSON OR PROPERTY (OR ANY OTHER INCIDENTAL OR CONSEQUENTIAL
LOSS), WHETHER ARISING UNDER WARRANTY, NEGLIGENCE, STRICT
LIABILITY, TORT OR ANY OTHER THEORY.
4.2 COMPANY agrees to maintain a comprehensive liability
insurance coverage including product liability coverage
throughout the term of this Agreement, which covers
REPRESENTATIVE as a vendor, according to Exhibit 2.
REPRESENTATIVE agrees to maintain a comprehensive liability
insurance coverage including product liability throughout the
term of this Agreement.
5. RESTRICTIVE COVENANT
DISTRIBUTOR acknowledges that from time to time during the term of this
Agreement it will acquire information concerning secret processes, designs,
formulae, know-how, prices, margins, plans, strategies, customers, markets and
other confidential information of or concerning COMPANY, its affiliates or the
Products or processes of COMPANY or its affiliates, which information is
valuable, gives COMPANY a competitive advantage and which COMPANY uses
reasonable means was to keep secret ("Confidential Information"). DISTRIBUTOR
acknowledges COMPANY's exclusive right, title and interest in the Confidential
Information and in COMPANY's trademarks, trade names, patents and copyrighted
material and agrees to do nothing during or after the term of this Agreement to
impair such right, title, and interest or to disclose to any third party any
Confidential Information acquired by DISTRIBUTOR pursuant to this Agreement or
otherwise. DISTRIBUTOR agrees that all Confidential Information shall at all
times be the exclusive property of COMPANY. DISTRIBUTOR further agrees to
discontinue all use of COMPANY's name, trademarks, patents, copyrighted material
and Confidential Information immediately upon the termination or expiration of
this Agreement for any reason. The obligation to maintain the confidentiality of
Confidential Information shall not extend to:
(a) Information which is or becomes part of the public domain
through no fault of DISTRIBUTOR;
(b) Information which can be shown to have been legally
disclosed to DISTRIBUTOR by a third party which has not
breached any
5
<PAGE>
obligation as to non-disclosure;
(c) Information which can be shown by DISTRIBUTOR to have been
acquired by DISTRIBUTOR without restriction prior to
disclosure of the same information to it by COMPANY;
(d) Information which can be shown by DISTRIBUTOR to have
been developed by it independently of any disclosure of
Confidential Information to it pursuant to this Agreement;
or
(e) Information about market conditions or customers which
DISTRIBUTOR develops as a result of its performance of its
duties hereunder.
In the event of an actual or threatened violation of this restrictive
covenant by DISTRIBUTOR, COMPANY shall have the right to terminate this
Agreement immediately upon giving written notice of termination to DISTRIBUTOR
and to obtain temporary and permanent injunctive relief to prevent any such
violation.
6. PATENT INFRINGEMENT. DISTRIBUTOR shall notify COMPANY promptly upon learning
of any claim of infringement brought against DISTRIBUTOR or its customers of any
patent owned or assigned to any other person or business on account of the sale
or use of any of the Products within the Territory. Upon notification, COMPANY
shall undertake to defend, settle or dispose of any such claim, charge or
proceeding and to pay the final amount of any settlement agreed to by COMPANY or
any judgment awarded against DISTRIBUTOR or COMPANY. COMPANY reserves the sole
right to defend or not to defend and to settle or not to settle any such claim,
and DISTRIBUTOR shall cooperate with COMPANY in its lawful disposition of such
claim. COMPANY shall keep DISTRIBUTOR fully informed of all actions taken or to
be taken by it to dispose of any such claim of infringement.
7. TERMINATION.
7.1 Unless earlier terminated as provided for herein, the Term
of this Agreement shall be three (3) years, beginning on the
date of execution of this Agreement; provided, that this
Agreement shall automatically be renewed for successive one
year periods unless either party gives written notice not less
than ninety (90) days prior to the end of the initial term (or
any succeeding term) that it does not wish to further extend
this Agreement ("Notice of Expiration").
6
<PAGE>
7.2 In addition to the rights of termination provided
elsewhere in this Agreement, this Agreement may be terminated:
(a) By an agreement in writing between COMPANY and
DISTRIBUTOR; or
(b) By either party in the event the other does or
attempts to do any of the following:
(i) assigns its rights or obligations
hereunder without the other party's
consent;
(ii) ceases business as a going concern;
(iii) liquidates, dissolves or adopts a plan
to liquidate or dissolve;
(iv) files for bankruptcy or seeks to have a
receiver, trustee or conservator of its
assets appointed or takes other action
to gain relief from its creditors
generally;
(v) is the subject of an involuntary
petition for bankruptcy, or for the
appointment of a receiver, trustee or
conservator of its assets or any other
judicial proceeding for relief from
creditors generally and the same is not
dismissed within sixty days after
filing;
(vi) commits a material breach of any
provision of paragraph 6 herein.
(vii) is subject to a major change in control
and/or management that would seriously
hinder the party to carry out his
obligations under this Agreement.
(c) By either party by thirty (30) days prior
written notice identifying the breach in the
event the other party commits a material breach
of any provisions of this Agreement and does not
cure such breach by the end of the notice
period.
(d) Either party may terminate the Agreement with
three (3) months' written notice if the order
intake from the Territory is less than
threehundredthousand (300,000) dollars for the
first year, less than fourhundredfiftythousand
(450,00) for the second year and less than
sixhundredthousand (600,000) dollars for the
third year.
8. EFFECT OF TERMINATION.
7
<PAGE>
8.1 All rights extended to DISTRIBUTOR under this Agreement
shall immediately cease upon the expiration or termination of
this Agreement for any reason, but such expiration or
termination shall not extinguish any past due obligation of
DISTRIBUTOR hereunder.
8.2 The acceptance of any Product order or renewal parts order
from, or sale of any Products or renewal parts to, DISTRIBUTOR
after the expiration, termination, or the giving of Notice of
Expiration or notice of termination of this Agreement shall be
in the sole discretion of COMPANY. Any such acceptance or sale
shall not be construed as a renewal or extension thereof nor
as a waiver of expiration or termination but in the absence of
a written agreement otherwise, all such transactions shall be
governed by provisions identical with the applicable
provisions of this Agreement.
9. BENEFIT AND ASSIGNMENT. The rights, duties, and obligations of the parties
under this Agreement shall inure to the benefit and shall be binding upon their
respective successors and permitted assigns.
10. STATUS OF DISTRIBUTOR. With respect to the Products, the relationship
between COMPANY and DISTRIBUTOR is solely that of vendor and vendee, and nothing
in this Agreement shall constitute DISTRIBUTOR as the agent, partner, joint
venture or legal representative of COMPANY for any purpose whatsoever; nor shall
DISTRIBUTOR hold itself out as such. DISTRIBUTOR shall have no authority to bind
or commit COMPANY in any manner or for any purpose but rather shall act and
conduct itself in all respects as an independent contractor with respect to the
Products and the conduct of its business.
11. FORCE MAJEURE. No party to this Agreement shall be deemed to be in breach or
default of any provisions hereof by reason of delay or failure in the discharge
or performance of any duty or obligation hereunder due to strikes, lock-outs,
natural calamity, war, civil disorder, force majeure or any other cause beyond
the reasonable control of the party so affected.
12. SEVERABILITY; SURVIVAL. The provisions of this Agreement are hereby deemed
by the parties to be severable, and the invalidity or unenforceability of any
one or more of the provisions of this Agreement shall not affect the validity
and enforceability of the remaining provisions thereof. The provisions of
Sections 5, 6, 14 and 15 shall survive termination of this Agreement for any
reason.
8
<PAGE>
13. NOTICES. Any notice contemplated or required or permitted to be given under
this Agreement shall be sufficient if in writing and if delivered personally, or
sent registered or certified mail, return receipt requested, to the parties'
respective addresses below,
If to DISTRIBUTOR: NDC AUTOMATION, INC.
3101 Latrobe Drive
Charlotte, NC 28211, USA
If to COMPANY: SCHABMULLER GmbH
D-92334 Berching-Sollngriesbach
Industristrasse 8, Germany
or to such other address as either party may direct by notice give to the other
as herein provided.
14. PROCEDURE IN CASE OF DISPUTE. Any controversy or dispute arising out of this
Agreement, or the breach thereof, shall be settled in accordance with the Rules
of Conciliation and Arbitration of the International Chamber of Commerce by on
or more arbitrators appointed according to these rules.
15. CONSTRUCTION OF AGREEMENT. This Agreement may be executed in counterparts in
order to provide each party with a fully-executed original hereof. Except as
otherwise provided herein, this Agreement may not be changed, modified or
amended except by an agreement in writing signed by both parties. The waiver by
any party to this Agreement of any breach or violation of any provisions of this
Agreement by any other party hereto shall not operate as a waiver of any other
breach. This Agreement reflects the complete understanding of the parties and
constitutes their entire agreement, superseding all prior negotiations,
representations, agreements, understandings, and statements.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by
signature of their respective duly authorized representatives as of the date
written below.
SCHABMULLER GmbH
By: /s/ Ralph Kriegel
----------------------------
Title: President
-------------------------
Date: February 19, 1998
--------------------------
NDC AUTOMATION, INC.
By: /s/ Ralph Dollander
---------------------------
Title: President
------------------------
Date: February 19, 1998
-------------------------
10
<PAGE>
EXHIBIT 10. 5 (b)
***: CERTAIN MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES EXCHANGE
COMMISSION.
TECHNOLOGY LICENSE AGREEMENT
This Technology License Agreement is made and entered into by and
between NDC Automation, Inc., a Delaware corporation, with its principal place
of business at 3101 Latrobe Drive, Charlotte, North Carolina 28211 ("NDCA") and
Mentor AGVS, with its principal place of business located at 26800 Richmond
Road, Bedford Heights, OH 44148, ("Mentor") as of the 30th day of January, 1998.
WHEREAS, NDCA is the exclusive licensee in North America of certain
patents, software and know-how related to automatic guided vehicle systems and
is the exclusive distributor in North America for certain control components and
equipment based on such patents, software and know-how which has been designed
by, manufactured for, and sold by NDC Netzler et Dahlgren AB, a Swedish company;
and
WHEREAS, Mentor designs, manufactures (or has manufactured) installs
and services complete automatic guided vehicle systems ("AGVS"); and
WHEREAS, Mentor desires to use NDCA's know-how, support and AGVS
control components and equipment in Mentor's AGVS; and
WHEREAS, the purpose of this agreement is to set forth the terms and
conditions pursuant to which NDCA shall license its AGVS technology to Mentor
and support Mentor in its use of the same.
NOW THEREFORE, in consideration of thee premises, the covenants
exchanged herein and other good and valuable consideration, the parties agree as
follows:
A G R E E M E N T
1 Grant of License.
1.1 Subject to the terms and conditions of this Agreement and during its Term,
NDCA grants to Mentor and Mentor accepts a non-exclusive license and right to
use NDCA Technology (as hereinafter defined) within the Territory (as
hereinafter defined) for the following purposes:
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(1) to market, sell, design, manufacture, assemble, install and set-up and
service AGVS for end-users; notwithstanding the above, Mentor may sell
AGVS to end- users outside the Territory provided that design,
manufacturing and assembly have been done within the Territory
(2) to sublicense third party contractors at its direction to manufacture,
assemble, install, set-up and service AGVS designed and sold by Mentor.
1.2 The "NDCA Technology" shall consist of all patents, information, processes,
solutions, techniques, software and documentation licensed to or and owned by
NDCA which relate to any of the navigation, control communication, or
decision-making functions of an AGVS or the design, use, manufacture,
installation, set-up or servicing of an AGVS as the same now exists or may be
developed or acquired by or licensed to NDCA during the Term hereof.
1.3 The "Territory" shall consist of the countries of North America.
2 License Fees.
2.1 Mentor shall pay to NDCA as annual license fee of *** payable as follows:
(1) The first annual license fee shall be due and payable upon execution of
this Agreement;
(2) subsequent annual license fees shall be due and payable on each
December 1st during the Term hereof.
2.2 In addition to the annual license fee, Mentor shall pay to NDCA an annual
maintenance and support fee consisting of a base fee of *** which may be reduced
pursuant to Section 3.2. The base maintenance and support fee shall be payable
in three installments each year of the term, as follows:
***
3. Performance Credits.
3.1 Mentor agrees to order, accept and pay for engineering, and support services
and AGVS control components and equipment totaling at least $*** in each
Contract Year during the Term of this Agreement. Failure to meet this minimum,
will allow NDCA to terminate the Agreement in accordance with paragraph 5.3.
3.2 NDCA will grant to Mentor a performance credit in the first Contract Year as
follows; if NDCA has invoiced Mentor for engineering or support services or for
AGVS control
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components and equipment in a total amount in excess of *** by July 31, 1998,
the installment of the base maintenance and support fee due on that date shall
be reduced by one half and the third installment shall be waived; if NDCA has
invoiced Mentor for more than $*** by November 30, 1998, the third installment
shall be waived. These performance credits shall be in addition to the credits
to be applied in the second Contract Year with respect to invoicing totals in
the first Contract Year: NDCA will grant to Mentor a performance credit in the
second and each subsequent Contract Year of this Agreement equal to ***% of the
net invoice amount on the first $*** invoiced by NDCA during the previous
Contract Year for engineering and support services and AGVS control components
and equipment and ***% of the net invoice amount for all such services,
components and equipment over and above $***.
3.3 NDCA shall calculate and notify Mentor as to the performance credit earned
with respect to the sales made in any Contract Year no later than December 31 of
the following Contract Year.
3.4 Any earned performance credit shall be applied first to the maintenance and
support fee due in the Contract Year in which the credit is calculated (i.e.,
the Contract Year following the Contract Year in which the credit is earned) and
then against the license fee due from the Contract Year in which the credit is
calculated. If any credit remains, it shall be paid in cash to Mentor no later
than the January 31 following the date of calculation.
3.5 Mentor shall be entitled to purchase AGVS control components and equipment
from NDCA at a discount of ***% from NDCA's current net list price. NDCA
reserves the right to revise its prices upon giving Mentor sixty (60) days prior
written notice.
4 Obligations of the Parties.
4.1 NDCA shall provide, upon reasonable advance request and at a mutually
agreeable time: One week's up-date training to up to three (3) employees of
Mentor each year at NDCA's training facility and up to fifty hours of technical
or sales support per year. Any training or support provided by NDCA at Mentor's
request in excess of one week or fifty hours, respectively, will be charged to
and paid by Mentor at the rate of $100 per hour. Unused support hours may not be
accrued to the following Contract Year. NDCA will also facilitate participation
at its affiliate company's, NDC AB in Sweden, scheduled courses free of charge.
4.2 NDCA shall also provide upgrades of definition software at no charge, as the
same may be released generally by NDCA from time to time.
4.3 Mentor shall pay the travel and living expenses of its personnel when
receiving training or assistance, and Mentor shall reimburse NDCA for its
reasonable out-of-pocket expenses when traveling to provide training, technical
or sales support.
4.4 NDCA shall not compete with Mentor on a direct basis, unless agreed
otherwise in
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writing between the parties. Nothing in this agreement, however, shall prevent
NDCA from entering into similar license agreements or sales contracts with other
companies such as AGV manufacturers, material handling system integrators,
special equipment manufacturers, etc.
4.5 Both parties agree to use their best commercial efforts to promote and
support the products and technology covered by this Agreement.
5 Term and Termination.
5.1 This Agreement shall be deemed effective from December 1, 1997 upon
execution and shall continue in full force and effect until November 30, 2000
(the "Term") unless sooner terminated or extended pursuant hereto. This
Agreement shall be automatically extended for successive additional terms of one
year each (each an additional "Term") unless either party, at least ninety (90)
days prior to the expiration of the then current Term gives notice to the other
that the Agreement shall not be renewed.
5.2 The period from December 1 to the following November 30 during any Term
shall be known as a Contract Year.
5.3 This Agreement may be terminated by either party if the other commits a
material breach of this Agreement and does not cure such breach within thirty
(30) days after receiving notice of the breach and the sender's intent to
terminate or immediately upon giving notice in the event the receiving party
ceases business as a going concern, assigns this Agreement in violation of its
terms, files for bankruptcy or for the appointment of a trustee, receiver,
conservator or the like of its business or assets, dissolves or adopts a plan of
dissolution or liquidation.
5.4 This Agreement may also be terminated by mutual, written consent between the
parties.
6 Ownership and Confidentiality.
6.1 All AGVS Technology provided to Mentor by NDCA shall be and remain the
exclusive property of NDCA, and Mentor shall not acquire any right, title or
interest in the same, in the name and style "NDCA" or in the goodwill thereof.
6.2 Mentor shall and hereby does grant to NDCA, its successors and assigns, a
perpetual, irrevocable, non-exclusive license and right with right to sublicense
to use all improvements to the NDCA Technology and all inventions, discoveries,
patents and information, whether patented or not, which relate to NDCA or derive
from NDCA Technology which it develops, creates or acquires pursuant to a
development contract during the Term of this Agreement, at terms mutually agreed
in writing between the parties.
6.3 Mentor shall not use, copy or distribute NDCA Technology except as expressly
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authorized hereby.
6.4 Mentor shall use efforts no less stringent then it uses to protect its own
valuable proprietary information and, in any event, no less than reasonable to
protect the confidentiality of all NDCA Technology. Mentor shall limit
disclosure of NDCA Technology to its own employees who have a need to know and
to outside contractors, consultants or sublicensees who are bound, in writing,
to protect the confidentiality and proprietary nature of the NDCA Technology and
not to use it except in support of Mentor's AGVS projects. Such writings shall
be for NDCA's benefit and may be enforced by it. The foregoing obligations shall
not apply to information which is or becomes publicly known through no act or
omission of Mentor or its contractors, representatives or sublicensees.
6.5 Mentor shall return all expressions or tangible recordings of AGVS
Technology to NDCA upon the expiration or termination of this Agreement for any
reason.
7 General.
7.1 Any notice required or contemplated by this agreement shall be sufficient if
in writing and delivered personally, by courier service such as Federal Express
or if deposited with the U.S. Postal Service, first class, certified or
registered mail, postage paid, addressed as follows or to such other address as
a party may give to the other by notice:
If to NDCA: NDCA Automation, Inc.
3101 Latrobe Drive
Charlotte, North Carolina 28211
Attention: Ralph Dollander, President
If to Mentor: MENTOR AGVS
4899 Commerce Parkway
Warrensville Heights, OH 44128
Attention: Michael Urban, Vice President
7.2 All sales of AGVS control components and equipment and engineering services
shall be governed exclusively by the terms of the relevant purchase order and by
NDCA's standard terms and conditions of sale, copies of which are attached and
incorporated herein by reference (Exhibit 1 and 2).
7.3 Mentor may not assign this Agreement without the express, prior consent of
NDCA. Any purported assignment in violation of this provision shall be void.
Assignment shall include any assignment by operation of law, including merger.
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7.4 The relationship created by this Agreement is solely that of licensor and
licensee. Neither party shall be nor hold itself out as the legal representative
of the other, and no relationship of principal and agent, franchisor and
franchisee, employer and employee is created hereby.
7.5 The failure or delay by one party in enforcing its rights hereunder with
respect to any breach or failure of performance by the other shall not be deemed
a waiver; and the waiver by one party of any right or remedy hereunder on one
occasion shall not be deemed a waiver of any other right or remedy or on any
other occasion.
7.6 This Agreement and any claim or controversy arising out of or related to it
shall be governed exclusively by the domestic law of the State of North
Carolina.
7.7 This Agreement constitutes the entire expression of agreement between the
parties with respect to its terms, all prior agreements, understandings,
statements and representations being merged herein. It may not be amended or
modified orally, but only by a written agreement signed by both parties. Each
party represents that the other has not made any statement or premise on which
it has relied which is not expressed herein.
IN WITNESS WHEREOF, the parties have executed this Agreement by the
signature of their duly authorized representatives as of the date first above
appearing.
MENTOR AGVS NDC AUTOMATION, INC.
By: /s/ Roger K. Steel By: /s/ Ralph Dollander
-------------------------- -------------------------------
Title: President Title: President
----------------------- ----------------------------
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EXHIBIT 10.18
***: CERTAIN MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES EXCHANGE
COMMISSION.
AGREEMENT FOR SALES REPRESENTATION
GENERAL
AGREEMENT on this 30th day of January , 1998, between Thrige Electric A/S
("COMPANY"), a Danish Corporation with offices at Tolderlundsvej 3, 5000 Odense
C, and NDC Automation, Inc. ("REPRESENTATIVE"), a Delaware Corporation with
offices at 3101 Latrobe Drive, Charlotte, NC 28211, USA.
1. DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the following
terms shall have the meanings assigned to them below:
"Products" shall mean the products described on Schedule A attached hereto.
"Territory" shall mean the United States and Canada.
2. APPOINTMENT
Subject to the provisions of this Agreement, the COMPANY appoints the
REPRESENTATIVE to be its exclusive representative in the Territory. The scope of
REPRESENTATIVE's authority and responsibilities are set forth in this Agreement.
REPRESENTATIVE acknowledges that it has no power or authority to accept any
order for the COMPANY, or to make warranties or guaranties as to the Products,
or to make any commitment for the COMPANY or to obligate the COMPANY in any
respects whatsoever. REPRESENTATIVE further acknowledges that it is not an agent
or employee of the COMPANY but is an independent contractor.
3. COMMISSIONS
REPRESENTATIVE will be paid commissions, in U.S. dollars, on the amount actually
received by the COMPANY from sales of Products to customers in the Territory,
after the following deductions:
(a) Freight and insurance
(b) Sales and other taxes, duties, impositions and charges
(c) Other: There will be no commission paid on tooling, jigs, fixtures,
cancellation charges and the like unless otherwise agreed.
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COMMISSION/EXPENSES. A fixed commission of *** for the REPRESENTATIVE will be
included in the COMPANY's pricing to the customers during the first twelve (12)
month period. During this period, the COMPANY guarantees REPRESENTATIVE seventy
five thousand dollars ($75,000). This sum will be paid in arrears in twelve (12)
monthly installments of six thousand two hundred fifty dollars ($6,250) and
deducted from any commission due to REPRESENTATIVE within the first sixteen (16)
months.
After the twelve (12) month period, the intention is to review and discuss the
results and the market situation and their possible effects on the rate of
commission.
If the price quoted by COMPANY has to be reduced to obtain the contract, the
Parties shall in good faith discuss such reduction and its effect on the
commission.
COMMISSION PAYMENT. Commissions will be due to the REPRESENTATIVE upon receipt
of payment by the COMPANY and payable to the REPRESENTATIVE once a month on the
last day of each month. No commission shall be due or paid unless and until
COMPANY receives payment on an order.
SALES OUTSIDE THE TERRITORY. Company shall pay to REPRESENTATIVE on all sales
made outside the Territory anywhere in the world and delivered to customers
within the Territory, fifty percent (50%) of the compensation which would be
payable if such sales were made within the Territory.
***
4. COMPENSATION AFTER EXPIRATION
As of the expiration date, COMPANY will no longer be bound to pay commissions to
the REPRESENTATIVE on sales in the Territory, except on orders obtained by the
REPRESENTATIVE prior to the expiration of the Agreement, which result in
shipments within four (4) months after the expiration date. No commissions will
be paid on any shipments made more than four (4) months after the date of
expiration, no matter what the reason for such delay.
5. CUSTOMER PROPOSALS
The parties agree on the main principle that the COMPANY shall execute the final
proposal to the customer, in close consultation with the REPRESENTATIVE. The
COMPANY will send a copy of the proposal to the REPRESENTATIVE before it is
received by the customer to allow the REPRESENTATIVE the opportunity to present
and/or follow up the proposal. The parties agree to jointly work out quoting
procedures that are as efficient as possible and that meet customers'
requirements.
6. TRADEMARKS, PATENTS, ETC.
(a) The REPRESENTATIVE acknowledges that this Agreement conveys no right to
any trademarks, copyrights, patents, proprietary information or other
intellectual property rights of the COMPANY, all of which are the sole
property of the COMPANY.
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(b) The REPRESENTATIVE shall advertise the Products solely under the
trademarks of the COMPANY PROVIDED THAT the advertisements of the
Products may include, in a position that is remote from the trademarks,
the name and/or address of the REPRESENTATIVE. All goodwill and any
rights that may arise as a result of REPRESENTATIVE's use of the
COMPANY's trademarks, trade names or logos shall inure solely to the
benefit of the COMPANY.
(c) The REPRESENTATIVE shall not at any time in any manner whether by
advertising or in any other manner do any act or thing which would or
might adversely affect the validity of any patents, copyrights or
trademarks belonging to the COMPANY, except by the COMPANY's direction.
(d) The REPRESENTATIVE shall upon becoming aware of any infringement or
imitation of any such patents, copyrights or trademarks in the
Territory, immediately notify the COMPANY thereof by facsimile confirmed
by letter.
(e) Neither the COMPANY nor the REPRESENTATIVE, its officers, agents,
servants, and employees shall not during the term of this Agreement or
any time thereafter, disclose in any manner to any person, firm or
corporation whether in competition with either party or not, any
knowledge or information pertaining to the conduct or details of either
party's business or its processes, formulas, machinery, devices,
products, and components used by either party in carrying on its own
business, or lists of either party's customers.
This obligation of confidentiality shall not extend to:
(i) Information which is or becomes part of the public domain through
no fault of either party;
(ii) Information which can be shown to have been legally disclosed to
either party by a third party which has not breached any
obligation as to non-disclosure;
(iii) Information which can be shown by either party to have been
acquired without restriction prior to disclosure of the same
information to it by the other party;
(iv) Information which can be shown by either party to have been
developed by it independently of any disclosure of confidential
information to it pursuant to this Agreement; or
(v) Information about market conditions or customers which either
party develops as a result of its duties hereunder.
7. OBLIGATIONS BY REPRESENTATIVE
The REPRESENTATIVE shall, at its cost and expense, for as long as this
Agreement shall continue:
(a) promote and seek to increase the sales of the Products in the Territory,
and exercise its best efforts in fulfilling its obligations under this
Agreement, and promote the sale of the Products in such a way that the
goodwill of the COMPANY will be supported.
(b) employ adequate and qualified personnel to allow the REPRESENTATIVE to
carry out his obligations under this Agreement;
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(c) provide facilities necessary to adequately support the marketing, sales,
storing, shipping and service of the Products, at terms mutually agreed
between the Parties;
(d) maintain an adequate stock of spare parts for the Products to meet the
reasonable requirements of customers, at terms mutually agreed between
the Parties;
(e) communicate to the COMPANY as soon as practicable any discovery,
improvement or invention (whether patentable or not) which may be
discovered by or may otherwise come into the possession of the
REPRESENTATIVE and which constitutes an improvement to or a modification
of the Products; the REPRESENTATIVE shall at the request of the COMPANY
grant to the COMPANY a non-exclusive license to use any such invention,
discovery or improvement in return for the payment of reasonable
royalties except as restricted by other contracts or REPRESENTATIVE'S
own reasonable commercial needs for confidentiality;
(f) use all reasonable endeavors in advertising, promotion and publicity of
the Products supplied by the COMPANY;
(g) provide upon reasonable request by the COMPANY a detailed written market
report including but not limited to such information as a review of the
forthcoming year, market conditions, competition, details of sales
achieved, e.g. spares, (including the name and location of customers),
and details of selling prices including breakdown of costs. In
particular, the REPRESENTATIVE shall, as part of the report, submit a
sales forecast for the following year, such forecast to be agreed with
the COMPANY. Other reports concerning sales may be requested should
these be relevant to the sale of the production.
8. UNDERTAKINGS BY REPRESENTATIVE TO REFRAIN The REPRESENTATIVE shall not during
the term of this Agreement:
(a) purport to act or hold itself out as entitled to act as agent of the
COMPANY for any purpose whatsoever,
(b) incur any liability on behalf of the COMPANY or in any very pledge or
purport to pledge the COMPANY's credit or accept any order to make any
contract binding upon the COMPANY.
(c) advertise the Products outside the Territory;
(d) without the prior consent in writing of the COMPANY, be concerned or
interested either directly or indirectly in the manufacture, production,
sale or advertisement of any goods in the Territory which are like or
similar to or which either alone or in conjunction with some other
product perform or are designed to perform the same or a similar
function to or which might otherwise compete or interfere with the sale
of any of the Products; this restriction shall apply for the term of
this Agreement and for a period of twelve (12) months after the date of
expiration; and
(e) assign or transfer the benefit of this Agreement or any part thereof to
any third party without the prior written consent of the COMPANY,
including (without limitation) authorize any party (other than employees
of the REPRESENTATIVE) to market or sell the Products.
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9. OBLIGATIONS OF THE COMPANY
The Company shall during the term of this Agreement:
(a) assist the REPRESENTATIVE in advertising Products, by supplying such
advice and assistance as the COMPANY deems appropriate, and by supplying
free of charge, such an amount of sales aids and literature as it
considers reasonably sufficient, with a view to promoting sales of the
Products within the Territory; and
(b) support the REPRESENTATIVE in its selling and technical efforts by
regular visits to the Territory of experienced personnel at times and
frequencies to be determined by the COMPANY; such visits shall take
place where practicable at least twice a year;
10. SECRECY
Except where necessary for the purpose of:
(a) prospecting for Customers for Products, and
(b) instructing existing Customers on the use and maintenance of Products,
The REPRESENTATIVE shall not at any time, whether during the continuance of this
Agreement or after its termination from whatever cause, disclose to any third
party any information, know-how, data, drawings or specifications relating to
the Products or any part thereof in any manner whatsoever, or relating to
pricing or market or customer information except with the prior consent in
writing of the COMPANY.
This obligation of secrecy shall not extend to:
(i) Information which is or becomes part of the public domain through
no fault of REPRESENTATIVE;
(ii) Information which can be shown to have been legally disclosed to
REPRESENTATIVE by a third party which has not breached any
obligation as to non-disclosure;
(iii) Information which can be shown by REPRESENTATIVE have been
acquired without restriction prior to disclosure of the same
information to it by COMPANY;
(iv) Information which can be shown by REPRESENTATIVE to have been
developed by it independently of any disclosure of confidential
information to it pursuant to this Agreement; or
(v) Information about market conditions or customers which
REPRESENTATIVE develops as a result of its duties hereunder.
11. TERM AND TERMINATION
(a) The initial term of this Agreement will be three (3) years from the date
set forth on the first page hereof. Each Party may terminate the
Agreement with three (3) months' written notice if the order intake is
less than *** for the first year and less than *** for each of the two
(2) following
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years. Thereafter, this Agreement may be renewed for one (1) year
periods, provided the Parties agree to do so in writing.
(b) This Agreement shall terminate if:
(i) either party commits any breach of any of the obligations or
agreements on its part contained in this Agreement or under any
other agreement between the parties, and, in the case of a
breach capable of being remedied, does not remedy the same
within thirty (30) days after the receipt of notice in writing
from the other party requiring it so to do; or
(ii) payment of any sum due to either party under this Agreement or
any other agreement between the parties remains unpaid for a
period of thirty (30) days after the same becomes due; or
(iii) either party becomes insolvent or goes into liquidation or has a
receiver or similar official appointed in respect of all or a
substantial part of its business; or
(iv) the REPRESENTATIVE suffers a significant change of ownership, or
merges or consolidates with one or more party, with the result
that control of the REPRESENTATIVE vests in a Competitor (or
vice versa).
For this purpose:
a "significant change in ownership" shall be deemed to have occurred
when more than fifty percent (50%) of the equity share holding (or
equivalent in terms of the ability to direct the affairs of the
REPRESENTATIVE) in the REPRESENTATIVE is held by any party who at the
date of this Agreement holds less than fifty percent (50%) of such
equity; and a "Competitor" shall be deemed to be any manufacturer or
supplier of products which is similar to or which are designed to
perform a similar function to the Products whether alone or in
conjunction with any other product or which might otherwise interfere
with the sale of any of the Products covered by this Agreement, then the
innocent party may forthwith by notice in writing terminate this
Agreement. Any such termination shall be without prejudice to the rights
of the parties accrued up to the date of termination.
(c) Upon the expiration or sooner termination of this Agreement, the
REPRESENTATIVE shall forthwith return to the COMPANY, or otherwise deal
as may be directed by the COMPANY with all Products, customer lists,
catalogues, specification and other documentation and data relating to
the Products belonging to the COMPANY and which may at the time of such
expiration or termination be in the hands of or under the control of the
REPRESENTATIVE.
(d) The COMPANY, by reason of the expiration or termination of this
Agreement in conformity with the terms hereof shall not be liable to the
REPRESENTATIVE for compensation, reimbursement, or damage either because
of the loss of goodwill, present or prospective profits on sales of
Products, expenditures, investments, commitments made in connection
therewith, or related to the performance hereunder or the business or
goodwill of the REPRESENTATIVE, except as stipulated under this
Agreement or agreed in writing between the Parties.
(e) ***
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(f) The provisions of sections 4, 5, 10 and 12 through 16 shall survive any
termination of this Agreement.
12. WAIVER
The failure of either party hereto to exercise or enforce any right conferred
upon that party under this Agreement shall not be deemed to be a waiver of any
such right or operate to bar the exercise or enforcement thereof at any time or
times thereafter.
13. NOTICES
Any notice required to be given by either party under the terms of this
Agreement shall be given by registered letter or facsimile addressed to the
party for whom it is intended at its last known place of business. Every notice
shall be deemed to have been received and given at the time when in the ordinary
course of transmission it should have been delivered to the address to which it
was sent or within seven (7) days after the date of dispatch of such notice,
whichever is the earlier.
14. ENTIRE AGREEMENT
This Agreement embodies the entire agreement between the parties in relation to
Products and all previous understandings, representations, statements,
undertakings and agreements, written or otherwise between the parties in
relation to Products are hereby canceled as from the date of signature hereof.
The parties agree that neither of them has placed any reliance whatsoever on any
previous understandings, representations, undertakings, statements and
agreements other than those expressly incorporated in this Agreement.
15. AMENDMENTS
All amendments hereto must be in writing and signed by both the COMPANY and the
REPRESENTATIVE.
16. PRODUCT LIABILITY INDEMNIFICATION AND INSURANCE
COMPANY agrees to maintain a comprehensive liability insurance coverage
including product liability coverage throughout the term of this Agreement,
which covers REPRESENTATIVE as a vendor according to Schedule B. REPRESENTATIVE
agrees to maintain a comprehensive liability insurance coverage including
product liability throughout the term of this Agreement.
17. CHOICE OF LAW AND FORUM
This Agreement shall be construed in accordance with and governed by the laws of
the State of New York, without giving effect to principles of conflicts of laws.
Both parties hereby irrevocably and unconditionally waives any claim to assert
that the law of any other jurisdiction should govern this Agreement.
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Any dispute or controversy arising out of or relating to this Agreement shall be
settled by means of arbitration under the laws and proceedings of the State of
New York, unless otherwise agreed between both parties in writing.
Both parties hereby consent to the jurisdiction of the court of the State of New
York and the United States District Court of New York with respect to any suit,
action or other proceeding arising under or in respect of this Agreement or with
respect to the transactions contemplated hereby, and expressly waives any and
all objections the parties may have to venue in any such courts. Neither party
shall bring any suit, action or other proceeding under or in respect of this
Agreement in any courts other than the above. The parties further agree that any
summon and complaint commencing an action or proceeding in any of such courts
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to the other party at its address provided at
the beginning of this Agreement or as otherwise provided under the laws of the
State of New York.
18. ACCEPTANCE SIGNATURES
Executed the day and year set forth above.
THRIGE ELECTRIC A/S NDC AUTOMATION, INC.
By: /s/ Mogens From By: /s/ Ralph Dollander
--------------------------- ------------------------------
Title: President Title: President
------------------------ ---------------------------
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ATTACHMENTS
SCHEDULE A : List of Products
SCHEDULE B : COMPANY's liability insurance with endorsement for vendor
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Exhibit 10.21
For Immediate Release
February 13, 1998
Contact:
Ralph Dollander/ President
Claude Imbleau/ CFO
(704) 362-1115
NDC AUTOMATION, INC. RECEIVES PURCHASE ORDER FOR
LASER GUIDED AGV SYSTEM FROM KMH SYSTEMS
Charlotte, NC, February 13, 1998, NDC Automation, Inc. (OTC BULLETIN
BOARD SYMBOL - "AGVS") announces receipt of a purchase order exceeding $500,000
from KMH Systems ("KMH") of Cincinnati, Ohio. KMH is a major supplier of
material handling solutions, including conveyors, storage systems and system
integration to end users. KMH also supplies a broad range of lift trucks and
related components. The AGV system will be installed at a US facility of a
multinational paper manufacturing company. Revenue from the purchase order will
be recognized over the next 6 to 8 months.
This project will utilize Lazerway(TM) laser guidance technology,
available only through the NDC Group and its partners. Lazerway(TM) for AGVs
provides flexibility and accuracy which the Company believes is superior to
other guidance technology on the market today.
"NDCA is very pleased to receive this initial order from KMH Systems.
We anticipate this to be the first of many projects that are the result of a
relationship which began last year", said Mike Thornton, Vice President of Sales
for NDCA. "KMH already had a broad range of products and services which has now
been complemented by our AGVS experience and guidance technology. Both parties
should benefit from the combined contacts and capabilities brought to this
relationship".
NDC Automation, Inc. provides an integrated package of hardware and
software control technology and related products to be incorporated into and
used to control Automatic Guided Vehicle Systems (AGVS). The Company guarantees
the full functionality of such AGVS systems because of its product integration.
Such generic controls are designed for their flexibility and are well suited for
a broad range of vehicle types. NDCA's sales are targeted to OEMs and system
integrators which buy products, solutions and engineering services from the
Company and incorporate them into their material handling systems for industries
in which they specialize.
NDC's control technology is operating in over 7,000 vehicles worldwide,
1,000 of these laser guided, making NDC the leader in wire and non-wire AGVS
controls and guidance technology.
<PAGE>
<PAGE>
Exhibit 11.1
NDC AUTOMATION, INC
COMPUTATION OF EARNINGS PER SHARE
For The Year Ended November 30,1997
<TABLE>
<CAPTION>
FULLY
PRIMARY DILUTED
EPS EPS
-----------------------------------
Exercise
NUMBER OF SHARES UNDERLYING OUTSTANDING # shares Price
----------- ----------
<S> <C> <C> <C> <C> <C>
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 30,1997 $ 0.42
CLOSING AT November 30,1997 $ 0.25
SHARES THAT COULD BE REPURCHASED
WITH TOTAL PROCEEDS
532,178
---------
898,051
-------
EXCESS OF SHARES UNDERLYING OPTIONS/WARRANTS
OVER SHARES THAT COULD BE REPURCHASED
(354,845)
(720,718)
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 $ (1,060,360) $ (1,060,360)
-----------------------------------
EARNINGS PER SHARE ($0.3070) ($0.3070)
-----------------------------------
</TABLE>
ANNUAL REPORT 1997
COVER PAGE
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL SUMMARY
====================================================================================================================================
96 to 97 95 to 96
At or For Year Ended November 30 1997 1996 1995 % Change % Change
- ------------------------------------------------------------------------------------------------------------------------------------
Operations
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 4,076,897 $ 6,142,954 $ 7,851,147 (33.6) (21.8)
Net gain from restructuring of operations $ - $ - $ 366,764 NA NA
Operating income (loss) $ (864,398) $ 195,496 $ (1,586,140) * *
Income (loss) before income taxes (benefit) $(1,060,360) $ 16,602 $ (2,246,272) * *
Net income (loss) $(1,060,360) $ 45,431 $ (2,344,163) * *
Weighted average common shares outstanding 3,453,451 3,453,451 2,904,322 - 18.9
(primary and fully diluted)
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share Data^
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (.31) $ .01 $ (.81) * *
Cash dividends $ - $ - $ - NA NA
Stockholders' equity $ .19 $ .50 $ .48 (62.0) 4.2
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Position
- ------------------------------------------------------------------------------------------------------------------------------------
Assets $ 2,757,331 $ 4,556,794 $ 5,084,450 (39.5) (10.4)
Working capital $ 570,259 $ 1,416,912 $ 1,227,144 (59.8) 15.5
Property and equipment $ 1,129,377 $ 1,239,799 $ 1,357,555 (8.9) (8.7)
Long-term debt, less current maturities $ 1,042,055 $ 1,102,264 $ 1,170,311 (5.5) (5.8)
Stockholders' equity $ 657,581 $ 1,717,941 $ 1,672,510 (61.7) 2.7
- -----------------------------------------------------------------------------------------------------------------------------------
Number of employees 25 28 29
Number of stockholders approx. 1200 approx. 1200 approx. 1200
- -----------------------------------------------------------------------------------------------------------------------------------
* 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.
===================================================================================================================================
</TABLE>
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
1
<PAGE>
DEAR FELLOW SHAREHOLDER:
================================================================================
The Company's turnaround profit of 1996 was unfortunately followed by a loss in
1997. We were not able to accomplish our objective of continuing the
profitability of our Company, instead we saw a decline in revenues.
Why?
The Board of Directors adopted a very clear business plan in the fall of 1995;
namely for NDCA to focus on being a technology supplier to OEMs and partners
instead of being a systems supplier to end users. The Company was reorganized
and staffed to implement this strategy and considerable sales and marketing
efforts were made to develop new OEM customers and partners. However, it did
become increasingly evident that this business plan would require more time than
expected to generate sufficient revenues to offset the loss of end user
revenues. Therefore, in September 1997, the Board of Directors adopted a revised
strategy based on the following focus points :
o To establish and develop strategic alliances with
selected partners
o To pursue AGV system business in selected end user market
niches
o To grow the distribution business by adding new
supplementary products
o To develop a strong market position in the industrial
truck market
o To expand the after sales business of service and
maintenance to end users
Accordingly, the Company was reorganized and staffed to execute the new strategy
and during the last six months we have seen clear indications that we are on the
right track. Some important milestones:
1. In October, 1997, a strategic alliance agreement was signed with Munck
Autech in Newport News, VA, a leading material handling system supplier.
Under this agreement, Munck commits to NDC's technology and to use its best
efforts to meet a target which, if met, would provide NDCA with purchase
orders in excess of $ 9 million over the first three year period.
2. A new License and Support Agreement with Mentor AGVS, a long time partner
of NDCA, was negotiated in December, 1997, initially for a three year
period. The agreement secures the continuation of this partnership at a
time when Mentor will expand its AGV business under new ownership.
3. Our quotation activity has increased at a steady rate in the last six
months and new system orders are expected. For example, in February 1998,
NDCA was awarded an order in excess of $500,000 from KMH Systems, a system
integrator and engineering house, for a laser guided AGV system for a major
paper company. The project should be implemented by August, 1998.
4. An exclusive agreement of representation was signed in February, 1998, with
Thrige Electric, the largest European manufacturer of electric motors for
industrial trucks and other electric vehicles. Electric motor sales in the
North American market are currently estimated at $150,000,000 annually. The
Thrige agreement allows NDCA to earn commission revenues on this
significant North American market. The agreement runs for an initial period
of three years, subject to certain performance criteria. Our existing
exclusive distribution agreement with Schabmuller, a subsidiary of Thrige
Electric, was extended for another three year period in February, 1998.
On-going negotiations regarding distribution of other strategic key
products for the forklift market should be concluded during the
Spring of 1998.
5. Revenues from the after market are growing at a steady rate, due largely to
increased sales efforts and attention to customer satisfaction. One focus
area is to actively pursue service and maintenance contracts.
2
<PAGE>
================================================================================
6. During 1997 we successfully completed the installation of a large AGV
system at a Polygram CD manufacturing facility in North Carolina. The
system consists of ten laser guided vehicles, which handle most of the
transportation needs in this highly automated factory. Munck Autech was our
partner in this project. We also installed a four vehicle laser system at a
Chrysler stamping plant under a contract from HK Systems.
During 1998 we will make preparations for the market introduction of "Teach-In",
a new and exciting product primarily targeted for the industrial truck market.
We expect this product to open the industrial truck market for a dramatically
higher level of automation.
We are facing a period with a lot of opportunities and I remain optimistic about
1998 and beyond despite the set-back in 1997. I appreciate your understanding
and continued support.
Charlotte, North Carolina
February 1998
Respectfully,
Ralph Dollander
President and CEO
3
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
====================================================================================================================================
At or For Year Ended November 30
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Operations Data:
Net revenues $ 4,076,897 $ 6,142,954 $ 7,851,147 $ 9,472,585 $ 15,267,479
Cost of goods sold 2,695,289 3,864,393 5,597,305 6,214,318 8,993,742
- -----------------------------------------------------------------------------------------------------------------------------------
Gross profit $ 1,381,608 $ 2,278,561 $ 2,253,842 $ 3,258,267 $ 6,273,737
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain from restructuring of operations $ - $ - $ 366,764 $ - $ -
- -----------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 693,106 $ 656,537 $ 776,907 $ 517,884 $ 667,039
General and administrative 1,552,900 1,422,586 3,288,619 4,014,174 3,601,896
Research and development - 3,942 141,220 113,356 224,418
Public stock offering expense - - - - 247,078
- -----------------------------------------------------------------------------------------------------------------------------------
$ 2,246,006 $ 2,083,065 $ 4,206,746 $ 4,645,414 $ 4,740,431
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ (864,398) $ 195,496 $(1,586,140) $ (1,387,147) $ 1,533,306
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income (expense):
Interest income $ - $ 7,771 $ 9,025 $ 32,417 $ 15,681
Interest expense (195,962) (186,665) (669,157) (868,435) (311,013)
- -----------------------------------------------------------------------------------------------------------------------------------
$ (195,962) $ (178,894) $ (660,132) $ (836,018) $ (295,332)
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (benefit) $ (1,060,360) $ 16,602 $(2,246,272) $ (2,223,165) $ 1,237,974
Federal and state income taxes (benefit) - (28,829) 97,891 (598,971) 475,047
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1,060,360) $ 45,431 $(2,344,163) $ (1,624,194) $ 762,927
===================================================================================================================================
Weighted average number of
common shares outstanding 3,453,451 3,453,451 2,904,322 2,829,691 2,553,837
(primary and fully diluted)
===================================================================================================================================
Earnings (loss) per common share:* $ (.31) $ .01 $ (.81) $ (.57) $ .30
===================================================================================================================================
Cash dividend declared per common share $ - $ - $ - $ - $ -
===================================================================================================================================
Balance Sheets Data:
Working capital $ 570,259 $ 1,416,912 $ 1,227,144 $ 1,935,720 $ 2,268,784
Total assets $ 2,757,331 $ 4,556,794 $ 5,084,450 $ 13,188,231 $ 14,481,806
Long-term debt, less current maturities $ 1,042,055 $ 1,102,264 $ 1,170,311 $ 1,258,855 $ 1,509,051
Total liabilities $ 2,099,750 $ 2,838,853 $ 3,411,940 $ 9,711,853 $ 10,346,333
Stockholders' equity $ 657,581 $ 1,717,941 $ 1,672,510 $ 3,476,378 $ 4,135,473
</TABLE>
* Earnings (loss) per share - assuming full dilution are equivalent to earnings
(loss) per common share.
4
<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. During 1996 and for the first three quarters
of 1997, the Company refocused its sales efforts to existing original equipment
manufacturers (OEMs) and system integrators in the AGV systems industry. Such
OEMs and system integrators have historically sold products to end users to whom
the Company occasionally had direct sales. The Company reduced its sales effort
to such end users to avoid competing with its intended OEM customers. In
September of 1997, the Company began to pursue AGV system sales directly to end
users in selected market niches to supplement revenues obtained from OEMs and
system integrators.
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.
5
<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.
Strategy diversification: At this time the Company believes it must convert
several OEM and system integrators away from their own in-house AGV technology
to the Company's technology to increase its present market share. Such
technology transfers 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. The Company's strategy of not selling directly to end users contributed
to the losses incurred by the Company during 1997. The Company changed its sales
approach and began soliciting its products to end users during the fourth
quarter to ensure that its technology is available to such end users. In
order to avoid competing with its own customers, the Company will not
sell directly to end users where a qualified OEM or OEMs are specifying
NDC controls in their system solution to the potential end users. There
can be no assurances that such a strategy will be successful in the
short or long term.
Distribution of products and technology: The Company also intends to pursue
other related products 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 line. There can
be no assurance, however that this strategy will meet management's objectives
for growth.
Munck Agreement: On October 6, 1997, the Company executed a Strategic
Alliance Agreement with Munck Automation Technology. Inc. ("Munck") of Newport
News, Virginia. Munck is a major supplier of automated material handling systems
including AGVS vehicles and systems and automatic storage and retrieval systems
("AS/RS") to end users. The initial term of the agreement is three years,
subject to Munck reaching certain sale targets on an annual basis. The Agreement
extends, thereafter, in one year increments subject to the approval of both
companies.
Pursuant to the Agreement, Munck agrees to promote solely NDC AGVS
technology in its sales efforts of new AGV systems to end users. Munck also has
committed to use its best efforts to meet a target which would provide purchase
orders to NDCA for a minimum of $9,400,000 for hardware, software and
engineering services over the initial three year term of the Agreement. There
can be no assurances that Munck will meet such targets. Under the Agreement,
NDCA will promote Munck products to end users. The two companies should
complement each other well and customers will benefit from the combined
resources and capabilities. This agreement strengthens the existing cooperation
the companies have enjoyed over the last year in marketing and installing AGV
systems.
Forward-looking statements: This annual report (including information
included or incorporated by reference herein) contains certain forward-looking
statements with respect to the financial condition, results of operation, plans,
objectives, future performance and business of the Company.
These forward-looking statements involve certain risk and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities:
a) Revenues from end user systems sales and new OEMs may be lower than
expected, or sales by Munck Automation may be substantially lower than the
target of $9,400,000 over the initial three years of the agreement.
b) New product lines from Thrige and Netzler and Dahlgren (Teach-in) may not
be well received in the North American industrial truck market, thereby
restricting growth opportunities for the Company.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
c) The Company's existing bank relationships may not be extended which would
cause the Company to default on its current obligations.
d) The Company might not raise the additional working capital needed to
finance the current business strategy which may have a serious impact on
the Company's ability to sell its current and future products, as well as
satisfy existing banking relationships.
e) General economic or business conditions, either nationally or in the
markets in which the Company is doing business, may be less favorable than
expected resulting in, among other things, a deterioration of market share
or reduced demand for its products.
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, 1997, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
Percentage of Change
Period to Period
Percentage of net Revenues Increase (Decrease)
- ---------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
For year Ended November 30, November 30,
1997 1996 1995 1996 to 1997 1995 to 1996
---- ---- ---- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Revenues 100.0 % 100.0 % 100.0 % (33.6) % (21.8) %
Cost of goods sold 66.1 62.9 71.3 (30.3) (31.0)
- ------------------------------- ----------- ------------ ----------- ----------- -- ---------------- ----------------
Gross profit 33.9 37.1 28.7 (39.4) 1.1
Restructuring gain - - 4.7 - (100.0)
- ------------------------------- ----------- ------------ ----------- ----------- -- ---------------- ----------------
Operating expenses:
Selling 17.0 10.7 9.9 5.6 (15.5)
General and administrative 38.1 23.1 41.9 9.2 (56.7)
Research and development - 0.1 1.8 (100.0) (97.2)
- ------------------------------- ----------- ------------ ----------- ----------- -- ---------------- ----------------
55.1 33.9 53.6 7.8 (50.5)
- ------------------------------- ----------- ------------ ----------- ----------- -- ---------------- ----------------
Operating income (loss) (21.2) 3.2 (20.2) * *
Net interest expense 4.8 2.9 8.4 9.5 (72.9)
- ------------------------------- ----------- ------------ ----------- ----------- -- ---------------- ----------------
Income (loss) before income
taxes (benefit) (26.0) 0.3 (28.6) * *
Income Tax (benefit) - (0.4) 1.2 (100.0) *
- ------------------------------- ----------- ------------ ----------- ----------- -- ---------------- ----------------
Net income (loss) (26.0) % 0.7 % (29.9) % * % * %
=============================== =========== ============ =========== =========== == ================ ================
</TABLE>
* Because the data changes from negative to positive, or from positive to
negative, the percentage of change is not meaningful.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Fiscal Year Ended November 30, 1997 Compared To Fiscal Year Ended November 30,
1996.
Net revenues decreased by $2,066,057 or 33.6%, from $6,142,954 for the
fiscal year ended November 30, 1996 to $4,076,897 for the fiscal year ended
November 30, 1997. The primary reason for the decrease in 1997 compared to 1996
was a decline in project or turnkey system sales to end users and system
integrators. The Company chose to market and sell exclusively to major OEMs and
potential OEMs in an effort to increase sales revenues with the existing OEM
suppliers to the AGVS market. The Company believed that in 1997 it was
undesirable to compete with such potential customers if the Company was to
increase sales with these existing OEM customers. The strategy attracted a major
OEM supplier, Munck Automation Technologies( "Munck"), which signed a strategic
alliance with the Company in October 1997. Pursuant to the Agreement Munck
agreed to promote exclusively NDC AGVS technology in its sales efforts of new
AGV systems to end users. It is expected that other major OEMs will take longer
to convert to the Company's technology. Therefore, since the Company's
anticipated increased revenues from OEMs did not occur in 1997, the Company
began again selectively selling turnkey systems to end users in September of
1997. The Company is also aggressively pursuing distribution of new products and
technology to its market place to increase revenues.
Cost of goods sold decreased from $3,864,393 to $2,695,289, or 30.3%, due
primarily to the decreased level of net revenues. As a percentage of net
revenues, cost of goods sold increased to 66.1% compared to 62.9% the prior
year. The primary reason for the increase is the Company wrote-down
approximately $245,000 worth of inventory in 1997 compared to approximately
$110,000 in 1996. Gross profit decreased by $896,953, or 39.4%, from $2,278,561
to $1,381,608 due to the same factors.
Selling expenses increased from $656,537 to $693,106, or 5.6% due primarily
to higher advertising and marketing expenses. General and administrative
expenses increased from $1,422,586 to $1,552,900, or 9.2% primarily due to a
write down of approximately $63,000 of intangibles and software, increases in
lease and maintenance expenses relating to new computer equipment and an
increase in the provision for bad debt expense of $36,000 relating to a
receivable from the former subsidiary NDC Technologies Australia PTY LTD.
Primarily as a result of the foregoing, the operating income decreased by
$1,059,894 from an income of $195,496 to an operating loss of $864,398.
Net interest expense increased from $178,894 to $195,962, an increase of
9.5%. The increase is primarily due to increased bank fees in 1997 compared to
1996.
Income before income taxes decreased by $1,076,962, from an income of
$16,602, to a loss of $1,060,360 due primarily to the foregoing factors.
Primarily as a result of the foregoing, net loss increased by $1,105,791,
from a net income of $45,431 to a net loss of $1,060,360.
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, 1997, the Company
had a backlog of approximately $415,000 compared to approximately $780,000 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.
8
<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.
9
<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 offering, and private offerings, to satisfy its financing needs.
During the year ended November 30, 1997, net cash provided by operating
activities was $189,867. The primary reason for the positive cash flow from
operating activities was that the Company significantly reduced its account
receivable balance from November 30, 1996. The Company paid down its Note
payable to the bank by $419,583, the payment was funded by a reduction of the
Company's cash balance and by positive cash flows from operating activities.
The Company entered into a new Inventory and Accounts Receivable Loan and
Security Agreement ("Loan Agreement") February 28, 1997 with the National Bank
of Canada and National Canada Business Corp. (herein collectively called the
"Lender"). The Loan Agreement allows the Company to borrow up to a maximum of
$1,250,000. The new agreement provides for an increase in potential available
credit compared to the maximum available credit of $750,000 under the prior
credit arrangement with NationsBank, N.A.
Loans made under the new Loan Agreement are evidenced by a demand promissory
Note. The Loan Agreement allows the Company to borrow pursuant to a borrowing
formula which is secured by Company's personal property as collateral. The
Company's outstanding loan amount at any one time shall not exceed the lesser of
(a) U.S $1,250,000 or (b) 80% of qualified accounts receivable ( as defined in
the Loan Agreement) plus 50% of all eligible inventory ( as defined in the Loan
Agreement) with a $400,000 cap on loans based on eligible inventory. The
borrowed funds will bear interest at the Lender's prime rate plus 1.5% per annum
for the first $450,000 outstanding and prime plus 2.75% per annum for amounts
outstanding in excess of $450,000. The Loan Agreement is further secured by 1)
an Inventory Repurchase Agreement and 2) a $450,000 irrevocable Letter of Credit
issued by a Swedish bank. Netzler & Dahlgren Co. AB (NDCab) is obligated to
repay the letter of credit bank any funds it disburses under the Letter of
Credit. The Company is ultimately responsible to repay to NDCab for any amounts
it pays in reimbursing the letter of credit bank. The Repurchase Agreement
guarantees that NDCab will repurchase from the Company on certain conditions up
to $400,000 worth of inventory, thereby providing funds to pay the Lender should
the Company default on its loan obligations.
The lender, at its discretion, may demand payment upon written notice to the
Company. The maturity date of the Agreement is April 1, 1998 or upon demand by
the Bank. The Company has not yet discussed the renewal with the bank and there
can be no assurances that the bank will renew or the Company will obtain
alternative financing.
During May 1997, the Mortgage Loan maturity date was extended from February 10,
1998 to May 16, 1999. The interest rate on the note was increased to 9.5% from
7.75% . The combined principle and interest monthly payment was changed to
$13,912 compared to $13,057 per the prior agreement.
As of February 1998 the Company has been delaying payments of approximately
$300,000 to its affiliate Netzler and Dahlgren so not to exceed current
borrowing maximums from the bank. Such deficiency in the cash flow may possibly
worsen if the Company does not generate enough new business. There can be no
assurance that such deferred payments will continue to be acceptable to Netzler
and Dahlgren. The Company is exploring the possibility of raising additional
equity capital or subordinated debt in order to improve its financial position .
Management believes a stronger financial position should contribute to
increasing customer and shareholder confidence in the Company's plans.
10
<PAGE>
Independent Auditor's Report
Charlotte, North Carolina
To the Board of Directors
NDC Automation, Inc.
We have audited the accompanying balance sheets of NDC Automation, Inc. as of
November 30, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended November 30, 1997. 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, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended November 30, 1997 in conformity
with generally accepted accounting princiles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 18 to the
financial statements, the Company has suffered a significant loss from
operations in 1997. This raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 18. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
McGLADREY & PULLEN, LLP
Charlotte, North Carolina
January 9, 1998, except for the last sentence
of the third paragraph of Note 5, as to which
the date is February 23, 1998
11
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
==================================================================================================================
November 30,
<S> <C> <C>
1997 1996
- ------------------------------------------------------------------------------------------------------------------
ASSETS (Note 5)
CURRENT ASSETS
Cash and cash equivalents (Note 15) $ 72,368 $ 399,501
Accounts receivable, net (Notes 2 and 6) 670,489 1,526,390
Inventories (Note 9) 813,865 1,126,398
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 3) 23,406 49,277
Prepaid expenses and other assets 47,826 51,935
- ------------------------------------------------------------------------------------------------------------------
Total current assets $ 1,627,954 $ 3,153,501
- ------------------------------------------------------------------------------------------------------------------
OTHER ASSETS $ - $ 21,281
- ------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures, and office equipment 152,016 226,559
Machinery and equipment 76,814 153,572
Software (Note 14) - 102,650
Vehicles - 23,629
- ------------------------------------------------------------------------------------------------------------------
$ 1,655,453 $ 1,933,033
Less accumulated depreciation 526,076 693,234
- ------------------------------------------------------------------------------------------------------------------
$ 1,129,377 $ 1,239,799
- ------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS (Note 4) $ - $ 142,213
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
$ 2,757,331 $ 4,556,794
==================================================================================================================
</TABLE>
See Notes to Financial Statements
12
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
==================================================================================================================
November 30,
<S> <C> <C>
1997 1996
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable, bank (Note 5) $ 427,634 $ 847,217
Current maturities of long-term debt (Note 5) 65,022 68,410
Accounts payable and accrued expenses;
including affiliates $307,815 at 1997
and $422,050 at 1996 (Note 9) 535,201 702,305
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 3) 29,838 118,657
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities $ 1,057,695 $ 1,736,589
- ------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 5) $ 1,042,055 $ 1,102,264
- ------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 10 )
STOCKHOLDERS' EQUITY (Notes 11 and 12)
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 1997 and 1996; 3,453,451 shares
were issued at 1997
and 1996 34,534 34,534
Additional paid-in capital 4,211,566 4,211,566
Accumulated deficit (3,588,519) (2,528,159)
- ------------------------------------------------------------------------------------------------------------------
$ 657,581 $ 1,717,941
- ------------------------------------------------------------------------------------------------------------------
$ 2,757,331 $ 4,556,794
==================================================================================================================
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
====================================================================================================================
Years ended November 30,
<S> <C> <C> <C>
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Net revenues (Notes 6 and 9) $ 4,076,897 $ 6,142,954 $ 7,851,147
Cost of goods sold (Note 9) 2,695,289 3,864,393 5,597,305
- --------------------------------------------------------------------------------------------------------------------
Gross profit $ 1,381,608 $ 2,278,561 $ 2,253,842
- --------------------------------------------------------------------------------------------------------------------
Net gain from restructuring of operations (Notes 9 and 14) $ - $ - $ 366,764
- --------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 693,106 $ 656,537 $ 776,907
General and administrative (Notes 4, 10 and 13) 1,552,900 1,422,586 3,288,619
Research and development - 3,942 141,220
- --------------------------------------------------------------------------------------------------------------------
$ 2,246,006 $ 2,083,065 $ 4,206,746
- --------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ (864,398) $ 195,496 $ (1,586,140)
- --------------------------------------------------------------------------------------------------------------------
Net interest income (expense):
Interest income $ - $ 7,771 $ 9,025
Interest expense (Note 9) (195,962) (186,665) (669,157)
- --------------------------------------------------------------------------------------------------------------------
$ (195,962) $ (178,894) $ (660,132)
- --------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $(1,060,360) $ 16,602 $ (2,246,272)
Federal and state income taxes (benefit) (Note 7) - (28,829) 97,891
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1,060,360) $ 45,431 $ (2,344,163)
====================================================================================================================
Average shares outstanding:
Primary 3,453,451 3,453,451 2,904,322
Assuming full dilution 3,453,451 3,453,451 2,904,322
====================================================================================================================
Primary earnings per common and
common equivalent shares $ (.31) $ .01 $ (.81)
====================================================================================================================
Earnings per common share-
assuming full dilution $ (.31) $ .01 $ (.81)
====================================================================================================================
Dividends per common share $ - $ - $ -
====================================================================================================================
</TABLE>
See Notes to Financial Statements
14
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' EQUITY
====================================================================================================================================
Years Ended November 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
Amount Shares Amount Shares Amount Shares
Common Stock:
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning $ 34,534 3,453,451 $ 34,534 3,453,451 $ 29,024 2,902,514
Stock options exercised (Note 12) - - - - 10 937
Issuance of common stock (Note 11) - - - - 5,500 550,000
====================================================================================================================================
Balance, ending $ 34,534 3,453,451 $ 34,534 3,453,451 $ 34,534 3,453,451
====================================================================================================================================
Additional Paid-in Capital:
Balance, beginning $ 4,211,566 $ 4,211,566 $ 3,666,335
Stock options exercised (Note 12) - - 731
Issuance of common stock (Note 11) - - 544,500
====================================================================================================================================
Balance, ending $ 4,211,566 $ 4,211,566 $ 4,211,566
====================================================================================================================================
Accumulated Deficit:
Beginning deficit $(2,528,159) $ (2,573,590) $ (229,427)
Net income (loss) (1,060,360) 45,431 (2,344,163)
====================================================================================================================================
Ending deficit $(3,588,519) $ (2,528,159) $ (2,573,590)
====================================================================================================================================
Cumulative Currency Translation Adjustment:
Balance, beginning $ - $ - $ 10,446
Adjustment for period - - (10,446)
====================================================================================================================================
Balance, ending $ - $ - $ -
====================================================================================================================================
====================================================================================================================================
Stockholders' Equity at November 30 $ 657,581 3,453,451 $ 1,717,941 3,453,451 $ 1,672,510 3,453,451
====================================================================================================================================
</TABLE>
See Notes to Financial Statements
15
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
==================================================================================================================================
Years ended November 30,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ (1,060,360) $ 45,431 $ (2,344,163)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 114,564 149,107 403,996
Amortization 89,818 103,364 221,481
Amortization of unearned discount - - (1,588)
Increase (decrease) in provision for doubtful accounts 26,281 (42,500) (149,332)
Currency translation (gain) - - (24,745)
Loss on sale of property and equipment 26,027 20,630 3,634
Write-off of intangibles 52,394 - -
Loss (gain) on foreign currency exchange rate 3,652 (3,103) 5,123
Net restructuring gain - - (366,764)
Deferred income taxes - (28,829) 98,502
Change in assets and liabilities:
(Increase) decrease in accounts receivable 829,620 (280,753) 1,890,787
Decrease in licence fee receivable - - 38,412
(Increase) decrease in inventories 312,533 803,251 (267,030)
Decrease in income tax receivable - - 542,900
Decrease in costs and estimated earnings in
excess of billings on uncompleted contracts 25,871 73,983 4,407,306
(Increase) decrease in prepaid expenses
and other assets 4,109 (20,602) (879)
(Increase) decrease in other assets 21,281 (5,000) (10,519)
Decrease in accounts payable
and accrued expenses (167,104) (300,269) (2,159,168)
Decrease in billings in excess of costs and
estimated earnings on uncompleted contracts (88,819) (158,870) (950,271)
Decrease in income taxes payable - - (55,828)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 189,867 $ 355,840 $ 1,281,854
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment $ 6,535 $ 1,941 $ 12,503
Proceeds from the sales of subsidiaries and related assets - - 1,000,000
Purchase of property and equipment (36,703) (41,045) (66,418)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES $ (30,168) $ (39,104) $ 946,085
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
16
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
==================================================================================================================================
Years ended November 30,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
<S> <C> <C> <C>
Net borrowings (payments) on revolving credit agreement $ (419,583) $ 202,842 $ (2,934,404)
Principle payments on long-term borrowings,
including capital lease obligations (63,597) (287,961) (130,409)
Proceeds from current and long-term borrowings - - 200,000
Net proceeds from exercise of stock options
and common stock issued - - 550,741
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN
FINANCING ACTIVITIES $ (483,180) $ (85,119) $ (2,314,072)
- ----------------------------------------------------------------------------------------------------------------------------------
Effect of foreign currencies exchange rate changes
on cash and cash equivalents $ (3,652) $ 3,103 $ (5,123)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents $ (327,133) $ 234,720 $ (91,256)
Cash and cash equivalents:
Beginning 399,501 164,781 256,037
- ----------------------------------------------------------------------------------------------------------------------------------
Ending $ 72,368 $ 399,501 $ 164,781
==================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments (receipts) for:
Interest $ 204,684 $ 187,614 $ 669,157
Income taxes $ - $ - $ (489,423)
</TABLE>
17
<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 for the years ended November 30, 1995
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 1997 and 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.
18
<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, amortized or idle, it
is the Company's practice to write off the cost against accumulated
depreciation, or amortization, so that only costs not fully depreciated or idle,
are carried on the balance sheet. For the years ended November 30, 1997 and
1996, the Company has written off $102,650 and $908 of software, $105,143 and
$221,543 of machinery and equipment, and $82,862 and $193,955 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.
19
<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 ).
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.
Advertising:
The company follows the policy of charging the production costs of
advertising to expense as incurred. Advertising expenses for the years
ending November 30, 1997, 1996, and 1995 were $91,340, $4,562 and $5,467
respectively.
20
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
=====================================================================================================================
Note 2. Accounts Receivable
Accounts receivable consist of the following at November 30, 1997 and 1996,
respectively:
<S> <C> <C>
1997 1996
- ------------------------------------------------------------------------------ ------------------- ------------------
Trade and contract $ 721,506 $ 1,550,632
Less: Allowance for doubtful accounts (55,000) (65,000)
- ------------------------------------------------------------------------------ ------------------- ------------------
$ 666,506 $ 1,485,632
Other - 36,515
Officers and employees 3,983 4,243
- ------------------------------------------------------------------------------ ------------------- ------------------
$ 670,489 $ 1,526,390
============================================================================== =================== ==================
</TABLE>
Note 3. Costs and Estimated Earnings on Uncompleted Contracts
Costs and estimated earnings on uncompleted contracts consist of the following
at November 30, 1997 and 1996, respectively:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
- ------------------------------------------------------------------------------ ------------------- ------------------
Costs incurred on uncompleted contracts $ 613,760 $ 280,606
Estimated earnings 145,166 155,075
- ------------------------------------------------------------------------------ ------------------- ------------------
$ 758,926 $ 435,681
Less billings to date $ (765,358) $ (505,061)
============================================================================== =================== ==================
$ (6,432) $ (69,380)
============================================================================== =================== ==================
Included in the accompanying balance sheets under the following captions:
1997 1996
- ------------------------------------------------------------------------------ ------------------- ------------------
Costs and estimated earnings in excess of billings
on uncompleted contracts $ 23,406 $ 49,277
Billings in excess of costs and estimated earnings
on uncompleted contracts (29,838) (118,657)
- ------------------------------------------------------------------------------ ------------------- ------------------
$ (6,432) $ (69,380)
============================================================================== =================== ==================
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
Note 4. Intangible Assets
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of. SFAS No. 121 is effective for
fiscal years beginning after December 15, 1995. The Company is required
to review certain identifiable intangibles and goodwill for possible
impairment. Under the guidelines of the standard, the Company is
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.
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. During 1997, the Company
determined that the prospective cash flows from these rights became uncertain
and wrote-off the remaining unamortized balance of $52,394. Intangible assets at
November 30, 1997 and 1996, respectively, consisted of the following:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------- ------------------------- ---------------- ----------------
<S> <C> <C>
Netzler & Dahlgren navigator card products rights $ 449,092 $ 449,092
- --------------------------------------------------------- ------------------------- ---------------- ----------------
Less write-off 52,394 --
Less accumulated amortization 396,698 306,879
- --------------------------------------------------------- ------------------------- ---------------- ----------------
$ - $ 142,213
========================================================= ========================= ================ ================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Note 5. Pledged Assets, Note Payable, Bank and Long-Term Debt 1997 1996
- ------------------------------------------------------------------------------------ -------------- ---------------
Note Payable Agreement that allows the Company to borrow up to
$1,250,000 and bears interest at the lender's prime rate plus 1.50% per
annum for the first $450,000 outstanding and prime plus 2.75% per annum
for amounts in excess of $450,000. The Company's loan outstanding shall
not exceed the lesser of (a) U.S. $1,250,000 or (b) 80% of qualified
accounts receivable plus 50% of all Eligible Inventory (as defined in
the loan agreement) with a $400,000 cap on loans based on Eligible
Inventory. The loan agreement is further secured by 1) an Inventory
Repurchase Agreement and 2) a $450,000 irrevocable Letter of Credit
issued by a Swedish Bank. Netzler & Dahlgren Co. AB (NDCab) is obligated
to repay the letter of credit bank any funds it disburses under the
Letter of Credit. The Company is ultimately responsible to repay to
NDCab any amounts it pays in reimbursing the Letter of Credit Bank . The
Repurchase Agreement guarantees that NDCab will repurchase on certain
conditions up to $400,000 worth of inventory, thereby providing funds to
pay lender should the Company be in default on its loan obligations. The
Loan Agreement terminates upon demand by the Bank or April 1, 1998. (1)(2) $ 427,634 $ --
Line of credit for $750,000 is with interest at prime plus 3.25%. The
line is additionally secured by an irrevocable standby letter of credit
of $450,000. (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. $ -- $ 847,217
- ------------------------------------------------------------------------------------ ---------- -----------
$ 427,634 $ 847,217
==================================================================================== ========== ===========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
=====================================================================================================================
=====================================================================================================================
Note 5. Pledged Assets, Note Payable, Bank and Long-Term Debt (continued)
Long-term debt consists of the following: 1997 1996
- ---------------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Mortgage note payable to a bank, based on a 9.5% fixed rate. Original principal
balance to be repaid in twenty-three (23) consecutive monthly principal and
interest payments of $13,912, with one final payment of approximately $1,007,403
due on May 16, 1999(3). The note is collaterized by the Company's land and
building with a carrying value of $1,020,244 The loan also contains certain
financial covenants to which the Company must adhere. As of November 30, 1997,
the Company obtained waivers for certain financial covenants as specified by the
Mortgage note agreement. $ 1,107,077 $ 1,170,674
Less current maturities: 65,022 68,410
- ---------------------------------------------------------------------------------- ---------------- -----------------
$ 1,042,055 $ 1,107,264
================================================================================== ================ =================
</TABLE>
(1) The prime rate at November 30, 1997 was 8.50% and 8.25% at November 30,
1996.
(2) The line of credit is secured by a first priority security interest in the
Company's accounts receivable, inventory, software and intangibles.
(3) This note was refinanced with the same bank.
Maturities of long-term debt at November 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ending
November 30
- ---------------------------------------------------------------------------------------------------- ----------------
<S> <C>
1998 $ 65,022
1999 1,042,055
==================================================================================================== ================
$ 1,107,077
==================================================================================================== ================
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
=====================================================================================================================
Note 6. Major Customers
Net revenues and accounts receivable as of and for the years ended November 30,
1997, 1996, and 1995, 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,
<S> <C> <C> <C>
Customer 1997 1996 1995
- -------------------------------------------------------------------- ---------------- --------------- ---------------
A $ * $ * 1,033,991
B * * 1,007,997
C * * 903,210
D * 666,457 *
E 612,226 * *
F 590,588 * *
Accounts Receivable
November 30,
1997 1996 1995
- -------------------------------------------------------------------- ---------------- --------------- ---------------
A $ * $ * 75,847
B * * -
C * * 143,710
D * 76,448 *
E 61,075 * *
F 295,363 * *
</TABLE>
*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)
24
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
=====================================================================================================================
Note 7. Income Taxes
Income taxes (benefit) consist of the following components for the years ended
November 30, 1997, 1996, and 1995, respectively:
<S> <C> <C> <C>
1997 1996 1995
- ----------------------------------------------------------- ------------------ ------------------ -------------------
Current $ - $ - $ (611)
Deferred - $(28,829) 98,502
- ----------------------------------------------------------- ------------------ ------------------ -------------------
$ - $(28,829) $ 97,891
=========================================================== ================== ================== ===================
</TABLE>
<TABLE>
<CAPTION>
Net deferred tax assets consist of the following components as of November 30,
1997 and 1996, respectively:
Deferred tax assets:
<S> <C> <C>
Allowance for doubtful accounts $ 21,513 $ 25,425
Inventory valuation reserves 46,938 43,524
Capitalized cost in ending inventory 10,428 11,479
Net operating loss carryforward 1,349,438 803,195
General business credit carryforwards 45,367 206,547
Depreciation 10,600 162
Other reserves 20,254 6,063
Unrealized losses or foreign currency exchange 403 1,637
- ------------------------------------------------------------------------------ ------------------- ------------------
$ 1,504,941 $ 1,098,032
Less valuation allowance 1,504,941 1,098,032
- ------------------------------------------------------------------------------ ------------------- ------------------
Net deferred taxes $ - $ -
============================================================================== =================== ==================
</TABLE>
The changes in the valuation allowance for the years ended November 30, 1997,
1996 and 1995 were $406,909, $(49,886) and $845,970, 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,
<S> <C> <C> <C>
1997 1996 1995
- ---------------------------------- -------------------------- ---------------------------- --------------------------
% of % of % of
Dollar Pre-tax Dollar Pre-tax Dollar Pre-tax
Amount Income Amount Income Amount Income
- ---------------------------------- ------------- ------------- ------------- ------------ ------------- -------------
Statutory federal income
tax (benefit) $ (360,522) (34.0) $ 5,645 34.0 $ (763,427) (34.0)
Increase (decrease) in
taxes resulting from:
State income taxes (53,018) (5.0) 1,873 11.3 (61,423) (2.7)
Changes in valuation allowance 406,909 38.0 (49,886) (300.5) 845,970 37.7
Other 6,631 1.0 13,539 81.6 76,771 3.4
================================== ============= ============= ============= ============ ============= =============
$ - $ - $ (28,829) (173.6) $97,891 4.4
================================== ============= ============= ============= ============ ============= =============
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
Note 8. 401(k) 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 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, 1997, 1996 and 1995
amounted to $17,340, $18,550, 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 and 1997 the Company earned and netted against trade payables
$174,750 and $109,750, respectively, in laser fees from Netzler & Dahlgren.
The Company had the following transactions with Netzler & Dahlgren for the years
ended November 30, 1997, 1996, and 1995, respectively:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
- ----------------------------------------------------------- ------------------ ------------------ -------------------
Sales $ 153,176 $ 261,199 $ 1,007,997
=========================================================== ================== ================== ===================
Purchases of hardware, software & engineering services $ 689,059 $ 1,049,324 $ 737,375
=========================================================== ================== ================== ===================
Interest expense $ 17,968 $ - $ 279,540
=========================================================== ================== ================== ===================
</TABLE>
For the years ended November 30, 1997, 1996, and 1995, royalties expense was $0,
$0, and $500, respectively.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
Note 10. Commitments
At November 30, 1997, the Company had $200,000 in outstanding forward exchange
contracts. These contracts are purchased as needed to hedge identifiable foreign
currency commitments.
The Company leases property and equipment under long-term operating leases
expiring on various dates through August, 2001. In addition, the Company has
rental expenses for facilities rented on a short term basis and on a
month-to-month basis, such expenses were $16,103, $38,514, and $201,183 for the
years ended November 30, 1997, 1996, and 1995, respectively.
Minimum rental commitments under long-term operating leases at November 30, 1997
were as follows:
1998 $ 72,960
1999 59,634
2000 19,927
2001 6,613
2002 -
=================
$159,134
=================
The Company has an employment contract with the President dated March 1, 1996,
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.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 12. STOCK OPTION PLANS
ACCOUNTING CHANGE
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
123, Accounting for Stock-Based Compensation. FASB Statement No. 123, requires
that the Company account for its stock based compensation plans using a fair
value based method which measures compensation cost at the grant date based upon
the value of the awards, which is then recognized over the vesting period. The
accounting requirements of the statement apply to awards to employees entered
into 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 effect on net income and earnings per share to reflect the
difference between the compensation cost from applying APB Opinion No. 25 and
the related cost measured by the fair value method defined in the statement for
all awards granted in years beginning after December 15, 1994. The Statement did
not change the reporting required for the Plans discussed below.
1990 AND 1993 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.
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.
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, and 18,000 shares of common stock for the 93 Plan at an exercise
price of $1.56. The exercise price of the options granted is based on the
average fair market value of the common stock for the five business days
preceding the date of the grant.
1997 STOCK OPTION PLAN:
On December 7, 1996, the Compensation Committee of the Board of Directors
adopted The NDC Automation, Inc. 1997 Stock Option Plan ("the 97 Plan"), the
adoption of which was ratified by the shareholders at the annual meeting held
April 25, 1997. The 97 Plan authorized 225,000 options to all officers and
employees in the form of incentive stock options, of which 210,000 were
granted in January 1997 and are available for exercise, at an exercise price of
$0.50 per share upon achievement by the Company of certain financial
performance targets set by the Board of Directors on an annual basis. No pro
forma compensation expense has been disclosed due to financial performance
targets not being obtained in 1997 and due to uncertainty of financial
performance targets being obtained prospectively.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 12. STOCK OPTION PLANS (CONTINUED)
Transactions involving these plans for the years ended November 30, 1997, 1996
and 1995 respectively, are summarized as follows:
<TABLE>
<CAPTION>
STOCK OPTIONS 1997* 1996* 1995*
- ----------------------- -------------------------------- ----------------------- ------------------------
90 93 97 Total 90 93 Total 90 93 Total
Plan Plan Plan Plan Plan Plan Plan
------ ------ ------- ------ ------ ------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding, December 1 63,233 84,100 147,333 67,929 93,000 160,929 76,209 100,000 176,209
Granted - - 210,000 210,000 - - - - 30,000 30,000
Canceled - (500) (10,500) (11,000) (4,696) (8,900) (13,596) (7,343) (37,000) (44,343)
Exercised - - - - - - - (937) - (937)
- ---------------------------------------------------------- ---------------------- -------------------------
Outstanding, November 30 63,233 83,600 199,500 346,333 63,233 84,100 147,333 67,929 93,000 160,929
========================================================== ====================== ========================
Exercisable, November 30 63,233 83,600 - 146,833 63,233 84,100 147,333 67,929 30,000 97,929
========================================================== ======================= ========================
</TABLE>
* The weighted average exercise price per share of options outstanding, granted,
canceled, exercised, or exercisable for the 90 Plan is $0.7917, for the 93 Plan
is $1.56 and for the 97 Plan is $0.50.
29
<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:
o A down payment of $15,000 was due March 1, 1996
o Twenty-eight (28) monthly installments of $6,000 each, commenced March
1, 1996 for a total of $168,000.
o 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.
Statec was in default under the agreement by not paying or repurchasing the
inventory with a cost of $71,272 and had not paid the agreed installments of
$6,000 monthly since December 1996. There remained 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. On March 27, 1997 the Company received $47,884 for the repurchase of
all NDCA inventory related to Statec products and $20,000 per the Supplemental
Agreement between the Company and Statec. The amounts paid were approved by the
French court and terminate all obligations from Statec to the Company per the
Supplemental Agreement.
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, 1997 and
1996.
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).
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
Note 16. FASB Statements And Proposed Regulations
The FASB has issued SFAS No 128, Earnings Per Share, which the Company
has not been required to adopt as of November 30, 1997. The Statement,
which is effective for the Company's interim period ending February 28,
1998, specifies the computation, presentation and disclosure
requirements for earnings per share. The Company has determined that
there will be no material impact for SFAS No. 128 on the earnings per
share disclosure in Financial Statements.
The FASB has issued SFAS No. 130, Reporting Comprehensive Income, which the
Company has not been required to adopt as of November 30, 1997. The Statement,
which is effective for fiscal years beginning after December 15, 1997,
establishes standards for reporting and display of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement requires that all items
that are recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.
Note 17. Year 2000
At the turn of the century, computer-based information systems will be faced
with the problems potentially affecting hardware, software, networks, processing
platforms, as well as customer and vendor interdependencies. The Company is in
the process of assessing the effect of Year 2000 on the Company's operating
plans and systems. The Company is developing a plan for identifying, renovating,
testing and implementing its systems for Year 2000 processing and internal
control requirements. The cost of becoming Year 2000 compliant has not been
determined, however, management feels it will not be material to the Company's
financial statements.
Note 18. Continued operations
The Company has suffered a significant loss from operations in 1997. Should such
losses continue its total liabilities will exceed its total assets. This raises
substantial doubt about the Company's ability to continue as a going concern.
Management has made plans in regards to these matters to develop an operating
plan that will increase revenues and minimize losses. This plan includes a
reorganization of present resources to support the following :
o Establish and develop strategic alliances with selected customers
o Pursue AGV system business in selected market niches
o Grow the distribution business by adding new supplementary products
o Develop a strong market position in the industrial truck market
o Expand the aftermarket sales business
The Company is also pursuing raising additional equity to assist in reaching its
goals.
Although the Company believes that its strategic plans will permit it to meet
its 1998 working capital needs, there can be no assurance that the Company can
successfully meet the objectives of such plans.
31
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER INFORMATION
====================================================================================================================================
<S> <C>
ANNUAL MEETING DIRECTORS
The annual meeting will be held at 10:00 am, Friday,
May 8, 1998, at NDC Automation's Corporate offices Goran P.R. Netzler
in Charlotte, North Carolina. Chairman of the Board of Directors,
NDC Automation, Inc.
President
Netzler and Dahlgren Co. AB
SHAREHOLDER RELATIONS
A copy of NDC's Annual Report Ralph Dollander
and form 10-KSB, which is filed with the Securiries and Exchange President
Commission, will be sent to any shareholder upon
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
(704) 362-1115 Telephone
(704) 364-4039 Facsimile
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>
<TABLE>
<CAPTION>
COMMON STOCK DATA
Market Price Per Share
---------------------------------------------------------------------------------------------
1997 1996
--------------------------------------------- ------------------------------------------
Quarter Ended High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bid Ask Bid Ask Bid Ask Bid Ask
- ------------------------------------------------------------------------------------------------------------------------------------
February 28 11/16 13/16 9/32 11/32 5/8 7/8 3/8 15/32
May 31 13/32 17/32 9/32 3/8 1 1/16 1 5/16 3/8 1/2
August 31 31/32 1 1/32 5/16 3/8 5/8 7/8 1/4 1/2
November 30 13/16 15/16 1/4 3/8 5/8 3/4 1/4 3/8
====================================================================================================================================
</TABLE>
32
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in this Form 10-KSB of our
report dated January 9, 1998 except for the last sentence of the third
paragraph of Note 5, as to which the date is February 23, 1998,
which appears on page 11 of the 1997 Annual Report of NDC Automation,
Inc.
/S/ McGladrey & Pullen, LLP
Charlotte, North Carolina
February 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000859621
<NAME> NDC AUTOMATION, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<CASH> 72,368
<SECURITIES> 0
<RECEIVABLES> 735,489
<ALLOWANCES> 65,000
<INVENTORY> 813,865
<CURRENT-ASSETS> 1,627,954
<PP&E> 1,655,453
<DEPRECIATION> 526,076
<TOTAL-ASSETS> 2,757,331
<CURRENT-LIABILITIES> 1,057,695
<BONDS> 0
0
0
<COMMON> 34,534
<OTHER-SE> 623,047
<TOTAL-LIABILITY-AND-EQUITY> 2,757,331
<SALES> 4,076,897
<TOTAL-REVENUES> 4,076,897
<CGS> 2,695,289
<TOTAL-COSTS> 2,695,289
<OTHER-EXPENSES> 2,246,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (195,962)
<INCOME-PRETAX> (1,060,360)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,060,360)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,060,360)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
