<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to ________________
Commission File Number 0-19167
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TOPRO, INC.
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(Exact name of registrant as specified in its charter)
Colorado 84-1042227
- ------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
2525 West Evans Avenue Denver, Colorado 80219
- --------------------------------------- -----------------------------
(Address of principal executive offices) (city) (state) (zip code)
(303) 935-1221
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Issuer's telephone number including area code
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
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The number of shares outstanding of the issuer's $0.0001 par value common stock
on November 3, 1997 was 16,663,453.
Transitional Small Business Disclosure format (check one):
YES NO X
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<PAGE>
TOPRO, INC.
FORWARD-LOOKING STATEMENTS
Statements made in this Form 10-QSB that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Act and Section 21E of the 1934 Act. These statements often
can be identified by the use of terms such as "may," "will," "expect,"
"anticipate," "estimate," or "continue," or the negative thereof. The Company
intends that such forward-looking statements be subject to the safe harbors for
such statements. The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. Any forward-looking statements represent management's best judgment as to
what may occur in the future. However, forward-looking statements are subject
to risks, uncertainties and important factors beyond the control of the Company
that could cause actual results and events to differ materially from historical
results of operations and events and those presently anticipated or projected.
These factors include adverse economic conditions, entry of new and stronger
competitors, inadequate capital, unexpected costs, failure to integrate
operations of recently acquired subsidiaries and failure to capitalize upon
access to new clientele. Additional risks and uncertainties which may affect
forward-looking statements about the Company's Plant Y2K One-TM- business and
prospects include the possibility that a competitor will develop a more
comprehensive or less expensive Y2K solution, delays in market awareness of
Topro and its product and service solutions, possible delays in Topro product
roll out, which could have an immediate and material adverse effect by placing
Topro behind its competitors for a time sensitive product and inability to
engage qualified staff as needed. The Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statement or to reflect the occurrence of
anticipated or unanticipated events.
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS.
TOPRO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
September 30, 1997 June 30, 1997
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(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,108,000 $ 907,000
Receivables (Note 3):
Trade, net of allowance for doubtful accounts 6,471,000 6,097,000
Other receivables 25,000 20,000
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 2) 6,109,000 5,712,000
Inventories 202,000 174,000
Prepaid expenses and other 354,000 222,000
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Total current assets 14,269,000 13,132,000
PROPERTY AND EQUIPMENT, at cost:
Building and land 850,000 850,000
Furniture and equipment 2,944,000 2,820,000
Leasehold improvements 797,000 786,000
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4,591,000 4,456,000
Accumulated depreciation and amortization (1,967,000) (1,823,000)
- -----------------------------------------------------------------------------------
Net property and equipment 2,624,000 2,633,000
CAPITALIZED SOFTWARE COSTS, net of
accumulated amortization 2,576,000 2,025,000
OTHER ASSETS
Excess of cost over fair value of assets
acquired, net of amortization 8,373,000 8,538,000
Debt issuance costs, net of
accumulated amortization 338,000 274,000
Other assets 254,000 284,000
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TOTAL ASSETS $28,434,000 $26,886,000
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</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
3
<PAGE>
TOPRO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
September 30, 1997 June 30, 1997
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(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit (Note 4) $ 475,000 $ 75,000
Current portion of long-term debt (Note 4):
Related parties 100,000 142,000
Financial institutions and other 1,380,000 1,823,000
Capital lease obligations 101,000 111,000
Accounts payable 5,043,000 7,247,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,312,000 1,478,000
Accrued expenses 1,391,000 1,718,000
Reserve for contract losses 370,000 370,000
- ---------------------------------------------------------------------------------------------
Total current liabilities 10,172,000 12,964,000
LONG-TERM DEBT, NET OF CURRENT PORTION (Notes 4 and 5):
Financial institutions and other 2,599,000 5,332,000
Capital lease obligations 156,000 90,000
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Total long-term debt 2,755,000 5,422,000
DEFERRED GAIN 19,000 24,000
STOCKHOLDERS' EQUITY (Note 5):
Preferred stock, par value $.0001 per share; authorized
10,000,000 shares, 133,334 shares issued and -- --
outstanding, September 30 and June 30, 1997
Common stock, par value $.0001 per share; authorized
200,000,000 shares; 16,603,453 and 11,709,605
issued and outstanding September 30 and
June 30, 1997, respectively 2,000 1,000
Additional paid-in capital 23,614,000 15,998,000
Accumulated deficit (8,128,000) (7,523,000)
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Total stockholders' equity 15,488,000 8,476,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,434,000 $26,886,000
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</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
4
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TOPRO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended September 30,
1997 1996
- ------------------------------------------------------------------------------
REVENUES $11,319,000 $7,967,000
COST OF SALES 7,494,000 5,082,000
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GROSS PROFIT 3,825,000 2,885,000
EXPENSES:
Sales expenses 827,000 598,000
General and administrative expenses 3,151,000 1,932,000
Amortization of capitalized software and goodwill 276,000 103,000
- ------------------------------------------------------------------------------
4,254,000 2,633,000
OTHER INCOME (EXPENSE):
Gain (loss) on sale of assets -- (3,000)
Interest expense (165,000) (172,000)
Other 19,000 4,000
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(146,000) (171,000)
NET INCOME (LOSS) $ (575,000) $ 81,000
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NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ (605,000) $ 81,000
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NET INCOME (LOSS) PER SHARE $ (0.04) $ 0.01
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WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING DURING THE PERIOD 15,030,634 7,841,716
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- ------------------------------------------------------------------------------
The accompanying notes are an integral part of
the consolidated financial statements.
5
<PAGE>
TOPRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
For the three months ended
September 30,
1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ (575,000) $ 81,000
Adjustments to reconcile net cash (used in) provided by operating activities:
Depreciation 163,000 143,000
Amortization of goodwill and capitalized software costs 276,000 87,000
Amortization of debt offering costs 13,000 22,000
Allowance for doubtful accounts 11,000 (33,000)
Gain on sale of fixed assets -- 3,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable - trade (385,000) 1,654,000
Costs and estimated earnings in excess of
billings on uncompleted contracts (397,000) (29,000)
Inventories (28,000) (3,000)
Prepaid expenses and other (66,000) (75,000)
Increase (decrease) in:
Accounts payable (2,204,000) (145,000)
Accrued expenses (327,000) (899,000)
Billings in excess of costs and estimated
earnings on uncompleted contracts (166,000) (594,000)
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Net cash (used in) provided by operating activities (3,685,000) 212,000
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CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of equipment (167,000) (19,000)
Capitalized software costs (663,000) (161,000)
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Net cash used in investing activities (830,000) (180,000)
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CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from the issue of notes and other borrowings 401,000 51,000
Principal payments on notes and other borrowings (558,000) (163,000)
Proceeds from the exercise of warrants and options 4,903,000 --
Preferred stock dividend (30,000) --
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Net cash provided by (used in) financing activities 4,716,000 (112,000)
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INCREASE (DECREASE) IN CASH 201,000 (80,000)
CASH, BEGINNING OF PERIOD 907,000 236,000
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CASH, END OF PERIOD $ 1,108,000 $ 156,000
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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Cash paid for interest $ 166,000 $ 172,000
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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
- ------------------------------------------------------------------------------------------------------------
Conversion of debt to common stock $ 2,685,000 $ --
Purchase of equipment under capital lease 80,000 --
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</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
6
<PAGE>
TOPRO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL INFORMATION.
The accompanying financial statements should be read in conjunction with the
Company's audited consolidated financial statements for the year ended June 30,
1997. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position as of September 30 and June 30, 1997 and the results of
operations and cash flows for the periods presented. Management believes all
such adjustments are of a normal and recurring nature. The consolidated
financial statements include the accounts of Topro, Inc. (Topro), Management
Design & Consulting Services, Inc. (Management Design) Advanced Control
Technology, Inc. (Advanced Control), Vision Engineering Corporation (Vision) and
All Control Systems, Inc. (All Control), which was acquired as of December 1,
1996. The acquisition of All Control was recorded under the purchase method of
accounting accordingly, no results of operations are presented for periods prior
to its acquisition. The results of operations for interim periods are not
necessarily indicative of results to be expected for a full year.
The following unaudited pro forma summary combines the consolidated results of
operations of the Company and All Control as if its acquisition had occurred at
July 1, 1996 with pro forma adjustments to give effect to amortization of
goodwill, depreciation, and interest expense on debt incurred in connection with
the acquisitions. The pro forma summary is not necessarily indicative of future
operations or the results that would have occurred had the transactions been
consummated at the beginning of the periods indicated.
For the three months
ended September 30,
1997 1996
- -------------------------------------------------------------------------------
(Unaudited)
Net revenues $11,319,000 $12,355,000
Net income (loss) $ (575,000) $ 392,000
Income (loss) per share $ (0.04) $ 0.04
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NOTE 2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS.
The following information is applicable to uncompleted contracts:
September 30, June 30,
1997 1997
- -------------------------------------------------------------------------------
Costs incurred on uncompleted contracts $ 57,577,000 $ 54,400,000
Estimated earnings 8,182,000 10,136,000
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65,759,000 64,536,000
Less billings to date (60,962,000) (60,302,000)
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$ 4,797,000 $ 4,234,000
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These amounts are included in the accompanying
consolidated balance sheets under the
following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 6,109,000 $ 5,712,000
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,312,000) (1,478,000)
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$ 4,797,000 $ 4,234,000
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7
<PAGE>
TOPRO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. TRADE ACCOUNTS RECEIVABLE.
The following is a summary of trade accounts receivable:
September 30, June 30,
1997 1997
- -------------------------------------------------------------------------------
Completed contracts $ 1,301,000 $ 2,174,000
Uncompleted contracts 6,215,000 4,941,000
Retainage 1,041,000 1,057,000
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8,557,000 8,172,000
Allowance for doubtful accounts (2,086,000) (2,075,000)
- -------------------------------------------------------------------------------
Trade accounts receivable, net $ 6,471,000 $ 6,097,000
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NOTE 4. LINE-OF-CREDIT, SHORT AND LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS.
The following is a summary of the Company's indebtedness:
September 30, June 30,
1997 1997
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LINE OF CREDIT:
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$500,000 line-of-credit pursuant to a loan agreement
with a financial institution, collateralized by
substantially all assets of Advanced Control and
a deed of trust on its real property, interest at
the prime rate(2) plus 2.0% per annum. The line
expires in November 1997. $ 475,000 $ 75,000
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Total line-of-credit $ 475,000 $ 75,000
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RELATED PARTY:
Notes payable to an officer and a former director
of the Company, interest at 10.0% per annum
payable semiannually, due on demand, unsecured. 80,000 $ 80,000
Notes payable to a director and former majority
stockholders of Vision, interest at 8.0% per annum,
monthly payments of $10,000, unsecured. -- 42,000
Note payable to relatives of a director and former
majority stockholders of Vision, interest at 10.0%
per annum payable quarterly, unsecured. 20,000 20,000
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Total related party $ 100,000 $ 142,000
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SHORT-TERM DEBT:
Term loan pursuant to a loan agreement with a
financial institution, collateralized by
substantially all assets of Vision, interest at the
prime rate(2) plus 2.0% per annum. The loan matures
in December 1997 and requires monthly principal
payments in the amount of $17,000 plus interest. $ 142,000 $ 243,000
$1,000,000 term loan pursuant to a loan agreement
with a financial institution collateralized by
substantially all assets of All Control and guaranteed
by an officer, interest at the prime rate(2) plus
3.5% per annum, monthly principal payments of $20,000.
Prior to February 10, 1997, this obligation was a
$1,600,000 line-of-credit. In conjunction with the
acquisition of All Control, the line-of-credit was
converted to a term loan of $1,000,000 which is due on
January 1, 1998. 690,000 900,000
Term loan pursuant to a loan agreement with a
financial institution collateralized by substantially
all assets and a deed of trust on the real property
of Advanced Control. Monthly principal and interest
payments of $11,000, interest at the prime rate(2)
plus 2.5% per annum. The loan has a balloon payment
on the unpaid balance due November 1997. 335,000 404,000
8
<PAGE>
TOPRO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Line-of-credit, short and long-term debt and
capital lease obligations continued.
Term loan payable to a bank, interest at the
prime rate(2) plus 2.0% per annum, collateralized
by equipment and leasehold improvements of
Vision, due on demand or if no demand, payable in
monthly installments of $7,000 plus interest
through April 1998. -- 69,000
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Total short-term $ 1,167,000 $ 1,616,000
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LONG-TERM DEBT:
9% convertible debentures with a small business
investment fund. Outstanding borrowings bear
interest at 9.0% per annum, interest payable
monthly. If the debentures are not sooner
redeemed or converted, a mandatory principal
redemption is due beginning March 1, 1999 in the
amount of 1% of the then remaining principal
amount outstanding. The debentures are
convertible into the Company's common stock at
the rate of one share for each $1.50 of
principal. The loan is collateralized by all the
assets of Topro, Advanced Control, Management
Design and All Control . During July and August,
1997, the debenture holders converted $2,685,000
of principal into 1,790,032 shares of common
stock.(1) $ 2,015,000 $ 4,700,000
Mortgage note payable to a bank, due in monthly
installments of $2,941 including interest at
11.0% per annum, balloon payment of remaining
balance is due November 2001, collateralized by a
first deed of trust on Advanced Control's land
and building. 254,000 255,000
Four year promissory note bearing interest at
8.0% per annum payable to a creditor. Monthly
payments of $6,103 are due beginning May 1, 1996.
The promissory note is collateralized by a
second position on the real estate of Advanced
Control. 170,000 185,000
Term loan payable to a bank, interest adjusted
quarterly based upon the prime rate(2) plus
2.75% per annum, collateralized by a second
security interest on substantially all assets of
Vision, guaranteed by the Small Business
Administration and personally guaranteed by an
officer, which personal guarantee is
collateralized by a third deed on the officer's
residence, payable in monthly principal payments
of $7,000 adjusted quarterly, through September
2002. 260,000 274,000
Non-interest bearing note payable to Advanced
Control's legal counsel payable over 30 months at
$5,000 monthly beginning April 1, 1996. The note
has been discounted using an effective interest
rate of 10.25%. 80,000 88,000
Various notes payable, due in monthly
installments through November 1998,
collateralized by equipment and vehicles. 34,000 37,000
Capital lease obligations secured by equipment. 256,000 201,000
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Total long-term $ 3,069,000 $ 5,740,000
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Total indebtedness $ 4,811,000 $ 7,573,000
Less current portion (2,056,000) (2,151,000)
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Long-term portion $ 2,755,000 $ 5,422,000
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9
<PAGE>
TOPRO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Line-of-credit, short and long-term debt and capital lease obligations
continued.
(1) The debentures include covenants which require the Company to maintain
certain working capital and net worth ratios. At June 30, 1997, the Company was
not in compliance with a certain financial covenant, however, the lender has
agreed to waive its rights to declare a default for such violation and has
reduced the minimum standards required for the ratio through December 1997. The
Company was in compliance with the reduced covenant standard at September 30,
1997.
(2) At September 30, 1997, the prime rate of interest was 8.50% per annum.
NOTE 5. LONG-TERM DEBT AND STOCKHOLDERS' EQUITY.
During the quarter ended September 30, 1997, holders of the Company's 9%
convertible debentures exercised their rights thereunder and converted
$2,685,000 of debenture principal into 1,790,032 shares of common stock.
During the quarter ended September 30, 1997, holders of 3,103,816 stock options
and stock purchase warrants exercised their rights thereunder and received an
equal number of shares of the Company's common stock. The Company received
proceeds in the amount of $4,903,000.
NOTE 6. DISCONTINUED OPERATIONS.
The operations of Sharp Electric Construction Co. Inc., a wholly owned
subsidiary, were discontinued during fiscal 1995. All remaining backlog has
been executed. The cash impact, if any, of any remaining Sharp operations will
not be material.
The operations of Tech Sales, Inc., a wholly owned subsidiary, were discontinued
during fiscal 1996.
NOTE 7. EARNINGS PER SHARE.
Earnings (loss) per share is calculated by dividing the net income (loss) after
deducting (adding) preferred stock dividends by the weighted average common and
common share equivalent shares outstanding during the period. Common stock
equivalents are not included when the effect is antidilutive.
10
<PAGE>
TOPRO, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PLANTY2K-TM- PRODUCT DEVELOPMENT.
During the fourth quarter of fiscal 1997, the Company announced a major
business initiative based on its PlantY2KOne-TM- suite of products and
services designed to address year 2000 compliance problems in process control
and factory automation systems.
The PlantY2KOne-TM- product suite includes a methodology designed
specifically to address the manufacturing and process floor environment, an
inventory and compliance database that includes vendor information for
commonly used factory automation hardware and software components and search
engines that locate date related code in application programs.
The methodology includes assessment, analysis, planning and remediation
phases. The process begins with an assessment in which the overall project is
defined and organized. An inventory of all process control hardware and
software is then completed. In the analysis phase, that inventory is
examined, component by component, with the Company's database of vendor year
2000 compliance statements and custom code is analyzed with its search
engines to reveal date usage. The conversion planning stage addresses the
results of the analysis to develop a plan for bringing the client's system
into year 2000 compliance. The final stage is to execute the remediation
plan.
The Company supplies either "end to end" consulting services built upon the
methodology and use of the database and tools, or it will sell the
methodology, tools and database access, packaged on CD ROM supported by
internet access to the client for self execution. The CD ROM version of the
product was released in mid October 1997.
During the quarter, the Company received more than a dozen engagements for
its Y2KOne-TM- services. In addition, the Company received a large number of
requests for proposals for multi-plant engagements. Though only in its early
stages of these engagements, which makes forecasting difficult, the Company
believes its Y2KOne-TM- product and services hold significant near-term
commercial opportunity. To properly support that opportunity, the Company
has launched a recruiting program to add significant staff, perhaps as many
as 150 engineers over the next nine months. Further, it will have to make
additional investment in expanded product development. Subsequent to the
close of the quarter, the Company received two significant multi-plant
engagements.
Management believes that its pursuit of year 2000 business opportunities will
have long-term effects on its operations. In addition to the near-term
effect of increased revenues and improved margins, the Company expects that
these efforts will expand its client base for its core business of system
integration.
During the quarter, the Company signed preliminary distribution agreements
with major automation hardware and software suppliers, including Wonderware,
Inc. and Square D Company, a division of Groupe Schneider.
LIQUIDITY AND CAPITAL RESOURCES.
During the quarter ended September 30, 1997, holders of stock options and
stock purchase warrants representing 3,103,816 shares of common stock
exercised their rights thereunder and converted them into 3,103,816 shares of
common stock. The Company received proceeds in the amount of $4,903,000.
The proceeds were used to reduce accounts payable and for other working
capital purposes. Accounts payable were reduced by $2,204,000 during the
quarter.
During the quarter ended September 30, 1997, holders of the Company's 9%
convertible debentures in the principal amount of $2,685,000 exercised their
conversion rights and converted the debentures into 1,790,032 shares of
common stock. The Company did not receive cash proceeds in this transaction.
This debt reduction will decrease the Company's interest expense by in
excess of $240,000 per year.
11
<PAGE>
TOPRO, INC.
As a consequence of executing its acquisition strategy, the Company has
assumed the debt obligations of the acquired companies to three banks.
According to the terms of the debt agreements, the Company is required to
repay a term note in the amount of $335,000 and a line of credit in the
amount of $475,000 by November 30, 1997. The Company is discussing
short-term extensions of these facilities. Management is reasonably
confident that short-term extensions will be obtained. Under two other debt
facilities, the Company is required to repay principal in the amount of
$832,000 by January 1, 1998.
The Company continues the process of securing replacement financing for its
short-term obligations. The Company plans to secure one or two larger debt
facilities to consolidate its current short-term debt position. Discussions
are underway with several institutions for new credit facilities. No
assurances can be made that the Company will be successful in these
negotiations. If the Company is not successful in refinancing its short-term
debt, its liquidity would be severely negatively impacted and default could
result in the accelerated maturity of other debt obligations, including its
9% convertible debentures.
CAPITAL EXPENDITURES AND PRODUCT DEVELOPMENT COSTS.
The Company has no commitments for major capital expenditures. However, the
Company anticipates capital spending to upgrade its computer network and for
the development of hardware and software during fiscal 1998. During the
quarter ended September 30, 1997, the Company capitalized $663,000 of
software and product development costs, primarily for its Plant Y2KOne-TM-
suite of products. The CD ROM version of the Plant Y2Kone-TM- product has
been developed and is actively being marketed.
CASH FLOW.
During the three months ended September 30, 1997, cash increased by
$201,000. Funds used in operating activities were $3,685,000. Cash in the
amount of $2,531,000 was used primarily to reduce accounts payable and other
accrued expenses. Operating funds were also used to finance the $397,000
increase in costs and estimated earnings in excess of billings and the
$385,000 increases in accounts receivable. Investments were made in capital
equipment ($167,000) and capitalized software development costs ($663,000)
for a total use of funds for these activities of $830,000. Financing
activities provided $4,716,000 of cash proceeds. Cash in the amount of
$4,903,000 was received during the quarter from the exercise of stock options
and stock purchase warrants. Net payments and additional borrowings on the
Company's line of credit reduced debt obligations by $157,000. The Company
is continuing its efforts to improve its cash flow by combining and
consolidating some of its marketing and administrative functions.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED
TO THE THREE MONTHS ENDED SEPTEMBER 30, 1996.
The Company completed its last of four acquisitions (All Control Systems,
Inc.) on December 1, 1996. Because it was accounted for under the purchase
method of accounting, the results of its operations are not included in the
Company's financial statements for the three month period ended September 30,
1996. Results of operations for the Company and those of its other
acquisitions are included for both periods presented.
During the quarter ended September 30, 1997, the Company incurred a net loss
in the amount of $575,000, compared to net income of $81,000 for the
corresponding quarter of fiscal 1997. Revenues increased by $3,352,000 or
42% to $11,319,000 for the quarter ended September 30, 1997 compared to the
same quarter of the preceding year. Gross margins remained relatively
constant during the two quarters - 34% and 36%, respectively. The increase
in both revenues and cost of goods sold is attributed to the inclusion of All
Control Systems in only the most recent quarter.
Operating expenses increased by $1,621,000 or 62% to $4,254,000 for the
quarter ended September 30, 1997 compared to the corresponding quarter of the
preceding year. The increase is primarily attributed to higher corporate
expenses incurred to support growing operations. The Company has recently
hired additional executive staff and centrally located them in its corporate
headquarters in Denver, Colorado. Non-cash expenditures for the amortization
of capitalized software, goodwill and depreciation amounted to $439,000
during the current quarter. This compares to $246,000 during the quarter
ended September 30, 1996. Interest expense for the current quarter decreased
by $47,000 from the September 30, 1996 period. The decrease is due to the
reduction of debt through its conversion to common stock which occurred
during the current quarter.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS. Statement of Financial
Accounting Standards 128, "Earnings per Share" and Statement of Financial
Accounting Standards 129 "Disclosure of Information About an Entity's Capital
Structure". Statement 128 provides a different method of calculating earnings
per share than is currently used in accordance with Accounting Principles Board
Opinion 15 "Earnings per Share". Statement 128 provides for the calculation of
"basic" and "diluted" earnings per share. Basic earnings per share includes no
dilution and is computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of securities that
could share in the earnings of an entity, similar to fully diluted earnings per
share. Statement 129 establishes standards for disclosing information about an
entity's capital structure. Statements 128 and 129 are effective for financial
statements issued for periods ending after December 15, 1997. Their
implementation is not expected to have a material effect on the consolidated
financial statements.
Statement of Financial Accounting Standards 130, "Reporting Comprehensive
Income" and Statement of Financial Accounting Standards 131 "Disclosures About
Segments of an Enterprise and Related Information". Statement 130 establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes
in equity except those resulting from investments by owners and distributions
to owners. Among other disclosures, Statement 130 requires that all items that
are required to be recognized under current accounting standards as components
of comprehensive income be reported in a financial statement that displays with
the same prominence as other financial statements. Statement 131 supersedes
Statement of Financial Accounting Standards 14 "Financial Reporting for
Segments of a Business Enterprise". Statement 131 establishes standards on the
way that public companies report financial information about operating segments
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. Statement 131 defines operating segments
as components of a company about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
Statements 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any, the
standards may have on the future financial statement disclosures. Results of
operations and financial position, however, will be unaffected by
implementation of these standards.
12
<PAGE>
TOPRO, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Subsequent to September 30, 1997, the Company settled two claims/disputes it
had involving contract performance with customers and general contractors for
which it was a subcontractor. The disputes involved claims by the Company to
third parties and counter-claims to the Company by third parties. Both
claims were fully reserved for in the Company's accounts. The settlements,
which have been agreed to by the parties, resulted in the Company realizing
approximately 73% of its claims and the dismissal of all pending
counter-claims against it.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
The Company's publicly traded warrants are redeemable by it when the
closing bid price of its common stock for at least 20 consecutive
trading days and the seven consecutive trading days prior to the
redemption exceeds $6.38. This information clarifies information
previously reported in the Company's Form 10-KSB/A No 1 for the year
ended June 30, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits.
10.1 Employment agreement dated July 15, 1997 with Lawrence B.
Hagewood, filed herewith.
27 Financial Data Schedule.
b) Reports on Form 8-K.
During the quarter covered by this report, the Company
filed the Current Reports on Form 8-K listed below, all
of which reported information pursuant to Item 5, "Other
Events." No financial statements were filed or required
to be filed with these reports.
Form 8-K dated July 11, 1997.
Form 8-K dated July 14, 1997.
Form 8-K dated July 22, 1997.
Form 8-K dated August 5, 1997.
Form 8-K dated August 22, 1997.
Form 8-K dated September 4, 1997.
Form 8-K dated September 19, 1997.
Form 8-K dated September 29, 1997.
13
<PAGE>
TOPRO, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Topro, Inc.
(Registrant)
Date: November 14, 1997 /s/ John Jenkins
----------------------------------------
John Jenkins
Chairman of the Board,
President and Chief Executive Officer
Date: November 14, 1997 /s/ Douglas H. Kelsall
----------------------------------------
Douglas H. Kelsall
Chief Financial Officer, Secretary and Principal
Finance and Accounting Officer
14
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of July 15, 1997, by and
between Topro, Inc., a Colorado corporation (the "Employer" or "Company") and
Larry B. Hagewood (the "Employee"). In consideration of the mutual covenants
contained in this Agreement, the Employer agrees to employ the Employee, and
the Employee agrees to be employed by the Employer, upon the terms and
conditions hereinafter set forth.
ARTICLE I
TERM OF EMPLOYMENT; SERVICES PRIOR TO COMMENCEMENT DATE
1.1 INITIAL TERM. The initial term of full-time employment hereunder
shall be two years and will commence on July 15, 1997 ("Commencement Date").
1.2 RENEWAL; NOTICE OF NON-RENEWAL. At the end of the initial term of
this Agreement, and on each anniversary thereafter, the term of Employee's
employment automatically will be extended for one additional year unless, at
least 90 days before such anniversary, the Employer or the Employee shall
have delivered to the other written notice that this Agreement will not be
extended.
ARTICLE II
DUTIES OF THE EMPLOYEE
2.1 DUTIES. The Employee shall be employed as the Company's Senior Vice
President of Marketing and Sales, with the responsibilities and authority
customary for such officers including, but not limited to, those duties as
from time to time may be assigned to Employee by the Company's Board of
Directors, Chief Operating Officer and Chief Executive Officer. Employee
shall have responsibility and authority for directing and managing all of the
Company's sales and marketing activities within the strategic guidelines and
budgets approved by the Board of Directors. Employee shall report directly
to the Chief Operating Officer ("COO") of the Company.
2.2 EXTENT OF DUTIES. Subject only to the foregoing, Employee shall
devote all of his working time, efforts, attention and energies to the
business of the Employer.
ARTICLE III
COMPENSATION OF THE EMPLOYEE
3.1 BASE COMPENSATION. As compensation for services rendered under this
Agreement, the Employee will be paid an annual base salary of not less than
$160,000 during the term of this Agreement, to be paid in accordance with
Employer's normal payroll practices. The annual base salary specified herein
may be increased from time to time at the discretion of the Employer's Board
Page 1 of 10
<PAGE>
of Directors. The Employee's annual base salary shall not be deemed
exclusive compensation and shall not prevent Employee from participating in
any other compensation or benefit plan of Employer.
3.2 SHORT-TERM INCENTIVE COMPENSATION PROGRAM. Employee shall be
eligible to participate in any performance bonus program which may be
established by the Company for its officers. As of the date of this
Agreement, such program has not been fully designed and adopted. The program
currently contemplated would provide the opportunity for officers, including
Employee, to earn annual bonuses which would average 50% of base salary over
a five year term. During the first year of this Agreement, if the Company
achieves 80% of its growth goal (to be developed and approved by the
executive team), Employee shall receive a minimum of $55,000 in bonus.
Participation in such bonus program shall not preclude Employee from
receiving additional bonus or incentive compensation granted in accordance
with Company programs or in the discretion of the Board of Directors.
3.3 LONG-TERM INCENTIVE COMPENSATION PROGRAM.
a. Employee shall receive incentive compensation for his services
hereunder through the grant of stock purchase options (the "Options") as
set forth herein. On the Commencement Date, the Company shall grant to
Employee Options exercisable as set forth herein to purchase 225,000 shares
of the Company's Common Stock, at the prices per share set forth below,
which prices shall be based upon the average of the closing price of the
Company's Common Stock as reported by Nasdaq for the ten trading days prior
to the Commencement Date (such average of the closing price hereafter
referred to as the "Market Price"). The Options shall expire on July 15,
2007, (the "Option Expiration Date"), provided, however, that all Options
shall expire on the date 90 days following any termination of employment by
Employee pursuant to Section 5.1.e and shall expire on the Date of
Termination if employment is terminated by Employer for Cause. Subject to
the provisions of Section 3.3.b. below, the Options shall become
exercisable on the initial exercise dates set forth below, provided that no
Option shall become exercisable if the Employee's employment has been
terminated, or if Notice of Termination (hereafter defined) has been given
by Employee or Employer, before the initial exercise dates specified below:
(i) on the day following the Commencement Date, 75,000 Options
shall become exercisable to purchase an aggregate of 75,000 shares of
Common Stock at a price per share equal to the Market Price;
(ii) on the day following the first anniversary of the
Commencement Date, 75,000 Options shall become exercisable to purchase
an aggregate of 75,000 shares of Common Stock at a price per share
equal to 150% of the Market Price; and
Page 2 of 10
<PAGE>
(iii) on the day following the third anniversary of the
Commencement Date, 75,000 Options shall become exercisable to purchase
an aggregate of 75,000 shares of Common Stock at a price per share
equal to 175% of the Market Price.
b. Regardless of the initial exercise dates set forth above, all
unexercised options shall become immediately exercisable in the event of a
"Change of Control," which, for purposes of this Agreement, shall be
defined as the occurrence of one of the following events:
(i) any "person" (as that term is used in Section 13(d) and 14(d)
of the Exchange Act), other than the Company or any "person" who on
the date hereof is a director or officer of the Company, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities, other than in connection with a merger or
business combination by the Company of another entity in which the
Company is the surviving entity and which does not result in a change
in the majority of the Board of Directors upon the effective date of
such merger or business combination, or
(ii) during any period of two consecutive years during the term of
this Agreement, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a
majority thereof, unless the election of each director who was not a
director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period.
c. Employee understands that the Options and underlying Shares are
"restricted securities" under the Securities Act of 1933 and applicable
state statutes. Employee agrees to execute an investment representation
letter to acknowledge his understanding of the terms of the grant and the
characteristics of this investment in securities.
d. Employee represents and acknowledges that the issuance of securities
hereunder is intended solely as compensation for the services provided
pursuant to this Agreement, and that the payment in securities is not
intended by the Company to be and has not been construed by Employee to be
a promise of continued employment by the Company, nor as a promise of
renewal of this Agreement or of the continuation of the relationship of the
parties beyond the term of this Agreement. Employee represents that the
securities to be acquired as compensation for his services hereunder are
being acquired by Employee for his own account and not on behalf of any
other person, and that the Securities are being acquired for investment
purposes and not for distribution. Employee represents that an investment
in the Securities is a suitable investment for Employee, taking into
consideration the restrictions on transferability affecting the Securities.
Page 3 of 10
<PAGE>
3.4 RELOCATION EXPENSES. Employer shall pay Employee's reasonable
expenses for relocating one residence. Such expenses shall include, but not
be limited to, sales commissions, moving expenses, temporary living expenses,
house-hunting travel and closing costs on a new home, "grossed up" to cover
any tax liability incurred by Employee. All expenses are subject to the
prior approval of Employer's COO.
3.5 BENEFITS.
a. Employee shall be entitled to paid vacation and all paid
holidays customarily extended to executive employees, and shall be entitled
to a minimum of three weeks paid vacation during the first year of this
Agreement.
b. Employee shall be entitled to participate in all of
Employer's employee benefit plans and employee benefits, including any
retirement, 401(k), pension, profit-sharing, stock option, insurance,
hospital or other plans and benefits which now may be in effect or which may
hereafter be adopted, it being understood that Employee shall have the same
rights and privileges to participate in such plans and benefits as any other
executive employee. Participation in any benefit plans shall be in addition
to the compensation otherwise provided for in this Agreement. Employer will
also reimburse Employee for Cobra bridge payments for the wait period to join
Tava/Topro plans.
c. Employer shall provide an automobile allowance of an
up-front payment ranging from $5,000.00 to $6,000.00 and $500.00 per month to
reimburse and compensate Employee for reasonable expenses of maintaining one
automobile for Employee's use.
d. Employer will assume payment of reasonable dues related to
Employee's membership in professional associations.
3.6 EXPENSES. Employee shall be reimbursed promptly for all reasonable
expenses incurred by Employee in the performance of his duties hereunder
following Employer's customary practice.
3.7 NON-EXCLUSIVE PROVISIONS. None of the provisions of this Article
III shall be deemed to limit additional compensation which the Employer's
Board of Directors may grant to Employee.
ARTICLE IV
NON-COMPETITION; CONFIDENTIALITY
4.1 The Employee will offer to the Employer any investment or other
opportunity of which he becomes aware in the process control and systems
integration industries (including, without limitation, software product
development) or in the other areas of business in which the Company operates.
If the Board of Directors of the Employer refuses the opportunity to
participate in such investment or other opportunity, the Employee may do so
as permitted by Section 4.2 hereof and otherwise only if the Employer's Board
of Directors consents thereto.
Page 4 of 10
<PAGE>
4.2 Notwithstanding the above, the Employee may make passive investments
in companies involved in the process control and systems integration
industries or other industries in which the Company operates, provided any
such investment does not exceed a 5% equity interest. Employee may acquire
an equity interest exceeding 5% only if a majority of the Employer's Board of
Directors consents thereto.
4.3 Except as provided in Sections 4.1 and 4.2 hereof, during the term
of this Agreement the Employee may not participate in the process control or
systems integration industries or other areas of business in which the
Company is engaged except through and on behalf of the Company.
4.4 a. The Employee recognizes and acknowledges that the
information, business, customer list and any other trade secret or other
secret or confidential information relating to Employer's business as they
may exist from time to time are valuable, special and unique assets of
Employer's business. Therefore, Employee agrees as follows:
(i) that Employee will hold in strictest confidence and not
disclose, reproduce, publish or use in any manner, whether during or
subsequent to this employment, without the express authorization of
the Board of Directors of the Employer, any information, business,
customer lists of other employees of Employer, or any other secret or
confidential matter relating to any aspect of the Employer's business,
except as such disclosure or use may be required in connection with
Employee's work for the Employer or by court order or subpoena;
(ii) that upon request or at the time of leaving the employ of the
Employer the Employee will deliver to the Employer, and not keep or
deliver to anyone else, any notes, memoranda, documents and, in
general, any and all material relating to the Employer's business; and
(iii) that the Board of Directors of Employer may from time to time
designate other subject matters requiring confidentiality and secrecy
that shall be covered by the terms of this Agreement.
b. The restrictions imposed by this Section 4.4 shall not apply to
information which is publicly disclosed by the Company or otherwise within
the public domain through no fault or action or failure to act of Employee
or rightfully received by Employee from a third party without restrictions
on disclosure or use.
c. In the event of Employee's breach or threatened breach of the
provisions of this paragraph 4.4, the Employer shall be entitled to an
injunction (i) restraining the Employee from disclosing, in whole or in
part, any information as described above or from rendering any services to
any person, firm, corporation, association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to be
disclosed, and/or (ii) requiring that Employee deliver to Employer all
information, documents, notes,
Page 5 of 10
<PAGE>
memoranda and any other material as described above upon Employee's leave
of the employ of the Employer. Nothing herein shall prohibit the Employer
from pursuing other remedies available to the Employer for such breach or
threatened breach, including the recovery of damages from the Employee.
d. In addition to the confidential information described above, Employee
agrees that prior to the Commencement Date, the existence of this Agreement
is considered by the Company to be confidential and Employee agrees not to
disclose this Agreement or Employee's contemplated employment by the
Company to any party prior to the Company's announcement of these matters.
ARTICLE V
TERMINATION OF EMPLOYMENT
5.1 TERMINATION. The Employee's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances:
a. BY EMPLOYEE. Upon the occurrence of any of the following events, this
Agreement may be terminated by the Employee by written notice to Employer:
(i) if Employer makes a general assignment for the benefit of
creditors, files a voluntary bankruptcy petition, files a petition or
answer seeking a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
law, or any petition or application for the involuntary bankruptcy of
Employer, or other similar proceeding, has been filed in which an
order for relief is entered or which remains undismissed for a period
of thirty days or more, or Employer seeks, consents to, or acquiesces
in the appointment of a trustee, receiver, or liquidator of Employer
or any material part of its assets;
(ii) a decision by Employer to terminate its business and
liquidate its assets; or
(iii) Employer's breach of any of the terms of this Agreement which
breach is not cured by Employer within 15 business days after notice
from Employee.
(iv) within 90 days following a Change in Control of the Company.
b. DEATH. This Agreement shall terminate upon the death of Employee.
c. DISABILITY. The Employer may terminate this Agreement due to
Employee's permanent disability only in accordance with Employer's policy
applicable to other employees.
Page 6 of 10
<PAGE>
d. CAUSE. The Employer may terminate the Employee's employment
hereunder for Cause. For purposes of this Agreement, the Employer shall
have "Cause" to terminate the Employee's employment hereunder only upon the
following: (i) the continued failure by the Employee substantially to
perform his duties hereunder (other than any such failure resulting from
the Employee's incapacity due to physical or mental illness), after demand
for substantial performance is delivered by the Employer; or (ii)
misconduct by the Employee that is deemed by the Board of Directors to be
harmful to the Employer, monetarily or otherwise; or (iii) the violation by
the Employee of the provisions of this Agreement.
e. BY EMPLOYER OR EMPLOYEE OTHER THAN FOR CAUSE. In any other case,
the Company and the Employee shall have the right to terminate this
Agreement upon 30 days' prior written notification to the other party.
5.2 NOTICE OF TERMINATION. Any termination of the Employee's employment
by the Employer or by the Employee (other than termination pursuant to
subsection 5.1(b) above) shall be communicated by written notice ("Notice of
Termination") sent to the other party in accordance with Section 7.5 hereof.
5.3 DATE OF TERMINATION. "Date of Termination" shall mean (i) if the
Employee's employment is terminated by his death, the date of his death; and
(ii) if the Employee's employment is terminated for any other reason, the
date specified in a Notice of Termination by Employer or Employee, which date
shall not be less than 30 days after the date of the Notice of Termination.
5.4 PAYMENTS FOLLOWING TERMINATION OR NON-RENEWAL.
a. In the event of termination of this Agreement by Employee pursuant to
Section 5.1(a)(iv) or by Employer pursuant to Section 5.1(e) within one
year following a Change in Control of the Company, the Employee will
receive (i) continuation of base salary payments for 12 months following
the Date of Termination; (ii) full and immediate vesting exercisability of
all stock options and stock appreciation rights or other benefits
consisting of or related to securities granted under this Agreement; and
(iii) payment of any accrued bonus.
b. Following the termination of this Agreement pursuant to Section
5.1(b), Employer shall pay to Employee's estate the compensation that would
otherwise be payable through the end of the month in which his death
occurs.
c. Upon temporary or permanent disability of the Employee as described in
Section 5.1(c) hereof, whether or not the Employer elects to terminate
this Agreement, Employee shall receive such compensation and benefits, if
any, as are payable to employees generally in accordance with the policy of
Employer.
Page 7 of 10
<PAGE>
d. If this Agreement is terminated by Employer other than for Cause,
Employer shall continue to pay to the Employee his base salary as then in
effect for a period of six months following the Date of Termination, which
payments shall constitute severance pay.
e. In the event this Agreement is not renewed by Employer at the end of
the initial or any subsequent term, Employer shall continue to pay to the
Employee his base salary as then in effect for a period of six months
following the Date of Termination.
5.5 REMEDIES. Any termination of this Agreement shall not prejudice any
other remedy to which the Employer or Employee may be entitled, either at
law, equity, or under this Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION. To the fullest extent permitted by applicable law,
Employer agrees to indemnify, defend and hold Employee harmless from any and
all claims, actions, costs, expenses, damages and liabilities, including,
without limitation, reasonable attorneys' fees, hereafter or heretofore
arising out of or in connection with activities of Employer or its employees,
including Employee, or other agents in connection with and within the scope
of his employment by Employer or by reason of the fact that he is or was a
director or officer of Employer or any affiliate of Employer. To the fullest
extent allowed by applicable law, Employer shall advance to Employee expenses
of defending any such action, claim or proceeding. However, Employer shall
not indemnify Employee or defend Employee against, or hold him harmless from
any claims, damages, expenses or liabilities, including attorneys' fees,
resulting from the gross negligence or willful misconduct of Employee. The
duty to indemnify shall survive the expiration or early termination of this
Agreement as to any claims based on facts or conditions which occurred or are
alleged to have occurred prior to expiration or termination.
ARTICLE VII
GENERAL PROVISIONS
7.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
7.2 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in the
City and County of Denver, Colorado in accordance with the rules then
existing of the American Arbitration Association and judgment upon the award
may be entered in any court having jurisdiction thereof.
7.3 ENTIRE AGREEMENT. This Agreement supersedes any and all other
Agreements, whether oral or in writing, between the parties with respect to
the employment of the Employee by the Employer. Each party to this Agreement
acknowledges that no representations, inducements, promises, or agreements,
orally or otherwise, have been made by either party, or anyone acting on
Page 8 of 10
<PAGE>
behalf of any party, that are not embodied in this Agreement, and that no
agreement, statement, or promise not contained in this Agreement shall be
valid or binding.
7.4 SUCCESSORS AND ASSIGNS. This Agreement, all terms and conditions
hereunder, and all remedies arising here from, shall inure to the benefit of
and be binding upon Employer, any successor in interest to all or
substantially all of the business and/or assets of Employer (whether by
merger, consolidation or otherwise), and the heirs, administrators,
successors and assigns of Employee. Except as provided in the preceding
sentence, the rights and obligations of the parties hereto may not be
assigned or transferred by either party without the prior written consent of
the other party.
7.5 NOTICES. For purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed given if delivered by hand or overnight courier or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses for a party as shall be
specified by like notice), and shall be deemed given on the date on which so
hand-delivered, or on the business day following the day on which sent by
overnight courier, or on the third business day following the date on which
so mailed:
If to Employee: Larry B. Hagewood
50 Wilding Chase
Chagrin Falls, OH 44022
If to Employer: Topro, Inc.
Attn: John Jenkins, President and CEO
2525 West Evans Avenue
Denver, CO 80219
7.6 SEVERABILITY. If any provision of this Agreement is prohibited by
or is unlawful or unenforceable under any applicable law of any jurisdiction
as to such jurisdiction, such provision shall be ineffective to the extent of
such prohibition without invalidating the remaining provisions hereof.
7.7 SECTION HEADINGS. The section headings used in this Agreement are
for convenience only and shall not affect the construction of any terms of
this Agreement.
7.8 SURVIVAL OF OBLIGATIONS. Termination of this Agreement for any
reason shall not relieve Employer or Employee of any obligation accruing or
arising prior to such termination.
7.9 AMENDMENTS. This Agreement may be amended only by written agreement
of both Employer and Employee.
Page 9 of 10
<PAGE>
7.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which,
when taken together, shall constitute only one legal instrument. This
Agreement shall become effective when copies hereof, when taken together,
shall bear the signatures of both parties hereto. It shall not be necessary
in making proof of this Agreement to produce or account for more than one
such counterpart.
7.11 FEES AND COSTS. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys fees, costs and necessary disbursements
in addition to any other relief to which that party may be entitled.
IN WITNESS WHEREOF, the Employer and the Employee have executed this
Agreement to be effective as set forth above.
"EMPLOYER"
TOPRO, INC.
By /s/ KEVIN FALLON
---------------------------------------
Kevin Fallon, Chief Operating Officer
"EMPLOYEE"
/s/ LARRY B. HAGEWOOD
---------------------------------------
Larry B. Hagewood
Page 10 of 10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
conslidated financial statements of Topro, Inc. at September 30, 1997 and for
the three month period ended September 30, 1997 and is qualified in its
entirety by reference to such consolidated financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,108,000
<SECURITIES> 0
<RECEIVABLES> 6,566,000
<ALLOWANCES> 2,086,000
<INVENTORY> 202,000
<CURRENT-ASSETS> 14,269,000
<PP&E> 4,591,000
<DEPRECIATION> 1,967,000
<TOTAL-ASSETS> 29,434,000
<CURRENT-LIABILITIES> 10,172,000
<BONDS> 4,811,000
0
0
<COMMON> 2,000
<OTHER-SE> 15,486,000
<TOTAL-LIABILITY-AND-EQUITY> 28,434,000
<SALES> 11,319,000
<TOTAL-REVENUES> 11,319,000
<CGS> 7,494,000
<TOTAL-COSTS> 7,494,000
<OTHER-EXPENSES> 4,243,000
<LOSS-PROVISION> 11,000
<INTEREST-EXPENSE> 165,000
<INCOME-PRETAX> (575,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (575,000)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
