<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A No. 1
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Period Ended September 30, 1996
---------------------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-19167
---------------------------------------------------------
TOPRO, INC.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1042227
- --------------------------------------- -------------------------------
(State of Incorporation) (IRS Employer ID Number)
2525 West Evans Avenue Denver, Colorado 80219
- -------------------------------------- --------------------------------
(Address of principle executive offices) (city) (state) (zip code)
(303) 935-1221
----------------------------------------------------------
Registrant's telephone number including area code
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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. (See Item 6b on page 13 for detailed
explanation)
YES X NO
------ ------
Transitional Small Business Disclosure format (check one):
YES NO X
------ ------
The number of shares outstanding of the Registrant's $0.0001 par value common
stock on November 13, 1996 was 6,639,403.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TOPRO INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1996
-------------- ----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 236,000 $ 156,000
Receivables:
Trade, net of allowance for doubtful accounts 6,801,000 5,234,000
Refundable income taxes 222,000 222,000
Other receivable 54,000 1,000
Cost and estimated earnings in excess of billings on
uncompleted contracts 2,837,000 2,866,000
Inventories 148,000 151,000
Prepaid expense 173,000 244,000
Assets of discontinued operations 526,000 581,000
-------------- ----------------
Total current assets 10,997,000 9,455,000
PROPERTY AND EQUIPMENT, AT COST:
Building and land 850,000 850,000
Furniture and equipment 2,516,000 2,497,000
Leasehold improvements 743,000 784,000
Capitalized software costs, net of amortization 572,000 733,000
-------------- ----------------
4,681,000 4,864,000
Less accumulated depreciation (1,285,000) (1,423,000)
-------------- ----------------
Net property and equipment 3,396,000 3,441,000
OTHER ASSETS
Other assets 155,000 145,000
Debt issuance costs, net of amortization 354,000 333,000
Excess of cost over fair value of net assets
acquired, net of amortization 5,111,000 5,024,000
TOTAL ASSETS $ 20,013,000 $ 18,398,000
============== ================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE> 3
TOPRO INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1996
----------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Line-of-credit $ 1,019,000 $ 927,000
Current portion of long-term debt:
Related parties 230,000 230,000
Financial institutions and other 975,000 1,422,000
Capital lease obligations 56,000 41,000
Accounts payable 5,915,000 5,770,000
Billings in excess of costs and estimated earnings on
uncompleted contracts 1,582,000 988,000
Accrued expenses 2,155,000 1,362,000
Deferred gain - bldg 24,000 24,000
----------------- ----------------
Total current liabilities 11,956,000 10,764,000
LONG-TERM DEBT, NET OF CURRENT PORTION:
Financial institutions and other 4,859,000 4,361,000
Capital lease obligations 151,000 146,000
----------------- ----------------
Total long-term debt 5,010,000 4,507,000
DEFERRED GAIN - BLDG 45,000 39,000
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00 per share;
authorized 10,000,000 shares; no shares
issued
Common stock, par value $.0001 per share;
authorized 200,000,000 shares; 6,639,403
issued and outstanding June 30 and 1,000 1,000
September 30, 1996
Additional paid-in capital 7,774,000 7,775,000
Accumulated deficit (4,773,000) (4,688,000)
----------------- ----------------
Total stockholders' equity 3,002,000 3,088,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 20,013,000 $ 18,398,000
================= ================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 4
TOPRO INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1995 1996
-------------- --------------
<S> <C> <C>
REVENUES:
Control systems integration $ 2,450,000 $ 7,967,000
Distributorship 363,000 -
-------------- --------------
2,813,000 7,967,000
COST OF SALES:
Control systems integration 1,602,000 5,082,000
Distributorship 227,000 -
-------------- --------------
1,829,000 5,082,000
GROSS PROFIT 984,000 2,885,000
EXPENSES
Sales expense 139,000 598,000
General & administrative expense 608,000 1,948,000
Distributorship selling and other expenses 283,000 -
-------------- --------------
1,030,000 2,546,000
OTHER INCOME (EXPENSE):
Gain (loss) on sale of assets 7,000 (3,000)
Interest expense (35,000) (172,000)
Other 2,000 4,000
Goodwill amortization - (87,000)
-------------- --------------
(26,000) (258,000)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (72,000) 81,000
INCOME TAX BENEFIT (PROVISION): 0 0
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations - Sharp 0 0
Loss on disposal - Sharp Electric (16,000) -
-------------- --------------
NET INCOME (LOSS) $ (88,000) $ 81,000
============== ==============
PRIMARY EARNINGS PER SHARE:
Continuing operations - Income (Loss) (0.02) 0.01
Discontinued operations - Income (Loss) 0.00 0.00
-------------- --------------
Net income (Loss): $ (0.02) $ 0.01
============== ==============
WEIGHTED AVERAGE SHARES
OUTSTANDING $ 3,891,354 $ 7,841,716
============== ==============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE> 5
TOPRO, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (loss) from continuing operations $ (72,000) $ 81,000
Adjustments to reconcile to net cash provided by (used in) operating
activities
Depreciation 36,000 143,000
Amortization of note costs 22,000
Amortization of goodwill 87,000
Allowance for doubtful accounts 11,000 (33,000)
Gain on sale of assets (7,000) 3,000
Changes in operating assets and liabilities: (Increase) decrease in:
Accounts receivables - trade (45,000) 1,654,000
Other receivables 60,000 41,000
Cost & estimated earnings in excess of billing 279,000 (29,000)
Inventories (69,000) (3,000)
Prepaid expenses (110,000) (71,000)
Other assets 36,000 10,000
Increase (decrease) in:
Accounts payables (363,000) (145,000)
Accrued expenses (74,000) (899,000)
Billings in excess of costs & estimated earnings 80,000 (594,000)
Income (loss) from discontinued operations (16,000) -
Change in assets - from discontinued operations - Sharp Electric (275,000) (55,000)
------------ ------------
Net cash provided by (used in) operating activities (529,000) 212,000
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of equipment (56,000) (19,000)
Capitalized software costs - (161,000)
Proceeds from notes receivable 40,000 -
------------ ------------
Net cash used in investing activities (16,000) (180,000)
</TABLE>
Continued next page
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE> 6
TOPRO, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1995 1996
----------------- ---------------
<S> <C> <C>
Continued from previous page:
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from short term debt 3,611,000
Principal payments on borrowings (3,614,000) (163,000)
Proceeds from issuance of note payable 51,000
Proceeds from sale of stock 427,000
----------------- ---------------
Net cash provided by (used in) financing activities 424,000 (112,000)
INCREASE (DECREASE) IN CASH (121,000) (80,000)
CASH: BEGINNING OF PERIOD 224,000 236,000
----------------- ---------------
CASH: END OF PERIOD $ 103,000 $ 156,000
================= ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE> 7
TOPRO, INC. AND SUBSIDIARIES
CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
1. Interim Financial Information
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, 1996 and June 30,
1996 and the results of operations and statement of cash flows for the
periods presented. Management believes all such adjustments are of a
normal and recurring nature. The statements presented reflect the
acquisitions of Advanced Control Technology, Inc. (ACT) acquired as of
January 1, 1996 and Vision Engineering (VEC) acquired as of May 1,
1996 for the period subsequent to the acquisition dates. The
acquisition of ACT and VEC were recorded as a purchase method
accounting and no results for previous years are recorded in the 1995
results. The results of operations for the three month period ending
September 30, 1996 and 1995 are not necessarily indicative of the
results to be expected for the full year.
2. Trade Receivables
The following information summarizes trade receivables:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1996
----------- -----------
<S> <C> <C>
Contract receivables:
Completed contracts $ 869,000 $ 984,000
Uncompleted contracts 5,812,000 3,845,000
Retainage 497,000 724,000
----------- -----------
7,178,000 5,553,000
Other trade receivables - 11,000,000
----------- -----------
7,178,000 5,564,000
Less allowance for doubtful accounts (377,000) (330,000)
----------- -----------
$ 6,801,000 $ 5,234,000
=========== ===========
</TABLE>
7
<PAGE> 8
3. Costs and Estimated Earnings on Uncompleted Contracts:
The following information is applicable to uncompleted contracts:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1996
-------------- --------------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 32,071,000 $ 32,934,000
Estimated earnings 2,282,000 2,902,000
-------------- --------------
34,353,000 35,836,000
Less billings to date (33,098,000) (33,958,000)
-------------- --------------
$ 1,255,000 $ 1,878,000
============== ==============
These amounts are included in accompanying
balance sheets under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 2,837,000 $ 2,866,000
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,582,000) (988,000)
-------------- --------------
$ 1,255,000 $ 1,878,000
============== ==============
</TABLE>
8
<PAGE> 9
TOPRO, INC. AND SUBSIDIARIES
CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
4. Line-Of-Credit and Long-Term Debt:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1996
------------- -------------
<S> <C> <C>
Lines-of-credit:
---------------
VEC has a $650,000 line-of-credit pursuant to a loan
agreement with a financial institution, collateralized by
substantially all assets of VEC, with interest at prime plus
2% (total of 10.25% at June 30 and September 30, 1996). The
line expires in December 1996 and requires monthly principal
payments of $17,000. $ 583,000 $ 500,000
ACT has a $500,000 line-of-credit pursuant to a loan
agreement with a financial institution collateralized by
substantially all assets of ACT and a deed of trust on the
real property, with interest at prime plus 2.5% (total of
10.75% at June 30, 1996 and September 30, 1996). The line
expires in February 1997. 436,000 427,000
------------- -------------
Total Line-of-Credit 1,019,000 927,000
============= =============
Related Party:
--------------
Notes payable to an officer and a director of the Company at
10% interest payable semiannually, due on demand, unsecured. 80,000 80,000
Notes payable to a director and former majority stockholders
of VEC, with interest at 8%, monthly payments of $10,000,
unsecured. 130,000 130,000
Note payable to relatives of a director and former majority
stockholders of VEC, interest payable quarterly at 10%,
unsecured. 20,000 20,000
------------- -------------
Total Related Party $ 230,000 $ 230,000
============= =============
</TABLE>
9
<PAGE> 10
4. Line-Of-Credit and Long-Term Debt - Continued:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1996
------------- -------------
<S> <C> <C>
Long-term 9% convertible debenture dated February 21, March
7, and June 1, 1996 with a small business investment fund.
Outstanding borrowings bear interest at 9% and interest is
payable monthly. If the debenture is 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. $2,500,000 of the debenture is
convertible into the Company's common stock at $1.50 per
share. The remaining $1,000,000 is convertible at $2.25 per
share. The loan is collateralized by all the assets of
Topro, ACT, and MDCS. The loan has certain restrictive
covenants described below.
3,500,000 3,500,000
Convertible note, 8% interest payable quarterly on August
17, November 17, 1996 and February 17, 1997 due in February
1997. The notes are convertible into one share of common
stock per $1.75 of principal and accrued and unpaid
interest. The loan is unsecured. 375,000 375,000
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 ACT. Monthly payments
of $11,000 for principal and interest are due, interest at
prime plus 2.5% (total of 10.75% at June 30, 1996 and
September 30, 1996). The loan has a balloon payment on the
unpaid balance due August 1997. 474,000 448,000
Mortgage note payable to a bank, due in monthly installments
of $2,941 including interest at 11%, a balloon payment of
remaining balance is due November 1, 1996, collateralized by
a first deed of trust on ACT's land and building. 241,000 260,000
Four year promissory note bearing interest at 8% payable to
ElectroCom Automation. Monthly payments of $6,103 are due
beginning May 1, 1996. The promissory note is secured by a
second position on the real estate of ACT. 262,000 228,000
Senior convertible notes, 10% interest payable semiannually
on December 31 and March 31. Due March 2000. The notes are
convertible into units consisting of one share of common
stock and one warrant at the rate of $.67 per unit. The
warrants are exercisable to purchase one share of common
stock at $1.00, expiring the earlier of 3 years from date of
conversion or December 31, 2001. 350,000 350,000
</TABLE>
10
<PAGE> 11
4. Line-Of-Credit and Long-Term Debt - Continued:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1996
------------- -------------
<S> <C> <C>
Term loan payable to a bank, with a variable interest
adjusted quarterly based on prime plus 2.75% (total of 11.0%
at June 30 and September 30, 1996), collateralized by a
second security interest on substantially all assets of VEC,
guaranteed by the SBA and personally guaranteed by a
director, which personal guarantee is collateralized by a
third deed on the director's residence, payable in monthly
principal payments of $7,000, adjusted quarterly, through 324,000 303,000
September 2002.
Term loan payable to a bank, with a variable interest rate
at prime plus 2% (total of 10.25% at June 30 and September
30, 1996), collateralized by equipment and leasehold
improvements of VEC, due on demand or if no demand, payable
in monthly installments of $7,000 plus interest through
April 1998. 153,000 132,000
Non-interest bearing note payable to ACT'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%. 121,000 108,000
Various notes payable, due in maximum monthly installments
totaling $1,526 through March 1998, collateralized by
equipment and vehicles. 34,000 28,000
Capital lease obligations secured by equipment of VEC. The
leases are of varying length and vary in imputed interest of
12% - 22%. The monthly installments total $ 10,000. 207,000 187,000
12% unsecured subordinated promissory notes series 1996-A is
due along with accrued interest on November 8, 1996. The
Company will pay the lender a fee of 2,500 shares of common
stock per $50,000 of the principal sum. If the note is not
repaid on November 8, 1996, the Company will pay lender
2,500 shares of common stock per $50,000 of principal in
consideration of extension to January 8, 1997. Upon the
event of default, the shares will convert at one share per
$.50 of principal and accrued interest. - 50,000
------------- -------------
Total $ 6,041,000 $ 5,970,000
------------- -------------
Less current portion (1,031,000) (1,463,000)
------------- -------------
Long-term portion $ 5,010,000 $ 4,507,000
============= =============
</TABLE>
11
<PAGE> 12
TOPRO, INC. SUBSIDIARIES
CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
5. Discontinued Operations
Sharp Electric Construction Co. Inc.- was discontinued in fiscal 1995,
all remaining backlog has been executed. The Company will complete
the final contract and is negotiating open change orders on the
remaining project as of November 1996. The remaining suppliers and
subcontractors on these projects must be covered out of the remaining
billings to be collected on these projects. The anticipated cash
impact of the remaining negotiations will not be material.
Tech Sales, Inc.- was discontinued in December 1995. The quarter
ended September 30, 1995 includes the results of this discontinued
operations.
6. Earnings per Share
Earnings per share are computed on the basis of the weighted average
number of common shares outstanding during the period.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In September 1996 the Company issued a 12% unsecured subordinated
promissory note Series 1996-A in the amount of $50,000. This note is due along
with accrued interest on November 8, 1996. If the note is not repaid on
November 8, 1996 the Company will be required to issue to the lender 2,500
shares of common stock per $50,000 of principal in consideration of extension
to January 8, 1997. In conjunction with the issuance of this note the Company
issued the lender a fee of 2,500 shares of common stock per $50,000 of the
principal sum. Upon the event of default the shares will convert at one share
per $.50 of principal and accrued interest. The Company issued an additional
$100,000 of the promissory notes subsequent to September 1996. The notes were
not repaid on the maturity date and thus were extended.
Subsequent to quarter end, the Company on October 30, 1996 issued
$1,200,000, 9% convertible debentures to Renaissance Capital Growth & Income
Trust, PLC to provide working capital funding. This indebtedness is
collateralized by a security interest in the assets of the Company including
assets of ACT, MDCS, TSI, VEC, and Topro, Inc. The Company also pledged the
shares of its subsidiaries ACT and VEC to secure repayment of the debenture,
and agreed to pledge the assets and shares of its subsidiaries of ACS if and
when that company is acquired. Interest on the
12
<PAGE> 13
unpaid principal balance is due monthly beginning November 1, 1996. Mandatory
monthly principal installments, if the debenture is not sooner redeemed or
converted, are due commencing on March 1, 1999, in principal installments of
$10 per $1,000 of the then remaining principal amount. The outstanding
principal amount of this debenture is redeemable at 120% of par if the closing
bid price for the Company's common stock averages at least $5.00 for 20
consecutive trading days and is supported by a minimum of $0.25 in net earnings
per share. The conversion price is $ 1.50 per share on $1,200,000 of the
principal amount of the convertible debentures.
Renaissance Capital Group, Inc. serves as investment adviser to Trust
PLC and to Renaissance Capital Growth & Income Fund III, Inc. which previously
purchased an aggregate of $3,500,000 principal amount of 9% convertible
debentures from the Company. On $1,000,000 of the principal amount of
debenture issued to Renaissance Capital Growth & Income Fund III, Inc. in June
1996 the original conversion price was renegotiated. The original issuance
required a conversion price of $2.25 or 444,444 shares of the Company's common
stock. This was renegotiated to a conversion price of $1.50 or 666,667 shares
of the Company's common stock, consistent with the terms of the debentures
issued to Trust PLC.
The convertible debenture requires certain financial covenants of debt
to equity of less than 7 to 1, current ratio of no less than .75 to 1, minimum
tangible net worth of not less than a negative $3,000,000, and times interest
earned on the basis of EBITDA of at least 3 to 1 to be met. The Company is not
in compliance with times interest earned which is 2.97 to 1 at September 30,
1996. The Company has received a waiver of the covenants outlined above until
October 1, 1997.
CASH FLOW
For the three months ending September 30, 1996, the Company's cash
decreased $80,000. PROFITS FROM CONTINUING OPERATIONS totaled $81,000,
INCLUSIVE OF NON CASH CHARGES for depreciation, amortization of note costs,
goodwill, reserve for bad debts, and loss on sale of assets totaling $223,000.
Decreases in trade and other receivables and other assets added $1,705,000 for
a source of funds totaling $2,009,000. FUNDS WERE USED to finance increases in
costs and estimated earnings in excess of billings, inventories, prepaid
expenses, deferred note costs, deferred gain on the sale of building and
decreases in accounts payables, accrued expenses, billings in excess of costs
and estimated earnings and discontinued operations of Sharp Electric totaling
$1,797,000. INVESTMENTS were made in capital equipment and capitalized
software development costs in the period of $180,000. FINANCING ACTIVITIES
from short and long term debt, required $163,000 and a private placement of a
note generated $51,000.
ACCOUNTS RECEIVABLE ISSUE - In calendar year 1994, the Company was
engaged by an electrical contractor ("EC") to supply control system integration
services on municipal water treatment facilities in California. As the work
progressed, the EC fell significantly behind in its payment obligations and
eventually was taken over by its bonding company. As of June 1996, the EC owed
the Company $427,000. The EC's payment obligations are covered by payment and
performance bonds. In June 1995, the Company received indication of a
forthcoming settlement offer from the general contractor on one of the projects
for the EC's receivable. It was felt that the Company had reasonably reserved
for the portion of the receivable that was disputed by the EC. The
13
<PAGE> 14
offer for settlement has since been withdrawn by the general contractor. The
Company has retained legal counsel in California to review the adequacy of its
stop notice filings and determine the Company's legal standing. Stop notices
have been issued to the appropriate municipalities reserving 125% of these funds
from payment to the contractors. The EC has sent a notice to the bonding company
stating a $192,000 back charge. The bonding company has reviewed all supporting
documents and doesn't support the EC's claim. This claim has been reviewed and
evaluated by an independent third party ("ITP") who engages in providing
construction/systems dispute resolution and management services to both owners
and contractor/subcontractors and suppliers on projects similar to the EC's
project. The ITP view is the back charge claims are not valid. The ITP also
believes the Company has back charges of between $200,000 and $250,000 in claims
against the EC for excessive cost on the projects directly attributed to the
EC's delays. The ITP also believes the Company has a direct claim against the
municipality for owner-directed changes and delays. The Company is in the
process of perfecting its claims position.
The Company, on one of the WWTP projects worked on with the EC, has been
discussing a settlement with the general contractor. The total amount owing
from the EC on this project amounts to $161,000. The general contractor has
issued a bond to the municipality to cover stop notices issued on the project
because of the EC's non payment including our claim. The requirement for the
bond by the general contractor was to allow the municipality to release
retainage on the job. The municipality would not do so unless they had
assurances that the claims were provided for.
Discussions have since commenced on the other waste water treatment project
with both the general contractor and the electrical contractor. The EC and the
general contractor have initiated discussions with the city and it is
anticipated they will conclude negotiation with the city in the next six weeks
on the portion owed the Company. The Company feels that it has an adequate
allowance to cover any unforeseen collection issues of these receivables.
The Company has no material commitments for external capital
expenditures, however will continue to capitalize software development costs
consistent with its strategy of the development of discrete products for
specific markets.
14
<PAGE> 15
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1995
The statement of operations contains 1995 detail on the distributing
business that was discontinued in December 31, 1995. The following analysis
discusses only the continuing operations of the Company.
REVENUES increased by $5,517,000 or 225% to $7,967,000 in the 1996
period versus revenue of $2,450,000 in 1995. The increase is associated with
the acquisition of two additional wholly-owned subsidiaries: Advanced Control
Technology, Inc. ("ACT"), acquired as a purchase as of January 1, 1996, had
revenue for the current quarter of $2,361,000 while Vision Engineering Corp.
("VEC"), acquired also as a purchase as of May 1, 1996, added revenue of
$2,480,000 during the quarter. Topro Systems Integration, Inc. ("TSI") had an
increase in revenue of $640,000, from $2,131,000 in 1995 to $2,771,000 in
1996. Management, Design and Consulting Services, Inc.'s ("MDCS") revenue for
the three months ended September 30, 1996 was $355,000, an increase of $36,000
over the comparable period in 1995. The Company's order backlog at September
30, 1996 was $7,693,000 ($3,223,000 in TSI, $958,000 in ACT, $3124,000 in VEC
and $388,000 in MDCS). This compares to a total backlog of $ 8,837,000 as of
June 30, 1996.
GROSS PROFIT MARGIN in the current quarter was 36% of revenue
($2,885,000) compared to 35% ($847,000) or the three months ended September
30, 1995. The additions of ACT and VEC contributed $2,023,000 to the increased
gross margin (28% of revenue and $670,000 from ACT; and 55% of revenue and
$1,353,000 from VEC). TSI's gross profit margin was 26% , a decrease from 33%
in the previous year but with higher revenue brought $730,000 in dollar gross
profit as compared to $702,000 in 1995. TSI's gross margin was depressed by
product mix heavily weighted to completion of lower margin water treatment
projects being executed. MDCS had a gross profit margin of 37% ($132,000) in the
three months ended September 30, 1996 as compared to 45% ($145,000) in the 1995
period. Management expects the gross margin to improve in subsequent quarters
from the relative mix of revenue from the four operations. For example the
revenue split is expected to be equal between the three larger operations,
accounting for slightly less than one third of the revenue stream each. With
the higher margin in VEC and in ACT (they earned 36% gross margin for the last
six months of Fiscal 1996), the overall results are expected to improve with
increased margins at TSI, due to product mix shifting away from water treatment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (S,G&A) increased
$1,794,000 from $751,000 in the 1995 first quarter to $2,545,000 in the 1996
period. The acquisitions accounted for $1,567,000 of the increase, $498,000
from ACT and $1,069,000 from VEC. TSI's S,G&A rose 25% from $652,000 in
1995's first quarter to $818,000 currently. MDCS increased $78,000 from
$83,000 to $161,000. SALES EXPENSES increased $437,000 from $161,000 in 1995
to $598,000 in 1996. Significant increases are associated with the ACT
acquisition resulting in $203,000 additional costs, and with the VEC
acquisition adding $208,000 currently. The selling expense for Topro increased
by $26,000 for the period. MDCS's sales expense did not increase or decrease
in the current quarter from the comparable quarter in 1995. GENERAL AND
ADMINISTRATIVE EXPENSE increased $1,357,000, from $590,000 in the 1995 period
compared to $1,947,000 currently. Of this increase $295,000 is associated with
the ACT purchase and $862,000 is from the acquisition of VEC. TSI's expense in
15
<PAGE> 16
the three months ended September 30, 1996 increased $139,000 to $652,000 from
$513,000 in the 1995 period. MDCS operations accounted for $61,000 of the
increase as its G&A was $139,000 in the current quarter compared to $78,000 in
1995. While it is difficult to assess the overall Selling, General and
Administrative expenses with the current quarter of results from the larger
acquired subsidiaries, management feels the assimilation of these businesses has
increased overhead costs in the short run. For example, Topro's legal fees in
the quarter were $23,000, an increase of $13,000 from the 1995 period, outside
services increased $22,000 (from $7,000) and stockholder relations expense
increased $17,000 from $7,000. The overall increase in Topro G&A expense was
$78,000 from $175,000 in the three months ended September 30, 1995 to $253,000
for the current quarter. On the other hand, it appears both acquired
subsidiaries have decreased their S,G&A expenses in the quarter ended September
30, 1996 when compared to their rate of expenditure in periods included in the
last fiscal year (six months for ACT and two months for VEC). Management
believes elimination of duplicate services will continue to reduce the S,G&A
expense.
GOODWILL AMORTIZATION resulting from the acquisitions of ACT and VEC
totaled $87,000 ($41,000 for ACT and $46,000 for VEC).
INTEREST EXPENSE increased $137,000 in the three months ended
September 30, 1996 from $35,000 in 1995 to $172,000 in 1996. $131,000 of the
increase is attributable to the inclusion of the acquired subsidiaries, ACT
($89,000) and VEC ($42,000). TSI accounted for $6,000 of the increase from
$35,000 in 1995 to $41,000 in 1996. As of September 30, 1996 there is
$1,472,000 of short and long term debt carried by ACT, $1,275,000 by VEC and
$4,380,000 by the parent company. MDCS has no short or long term debt.
OTHER INCOME decreased $8,000 in the three months ended September 30,
1996 over the same period in 1995. There was a $10,000 gain from the sale of
assets in the 1995 period.
NET INCOME OF THE CONTROL SYSTEMS OPERATIONS was $81,000 for the three
months ended September 30, 1996, compared to $70,000 in the 1995 period, an
improvement of $11,000. The net income from ACT and VEC total $239,000
($41,000 from ACT and $198,000 from VEC) while TSI had a decrease of $154,000
from the $24,000 earned in 1995 (a net loss of $130,000). MDCS lost $28,000 in
the current period, a net decrease of $74,000 from the $46,000 earned in the
three months ended September 30, 1995. Net Income for the quarter was lower
than expected as the direct result of a sudden delay of a major semi-conductor
fabrication project the Company had been executing. The project was put on
immediate and complete hold in July. The delay was attributed to the customers
concern over demand for its project in the market place. Without this impact
revenues for the quarter would have been more than $1,000,000 higher with a
corresponding increase in net profits. The project is forecast to resume in
mid-calendar 1997.
NET INCOME FROM CONTINUING OPERATIONS inclusive of the distribution
business(Tech Sales, Inc.), which was discontinued in 1995, resulted in a loss
of $72,000 for 1995. This compares with a profit of $81,000 for the three
months ended September 30, 1996 or an improvement of $153,000. The
distribution business contributed a net loss in the period ended September 30,
1995 of $143,000.
16
<PAGE> 17
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.19* Employment Agreement dated July 27, 1995 between
Registrant and E. Gregory Fisher.
10.21* Employment and Consulting Agreement - Michael Taylor.
10.22* Employment and Consulting Agreement - Kathleen
Taylor.
10.23* Loan Agreement and Convertible Debenture dated
October 30, 1996 - Renaissance Capital Growth &
Income Trust, PLC.
17
<PAGE> 18
10.24* Press Release dated October 16, 1996 with respect to
the All-Control Systems, Inc. Letter of Intent.
11.1 Computation of Earnings per Share filed with this
amendment.
27* Financial Data Schedule.
b) Reports on Form 8-K.
During the quarter covered by this report, the
Company filed no reports on Form 8-K.
* Previously Filed in original 10-Q.
18
<PAGE> 19
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: January 21, 1997 /s/ John Jenkins
----------------------------- -------------------------------------
John Jenkins
President and Chief Executive Officer
Date: January 21, 1997 /s/ Thomas Tennessen
----------------------------- -------------------------------------
Thomas Tennessen
(Principal Accounting Officer)
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.19* Employment Agreement dated July 27, 1995 between Registrant and E. Gregory Fisher.
10.21* Employment and Consulting Agreement - Michael Taylor.
10.22* Employment and Consulting Agreement - Kathleen Taylor.
10.23* Loan Agreement and Convertible Debenture dated October 30, 1996 - Renaissance Capital Growth & Income Trust,
PLC.
10.24* Press Release dated October 16, 1996 with respect to the All-Control Systems, Inc. Letter of Intent.
11.1 Computation of Earnings per Share.
27* Financial Data Schedule.
</TABLE>
* Previously Filed
20
<PAGE> 1
EXHIBIT 11.1
TOPRO, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Quarter ended September 30,
---------------------------
1995 1996
---- ----
<S> <C> <C>
Primary:
Income (loss):
Continuing operations $ (72,000) $ 81,000
Discontinued operations $ (16,000) --
--------- ----------
$ (88,000) $ 81,000
========= ==========
Shares:
Weighted number of common shares outstanding 3,891,354 6,639,403
Add - Dilutive effect of outstanding options and warrants (as
determined by the application of the treasury stock method) -- 1,202,313
--------- ----------
3,891,354 7,841,716
========= ==========
Primary earnings per share:
Continuing operations $ (0.02) $ 0.01
Discontinued operations * $ 0.00
--------- ----------
$ (0.02) $ 0.01
========= ==========
* Less than $.01 per share
Reconciliation of net income (loss) to amount used for fully
diluted computation
Income (loss) per primary computation above
Continuing operations $ (72,000) $ 81,000
Discontinued operations $ (16,000) --
--------- ----------
$ (88,000) $ 81,000
Add: Interest on 9% Convertible Debenture -- $ 79,000
Interest on 10% Senior Convertible Debenture -- $ 9,000
Interest on 8% 270 Day Convertible Notes -- $ 7,000
--------- ----------
$ (88,000) $ 176,000
========= ==========
Reconciliation of weighted average number of shares outstanding
to amount used for fully diluted computation:
Weighted number of common shares outstanding 3,891,354 6,639,403
Add: Dilutive effect of outstanding options and warrants (as
determined by the application of the treasury stock method) -- 1,342,454
Shares issuable from assumed exercise of convertible debt -- 3,070,007
--------- ----------
3,891,354 11,051,864
========= ==========
Fully diluted earnings per share:
Continuing operations $ (0.02) $ 0.02
Discontinued operations * $ 0.00
--------- ----------
$ (0.02) $ 0.02 (a)
========= ==========
</TABLE>
- ---------------
* Less than $.01 per share
(a) Effect is antidilutive, therefore not presented in statement of operations
