SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT
------ OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
------ ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number: 0-12643
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GANDALF TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
ONTARIO, CANADA NOT APPLICABLE
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
130 COLONNADE ROAD SOUTH, NEPEAN, ONTARIO, CANADA K2E 7M4
(Address of principal executive offices) (Postal Code)
Registrant's telephone number, including area code: (613) 723-6500
---------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares
(Title of Class)
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.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
[Cover page 1 of 2 pages]
The aggregate market value of the Common Shares held by non-
affiliates of the registrant, based upon the closing sales price
of the Common Shares as reported on The Nasdaq Stock Market
(National Market System) on June 2, 1994 was approximately
$14,165,313. This amount excludes 5,407,833 Common Shares held
by all executive officers, directors, and shareholders holding
over 5 percent of the outstanding Common Shares on that date, as
such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination
for other purposes. As of June 2, 1994, 28,072,333 Common
Shares, without nominal or par value, were issued and
outstanding.
All dollar amounts in the Annual Report on Form 10-K are in
United States dollars, except where indicated.
DOCUMENTS INCORPORATED BY REFERENCE
PART I None
PART II
Item 5 Market for Registrant's Common Stock and Related
Security Holder Matters. Page 30 of the Annual
Report to Shareholders for the fiscal year ended
March 31, 1994 (Exhibit 13).
Item 6 Selected Financial Data. Inside front cover of the
Annual Report to Shareholders for the fiscal year
ended March 31, 1994 (Exhibit 13).
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. Pages 25 to 29
of the Annual Report to Shareholders for the fiscal
year ended March 31, 1994 (Exhibit 13).
Item 8 Financial Statements and Supplementary Data. Pages 12
to 24 of the Annual Report to Shareholders for the fiscal
year ended March 31, 1994 (Exhibit 13).
PART III None
[Cover page 2 of 2 pages]
TABLE OF CONTENTS
Page
----
PART I
Item 1. Description of Business 4
Industry Background 4
The Company 4
Products and Strategy 4
Sales and Marketing 7
Field Service and Customer Support 7
Research and Development 7
Manufacturing 8
Customers 8
Competition 9
Backlog 9
Patents and Trademarks 9
Employees 9
Environmental Affairs 10
Corporate Structure 10
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote
of Security Holders 11
PART II
Item 5. Market for Registrant's Common Stock
and Related Security Holder Matters 12
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 12
Item 8. Financial Statements and
Supplementary Data 12
Item 9. Disagreements on Accounting and
Financial Disclosure 12
PART III
Item 10. Directors and Executive Officers 12
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain
Beneficial Owners and Management 19
Item 13. Certain Relationships and Related
Transactions 20
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 21
Signatures 24
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Industry Background
------------------------------
Over 20 years, the marketplace for intelligent networking of
computer system has developed from simple extension of the
geographic distance separating users from centralized computing
resources to complex, infrastructures that now link users, and
organizations, together on premises (Local Area Networks) or over
telephone services (Wide Area Networks). Increasingly, however,
this distinction has become blurred as LAN's reach out to remote
locations, and invisible access to any authorized resource
becomes normal.
The use of the telecommunications network now allows people
to work from their homes with computers. Companies can hold
meetings in different cities using video transmissions and
important documents can be transmitted using facsimile equipment
anywhere in the world. This increasing need for the transmission
of information provides ever increasing opportunities for the
supply of products that allow for continued, effortless
communication to all parts of the world.
The Company
--------------------
Gandalf Technologies Inc. was incorporated on April 29, 1971
as Gandalf Data Communications Limited by articles of
incorporation under the laws of the Province of Ontario. The
terms "Gandalf" and "the Company" herein refer to Gandalf
Technologies Inc. and its subsidiaries. The registered office of
Gandalf Technologies Inc. is 130 Colonnade Road South, Nepean,
Ontario, Canada K2E 7M4, in the metropolitan Ottawa area,
telephone (613) 723-6500. On August 2, 1991 the Company acquired
Infotron Systems Corporation, an American company incorporated in
1968, and merged its two U.S. subsidiaries under the name Gandalf
Systems Corporation.
Products and Strategy
-----------------------------------
Gandalf's software and hardware products permit users to
communicate between information sources originating from a
variety of equipment supplied by different vendors, over
distances ranging from inter-office local area networks to
intercontinental wide area networks. The Company's products may
be sold separately as discrete network components or they may be
configured, integrated and serviced by the Company or its
partners as value-added networks designed to interconnect multi-
vendor computer, voice and video systems in geographically
dispersed areas.
The technologies contained within the range of Gandalf
products provide users with choice of telecommunications
technologies for the transmission of mixed media services over an
array of different telecommunication services. The mixed media
inputs may be voice, computer terminals, personal computers,
local area networks, mainframe computers, facsimile machines and
video equipment connected to transmission services, such as,
Public Switched Telephone Network (PSTN), Integrated Services
Digital Network (ISDN), X.25 digital networks, frame relay and
private leased circuits from 1200 bits per second to digital
circuits up to 34 megabits per second (E3).
Using both direct and indirect sales channels through its
subsidiaries in Canada, the United States, the United Kingdom,
the Netherlands, France and Belgium, and selected distributors
other geographical areas, Gandalf is able to bring to its
customers a variety of telecommunication solutions.
The Company also provides support services and uses a worldwide
force of skilled employees to:
. consult with the Company's customers;
. design communications networks for the customer's
specific needs;
. manufacture or source the product components of that
network;
. install the equipment;
. train the customer's employees on how to use and maintain
the system;
. stand by to diagnose the network and service the
equipment should it be necessary.
With its broad expertise in both the mixed media input of a
telecommunications network and the connection to an array of
transmission technologies, Gandalf is now focussing its efforts
on the remote access segment of the telecommunications market.
The remote access market, still a young and growing opportunity,
has evolved as organizations have recognized the need to bring
information to their users and customers at the furthest point of
contact. This contact at the remote branch office, site or home
provides the customer with access to information needed to make
informed decisions and effectively understand the service or
product being offered.
For information regarding Gandalf's foreign and domestic
operations, see note 23 to the Company's financial statements
incorporated by reference herein.
The Company markets an extensive product portfolio, many
products of which have been newly introduced or substantially
enhanced in fiscal 1994.
Private Wide Area Networking
--------------------------------------------
Private backbone networks are an important feature of many
Gandalf customers and emerging users in international markets.
Typically purchased to improve company costs when compared to
using normal telephone services, the family comprises:
Access 2120. Access 2120 branch hub combines technology
integration and aggressive pricing to extend the benefits of
multimedia networking to an enterprise's remote sites. Available
for entry-level applications in large networks or for branch
support in smaller branch and region networks, the Access 2120
aggregates voice, video and data or LAN traffic, reducing
equipment costs and consolidating traffic over cost-effective,
high bandwidth trunks. High performance voice compression and
innovative LAN traffic management maximize cost efficiency.
Gandalf 2300 Regional Concentrator. The Gandalf 2300
Regional Concentrator provides cost-effective voice, data, LAN
and video integration for regional concentration of many 2120
locations. Supporting both circuit-switched traffic and frame
relay concentration over private and public services, it
maximizes the use of bandwidth up to and including T1/E1 services
by innovative concentration of multiple frame relay branch
circuits onto a smaller number of backbone connections.
Access 2050. Access 2050 is a high performance Cell
Switching network communications server, providing network
processing, routing and transportation consolidation. The Access
2050 uses a patented high-speed multiple bus architecture for
greater throughput and reliability. The Quic-Bus architecture
offers integrated cell switching and circuit transport on the
same platform for integration of voice, LAN, video and data
networks.
StarMaster
---------------
The StarMaster system is a software-based local and wide
area digital networking system, designed to link commonly used
computers and terminals in a user friendly and secure operating
environment. Within the StarMaster system, a number of sub-
systems offer the physical and logical functions required within
a network; to provide connectivity to terminal-based host
systems, as well as gateways to LAN and wide area X.25 services.
The product also features innovative digital ISDN and T1 services
for use in Voice PBX and video conferencing applications. Multi
location StarMaster networks are supported by a scalable, robust
family of small statistical multiplexors
(MUX 2000), transmission products and ISDN terminal adaptors.
Xpressway
---------------
A key focus for managed LAN-based networks, Xpressway was
introduced in fiscal 1994 and delivers new functionality to
Access Hub users. Key to its architecture is the ability to
seamlessly integrate LAN's even when remotely connected, to on-
premise computing facilities using cost effective, emerging
digital switched telephone services such as ISDN. This
architecture combines the best of LAN Hub, router and emerging
LAN switching technologies, in a single, inexpensive approach to
LAN user ubiquity. Key product introductions have been:
Xpressway ISDN. A high performance Band Role (64K) ISDN
subsystem for direct telephony channel connections for LANs,
featuring Gandalf's patented data compression. This supports up
to 248 remote locations per hub.
Xpressway XBR. A high performance up to E1 (2.048 Mbps)
mutliport compression bridge.
Xpressway Prism. A multisegment (21) Ethernet LAN switching
subsystem with Fibre Distributed Data Interchange (FDDI)
functionally. A wide range of on-premise Ethernet and Token Ring
connectivity options, as well as mutliprotocol routing functions,
are also supported.
These complement existing analog and gateway products
including Access Router and Access 2590, and provide seamless
conversion gateways for existing StarMaster and Infotron NP
users.
LANLine
------------
LANLine addresses the high performance LAN inter-
connectivity market primarily through indirect channels. Its
technology, and certain products, are also key elements of
Xpressway networks when located at the remote end points of
these networks. Development and marketing focusses upon fast
time to market, and innovative designs which are extremely easy
to install and use by a large population with little or no
technical skill. This simplifies sale and reduces substantially
the traditional costs of support and service of complex
networking products. Products new in fiscal 1994 include:
LANLine 5220. The LANLine 5220 Remote Bridge is now the
world's largest selling Ethernet Bridge and combines Gandalf's
patented data compression, RISC processor performance and
aggressive pricing. This has been complemented by innovative
models for specific segments. The LANLine 5225i and 5240i
support remote, switched networks of Novell Netware users
seamlessly without complex systems administration, over PSTN and
ISDN services respectively.
LANLine 5250. The LANLine 5250L is a high performance
security and firewall local router. Gandalf has successfully
pioneered ultra-low cost and easy to use segmentation of local
LAN workgroups, through development of custom chips (ASICS)
providing inter-bridging of workgroups in its LANLine 5210/11
family, at unit costs comparable to PC software.
Extensive third party distribution worldwide has been
achieved through effective marketing and integrated product
family approval.
Centralized Management and Control
----------------------------------------------------------
Gandalf has recently developed a new and extremely powerful
end-to-end network management system, Gandalf Passport. Gandalf
Passport is a standards-based graphics manager that combines the
needs of Local Area Networks (LANs) with the more diverse Wide
Area Backbone Networks (WANs) by constantly monitoring all
activities within a network. Gandalf Passport is designed to
identify problems, offer solutions and, if needed, rectify
network failures for a network operator. This product was
released in October 1993.
Sales and Marketing
------------------------------
Gandalf markets its products and services through both
direct and indirect channels through wholly-owned subsidiaries in
the United States, Canada, United Kingdom, the Netherlands and
France. The Company's international division also markets to
over 75 other countries through local distributors.
Field Service and Customer Support
-------------------------------------------------------
The Company provides, through its field service staff, both
technical support relating to the successful installation and
interconnection of the Company's products with those of other
manufacturers, and ongoing field service and maintenance support.
The Company's field service and technical support staff consists
of over 250 employees in the United States, Canada, the United
Kingdom, and Continental Europe.
The Company believes that providing network services and
support to its large installed base of customers is fundamental
to its continued growth. The Company, through its extensive
field service organization, sells support services under contract
to a significant percentage of its customers. The Company
believes that the customer contacts generated through its field
service organization provide the opportunity for sales of
additional Gandalf products and enhance referrals for the sale of
products to new customers.
Research and Development
------------------------------------------
Success in the rapidly changing communications element of
the information industry is dependent upon the ability to
anticipate and respond to customer needs and to develop reliable,
cost-effective products with expanded capabilities and
performance. The Company intends to continue to focus its
research and development in the areas of network design, high-
speed digital communications and network management.
The Company spent $16.8 million on product development in
fiscal year 1991, $18.1 million in fiscal 1992 (8 months), $20.5
million in fiscal 1993 and $15.0 million in fiscal 1994.
In recognition of the geographic diversity of its business,
the Company operates a separate European Technology Centre in
addition to its research and development facilities located in
Canada and the United States.
Manufacturing
----------------------
The manufacturing of Gandalf's products consists primarily
of assembling and testing electronics assemblies. In addition,
enclosures and racks are assembled complete with electrical power
apparatus, interconnect wiring and cabling. Finally, electronics
assemblies are integrated with the enclosures or racks, according
to standard and customer-specific configurations, which are
tested prior to shipment to customers.
The Company manufactures electronics assemblies in Canada
using a high degree of automation. All operations are conducted
under procedures which are managed under the ISO 9002 quality
management program. These standards provide a framework for
Gandalf's ongoing quality improvement programs and they are
widely recognized as the mark of a world-class manufacturer.
Final assembly and testing are conducted at the Canadian factory
as well as the distribution centre in the United Kingdom.
In some cases, Gandalf subcontracts the entire manufacture
of products to a single supplier. As well, whenever Gandalf
designs components and subassemblies, a single-source supplier is
used. Gandalf believes that the close working relationship with
a single supplier enhances product quality, on-time delivery and
a close control of costs. If necessary, all of these items could
be sourced from other vendors at Gandalf's discretion.
To assure product supply, it is the Company's policy to
avoid designing with sole sources of components or subassemblies.
However, even with multiple sources, from time to time the
electronics industry has experienced shortages in the supply of
certain semi-conductor and other components. To date, the
Company has not experienced any significant production problems
or delays of its shipping schedules for this reason. No
assurances can be given that future shortages will not have an
adverse effect on the Company's business.
Customers
----------------
Gandalf's target customers are end users of data processing
equipment and include major corporations, institutions, carriers
and governments in all of its major geographic markets.
The Company's business is not seasonal. The Company is not
dependent upon a single customer or a few customers and the loss
of any one or more would not have a material adverse affect on
the Company. During the three-year period ended March 31, 1994,
no customer accounted for 10 percent or more of the Company's
revenues in any year.
Competition
-------------------
Competition in the telecommunications market is intense and
marked by advances in technology which frequently result in the
introduction of products with improved performance
characteristics. Failure to keep pace with such advances could
negatively affect the Company's competitive position and
prospects for growth. The Company competes on the basis of
price, product quality and communications reliability, various
supporting services, product development capabilities and
availability. The Company believes it is competitive in each of
these respects. However, many of Gandalf's competitors have
greater financial, technological, manufacturing, marketing and
personnel resources than the Company.
The Company competes with the local area networking (LAN)
and wide area networking (WAN) companies who are attempting to
address the LAN/WAN Internetworking marketplace. These include
Ascom Timeplex, Cabletron Systems Inc., Cisco Systems Inc.,
General DataComm Industries Inc., SynOptics Communications Inc.,
3COM Corporation and Wellfleet Communications Inc. Gandalf
believes its worldwide coverage, its extensive customer base, its
experienced direct sales force and its global technical support
will allow it to compete successfully in its chosen markets.
Backlog
-------------
Gandalf attempts to manufacture inventory in quantities
sufficient to provide timely delivery of its products. Because
of the short delivery cycle, backlog is not considered to be a
meaningful indication of future revenues.
Patents and Trademarks
------------------------------------
The telecommunications industry is characterized by rapid
technological advances and the Company believes that patents are
of less significance than such factors as continuing innovative
engineering and design efforts. The Company believes its
trademark "GANDALF" is a valuable asset and the Company has
obtained or applied for trademark registration in a number of
countries. The Company's product trademarks are protected in
sales markets where potential business is believed to warrant the
expenditure for such trademark registrations.
Employees
-----------------
On March 31, 1994 Gandalf had 1,127 employees, of whom 294
were engaged in manufacturing, 149 were engaged in engineering
development, 553 were sales, marketing and customer support
personnel and 131 held general and administrative positions. For
information with respect to restructuring actions taken in the
fourth quarter of fiscal 1994, please see Note 14 of the Notes to
the Consolidated Financial Statements included in Exhibit 13
hereto. On March 31, 1993 the Company had 1,366 employees and on
March 31, 1992 the Company had 1,616 employees. Gandalf believes
that its continued success will depend in part on its ability to
attract and retain highly skilled technical, marketing and
management personnel. To date, the Company has had no difficulty
attracting and retaining qualified employees. The Company
considers its relations with its employees to be satisfactory.
Environmental Affairs
---------------------------------
The Company's manufacturing facilities are subject to
numerous laws and regulations designed to protect the environment
from pollution which, to date, have not had a material effect on
the capital expenditures or earnings of the Company. The Company
posted a bond for $500,000 at the time of the merger with
Infotron Systems Corporation, under the requirements of the New
Jersey Environmental Cleanup Responsibility Act, in connection
with Infotron's facilities in Cherry Hill, New Jersey to cover
future cleanup costs that may be required to be paid by the
Company under the legislation. Other than as described above, in
the opinion of management environmental laws and regulations are
not expected to have a material effect on future capital
expenditures or earnings of the Company.
Corporate Structure
-----------------------------
The Company has a number of wholly-owned direct and indirect
subsidiaries of which the following are deemed principal
subsidiaries:
* Gandalf Canada Ltd., Ontario, Canada
* Gandalf Systems Corporation, Delaware, U.S.A.
Gandalf International Limited, United Kingdom
* Gandalf Digital Communications Limited, United Kingdom
- Gandalf S.A., France
- Gandalf Nederland B.V., Netherlands
* Shares have been pledged as security to the Royal Bank of
Canada pursuant to Credit Agreements.
ITEM 2. PROPERTIES
The Company operates from four leased premises in Nepean,
Ontario, Canada. A research and administration facility
(comprising 97,000 square feet) is located on land adjacent to
the Company's manufacturing facility (comprising 58,000 square
feet) in Nepean. Pursuant to an option agreement dated October
1, 1986, the Company sold to the builder of the research and
administration facility both the manufacturing facility and the
research and administration facility for a price of $11.6
million. Both facilities have been leased back to the Company
for a 10-year term with four options to renew of five years each.
In October 1988, the Company opened a 18,250 square foot printed
circuit board manufacturing facility on land adjacent to the
Company's other buildings in Nepean. In October 1988, the
Company sold this building to the builder for a price of $2.6
million with a leaseback to the Company for a 20-year term. The
Company also leases a 17,000 square foot computer services
facility in Nepean, Ontario. The lease expires in 1996.
In August 1991, as a result of the Infotron merger, the
Company acquired a lease on a research, administrative and
distribution facility in Cherry Hill, New Jersey, U.S.A.
(comprising 183,000 square feet). In September 1992, the lease
was amended to reduce the leased square footage to 123,000. The
lease expires in 1995 and may be extended by the Company for an
additional five (5) years. The Company is presently negotiating
the termination of the lease in its entirety and is planning to
relocate its Cherry Hill operations to a smaller facility in the
area. The Company also leases approximately 62,000 square feet
in a separate building in Cherry Hill, New Jersey which is not
presently being occupied. The lease expires in 1995.
The Company owns a facility in Warrington, Cheshire, England
(comprising 37,200 square feet) used as a distribution centre and
offices.
It is management's belief that the existing principal
properties described above are adequate for the Company's current
needs.
ITEM 3. LEGAL PROCEEDINGS
An action was commenced in October 1987 against the Company
in the Supreme Court of Ontario by CSS Communications Systems
Services GmbH, a former distributor of Gandalf products. This
claim is in the amount of approximately $2.5 million for an
alleged breach of a distribution agreement. Based upon their
review of the proceedings to date and the result of the pre-trial
conference, counsel considers the Company has good defenses to
the action on the merits.
In August 1990, an action was initiated against the Company
in the Trade Court of Brussels by Comtech SA, a distributor of
Gandalf products in Belgium. Claims total approximately $1.8
million for an alleged termination of the distribution agreement
and an alleged unlawful termination of negotiations for
the purchase of Comtech SA. The Company has retained counsel to
defend the action. Counsel has filed a brief stating that the
Company has good defenses to the action.
On December 26, 1991 the Company filed a complaint in the
Superior Court of New Jersey for breach of contract against
Graphnet, Inc., a customer of the Company, demanding judgement in
the approximate amount of $2.0 million. On March 6, 1992
Graphnet filed an answer and a counterclaim for breach of
contract claiming relief for an unspecified amount. In answers
to interrogatories dated November 24, 1992, Graphnet asserted
that it was seeking compensatory damages in this proceeding in an
unspecified amount which it described as being in excess of $1.0
million and that it was also seeking punitive damages, interest,
counsel fees and treble damages. On September 24, 1993, the
Company, with leave of court, joined Netrix Corporation, the
manufacturer of the equipment, as a third-party defendant on
Graphnet's counterclaim, for, inter alia, contribution and
indemnity. The Company believes that its complaint is
meritorious and that it has good defenses to the counterclaim.
On April 19, 1993, a third party claim was made against the
Company in the Ontario Court (General Division) by Distribution
Architects International, Inc. and D.A. Distribution Software
Systems Ltd. who, among others, are defendants in an action
commenced by 1110-0435 Quebec Inc. and Deskin Inc. for breach of
contract and negligence as a result of the alleged failure of a
computer system that was designed, supplied and installed by the
defendants. The third party claim is for contribution and
indemnity in respect of the claim made against the defendants,
which is in the amount of $25 million (Cdn.). Counsel in the
action has filed a statement of defense. The Company considers
that it has good defenses to the third party claim on the merits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
For information relating to the registrant's common stock
and related shareholder matters, reference is made to page 30 of
the 1994 Annual Report to Shareholders, filed as Exhibit 13
hereto, which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
For information relating to Gandalf's selected financial
data, reference is made to the inside front cover of the 1994
Annual Report to Shareholders, filed as Exhibit 13 hereto, which
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For information relating to management's discussion and
analysis of financial condition and results of operations,
reference is made to pages 25 to 29 of the 1994 Annual Report to
Shareholders, filed as Exhibit 13 hereto, which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For information relating to the Company's financial
statements and supplementary data, reference is made to pages 12
to 24 of the 1994 Annual Report to Shareholders, filed as Exhibit
13 hereto, which information is incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table and the notes thereto set out, as of
June 2, 1994, the name and age of each director of the Company
and any nominees for director of the Company; his present
principal occupation, business or employment; his principal
occupation, business or employment during the past five years,
the period during which he has served as a director of the
Company, all other major positions and offices with the Company
and significant affiliates thereof now held by him, if any.
BUSINESS EXPERIENCE
DIRECTOR DURING THE PAST FIVE YEARS,
NAME SINCE DIRECTORSHIPS AND OTHER
INFORMATION
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Desmond Cunningham, 63 1971 A founder of the Company; Chairman
since August 1985 and Chief
Executive Officer from October 1989
to October 1992. Director of
Gandalf Systems Corporation,
Gandalf Digital Communications
Limited, Gandalf Nederland B.V. and
Gandalf International Limited
(subsidiaries of the Company).
Alexander Curran, 67 1987 President, Alex Curran
Consultant Inc. (management
consulting) since December
1988.
Charles J. Gardner, Q.C., 58 1981 Partner of Goldberg, Shinder,
Gardner & Kronick (barristers
and solicitors) since 1966.
Donald M. Gleklen, 57 1991 Managing Partner of Brobyn
Capital Partners (private
venture capital firm) since
March 1994. Senior Vice-
President of MEDIQ
Incorporated (health care
services company) from
September 1968 to February
1994.
Brian R. Hedges, 41 1992 Management Consultant since April
1994. Chief Executive Officer of
the Company from October 1992 until
April 1994 and President from
September 1992 to April 1994.
Management Consultant from April
1992 to August 1992. Senior Vice-
President of Finance, Teleglobe
Inc. (telecommunications carrier)
from December 1990 to March 1992
and Vice President of Finance,
First Air (regional airline) from
December 1989 to December 1990.
Financial Consultant from August
1989 to November 1989. Director of
the Company from September 1981 to
August 1989 and Vice-President from
June 1980 to July 1989.
Robert E. Keith, 52 1992 President of Technology Leaders
Management Inc. (high technology
venture capitalists) and Managing
Director of Radnor Venture
Partners, L.P. (high technology
venture capitalists) since July
1989.
A. Graham Sadler President of Morline Inc.
(suppliers of electronic and
mechanical components and parts)
since 1991. Executive with
Northern Telecom (manufacturers of
telecommunications products from
1962 to 1991, and President of
Northern Telecom Electronics
(subsidiary of Northern Telecom)
responsible for managing custom
silicon supply, hybrids, printed
circuit boards, and manufacturing
process development in North
America and Asia, from 1987 to
1991.
Thomas A. Vassiliades, 58 1993 President and Chief Executive
Officer of the Company since
May 1994. President and Chief
Executive Officer of Avatar
Management Services, Inc.
(management and consulting
services) since June 1993 and
President and Chief Executive
Officer of Bell Atlantic
Business Systems Inc.
(international independent
computer and network services)
from February 1990 to June
1993. From August 1988 to
February 1990, Chief Executive
Officer of Bell Atlantic
Customer Services Inc.
(independent computer
services) and from July 1987
to December 1989, information
systems oversight executive
for the Bell Atlantic
Enterprises' Corporation (the
non-regulated business of Bell
Atlantic - a regional Bell
operating company).
Mr. Hedges resigned from the Board as of June 6, 1994 and
Dr. Sadler has been nominated for election to the Board of
Directors at the upcoming meeting of shareholders on August 11,
1994.
There are no family relationships between directors or
executive officers of the Company. Under the provisions of the
Ontario Business Corporations Act, 1982, a majority of the
directors must be resident Canadians.
The names, ages, positions with the Company and business
experience of the executive officers of the Company, other than
Mr. Vassiliades, are as follows:
Alexander Brisbourne, 44, who has been Vice President of
Marketing since January 1994. From August 1993 to January 1994,
he was Vice President and General Manager, Premier, of Gandalf
Canada Ltd. and from March 1993 to January 1994, he was General
Manager, Premier. From June 1992 to March 1993, he was Vice
President, Marketing Strategy of the Company and from September
1990 to June 1992, he was Director of International Marketing
Operations. From October 1987 to September 1990, he was Director
of Marketing of Gandalf Digital Communications Limited.
Gatone A. Daniello, 49, who has been Vice President and
Chief Technology Officer since June 1993. From March 1991 to May
1993, he was founder and President of Network Architects Inc.,
(software company specializing in the development of custom
business applications). From May 1982 to March 1991, he was
President and Chief Executive Officer of Datamedia Corp.,
(speciality microcomputer manufacturer).
M. Gerald Gainer, 46, who has been Vice President of
Manufacturing of Gandalf Canada Ltd. since April 1989.
Walter R. MacDonald, 32, who has been Vice President of
Finance and Chief Financial Officer since September 1993. From
June 1992 to September 1993, he was Controller; from June 1991 to
June 1992, he was Treasurer; and from January 1990 to June 1991,
he was Assistant Treasurer of the Company. From May 1988 to
December 1989, he was General Manager of Charlesfort Development
Corporation (residential developer).
William M. McKenzie, 52, who has been President of Gandalf
Canada Ltd. since April 1994. Management consultant from May
1992 to April 1994. President and Chief Executive Officer of
Memotec Data Inc./Teleglobe Inc. (telecommunications, networking
and information processing company) from March 1983 to May 1992
and President and Chief Executive Officer of Teleglobe Canada
Inc. (international telephone company) from July 1990 to May
1992.
Judith M. Scott, 51, who has been Managing Director of
Gandalf Digital Communications Limited since August 1990. From
December 1987 to August 1990, she was Vice-President, Sales
(U.K.) of the Company.
ITEM 11.
EXECUTIVE COMPENSATION
Overview
-------------
The Company currently has seven executive officers. The
aggregate cash compensation, including amounts paid under the
Executive Incentive Plan and excluding amounts paid on
termination of employment, paid to all executive officers as a
group (twelve persons) by the Company and its subsidiaries for
services rendered during the fiscal year ended March 31, 1994 was
$1,414,572. In addition, during the fiscal year ended March 31,
1994, executive officers were given the use of automobiles leased
by the Company at an aggregate incremental cost to the Company
and its subsidiaries of $62,351.
The Company provides liability insurance for directors and
officers of the Company and its subsidiaries. The premium
(expressed in U.S. dollars) for the fiscal year ended March 31,
1994 was $93,246 which was paid for by the Company. The policy
limit (expressed in U.S. dollars) is $30 million per year or $30
million per claim with an aggregate deductible of $180,000 per
claim for the Company and a nil deductible for the individual.
The individual directors and officers of the Company and its
subsidiaries are insured for losses arising from claims against
them for certain of their acts, errors or omissions as such. The
Company is insured against any loss arising out of any liability
to indemnify a director or officer.
Summary Compensation Table
--------------------------
The following table presented in accordance with current
regulations under the Securities Act (Ontario) sets forth all
compensation paid for the fiscal years ended March 31, 1994, 1993
and 1992, in respect of each of the individuals who were, at
March 31, 1994, the Chief Executive Officer and the other four
most highly compensated executive officers of the Company, and
three additional individuals who were executive officers of the
Company but were not serving at March 31, 1994. During fiscal
1992, the Company changed the date of its fiscal year end from
July 31 to March 31 and the compensation disclosed in the Summary
Compensation Table for the fiscal 1992 year covers an eight-month
period.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
----------------------------- --------------
Awards
--------------
Securities
Other Annual* Under Options All Other
Name and Principal Positions Year Salary Bonus Compensation Granted Compensation
($) ($) ($) (#) ($)
(a) (b) (c) (d) (e) (f) (j)
-------------------------------------------------------------------------------------------------------------------
Chief Executive Officer 1994 $147,455 --- --- 50,000 ---
B.R. Hedges 1993 $ 65,787 (1) --- --- 75,000 ---
1992 --- --- --- --- ---
Vice President Marketing 1994 $ 90,076 $ 65,496 --- 85,000 ---
A. Brisbourne 1993 $ 92,709 --- --- 25,000 ---
1992 $ 68,183 $ 6,083 --- 9,000 ---
Managing Director 1994 $101,860 $ 8,726 $ 15,920 (6) 50,000 ---
Gandalf Digital 1993 $101,655 $ 44,297 --- 50,000 ---
Communications Limited 1992 $ 63,915 $ 6,620 --- 1,500 ---
J.M. Scott
Vice President and Chief 1994 $111,493 (2) --- --- 125,000 ---
Technology Officer 1993 --- --- --- --- ---
G.A. Daniello 1992 --- --- --- --- ---
Vice President Manufacturing 1994 $ 75,063 $ 8,404 $ 10,693 50,000 ---
M.G. Gainer 1993 $ 77,226 $ 7,327 --- 40,000 ---
1992 $ 82,555 $ 14,946 --- --- ---
Vice President Marketing 1994 $122,851 (3) $144,257 --- --- $ 27,694 (7)
J.C.Hahn 1993 $113,625 $100,000 --- 50,000 ---
1992 $ 81,728 $ 50,000 --- 5,000 ---
President 1994 $ 94,234 (4) $ 43,193 --- 75,000 $181,338 (7)
Gandalf Systems Corporation 1993 --- --- --- --- ---
R.F. Jerd 1992 --- --- --- --- ---
President 1994 $ 80,156 (5) $ 8,989 $ 22,716 (8) --- ---
Gandalf International Limited 1993 $106,630 $ 15,254 --- 40,000 ---
M.F. McGrail 1992 $ 90,353 --- --- 25,000 ---
<FN>
* Perquisites and other personal benefits exceeding the lesser of $50,000 or 10 percent of the total annual salary
and bonus for any of the named executive officers.
(1) Mr. Hedges was employed for six months during fiscal 1993.
(2) Mr. Daniello was employed for ten months during fiscal 1994.
(3) Mr. Hahn was employed for nine months during fiscal 1994.
(4) Mr. Jerd was employed for eight months during fiscal 1994.
(5) Mr. McGrail was employed for nine months during fiscal 1994.
(6) Includes automobile lease payments of $9,342 and payments of $4,074 for retirement benefits.
(7) Amounts accrued or paid in respect of termination of employment.
(8) Includes automobile lease payments of $16,992.
</FN>
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
Market Value of
% of Total Securities
Options Underlying
Securities Granted to Options on the
Under Options Employees in Exercise or Base Price Date of Grant
Name Granted Financial Year ($/Security) ($/Security) Expiration
Date
(a) (b) (c) (d) (e) (f)
----------------------------------------------------------------------------------------------------------------------
Chief Executive Officer 50,000 3.7% 25,000 @ $4.15 Cdn.(1) $4.15 Cdn.(2) June 1, 2003
B.R. Hedges 3.7% 25,000 @ $4.25 Cdn.(1) $4.25 Cdn.(2) November 10, 2003
Vice President Marketing 85,000 5.1% 35,000 @ $4.25 Cdn.(1) $4.25 Cdn.(2) November 10, 2003
A. Brisbourne 7.4% 50,000 @ $1.80 Cdn.(1) $1.80 Cdn.(2) February 9, 2004
Managing Director 50,000 7.4% $1.80 Cdn.(1) $1.80 Cdn.(2) February 9, 2001
Gandalf Digital
Communications Limited
J.M. Scott
Vice President and Chief 125,000 11.0% 75,000 @ $4.15 Cdn.(1) $4.15 Cdn.(2) June 1, 2003
Technology Officer 7.4% 50,000 @ $1.80 Cdn.(1) $1.80 Cdn.(2) February 9, 2004
G.A. Daniello
Vice President 50,000 7.4% $1.80 Cdn.(1) $1.80 Cdn.(2) February 9, 2004
Manufacturing
M.G. Gainer
President Gandalf Systems 75,000 10.8% $3.75 Cdn.(1) $3.75 Cdn.(2) August 11, 2003
Corporation
R.F. Jerd
<FN>
(1) Under terms of the stock options granted in fiscal 1994, executive officers may elect a discount of 15 percent
from the exercise price shown.
(2) The Market Value of the common shares underlying the options was the closing market price on the day prior to the
date of grant.
</FN>
AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
Unexercised Options at
Securities Acquired Fiscal Year End
on Exercise Aggregate Value Realized (#)
Name (#) ($) Exercisable/Unexercisable
(a) (b) (c) (d)
----------------------------------------------------------------------------------------------------------------------
Chief Executive Officer --- --- 58,333 Exercisable
B.R. Hedges 41,667 Unexercisable
Vice President Marketing 6,000 $9,300 Cdn. 11,335 Exercisable
A. Brisbourne 101,665 Unexercisable
Managing Director, --- --- 41,667 Exercisable
Gandalf Digital 83,333 Unexercisable
Communications Limited
J.M. Scott
Vice President and Chief --- --- 25,000 Exercisable
Technology Officer 100,000 Unexercisable
G.A. Daniello
Vice President --- --- 33,333 Exercisable
Manufacturing 76,667 Unexercisable
M.G. Gainer
President --- --- 25,000 Exercisable (1)
Gandalf Systems Corporation 50,000 Unexercisable (1)
R.F. Jerd
<FN>
(1) Expiry date of options was extended beyond fiscal 1994 year end.
</FN>
Bonus and Stock Plans
-------------------------------------
The Company has an Executive Incentive Plan under which cash
compensation is distributed to executive officers during the
year. The plan is administered by the Compensation Committee
which determines the amount that may be paid to executive
officers as a bonus during the year. The criteria used to
determine the amount awarded reflects the position held by the
executive officer in the Company, the level of responsibility,
and the degree to which objectives are achieved. The aggregate
cash compensation paid to executive officers during the fiscal
year ended March 31, 1994 included $134,807 distributed under
this plan.
The Company has five stock option plans as follows:
1983 Stock Option Plan for Key Employees
1984 Stock Option Plan for Directors
1988 Stock Option Plan for Key Employees
1988 Stock Option Plan for Directors
Stock Option Plan for Executives and Directors
As at June 2, 1994, 1,392,500 Common Shares were subject to
options at prices ranging from Cdn.$5.25 to Cdn.$1.35 and
expiring at various dates to April 14, 2004. Of such options,
944,000 Common Shares were subject to options held by all
directors and executive officers as a group.
Compensation of Directors
-----------------------------------------
The by-laws of the Company authorize the Board to determine
the amount of remuneration to be paid to directors for their
services as directors. The Board has approved the following
schedule of fees for directors who are not employees of the
Company.
Directors resident in Canada receive $7,500 (Cdn.) per
annum. Directors resident in the United States receive $7,000
(U.S.) per annum. In addition to the annual retainer referred to
above, each director receives an attendance fee of $400 (in local
currency) for meetings of shareholders, the Board of Directors
and committees of the Board (if he is a member thereof), with the
exception that members receive $800 for each Executive Committee
meeting attended. Directors are entitled to reimbursement by the
Company for all reasonable expenses incurred in attending such
meetings. The Board of Directors held thirteen meetings, the
Audit Committee held four meetings, the Compensation Committee
held two meetings, the Executive Committee held two meetings and
the Nominating Committee held one meeting during the fiscal year
ended March 31, 1994.
During the fiscal year ended March 31, 1994, the following
amounts were paid to directors of the Company in their capacity
as directors, including amounts paid for committee participation
or special assignments: Alexander Curran $10,925; Charles J.
Gardner, Q.C. $11,536; Donald M. Gleklen $14,200; Robert E. Keith
$13,800; David N. Koffsky $4,117; Warren V. Musser $ 3,317;
Patrick J. Suddick $3,588; and Thomas A. Vassiliades $8,897.
The Company has two stock option plans for directors under
which non-employee directors are each awarded stock options on
5,000 common shares on the date of their initial election or re-
election as directors, provided they do not hold stock options at
that time under any of the Company's stock option plans. On
August 12, 1993, Mr. Vassiliades, a director of the Company,
received a stock option under the 1988 Stock Option Plan for
Directors to purchase 5,000 common shares at an exercise price of
Cdn. $3.24 per share.
Directors also participate in the Stock Option Plan for
Executives and Directors. On November 11, 1993 an option to
purchase 25,000 common shares at an exercise price of $4.25 per
share was granted under this Plan to each of Messrs. Cunningham,
Curran, Gardner, Gleklen, Hedges, Keith and Vassiliades,
directors of the Company.
Mr. Charles J. Gardner is a member of a law firm that
provides legal services to the Company. During the fiscal year
ended March 31, 1994, Mr. Gardner's firm was paid $101,153 in
legal fees by the Company and its subsidiaries.
Messrs. Cunningham and Vassiliades each had consulting
arrangements during fiscal 1994 under which they were compensated
by the Company and its subsidiaries. During the fiscal year
ended March 31, 1994, the amount paid to each was as follows:
Mr. Cunningham $112,995 and Mr. Vassiliades $46,000.
Mr. Robert E. Keith and Mr. Warren V. Musser (a former
director of the Company) are executives of Radnor Venture
Partners, L.P., and Safeguard Scientifics (Delaware), Inc. which
are parties to a loan agreement with the Company. During the
fiscal year ended March 31, 1994, the Company and its
subsidiaries repaid $201,000 of the outstanding balance. During
the year interest on this loan amounted to $47,869.
Mr. David N. Koffsky, a former director of the Company, is a
member of a patent, trademark and copyright firm that provides
legal services to the Company. During the fiscal year ended
March 31, 1994, Mr. Koffsky's firm was paid $14,045 by the
Company and its subsidiaries.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of June 2,
1994 with respect to (1) all shareholders known by the Company to
be beneficial owners of more than 5 percent of its outstanding
Common Shares and (2) share ownership by each director and
nominee for director and by each named executive officer still in
the employ of the Company and by all executive officers and
directors as a group:
AMOUNT
BENEFICIALLY PERCENT OF
NAME OWNED (1) CLASS (7)
-----------------------------------------------------------------
Ontario Municipal Employees 1,974,700 7.0%
Retirement Board
One University Avenue, Suite 1000
Toronto, Ontario M5J 2P1
Desmond Cunningham 1,743,092 (2) 6.2%
130 Colonnade Road South
Nepean, Ontario K2E 7M4
Mackenzie Financial Corporation 1,607,700 (3) 5.7%
150 Bloor Street West
Toronto, Ontario M5S 3B5
Alexander Brisbourne 11,333 (4) (8)
Alexander Curran 2,500 (4) (8)
Gatone A. Daniello 25,000 (4) (8)
M. Gerald Gainer 37,133 (5) (8)
Charles J. Gardner 5,000 (4) (8)
Donald M. Gleklen 33,750 (5) (8)
Brian R. Hedges 93,333 (5) (8)
Robert E. Keith 10,000 (5) (8)
A. Graham Sadler 21,550 (8)
Judith M. Scott 47,708 (5) (8)
Thomas A. Vassiliades 1,250 (4) (8)
All executive officers and directors
as a group (13 persons) 2,017,099 (6) 7.1%
(1) All shares are owned of record and beneficially and the
sole investment and voting power is held by the person
named, except as set forth below.
(2) Shares are owned of record by Donosti Investments Inc., a
corporation controlled by Desmond Cunningham.
(3) These securities are beneficially owned by various mutual
funds and client accounts managed by Mackenzie Financial
Corporation. For purposes of the reporting requirements of
the Exchange Act, Mackenzie Financial Corporation is deemed
to be a beneficial owner of such securities; however,
Mackenzie Financial Corporation expressly disclaims that it
maintains beneficial ownership over these shares.
(4) Represents options (currently exercisable or exercisable
within 60 days).
(5) Includes options (currently exercisable or exercisable
within 60 days) on the following common shares:
M. Gerry Gainer 33,333
Donald M. Gleklen 3,750
Brian R. Hedges 58,333
Robert E. Keith 2,500
Judith M. Scott 41,667
(6) Includes options (currently exercisable or exercisable
within 60 days) on 191,666 common shares.
(7) Percentage ownership is calculated based upon total shares
outstanding plus shares subject to options (currently
exercisable or exercisable within 60 days) held by the
individual named or the persons included in the relevant
group.
(8) Amount beneficially owned represents less than one percent
of the total outstanding common shares.
Statements contained in the table as to securities
beneficially owned by directors, officers and certain
shareholders or over which they exercise control or direction
are, in each instance, based upon information obtained from such
directors, executive officers and shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Charles J. Gardner, Q.C., a director of the Company, is
a member of a law firm that provides legal services to the
Company. Messrs. Cunningham and Vassiliades have consulting
arrangements under which they performed services for the Company
during the fiscal year ended March 31, 1994. Other than as
described above, there are no material relationships and related
transactions with directors and executive officers of the
Company.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents included in the 1994 Annual Report
to Shareholders are incorporated by reference into this report:
(1) Auditors' Report.
(2) Consolidated Financial Statements of Gandalf Technologies
Inc. including:
Consolidated Balance Sheets at March 31, 1994 and March 31,
1993.
Consolidated Statements of Income and Retained Earnings for
the years ended March 31, 1994 and March 31, 1993, the eight
months ended March 31, 1992 and the year ended July 31,
1991.
Consolidated Statement of Changes in Financial Position for
the years ended March 31, 1994 and March 31, 1993, the eight
months ended March 31, 1992 and the year ended July 31,
1991.
Notes to Consolidated Financial Statements.
(b) Financial Statement Schedules.
The following financial statement Schedules supporting the
Consolidated Financial Statements and Auditors' Report on
Schedules which are filed as part of this report are as follows:
(1) Auditors' Report on Schedules
(2) Schedule V: Property, plant and
equipment.
Schedule VI: Accumulated depreciation,
depletion and amortization
of property, plant and
equipment.
Schedule VIII: Valuation and qualifying
accounts.
Schedule IX: Short-term borrowings.
Note: Schedules other than those listed above are omitted
as not applicable, not required, or the information is
included in the consolidated financial statements thereto.
(4) Exhibits
Exhibit No. Description
---------- ----------
*3.1 Articles of Incorporation of the
Registrant and amendments thereto
(filed as Exhibit 3.1 to
Registration Statement
No. 2-74405 on Form S-1).
*3.2 Articles of Amendment to Articles
of Incorporation of the Registrant
effective December 14, 1983 and
December 13, 1985 (filed as
Exhibit 4.4 to Registration
Statement No.33-14899 on Form S-
2).
*3.3 By-laws of the Registrant (filed
as Exhibit 3.2 to the Form 10-K
for the fiscal year ended July 31,
1985).
*3.4 Amendment to By-laws of the
Registrant (filed as Exhibit 4.5
to Registration Statement No. 33-
14899 on Form S-2).
*4.1 Common Share certificate (filed as
Exhibit 4.1 to the Form 10-K for
the fiscal year ended March 31,
1993).
*10.1 Lease dated 15th September, 1987
between The Glenview Corporation,
the Company and Gandalf Data
Limited whereby The Glenview
Corporation leased the land and
buildings known as 130 Colonnade
Road South, Nepean to the Company
and Gandalf Data Limited for an
initial term of 10 years at an
initial rent of $1,125,000 (Cdn.)
per annum with four options to
extend each being for five year
periods (filed as Exhibit 10.2 to
the Form 10-Q for the quarter
ended April 30, 1988).
*10.2 Lease dated 15 September, 1987
between The Glenview Corporation,
the Company and Gandalf Data
Limited whereby The Glenview
Corporation leased the land and
the buildings known as 100
Colonnade Road South, Nepean, to
the Company and Gandalf Data
Limited for an initial term of 10
years at an initial rent of
$402,000 (Cdn.) per annum with
four options extend each being for
five year periods (filed as
Exhibit 10.3 to the Form 10-Q for
the quarter ended April 30, 1988).
*10.3 Agreement of Purchase and Sale
dated October 14, 1988 between the
Company and The Glenview
Corporation of the land and
building known as 40 Concourse
Gate in Nepean, Ontario for
$3,000,000 (Cdn.) subject to a
lease-back to the Company for 20
years at a basic rent of $420,000
(Cdn.) per annum; and providing
the Company with an exclusive
option to re-purchase the lands
for $3,500,000 (Cdn.) within 10
years or $4,000,000 (Cdn.) after
October 31, 1998 and before
October 31, 2003 (filed as Exhibit
10.27 to the Form 10-K for the
fiscal year ended July 31, 1989).
*10.4 Management consulting agreement
dated October 2, 1989 between Alex
Curran, Alex Curran Consultant
Inc. and the Company (filed as
Exhibit 10.11 to the Form 10-K for
the fiscal year ended July 31,
1990).
*10.5 Agreement and Plan of Merger dated
as of May 10, 1991, among the
Company, Gandalf Data, Inc. and
Infotron Systems Corporation
(filed as Exhibit 2 to the Form
10-Q for the quarter ended April
27, 1991).
*10.6 Consulting agreement dated April
4, 1991, between the Company and
Donald R. Gibbs (filed as Exhibit
19(d) to the Form 10-Q for the
quarter ended April 27, 1991).
*10.7 Agreement dated as of July 3,
1991, among Radnor Venture
Partners, L.P., Safeguard
Scientifics (Delaware), Inc., the
Company and Gandalf Systems
Corporation (filed as Exhibit
10.17 to the Form 10-K for the
fiscal year ended July 31, 1991).
*10.8 Registration Agreement dated as of
August 1, 1991, among Radnor
Venture Partners, L.P., Safeguard
Scientifics (Delaware), Inc. and
the Company (filed as Exhibit
10.18 to the Form 10-K for the
fiscal year ended July 31, 1991).
*10.9 Employment Agreement, dated
January 1, 1989, between Infotron
Systems International Limited and
Michael F. McGrail (filed as
Exhibit 10.45 to the Form 10-K for
the fiscal year ended July 31,
1991).
*10.10 Lease dated December 15, 1980
between Gandalf Systems
Corporation and Ingerman Ginsburg
Partnership (filed as Exhibit
10.50 to the Form 10-K for the
fiscal year ended July 31, 1991).
*10.11 Lease dated September 13, 1988
between Cherry Hill Industrial
Sites, Inc. and Gandalf Systems
Corporation (filed as Exhibit
10.52 to the Form 10-K for the
fiscal year ended July 31, 1991).
*10.12 Trust Indenture dated as of
November 10, 1992 between The R-M
Trust Company and the Company
(filed as Exhibit 10.26 to the
Form 10-K for the fiscal year
ended March 31, 1993).
*10.13 Special Note Indenture dated
November 10, 1992 between The R-M
Trust Company and the Company
(filed as Exhibit 10.27 to the
Form 10-K for the fiscal year
ended March 31, 1993).
*10.14 Underwriting Agreement (Canadian)
dated as of October 20, 1993 among
Wood Gundy Inc., Deacon Barclays
de Zoete Wedd Limited, Gordon
Capital Corporation and Richardson
Greenshields of Canada Limited and
the Company (filed as Exhibit 10.1
to the Form 10-Q for the quarter
ended January 1, 1994).
*10.15 Credit Agreement dated as of
January 7, 1994 between the Royal
Bank of Canada and the Company
(filed as Exhibit 10.2 to the Form
10-Q for the quarter ended January
1, 1994).
*10.16 Credit Agreement dated as of
January 7, 1994 between the Royal
Bank of Canada and the Company
(filed as Exhibit 10.3 to the Form
10-Q for the quarter ended January
1, 1994).
10.17 Consulting agreement dated as of
February 21 , 1994 between the
Company and Thomas A. Vassiliades.
10.18 Waiver of Default dated April 14,
1994 related to Credit Agreements,
dated as of January 7, 1994,
between the Royal Bank of Canada
and the Company.
10.19 Waiver of Default dated June 1,
1994 related to Credit Agreements,
dated as of January 7, 1994,
between the Royal Bank of Canada
and the Company.
13 Inside front cover and
pages 12 to 30 of the
Annual Report to
Shareholders for the
fiscal year ended March 31, 1994.
21 List of subsidiaries.
23 Consent of KPMG Peat Marwick Thorne.
________________________________
*Incorporated herein by reference.
(b) The Company did not file any reports on Form 8-K during the
last quarter of the fiscal year ended March 31, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GANDALF TECHNOLOGIES INC.
By: THOMAS A. VASSILIADES
-----------------------------------
(Thomas A. Vassiliades)
President
Dated: June 2, 1994
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Thomas A.
Vassiliades and Walter R. MacDonald, jointly and severally, his
attorneys-in-fact, each with full power of substitution, for him
in any and all capacities, to sign any amendments to the Report
on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission hereby ratifying and confirming all that each
said attorneys-in-fact, or his substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
Signatures Title Date
------------------------ ----- --------
DESMOND CUNNINGHAM
-----------------------
(Desmond Cunningham) Director and Chairman June 2, 1994
ALEXANDER CURRAN
-----------------------
(Alexander Curran) Director June 2, 1994
CHARLES J. GARDNER
-----------------------
(Charles J. Gardner) Director June 2, 1994
DONALD M. GLEKLEN
-----------------------
(Donald M. Gleklen) Director June 2, 1994
BRIAN R. HEDGES
-----------------------
(Brian R. Hedges) Director June 2, 1994
ROBERT E. KEITH
-----------------------
(Robert E. Keith) Director June 2, 1994
WALTER R. MACDONALD Vice President June 2, 1994
----------------------- of Finance
(Walter R. MacDonald) (Principal Financial
and Accounting Officer
THOMAS A. VASSILIADES Director, President, June 2, 1994
----------------------- and Chief Executive
(Thomas A. Vassiliades) Officer (Principal
Executive Officer)
AUDITORS' REPORT ON SCHEDULES
To the Board of Directors and Shareholders
of Gandalf Technologies Inc.
Under date of May 27, 1994, we reported on the consolidated
balance sheets of Gandalf Technologies Inc. as at March 31, 1994
and 1993 and the consolidated statements of income and retained
earnings and changes in financial position for each of the years
ended March 31, 1994 and 1993, and the eight months ended March
31, 1992 and the year ended July 31, 1991 as contained in the
1994 annual report to shareholders. These consolidated financial
statements and our report thereon are incorporated by reference
in the annual report on Form 10-K for the year 1994. In
connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial
statement schedules as listed in item 14 of Form 10-K. These
financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our
audits.
In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK THORNE
------------------------------
Ottawa, Canada KPMG Peat Marwick Thorne
May 27, 1994 Chartered Accountants
GANDALF TECHNOLOGIES INC.
Schedule V: Property, plant and equipment.
(Thousands of United States dollars)
_____________________________________________________________________________________
Col. A Col. B Col. C Col. D Col. E Col. F
Classifi- Balance at Additions Retirements Other Balance at
cation beginning of at cost changes(2) end of
year(1) year
_____________________________________________________________________________________
Fiscal 1994 (Year ended March 31, 1994)
Land $ 216 $ - $ - $ (3) $ 213
Buildings 4,756 - - (221) 4,535
Equipment 72,185 4,255 (20,114) (2,986) 53,340
Leasehold 4,056 156 (2,301) (132) 1,779
Improvements
_______________________________________________________________________
TOTAL $81,213 $ 4,411 $(22,415) $ (3,342) $ 59,867
=======================================================================
Fiscal 1993 (Year ended March 31, 1993)
Land $ 248 $ - $ - $ (32) $ 216
Buildings 6,415 (679) 5,736
Equipment 73,101 3,077 (1,539) (2,454) 72,185
Leasehold 3,290 852 (86) 4,056
Improvements
_____________________________________________________________________________________
TOTAL $83,054 $ 3,929 $(1,539) $(3,251) $82,193
======================================================================
<FN>
(1) Balance at beginning of fiscal 1994 was restated to conform with current year
presentation.
(2) Amounts primarily relate to foreign exchange movement.
</FN>
GANDALF TECHNOLOGIES INC.
Schedule VI: Accumulated depreciation, depletion and amortization of
property, plant and equipment.
(Thousands of United States dollars)
_________________________________________________________________________________
Col. A Col. B Col. C Col. D Col. E Col. F
Description Balance at Additions Retirements Other Balance
beginning charged to changes(2) at end
of year(1) costs and of
expenses year
_________________________________________________________________________________
Fiscal 1994 (Year ended March 31, 1994)
Buildings $ 1,569 $ 178 $ - $ (45) $ 1,702
Equipment 47,484 6,447 (13,905) (2,735) 37,291
Leasehold 1,392 620 (1,337) (15) 660
Improvements
___________________________________________________________________
TOTAL $ 50,445 $ 7,245 $(15,242) $ (2,795) $ 39,653
===================================================================
Fiscal 1993 (Year ended March 31, 1993)
Buildings $ 1,565 $ 224 $ - $ (143) $ 1,646
Equipment 42,254 8,693 (1,543) (1,920) 47,484
Leasehold 819 564 9 1,392
Improvements
___________________________________________________________________
TOTAL $ 44,638 $ 9,481 $ (1,543) $(2,054) $ 50,522
===================================================================
<FN>
(1) Balance at beginning of fiscal 1994 was restated to conform with current year
presentation.
(2) Amounts primarily relate to foreign exchange movement.
</FN>
GANDALF TECHNOLOGIES INC.
Schedule VIII: Valuation and qualifying accounts and reserves.
(Thousands of United States dollars)
_________________________________________________________________________________
Col. A Col. B Col. C Col. D Col. E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance at
beginning costs and accounts Deductions end of
Description of year expenses -describe(1) -describe(2) year
_________________________________________________________________________________
Fiscal 1994 (Year ended March 31, 1994)
-----------
Reserve for bad
debts deducted
in the balance
sheet from amounts
receivable ...... $ 3,797 $ 2,235 $(1,345) $ (273) $ 4,414
Fiscal 1993 (Year ended March 31, 1993)
-----------
Reserve for bad
debts deducted
in the balance
sheet from amounts
receivable ....... $ 3,392 $ 1,591 $(1,186) $ - $ 3,797
<FN>
(1) Relates to accounts receivable charged directly against reserve for bad debts.
(2) Balance deducted represents a reserve recorded in the accounts of a subsidiary
which was sold in the fiscal year.
</FN>
GANDALF TECHNOLOGIES INC.
Schedule IX: Short-term borrowings.
(Thousands of United States dollars)
_____________________________________________________________________________________________
Col. A Col. B Col. C Col. D Col. E Col. F
Weighted
Maximum Average Average
Category of Weighted amount amount interest
aggregate Balance average outstanding outstanding rate
short-term at end of interest during the during the during the
borrowings year rate year year year
_____________________________________________________________________________________________
Bank Operating Lines
Year ended
March 31/94 $10,512 7.9% $13,380 $ 8,867 7.0%
Year ended
March 31/93 $10,025 6.5% $16,038 $14,063 7.7%
Bank Term Indebtedness
Year ended
March 31/94 $ - - $20,382 $13,247 7.5%
Year ended
March 31/93 $20,382 7.3% $31,993 $28,806 7.9%
(4) Exhibits
Exhibit No. Description
---------- ----------
*3.1 Articles of Incorporation of the
Registrant and amendments thereto
(filed as Exhibit 3.1 to
Registration Statement
No. 2-74405 on Form S-1).
*3.2 Articles of Amendment to Articles
of Incorporation of the Registrant
effective December 14, 1983 and
December 13, 1985 (filed as
Exhibit 4.4 to Registration
Statement No.33-14899 on Form S-2).
*3.3 By-laws of the Registrant (filed
as Exhibit 3.2 to the Form 10-K
for the fiscal year ended July 31,
1985).
*3.4 Amendment to By-laws of the
Registrant (filed as Exhibit 4.5
to Registration Statement No. 33-
14899 on Form S-2).
*4.1 Common Share certificate (filed as
Exhibit 4.1 to the Form 10-K for
the fiscal year ended March 31,
1993).
*10.1 Lease dated 15th September, 1987
between The Glenview Corporation,
the Company and Gandalf Data
Limited whereby The Glenview
Corporation leased the land and
buildings known as 130 Colonnade
Road South, Nepean to the Company
and Gandalf Data Limited for an
initial term of 10 years at an
initial rent of $1,125,000 (Cdn.)
per annum with four options to
extend each being for five year
periods (filed as Exhibit 10.2 to
the Form 10-Q for the quarter
ended April 30, 1988).
*10.2 Lease dated 15 September, 1987
between The Glenview Corporation,
the Company and Gandalf Data
Limited whereby The Glenview
Corporation leased the land and
the buildings known as 100
Colonnade Road South, Nepean, to
the Company and Gandalf Data
Limited for an initial term of 10
years at an initial rent of
$402,000 (Cdn.) per annum with
four options extend each being for
five year periods (filed as
Exhibit 10.3 to the Form 10-Q for
the quarter ended April 30, 1988).
*10.3 Agreement of Purchase and Sale
dated October 14, 1988 between the
Company and The Glenview
Corporation of the land and
building known as 40 Concourse
Gate in Nepean, Ontario for
$3,000,000 (Cdn.) subject to a
lease-back to the Company for 20
years at a basic rent of $420,000
(Cdn.) per annum; and providing
the Company with an exclusive
option to re-purchase the lands
for $3,500,000 (Cdn.) within 10
years or $4,000,000 (Cdn.) after
October 31, 1998 and before
October 31, 2003 (filed as Exhibit
10.27 to the Form 10-K for the
fiscal year ended July 31, 1989).
*10.4 Management consulting agreement
dated October 2, 1989 between Alex
Curran, Alex Curran Consultant
Inc. and the Company (filed as
Exhibit 10.11 to the Form 10-K for
the fiscal year ended July 31,
1990).
*10.5 Agreement and Plan of Merger dated
as of May 10, 1991, among the
Company, Gandalf Data, Inc. and
Infotron Systems Corporation
(filed as Exhibit 2 to the Form
10-Q for the quarter ended April
27, 1991).
*10.6 Consulting agreement dated April
4, 1991, between the Company and
Donald R. Gibbs (filed as Exhibit
19(d) to the Form 10-Q for the
quarter ended April 27, 1991).
*10.7 Agreement dated as of July 3,
1991, among Radnor Venture
Partners, L.P., Safeguard
Scientifics (Delaware), Inc., the
Company and Gandalf Systems
Corporation (filed as Exhibit
10.17 to the Form 10-K for the
fiscal year ended July 31, 1991).
*10.8 Registration Agreement dated as of
August 1, 1991, among Radnor
Venture Partners, L.P., Safeguard
Scientifics (Delaware), Inc. and
the Company (filed as Exhibit
10.18 to the Form 10-K for the
fiscal year ended July 31, 1991).
*10.9 Employment Agreement, dated
January 1, 1989, between Infotron
Systems International Limited and
Michael F. McGrail (filed as
Exhibit 10.45 to the Form 10-K for
the fiscal year ended July 31,
1991).
*10.10 Lease dated December 15, 1980
between Gandalf Systems
Corporation and Ingerman Ginsburg
Partnership (filed as Exhibit
10.50 to the Form 10-K for the
fiscal year ended July 31, 1991).
*10.11 Lease dated September 13, 1988
between Cherry Hill Industrial
Sites, Inc. and Gandalf Systems
Corporation (filed as Exhibit
10.52 to the Form 10-K for the
fiscal year ended July 31, 1991).
*10.12 Trust Indenture dated as of
November 10, 1992 between The R-M
Trust Company and the Company
(filed as Exhibit 10.26 to the
Form 10-K for the fiscal year
ended March 31, 1993).
*10.13 Special Note Indenture dated
November 10, 1992 between The R-M
Trust Company and the Company
(filed as Exhibit 10.27 to the
Form 10-K for the fiscal year
ended March 31, 1993).
*10.14 Underwriting Agreement (Canadian)
dated as of October 20, 1993 among
Wood Gundy Inc., Deacon Barclays
de Zoete Wedd Limited, Gordon
Capital Corporation and Richardson
Greenshields of Canada Limited and
the Company (filed as Exhibit 10.1
to the Form 10-Q for the quarter
ended January 1, 1994).
*10.15 Credit Agreement dated as of
January 7, 1994 between the Royal
Bank of Canada and the Company
(filed as Exhibit 10.2 to the Form
10-Q for the quarter ended January
1, 1994).
*10.16 Credit Agreement dated as of
January 7, 1994 between the Royal
Bank of Canada and the Company
(filed as Exhibit 10.3 to the Form
10-Q for the quarter ended January
1, 1994).
10.17 Consulting agreement dated as of
February 21 , 1994 between the
Company and Thomas A. Vassiliades.
Provided as part of this
electronic transmission.
10.18 Waiver of Default dated April 14,
1994 related to Credit Agreements,
dated as of January 7, 1994,
between the Royal Bank of Canada
and the Company. Provided as part
of this electronic transmission.
10.19 Waiver of Default dated June 1,
1994 related to Credit Agreements,
dated as of January 7, 1994,
between the Royal Bank of Canada
and the Company. Provided as part
of this electronic transmission.
13 Inside front cover and
pages 12 to 30 of the
Annual Report to
Shareholders for the
fiscal year ended March
31, 1994. Provided as
part of this electronic
transmission.
21 List of subsidiaries.
Provided as part of this
electronic transmission.
23 Consent of KPMG Peat Marwick
Thorne. Provided as part of this
electronic transmission.