Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1996 Commission File Number 0-5449
COMARCO, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2088894
- ------------------------------- ----------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
22800 Savi Ranch Parkway, Suite 214, Yorba Linda, California 92808-1299
- ------------------------------------------------------------ -----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (714) 282-3832
---------------
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of May 31, 1996.
Common Stock,
$.10 Par Value 4,746,459 Shares
-------------- ----------------
<PAGE>
Index to Form 10-Q
Page No.
--------
Part I. Financial Information
Condensed Consolidated Balance Sheets
April 30, 1996 and January 31, 1996 1
Condensed Consolidated Statements of Income
Quarters ended April 30, 1996 and April 30, 1995 2
Condensed Consolidated Statements of Cash Flows
Quarters ended April 30, 1996 and April 30, 1995 3
Notes to Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
COMARCO, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
April 30, 1996 January 31, 1996
ASSETS (Unaudited) *
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,232,000 $ 11,801,000
Short-term investments 2,124,000 2,657,000
Accounts receivable, net 7,719,000 7,335,000
Inventory 1,737,000 1,361,000
Other current assets 754,000 573,000
----------------- ----------------
Total current assets 23,566,000 23,727,000
Long-term investments 1,444,000 841,000
Property and equipment, net 1,254,000 1,174,000
Software development costs, net 1,421,000 1,401,000
Intangible assets, net 2,494,000 2,578,000
Other assets 248,000 268,000
----------------- ----------------
TOTAL ASSETS $ 30,427,000 $ 29,989,000
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 192,000 $ 547,000
Deferred revenue 1,443,000 1,410,000
Accrued liabilities 5,278,000 5,721,000
----------------- ----------------
Total current liabilities 6,913,000 7,678,000
Deferred income taxes 573,000 573,000
Stockholders' equity:
Common stock, $.10 par value,
33,705,000 shares authorized,
4,718,959 and 4,707,709 shares
outstanding at April 30, 1996 and
January 31, 1996, respectively 472,000 471,000
Capital contributed in excess
of par value 3,983,000 3,883,000
Retained earnings 18,486,000 17,384,000
----------------- ----------------
Total stockholders' equity 22,941,000 21,738,000
----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 30,427,000 $ 29,989,000
================= ================
See accompanying notes to the condensed consolidated financial statements.
*The condensed consolidated balance sheet as of January 31, 1996 has been
summarized from the Company's audited consolidated balance sheet as of that
date.
</TABLE>
<PAGE>
<TABLE>
COMARCO, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Quarter Ended
April 30, 1996 April 30, 1995
-------------- --------------
<S> <C> <C>
Revenues:
Contract revenues $ 11,952,000 $ 13,842,000
Product sales 4,456,000 3,487,000
--------- ---------
16,408,000 17,329,000
---------- ----------
Direct costs:
Contract costs 8,385,000 9,266,000
Cost of product sales 1,550,000 1,437,000
--------- ---------
9,935,000 10,703,000
Indirect costs 4,848,000 5,320,000
--------- ---------
14,783,000 16,023,000
---------- ----------
Operating income 1,625,000 1,306,000
Net interest income 153,000 91,000
---------- ----------
Income before income taxes 1,778,000 1,397,000
Income taxes 676,000 559,000
---------- ----------
Net income $ 1,102,000 $ 838,000
============= =============
Earnings per share
Primary $ .21 $ .17
============= =============
Fully diluted earnings per share has not been presented as the effect is
immaterial.
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
COMARCO, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Quarter Ended
-----------------------------------------
April 30, 1996 April 30, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,102,000 $ 838,000
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 586,000 545,000
Provision for doubtful accounts receivable 9,000 8,000
Net purchases of trading securities (555,000) (262,000)
Increase in accounts receivable (393,000) (69,000)
Decrease (increase) in inventory (376,000) 15,000
Decrease (increase) in other current assets (181,000) 12,000
Decrease in other assets 20,000 17,000
Increase (decrease) in accounts payable (355,000) 35,000
Increase in deferred revenue 33,000 9,000
Decrease in other current liabilities (443,000) (622,000)
--------------- --------------
Net cash provided (used) by operating activities (553,000) 526,000
Cash flows from investing activities:
Purchases of investments (1,024,000) (220,000)
Sales of investments 1,509,000 -
Purchases of property and equipment (201,000) (200,000)
Software development costs (401,000) (562,000)
--------------- --------------
Net cash used in investing activities (117,000) (982,000)
Cash flows from financing activities:
Proceeds from issuance of common stock 101,000 6,000
Purchase of subordinated debentures - (844,000)
--------------- --------------
Net cash provided (used) by financing activities 101,000 (838,000)
-------------- --------------
Net decrease in cash and cash equivalents $ (569,000) $ (1,294,000)
=============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest $ - $ 41,000
Income taxes 2,000 31,000
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
COMARCO, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
April 30, 1996 and April 30,1995
(Unaudited)
1. General
The financial statements have been prepared without audit. However, they
reflect all adjustments which in the opinion of management are necessary
to fairly state the Company's financial position at April 30, 1996 and
April 30, 1995 and the results of its operations and cash flows for the
quarters ended April 30, 1996 and January 31, 1996. The information has
been prepared in accordance with Form 10-Q instructions, but does not
necessarily include all information and footnotes required by generally
accepted accounting principles for complete financial statements. The
results of the quarter ended April 30, 1996 are not necessarily
indicative of the results to be obtained for the full fiscal year.
2. Significant Accounting Policies - Per Share Information
The outstanding shares used for earnings per share calculations for all
years presented include the weighted average effect of common shares and
common share equivalents outstanding during the year. Common share
equivalents include dilutive stock options computed using the treasury
stock method. Convertible subordinated debentures are not considered
common stock equivalents and are not considered in the computation of
fully diluted earnings per share since the effect would be antidilutive.
Consolidated net income of the Company used for earnings per share
purposes is diluted as a result of stock options issued by the Company's
subsidiaries which enable their holders to obtain the subsidiaries'
common stock. Primary earnings per share is calculated as follows:
<TABLE>
Quarter Ended
April 30, 1996 April 30, 1995
-------------- --------------
<S> <C> <C>
Net income $ 1,102,000 $ 838,000
less - net income
allocated to subsidiary
dilutive stock options
oustanding (53,000) (13,000)
-------------- --------------
Net income used in
calculation of primary
income per share $ 1,049,000 $ 825,000
============== =============
Weighted average number
of common shares used in
calculation of primary
income per share 5,081,000 4,929,000
============== =============
Primary income per
common share $ .21 $ .17
============== =============
</TABLE>
3. Reclassifications
Certain reclassifications of prior year amounts have been made to conform
with the current year presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
This quarterly report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities
Exchange Act of 1934. These are in paragraphs 12,14,15,17,18, 21,
25, 28, and 29 of Management's Discussion and Analysis of Results
of Operations and Financial Condition. A more complete discussion
of business risks is included in the Company's Annual Report on
Form 10-K for the year ended January 31, 1996.
(a) Results of Operations
During the first quarter of Fiscal Year 1997 (year ending January
31, 1997), the Company recorded total revenues of $16.4 million,
down 5.2% from the revenues of $17.3 million for the comparable
period of a year earlier. Decreased year-to-year revenues are
primarily due to:
o substantial completion as of September 30, 1995, of the
Company's contract with the Naval Air Warfare Center
("NAWC") at China Lake, California,
partially offset by:
o increased sales of the Company's wireless communications
products, including various field measurement and revenue
assurance systems to major cellular telephone carriers.
Total direct costs of $9.9 million for the first quarter of
Fiscal Year 1997 are down $.8 million, or 7.5%, from $10.7
million for the first quarter of Fiscal Year 1996. The decrease
is due to the completion of the China Lake contract, offset by
increased sales of wireless communications products, as discussed
above. The decrease in the amount of direct costs is greater than
the decrease in revenues since the Company's wireless
communications products business requires a smaller component of
direct costs than the government services
business.
Total indirect costs of $4.8 million for the first quarter of
Fiscal Year 1997 are down $.5 million, or 9.4%, from $5.3 million
for the first quarter of Fiscal Year 1996. The decrease is due to
the completion of the China Lake contract, offset by increased
sales of wireless communications products, as discussed above. The
decrease in the amount of indirect costs is greater than the
decrease in revenues because the Company's wireless communications
products business has been able to increase sales without
increasing its indirect costs by the same extent.
Net interest income (interest income, less amortization of
offering costs and interest expense) for the first quarter of
Fiscal Year 1997 amounted to $153,000, as compared to $91,000 for
the comparable period of the prior fiscal year. The increase is
principally due to the repurchase of the Company's convertible
subordinated debentures outstanding and the accelerated
amortization of offering costs related to the Company's purchase
of its convertible subordinated debentures during the first
quarter of Fiscal Year 1996, as well as an increase in the amount
of the Company's invested funds. The Company recorded accelerated
offering cost amortization of $23,000 in the first quarter of
Fiscal Year 1996, when the Company retired the remaining $844,000
of its convertible subordinated debentures on April 15, 1995.
The Company's effective tax rate for the first quarter of Fiscal
Year 1997 is 38% versus an effective tax rate of 40% for the
comparable period of the prior fiscal year.
The overall increase in net income from the prior fiscal year is
primarily due to the significant increase in the sales of wireless
communications products at higher operating income margins, as
well as increased net interest income.
Wireless Communications Products
Wireless communications products revenues increased 36.7% to $4.1
million for the first quarter of Fiscal Year 1997 from $3.0
million for the comparable period of the prior fiscal year. This
increase is due to increased sales of the Company's field
measurement systems and revenue assurance systems for major
cellular telephone carriers. The Company has broadened its product
line with the introduction of its second generation of field
measurement equipment, including products supporting the AMPS,
TDMA, NAMPS, ETACS and GSM air interfaces. Summary operating
results for Comarco Wireless Technologies, Inc., the Company's
wireless communications products subsidiary, are as follows:
Quarter Ended Quarter Ended
April 30, 1996 April 30, 1995
-------------- --------------
Revenues $4,058,000 $2,977,000
Cost of product sales 1,504,000 1,240,000
--------- ---------
Gross income 2,554,000 1,737,000
Gross income percentage 62.9% 58.3%
Indirect costs* 1,452,000 1,099,000
--------- ---------
Operating income $1,102,000 $ 638,000
========== ==========
*Indirect costs include selling, general, and administrative
expenses as well as research and development expenses.
The increased gross income percentage is due to the incremental
benefit of spreading the fixed costs of operations over a larger
activity base. In the first quarter of Fiscal Year 1997, the gross
income percentage increased to 62.9% of revenues from 58.3% of
revenues for the comparable period of the prior fiscal year.
The increase in indirect costs of 32.1% for the first quarter of
Fiscal Year 1997 over the comparable period of the prior fiscal
year is a result of the increase in revenues as well as an
increase in research and development expenses. Selling, general
and administrative expenses increased 31% from the first quarter
of Fiscal Year 1996 to the first quarter of Fiscal Year 1997,
while research and development expenses increased 38% to $295,000
from the first quarter of Fiscal Year 1996 to the first quarter of
Fiscal Year 1997.
Operating income as a percentage of revenues is 27.2% for the
first quarter of Fiscal Year 1997, compared to 21.4% for the
comparable period of the prior fiscal year. This increase is
primarily due to the increased gross income percentage, as
discussed above.
As part of its product development program, the Company is
continuing its software product development program in its
wireless communications products business. In accordance with
Financial Accounting Standard No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed, the
Company capitalized $400,000 and $300,000, respectively, during
the first quarters of Fiscal Years 1997 and 1996, respectively.
Corresponding amounts amortized were $325,000 and $275,000,
respectively. The Company's future product prospects will depend
in part on its ability to enhance the functionality of its
existing products in a timely and cost-effective manner and to
identify, develop, and achieve market acceptance of new products.
There can be no assurance that the Company will be able to respond
to technological advances, changes in customer requirements, or
changes in regulatory requirements or industry standards, and any
significant delays in development, introduction or shipment of
products, or achievement of acceptable product costs, could have a
material adverse effect on the Company's business, operating
results and financial condition.
The Company's orders for wireless communications products totalled
$1.9 million for the first quarter of Fiscal Year 1997, down from
$3.5 million from the comparable prior period. For the twelve
month periods ended April 30, 1996 and 1995, orders received were
$14.9 million and $12.3 million, respectively. Because of the long
sales cycle involved in selling these products and the high unit
sales price, the Company believes that orders are best analyzed by
looking at a twelve month time period, as orders can fluctuate
significantly from quarter to quarter. The value of unfilled
orders at April 30, 1996 totalled $1.4 million. An additional $1.4
million of deferred revenue has been recorded for anticipated
customer warranty obligations.
The Company has experienced fluctuations in wireless
communications products activity in each of the past three years,
with greater sales in the second half of its fiscal year and
lesser amounts in the first half. This trend may or may not
continue as the Company broadens its product offerings. The nature
of the wireless communications products business is inherently
less predictable (than the Company's traditional Government
contracting business) as the Company will normally not have a
significant amount of unfilled orders at the end of a period.
Therefore, the amount of orders, sales levels, and profits are
more difficult to predict and may fluctuate significantly from
quarter to quarter.
The Company faces additional risk factors in developing its
wireless communications products business, including: foreign
marketing, capital requirements, technical requirements,
employees, competition, and proprietary information. A negative
impact to any of these risk factors could have a material adverse
effect on the Company's business, operating results, and financial
condition. Foreign marketing risks include: the need for export
licenses; tariffs and other potential trade restrictions
(including the need to be ISO 9000 certified); and changes in laws
governing the imposition of duties, quotas, taxes, or other
charges relating to the import or export of its products. Other
companies having a presence or doing business overseas may have
advantages over the Company in these areas. Certain components
used by the Company in its existing products are only available
from single or a limited number of suppliers, and the inability by
any of these suppliers to fulfill Company requirements may result
in an interruption in production. Access to technical design of
air interface devices is essential for the Company to anticipate
and develop compatible wireless communications products,
therefore, the inability to obtain such technical designs on a
timely basis would have a direct impact on product design and
schedule. The Company's future success also depends in large part
on the continued service of its key personnel, and on its ability
to continue to attract and retain qualified employees, especially
highly skilled engineers, for whom competition in the industry is
intense. In addition, the ability of the Company to compete
successfully depends upon a number of factors, including the rate
at which customers accept the Company's products in overseas
markets, product quality and performance, experienced sales and
marketing personnel, rapid development of new products and
features, evolving industry standards, and the number and nature
of the Company's competitors. There can be no assurance that the
Company will be able to compete successfully in the future. The
Company relies on a combination of trade secrets, copyrights,
trademarks, and contractual rights to protect its intellectual
property. There can be no assurance that the steps taken by the
Company will be adequate to protect of its technology; in
addition, the laws of certain foreign countries in which the
Company's products may be sold do not protect the Company's
intellectual property rights to the same extent as do the laws of
the United States.
Government Contracting and Other Revenue
Revenues provided by the Company's traditional Government
contracting services business area decreased 14.0%, from $14.3
million in the first quarter of Fiscal Year 1996 to $12.3 million
in the first quarter of Fiscal Year 1997. Revenues in this
business area decreased from 82.7% of the Company's total revenues
in the first quarter of Fiscal Year 1996 to 75.0% of the Company's
total revenues in the first quarter of Fiscal Year 1997. These
decreases are due to the completion of the Company's contract with
the Naval Air Warfare Center at China Lake, California, on
September 30, 1995. The China Lake contract accounted for
approximately 12% of the Company's total operating income and
approximately 15% of the Company's total revenue in the first
quarter of Fiscal Year 1996. The loss of this contract required
the Company to reduce the indirect organization supporting this
business in line with the reduced revenue base. The Company's
remaining Government contracting revenue increased 6% in the first
quarter of Fiscal Year 1997 over the comparable period of the
prior fiscal year.
Sales to the U.S. Government as well as to government prime
contractors were 53% and 43% of the Company's total revenue during
the first quarters of Fiscal Years 1996 and 1997, respectively. In
the course of the Company's business, its government contracts are
periodically opened for competition. Approximately 26% of the
Company's current Government contracting services revenues will
either end or will be open for competition during the remainder of
Fiscal Year 1997. The Company plans to aggressively compete for
all work opened for competition to the extent possible and
selectively pursue certain high value Government procurements. As
of June 1996, the Company has outstanding proposals valued at
approximately $100 million for recompetition or new efforts with
Government agencies. There can be no assurance that the Company
will be selected and awarded the work associated with these
outstanding proposals. In addition, government agencies may
terminate their contracts in whole or in part at their
convenience. Government agencies may remove funding previously
provided or may not exercise option periods. Therefore, there can
be no assurance that the Government will fund the portions of
existing contracts that are unfunded, or that the Governmental
agencies will exercise any options.
Operating income (revenues less direct costs, indirect costs, and
depreciation and amortization) for Government contracting services
is down 20.9% from $676,000 in the first quarter of Fiscal Year
1996 to $535,000 in the first quarter of Fiscal Year 1997. The
reduced operating income is due to the operating loss incurred by
the Company's software products line in the first quarter of
Fiscal Year 1997, and the impact of the completion of the China
Lake contract. The operating loss for the Company's software
products line is due to a concerted effort on the Company's part
to complete a comprehensive repositioning of the CASE tool
products. The upgraded product was released on February 29, 1996.
Because of the long sales cycle involved in selling the Company's
software products, the Company believes that the receipt of orders
for the upgraded product will occur over an extended period of
time. In addition to completing the software tooling project, the
Company took other steps to reorganize this product line during
the latter part of Fiscal Year 1996, including having this
software products group report to the government business
organization.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of ("Statement 121"). Statement 121 requires that
the Company review its long-lived assets for impairment whenever
events or circumstances indicate that the carrying amount of an
asset may not be recoverable. To the extent that the future
undiscounted net cash flows expected to be generated from an asset
are less than the carrying amount of the asset, an impairment loss
is recognized based on the difference between the asset's carrying
amount and its fair market value. The Company adopted Statement
121 as of February 1, 1996. The adoption of Statement 121 did not
have a material impact on the Company's financial condition or
results of operations.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting
for Stock-based Compensation ("Statement 123"). Statement 123
recommends, but does not require, the adoption of a fair value
based method of accounting for stock-based compensation of
employees, including common stock options. Statement 123 requires
a fair value based method of accounting for stock-based
compensation to individuals other than employees. The Company
currently intends to continue recording stock-based compensation
to employees under the intrinsic value method and does not intend
to adopt the fair value based method of accounting for stock-based
compensation to employees as permitted by Statement 123. Certain
pro forma disclosures will be required in the Company's financial
statements for the year ending January 31, 1997 as if the fair
value based method had been adopted.
(b) Financial Condition
The Company signed a loan agreement with a bank effective
September 26, 1994, which was amended effective September 26,
1995. The loan agreement consists of (1) an $8 million revolving
credit facility, which expires June 30, 1997, and (2) a $5 million
guidance line of credit, which expires June 30, 1996. The
revolving credit facility and the guidance line of credit are
unsecured provided that the Company maintains certain covenants.
Currently, management anticipates that cash flow will remain at a
level which will enable the Company to avoid utilizing the credit
facility except to support letters of credit and acquisition
financing, and that the Company will be able to purchase
investments on a regular basis. The Company's cash and investment
balances averaged $15 million (includes highly liquid long-term
investments with maturities of 12 to 36 months) during the first
quarter of Fiscal Year 1997. However, maintaining such cash
balances is predicated on the Company maintaining its business
base and is subject to the cost of financing new contracts,
acquisitions, and software product development costs.
During the first quarter of Fiscal Year 1997, the Company's
average days' sales in accounts receivable have remained steady
from the prior fiscal year's levels, at approximately 41 days.
Several additional key factors indicating the Company's financial
condition include:
April 30, 1996 January 31, 1996
-------------- ----------------
Current ratio 3.41 3.09
Working capital $ 16,653,000 $ 16,049,000
Debt to equity 0 0
Book value per share $4.86 $4.62
The Company continues to demonstrate improvements in the above
financial factors during the first quarter of Fiscal Year 1997,
primarily due to increased operating margins from increased sales
of wireless communications products.
The Company has a significant commitments for capital expenditures
at April 30, 1996 for Comarco Wireless Technologies, Inc. The
Company has developed and intends to continue to develop new
product line extensions for the wireless communications industry.
This product development program is expected to be funded from the
Company's current working capital. Under the software development
portion of the Company's product development program, the Company
capitalized and amortized in accordance with Financial Accounting
Standard No. 86, Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed, $400,000 and $325,000,
respectively, in the first quarter of Fiscal Year 1997.
The Company's Board of Directors has authorized a stock
re-purchase program of up to 1,000,000 shares. As of April 30,
1996, the Company has re-purchased and retired approximately
796,000 shares. The average price paid per share re-purchased
under the program was $4.75.
The Company redeemed the remaining $844,000 of outstanding
convertible subordinated debentures in accordance with the
provisions of the debenture agreement on April 15, 1995.
The Company is subject to legal proceedings and claims which arise
in the ordinary course of business. In the opinion of management,
the amount of ultimate liability with respect to these actions
will not materially affect the financial condition of the Company.
The Company believes that its cash flow from operations and
available bank borrowings will be sufficient to satisfy the
current and anticipated capital requirements for operations. The
Company anticipates that it will be able to renew each of the
credit facilities under its loan agreement for an additional one
year period during June 1996.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included herewith:
ll. Schedule of Computation of Net Income Per Share
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURE
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.
COMARCO, Inc.
------------------
(Registrant)
June 5, 1996
THOMAS P. BAIRD
----------------------------------------------------
Thomas P. Baird
Chief Financial Officer
(Authorized Officer and Principal Financial Officer)
<TABLE>
Exhibit ll
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
Quarter Ended
April 30, 1996 April 30, 1995
<S> <C> <C>
PRIMARY
Net income $ 1,102,000 $ 838,000
Less - net income allocated to subsidiary
dilutive stock options outstanding (53,000) (13,000)
------------------ -----------------
Net income used in calculation of primary
income per share $ 1,049,000 $ 825,000
================= ================
Weighted average number of common shares
outstanding during the period 4,715,000 4,603,000
Add - common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon
exercise of stock options 366,000 326,000
----------------- ----------------
Weighted average number of shares used in
calculation of primary income per share 5,081,000 4,929,000
================= ================
Primary income per common share $ .21 $ .17
================= ================
FULLY DILUTED
Net income used in calculation of primary
income per share $ 1,049,000 $ 825,000
================= ================
Weighted average number of common shares
outstanding during the period 4,715,000 4,603,000
Add - common equivalent shares
(determined using the "treasury stock"
method) representing shares issuable
upon exercise of stock options 368,000 368,000
----------------- ----------------
Weighted average number of shares used in
calculation of fully diluted
income per share 5,083,000 4,971,000
================= ================
Fully diluted income per common share $ .21 $ .17
================= ================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> APR-30-1996
<CASH> 11,232
<SECURITIES> 3,568
<RECEIVABLES> 7,719
<ALLOWANCES> 0
<INVENTORY> 1,737
<CURRENT-ASSETS> 23,566
<PP&E> 1,254
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,427
<CURRENT-LIABILITIES> 6,913
<BONDS> 0
0
0
<COMMON> 472
<OTHER-SE> 22,469
<TOTAL-LIABILITY-AND-EQUITY> 30,427
<SALES> 4,456
<TOTAL-REVENUES> 16,408
<CGS> 2,375
<TOTAL-COSTS> 14,783
<OTHER-EXPENSES> 4,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (153)
<INCOME-PRETAX> 1,778
<INCOME-TAX> 676
<INCOME-CONTINUING> 1,102
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,102
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
<FN>
NOTE-RECEIVABLES AND PP&E VALUES REPORTED REPRESENT NET AMOUNTS.
</FN>
</TABLE>
