<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number 1-10538
GAMMA BIOLOGICALS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1668436
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3700 Mangum Road, Houston, Texas 77092
----------------------------------------------------
(Address of principal executive offices) (Zip code)
(713) 681-8481
----------------------------------------------------
(Registrant's telephone number, including area code)
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 the latest practicable date.
At August 13, 1997: 4,603,052 shares
<PAGE>
PART I. FINANCIAL INFORMATION
GAMMA BIOLOGICALS, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 2,974,896 $ 3,618,970
Short-term investments............................................... 100,000 100,000
Receivables - net of allowance for doubtful
accounts of $114,463 and $105,505, respectively..................... 3,889,664 3,524,585
Inventories.......................................................... 3,625,313 3,658,642
Prepaid expenses..................................................... 535,855 515,660
Deferred taxes....................................................... 76,400 73,400
------------- -------------
Total current assets................................................. 11,202,128 11,491,257
------------- -------------
PROPERTY - At cost, net of accumulated
depreciation and amortization of $6,477,375
and $6,241,338, respectively......................................... 6,409,329 5,994,374
CASH VALUE OF LIFE INSURANCE.......................................... 1,919,339 1,858,672
EXCESS OF COST OVER NET ASSETS ACQUIRED-NET........................... 131,926 139,686
OTHER ASSETS.......................................................... 584,525 385,538
------------- -------------
TOTAL............................................................ $ 20,247,247 $ 19,869,527
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations............................. $ 157,054 $ 127,761
Accounts payable - trade............................................. 626,777 786,214
Dividends payable.................................................... 115,076 115,077
Accrued salaries and other expenses.................................. 434,370 294,748
------------- -------------
Total current liabilities........................................ 1,333,277 1,323,800
------------- -------------
LONG-TERM OBLIGATIONS................................................. 508,620 345,120
------------- -------------
DEFERRED TAXES........................................................ 545,800 535,700
------------- -------------
COMMITMENTS AND CONTINGENCIES.........................................
SHAREHOLDERS' EQUITY.................................................. 17,859,550 17,664,907
------------- -------------
TOTAL............................................................ $ 20,247,247 $ 19,869,527
============= =============
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE>
GAMMA BIOLOGICALS, INC.
Statements of Consolidated Income
(Unaudited)
THREE MONTHS ENDED
------------------------
JUNE 30,
-------
1997 1996
----------- -----------
NET SALES.......................................... $ 4,827,992 $ 4,212,036
COST OF SALES...................................... 2,165,405 1,984,592
----------- -----------
GROSS MARGIN....................................... 2,662,587 2,227,444
----------- -----------
OPERATING EXPENSES:
Selling.......................................... 1,085,929 863,366
General and administrative....................... 588,125 533,229
Shipping and warehouse........................... 190,374 168,818
Research and development......................... 344,569 329,916
----------- -----------
Total operating expenses...................... 2,208,997 1,895,329
----------- -----------
OPERATING INCOME................................... 453,590 332,115
----------- -----------
OTHER INCOME (EXPENSE):
Interest income.................................. 60,663 47,806
Interest expense................................. (11,283) (11,412)
Other - net...................................... (9,400) (3,979)
----------- -----------
Other income - net............................ 39,980 32,415
----------- -----------
INCOME BEFORE INCOME TAXES......................... 493,570 364,530
INCOME TAXES....................................... 184,564 144,100
----------- -----------
NET INCOME......................................... $ 309,006 $ 220,430
=========== ===========
Weighted average number of common and
common equivalent shares outstanding............. 4,675,637 4,593,336
----------- -----------
Net income per common and common
equivalent share................................. $ .07 $ .05
=========== ===========
See notes to unaudited consolidated financial statements.
3
<PAGE>
GAMMA BIOLOGICALS, INC.
Statements of Consolidated Changes in Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JUNE 30,
-------
1997 1996
---- ----
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
COMMON STOCK
Balance, beginning of period......................... 4,762,615 $ 476,261 4,711,365 $ 471,136
Exercise of stock options............................ 1,000 100
-------------------------------------------------
Balance, end of period............................... 4,762,615 476,261 4,712,365 471,236
--------------------------------------------------
CAPITAL IN EXCESS OF PAR
Balance, beginning of period......................... 13,674,209 13,512,836
Exercise of stock options............................ 2,710
--------------------------------------------------
Balance, end of period............................... 13,674,209 13,515,546
--------------------------------------------------
RETAINED EARNINGS
Balance, beginning of period......................... 4,644,801 3,988,022
Net income........................................... 309,006 220,430
Dividends declared................................... (115,076) (113,821)
--------------------------------------------------
Balance, end of period............................... 4,838,731 4,094,631
--------------------------------------------------
TRANSLATION ADJUSTMENTS
Balance, beginning of period......................... (10,456)
Current period translation adjustments............... 713
--------------------------------------------------
Balance, end of period............................... (9,743)
--------------------------------------------------
TREASURY STOCK......................................... (159,563) (1,119,908) (159,563) (1,119,908)
--------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY............................. 4,603,052 $17,859,550 4,552,802 $16,961,505
==================================================
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
GAMMA BIOLOGICALS, INC.
Statements of Consolidated Cash Flows
(Unaudited)
THREE MONTHS ENDED
------------------------
JUNE 30,
-------
1997 1996
----------- -----------
[INCREASE (DECREASE) IN CASH]
Cash flows from operating activities:
Cash received from customers.................... $ 4,458,990 $ 4,482,280
Interest received............................... 59,441 51,192
Cash paid to suppliers and employees............ (4,480,114) (3,479,830)
Interest paid................................... (11,278) (11,412)
Income taxes paid............................... (26,794)
----------- -----------
Net cash provided by operating activities....... 245 1,042,230
----------- -----------
Cash flows from investing activities:
Property additions.............................. (431,869) (415,053)
Increase in cash value of life insurance........ (60,668) (83,814)
Proceeds from sale of equipment................. 49
----------- -----------
Net cash used in investing activities........... (492,537) (498,818)
----------- -----------
Cash flows from financing activities:
Payments on long-term obligations............... (32,891) (27,291)
Exercise of stock options....................... 2,810
Dividends paid.................................. (115,077) (113,796)
----------- -----------
Net cash used in financing activities........... (147,968) (138,277)
----------- -----------
Effect of exchange rate fluctuation on cash..... (3,814)
Net increase (decrease) in cash................... (644,074) 405,135
Cash and cash equivalents at beginning of period.. 3,618,970 3,724,379
----------- -----------
Cash and cash equivalents at end of period........ $ 2,974,896 $ 4,129,514
=========== ===========
5
<PAGE>
GAMMA BIOLOGICALS, INC.
Statements of Consolidated Cash Flows
(Unaudited)
Reconciliation of Net Income to
Net Cash Provided by Operating Activities
THREE MONTHS ENDED
-----------------------
JUNE 30,
-------
1997 1996
---------- ----------
Net Income $ 309,006 $ 220,430
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation.................................. 243,117 172,383
Amortization of goodwill...................... 7,760
Loss on sale of fixed assets.................. 1,862 2,863
(Increase) decrease in accounts receivable.... (352,949) 285,008
(Increase) decrease in investments............ (1,222) 3,386
(Increase) decrease in inventory.............. 47,171 (50,918)
(Increase) decrease in prepaid expenses....... (21,831) 185,815
(Increase) decrease in other assets........... (198,987) 18,299
Increase (decrease) in accounts payable....... (183,536) 107,975
Increase in accrued salaries and other
expenses.................................... 149,854 96,989
---------- ----------
Net Cash Provided by
Operating Activities............................ $ 245 $1,042,230
========== ==========
Supplemental Schedule of Non-Cash Investing and Financing Activities:
In March 1996, the company outsourced the assembly of plastic droppers and
SegmentSamplers. As a result, inventory of component parts totaling $282,886
was transferred to outside vendors and a corresponding receivable due from the
vendors was recorded. This receivable is being reduced as assembled parts are
delivered, with the cost of components deducted from the vendors' selling price.
To date, additional inventory of $105,000 was transferred to outside vendors and
the outstanding receivable balance at June 30, 1997 was $33,271.
The company purchased 100% of the outstanding shares of Gamma Biologicals, B.V.,
effective September 30, 1996, for 50,000 shares of common stock. In conjunction
with the acquisition, assets of $336,000 (including $143,000 cash) were
received, and liabilities of $313,000 were assumed.
In June 1997, the company entered into a capital lease agreement for
approximately $700,000 for the design, manufacture, and installation of a
special filling and heat-sealing machine for the ReACT strips. As of June 30,
1997, $230,500 has been funded. The capital lease bears interest at 7% and
payments will be due quarterly over five years following the installation of the
equipment in January 1998.
See notes to unaudited consolidated financial statements.
6
<PAGE>
GAMMA BIOLOGICALS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Reconciliation of statutory rate with effective United States
income tax rate:
THREE MONTHS ENDED
-------------------------
JUNE 30,
-------
1997 1996
----------- -----------
Statutory rate............................... 34.0% 34.0%
Increase (decrease) resulting from:
Exempt export earnings..................... (2.0) (3.2)
Life insurance premiums.................... 1.2 .7
Research and development credit............ (1.5)
Valuation of temporary differences......... 4.8 7.1
Other-net.................................. .9 .9
----------- -----------
Effective tax rate........................... 37.4% 39.5%
=========== ===========
Significant components of the company's deferred tax assets (liabilities)
are as follows:
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
Allowance for bad debts...................... $ 38,900 $ 35,900
Inventory costs capitalized.................. 37,500 37,500
---------- ----------
Net current deferred tax asset............. 76,400 73,400
---------- ----------
Difference between book and tax basis
of property, plant and equipment........... (537,400) (523,900)
Other........................................ (8,400) (11,800)
---------- ----------
Net noncurrent deferred tax liability...... (545,800) (535,700)
---------- ----------
Net deferred tax liability................... $ (469,400) $ (462,300)
========== ==========
2. Net income per common and common equivalent share is computed using weighted
average number of shares and dilutive equivalent shares outstanding during
each period. The weighted average number of shares for the three-month period
ended June 30 was 4,675,637 in 1997 and 4,593,336 in 1996.
7
<PAGE>
3. Inventories are valued at the lower of cost (principally FIFO) or market
value, as follows:
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
Raw materials................................ $ 943,893 $1,144,949
Products in process.......................... 455,555 432,357
Finished products............................ 1,416,970 1,319,605
Supplies..................................... 808,895 761,731
---------- ----------
Total..................................... $3,625,313 $3,658,642
========== ==========
4. INVESTMENTS
In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities", the company has classified its investment in debt
securities as "held to maturity", since the company has the positive intent
and ability to hold its investments in debt securities to maturity. These
investments are reported at amortized cost. Investments in debt securities
are summarized as follows:
<TABLE>
<CAPTION>
UNREALIZED CARRYING
TYPE CLASSIFICATION FAIR VALUE GAIN (LOSS) VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Three months ended June 30, 1997
Debt securities:
Certificates of Deposit - due 9/8/97..... Held to maturity $ 100,000 $ 100,000
---------------------------------------
Total debt securities................................... 100,000 100,000
---------------------------------------
Total investments.................................... $ 100,000 $ 100,000
=======================================
Three months ended June 30, 1996
Debt securities:
Certificates of Deposit - due 9/9/96..... Held to maturity $ 100,000 $ 100,000
---------------------------------------
Total debt securities................................... 100,000 100,000
---------------------------------------
Total investments.................................... $ 100,000 $ 100,000
=======================================
</TABLE>
5. In the opinion of management, the unaudited consolidated condensed financial
statements for Gamma Biologicals, Inc. (the "company") includes all
adjustments (consisting solely of normal recurring adjustments) necessary for
a fair presentation of the financial position of the company as of June 30,
1997, the results of operations of the three month periods ended June 30,
1997 and 1996 and cash flows for the three month periods ended June 30, 1997
and 1996. Although management believes the disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission. The results of
operations for the period ended June 30, 1997 are not necessarily indicative
of the results to be expected for the full year.
8
<PAGE>
6. LONG-TERM OBLIGATIONS
Long-term obligations consist of:
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
Mortgage note, due monthly through 2000........ $ 333,324 $ 353,485
Note payable-foreign, due semiannually
through 2000................................. 101,828 119,396
Other obligations.............................. 230,522
---------- ----------
665,674 472,881
Less current portion......................... 157,054 127,761
---------- ----------
Total long-term obligations.................... $ 508,620 $ 345,120
========== ==========
The mortgage note bears interest at the bank's base rate, but not less than
7% nor more than 13%. At June 30, 1997, the note bore interest at 9.5%. The
mortgage note is collateralized by a first lien on the company's land and
building. The foreign note payable bears interest at 7%.
In June 1997, the company entered into a capital lease agreement for
approximately $700,000 for the design, manufacture, and installation of a
special filling and heat-sealing machine for the ReACT strips. As of June 30,
1997, $230,500 has been funded. The interest rate varies dependent upon the
amount funded. At June 30, 1997, the note bore interest at 7%.
7. ACQUISITION OF WHOLLY-OWNED SUBSIDIARY
Effective September 30, 1996, the company acquired 100% of the outstanding
shares of its distributor in the Netherlands, Gamma Biologicals, B.V.
Consideration for the acquisition was 50,000 shares of Gamma common stock,
valued at $3.25 per share, the market price on the effective date. The
acquisition has been accounted for using the purchase method of accounting,
and accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based upon the fair values at the date
of acquisition. The excess of the purchase price over the fair values of the
net assets acquired was $155,207 and has been recorded as goodwill, which
will be amortized over five years.
Gamma Biologicals, B.V. was formed in November 1993 to market Gamma products
and certain noncompeting product lines in the Netherlands. Subsequent to the
acquisition, the subsidiary will continue to sell directly in the
Netherlands, as well as serve as a European distribution center.
9
<PAGE>
8. OPERATIONS BY GEOGRAPHIC AREA
The company operates within one dominant segment - the manufacture and sale
of blood bank and diagnostic products - and has no customer which accounts
for 10% or more of its total sales. During the three-month period ended June
30, 1997, the company operated in two geographic areas, the United States and
Europe. Prior to the September 30, 1996 acquisition of Gamma Biologicals,
B.V., the company operated in one geographic area from which it sold to
numerous countries.
THREE MONTHS ENDED
-------------------------
June 30,
-------
1997 1996
----------- -----------
Net sales to unaffiliated customers:
United States..................................... $ 3,082,567 $ 3,077,478
Europe............................................ 641,306 389,155
Pacific Region.................................... 359,942 317,242
Mexico, Central and South America................. 389,704 240,490
Middle East....................................... 296,436 142,206
Other............................................. 58,037 45,465
----------- -----------
Total.......................................... $ 4,827,992 $ 4,212,036
=========== ===========
Export sales from United States to
unaffiliated customers:
Europe............................................ $ 357,778 $ 389,155
Pacific Region.................................... 354,548 317,242
Mexico, Central and South America................. 389,265 240,490
Middle East....................................... 296,209 142,206
Other............................................. 57,086 45,465
----------- -----------
Total.......................................... $ 1,454,886 $ 1,134,558
=========== ===========
Sales between geographic areas:
United States to Europe........................... $ 125,592
-----------
Income before income taxes:
United States..................................... $ 410,316 $ 364,530
Europe............................................ 83,254
----------- -----------
Total.......................................... $ 493,570 $ 364,530
=========== ===========
6/30/97 3/31/97
----------- -----------
Identifiable assets:
United States..................................... $17,672,924 $17,468,384
Europe............................................ 432,108 317,831
Corporate......................................... 2,142,215 2,083,312
----------- -----------
Total.......................................... $20,247,247 $19,869,527
=========== ===========
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997
Revenues increased 15% for the three months ended June 30, 1997 compared with
the same period in 1996 with international sales accounting for 36% of total
sales and domestic sales remaining flat. On the domestic front, increased sales
of RQC products and a significant price increase for one third-party product
effective late in fiscal 1996 offset declines in other product lines due to
certain contracts awarded to competitors and the phase out of products at the
end of their lifecycle. Sales of GTI Elisa products, which began March 1997,
had a minimal impact on the first quarter revenues. International sales rose 54%
overall. European sales rose 65%, including the increased contribution of Gamma
Biologicals, B.V., the company's subsidiary in the Netherlands acquired
September 30, 1996. Sales were up 62% in Mexico and Central and South America,
with particularly strong activity in Brazil. The Middle East, principally Saudi
Arabia, also added to first quarter revenues. The measurable growth in
international sales reflects the company focus on globalization to overcome the
competitive pressures in the domestic market.
Gross margin as a percentage of sales rose to 55% in 1997 from 53% in 1996.
The added international sales improved manufacturing efficiencies in both
reagent manufacturing and the clone lab. The gross margin contributed by Gamma
Biologicals, B.V. also had a positive affect.
Selling expense increased 26% for the first quarter; 9% of the increase was
due to activity at Gamma Biologicals, B.V. The increase also reflects higher
international commissions, more frequent international travel and the addition
domestically of one salesperson to promote GTI Elisa products. General and
administrative expenses rose 10% over the prior year mainly due to increased
depreciation and amortization expense related to the computer upgrade
implemented in the latter part of fiscal 1996. Shipping and warehouse expenses
increased 13% compared with the same period in 1996. The relocation of the
shipping department to new facilities and the completion of a computer software
upgrade has improved efficiencies but has also increased depreciation expense in
this area.
Research and development expenses increased 4% over the first quarter last
year in keeping with planned expenditures for the Gamma-ReACT Test System and
ongoing monoclonal programs, as well as for the chief science officer, added
late last fiscal year.
The contribution of interest and other income was relatively unchanged.
The provision for income taxes rose 28% due to a 35% increase in taxable
income for the period.
In March 1995, the Financial Accounting Standards Board("FASB") issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which sets forth guidance as to when to recognize an
impairment of long-lived assets, including goodwill, and how to measure such an
impairment. The company adopted SFAS No. 121 on April 1, 1996. The adoption of
SFAS No. 121 did not have a material effect on the company's results of
operations or financial position.
11
<PAGE>
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which permits, but does not require, a fair-value-based method
for accounting for employee stock option plans which results in compensation
expense being recognized in the results of operations when stock options are
granted. The company adopted SFAS No. 123 on April 1, 1996. We plan to
continue the use of our current intrinsic-value-based method of accounting for
such plans where no compensation expense is recognized. However, as required by
SFAS No. 123, we will provide pro forma disclosure of net income and earnings
per share, if significantly different from reported amounts, in the notes to the
annual financial statements as if the fair-value-based method had been applied.
The company has not granted any stock-based compensation instruments in the
three month period ended June 30, 1997.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." SFAS 128
establishes standards for computing and presenting earnings per share ("EPS")
and applies to entities with publicly held common stock or potential common
stock. This statement simplifies the standards for computing EPS previously
found in Accounting Principles Board Opinion No. 15, "Earnings Per Share," and
makes them comparable to international EPS standards. This statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. This
statement requires restatement of all prior-period EPS data presented.
Considering the guidelines as prescribed by SFAS 128, management believes that
the adoption of this statement will not have a material effect on EPS and thus
pro forma EPS, as suggested for all interim and annual periods prior to required
adoption, have been omitted.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows decreased approximately $1,050,000 during the three month
period ended June 30, 1997 compared with the same period in 1996. Operating cash
flows shrunk significantly due to the following factors. The accounts
receivable turn has declined to 73 days from 68 days for the same period in
1996, or approximately $640,000, due to the heavy emphasis on international
sales that typically have longer payment terms. In June, a fee of $200,000 was
paid to acquire a nonexclusive license from the owner of a patent covering
certain technology utilized in the ReACT test strips in certain European
countries. Management believes, however, that operating cash flows will be
sufficient to meet future operating needs.
Approximately $200,000 has been committed for 100 additional ReACT
centrifuges and incubators to be delivered in the second and third quarter in
anticipation of international sales and ultimately FDA licensure the latter part
of this year. In June 1997, we placed an order for customized equipment to
automate the filling, sealing and labeling of ReACT test strips, with delivery
scheduled for January 1998. The estimated cost of this equipment is
approximately $700,000; the company has entered into a lease agreement to
finance the equipment purchase.
The company is currently reviewing proposals from medical equipment
manufacturers for the development of an upgraded version of the ReACT system.
The cost to develop such a system will depend on several factors, including the
level of automation and the number of enhanced features required for market
acceptance. Once a manufacturer is selected, the development process should
take between six and 12 months.
12
<PAGE>
The company's existing capital resources, consisting of $3,075,000 in cash
and short-term investments and a $1,500,000 revolving credit line, should be
sufficient to support planned product development and capital improvements
during the next 12 months.
RECENT SALES OF EXEMPT SECURITIES
In June 1997, the company granted Cyn Del & Co., Inc. a warrant to purchase
100,000 shares of the company's common stock at an exercise price of $5.00 per
share (the "Warrant") pursuant to Section 4(2) of the Securities Act of 1933.
The Warrant is exercisable by Cyn Del & Co., Inc. at any time prior to
June 19, 2002. The company granted the Warrant as partial consideration for
consulting services to be provided to the company's board of directors by Cyn
Del & Co., Inc.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits, Part II
10(a) Warrant to Purchase Common Stock dated June 19, 1997.
(b) Registration Rights Agreement dated June 19, 1997 between
the Company and Cyn Del & Company, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K - None
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
GAMMA BIOLOGICALS, INC.
August 13, 1997 By: /s/ David E. Hatcher
________________________________
David E. Hatcher
President
(Chief Executive Officer)
August 13, 1997 By: /s/ Margaret J. O'Bannion
________________________________
Margaret J. O'Bannion
Vice President - Finance
(Chief Financial Officer)
15
<PAGE>
THIS WARRANT, AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE EXERCISE OF
THIS WARRANT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
OTHER SECURITIES LAWS. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND
NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD OR TRANSFERRED FOR
VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES
ACT OF 1933 AND ANY OTHER APPLICABLE SECURITIES LAW, OR RECEIPT BY THE COMPANY
OF AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER SUCH ACT, NEITHER THIS
WARRANT NOR ANY OF SUCH SHARES MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT, AND NO TRANSFER OF THIS WARRANT OR ANY OF SUCH
SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH.
WARRANT
To Purchase 100,000 Shares
of Common Stock of
Gamma Biologicals, Inc.
THIS CERTIFIES THAT, for value received:
Cyn Del & Co., Inc. is entitled to subscribe for and purchase from Gamma
Biologicals, Inc., a corporation organized and existing under the laws of the
State of Texas (the "Company"), at any time during the period specified in
paragraph 3 hereof, a total of 100,000 fully paid and nonassessable shares of
the Company's Common Stock, par value $0.10 per share (the "Common Stock"), at
an exercise price of $5.00 per share of Common Stock (the "Exercise Price"),
subject to adjustment from time to time pursuant to the provisions of paragraph
5 hereof. The term "Warrants," as used herein, shall mean this Warrant of even
date herewith, including all amendments to such Warrants and all warrants issued
in exchange, transfer or replacement therefor. The term "Warrant Shares," as
used herein, refers to the shares of Common Stock purchased or purchasable upon
the exercise of the Warrants.
This Warrant is subject to the following provisions, terms and conditions:
1. Definitions. For the purpose of this Warrant, the following terms
shall have the following meanings:
"Commission" shall mean the U.S. Securities and Exchange Commission or any
other governmental authority at the time administering the Securities Act.
"Common Stock" shall have the meaning specified in the introduction to
this Warrant.
<PAGE>
"Company" shall have the meaning specified in the introduction to this
Warrant.
"Exercise Agreement" shall have the meaning specified in paragraph 2
hereof.
"Exercise Price" shall have the meaning specified in the introduction to
this Warrant.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such similar or successor
federal statute.
"Warrant(s)" shall have the meaning specified in the introduction to this
Warrant.
"Warrant Shares" shall have the meaning specified in the introduction to
this Warrant.
2. Manner of Exercise; Issuance of Certificates; Payment for Shares; No
Fractional Shares. The rights represented by this Warrant may be exercised by
the holder hereof in whole by the surrender of this Warrant, together with a
completed Exercise Agreement in the form attached hereto ("Exercise Agreement"),
during normal business hours on any business day at the principal office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the holder hereof at the address of such holder appearing
on the books of the Company) at any time during the period set forth in
paragraph 3 hereof and upon payment to the Company by certified check or wire
transfer in an amount equal to the Exercise Price for the Warrant Shares to be
purchased in connection with such exercise. The Company agrees that the shares
so purchased shall be and are deemed to be issued to the holder hereof or its
designee (subject to the transfer restrictions applicable to this Warrant to
shares purchased upon exercise of this Warrant) as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid.
Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in said Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding five (5)
business days, after the rights represented by this Warrant shall have been so
exercised. The stock certificate or certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of said holder or such other name as shall be designated by said
holder (subject to the transfer restrictions applicable to this Warrant and to
shares purchased upon exercise of this Warrant). The Company shall pay all
expenses and charges payable in connection with the preparation, execution and
delivery of stock certificates (and any new Warrants) pursuant to this
paragraph 2 except that, in case such stock certificates shall be registered in
a name or names other than the holder of this Warrant or such holder's nominee,
funds sufficient to pay all stock transfer taxes which shall be payable in
connection with the execution and delivery of such stock certificates shall be
paid by the holder hereof to the Company at the time of the delivery of
such stock certificates by the Company as mentioned above.
2
<PAGE>
This Warrant shall be exercisable only for a whole number of Warrant
Shares. No fractions of shares of Common Stock, or scrip for any such fractions
of shares, shall be issued upon the exercise of this Warrant. Instead, the
Company shall pay a cash adjustment in respect of such fractional interest in an
amount equal to the fair market value of such fractional interest as determined
by the Company's Board of Directors.
3. Period of Exercise. This Warrant is exercisable at any time or from time to
time during the period from the date of issue hereof until June 19, 2002.
4. Shares to be Fully Paid; Reservations of Shares. The Company covenants and
agrees that all Warrant Shares will be duly authorized and validly issued and
upon issuance in accordance with the terms and conditions hereof, will be fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof. Without limiting the generality of the foregoing, the
Company covenants and agrees that it will from time to time take all such action
as may be required to assure that the par value per Warrant Share is at all
times equal to or less than the Exercise Price then in effect. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of issue upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant and any other Warrants.
5. Anti-Dilution Provisions. The number, rights and privileges of the shares
of Common Stock issuable upon exercise of this Warrant shall be subject to the
following adjustments:
a. Dividends and Distributions. If the Company shall declare a dividend
or distribution of its capital stock or of evidences of the Company's
indebtedness or assets (excluding cash dividends or distributions) on the
Common Stock, or effect a stock split or reverse stock split with respect
to the Common Stock, or issue shares of its capital stock by
reclassification of shares of the Common Stock, the exercise rights of the
holder hereof in effect on the record date, for any such stock dividend or
distribution, or the effective date, of any such other event, shall be
adjusted proportionately so that the holder of this Warrant thereafter
shall be entitled to receive upon exercise pursuant to paragraph 2 hereof
the aggregate number of shares of the Common Stock or other capital stock
that such holder would own or be entitled to receive after the happening of
any of the events mentioned above if this Warrant had been exercised
immediately prior to the close of business on such record date or effective
date, as applicable.
b. Other Reclassifications, Consolidation, Merger or Sale of Assets. If
the Company shall effect any reclassification or similar change of
outstanding shares of the Common Stock (other than as set forth in clause
(a) of this paragraph 5), or a consolidation or merger of the Company with
another corporation, or a conveyance of all or substantially all of the
assets of the Company, this Warrant shall, after such capital
reorganization, reclassification, consolidation, merger or conveyance, be
exercisable only for the number of shares of stock
3
<PAGE>
or other properties, including cash, to which a holder of the number of
shares of the Common Stock deliverable upon exercise of this Warrant would
have been entitled upon such capital reorganization, reclassification,
change, consolidation, merger or conveyance if this Warrant had been
exercised immediately prior to the effective date of such event; and, in
any such case, appropriate adjustments (as determined by the Company's
Board of Directors) shall be made in the application of the provisions set
forth in this paragraph 5 with respect to the rights and interests
thereafter of the holders of this Warrant to the end that the provisions
set forth in this paragraph 5 (including provisions with respect to changes
in and other adjustments of the exercise rights in this paragraph 5) shall
thereafter be applicable, as nearly as may be reasonable, in relation to
any shares of stock or other securities thereafter deliverable upon the
exercise of this Warrant.
c. Notice of Transaction. The Company shall give written notice to the
holder thereof of any transaction within the scope of clause (a) or (b) of
this paragraph 5 promptly after the effective date, as the case may be,
therefor and provide in such written notice a brief description of the
terms and conditions of such transaction.
6. Successors and Assigns. This Warrant will be binding upon any entity
succeeding to the Company by merger or consolidation.
7. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle
the holder hereof to any voting rights or other rights as a Shareholder of the
Company. No provision of this Warrant, in the absence of affirmative action by
the holder hereof to purchase Warrant Shares, and no mere enumeration herein of
the rights or privileges of the holder hereof, shall give rise to any liability
if asserted by the Company or by creditors of the Company.
8. Transfer and Exchange.
a. No Transfer of Warrant. This Warrant may not be offered, sold, pledged
or otherwise transferred in any manner whatsoever.
b. Replacement of Warrant. Upon receipt of written notice from the holder
hereof or other evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity
agreement, or other indemnity reasonably satisfactory to the Company, or,
in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
c. Cancellation; Payment of Expenses. Upon the surrender of this Warrant
in connection with any exchange, transfer or replacement as provided in
this paragraph 8, this Warrant shall be promptly canceled by the Company.
The Company shall pay expenses and charges payable in connection with the
preparation, execution and delivery of Warrants pursuant to this
paragraph 8.
4
<PAGE>
d. Legend. Except where a certificate for Warrant Shares is issued in
connection with a distribution of such shares pursuant to a registration
statement under the Securities Act, each certificate for Warrant Shares
initially issued upon the exercise of this Warrant and each certificate for
shares of capital stock of the Company issued to any subsequent transferee
of any such certificate shall bear the following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933 OR ANY OTHER SECURITIES LAWS. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND ANY OTHER APPLICABLE SECURITIES
LAW, OR RECEIPT BY THE CORPORATION OF AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM REGISTRATION UNDER SUCH ACT.
9. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or by messenger including
Federal Express or similar courier service, addressed (i) if to the holder
hereof or any other holder of any Warrants, at the registered address of the
holder hereof or such other holder as set forth in the register kept by the
Company at its principal office with respect to the Warrants, or to such other
address as the holder hereof or such other holder may have designated to the
Company in writing, and (ii) if to the Company, at 3700 Mangum Road, Houston,
Texas 77092, or such other address as the Company may have designated in writing
to the holder hereof and each other holder of any of the Warrants at the time
outstanding.
10. Governing Law. This Warrant shall be governed by the laws of the State of
Texas, without regard to principles of conflicts of laws.
11. Remedies. The Company stipulates that the remedies at law of the holder
hereof in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
12. Amendments. This Warrant and any provision hereof may be changed, waived,
discharged or terminated, but only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against whom enforcement of the
same is sought.
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer this 19th day of June, 1997.
GAMMA BIOLOGICALS, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
6
<PAGE>
FORM OF EXERCISE AGREEMENT
_______, ____
Gamma Biologicals, Inc.
3700 Mangum Road
Houston, Texas 77092
Attention: Chief Executive Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to subscribe for and purchase ____________ shares of
Common Stock covered by such Warrant, and makes payment herewith in full
therefor at the price per share provided by such Warrant in cash. The
undersigned is acquiring such shares for the purpose of investment and not with
a view to or for sale in connection with any distribution thereof.
Signature:
--------------------------
Name:
-------------------------------
Address:
----------------------------
----------------------------
----------------------------
7
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
June 19, 1997 by and between Gamma Biologicals, Inc., a Texas corporation (the
"Company") and Cyn Del & Company, Inc., a _______________ corporation ("Cyn
Del").
WHEREAS, on the date hereof, Cyn Del received a warrant for the purchase of
100,000 shares of restricted common stock, par value $0.10 per share (the
"Stock"), of the Company pursuant to that certain Consulting Agreement dated the
same date hereof by and between the Company and Cyn Del (the "Consulting
Agreement"); and
WHEREAS, the Company desires to grant Cyn Del certain registration rights
in respect of the Stock, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set
forth below:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Holder" shall mean any distributee of the Stock. All of such distributees
shall be collectively referred to as the "Holders".
"Registrable Securities" shall mean the Stock.
The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with Sections
2.1 and 2.2, including, without limitation, all registration, qualification and
filing fees, exchange listing fees, printing expenses, escrow fees, fees and
disbursements of counsel of the Company, blue sky fees and expenses, the expense
of any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company which shall be
paid in any event by the Company).
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered on
behalf of Cyn Del and/or any Holder and, except as set forth above, all fees and
disbursements of counsel for Cyn Del and any Holder.
"Underwritten Public Offering" shall mean a public offering in which the
common stock is offered and sold on a firm commitment basis through one or more
underwriters, all pursuant to an underwriting agreement between the Company and
such underwriters.
2. REGISTRATION RIGHTS.
2.1 Piggy-Back Registration.
(a) Notice of Registration. Subject to the terms hereof, if at any time
within five (5) years after the date hereof the Company shall determine to
register any of its securities (except for registration statements relating to
employee benefit plans or exchange offers), either for its own account or the
account of a securityholder, the Company will:
(i) promptly give to Cyn Del written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in the underwriting
involved therein, the Registrable Securities if Cyn Del or any Holder
unconditionally requests in a writing delivered to the Company within
ten (10) days after Cyn Del's receipt of the Company's written notice
delivered pursuant to Section 2.1(a)(i). If no such notice is received
by the Company in the time period set forth above, the Company shall
have no further registration obligations with respect to the Stock in
such registration.
(b) Underwriting. If any registration statement is an Underwritten Public
Offering, the right of Cyn Del and/or any Holder to registration pursuant to
this Section 2.1 shall be conditioned upon Cyn Del's and/or any such Holder's
participation in such reasonable underwriting arrangements as the Company shall
make regarding the offering, and the inclusion of Registrable Securities in the
underwriting shall be limited to the extent provided herein. Cyn Del, any
Holder and all other securityholders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting ) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provisions of
this Section 2.1, if the managing underwriter concludes in its reasonable
judgment that the number of shares to be registered for selling securityholders
(including Cyn Del and/or any Holder) would materially adversely effect such
offering, the number of shares of Stock to be registered, together with the
-2-
<PAGE>
number of shares of common stock or other securities held by other
securityholders proposed to be registered in such offering, shall be reduced on
a pro rata basis based on the number of shares of Stock proposed to be sold by
Cyn Del and/or any Holders as compared to the number of shares proposed to be
sold by all securityholders.
(c) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 2.1
prior to the effectiveness of such registration whether or not Cyn Del and/or
any Holder has elected to include securities in such registration.
2.2 Demand Registration. At any time within five (5) years after the date
hereof, Cyn Del and/or any Holder may, on not more than one (1) occasion, make a
written request to the Company to register under the Securities Act all of its
Registrable Securities on the applicable registration form to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act.
After receipt of such a request, the Company shall effect the registration of
the Registrable Securities that the Company has been requested to register as
soon as practicable. In no event shall any person other than Cyn Del or any
Holder be entitled to include any shares of common stock of the Company in any
registration statement filed pursuant to this Section 2.2 unless otherwise
consented to in writing by Cyn Del. Nothing in this Section 2.2 shall be
construed as requiring the Company to offer the Registrable Securities in an
Underwritten Public Offering.
2.3 Expenses of Registration. All Registration Expenses incurred in
connection with all registrations pursuant to Sections 2.1 and 2.2 shall be
borne by the Company. Unless otherwise stated herein, all Selling Expenses
relating to securities registered on behalf of Cyn Del and/or any Holder under
Sections 2.1 and 2.2 shall be borne by Cyn Del and/or the Holders; provided,
however, that Cyn Del shall bear any accounting expenses resulting from a
registration pursuant to Section 2.2.
2.4 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep Cyn Del advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense, the Company will:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its commercially reasonable efforts to cause
such registration statement to become and remain effective until the
distribution described in such registration statement has been completed;
(b) if necessary, furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such underwriter
may reasonably request in order to facilitate the public sale of the Stock by
such underwriter, and promptly furnish to each underwriter and Cyn Del notice of
any stop-order or similar notice issued by the Commission or any state agency
charged with the regulation of securities, and notice of any securities exchange
listing; and
-3-
<PAGE>
(c) cause the Stock to be listed on each securities exchange on which the
Common Stock is approved for listing.
2.5 Certain Information.
(a) Cyn Del and each of the Holders agrees, with respect to any of its or
his Registrable Securities included in any registration, to furnish to the
Company such information regarding Cyn Del and/or such Holder, its or his
Registrable Securities and the distribution proposed by Cyn Del and/or such
Holder, as applicable, as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification or
compliance referred to in Section 2.1 or Section 2.2.
(b) The failure of Cyn Del and/or any Holder to furnish the information
requested pursuant to Section 2.5(a) shall not affect the obligation of the
Company to the other selling securityholders who furnish such information
unless, in the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs or may impair the legality of the Registration Statement or
the underlying offering.
3. MISCELLANEOUS.
3.1 Governing Law. This Agreement shall be governed by the laws of the
State of Texas, without regard to principles of conflicts of laws.
3.2 Entire Agreement; Amendment. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended,
waived, discharged or terminated upon the written consent of the Company and Cyn
Del.
3.3 Non-Assignment. This Agreement shall be not assignable by Cyn Del and
Cyn Del's registration rights hereunder shall not inure to the benefit of any
successor to Cyn Del.
3.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to Cyn
Del, to Cyn Del & Co., Inc., 26 Ludlam Avenue, Bayville, New York 11709, or (b)
if to the Company, to Gamma Biologicals, Inc., 3700 Mangum Road, Houston, Texas
77092, or at such other address as the Company shall have furnished in writing
to Cyn Del. Each such notice or other communication shall for all purposes of
this Agreement be treated as effective upon receipt.
3.5 Delays or Omissions. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
-4-
<PAGE>
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
3.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
3.7 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
3.8 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective upon
the date first set forth above.
GAMMA BIOLOGICALS, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
CYN DEL & CO., INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
-5-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 2,974,896
<SECURITIES> 100,000
<RECEIVABLES> 4,004,127
<ALLOWANCES> 114,463
<INVENTORY> 3,625,313
<CURRENT-ASSETS> 11,202,128
<PP&E> 12,886,704
<DEPRECIATION> 6,477,375
<TOTAL-ASSETS> 20,247,247
<CURRENT-LIABILITIES> 1,333,277
<BONDS> 508,620
0
0
<COMMON> 476,261
<OTHER-SE> 17,383,289
<TOTAL-LIABILITY-AND-EQUITY> 20,247,247
<SALES> 4,827,992
<TOTAL-REVENUES> 4,827,992
<CGS> 2,165,405
<TOTAL-COSTS> 1,620,872
<OTHER-EXPENSES> 572,072
<LOSS-PROVISION> 16,053
<INTEREST-EXPENSE> 11,283
<INCOME-PRETAX> 493,570
<INCOME-TAX> 184,564
<INCOME-CONTINUING> 309,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 309,006
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
