SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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:December 31, 1995
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 0-11274
PHARMACEUTICAL FORMULATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2367644
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 Plainfield Avenue, Edison, NJ 08818
(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including area code) (908) 985-7100
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
----- -----
The number of shares outstanding of common stock, $.08 par value, as of
January 31, 1996 was 29,438,814.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, June 30,
1995 1995
(Unaudited) (Note 1)
CURRENT ASSETS
<S> <C> <C>
Cash $ 496,000 $ 655,000
Accounts receivable - net of allowance for doubtful
accounts of $140,000 and $333,000 10,355,000 8,093,000
Inventories 12,159,000 14,915,000
Prepaid expenses and other current assets 627,000 696,000
Income taxes recoverable 581,000
Deferred tax asset 400,000 400,000
Total current assets 24,618,000 24,759,000
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation and amortization of
$11,461,000 and $10,832,000 16,181,000 14,346,000
OTHER ASSETS
Deferred financing costs 123,000 130,000
Deferred tax asset 1,150,000 1,000,000
Other assets 227,000 221,000
$42,299,000 $40,456,000
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Current portion of long-term debt $ 642,000 $ 642,000
Current portion of capital lease obligations 1,642,000 1,529,000
Accounts payable 9,665,000 9,829,000
Accrued expenses 685,000 549,000
Income taxes payable 38,000
Total current liabilities 12,634,000 12,587,000
LONG TERM DEBT 19,741,000 18,207,000
LONG TERM CAPITAL LEASE OBLIGATIONS 10,449,000 8,731,000
DEFERRED GAIN ON SALE/LEASEBACK 451,000 477,000
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock - par value $1.00 per share
Authorized - 10,000,000 shares, none issued - -
Common stock - par value $.08 per share
Authorized - 40,000,000 shares
Issued and outstanding - 29,438,814 and
29,311,816 shares 2,355,000 2,347,000
Capital in excess of par value 37,239,000 37,200,000
Accumulated deficit ( 40,570,000) (39,093,000)
Total stockholders' equity (deficiency) ( 976,000) 454,000
$ 42,299,000 $ 40,456,000
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
-------------------- -------------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
REVENUES
Net sales $29,167,000 $33,564,000 $15,772,000 $17,790,000
COST AND EXPENSES
Cost of goods sold 22,289,000 23,789,000 12,187,000 12,570,000
Selling, general and
administrative 6,111,000 5,235,000 3,092,000 2,808,000
Special compensation
expense 678,000 - 678,000 -
Research and
development 426,000 748,000 218,000 415,000
29,504,000 29,772,000 16,175,000 15,793,000
PROFIT (LOSS)FROM
OPERATIONS ( 337,000) 3,792,000 ( 403,000) 1,997,000
OTHER INCOME (EXPENSE)
Interest expense ( 1,911,000) ( 1,896,000) ( 925,000) ( 954,000)
Other 40,000 35,000 26,000 19,000
( 1,871,000) ( 1,861,000) ( 899,000) ( 935,000)
INCOME (LOSS) BEFORE
INCOME TAXES (BENEFIT) ( 2,208,000) 1,931,000 ( 1,302,000) 1,062,000
INCOME TAXES (BENEFIT) ( 731,000) 360,000 ( 431,000) 210,000
NET INCOME (LOSS) ($1,477,000) $ 1,571,000 ($ 871,000) $ 852,000
INCOME (LOSS) PER COMMON
AND COMMON EQUIVALENT
SHARE ($.05) $.05 ($.03) $.03
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 29,381,000 29,977,000 29,439,000 30,022,000
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
------------------------
1995 1994
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($1,477,000) $ 1,571,000
Adjustments to reconcile net income
(loss) to net cash provided by (used
for) operating activities:
Depreciation and amortization of
property, plant and equipment 805,000 691,000
Amortization of bond discount and
deferred financing costs 57,000 170,000
Amortization of deferred gain on
sale/leaseback ( 26,000) ( 26,000)
Deferred tax benefit ( 150,000) ( 300,000)
Common stock issued for services 21,000
Non-cash special compensation 578,000
Changes in current assets and liabilities:
(Increase) in accounts receivable ( 2,262,000) ( 2,782,000)
(Increase) in income taxes recoverable ( 581,000)
Decrease in inventories 2,756,000 622,000
Decrease in other current assets 69,000 379,000
Decrease in accounts payable, accrued -
expenses and income taxes payable ( 644,000) ( 568,000)
Net cash (used in) operating
activities ( 875,000) ( 222,000)
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) in other assets ( 6,000) ( 192,000)
(Increase) in property, plant and
equipment ( 992,000) ( 910,000)
Net cash (used in) investing
activities ( 998,000) ( 1,102,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings under line
of credit 1,803,000 2,103,000
Principal payments of capital lease
obligations ( 785,000) ( 678,000)
Principal repayments of long-term debt ( 291,000) ( 217,000)
Refinancing of capital leases 968,000
Issuance of common stock 19,000
Net cash provided by financing
activities 1,714,000 1,208,000
Net (decrease) in cash ( 159,000) ( 116,000)
CASH, beginning of period 655,000 1,212,000
CASH, end of period $ 496,000 $1,096,000
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: INTERIM FINANCIAL REPORTING:
The consolidated balance sheet as of June 30, 1995 has been
derived from the audited consolidated balance sheet and is
presented for comparative purposes.
The accompanying financial statements presume that users have
read the audited financial statements for the preceding fiscal
year. Accordingly, footnotes which would substantially dupli-
cate such disclosure have been omitted.
The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair state-
ment of the results for the interim periods presented. Such
adjustments consist solely of normal recurring accruals.
Certain amounts appearing in the December 31, 1994 financial
statements have been reclassified to conform to the December 31,
1995 presentation. There was no effect on net income due to the
reclassification.
The results of operations for the six and three months ended
December 31, 1995 are not necessarily indicative of the results
to be expected for a full year.
Note 2: CONTINGENCIES:
Other than described below, no material proceedings to which the
Company is a party, or to which any of its properties are sub-
ject, are pending or are known to be contemplated, and the Com-
pany knows of no material legal proceedings, pending or threat-
ened, or judgments entered against any director or officer of
the Company in his capacity as such.
In or about October 1991, an action was instituted in the Supe-
rior Court of New Jersey, County of Middlesex, against the Com-
pany by an individual seeking monies claimed to be due under an
alleged employment agreement. The Company believes that the
amount sought, $3,500,000 has been frivolously asserted to ha-
rass the Company and that the allegations are completely base-
less. The Company has interposed counterclaims against plain-
tiff for fraud and related claims and seeks damages in the
amount of $5,000,000. As a result of plaintiff's poor physical
condition, in April 1994, he moved to transfer the matter to the
"inactive" trial list which motion has been granted. According-
ly, no further action will be taken by either party with respect
to the matter unless and until plaintiff seeks to restore the
matter to the active trial calendar.
In or about November 1992, an action was instituted against the
Company in the Supreme Court of New York, County of New York by
Univest Technologies, alleging that the Company breached its
agreement by refusing to furnish Soluble Aspirin to such entity.
Plaintiff seeks "consequential damages" of $1,500,000. The Com-
pany denies that any such agreement existed and vigorously de-
nies that any monies are owed to plaintiff. The Company moved
to dismiss the complaint, which motion was granted with leave to
replead. Plaintiff served an amended complaint thereafter and
the Company again moved to dismiss the complaint. The Company
is awaiting a decision from the court with respect to the Compa-
ny's second motion. If the complaint is not dismissed, the Com-
pany intends to assert counterclaims against plaintiff for
amounts in excess of the amount sought, on the basis of, among
other things, plaintiff's fraud and misrepresentation.
In or about July 1994, Puritan Quartz, Inc. ("Puritan") brought
suit against the Company, in the U.S. District Court for the
Southern District of New York, alleging breach of (i) the Compa-
ny's purported contractual obligations to supply Puritan with
acetaminophen and ibuprofen for resale to an unaffiliated party;
and (ii) related confidentiality obligations. The complaint
seeks damages in the aggregate amount of $3,600,000, plus $300,-
000 for each additional month of continuing breach. The Company
believes that the clear meaning of the language of the agreement
between the parties was that the agreement had a one year term,
ending October 26, 1993, prior to the events of the alleged
breach, and that such agreement was never extended. According-
ly, in the Company's view, it had no obligation whatsoever to
Puritan at the time of the alleged breach. The Company further
believes that Puritan's claims as to the aggregate amount of its
alleged lost profits are overstated. The Company has answered
the complaint and served preliminary discovery demands upon Pu-
ritan.
Note 3: INVENTORIES:
December 31, June 30,
Inventories consist of the 1995 1995
following:
Raw materials $ 4,196,000 5,321,000
Work in process 454,000 375,000
Finished goods 7,509,000 9,219,000
$12,159,000 $14,915,000
Note 4: DIVIDENDS:
No dividends were declared during any period presented.
Note 5: EARNINGS PER SHARE:
Earnings per share are based on the weighted average
number of common and common equivalent shares outstanding for
the period. Common equivalent shares consist of the dilutive
effect of unissued shares under options, warrants and, in the
case of fully-diluted earnings per share, convertible deben-
tures, computed using the treasury stock method with the average
stock prices for primary basis and the higher of average or pe-
riod end stock prices for fully-diluted basis. Fully-diluted
earnings per share are not presented since the amounts are sub-
stantially the same as primary earnings per share.
No effect has been given to shares issuable for common stock
equivalents for the six and three months ended December 31, 1995
as the effect would be anti-dilutive.
Note 6: RELATED PARTY TRANSACTIONS:
The following transactions with ICC Industries Inc. ("ICC"), an
affiliated company, are reflected in the consolidated financial
statements as of or for the six months ended December 31, 1995
and 1994:
1995 1994
Inventory purchases from ICC $ 315,000 $ 714,000
Interest expense 223,000 299,000
Accounts payable to ICC 144,000 53,000
Equipment lease obligations due ICC 5,112,000 3,050,000
Note 7: SPECIAL COMPENSATION EXPENSE:
In December 1995, the Company replaced its former President and
Chief Executive Officer. The Company accrued the estimated
remaining obligation due to this individual under his employ-
ment contract. In addition, as part of a continuing effort to
improve operations, the Company has embarked on a resizing
plan. The Company has accrued the estimated severance and
other fees to be provided as part of this plan.
Note 8: SUBSEQUENT EVENTS:
On January 25, 1996 the Board of Directors of the Company ap-
proved an issuance of Series Preferred Stock to ICC subject to
the formalization of a definitive stock purchase
agreement. The exact amount that may be sold, or the definitive
terms of the stock, have not yet been determined.
On January 17, 1996, ICC purchased 29 $1,000 8% Convertible
Bonds of the Company due 2002 at a purchase price of $17,643.
ICC offered these bonds to the Company at ICC's cost and the
Company has accepted such offer.
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Revenues for the six months ended December 31, 1995 were
$29,167,000 compared to $33,564,000 in the comparable period in
the prior fiscal year. The decrease in revenues of $4,397,000
or 13% is the result of a decrease in contract manufacturing
business in the six months ended December 31, 1995 compared to
the comparable period in the prior fiscal year.
In addition, there was a reduction in sales in the private label
(store brand) sector of the business including a reduction in
sales to the Company's largest customer, Revco D.S., Inc.
("Revco"). Revco acquired a large drug chain in the earlier
part of the prior fiscal year. The prior year includes increased
sales to fill the new acquisition's start-up requirements. The
lower sales for Revco were offset somewhat by increased
sales to other private label customers. In November 1995, Rite
Aid Corporation ("Rite Aid") announced the signing of a merger
agreement with Revco. While such a merger may have a negative
effect upon the Company, the Company will take efforts to
minimize any such effect by an aggressive marketing program to
increase sales to Rite Aid. Bulk sales to repackers
remained somewhat constant in the current period as compared to
the prior fiscal year. Three customers represent approximately
51% of the Company's sales for the six months ended December 31,
1995. These three customers are Revco, Price-Costco, Inc.
("Price-Costco") and Walgreen Company ("Walgreen"). Sales to
Revco amounted to $5,201,000 for the six months ended
December 31, 1995 or 18% of total sales compared to $8,662,000
or 26% of total sales in the comparable period in the prior
fiscal year. Sales to Walgreen amounted to $4,444,000 or 15% of
total sales for the six months ended December 31, 1995 compared
to $5,330,000 or 16% of total sales in the comparable period in
the prior fiscal year. Sales to Price-Costco amounted to
$5,254,000 or 18% of total sales for the six months ended
December 31, 1995 compared to $3,404,000 or 10% of total sales
in the prior fiscal year.
Sales for the three months ended December 31, 1995 were
$15,772,000 compared to $17,790,000 in the comparable period in
the prior fiscal year. The decrease of $2,018,000 or 11% is
mainly a result of the items discussed above.
Cost of sales as a percentage of sales was 76% for the six
months ended December 31, 1995 compared to 71% in the comparable
period in the prior fiscal year. The increase in cost of sales
as a percentage of sales was due to the reduction in sales
volume (especially, in the contract manufacturing business,
which typically has the higher profit margin) and an
increase in certain operating costs such as raw materials and
labor rates. Cost of sales as a percentage of sales was 77% in
the three months ended December 31, 1995 as compared to 71% in
the comparable period in the prior fiscal year due to the
reasons cited above.
Selling, general and administrative expenses were $6,111,000 for
the six months ended December 31, 1995 compared to $5,235,000 in
the comparable period in the prior fiscal year. The increase of
$876,000 is due to an increase in promotional activity to
generate sales volume and an increase in distribution costs.
The Company has a new distribution warehouse which was not in
operation in the prior year. Research and development
costs were $426,000 for the six months ended December 31, 1995
compared to $748,000 in the comparable period in the prior
fiscal year. The decrease of $322,000 is due to the fact that
certain product research was substantially completed in fiscal
1995 and research is not being conducted to the same extent in
the six months ended December 31, 1995.
Selling, general and administrative expenses were $3,092,000 in
the three months ended December 31, 1995 as compared to
$2,808,000 in the prior period. The increase of $284,000 is due
to the reason stated above. Research and Development costs were
$218,000 in the three months ended December 31, 1995 as compared
to $415,000 in the prior fiscal year. The
decrease of $197,000 is due to the reasons stated above.
The Company recorded a special compensation expense of $678,000
in the three months ended December 31, 1995 (see Note 7).
As stated above, revenues decreased by $4,397,000 in the six
months ended December 31, 1995 as compared to the comparable
period in the prior fiscal year. If the Company's bulk and
contract manufacturing business continues to decline and if the
Company's private label (store brand) business does not grow
above the prior year's levels, there will be a negative effect
on the Company's future operating results. The Company has
embarked on an aggressive marketing and selling program to
increase sales in both the private label (store brand) and
contract manufacturing sectors. In addition, a resizing program
is being implemented to reduce costs and to improve productivity
toward improving operating results in the future. As part of
the resizing, a provision for the estimated cost of special
compensation and other fees has been reflected in the financial
statements for the six months ended December 31, 1995
(see Note 7).
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had working capital of
$11,984,000 compared to $12,172,000 at June 30, 1995.
Accounts receivable increased by $2,262,000 due to the higher
sales in the three months ended December 31, 1995 as compared to
the quarter ending June 30, 1995. Inventories decreased by
$2,756,000 as the Company reduced its inventory requirements due
to the lower sales in the six months ended December 31, 1995 as
compared to the prior year.
The Company incurred $2,640,000 of capital expenditures in the
six months ended December 31, 1995, most of which related to the
upgrade of the manufacturing facility. This was financed
through capital leases entered into with ICC for a total of
$1,205,000. ICC refinanced certain equipment
lease obligations of the Company which provided an additional
$968,000 to finance the plant upgrade. In addition, the Company
borrowed $443,000 from its institutional lender. Principal
payments on capital leases and long-term debt were $785,000 and
$291,000 respectively.
In the six months ended December 31, 1995, certain of the 8.25%
Debentures were converted into common stock of the Company. The
conversion reduced debt and increased stockholders' equity
(deficiency) by approximately $28,000. In addition, ICC
exercised its' preemptive rights with respect to such
conversions and purchased shares of common stock, which
increased stockholders' equity (deficiency) by $19,000.
The Company continues to take steps to reduce costs to improve
operating results to meet the working capital needs of the
Company. Significant capital expenditures, however, will
require additional financing. While the Company has in the past
had no difficulty obtaining such financing,
there can be no assurance the Company will obtain the additional
financing necessary for the capital expenditures.
The receipt of the funds for Series Preferred Stock to be
issued to ICC (see Note 8) will increase the Company's working
capital and stockholders' equity (deficiency).
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
See Note 2 to the Company's Notes to Consolidated Financial
Statements.
Item 2: CHANGES IN SECURITIES
None.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the Company's 1995 Annual Stockholders Meeting held on
November 15, 1995, stockholders approved (i) the election of
Ben A. Blackshire, Michael Callahan, Ray W. Cheesman, John L.
Oram and Dr. Max A. Tesler to the Company's Board of Direc-
tors, (ii) the amendment of the Company's Certificate of In-
corporation to authorize 10,000,000 shares of Series Pre-
ferred Stock and (iii) the ratification of the selection by
the Company of BDO Seidman, LLP, independent public accoun-
tants, to audit the financial statements of the Company for
the year ending June 30, 1996.
ITEM 5: OTHER INFORMATION
On December 7, 1995, the Board of Directors appointed Charles
LaRosa as the Company's President and CEO, increased the size
of the Company's Board of Directors to six and elected Mr.
LaRosa to fill the newly-created vacancy. Mr. LaRosa re-
placed Dr. Max Tesler as President and CEO of the Company.
John L. Oram was appointed to the position of Chairman of the
Board, a position previously held by Dr. Tesler. Dr. Tesler
remains as a member of the Board of Directors and will con-
tinue to receive any compensation owed to him pursuant to his
existing employment agreement with the Company.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1 Composite Certificate of Incorporation reflecting
an amendment filed on November 28, 1995.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PHARMACEUTICAL FORMULATIONS, INC.
(REGISTRANT)
Date: February 14, 1996 By: /s/ Charles LaRosa
Charles LaRosa
Chief Executive Officer
(Principal Executive Officer)
Date: February 14, 1996 By: /s/ Frank Marchese
Frank Marchese
Chief Financial Officer and
Treasurer
(Principal Financial Officer)
COMPOSITE CERTIFICATE OF INCORPORATION
OF
PHARMACEUTICAL FORMULATIONS, INC.
AS AMENDED NOVEMBER 28, 1995
I, the undersigned, in order to form a corporation for the
purposes hereinafter stated, under and pursuant to the
provisions of the General Corporation Law of the State of
Delaware, do hereby certify as follows:
FIRST: The name of the corporation is PHARMACEUTICAL
FORMULATIONS, INC.
SECOND: The registered office of the corporation and place
of business in the State of Delaware is to be located at 410
South State Street, in the City of Dover, County of Kent. The
name of its registered agent at that address is Corporate Filing
Service, Inc.
THIRD: The nature of the business, and the objects and
purposes proposed to be transacted, promoted and carried on, are
to do any and all things therein mentioned, as fully and to the
same extent as natural persons might or could do, and in any
part of the world, viz:
To do any lawful act or thing for which corporations
may be organized under the General Corporation Law of the
State of Delaware.
Without limiting the generality and scope of the
foregoing, the corporation may engage in the following
activities:
To provide a means and method of evaluating,
examining, financing, licensing, purchasing, promoting,
expediting, developing, testing, producing and marketing in
whole or in part all inventions, formulae, machines,
scientific instruments, drugs, medical equipment and any
other product or service of any/or every kind and character
for the benefit of the shareholders of this corporation for
their financial gain and for the benefit of society in
general.
To employ technicians, experts, and engineers in every
branch of scientific skill and endeavor and to initiate,
direct and supervise their efforts in research and
investigations in any and all branches and fields of
science and technology and in connection with any matter or
things, enterprise or project conducted and/or to be
conducted by or under the supervision of this corporation;
but the corporation in furtherance of its corporate
purposes will not engage in the practice of the professions
of engineering or architecture.
To assemble data and findings, and to compile reports,
papers, pamphlets, and books based thereon, practical and
theoretical, upon and/or in connection with any branch
and/or field of science or technology.
FOURTH: The total number of shares which the Corporation
shall have the authority to issue is fifty million (50,000,000),
which are divided into ten million (10,000,000) Preferred Shares
of a par value of $1.00 per share and forty million (40,000,000)
Common Shares of a par value of $.08 per share. The relative
rights, preferences and limitations of the shares of each class
are as follows:
(a) The Preferred Shares authorized hereby may be
issued (i) in such series and with such voting powers, full
or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other
special rights, and with such qualifications, limitations
or restrictions thereon, as the Board of Directors shall
fix by resolution, and (ii) in such number of shares in
each series as the Board of Directors shall fix by
resolution provided that the aggregate number of all
Preferred Shares issued does not exceed the number of
Preferred Shares authorized hereby.
(b) Holders of Common Shares shall be entitled to such
dividend, liquidation and voting rights and privileges as
are provided by the General Corporation Law, subject to the
rights of holders of Preferred Shares issued pursuant to
paragraph (a) above."
FIFTH: The names and addresses of each of the
incorporators or incorporator are as follows:
Name Address
------ ---------
P. Linda Mancuso 99 Washington Avenue, Suite 1114
Albany, New York 12210
SIXTH: The Directors shall have power to make and to alter
or amend the By-Laws; to fix the amount to be reserved as
working capital, and to authorize and cause to be executed,
mortgages and liens without limit as to the amount, upon the
property and franchises of this Corporation.
With the consent in writing, and pursuant to a vote of the
holders of a majority of the capital stock issued and
outstanding, the Directors shall have authority to dispose, in
any manner, of the whole property of this corporation.
The By-Laws shall determine whether and to what extent the
accounts and books of this Corporation, or any of them, shall be
open to the inspection of the stockholders; and no stockholder
shall have any right of inspecting any account, or book, or
document of this Corporation, except as conferred by Law or the
By-Laws, or resolution of the stockholders.
The stockholders and directors shall have power to hold
their meetings and keep the books, documents and papers of the
Corporation outside the State of Delaware, at such places as may
be from time to time designated by the By-Laws or by resolution
of the stockholders or directors, except as otherwise required
by the laws of Delaware.
It is the intention that the objects, purposes and powers
specified in the third paragraph hereof shall, except where
otherwise specified in said paragraph, be in no wise limited or
restricted by reference to or inference from the terms of any
other clause or paragraph in this Certificate of Incorporation,
but that the objects, purposes and powers specified in the third
paragraph and in each of the clauses or paragraphs of this
charter shall be regarded as independent objects, purposes and
powers.
SEVENTH: The Board of Directors shall consist of not less
than three nor more than fifteen directors, the exact number of
directors to be determined from time to time by resolution
adopted by affirmative vote of a majority of the whole Board of
Directors. As used in this Article SEVENTH, the term "whole
Board of Directors" shall mean the total number of directors
which the Corporation would have if there were no vacancies.
EIGHTH: A director of the corporation shall not be
personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section
174 of the Delaware General Corporation Law, as the same exists
or hereafter may be amended, or (iv) for any transaction from
which the director derived an improper personal benefit. If the
Delaware General Corporation Law hereafter is amended to
authorize the further elimination or limitation of the liability
of directors, then the liability of a director of the
corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent
permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this paragraph by the stockholders of
the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a
director of the corporation existing at the time of such repeal
or modification.
NINTH: The Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered
by said section, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-Law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a
person who has ceased to be director, officer, employee or agent
and shall inure to the benefit of the heirs, executors and
administrators of such a person. The Corporation shall provide
for the advance payment of all indemnified expenses.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 1st day of June, 1981
P. Linda Mancuso /s/ P. Linda Mancuso
- ------------------- --------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Consolidated Balance Sheets at December 31, 1995
(Unaudited) and the Consolidated Statement of Operations for Six
Months Ended December 31, 1995 (Unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 496,000
<SECURITIES> 0
<RECEIVABLES> 10,495,000
<ALLOWANCES> 140,000
<INVENTORY> 12,159,000
<CURRENT-ASSETS> 24,618,000
<PP&E> 16,181,000
<DEPRECIATION> 11,461,000
<TOTAL-ASSETS> 42,299,000
<CURRENT-LIABILITIES> 12,634,000
<BONDS> 0
0
0
<COMMON> 2,355,000
<OTHER-SE> 37,239,000
<TOTAL-LIABILITY-AND-EQUITY> 42,299,000
<SALES> 29,167,000
<TOTAL-REVENUES> 29,167,000
<CGS> 22,289,000
<TOTAL-COSTS> 29,504,000
<OTHER-EXPENSES> 1,871,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,911,000
<INCOME-PRETAX> (2,208,000)
<INCOME-TAX> (731,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,477,000)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
