UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-Q
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/X/ Quarter report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
Commission file number 0-5404
_____________________
HADRON, INC.
(Exact name of registrant as specified in its charter)
New York 11-2120726
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9990 Lee Highway
Fairfax, Virginia 22030
(Address of principal executive offices)
Registrant's Telephone number including area code
(703) 359-6100
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 / /
As of November 9, 1995, 1,503,685 shares of the Common Stock of
the registrant were outstanding.
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HADRON, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Consolidated Balance Sheets 3
September 30, 1995 and June 30, 1995
Consolidated Statements 5
of Operations for the Three Months Ended
September 30, 1995 and 1994
Consolidated Statements of 6
Cash Flows for the Three Months Ended
September 30, 1995 and 1994
Notes to Consolidated 7
Financial Statements
Item 2. Management's Discussion and Analysis 9
of Financial Condition and Results
of Operations
Part II Other Information:
Item 1. Legal Proceedings 13
SIGNATURES
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<CAPTION>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND JUNE 30, 1995
SEPT. 30, JUNE 30,
ASSETS 1995 1995
-------------- --------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $334,579 $640,553
Restricted cash 100,000 120,000
Accounts receivable, net 2,804,582 3,308,394
Prepaid expenses and other 54,707 31,230
------------ ------------
Total current assets 3,293,868 4,100,177
------------ ------------
Fixed assets, net 179,172 180,969
Other Assets:
Contractual rights acquired 22,594 28,756
Restricted cash - long - term - 10,000
Other 53,885 52,699
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Total other assets 76,479 91,455
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Total assets $3,549,519 $4,372,601
========== ==========
See Notes to Consolidated Financial Statements
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<CAPTION>
HADRON, INC. AND SUBSIDIARIES
BALANCE SHEETS
SEPTEMBER 30, 1995 AND JUNE 30, 1995
SEPT. 30, JUNE 30,
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 1995 1995
------------- -------------
(Unaudited)
<S> <C> <C>
Current liabilities
Current maturities of long-term debt $1,003,749 $1,185,710
Accounts payable 1,674,607 2,115,895
Other current liabilities 1,479,695 1,777,300
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Total current liabilities 4,158,051 5,078,905
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Note Payable - Related party 350,000 300,000
Long-term debt 42,200 41,180
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Commitments and contingencies
Total Liabilities 4,550,251 5,420,085
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Shareholders' equity (deficit)
Common stock $.02 par; authorized 20,000,000 shares;
Issued : September 30, 1995 - 1,516,185 shares
June 30, 1995 - 1,505,125 shares
Outstanding : September 30, 1995 - 1,503,685 shares
June 30, 1995 - 1,492,625 shares 30,324 30,103
Capital in excess of par 9,783,892 9,767,863
Accumulated deficit (10,291,510) (10,322,012)
------------- -------------
Total (477,294) (524,046)
Less 12,500 shares of treasury stock at cost (523,438) (523,438)
------------- -------------
Total shareholders' equity (deficit) (1,000,732) (1,047,484)
------------- -------------
Total liabilities and shareholders' equity $3,549,519 $4,372,601
(deficit)
======== ========
See Notes to Consolidated Financial Statements
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<CAPTION>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,1995 AND 1994
Three Months Ended
September 30,
1995 1994
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<S> <C> <C>
Revenues $5,758,971 $4,091,042
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Operating costs and expenses:
Costs of revenue 5,000,822 3,601,322
Selling, general and administrative 625,535 657,552
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Total operating costs and expenses 5,626,357 4,258,874
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Operating income (loss) 132,614 (167,832)
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Other income (expense):
Interest expense, net (58,062) (75,839)
Other expense (25,972) (31,933)
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Total other expense (84,034) (107,722)
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Income (loss) before income taxes and 48,580 (275,604)
extraordinary gain
Provision for income taxes 18,078 2,886
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Income (loss) before extraordinary gain 30,502 (278,490)
Extraordinary gain on extinguishment of - 2,718,418
debt
----------- -----------
Net income (loss) $30,502 $2,439,928
======== ========
Per share data:
Earnings per common share and common equivalent share:
Income before extraordinary item $0.02 ($0.19)
Extraordinary item -- $1.82
----------- -----------
Net Income $0.02 $1.63
======== ========
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Earnings per common share and common equivalent share-
assuming full dilution:
Income before extraordinary item $0.01
-----------
Net Income (loss) $0.01
Weighted average number of common shares
outstanding:
Primary 1,570,401 1,492,660
Assuming full dilution 2,770,401
======== ========
See Notes to Consolidated Financial Statements
(Unaudited)
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<CAPTION>
HADRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Three Months Ended
September 30,
1995 1994
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $30,502 $2,439,928
-------------- --------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 37,225 58,638
Extraordinary gain on extinguishment of debt - (2,718,418)
Other 16,250 -
Changes in net assets and liabilities:
Accounts receivable 503,812 976,597
Prepaid expenses (23,477) 6,709
Other assets (1,186) 50,659
Restricted cash 30,000 30,000
Accounts payable (441,288) 23,772
Deferred income - (3,849)
Other current liabilities (297,606) (303,177)
Other long-term liabilities 1,020 (26,069)
-------------- --------------
Total adjustments (175,250) (1,905,138)
-------------- --------------
Net cash provided by (used in) operating activities (144,748) 534,790
-------------- --------------
Cash flows used for investing activities:
Property additions (29,265) (12,312)
-------------- --------------
Net cash used by investing activities (29,265) (12,312)
-------------- --------------
Cash flows from financing activities:
Borrowings on bank and other loans 50,000 960,000
Payments on bank and other loans (181,961) (1,574,265)
-------------- --------------
Net cash used in financing activities (131,961) (614,265)
-------------- --------------
Net increase (decrease) in cash and cash equivalents (305,974) (91,787)
Cash and cash equivalents at beginning of period 640,553 518,551
-------------- --------------
Cash and cash equivalents at end of period $334,579 $426,764
========== ==========
See Notes to Consolidated Financial Statements
(Unaudited)
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HADRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The interim consolidated financial statements for Hadron, Inc. (the
"Company") are unaudited, but in the opinion of management reflect all
adjustments (consisting only of normal recurring accruals) necessary for
a fair presentation of results for such periods. The results of
operations for any interim period are not necessarily indicative of
results for the full year. These consolidated financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended June 30, 1995 ("1995 Form 10-K") filed with the Securities and
Exchange Commission.
Income (loss) per share is based on the weighted average number of
common shares outstanding during each quarter and common stock
equivalents, if dilutive. For the quarter ended September 30, 1995
common stock equivalents were included in the income per share
calculation. For the quarter ended September 30, 1994, common stock
equivalents were not included due to the antidilutive effect on loss per
share before the extraordinary item. Since common stock equivalents has
an antidilitive effect on the Company's loss per share in the quarter
ended 9/30/94, the fully diluted per share data for this quarter is not
shown on the Consolidated Statements of Operations.
2. Legal Proceedings
As previously reported, in August, 1991, United Press International,
Inc. ("UPI") filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of
New York. UPI was owned substantially by New UPI, Inc. ("NUPI"). NUPI
is owned substantially by Infotechnology, Inc. ("Infotech"), and Infotech
beneficially owns 13.5% of the common stock of the Company.
The Company, as a creditor of UPI, filed in September 1992 a
$594,621 proof of claim against UPI, subject to a possible $500,000
setoff. In July, 1993, UPI filed an adversarial action challenging the
Company's proof of claim and demanding $500,000 plus interest based upon
an alleged debt or note payable from the Company to UPI. The Company
later determined that the claimed $500,000 indebtedness of the Company to
UPI had not, and did not, in fact, exist. In March, 1994, the Company
amended its proof of claim to reflect that the Company does not owe any
amount to UPI, and to assert against UPI an aggregate claim of $512,477.
The litigation between the Company and UPI was stayed after the
proceeding was converted to Chapter 7 of the U.S. Bankruptcy Code in May,
1994, and a Trustee was appointed to administer UPI's estate. The
Trustee is reevaluating the merits of UPI's lawsuit against the Company
and UPI's objection to the Company's claim. A pre-trial conference
regarding the UPI lawsuit is scheduled for December 15, 1995. The
Company does not believe that it will ultimately incur any liability as a
result of the UPI lawsuit and has made no provision in its financial
statements for this matter.
-7-
<PAGE>
3. Restricted Cash/Note Payable - Related Party
The Company's $100,000 in Restricted Cash at September 30, 1995
represents funds invested in certificates of deposit as collateral for an
irrevocable letter of credit which collateralizes certain payments due to
Equitable Variable Life Insurance Company ("Equitable") pursuant to a
lease amendment dated October 21, 1993 between Equitable, as landlord,
and the Company, as tenant, amending the Company's lease of its principal
offices in Fairfax, Virginia ("Lease Amendment"). The $350,000 Note
Payable - Related Party represents i) a convertible promissory note
("Note") dated October 21, 1993 in the original principal amount of
$300,000, executed by Engineering and Information Services, Inc. ("EISI")
and SyCom Services, Inc. ("SyCom"), two wholly owned subsidiaries of the
Company and payable to C.W. Gilluly, Chairman of the Board of Directors
and Chief Executive Officer of the Company and ii) a $50,000 bridge loan
from Dr. Gilluly which was repaid in early October 1995. The proceeds of
the $300,000 Note were utilized to obtain the collateral required for the
issuance of the irrevocable letter of credit. For a more detailed
description of the Lease Amendment and the Note, see the 1995 Form 10-K.
4. Extraordinary Gain
On September 14, 1994, the Company entered into a Settlement
Agreement with the Federal Deposit Insurance Corporation ("FDIC"),
pursuant to which the Company paid the FDIC $1,100,000 as consideration
for a complete release from indebtedness totalling $3,905,093. As a
result, the Company recorded an extraordinary gain of $2,718,418 (the
indebtedness released, less $86,675 in related costs incurred) in the
first quarter 1995 fiscal year consolidated financial statements.
5. Concentration of Business
The Company has historically been, and continues to be, heavily
dependent upon contracts from various U.S. government agencies. As
reported in various forums, government contractors such as the Company
have experienced, and are expected to experience, increased levels of
competition as overall government expenditures are reduced. This
increased competition will focus on both technical expertise and price.
The Company is marketing its capabilities in various civilian and defense
agencies, as well as in the commercial marketplace, in an effort to
diversify its customer base and to maintain or increase its market share.
-8-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1995
TO THE THREE MONTHS ENDED SEPTEMBER 30, 1994
During the three months ended September 30, 1995, the Company's
revenues were approximately $5,759,000, or approximately $1,668,000 more
than revenues for the three months which ended September 30, 1994. This
represents a 41% increase in revenue in the quarter ended September 30,
1995, as compared with the quarter ended September 30, 1994.
The increase in revenue between the three months ended September 30,
1995 and the three months ended September 30, 1994, was primarily due to
increases in revenues of the Company's wholly owned subsidiaries,
Acumenics Research and Technology, Inc. ("Acumenics") and Sycom Services,
Inc. ("SyCom"). The increase in Acumenics' revenue is the result of
obtaining new business through an existing contract and garnering new
commercial business. The SyCom revenue increase reflects increased
staffing on existing contracts and the acquisition of new contracts.
Operational expenses for the quarter ended September 30,1995, were
approximately $5,616,000, as compared with operational expenses of
approximately $4,259,000 for the quarter ended September 30, 1994. This
represents a 32% increase in operational expenses for the three months
ended September 30, 1995, as compared with the corresponding period ended
September 30, 1994. This increase in expenses reflects a 39% increase in
costs of revenues in conjunction with the 41% revenue increase, offset by
an approximately $32,000 decrease in selling, general and administrative
expenses.
Costs of revenue for the three months ended September 30, 1995,
decreased from 88% of revenues to 87% of revenues as compared with the
corresponding three months ended September 30, 1994. This reflects a
change in the revenue mix as distributed among Hadron's subsidiaries in
the three months ended September 30, 1995, when compared with the revenue
composition for the three months ended September 30, 1994.
The Company earned operating income for the quarter ended September
30, 1995 of approximately $133,000, as compared to an operating loss of
approximately $168,000 for the corresponding quarter of the prior year.
The Company's improvement from an operating loss to operating income, an
aggregate change of approximately $301,000, was predominately due to
increased revenues, and reduced selling, general and administrative
expenses.
For the quarter ended September 30, 1995, net interest expense of
approximately $58,000 decreased by approximately $18,000 compared to the
corresponding period of the prior year. This decrease is due to a
significant decrease in the Company's debt, partially offset by higher
interest rates primarily attributable to new debt borrowings from CFC in
the three months ended September 30, 1995 as compared with the three
months ended September 30, 1994.
-9-
<PAGE>
In the three months ended September 30, 1994, the Company recognized
an extraordinary gain of approximately $2,718,000 related to a Settlement
Agreement with the Federal Deposit Insurance Corporation ("FDIC"). In
the Settlement Agreement the Company paid the FDIC $1,100,000 in
consideration for a complete release from indebtedness of approximately
$3,900,000. The Company incurred legal and other professional fees of
approximately $87,000 to consummate the settlement.
The Company recorded a net income of approximately $31,000 in the
three months ended September 30, 1995, as compared with a net income of
approximately $2,440,000 for the three months ended September 30, 1994.
The decrease in net income is attributable to the inclusion of the
approximately $2,718,000 extraordinary gain in the quarter ended
September 30, 1994 and no corresponding item in the quarter ended
September 30, 1995. Excluding the extraordinary gain, net income
increased by approximately $309,000 in the three months ended September
30, 1995 as compared with the three months ended September 30, 1994. The
improvement is attributable to increased revenues and reduced expenses.
CAPITAL RESOURCES AND LIQUIDITY
During the three months ended September 30, 1995, the Company's
operating activities absorbed cash of approximately $145,000 (See
Consolidated Statements of Cash Flows).
The absorption of approximately $145,000 of cash is predominately
the result of a decrease in accounts payable of approximately $441,000
and a decrease in other current liabilities of approximately $298,000,
partially offset by a decrease in accounts receivable of approximately
$504,000. The generation of approximately $535,000 of cash during the
quarter ended September 30, 1994 was primarily the result of strong
collections efforts, which reduced accounts receivable by approximately
$977,000, offset by an operating loss and changes in other operating
assets and liabilities.
Management believes the cash from operations and the existing cash
balances and borrowings through Commerce Funding Corporation ("CFC") will
provide the Company with adequate cash resources to meet its obligations
on a short-term basis, provided the Company is able to generate
sufficient billings to be utilized in the Company's financing agreement
with CFC. To supplement CFC, C.W. Gilluly, Chairman of the Board of
Directors and Chief Executive Officer of the Company, has obtained a
personal line of credit in the amount of $300,000 which may be utilized
by the Company as short-term financing. Borrowings from Dr. Gilluly bear
interest at the rate of three percent per annum over the prime rate per
annum published from time to time in The Wall Street Journal. The
Company had borrowings of approximately $866,000 from CFC and $50,000
from Dr. Gilluly at September 30, 1995.
Currently, the Company's operations do not generate cash flow
sufficient to cover its monthly interest to CFC. Furthermore, from time
to time, the Company's cash flow is impaired by funding of Federal
contracts and hindered by Federal budget resolution issues. The
Company's ability to meet its liquidity needs on a long-term basis is
dependent on the Company generating sufficient billings to utilize as a
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<PAGE>
borrowing base for accounts receivable financing with CFC and ultimately
building profitable operations. No assurance may be given, however, that
the Company will be able to maintain this billing base or build
profitable operations.
Effective September 6, 1995, Hadron entered into a new agreement
with CFC. The basis for funding is 80% of all credit worthy government
and commercial billed accounts receivables, with an ability to borrow up
to 98% of billed accounts receivable. Hadron incurs no annual commitment
fee on the credit facility and may cancel the one-year agreement at any
time. Additionally, CFC extends its commitment to financing for all
future contracts awarded to Hadron and its subsidiaries.
The Company, in October 1993, settled a dispute with its Landlord,
Equitable Variable Life Insurance Company ("Equitable"), concerning the
Company's principal premises at 9990 Lee Highway. One of the conditions
of Hadron's settlement with Equitable was that the Company provide
Equitable with an irrevocable letter of credit ("Letter of Credit") in
the amount of $320,000 to collateralize certain payments due Equitable
pursuant to the Lease Amendment. The Company was not able to obtain the
letter of credit using only internally generated or bank-borrowed funds.
C.W. Gilluly, Chairman of the Board of Directors and Chief Executive
Officer of the Company, agreed to make a personal loan in the principal
amount of $300,000 ("Gilluly Loan") to collateralize the Letter of
Credit.
The Gilluly Loan is evidenced by a three-year convertible promissory
note ("Note") due and payable October 21, 1996, executed by EISI and
SyCom and payable to C.W. Gilluly. The Note may, at the option of Dr.
Gilluly, be converted into 1,200,000 restricted shares of the Company's
Common Stock in accordance with agreements dated October 21, 1993 and
amended September 14, 1994. The Note is prepayable at any time, in whole
or in part, upon which Dr. Gilluly is entitled to receive a warrant in
respect of approximately the number of shares of the Company's common
stock that he would have received upon conversion of the Note.
As previously reported, in August, 1991, United Press International,
Inc. ("UPI") filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of
New York. UPI was owned substantially by New UPI, Inc. ("NUPI"). NUPI
is owned substantially by Infotechnology, Inc. ("Infotech"), and Infotech
beneficially owns 13.5% of the common stock of the Company.
The Company, as a creditor of UPI, filed in September 1992 a
$594,621 proof of claim against UPI, subject to a possible $500,000
setoff. In July, 1993, UPI filed an adversarial action challenging the
Company's proof of claim and demanding $500,000 plus interest based upon
an alleged debt or note payable from the Company to UPI. The Company
later determined that the claimed $500,000 indebtedness of the Company to
UPI had not, and did not, in fact, exist. In March, 1994, the Company
amended its proof of claim to reflect that the Company does not owe any
amount to UPI, and to assert against UPI an aggregate claim of $512,477.
-11-
<PAGE>
The litigation between the Company and UPI was stayed after the
proceeding was converted to Chapter 7 of the U.S. Bankruptcy Code in May,
1994, and a Trustee was appointed to administer UPI's estate. The
Trustee is reevaluating the merits of UPI's lawsuit against the Company
and UPI's objection to the Company's claim. A pre-trial conference
regarding the UPI lawsuit is scheduled for December 15, 1995. The
Company does not believe that it will ultimately incur any liability as a
result of the UPI lawsuit and has made no provision in its financial
statements for this matter.
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<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The information provided in Note 2 of the Notes to Consolidated
Financial Statements is incorporated herein by reference.
Item 6. Exhibits and Reports.
(a) Exhibits
Exhibit No.
10.18 Employment Agreement with J. Anthony Vidal dated
October 1, 1995.
10.19 Employment Agreement with George E. Fowler dated
October 1, 1995.
11.01 Statement of Computation of Primary Earnings per share.
11.02 Statement of Computation of Earnings per share assuming
full dilution.
(b) Reports on Form 8-K
None.
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<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.
Date: November 14, 1995 HADRON, INC.
(Registrant)
By:/S/ C.W. Gilluly By:/S/ C.W. Gilluly
C. W. Gilluly Ed.D. C.W. Gilluly Ed.D.
Chief Executive Officer Acting Chief Financial Officer
and Chairman (Principal Financial
(Principal Executive Officer) Officer and Principal
Accounting Officer)
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<PAGE>
October 1, 1995
Mr. George Fowler
5808 Beech Avenue
Bethesda, MD 20817
Dear George:
On behalf of HADRON I am pleased to renew the offer for you to
continue as the President and Chief Operating Officer of HADRON,
Inc., reporting to me. The annual salary for this position is
currently $115,000.00, paid bi-weekly. This offer is effective
as of October 1, 1995 and supersedes the previous offer dated
September 21, 1993.
The term of your employment is for one year, subject to renewal
annually, at the Company's discretion, for two additional one-
year terms; provided, however, that the Company shall have the
right to terminate your employment with no further obligation on
the part of the Company if you are convicted of a felony or a
crime of moral turpitude or if the Company determines that you
have not satisfactorily performed your duties. In the event that
the Company terminates your employment without cause, or if the
Company decides not to renew this agreement for any reason other
than those specified above, you shall receive six months'
severance pay in full and complete satisfaction of any claim you
may have by virtue of such termination of or election not to
renew your agreement with the Company.
In the event your employment agreement is renewed by October 1,
1996, you shall be entitled to an increase in annual salary which
is commensurate with the annual increase awarded to other
executive officers of the Company, as determined by the Board of
Directors.
During the term of your employment, you shall be entitled to
participate, on the same terms and conditions as other executive
employees of the Company, in such major medical, dental, life
insurance, 401(k), and other employee benefits which the Company
now provides or in the future may provide to its executive
employees. You shall be entitled to two weeks of paid vacation
leave and two weeks of sick leave per year.
In addition, and as part of your compensation package, you shall
continue to receive a car allowance in the amount of $350 per
month. Furthermore, the Company will reimburse you for all
reasonable expenses incurred in the performance of your duties in
accordance with the Company's standard policy.
<PAGE>
Mr. George Fowler
October 1, 1995
Page 2
As previously discussed for FY 96, you will be able to earn up to
50% of your base salary as additional cash compensation based
upon the revenue growth and profitability of HADRON. The Target
Performance Goals are based upon the growth of revenue and profit
relative to the past year (currently FY 95) for HADRON weighted
1/2 for revenue and 1/2 for net income. Once HADRON achieves its
budgeted revenue goal of $20,365,962.00 you will be eligible for
a bonus on a pro rated basis that will stop at a value of 25% of
your base salary when a revenue level of $22,587,760.00 (10%
growth over FY 95) is achieved. Once HADRON achieves its
budgeted net income level of $176,525.00 you will be eligible for
a bonus on a pro rated basis that will stop at a value of 25% of
your base salary when a net profit level of $345,039.00 (1.5%
profitability) is achieved.
In addition to the above, you will be eligible to receive
incentive stock options as stipulated in the HADRON, Inc. 1994
Stock Option Plan and approved by the Board of Directors.
After review of the terms and conditions expressed above, sign
the agreement in the space provided and return a copy to me. I
look forward to the opportunity to continue to work with you here
at HADRON. I believe you will continue to find the position
challenging and worthy of your talents.
Very truly yours,
/S/ C.W. GILLULY
C. W. Gilluly
Chairman of the Board and
Chief Executive Officer
Accepted:
/S/ GEORGE FOWLER 10/1/95
________________________ __________
George Fowler Date
<PAGE>
October 1, 1995
Mr. Anthony Vidal
1220 Canterbury
Sykesville, MD 21784
Dear Anthony:
On behalf of HADRON I am pleased to offer you the position of
Vice President of HADRON, as approved by the Compensation
Committee of the HADRON Board of Directors on September 18, 1995.
The annual salary for this position is currently $5,000.00, paid
bi-weekly. In addition, I am pleased to renew the offer for you
to continue as the President of HADRON's subsidiary, SyCom
Services, Inc., reporting to George Fowler, President of HADRON.
The annual salary accompanying this position is $75,000 per annum
paid bi-weekly. This offer is effective as of October 1, 1995
and supersedes the previous offer dated March 15, 1995.
The term of your employment is for one year, subject to renewal
annually, at the Company's discretion, for two additional one-
year terms; provided, however, that the Company shall have the
right to terminate your employment with no further obligation on
the part of the Company if you are convicted of a felony or a
crime of moral turpitude or if the Company determines that you
have not satisfactorily performed your duties. In the event that
the Company terminates your employment without cause, or if the
Company decides not to renew this agreement for any reason other
than those specified above, you shall receive six months'
severance pay in full and complete satisfaction of any claim you
may have by virtue of such termination of or election not to
renew your agreement with the Company.
In the event your employment agreement is renewed by October 1,
1996, you shall be entitled to an increase in annual salary which
is commensurate with the annual increase awarded to other
executive officers of the Company, as determined by the Board of
Directors.
During the term of your employment, you shall be entitled to
participate, on the same terms and conditions as other executive
employees of the Company, in such major medical, dental, life
insurance, 401(k), and other employee benefits which the Company
now provides or in the future may provide to its executive
employees. You shall be entitled to three weeks of paid vacation
leave and two weeks of sick leave per year.
<PAGE>
Mr. Anthony Vidal
October 1, 1995
Page 2
In addition, and as part of your compensation package, you shall
continue to receive a company car or a car allowance in the
amount of $350 per month. Furthermore, the Company will
reimburse you for all reasonable expenses incurred in the
performance of your duties in accordance with the Company's
standard policy.
As previously discussed for FY 96, you will be able to earn up to
50% of your base salary as additional cash compensation based
upon revenue growth and profitability of SyCom. The Target
Performance Goals are based upon the growth of revenue and profit
relative to the past year (currently FY 95) for SyCom weighted
1/2 for revenue and 1/2 for net income. If SyCom achieves more
than a 10% growth in revenue relative to the previous year, you
will be entitled to a bonus of 25% of your base annual salary.
If SyCom achieves more than a 15% growth in net profit relative
to the previous year, you will be entitled to a bonus of 25% of
your base annual salary. In addition, you will be able to earn
10% of the net profit earned over the 15% growth point. An
example follows:
<TABLE>
<CAPTION>
SyCom 1995 Actual 1996 Example 1996 Bonus
<S> <C> <C> <C>
Revenue $6,081,225 $6,689,347 25% of base
salary
$20,000
Net Profit $195,925 $225,313 25% of base
salary
$20,000
Excess net N/A $25,000 10% of excess
Profit profit
$2,500
Total bonus N/A N/A $42,500
</TABLE>
In addition to the above, you will be eligible to receive
incentive stock options as stipulated in the HADRON, Inc. 1994
Stock Option Plan and approved by the Board of Directors.
<PAGE>
Mr. Anthony Vidal
October 1, 1995
Page 3
After review of the terms and conditions expressed above, sign
the agreement in the space provided and return a copy to me.
George Fowler and I look forward to the opportunity to continue
to work with you here at HADRON and SyCom. I believe you will
continue to find the position challenging and worthy of your
talents.
Very truly yours,
/S/ C.W. GILLULY
C. W. Gilluly
Chairman of the Board and
Chief Executive Officer
Accepted:
/S/ ANTHONY VIDAL 10/1/95
________________________ __________
Anthony Vidal Date
<PAGE>
<TABLE>
<CAPTION>
HADRON, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Three Months Ended
September 30,
1995 1994
----------- -----------
<S> <C> <C>
Income (loss) before extraordinary gain $30,502 ($278,490)
Extraordinary gain on extinguishment of debt - 2,718,418
----------- -----------
Net Income $30,502 $2,439,928
========== ==========
Weighted average shares of common stock 1,497,329 1,492,660
outstanding
Weighted average affect of common stock 73,072 -
equivalents
----------- -----------
Weighted average shares outstanding 1,570,401 1,492,660
=========== ===========
Income (loss) before extraordinary gain per
common share and common share equivalent $0.02 ($0.19)
Extraordinary gain on extinguishment of debt
per common share and common share equivalent - $1.82
----------- -----------
Net income per common share and common share
equivalent $0.02 $1.63
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HADRON, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE ASSUMING FULL DILUTION
Three Months Ended
September 30,
1995
----------------
<S> <C>
Net Income $30,502
==========
Interest expense related to note assumed converted $9,175
------------
Net income with interest on note assumed converted $39,677
============
Weighted average shares of common stock outstanding 1,497,329
Weighted average affect of common stock equivalents 73,072
Assumed conversion of note payable-related party
into common stock 1,200,000
------------
Weighted average shares outstanding 2,770,401
------------
Net income per common share and common share
equivalent - assuming full dilution $0.01
==========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the first quarter 10-Q and is qualfied in its
entirety by reference to such 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 334,579
<SECURITIES> 0
<RECEIVABLES> 3,139,242
<ALLOWANCES> 334,660
<INVENTORY> 0
<CURRENT-ASSETS> 3,293,868
<PP&E> 1,444,632
<DEPRECIATION> 1,265,460
<TOTAL-ASSETS> 3,549,519
<CURRENT-LIABILITIES> 4,158,051
<BONDS> 0
<COMMON> 30,324
0
0
<OTHER-SE> (507,618)
<TOTAL-LIABILITY-AND-EQUITY> 3,549,519
<SALES> 5,758,971
<TOTAL-REVENUES> 5,758,971
<CGS> 5,000,822
<TOTAL-COSTS> 5,626,535
<OTHER-EXPENSES> 25,972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,062
<INCOME-PRETAX> 48,450
<INCOME-TAX> 18,078
<INCOME-CONTINUING> 30,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,502
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.01
</TABLE>
