<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file No. 0-12641
PCPI
PERSONAL COMPUTER PRODUCTS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0021693
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
11031 VIA FRONTERA
SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices)
Issuer's Telephone Number, Including Area Code: (619) 485-8411
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 / /
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Class: Common Stock, $0.005 par Outstanding at February 13, 1997:
35,364,914 Shares
Transitional Small Business Disclosure Format (Check one):
Yes / / No /X/
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
INDEX
- --------------------------------------------------------------------------------
PAGE
NO.
Part I. Financial Information:
Consolidated Condensed Balance Sheet, December 31, 1996 1
Consolidated Condensed Statement of Operations
Three Months ended December 31, 1996 and 1995 2
Consolidated Condensed Statement of Operations
Three Months ended December 31, 1996 and 1995 3
Consolidated Condensed Statement of Cash Flows
Six Months ended December 31, 1996 and 1995 4
Notes to Consolidated Condensed Financial Statements 5
Management's Discussion and Analysis or Plan of Operations 6
Part II. Other Information 10
- --------------------------------------------------------------------------------
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------
<S> <C>
Current assets:
Cash $ 2,097,000
Accounts receivable, net 3,651,000
Inventories 322,000
Other current assets 432,000
-------
Total current assets 6,502,000
Capitalized software, net 174,000
Prepaid licenses, net 235,000
Property and equipment, net 710,000
------------
$ 7,621,000
------------
------------
- ---------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 1,399,000
Accrued expenses 440,000
Deferred revenues 210,000
Notes payable 124,000
-------
Total current liabilities 2,173,000
---------
Shareholders' equity:
5% convertible preferred stock
$1,000 PAR VALUE, 7,500 SHARES AUTHORIZED, 947 ISSUED AND OUTSTANDING 947,000
5% series B convertible preferred stock
$1,000 PAR VALUE, 117 SHARES AUTHORIZED, 116.2 ISSUED AND OUTSTANDING 1,162,000
Preferred stock
$1,000 PAR VALUE, 2,383 AUTHORIZED, NO SHARES ISSUED AND OUTSTANDING
Common stock
$.005 PAR VALUE, 100,000,000 SHARES AUTHORIZED, 35,220,890 SHARES
ISSUED AND OUTSTANDING 176,000
Paid-in capital 26,318,000
Shareholder loans (30,000)
Accumulated deficit (23,125,000)
-----------
Total shareholders' equity 5,448,000
---------
$ 7,621,000
------------
------------
- ---------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
1
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31,
1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Sales of products $ 2,398,000 $ 2,245,000
Engineering fees 1,396,000 293,000
License fees and royalties 10,000 1,000
--------- ---------
3,804,000 2,539,000
--------- ---------
Costs and expenses:
Cost of products sold 2,037,000 2,021,000
Selling, general and administrative 731,000 829,000
Cost of engineering fees and research and development 697,000 501,000
Amortization of capitalized software development costs 115,000
--------- ---------
3,465,000 3,466,000
--------- ---------
Income (loss) from operations 339,000 (927,000)
--------- ---------
Other income (expense):
Interest, net 35,000 (31,000)
Other 65,000
--------- ---------
100,000 (31,000)
--------- ---------
Net income (loss) before provision
for income taxes 439,000 (958,000)
Provision for taxes 6,000
--------- ---------
Net income (loss) before extraordinary item 433,000 (958,000)
Extraordinary gain on conversion of
accounts payable into common stock 109,000
--------- ---------
Net income (loss) $ 433,000 $ (849,000)
--------- ---------
--------- ---------
Primary and fully diluted income (loss) per
common share before extraordinary item $ 0.01 $ (0.06)
--------- ---------
--------- ---------
Primary and fully diluted income (loss) per common share $ 0.01 $ (0.05)
--------- ---------
--------- ---------
Average shares outstanding 44,811,000 17,939,000
- ---------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
2
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31,
1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Sales of products $ 4,530,000 $ 4,716,000
Engineering fees 2,714,000 513,000
License fees and royalties 285,000 1,000
--------- ---------
7,529,000 5,230,000
--------- ---------
Costs and expenses:
Cost of products sold 3,832,000 4,296,000
Selling, general and administrative 1,518,000 1,566,000
Cost of engineering fees and research and development 1,453,000 937,000
Amortization of capitalized software development costs 230,000
--------- ---------
6,803,000 7,029,000
--------- ---------
Income (loss) from operations 726,000 (1,799,000)
--------- ---------
Other income (expense):
Interest, net 76,000 (53,000)
Other 65,000
--------- ---------
141,000 (53,000)
--------- ---------
Net income (loss) before provision
for income taxes 867,000 (1,852,000)
Provision for taxes 9,000 4,000
--------- ---------
Net income (loss) before extraordinary item 858,000 (1,856,000)
Extraordinary gain on conversion of
accounts payable into common stock 116,000
--------- ---------
Net income (loss) $ 858,000 $ (1,740,000)
--------- ---------
--------- ---------
Primary and fully diluted income (loss) per
common share before extraordinary item $ 0.02 $ (0.11)
--------- ---------
--------- ---------
Primary and fully diluted income (loss) per common share $ 0.02 $ (0.10)
--------- ---------
--------- ---------
Average shares outstanding 45,347,000 17,690,000
- ---------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
3
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31,
1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 858,000 $(1,740,000)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO CASH USED
BY OPERATING ACTIVITIES:
Depreciation and amortization of property and equipment 101,000 65,000
Amortization of capitalized software development costs 230,000
Amortization of prepaid licenses and royalties 56,000
Extraordinary gain on conversion of accounts payable (116,000)
Changes in assets and liabilities:
Accounts receivable (1,972,000) 592,000
Inventories (117,000) (51,000)
Other current assets (384,000) (106,000)
Accounts payable and accrued expenses 113,000 252,000
Deferred revenues (178,000) 693,000
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (1,579,000) (125,000)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Prepaid licenses and royalties (179,000) (24,000)
Capitalized software development costs (151,000)
Proceeds for certificate of deposit 50,000
Capital expenditures (452,000) (67,000)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (732,000) (91,000)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of stock options and warrants 176,000
Repayment of line-of-credit (135,000) (286,000)
Proceeds from line-of-credit 255,000
Principal payments under capital lease obligations (13,000) (5,000)
Proceeds from notes payable 135,000
Repayment of notes payable (10,000) (174,000)
Proceeds from sale of common stock 100,000
Proceeds from sale of common stock warrants 8,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 18,000 33,000
--------- ---------
Net decrease in cash (2,293,000) (183,000)
Cash at the beginning of the period 4,390,000 322,000
--------- ---------
Cash at the end of the period $ 2,097,000 $ 139,000
--------- ---------
--------- ---------
NON-CASH FINANCING ACTIVITIES:
Conversion of preferred stock into common stock $ 1,371,000
---------
---------
Options exercised with loans $ 22,000
---------
---------
Fixed assets acquired under capital leases $ 14,000
---------
---------
Conversion of accrued interest into common stock $ 12,000
---------
---------
Conversion of notes payable into common stock $ 123,000
---------
---------
Conversion of accrued interest to principal on notes payable $ 21,000
---------
---------
Conversion of accounts payable into common stock $ 10,000
---------
---------
Consulting fees paid with common stock $ 5,000
---------
---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 15,000 $ 10,000
--------- ---------
--------- ---------
Cash paid during the period for income taxes $ 9,000
---------
---------
- ------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The accompanying consolidated condensed financial statements of Personal
Computer Products, Inc. and Subsidiaries (the "Company" or "PCPI") have not been
audited. These financial statements reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial position, results of operations and
cash flows for the periods presented. These financial statements should be read
in conjunction with the Company's audited financial statements which are
included in the Company's annual report on Form 10-KSB for the year ended June
30, 1996 filed with the Securities and Exchange Commission. Interim operating
results are not necessarily indicative of operating results for the full year.
NOTE 2- INVENTORIES
Inventories at December 31, 1996 consisted of the following:
Raw materials and supplies $ 112,000
Finished goods 210,000
-------
$322,000
--------
--------
NOTE 3- PREFERRED DIVIDENDS
The Company's 5% convertible preferred stock (which ranks prior to the Company's
5% Series B Preferred Stock and common stock) and the Company's 5% Series B
Preferred Stock (which ranks prior to the Company's common stock), carry
cumulative dividends, when and as declared, at an annual rate of $50.00 and
$500.00 per share, respectively. The aggregate amount of such dividends in
arrears at September 30, 1996 were approximately $1,789,000 and $58,000,
respectively. The Company extended an offer to holders of the Company's 5%
preferred shares to convert the accumulated dividend into unregistered shares of
the Company's common stock at a conversion rate of $1.50. During the quarter
ended December 31, 1996, under the terms of the offer preferred shareholders
converted an aggregate of $926,000 of the accumulated dividend into unregistered
shares of the Company's common stock. Subsequent to December 31, 1996, an
additional $148,000 was converted.
NOTE 4 - EVENT SUBSEQUENT TO DECEMBER 31, 1996
Subsequent to December 31, 1996, the Company entered into an agreement to merge
NewGen Systems Acquisition Corporation ("NewGen") into a newly created,
wholly-owned subsidiary of the Company. Under the terms of the Merger Agreement,
10,750,000 unregistered shares of PCPI's common stock are to be exchanged for
all of the outstanding shares of NewGen. Upon the consummation of the merger,
NewGen will become a wholly-owned subsidiary of the Company.
5
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
The Company has been in a transition period, from older technology and products,
to becoming a leading technology-based supplier of state-of-the-art printer
controllers to OEM customers. The implementation of the strategy of the
development of the new Adobe PostScript Interpreter (APSI) project, which
includes the Company's ColorImage-TM- Series controller implementation of
Adobe-Registered Trademark- PostScript-Registered Trademark- software for OEM
customers, and its LaserImage-TM- Series controllers including HP-based (PCL)
multi-function technology continues to show promising results.
The Company has been successful in attracting several major customers, with
substantial resources and marketing capabilities, that desire to utilize the
technologies of the Company which the Company has developed over the past few
years. Several customers have executed contracts over the past few years to
adapt the Company's software products to controllers that will be integrated
with the hardware products of various OEM customers. These customers include,
but are not limited to, Integrated Device Technology, Inc., Matsushita Electric
Company, Ltd. (Panasonic), Minolta Company, Ltd., NEC Electronics, Inc., and
Canon USA.
The Company recognized non-recurring engineering fees ("NRE") to adapt the
Company's software products to controllers of its OEM customers of approximately
$1,396,000 for the three month period ended December 31, 1996 compared to
$293,000 for the three month period ended December 31, 1995, an increase of
376%. For the six month period ended December 31, 1996, such revenues were
$2,714,000 compared to $513,000 for the six month period ended December 31,
1995, an increase of 429%.
PCPI's strategy has required the Company to alter its focus away from some of
its traditional revenue sources and to make expenditures in support of these
efforts. As a result, the Company's business continues to be in a significant
transitional phase and there are important short-term operational and liquidity
challenges. Accordingly, year-to-year financial comparisons may be of limited
usefulness now and for the next several quarters due to these important changes
in the Company's business.
The Company had net income of $433,000 for the second quarter of fiscal 1997
compared to a net loss of $849,000 for the second quarter of fiscal 1996. Total
revenues were $3,804,000 for the second quarter of fiscal 1997 versus $2,539,000
for the second quarter of fiscal 1996, an increase of 50%.
For the six month period ended December 31, 1996 net income was $858,000
compared to a net loss of $1,740,000 for the six month period ended December 31,
1995. Total revenues were $7,529,000 for the six month period ended December 31,
1996 versus $5,230,000 for the six month period ended December 31, 1995, an
increase of 44%.
REVENUES
Sales of products were $2,398,000 for the second quarter of fiscal 1997 versus
$2,245,000 for the second quarter of fiscal 1996. For the first six month period
of fiscal
6
<PAGE>
1997 sales of products were $4,530,000 versus $4,716,000 for the first six month
period of fiscal 1996.
The Company's sales of products were derived primarily from PCPI's wholly-owned
subsidiary Prima International. The majority of Prima's sales during the current
fiscal year were from distribution of PCMCIA-based memory products. In prior
fiscal years, Prima's sales consisted of product distribution and integration,
including sales of its PDQ-TM- line of memory storage devices featuring
removable cartridge and magneto optical technologies. The increase in product
sales during the quarter ended December 31, 1996 was attributed to an increase
in Prima's distribution sales of PCMCIA-based memory products from Sandisk and
Intergral and to the concerted effort to effect a product transition by Prima
that places less reliance on products and technologies from SyQuest-TM-. Over
the past year the ability to obtain quality SyQuest products suitable for
distribution in Prima's market has diminished.
The Company has been transitioning from older technology and products, to new
technology-based printer controller products over the past few years. It is
anticipated that certain of these new technology-based products can be
distributed to Prima's customer base. Non-Prima sales of printer products and
accessories for the first quarter of fiscal 1996, which represents sales of
these older technology based products, were $37,000.
During fiscal 1997 and 1996, the Company performed work on engineering projects
that were funded by OEM customers under non-recurring engineering contracts. NRE
revenue for the quarters ended December 31, 1996 and 1995 was $1,396,000 and
$293,000, respectively, which was recognized during the course of development
based on the percentage of completion method. For the six month period ended
December 31, 1996 NRE revenue was $2,714,000 versus $513,000 for the six month
period ended December 31, 1995.
License fees and royalty revenue for the second quarter of fiscal 1997 and for
the six month period ended December 31, 1996 were $10,000 and $285,000,
respectively, which was derived from "older-technology" based products. In the
past, License fees and royalty revenue have shown significant quarter-to-quarter
fluctuations which may continue in future quarters. PCPI has submitted several
proposals to prospective customers in order to develop Adobe PostScript-based
controllers and other controllers based upon its ImageBase-TM- technology. While
the Company has entered into some contracts with OEM customers for controller
development, there can be no assurance that additional contracts will be
obtained for the development of such controllers, or that the existing contracts
will be completed, or that products will be shipped by the customer which may
result in the generation of future royalty and license revenues or that these
products, once generating royalties, will continue to do so.
COST OF PRODUCTS SOLD
Cost of products sold for the quarters ended December 31, 1996 and 1995 were
$2,037,000 and $2,021,000, respectively, representing a gross margin of 15.1%
and 10.0%. Cost of products sold for the six month periods ended December 31,
1996 and 1995 were $3,832,000 and $4,296,000, respectively, representing a gross
margin of 15.4% and 8.9%. The increase in the gross margin is attributed to a
change in the product mix between the periods. During the latter part of fiscal
1996 and through December 31, 1996, sales of higher margin PCMCIA-based memory
products and replacement lines for SyQuest products, which Prima was unable to
continue to place
7
<PAGE>
reliance on due to quality issues, have been increasing as a percentage of
Prima's sales which has improved the margins. During the quarter and six month
periods ended December 31, 1995, a majority of the products sales were
older-technology based products and Prima's SyQuest product lines, both of which
have experienced continued decline in the margins. The inability to obtain
quality product from SyQuest over the past several years also contributed to the
erosion of the margins on these products.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the second quarter of fiscal
1997 were $731,000 versus $829,000 for the second quarter of fiscal 1996.
Selling, general and administrative expenses for first six months of fiscal 1997
were $1,518,000 versus $1,566,000 for the first six months of fiscal 1996. The
decrease is primarily the result of a concerted effort to reduce Prima's
administrative overhead which was partially offset by an increase in selling
expenses in an attempt to stimulate technology and product sales.
COST OF ENGINEERING FEES AND RESEARCH AND DEVELOPMENT
Cost of engineering fees and research and development for the second quarter of
fiscal 1997 were $848,000 (which includes $151,000 of capitalized software
development costs) versus $501,000 for the second quarter of fiscal 1996, an
increase of 69.3%. Cost of engineering fees and research and development for the
six month period ended December 31, 1996 were $1,604,000 (which includes
$151,000 of capitalized software development costs) versus $937,000 for the
second quarter of fiscal 1996, an increase of 71.2%. These expenditures consist
of engineering expenses associated with the development of controller
technologies and designs for PCPI technology customers. During the second
quarter of fiscal 1997, the Company capitalized certain qualified costs in the
aggregate of $151,000 pursuant to Financial Accounting Standard No. 86
("Accounting for Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed").
Over the past several quarters, PCPI has noticed an increase in the demand for
qualified engineers in the local market. As a result of this increased demand,
the cost of hiring and maintaining engineers could continue to increase and PCPI
could experience difficulty in obtaining these resources in the future. Should
the local market not be able to supply the required engineering talent, the
Company may be required to hire individuals from outside the market or consider
establishing an engineering division in an area of the country that could more
readily support PCPI's engineering requirements.
OTHER INCOME AND LOSS
Net interest income was $35,000 for the quarter ended December 31, 1996 versus
net interest expense of $31,000 for the quarter ended December 31, 1995. Net
interest income was $76,000 for the six month period ended December 31, 1996
versus net interest expense of $53,000 for the six month period ended December
31, 1995. The reduction in net interest expense is attributed to the reductions
in the outstanding debt from $838,000 as of December 31, 1995 to $124,000 as of
December 31, 1996 and increased interest income associated with the increased
cash being invested.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of $4,329,000 compared to
working capital of $3,976,000 as of June 30, 1996. The shift in focus toward
Adobe co-development projects presents continuing liquidity problems because, in
the short-term, these activities are net users of working capital. Although the
Company has improved its cash and liquidity, adequate working capital is
necessary to continue the Company's operations, develop its technology licensing
business and to deliver the resulting products to contract customers in an
efficient and timely manner. In addition, as noted above, while the Company has
entered into several contracts with OEM customers for controller development,
there can be no assurance that additional contracts will be obtained for the
development of such controllers, or that the existing contracts will be
completed, or that products will be shipped by the customer that will generate
future royalty and license revenues or that once these products are being
shipped by the Company's customers that they will continue to generate
royalties.
As of December 31, 1996, the Company had no unused lines of credit.
PCPI has no material commitments for capital expenditures.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No reportable matter.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company's 5% convertible preferred stock (which ranks prior to the Company's
5% Series B Preferred Stock and common stock) and the Company's 5% Series B
Preferred Stock (which ranks prior to the Company's common stock), carry
cumulative dividends, when and as declared, at an annual rate of $50.00 and
$500.00 per share, respectively. The aggregate amount of such dividends in
arrears at December 31, 1996 were approximately $921,000 and $58,000,
respectively.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of Earnings (loss) Per Common Share
(b) Reports on Form 8-K:
Filed on December 20, 1996 regarding "Forwarding Looking Statements"
and "Risk Factors".
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PERSONAL COMPUTER PRODUCTS, INC.
BY: HARRY J. SAAL
----------------------------------------
DATE: February 14, 1997 Harry J. Saal
CHAIRMAN OF THE BOARD
BY: EDWARD W. SAVARESE
----------------------------------------
DATE: February 14, 1997 Edward W. Savarese
VICE CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
BY: RALPH R. BARRY
----------------------------------------
DATE: February 14, 1997 Ralph R. Barry
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
11
<PAGE>
EXHIBIT 11 - COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY LOSS PER COMMON SHARE:
Net income (loss) before extraordinary item $ 433,000 $ (958,000)
Preferred dividend requirement (58,000) (58,000)
----------- -----------
Net income (loss) before extraordinary item applicable
to common shareholders $ 375,000 $(1,016,000)
----------- -----------
----------- -----------
Net income (loss) $ 433,000 $ (849,000)
Preferred dividend requirement (58,000) (58,000)
----------- -----------
Net income (loss) applicable to common shareholders $ 375,000 $ (907,000)
----------- -----------
----------- -----------
Weighted average number of shares outstanding
Common stock 34,358,000 17,939,000
5% convertible preferred stock 271,000
5% Series B convertible preferred stock 1,107,000
Common stock purchase options and warrants 14,239,000
Assumed repurchase of common stock (5,164,000)
----------- -----------
Weighted average number of shares outstanding 44,811,000 17,939,000
----------- -----------
----------- -----------
Primary income (loss) per common share before extraordinary item $ 0.01 $ (0.06)
----------- -----------
----------- -----------
Primary income (loss) per common share $ 0.01 $ (0.05)
----------- -----------
----------- -----------
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
-----------------------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY LOSS PER COMMON SHARE:
Net income (loss) before extraordinary item $ 858,000 $(1,856,000)
Preferred dividend requirement (58,000) (58,000)
----------- -----------
Net income (loss) before extraordinary item applicable
to common shareholders $ 800,000 $(1,914,000)
----------- -----------
----------- -----------
Net income (loss) $ 858,000 $(1,740,000)
Preferred dividend requirement (58,000) (58,000)
----------- -----------
Net income (loss) applicable to common shareholders $ 800,000 $(1,798,000)
----------- -----------
----------- -----------
Weighted average number of shares outstanding
Common stock 34,152,000 17,690,000
5% convertible preferred stock 271,000
5% Series B convertible preferred stock 1,107,000
Common stock purchase options and warrants 14,239,000
Assumed repurchase of common stock (4,422,000)
----------- -----------
Weighted average number of shares outstanding 45,347,000 17,690,000
----------- -----------
----------- -----------
Primary income (loss) per common share before extraordinary item $ 0.02 $ (0.11)
----------- -----------
----------- -----------
Primary income (loss) per common share $ 0.02 $ (0.10)
----------- -----------
----------- -----------
</TABLE>
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,097
<SECURITIES> 0
<RECEIVABLES> 3,866
<ALLOWANCES> 215
<INVENTORY> 322
<CURRENT-ASSETS> 6,502
<PP&E> 1,567
<DEPRECIATION> 856
<TOTAL-ASSETS> 7,621
<CURRENT-LIABILITIES> 2,173
<BONDS> 0
0
2,109
<COMMON> 176
<OTHER-SE> 3,163
<TOTAL-LIABILITY-AND-EQUITY> 7,621
<SALES> 4,530
<TOTAL-REVENUES> 7,529
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<INCOME-TAX> 9
<INCOME-CONTINUING> 858
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 425
<EPS-PRIMARY> 0.020
<EPS-DILUTED> 0.020
</TABLE>
