SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995 Commission File Number 0-13318
STAR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-0794452
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 Shaw Road
Sterling, Virginia 20166
(Address of principal executive offices)
(Zip Code)
(703) 689-4400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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
19,880,244 shares of Common Stock were outstanding as of June 30, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<CAPTION>
Three Months Ended
June 30,
1995 1994
<S> <C> <C>
Revenue (includes revenue from GEMS of $2,180 and $5,433) $2,576 $5,907
Cost of revenue 1,356 3,890
Gross margin 1,220 2,017
Operating expenses
Research and development 677 870
Selling, general and administrative 1,014 1,062
Recognition of accumulated foreign translation gain - (494)
Total operating expenses, net 1,691 1,438
Operating income (loss) (471) 579
Interest income, net 137 23
Net income (loss) before provision for income taxes (334) 602
Provision for income taxes - -
Net income (loss) $ (334) $ 602
====== ======
Net income (loss) $ (334) $ 602
Preferred stock dividend requirement (298) (516)
Repurchase of preferred stock 4,954 -
Net income applicable to common shares $4,322 $ 86
====== ======
Earnings per share:
Per common and common equivalent share $ .22 $ .00
====== ======
Assuming full dilution $ .15 $ .02
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(In thousands, except share data)
<CAPTION>
June 30, March 31,
Assets 1995 1995
Current assets
<S> <C> <C>
Cash (includes restricted cash of $427 and $530) $ 651 $ 1,353
Short-term investments 7,550 7,900
Accounts receivable, net (includes GEMS receivable of $10 and $91) 103 248
Inventory, net 1,558 2,462
Other current assets 69 70
Total current assets 9,931 12,033
Property and equipment, net 625 698
Other assets 265 289
Total assets $10,821 $13,020
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 435 $ 893
Accrued payroll and related benefits 576 615
Other accrued liabilities 915 1,089
Notes payable and capital lease obligations 30 37
Total current liabilities 1,956 2,634
Capital lease obligations, net of current portion 7 12
Total liabilities 1,963 2,646
Commitments and contingencies - -
Stockholders' equity
Preferred stock; $.01 par value; 1,000,000 shares authorized
Series A convertible; 500,000 shares designated; 46,900
shares issued; 46,900 shares outstanding; aggregate
liquidation preference of $1,688 1 1
Series B convertible; 120,117 shares designated; 59,584 and
87,513 shares issued; 59,584 and 87,513 shares outstanding;
aggregate liquidation preference of $5,958 and $8,751 1 1
Series C convertible; 80,079 shares designated; 39,723 and
58,343 shares issued; 39,723 and 58,343 shares outstanding;
aggregate liquidation preference of $3,972 and $5,834 1 1
Common stock; $.01 par value; 60,000,000 shares authorized;
19,927,035 and 19,919,035 shares issued; 19,880,244 and
19,872,244 shares outstanding 199 199
Additional paid-in capital 63,446 64,628
Treasury stock, at cost; 46,791 shares (201) (201)
Retained deficit (54,589) (54,255)
Total stockholders' equity 8,858 10,374
Total liabilities and stockholders' equity $10,821 $13,020
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Three Months Ended
June 30,
1995 1994
Cash flows from (used for) operating activities
<S> <C> <C>
Net income (loss) $ (334) $ 602
Adjustments to reconcile net income (loss) to net cash
from (used for) operating activities
Depreciation and amortization 86 417
Gain on recognition of translation adjustment - (494)
Decrease in restricted cash 103 -
Decrease in accounts receivable 145 929
Decrease in inventory 904 479
(Increase) decrease in other current assets 1 (10)
Decrease in accounts payable (458) (51)
Increase (decrease) in accrued liabilities (213) 65
Net cash from operating activities 234 1,937
Cash flows from (used for) investing activities
Capital expenditures (7) (69)
Other investing activities, net 18 11
11 (58)
Cash flows from (used for) financing activities
Decrease in notes payable and capital lease obligations (12) (30)
Repurchase of preferred stock (1,187) -
Proceeds from stock option exercises 5 1
(1,194) (29)
Net increase (decrease) in cash and equivalents (949) 1,850
Cash and equivalents, beginning of period 8,723 1,776
Cash and equivalents, end of period $7,774 $3,626
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Star Technologies, Inc. (the "Company") develops, manufactures, markets
and services high-performance scientific computer systems and is a value-added
manufacturer of integrated solutions for the imaging information systems
market. The Company's products are sold to customers in the United States,
Canada and major European markets.
NOTE 1 - Financial Information
The interim financial statements presented herein are unaudited. They
reflect all adjustments that, in the opinion of management, are necessary to
fairly present the Company's financial position and results of operations for
the interim periods presented. All such adjustments are of a normal, recurring
nature. The results of operations for the three-month period ended June 30,
1995 are not necessarily indicative of the results to be expected for the
entire fiscal year.
The interim consolidated financial information should be read in
conjunction with the Company's Annual Report on Form 10-K, Commission file
number 0-13318, for the fiscal year ended March 31, 1995.
Certain fiscal 1995 amounts have been reclassed for comparative purposes.
NOTE 2 - Revenue Recognition for Long-Term Contracts
Revenue on the Company's long-term contract, which was completed during
fiscal 1995, is recorded under the percentage-of-completion method of
accounting. Under this method, revenue is recognized based on contract costs
incurred to date compared with total estimated contract costs. Contract costs
include labor and benefits, materials and allocations of indirect costs.
Losses on long-term contracts are recognized when they become known.
NOTE 3 - Short-Term Investments
The Company's short-term investments consist entirely of commercial
paper. These investments, which are held to maturity (less than three months
from the date of purchase), are carried at cost which approximates their
market value.
NOTE 4 - Inventory
Inventory is stated at the lower of cost (first-in, first-out basis) or
market. All classifications of inventory include materials and an allocation
of manufacturing overhead. Systems-in-process and completed systems include an
allocation of labor.
-4-
<PAGE>
The major classifications of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
<S> <C> <C>
Components and subassemblies $1,274 $1,973
Systems-in-process 270 413
Completed systems 14 76
$1,558 $2,462
====== ======
</TABLE>
Approximately $400,000 of inventory at June 30, 1995 and March 31, 1995
relates to a lot terminated for the convenience of the government during fiscal
1994 under a long-term subcontract under the United States Navy's SH-60
Program. The Company has submitted a claim for recovery of related costs and
inventory and is actively working with the government and the prime contractor
toward settlement of the claim.
NOTE 5 - Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful accounts of
$78,000 and $74,000 at June 30, 1995 and March 31, 1995, respectively.
NOTE 6 - Sales to General Electric Medical Systems ("GEMS")
The Company's revenue from shipments and related services of ST-RP's to
GEMS totaled $2.2 million and $5.4 million for the quarters ended June 30, 1995
and 1994, respectively. In January 1995, the Company filed a demand for
arbitration against GEMS brought under a development and technology transfer
agreement with GEMS (the "Development Agreement"). (See Note 10.) During May
1995, GEMS ceased purchasing such products from the Company.
NOTE 7 - Notes Payable and Capital Lease Obligations
In October 1994, the Company extended its revolving credit note agreement,
which operates as a line of credit, with its current bank through September 30,
1995. The note agreement was amended in April 1995 and permits borrowings of
up to $1.5 million, subject to existing accounts receivable levels, and bears
interest at prime plus 0.5%. Borrowings under the agreement are secured by
substantially all of the assets of the Company, and are subject to certain
conditions and financial covenants, including restrictions on the payment of
dividends on common stock. As of June 30, 1995, the Company was in compliance
with the covenants in the note agreement. There were no borrowings under the
agreement at June 30, 1995 and March 31, 1995. The Company's remaining short-
and long-term obligations relate entirely to capital lease obligations.
As a result of the expected reduction in the Company's level of operations
in fiscal 1996 due to the cessation of GEMS purchases, the level of available
borrowings under the note agreement may be limited. However, the Company
expects to generate sufficient cash, through its current cash and short-term
investments position and through operations, to meet its fiscal 1996 operating
requirements. In the event that the Company requires more funds than those
provided through current financing and internally generated cash, there
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<PAGE>
can be no assurance that the Company would be successful in raising new capital
from external sources.
There was no interest paid during the quarter ended June 30, 1995.
Interest paid during the three months ended June 30, 1994 was $3,000.
NOTE 8 - Repurchase of Preferred Stock
In March and April, 1995, the Company repurchased and retired 46% of the
outstanding shares of its Series B and Series C Senior Preferred Stock (the
"Preferred Stock") from two of the three preferred shareholders. In the March
transaction, the Company paid $950,000 for 37,240 shares of the Preferred Stock
which had a redemption price of more than $4.9 million, including cumulative
undeclared dividends of $1.2 million. In the April transaction, the Company
paid $1.2 million for 46,549 shares of the Preferred Stock which had a
redemption price of $6.2 million, including cumulative undeclared dividends in
excess of $1.5 million. For purposes of computing the earnings per share for
the quarter ended June 30, 1995, the April transaction resulted in the
availability of $5.0 million additional earnings to common stockholders,
representing the difference between the carrying amount of the redeemed
preferred stock, including cumulative undeclared dividends, and the price paid
by the Company to repurchase the stock.
NOTE 9 - Translation of Foreign Currencies
Operating accounts of the Company's foreign subsidiaries are translated
into U.S. Dollars using average currency exchange rates during the year.
Statements of financial position are translated using the applicable exchange
rates in effect at the end of the reporting period. Adjustments resulting from
translation of foreign financial statements are reported as a component of
consolidated stockholders' equity.
Due to the significant reduction of its foreign business and the closing
of its European offices, the Company recognized an accumulated foreign
translation gain of $494,000 in the first quarter of fiscal 1995. The gain is
reflected as a reduction of selling, general and administrative expense in the
fiscal 1995 Consolidated Statement of Operations.
NOTE 10 - Commitments and Contingencies
In July 1991, the Company filed a lawsuit against Ronald G. Walters
("Walters") in the United States District Court for the Northern District of
Ohio alleging breach of contract arising from Walters' interference with the
Company's ownership of a certain technology used in its reconstruction
processor business. Walters alleged ownership of the technology, and in a
counterclaim filed in August 1991, sought unstated damages and a declaratory
judgment regarding the disputed technology. In April 1995, a trial was held in
the United States District Court for the Northern District of Ohio on the
Company's claim for breach of contract against Walters and Walters'
counterclaim for breach of contract against the Company. On April 24, 1995, a
jury returned a verdict for Walters, finding in his favor on his claim for
breach of contract and against Star on its claim for breach of contract. The
jury found that Walters does not have an obligation to assign his ownership
rights in the disputed technology to Star. On June 13, 1995, Walters filed a
separate lawsuit against the Company, its Directors and certain officers in the
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<PAGE>
United States District Court for the Northern District of Ohio alleging patent
infringement and unjust enrichment in connection with the Company's use of the
disputed technology. Walters seeks damages of $67,500,000, trebling of any
damages awarded, and an injunction that would prohibit the Company from using
the disputed technology. Management believes it has valid defenses to this
claim.
On January 25, 1995, the Company filed a demand for arbitration (the
"Demand") with the Commercial Arbitration Tribunal of the American Arbitration
Association requesting arbitration of certain contract claims against GEMS
brought under the Development Agreement. The Development Agreement obligates
GEMS to purchase its requirements for up to 900 reconstruction processors from
the Company and to pay royalties for certain reconstruction processors that
GEMS has the right to produce under the Agreement. GEMS has developed its own
reconstruction processor instead of purchasing the Company's. As discussed in
Note 6, in May 1995, GEMS ceased ordering reconstruction processors from the
Company. Additionally, GEMS has informed the Company that GEMS intends to use
in its reconstruction processors certain technology in which the Company has a
proprietary interest. The Company believes that the Agreement prohibits such
use. Accordingly, the Demand alleges that GEMS has breached its obligation to
purchase its requirements for reconstruction processors from the Company and
has breached its obligation not to use certain proprietary technology in its
reconstruction processors. The Company is seeking monetary damages from GEMS
and a permanent injunction prohibiting GEMS from selling, marketing or
distributing GEMS' reconstruction processors. The arbitration claim is
expected to be heard by early Fall 1995.
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<PAGE>
PART I. FINANCIAL INFORMATION CONT'D
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
The Company previously reported in its Forms 10-Q for the quarters ended
June 30, 1994, September 30, 1994 and December 31, 1994; and in its Form 10-K
for the year ended March 31, 1995 that General Electric Medical Systems
("GEMS") had informed the Company that GEMS intended to phase into full
production a reconstruction processor it was developing and to phase out
purchases of the Company's most recently developed reconstruction processor,
the ST-RP. GEMS informed the Company that it did not intend to purchase
additional units after May 1995. Accordingly, the Company has no outstanding
orders from GEMS. The Company believes that GEMS is obligated, under the terms
of the Development and Technology Transfer Agreement between the Company and
GEMS (the "GEMS Agreement"), to continue to obtain its requirements for
reconstruction processors from the Company. In January 1995, the Company filed
a demand for arbitration in accordance with the terms of the GEMS Agreement.
The arbitration claim is expected to be heard by early Fall 1995. There can be
no assurances that the Company will prevail in its arbitration claim against
GEMS, or that a favorable outcome would result in additional sales to GEMS or
damages payable to the Company.
Revenue for the first quarter of fiscal 1996 decreased 56% from the
comparable prior year quarter, primarily due to lower sales to GEMS. Revenue
from sales to GEMS totalled $2.2 million and $5.4 million for the quarters
ended June 30, 1995 and 1994, respectively.
The gross margin percentage for the quarter ended June 30, 1995 increased
to 47% from 34% for the same quarter a year ago, primarily due to cost
reductions achieved beginning in the second quarter of fiscal 1995 on the
medical imaging product sold to GEMS, in addition to the completion of a low
margin, long-term sub-contract in the fourth quarter of fiscal 1995.
Research and development ("R&D") expense for the first quarter of fiscal
1996 decreased 22% from the prior year quarter. The decrease is primarily
attributable to lower costs as a result of the sale of the Graphicon division
in March 1995. The Company has concentrated its R&D efforts over the past
year-and-a-half exploring growth opportunities in the medical imaging business
in which the Company has over ten years of experience. The Company has
targeted the medical information system market, including both medical
reporting and digital medical imaging and communications systems. In May 1995,
the Company received Food and Drug Administration approval to market the Image
Management Server, one of the Company's new products. Due to the nature of its
business, the Company expects R&D expense to continue to be a significant
operating expense.
Selling, general and administrative expense for the first quarter of
fiscal 1996 decreased 4% from the same quarter a year ago. During the
three-month period ended June 30, 1995 and 1994, the Company earned $137,000
and $23,000, respectively, of net interest income on its short-term
investments. There were no borrowings against the bank line of credit at June
30, 1995 or March 31, 1995.
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<PAGE>
In response to the elimination of reconstruction processor sales to GEMS,
the Company, in early June 1995, reduced its workforce approximately 30%,
affecting manufacturing, engineering and administrative departments. Resultant
cost reductions will occur beginning with the second quarter of fiscal 1996.
Liquidity and Capital Resources
The Company generated cash flow from operating activities of $234,000 for
the quarter ended June 30, 1995, primarily as a result of decreases in accounts
receivable and inventory, partially offset by decreases in accounts payable and
accrued liabilities.
In October 1994, the Company extended its revolving credit note agreement,
which operates as a line of credit, with its current bank through September 30,
1995. The note agreement was amended in April 1995 and permits borrowings of
up to $1.5 million, subject to existing accounts receivable levels, and bears
interest at prime plus 0.5%. Borrowings under the agreement are secured by
substantially all of the assets of the Company, and are subject to certain
conditions and financial covenants. As of June 30, 1995, the Company was in
compliance with the covenants in the note agreement. There were no borrowings
under the agreement at June 30, 1995.
As previously discussed in Results of Operations, GEMS, the Company's
major customer, informed the Company that it would not purchase additional
ST-RP units from the Company after May 1995. Revenue from GEMS accounted for
85% of total revenue in the first quarter of fiscal 1996. The Company does not
anticipate any additional orders from GEMS for the ST-RP product.
The Company continues to work on its new products in the imaging and
information systems market and anticipates bringing new products to market
during the third quarter of fiscal 1996. The Company can give no assurances
that the new products will be accepted in the market place or will
significantly offset the lost revenue from GEMS. The Company continues to
review business opportunities and new products that build on the Company's
experience.
In March and April, 1995, the Company repurchased and retired 46% of the
outstanding shares of its Series B and Series C Senior Preferred Stock (the
"Preferred Stock") from two of the three preferred shareholders. In the March
transaction, the Company paid $950,000 for 37,240 shares of the Preferred Stock
which had a redemption price of more than $4.9 million, including cumulative
undeclared dividends of $1.2 million. In the April transaction, the Company
paid $1.2 million for 46,549 shares of the Preferred Stock which had a
redemption price of $6.2 million, including cumulative undeclared dividends in
excess of $1.5 million. For purposes of computing earnings per share for the
quarter ended June 30, 1995, the April transaction resulted in the availability
of $5.0 million additional earnings to common stockholders, representing the
difference between the carrying amount of the redeemed preferred stock,
including cumulative undeclared dividends, and the price paid by the Company to
repurchase the stock.
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<PAGE>
For the remaining preferred shareholder, General Electric Company ("GE"),
the Preferred Stock accrues dividends at a rate of 10% per annum. The dividend
rate is subject to scheduled annual increases of an additional 2% on each of
June 1, 1995 and June 1, 1996, and shall further increase by 1% per annum on
June 1, 1997. The per annum dividend rate on the Preferred Stock is also
subject to a 2% increase should the Company breach any of certain covenants
outlined in the Preferred Stock Purchase Agreement or not pay in full when due
any dividends on the Preferred Stock. The Company is not in compliance with
certain of the covenants in the Preferred Stock Purchase Agreement and has not
paid the dividends due on the remaining Preferred Stock. Consequently,
dividends have been calculated at an aggregate dividend rate of 12% per annum
through May 31, 1995, and will be calculated at 14% per annum for the
subsequent year. To the extent declared, such dividends would be payable
quarterly in the amount of $298,000 in cash. Unpaid cumulative dividends in
arrears on the remaining Preferred Stock total $3.6 million as of June 30,
1995. The Company has suspended discussions with GE regarding the remaining
Preferred Stock, pending resolution of the arbitration concerning the GEMS
Agreement referred to above.
As discussed in Note 10 to the unaudited interim Consolidated Financial
Statements, on June 13, 1995, Ronald Walters filed a claim against the Company
for patent infringement and unjust enrichment. While the Company cannot
predict the likely outcome of this matter at this time, a judgment against the
Company could have a material adverse impact on the Company's results of
operations and liquidity. Management believes that it has valid defenses
against this claim.
The Company expects to generate sufficient cash, through its current cash
and short-term investment position and through operations, to meet its fiscal
1996 operating requirements. In the event that the Company requires more funds
than those provided through current financing and internally generated cash,
there can be no assurance that the Company would be successful in raising new
capital from external sources.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Part I, Item 1, Note 10.
Item 3. Defaults Upon Senior Securities
The Company's Series B and C Senior Preferred Stock (the "Preferred
Stock") issued in May 1990 accrues dividends at a rate of 10% per annum. The
dividend rate is subject to scheduled annual increases of an additional 2% on
each of June 1, 1995 and June 1, 1996, and shall further increase by 1% per
annum on June 1, 1997. The per annum dividend rate on the Preferred Stock is
also subject to a 2% increase should the Company breach any of certain
covenants outlined in the Preferred Stock Purchase Agreement or not pay in full
when due any dividends on the Preferred Stock. The Company is not in
compliance with certain of the covenants in the Preferred Stock Purchase
Agreement and has not paid the dividends due on the remaining Preferred Stock.
Consequently, dividends have been calculated at an aggregate dividend rate of
12% per annum through May 31, 1995, and will be calculated at 14% per annum for
the subsequent year. To the extent declared, such dividends would be payable
quarterly in the amount of $298,000 in cash. Unpaid cumulative dividends in
arrears on the remaining Preferred Stock total $3.6 million as of June 30,
1995. The Company has suspended discussions regarding the remaining Preferred
Stock with the holder, GE, pending resolution of the arbitration concerning the
GEMS Agreement referred to above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. 11 - Statement Regarding Computation of Per Share Earnings
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1995.
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.
STAR TECHNOLOGIES, INC.
Dated: August 11, 1995 /s/ Robert C. Compton
Robert C. Compton
Chairman of the Board of Directors,
President and Chief Executive
Officer and Director
/s/ Brenda A. Potosnak
Brenda A. Potosnak
Controller, Treasurer, Secretary
and Principal Accounting Officer
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<TABLE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<CAPTION>
Three Months Ended
June 30,
Primary Per Share Earnings 1995 1994
<S> <C> <C>
Average shares outstanding during period 19,874 19,390
Unexercised stock option equivalent shares
computed by the "treasury stock" method - -
19,874 19,390
====== ======
Net income (loss) $ (334) $ 602
Undeclared cumulative dividends on
preferred stock (298) (516)
Excess carrying amount and cumulative undeclared
dividends of Preferred Stock over consideration 4,954 -
Adjustment for interest reduction of
assumed debt redemption, net of tax - 10
Net income applicable to common shares $4,322 $ 96
====== ======
Primary earnings per common and common
equivalent share:
Net income per common and common equivalent share $ .22 $ .00
====== ======
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<PAGE>
</TABLE>
<TABLE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS (Cont'd)
(In thousands, except per share data)
<CAPTION>
Three Months Ended
June 30,
Fully Diluted Per Share Earnings 1995 1994
<S> <C> <C>
Average shares outstanding during period 19,874 19,390
Unexercised stock option equivalent shares
computed by the "treasury stock" method - -
Dilutive effect of convertible securities
computed by the "if converted" method:
Series A preferred stock 338 818
Series B & C preferred stock 9,931 18,309
30,143 38,517
====== ======
Net income (loss) $ (334) $ 602
Excess carrying amount and cumulative undeclared
dividends of Preferred Stock over consideration 4,954 -
Adjustment for interest reduction of
assumed debt redemption, net of tax - 10
Net income applicable to common shares $4,620 $ 612
====== ======
Fully diluted earnings per common and common
equivalent share:
Net income per common and common equivalent share $ .15 $ .02
====== ======
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 651
<SECURITIES> 7550
<RECEIVABLES> 181
<ALLOWANCES> (78)
<INVENTORY> 1558
<CURRENT-ASSETS> 9931
<PP&E> 7846
<DEPRECIATION> (7221)
<TOTAL-ASSETS> 10821
<CURRENT-LIABILITIES> 1956
<BONDS> 0
<COMMON> 199
0
3
<OTHER-SE> 8656
<TOTAL-LIABILITY-AND-EQUITY> 10821
<SALES> 2576
<TOTAL-REVENUES> 2576
<CGS> 1356
<TOTAL-COSTS> 1356
<OTHER-EXPENSES> 1691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (137)
<INCOME-PRETAX> (334)
<INCOME-TAX> 0
<INCOME-CONTINUING> (334)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (334)
<EPS-PRIMARY> .22
<EPS-DILUTED> .15
</TABLE>
