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 September 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 September 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 Six Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue (includes revenue from GEMS of $98, $5,562 $ 505 $ 5,962 $ 3,081 $11,869
and $2,278, $10,996)
Cost of revenue 319 3,720 1,675 7,610
Gross margin 186 2,242 1,406 4,259
Operating expenses
Research and development 451 912 1,128 1,782
Selling, general and administrative 848 1,187 1,862 2,249
Recognition of accumulated foreign translation gain - - - (494)
Total operating expenses, net 1,299 2,099 2,990 3,537
Operating income (loss) (1,113) 143 (1,584) 722
Interest income, net 114 42 251 65
Other income (expense), net 35 (14) 35 (14)
Net income (loss) before provision for income taxes (964) 171 (1,298) 773
Provision for income taxes - - - -
Net income (loss) $ (964) $ 171 $(1,298) $ 773
======= ======= ======= =======
Net income (loss) $ (964) $ 171 $(1,298) $ 773
Preferred stock dividend requirement (348) (516) (646) (1,032)
Repurchase of preferred stock - - 4,954 -
Net income (loss) applicable to common shares $(1,312) $ (345) $ 3,010 $ (259)
======= ======= ======= =======
Earnings (loss) per share:
Per common and common equivalent share $ (.07) $ (.02) $ .15 $ (.01)
======= ======= ======= =======
Assuming full dilution $ (.07) $ (.02) $ .12 $ (.01)
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(In thousands, except share data)
<CAPTION>
Sept. 30, March 31,
Assets 1995 1995
Current assets
<S> <C> <C>
Cash (includes restricted cash of $345 and $530) $ 420 $ 1,353
Short-term investments 6,375 7,900
Accounts receivable, net (includes GEMS receivable of $12 and $91) 171 248
Inventory, net 1,485 2,462
Other current assets 131 70
Total current assets 8,582 12,033
Property and equipment, net 573 698
Other assets 240 289
Total assets $ 9,395 $13,020
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 348 $ 893
Accrued payroll and related benefits 406 615
Other accrued liabilities 719 1,089
Notes payable and capital lease obligations 28 49
Total current liabilities 1,501 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 (55,553) (54,255)
Total stockholders' equity 7,894 10,374
Total liabilities and stockholders' equity $ 9,395 $13,020
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Six Months Ended
September 30,
1995 1994
Cash flows from (used for) operating activities
<S> <C> <C>
Net income (loss) $(1,298) $ 773
Adjustments to reconcile net income (loss) to net cash
from (used for) operating activities
Depreciation and amortization 168 768
Gain on recognition of translation adjustment - (494)
Decrease in restricted cash 185 -
Decrease in accounts receivable 77 1,176
Decrease in inventory 977 1,297
Increase in other current assets (61) (80)
Increase (decrease) in accounts payable (545) 264
Decrease in accrued liabilities (579) (207)
Net cash from (used for) operating activities (1,076) 3,497
Cash flows from (used for) investing activities
Capital expenditures (32) (257)
Other investing activities, net 37 23
5 (234)
Cash flows from (used for) financing activities
Decrease in notes payable and capital lease obligations (21) (67)
Repurchase of preferred stock (1,187) -
Proceeds from stock option exercises 5 1
(1,203) (66)
Net increase (decrease) in cash and equivalents (2,274) 3,197
Cash and equivalents, beginning of period 8,723 1,776
Cash and equivalents, end of period $ 6,449 $4,973
======= ======
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Star Technologies, Inc. (the "Company") has historically designed and
manufactured performance-enhancing computing products and solutions for the
image and signal processing marketplace, principally for medical imaging.
During fiscal 1994, Star initiated a transition strategy to develop products
for the image and information management market. A key segment of this market
is medical imaging, which draws upon Star's historical skills and experience.
With a focus on total systems integration, Star is developing innovative
solutions that span the medical imaging spectrum. Star's current product focus
is a family of DICOM 3.0-compliant solutions, with special expertise in the
area of DICOM image storage. Star markets its products and technology to OEM
suppliers of medical imaging equipment. In addition, Star continues to pursue
contract engineering and manufacturing business.
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- and six-month periods ended
September 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 - 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 3 - 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.
The major classifications of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
Sept. 30, March 31,
1995 1995
<S> <C> <C>
Components and subassemblies $1,219 $1,973
Systems-in-process 252 413
Completed systems 14 76
$1,485 $2,462
====== ======
</TABLE>
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<PAGE>
Approximately $400,000 of inventory at September 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 4 - Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful accounts of
$28,000 and $74,000 at September 30, 1995 and March 31, 1995, respectively.
NOTE 5 - Sales to General Electric Medical Systems ("GEMS")
The Company's revenue from shipments of ST-RP's and related services to
GEMS totaled $98,000 and $5.6 million for the quarters ended September 30, 1995
and 1994, respectively. For the six months ended September 30, 1995 and 1994,
revenue from GEMS totaled $2.3 million and $11.0 million, 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 8.) During May 1995, GEMS ceased
purchasing such products from the Company.
NOTE 6 - Notes Payable and Capital Lease Obligations
On September 30, 1995, the Company's revolving credit note agreement
expired and was not renewed. The Company had not borrowed under this agreement
since December 1993 and has had sufficient cash reserves for its operating
needs since that time. Although the Company does not currently need a credit
agreement to meet its operating requirements, the Company is in discussion with
several banks regarding potential credit agreement arrangements. The Company's
remaining short- and long-term obligations relate entirely to capital lease
obligations.
The Company expects to have sufficient cash, through its current cash and
short-term investments position and from operations, to meet its fiscal 1996
operating requirements. In the event that the Company requires more funds,
there can be no assurance that the Company would be successful in raising new
capital from external sources.
There was no interest paid during the six months ended September 30, 1995.
Interest paid during the six months ended September 30, 1994 was $3,000.
NOTE 7 - 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
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<PAGE>
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 six-month period ended September 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 8 - 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
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,
defined in the Development Agreement as "GE Commercial Reconstruction
Processors" ("GECRPs"), 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 5, in May 1995, GEMS ceased
ordering reconstruction processors from the Company. Additionally, GEMS has
informed the company that GEMS is using 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 GECRPs 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 and distributing GEMS' reconstruction
processors. The arbitration hearing is scheduled to begin in December 1995.
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
The Company previously reported 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. Revenue from GEMS accounted for 74% and 90% of the Company's total
revenue for the six months ended September 30, 1995 and for the fiscal year
ended March 31, 1995. GEMS informed the Company that it did not intend to
purchase additional units after May 1995. Accordingly, the Company has not had
orders from GEMS for the ST-RP and has not shipped any new systems since May
1995. 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 hearing is scheduled to begin in December 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 three- and six-month periods ended September 30, 1995
decreased 92% and 74% respectively, from the same periods a year ago, due to
lower sales to GEMS. Revenue from sales to GEMS totalled $98,000 and $5.6
million for the quarters ended September 30, 1995 and 1994, respectively; and
$2.3 million and $11.0 million for the six-month periods ended September 30,
1995 and 1994, respectively.
The gross margin percentage for the six-month period ended September 30,
1995 increased to 46% from 36% from the comparable prior year period, 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. The
gross margin percentage for the quarter ended September 30, 1995 was 37% which
reflects the loss of the higher margin GEMS medical imaging product last sold
to GEMS in May 1995 as well as a higher absorption rate of fixed costs
associated with reduced revenue levels during the quarter.
In response to the elimination of reconstruction processor sales to GEMS,
in early June 1995, the Company reduced its workforce approximately 30%,
affecting manufacturing, engineering and administrative departments. Resultant
cost reductions are reflected in the second quarter of fiscal 1996.
Research and development ("R&D") expense for the three and six months
ended September 30, 1995 decreased 51% and 37% from the comparable prior year
periods. The decreases are primarily attributable to lower costs as a result
of the sale of the Graphicon division in March 1995 and a company-wide
reduction in workforce in June 1995. The Company has concentrated its R&D
efforts over the past two years 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 and August 1995, the Company received Food and Drug Administration approval
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to market the Image Management Server and the Film Image Scan System, two 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 three and six months
ended September 30, 1995 decreased 29% and 17% respectively from the same
periods a year ago primarily due to the company-wide workforce reduction in
June 1995. During the three- and six-month periods ended September 30, 1995
and 1994, the Company earned $114,000 and $42,000, and $251,000 and $65,000
respectively, of net interest income on its short-term investments.
Liquidity and Capital Resources
The Company had a net cash outflow from operating activities of $1,076,000
for the six months ended September 30, 1995, primarily as a result of the
significant reduction in revenue.
On September 30, 1995, the Company's revolving credit note agreement
expired and was not renewed. The Company had not borrowed under this agreement
since December 1993 and has had sufficient cash reserves for its operating
needs since that time. Although the Company does not need a credit agreement
to meet its operating requirements for the fiscal year, the Company is in
discussion with several banks regarding potential credit agreement
arrangements. The Company's remaining short- and long-term obligations relate
entirely to capital lease obligations.
The Company expects to have sufficient cash, through its current cash and
short-term investment position and from operations, to meet its fiscal 1996
operating requirements. In the event that the Company requires more funds,
there can be no assurance that the Company would be successful in raising new
capital from external sources.
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
six months ended September 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.
For the remaining preferred shareholder, General Electric Company ("GE"),
the Preferred Stock accrues dividends at a rate of 12% per annum, effective
June 1, 1995. The original rate was 10% per annum. The dividend rate is
subject to scheduled annual increases of 2% per annum on June 1, 1996 and 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.
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<PAGE>
Consequently, dividends have been calculated at an aggregate dividend rate of
12% per annum through May 31, 1995, and are currently calculated at 14% per
annum. To the extent declared, such dividends would be payable quarterly in
the amount of $348,000 in cash. Unpaid cumulative dividends in arrears on the
remaining Preferred Stock total $3.9 million as of September 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 8 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.
Corporate Repositioning
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
74% of total revenue in the first six months of fiscal 1996. The Company does
not anticipate any additional orders from GEMS for the ST-RP product.
In May and August 1995, the Company received Food and Drug Administration
approval to market the Image Management Server and the Film Image Scan System,
two of the Company's new products. The Company continues to work on these and
other products in the imaging and information systems market and anticipates
bringing some of the 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.
In May 1995, the Company engaged the investment banking firm of Broadview
Associates, LP of San Mateo, California to assist the Company in the
identification of strategic opportunities. The Company continues to review
business opportunities and new products that build on the Company's experience.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Part I, Item 1, Note 8.
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 12% per annum,
effective June 1, 1995. The original rate was 10% per annum. The dividend
rate is subject to scheduled annual increases of 2% on June 1, 1996 and 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 Preferred Stock.
Consequently, dividends have been calculated at an aggregate dividend rate of
12% per annum through May 31, 1995, and are currently calculated at 14% per
annum. To the extent declared, such dividends would be payable quarterly in
the amount of $348,000 in cash. Unpaid cumulative dividends in arrears on the
Preferred Stock total $3.9 million as of September 30, 1995. The Company has
suspended discussions regarding the Preferred Stock with the holder, GE,
pending resolution of the arbitration concerning the GEMS Agreement referred to
above.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on August 16, 1995.
16,251,706 shares of the Company's Common Stock and Series A Preferred Stock
were present, in person or by proxy, at the Annual Meeting to vote on the
election of three directors. 99,307 shares of the Series B and Series C
Preferred Stock were present, in person or by proxy, at the Annual Meeting.
At the Annual Meeting, Herbert Shaw was elected to the Company's Board of
Directors for a term equal to the earliest of one year, the election and
qualification of his successor, or until his death, resignation or removal from
office. Only holders of the Company's Common Stock and Series A Preferred
Stock were eligible to vote on the nomination of Mr. Shaw to the Board of
Directors. 15,761,198 shares were voted for Mr. Shaw and 490,508 shares were
withheld.
At the Annual Meeting, Robert C. Compton was elected to the Company's
Board of Directors for a term equal to the earliest of two years, the election
and qualification of his successor, or until his death, resignation or removal
from office. Only holders of the Company's Common Stock and Series A Preferred
Stock were eligible to vote on the nomination of Mr. Compton to the Board of
Directors. 15,762,198 shares were voted for Mr. Compton and 489,508 shares
were withheld.
At the Annual Meeting, Alan O. Maxwell was elected to the Company's Board
of Directors for a term equal to the earliest of three years, the election and
qualification of his successor, or until his death, resignation or removal from
office. Only holders of the Company's Common Stock and Series A Preferred
Stock were eligible to vote on the nomination of Mr. Maxwell to the Board of
Directors. 15,762,354 shares were voted for Mr. Maxwell and 489,352 shares
were withheld.
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Francis Jungers and Dr. Carl Ravin continue as Directors of the Company.
The term of Mr. Jungers expires on the date of the 1996 Annual Meeting of
Stockholders. The term of Dr. Ravin expires on the date of the 1997 Annual
Meeting of Stockholders.
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 September 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: November 14, 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 Six Months Ended
September 30, September 30,
Primary Per Share Earnings (Loss) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average shares outstanding during period 19,880 19,622 19,877 19,506
======= ======= ======= =======
Net income (loss) $ (964) $ 171 $(1,298) $ 773
Undeclared cumulative dividends on
preferred stock (348) (516) (646) (1,032)
Excess carrying amount and cumulative undeclared
dividends of Preferred Stock over consideration - - 4,954 -
Net income (loss) applicable to common shares $(1,312) $ (345) $ 3,010 $ (259)
======= ======= ======= =======
Primary earnings (loss) per common and common
equivalent share:
Net income (loss) per common and common $ (.07) $ (.02) $ .15 $ (.01)
equivalent share ======= ======= ======= =======
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</TABLE>
<TABLE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS (Cont'd)
(In thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
Fully Diluted Per Share Earnings 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average shares outstanding during period 19,880 19,622 19,877 19,506
Dilutive effect of convertible securities
computed by the "if converted" method:
Series A preferred stock 338 358 338 358
Series B & C preferred stock 9,931 18,309 9,931 18,309
30,149 38,289 30,146 38,173
======= ======= ======= =======
Net income (loss) $ (964) $ 171 $(1,298) $ 773
Excess carrying amount and cumulative undeclared
dividends of Preferred Stock over consideration - - 4,954 -
Net income (loss) applicable to common shares $ (964) $ 171 $ 3,656 $ 773
======= ======= ======= =======
Fully diluted earnings (loss) per common and common
equivalent share:
Net income (loss) per common and common $ (.03) $ .00 $ .12 $ .02
equivalent share ======= ======= ======= =======
</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> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
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0
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