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 December 31, 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 December 31, 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 Nine Months Ended
December 31, December 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue (includes revenue from GEMS of $10, $4,486 $ 875 $ 4,905 $ 3,956 $16,774
and $2,288, $15,481)
Cost of revenue 672 2,694 2,347 10,304
Gross margin 203 2,211 1,609 6,470
Operating expenses
Research and development 457 979 1,585 2,761
Selling, general and administrative 1,011 1,064 2,873 3,313
Recognition of accumulated foreign translation gain - - - (494)
Total operating expenses, net 1,468 2,043 4,458 5,580
Operating income (loss) (1,265) 168 (2,849) 890
Interest income, net 97 65 348 130
Other income (expense), net 3 - 38 (14)
Net income (loss) before provision for income taxes (1,165) 233 (2,463) 1,006
Provision for income taxes - - - -
Net income (loss) $(1,165) $ 233 $(2,463) $ 1,006
======= ======= ======= =======
Net income (loss) $(1,165) $ 233 $(2,463) $ 1,006
Preferred stock dividend requirement (348) (516) (994) (1,548)
Repurchase of preferred stock - - 4,954 -
Net income (loss) applicable to common shares $(1,513) $ (283) $ 1,497 $ (542)
======= ======= ======= =======
Earnings (loss) per share:
Per common and common equivalent share $ (.08) $ (.01) $ .08 $ (.03)
======= ======= ======= =======
Assuming full dilution $ (.08) $ (.01) $ .08 $ (.03)
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(In thousands, except share data)
<CAPTION>
Dec. 31, March 31,
Assets 1995 1995
Current assets
<S> <C> <C>
Cash (includes restricted cash of $89 and $530) $ 207 $ 1,353
Short-term investments 5,858 7,900
Accounts receivable, net (includes GEMS receivable of $3 and $91) 163 248
Inventory, net 999 2,462
Other current assets 95 70
Total current assets 7,322 12,033
Property and equipment, net 537 698
Other assets 217 289
Total assets $ 8,076 $13,020
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 496 $ 893
Accrued payroll and related benefits 321 615
Other accrued liabilities 513 1,089
Notes payable and capital lease obligations 17 49
Total current liabilities 1,347 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 (56,718) (54,255)
Total stockholders' equity 6,729 10,374
Total liabilities and stockholders' equity $ 8,076 $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>
Nine Months Ended
December 31,
1995 1994
Cash flows from (used for) operating activities
<S> <C> <C>
Net income (loss) $(2,463) $1,006
Adjustments to reconcile net income (loss) to net cash
from (used for) operating activities
Depreciation and amortization 241 1,094
Gain on recognition of translation adjustment - (494)
Decrease in restricted cash 441 -
Decrease in accounts receivable 85 2,182
Decrease in inventory 1,463 1,624
Increase in other current assets (25) (23)
Decrease in accounts payable (397) (115)
Increase (decrease) in accrued liabilities (870) 490
Net cash from (used for) operating activities (1,525) 5,764
Cash flows from (used for) investing activities
Capital expenditures (65) (328)
Other investing activities, net 57 12
(8) (316)
Cash flows from (used for) financing activities
Decrease in notes payable and capital lease obligations (32) (88)
Repurchase of preferred stock (1,187) -
Proceeds from stock option exercises 5 1
(1,214) (87)
Net increase (decrease) in cash and equivalents (2,747) 5,361
Cash and equivalents, beginning of period 8,723 1,776
Cash and equivalents, end of period $ 5,976 $7,137
======= ======
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 nine-month periods ended
December 31, 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>
Dec. 31, March 31,
1995 1995
<S> <C> <C>
Components and subassemblies $936 $1,973
Systems-in-process 34 413
Completed systems 29 76
$999 $2,462
==== ======
</TABLE>
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<PAGE>
Approximately $400,000 of inventory at March 31, 1995 related 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 submitted a claim for recovery of related costs and inventory. During
December 1995, the Company received a payment on the claim covering certain
related costs and the full cost of inventory. The Company is actively working
with the government and the prime contractor toward final settlement of the
claim.
NOTE 4 - Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful accounts of
$21,000 and $74,000 at December 31, 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 $10,000 and $4.5 million for the quarters ended December 31, 1995
and 1994, respectively. For the nine months ended December 31, 1995 and 1994,
revenue from GEMS totaled $2.3 million and $15.5 million, respectively. During
May 1995, GEMS ceased purchasing such products from the Company. 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"). The arbitration claim is expected to be resolved by the end of
the fiscal year. (See Note 8.)
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 borrowing
availability to meet its anticipated operating requirements, the Company is in
discussion with several banks regarding potential credit agreement
arrangements. The Company's remaining short-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 1997
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.
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
-5-
<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 nine-month period ended December 31, 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 reconstruction
processors containing technology that is proprietary to Star. The arbitration
hearing has ended; a decision is expected by the end of fiscal 1996.
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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 90% of the Company's total revenue
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 has ended; a decision is expected by the end of fiscal
1996. 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 nine-month periods ended December 31, 1995
decreased 82% and 76% respectively, from the same periods a year ago, due to
the cessation of sales to GEMS of the ST-RP in May 1995, as discussed above.
Revenue from sales to GEMS totalled $10,000 and $4.5 million for the quarters
ended December 31, 1995 and 1994, respectively; and $2.3 million and $15.5
million for the nine-month periods ended December 31, 1995 and 1994,
respectively. The Company's primary sources of revenue during the quarter
ended December 31, 1995 were from the payment received for the claim on the
U.S. Navy's SH-60 Program, discussed in Note 3, and from maintenance and
support agreements.
The gross margin percentage for the nine-month period ended December 31,
1995 was 41% as compared to 39% for the comparable prior year period. The
higher margin reflects cost reductions achieved on the medical imaging product
sold to GEMS during the first quarter of fiscal 1996 and the completion of a
low margin, long-term subcontract in the fourth quarter of fiscal 1995, offset
in part by a higher absorption rate of fixed costs associated with reduced
revenue levels during the year. The gross margin percentage for the quarter
ended December 31, 1995 was 23% 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 by approximately 30%,
affecting manufacturing, engineering and administrative departments. Resultant
cost reductions are reflected beginning in the second quarter of fiscal 1996.
Research and development ("R&D") expense for the three and nine months
ended December 31, 1995 decreased 53% and 43% 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
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<PAGE>
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.
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 nine months
ended December 31, 1995 decreased 5% and 13% respectively from the same periods
a year ago primarily due to the company-wide workforce reduction in June 1995,
offset in part by higher legal fees associated with the GEMS arbitration
hearing.
During the three- and nine-month periods ended December 31, 1995 and 1994,
the Company earned $97,000 and $65,000, and $348,000 and $130,000 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 $1.5
million for the nine months ended December 31, 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 borrowing
availability to meet its anticipated operating requirements for the fiscal
year, the Company is in discussion with several banks regarding potential
credit agreement arrangements. The Company's remaining short-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 1997
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
nine months ended December 31, 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 (exclusive of
any penalty), 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
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<PAGE>
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 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 $4.3 million as of December 31, 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. Total revenue for the first nine
months of fiscal 1996 decreased 95% from the same period a year ago. 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
initial sales of the products during the fourth 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.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of ("Statement
121"). Statement 121 will require that the Company review its long-lived
assets for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. To the extent that the
undiscounted net future cash flows expected to be generated from an asset are
less than the carrying amount, an impairment loss is recognized as the
difference between that asset's carrying amount and its fair value. The
Company is required to adopt Statement 121 during the year ending March 31,
1997. In the opinion of management of the Company, the adoption of Statement
121 will not have a material impact on the Company's financial condition or
results of operations.
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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
(exclusive of any penalty), 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 $4.3 million as of December 31, 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. 11 - Statement Regarding Computation of Per Share Earnings
Exhibit No. 27 - Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1995.
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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.
STAR TECHNOLOGIES, INC.
Dated: February 13, 1996
Robert C. Compton
Chairman of the Board of Directors,
President and Chief Executive
Officer and Director
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 Nine Months Ended
December 31, December 31,
Primary Per Share Earnings (Loss) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average shares outstanding during period 19,880 19,852 19,878 19,621
======= ======= ======= =======
Net income (loss) $(1,165) $ 233 $(2,463) $ 1,006
Undeclared cumulative dividends on
preferred stock (348) (516) (994) (1,548)
Excess carrying amount and cumulative undeclared
dividends of Preferred Stock over consideration - - 4,954 -
Net income (loss) applicable to common shares $(1,513) $ 283 $ 1,497 $ (542)
======= ======= ======= =======
Primary earnings (loss) per common and common
equivalent share:
Net income (loss) per common and common $ (.08) $ (.01) $ .08 $ (.03)
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 Nine Months Ended
December 31, December 31,
Fully Diluted Per Share Earnings 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average shares outstanding during period 19,880 19,852 19,878 19,621
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 38,519 30,147 38,288
======= ======= ======= =======
Net income (loss) $(1,165) $ 233 $(2,463) $ 1,006
Excess carrying amount and cumulative undeclared
dividends of Preferred Stock over consideration - - 4,954 -
Net income (loss) applicable to common shares $(1,165) $ 233 $ 2,491 $ 1,006
======= ======= ======= =======
Fully diluted earnings (loss) per common and common
equivalent share:
Net income (loss) per common and common $ (.04) $ .01 $ .08 $ .03
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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 207
<SECURITIES> 5858
<RECEIVABLES> 185
<ALLOWANCES> 22
<INVENTORY> 999
<CURRENT-ASSETS> 7322
<PP&E> 7753
<DEPRECIATION> 7216
<TOTAL-ASSETS> 8076
<CURRENT-LIABILITIES> 1347
<BONDS> 0
<COMMON> 199
0
3
<OTHER-SE> 6527
<TOTAL-LIABILITY-AND-EQUITY> 8076
<SALES> 3956
<TOTAL-REVENUES> 3956
<CGS> 2347
<TOTAL-COSTS> 2347
<OTHER-EXPENSES> 4458
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2463)
<INCOME-TAX> 0
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<NET-INCOME> (2463)
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
