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, 1996 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
19,890,324 shares of Common Stock were outstanding as of June 30, 1996.
<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,
1996 1995
<S> <C> <C>
Revenue (includes revenue from GEMS of $63 and $2,180) $ 715 $2,576
Cost of revenue 205 1,356
------ ------
Gross margin 510 1,220
------ ------
Operating expenses
Research and development 375 677
Selling, general and administrative 787 1,014
------ ------
Total operating expenses 1,162 1,691
------ ------
Operating loss (652) (471)
Interest income 61 137
------ ------
Net loss before provision for income taxes (591) (334)
Provision for income taxes - -
------ ------
Net loss $ (591) $ (334)
====== ======
Net loss $ (591) $ (334)
Preferred stock dividend requirement (348) (298)
Repurchase of preferred stock - 4,954
------ ------
Net income (loss) applicable to common shares $ (939) $4,322
====== ======
Earnings (loss) per share:
Per common and common equivalent share $ (.05) $ .22
====== ======
Assuming full dilution $ (.05) $ .15
====== ======
</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 1996 1996
Current assets
<S> <C> <C>
Cash (includes restricted cash of $17) $ 147 $ 166
Short-term investments 3,769 4,886
Accounts receivable, net 551 156
Inventory, net 672 726
Other current assets 85 94
------- -------
Total current assets 5,224 6,028
Property and equipment, net 483 502
Other assets 144 144
------- -------
Total assets $ 5,851 $ 6,674
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 448 $ 608
Accrued payroll and related benefits 403 408
Other accrued liabilities 383 450
------- -------
Total current liabilities 1,234 1,466
Commitments and contingencies - -
Stockholders' equity
Preferred stock; $.01 par value; 1,000,000 shares authorized
Series A convertible; 500,000 shares designated; 45,500 and
46,900 shares issued; 45,500 and 46,900 shares outstanding;
aggregate liquidation preference of $1,638 and $1,688 1 1
Series B convertible; 120,117 shares designated; 59,584
shares issued and outstanding; aggregate liquidation
preference of $5,958 1 1
Series C convertible; 80,079 shares designated; 39,723
shares issued and outstanding; aggregate liquidation
preference of $3,972 1 1
Common stock; $.01 par value; 60,000,000 shares authorized;
19,937,115 and 19,927,035 shares issued; 19,890,324 and
19,880,244 shares outstanding 199 199
Additional paid-in capital 63,446 63,446
Treasury stock, at cost; 46,791 shares (201) (201)
Retained deficit (58,830) (58,239)
------- -------
Total stockholders' equity 4,617 5,208
------- -------
Total liabilities and stockholders' equity $ 5,851 $ 6,674
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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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,
1996 1995
<S> <C> <C>
Cash flows from (used for) operating activities
Net loss $ (591) $ (334)
Adjustments to reconcile net loss to net cash
from (used for) operating activities
Depreciation and amortization 54 86
Decrease in restricted cash - 103
(Increase) decrease in accounts receivable (395) 145
Decrease in inventory 54 904
Decrease in other current assets 9 1
Decrease in accounts payable (160) (458)
Decrease in accrued liabilities (72) (225)
------ ------
Net cash from (used for) operating activities (1,101) 222
------ ------
Cash flows from (used for) investing activities
Capital expenditures (35) (7)
Other investing activities, net - 18
------ ------
(35) 11
------ ------
Cash flows from (used for) financing activities
Repurchase of preferred stock - (1,187)
Proceeds from stock option exercises - 5
------ ------
- (1,182)
------ ------
Net decrease in cash and equivalents (1,136) (949)
Cash and equivalents, beginning of period 5,035 8,723
------ ------
Cash and equivalents, end of period $3,899 $7,774
====== ======
</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. ("Star" or the "Company") has historically
designed and manufactured performance-enhancing computing products and
solutions for the image and signal processing marketplace, principally for
medical imaging. Star is currently developing 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. 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. The
Company anticipates generating initial revenue from these products in the
second quarter of fiscal 1997. In addition, Star continues to pursue
contract engineering and manufacturing business opportunities. The
Company's products compete in markets which are highly competitive and
characterized by rapid technological advances.
NOTE 1 - Financial Information
The interim consolidated 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, 1996 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, 1996.
Certain fiscal 1996 amounts have been reclassified 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>
June 30, March 31,
1996 1996
<S> <C> <C>
Components and subassemblies $644 $686
Systems-in-process 14 22
Completed systems 14 18
---- ----
$672 $726
==== ====
</TABLE>
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<PAGE>
NOTE 4 - Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful accounts
of $22,000 at June 30, 1996 and March 31, 1996.
NOTE 5 - 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 for the quarter ended June 30, 1995. During May
1995, GEMS ceased purchasing such products from the Company. (See Note 9.)
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
revolving credit arrangements. The Company's remaining short-term
obligations relate entirely to capital lease obligations, all of which
mature in 1997.
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 - Earnings Per Share
In April 1995, the Company repurchased and retired a second block of
the outstanding shares of its Series B and Series C Senior Preferred Stock
(the "Preferred Stock"). In the 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 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 - 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 asset's carrying amount, an impairment loss is
recognized as the difference between that asset's carrying amount and its
fair value. The Company adopted Statement 121 as of April 1, 1996. The
adoption of Statement 121 did not have a material impact on results of
operations for the quarter ended June 30, 1996.
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<PAGE>
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock
Based Compensation ("Statement 123"). Under Statement 123, the Company may
elect, but is not required, to adopt a fair value approach to accounting for
stock-based awards granted to employees. The Company adopted Statement 123
as of April 1, 1996. The Company did not implement the fair value
methodology of Statement 123, although certain pro forma disclosures will be
required in the Company's fiscal 1997 consolidated financial statements.
NOTE 9 - 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 that Court 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 the Company 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 the Company.
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 to prohibit the Company from using the disputed technology.
Management believes it has valid defenses to these claims and the Company
filed a counterclaim against Walters challenging the validity and
enforceability of the patent covering the disputed technology that was
issued to Walters. On June 27, 1996, the court issued an order dismissing
the directors and officers from the case. The Company has filed two motions
with the court seeking partial summary judgment on Walters' claims. The
Company cannot predict the likelihood, nor estimate the amount of loss, if any,
which could result from an unfavorable outcome to this matter. No amounts
have been recognized in the accompanying consolidated financial statements
pertaining to this matter.
On January 25, 1995, the Company filed a demand for arbitration (the
"Demand") with the Commercial Arbitration Tribunal of the American
Arbitration Association (the "AAA") requesting arbitration of certain
contract claims against GEMS brought under a Development and Technology
Agreement ("the Development Agreement"). The Development Agreement
obligated 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 Development Agreement. GEMS 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 informed the Company that GEMS is using in its
reconstruction processors certain technology in which the Company has a
proprietary interest. Accordingly, the Demand alleged that GEMS breached
its obligation to purchase its requirements for GECRPs from the Company and
breached its obligation not to use certain proprietary technology in its
reconstruction processors. The Company presented its claims in a hearing
conducted by a three-member arbitration panel of the AAA in December 1995
and January 1996. On March 14, 1996, the panel ruled
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<PAGE>
unanimously for the Company on its claims and awarded damages totaling $9.1
million, with interest at nine percent per annum from April 14, 1996, until
the award is paid. On April 4, 1996, GEMS filed a complaint against the
Company in the Court of Chancery of the State of Delaware, New Castle
County, asking the court to vacate the arbitration award, alleging that the
award is improper and should be set aside. On July 1, 1996, the Delaware
court dismissed GEMS' complaint challenging the award. On April 15, 1996,
the Company filed an application in the United States District Court for the
District of Columbia, seeking an order confirming the arbitration award and
to have judgment entered on the award. GEMS has filed a cross-application
to vacate the award. The Company's application and GEMS' cross-application
are pending before this District of Columbia court. The award has not been
received and is not reflected in results of operations.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Revenue for the first quarter of fiscal 1997 decreased 72% from the
comparable prior year quarter, primarily due to the cessation of sales to
General Electric Medical Systems ("GEMS") of the Company's reconstruction
processor in May 1995, as discussed below and in Note 9. Revenue from sales
to GEMS totalled $2.2 million for the quarter ended June 30, 1995. Sources
of revenue during the first quarter of fiscal 1997 include final payment
received on a claim under the U.S. Navy's SH-60 Program, discussed below,
maintenance and support agreements, and sales of spare parts.
The Company previously reported that GEMS had informed the Company that
GEMS intended to stop purchasing the Company's most recently developed
reconstruction processor, the ST-RP. The Company has not shipped any ST-RPs
since May 1995. The Company filed a demand for arbitration in January 1995,
believing that GEMS was obligated, under the terms of a Development and
Technology Transfer Agreement between the Company and GEMS, to continue to
obtain its requirements for reconstruction processors from the Company. The
arbitration panel appointed to resolve the dispute awarded the Company $9.1
million in March 1996 for lost profits, related damages and a one-time
royalty payment. GEMS filed an action asking that the award be set aside
and has opposed the Company's separate action to confirm the award. On July
1, 1996, GEMS' complaint to set aside the award was dismissed. The other
action is pending. The award has not been received and is not reflected in
the first quarter of fiscal 1997. (See Note 9.)
The Company had pending with the prime contractor a claim for recovery
of related costs associated with one lot terminated in August 1993 for the
convenience of the government under the SH-60 long-term subcontract. In
June 1996, the Company agreed to $443,000 as final settlement of the claim.
This amount is recognized as revenue in the first quarter of fiscal 1997.
The gross margin percentage for the quarter ended June 30, 1996
increased to 71% from 47% for the same quarter a year ago, primarily due to
final settlement on the SH-60 claim, discussed above, for which all
offsetting costs were previously expensed.
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.
These cost reductions are reflected after the first quarter of fiscal 1996.
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<PAGE>
Research and development ("R&D") expense for the first quarter of
fiscal 1997 decreased 45% from the prior year quarter. The decrease is
primarily attributable to lower costs as a result of a company-wide
reduction in workforce in June 1995. Due to the nature of its business, the
Company expects R&D expense as a percentage of revenue to continue to be a
significant operating expense.
Selling, general and administrative expense for the first quarter of
fiscal 1997 decreased 22% from the same quarter 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 appeals.
During the three-month period ended June 30, 1996 and 1995, the Company
earned $61,000 and $137,000, respectively, of interest income on its
short-term investments.
Liquidity and Capital Resources
The Company had a net cash outflow from operating activities of $1.1
million for the quarter ended June 30, 1996, primarily as a result of the
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
fiscal 1997, the Company is in discussion with several banks regarding
potential revolving credit agreement arrangements. The Company's remaining
short-term debt obligations relate entirely to capital lease obligations,
all of which mature in 1997.
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.
The Series B and Series C Senior Preferred Stock (the "Preferred
Stock") accrues dividends at a rate of 14% per annum (exclusive of any
penalty), effective June 1, 1996. The original rate was 10% per annum and
was subject to 2% per annum increases on both June 1, 1995 and 1996. The
dividend rate is subject to a final increase of 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 relating to the Preferred Stock 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, at 14%
through June 1, 1996 and are currently calculated at 16% 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 $5.0 million as of June 30, 1996. The Company is engaged in
discussions with GE, the sole remaining holder of the Preferred Stock,
regarding the repurchase and retirement of a portion of its holdings of
Preferred Stock.
-8-
<PAGE>
As discussed in Note 9 to the unaudited interim Consolidated Financial
Statements, on June 13, 1995, Ronald G. 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
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, including acquisitions. The
Company is engaged in discussions with two companies relating to the
possible acquisition of those companies, but has reached no formal
agreements or understandings with either company.
The Company has concentrated its R&D efforts over the past few 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 systems market, including both medical reporting and
digital medical imaging and communications systems. In May and August 1995,
the Company received Food and Drug Administration clearance to market the
Image Management Server and the Film Image Scan System, respectively, 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 second quarter of fiscal 1997. The
Company can give no assurances that the products will be accepted in the
marketplace or will significantly offset the lost revenue from GEMS.
Certain statements in Management's Discussion and Analysis of Results
of Operations and Financial Condition contain "forward-looking" information
(as defined in the Private Securities Litigation Reform Act of 1995) that
involve risks and uncertainties, including, but not limited to, customer
concentration, product demand and market acceptance risks, product
development, commercialization and technological difficulties, the impact of
competitive products and pricing, availability of parts and supplies from
third party suppliers on a timely basis and at reasonable prices, and the
effect of economic conditions.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Part I, Item 1, Note 9.
Item 3. Defaults Upon Senior Securities
The Series B and Series C Senior Preferred Stock (the "Preferred
Stock") accrues dividends at a rate of 14% per annum (exclusive of any
penalty), effective June 1, 1996. The original rate was 10% per annum and
was subject to 2% per annum increases on both June 1, 1995 and 1996. The
dividend rate is subject to a final increase of 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 relating to the Preferred Stock 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
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<PAGE>
been calculated at an aggregate dividend rate of 12% per annum through May
31, 1995, at 14% through June 1, 1996 and are currently calculated at 16%
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 $5.0 million as of June 30, 1996. The
Company is engaged in discussions with GE, the sole remaining holder of the
Preferred Stock, regarding the repurchase and retirement of a portion of its
holdings of Preferred Stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The exhibits filed herewith or incorporated by reference are set
forth on the Exhibit Index immediately preceding the exhibits.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1996.
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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: August 14, 1996 /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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<PAGE>
EXHIBIT INDEX
Exhibit
No.
3.1* Restated Certificate of Incorporation of the Company, as
amended, incorporated by reference from the Company's
Annual Report on Form 10-K for the fiscal year ended March
31, 1988 (Registration No. 0-13318) filed with the
Commission on June 29, 1988.
3.2* Certificate of Designation, Preferences and Rights of
Series B Senior Preferred Stock and Series C Senior
Preferred Stock ("Certificate of Designation"),
incorporated by reference from the exhibit filing to the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1990 (Registration No. 0-13318) filed with
the Commission on June 29, 1990.
3.3* Certificate of Amendment of Restated Certificate of
Incorporation of the Company, dated August 29, 1994,
incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1995
(Registration No. 0-13318) filed with the Commission on
June 29, 1995.
3.4* By-Laws of the Company, as amended and restated on February
24, 1994, incorporated by reference from the Company's
Annual Report on Form 10-K for the fiscal year ended March
31, 1994 (Registration No. 0-13318) filed with the
Commission on June 24, 1994.
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
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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 1996 1995
<S> <C> <C>
Average shares outstanding during period 19,883 19,874
====== ======
Net loss $ (591) $ (334)
Undeclared cumulative dividends on
preferred stock (348) (298)
Excess carrying amount and cumulative undeclared
dividends of Preferred Stock over consideration - 4,954
------ ------
Net income (loss) applicable to common shares $ (939) $4,322
====== ======
Primary earnings (loss) per common and common
equivalent share:
Net income (loss) per common and common equivalent share $ (.05) $ .22
====== ======
</TABLE>
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<PAGE>
<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 1996 1995
<S> <C> <C>
Average shares outstanding during period 19,883 19,874
Dilutive effect of convertible securities
computed by the "if converted" method:
Series A preferred stock 328 338
Series B & C preferred stock 9,931 9,931
------ ------
30,142 30,143
====== ======
Net loss $ (591) $ (334)
Excess carrying amount and cumulative undeclared
dividends of Preferred Stock over consideration - 4,954
------ ------
Net income (loss) applicable to common shares $ (591) $4,620
====== ======
Fully diluted earnings (loss) per common and common
equivalent share:
Net income (loss) per common and common equivalent share $ (.02) $ .15
====== ======
</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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 147
<SECURITIES> 3769
<RECEIVABLES> 573
<ALLOWANCES> 22
<INVENTORY> 672
<CURRENT-ASSETS> 5224
<PP&E> 7798
<DEPRECIATION> 7315
<TOTAL-ASSETS> 5851
<CURRENT-LIABILITIES> 1234
<BONDS> 0
0
3
<COMMON> 199
<OTHER-SE> 4415
<TOTAL-LIABILITY-AND-EQUITY> 5851
<SALES> 715
<TOTAL-REVENUES> 715
<CGS> 205
<TOTAL-COSTS> 205
<OTHER-EXPENSES> 1162
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (591)
<INCOME-TAX> 0
<INCOME-CONTINUING> (591)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (591)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
