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, 1997 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
21,182,884 shares of Common Stock were outstanding as of September 30, 1997.
<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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue $ 439 $ 217 $ 608 $ 932
Cost of revenue 124 259 261 464
------- ------- ------- -------
Gross margin 315 (42) 347 468
------- ------- ------- -------
Operating expenses
Research and development 203 305 430 680
Selling, general and administrative 794 1,027 1,367 1,814
------- ------- ------- -------
Total operating expenses 997 1,332 1,797 2,494
------- ------- ------- -------
Operating loss (682) (1,374) (1,450) (2,026)
Interest income, net 69 339 133 400
Other income, net 489 6,215 491 6,215
------- ------- ------- -------
Net income (loss) before provision for income taxes (124) 5,180 (826) 4,589
Provision for income taxes - - - -
------- ------- ------- -------
Net income (loss) $ (124) $ 5,180 $ (826) $ 4,589
======= ======= ======= =======
Net income (loss) $ (124) $ 5,180 $ (826) $ 4,589
Preferred stock dividend requirement (50) (25) (100) (25)
Adjustment for repurchase of preferred stock - (174) - (522)
Excess carrying amount and cumulative undeclared
dividends of preferred stock over consideration - 10,580 - 10,580
------- ------- ------- -------
Net income (loss) applicable to common shares $ (174) $15,561 $ (926) $14,622
======= ======= ======= =======
Earnings (loss) per share:
Per common and common equivalent share $ (.01) $ .78 $ (.05) $ .74
======= ======= ======= =======
Assuming full dilution $ (.01) $ .70 $ (.05) $ .66
======= ======= ======= =======
</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>
Sept. 30, March 31,
Assets 1997 1997
Current assets
<S> <C> <C>
Cash $ 92 $ 69
Short-term investments 2,530 5,474
Accounts receivable, net 220 35
Other current assets, net 264 147
-------- -------
Total current assets 3,106 5,725
Property and equipment, net 468 271
Intangible and other assets 2,479 35
-------- -------
Total assets $ 6,053 $ 6,031
======== =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 327 $ 161
Accrued payroll and related benefits 174 245
Other accrued liabilities 610 225
-------- -------
Total current liabilities 1,111 631
-------- -------
Commitments and contingencies - -
Stockholders' equity
Preferred stock; $.01 par value; 1,000,000 shares authorized
Series A convertible; 500,000 shares designated; 13,200 and
17,500 shares issued; 13,200 and 17,500 shares outstanding;
aggregated liquidation preference of $475 and $630 1 1
Series B convertible; 120,117 shares designated; 11,917
shares issued and outstanding; aggregate liquidation
preference of $1,192 1 1
Series C convertible; 80,079 shares designated; 7,945
shares issued and outstanding; aggregate liquidation
preference of $795 1 1
Common stock; $.01 par value; 60,000,000 shares authorized;
21,278,075 and 19,937,115 shares issued; 21,182,884 and
19,841,924 shares outstanding 213 199
Additional paid-in capital 61,327 61,011
Unrealized gain on investment 38 -
Treasury stock, at cost; 95,191 shares (209) (209)
Retained deficit (56,430) (55,604)
-------- -------
Total stockholders' equity 4,942 5,400
-------- -------
Total liabilities and stockholders' equity $ 6,053 $ 6,031
======== =======
</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>
Six Months Ended
September 30,
1997 1996
Cash flows from (used for) operating activities
<S> <C> <C>
Net income (loss) $ (826) $ 4,589
Adjustments to reconcile net income (loss) to net cash
from (used for) operating activities
Depreciation and amortization 140 105
Gain on sale of MIMS technology (489) -
Loss on sale of property and equipment 15 -
Decrease in restricted cash - 17
(Increase) decrease in accounts receivable (185) 21
(Increase) decrease in other current assets (29) 139
Increase (decrease) in accounts payable 166 (74)
Decrease in accrued liabilities (179) (181)
------- -------
Net cash from (used for) operating activities (1,387) 4,616
------- -------
Cash flows used for investing activities
Capital expenditures (4) (41)
Purchase of Intrafed technology (2,147) -
------- -------
Net cash used for investing activities (2,151) (41)
------- -------
Cash flows from (used for) financing activities
Repurchase of preferred stock - (2,399)
Proceeds from stock option exercises 4 -
------- -------
Net cash from (used for) financing activities 4 (2,399)
------- -------
Net increase (decrease) in cash and equivalents (3,534) 2,176
Cash and equivalents, beginning of period 5,543 5,035
------- -------
Cash and equivalents, end of period $ 2,009 $ 7,211
======= =======
</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") recently completed a
transition from providing performance-enhancing computing products and
solutions for the medical imaging market to providing imaging solutions for
the document imaging market. In July 1997, the Company, through a
newly-created operating subsidiary, PowerScan, Inc. ("PowerScan"), acquired
document imaging and processing technology and the Company sold its medical
imaging technology as part of the Company's long-term growth strategy to
refocus its business from the medical imaging archival market to the broader
document imaging market. Additionally, in October 1997, the Company acquired
Curran Data Technologies ("CDT"), a provider of data entry imaging services.
(See Notes 4 and 6.)
The CDT acquisition, Star's second during the past three months in the
document imaging and processing market, is part of the Company's long-term
growth plan to build market presence through strategic and synergistic
acquisitions. The Company continues to pursue its search to identify
additional acquisition opportunities in the document imaging and processing
industry. With these two acquisitions, Star is now a provider of data
capture imaging solutions, including both data capture and processing
software products and data entry imaging services.
The consolidated statements of operations for the three- and six-month
periods ended September 30, 1997 and the consolidated statement of financial
position as of September 30, 1997 presented herein reflect the July 1997
transactions. The October 1997 transaction will be included in the
consolidated financial statements beginning in the quarter ended December 31,
1997.
NOTE 1 - Financial Information and Basis of Presentation
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, 1997 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, 1997.
Revenue from the sale of computer hardware and software is recognized
when the products are shipped. Customized software revenue is recognized
when the software is accepted by the customer. Revenue from services
including data entry, integration, installation, and systems training is
recognized when the services are performed. Revenue from the sale of
maintenance contracts is recognized ratably over the contractual service
period. Amounts received but not earned are deferred and are reflected as
other accrued liabilities.
Certain fiscal 1997 amounts have been reclassified for comparative
purposes.
On August 21, 1997, the Company's Board of Directors voted to change the
Company's fiscal year end from March 31 to December 31, beginning with a
short fiscal year ending December 31, 1997. A transition report for the
period from April 1, 1997 through December 31, 1997 will be filed on Form
10-K.
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<PAGE>
NOTE 2 - Short-Term Investments
The Company's short-term investments include 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. The
Company's short-term investments in commercial paper of $1,917,000 and
$5,474,000 at September 30, 1997 and March 31, 1997, respectively, are
included as cash and cash equivalents.
At September 30, 1997, the Company's short-term investments also include
100,000 shares of common stock of CompuRAD, Inc. ("CompuRAD"). (See Note 5.)
The Company does not actively seek to trade this investment for purposes of
maximizing trading gains and classifies it as "available for sale." The
temporary excess (deficiency) of market value over (under) the underlying
cost is reported as an unrealized gain (loss) as a separate component of
stockholders' equity.
NOTE 3 - Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful accounts
of $19,000 and $15,000 at September 30, 1997 and March 31, 1997, respectively.
NOTE 4 - Acquisition of Intrafed Technology
On July 30, 1997, PowerScan, Inc. ("PowerScan"), a wholly-owned
subsidiary of the Company, acquired from Intrafed, Inc. ("Intrafed")
intellectual property related to the PowerScan (R) and Stageworks (R)
software products, and certain related fixed assets, inventory, contracts and
licenses, and assumed certain liabilities, including those under customer
maintenance contracts. At closing, the consideration paid to Intrafed was
$1,880,000 in cash and 1.3 million shares of Star common stock valued at
$325,000, with up to an additional 1.3 million shares issuable to Intrafed
based upon the future performance of PowerScan.
The business combination has been accounted for using the purchase
method under Accounting Principles Board Opinion No. 16, "Business
Combinations," ("APB Opinion 16") to record the purchase of the intellectual
property and certain related assets and liabilities of Intrafed. The
purchase price has been allocated to the assets acquired and liabilities
assumed based on management's estimate of the fair value as of the date of
acquisition. Based on the allocation of the purchase price over the net
assets acquired, goodwill of approximately $2,325,000 was recorded. Such
goodwill is being amortized on a straight-line basis over 8 years.
The purchase price of the assets acquired and liabilities assumed from
Intrafed is computed as follows (in thousands):
<TABLE>
<S> <C>
Cash consideration $1,880
Fair value of common stock issued 325
Estimated transaction costs 267
------
$2,472
======
</TABLE>
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<PAGE>
<TABLE>
The purchase price is allocated as follows (in thousands):
<S> <C>
Current assets $ 88
Property and equipment 382
Other assets 20
Patents and trademarks 150
Goodwill 2,325
Liabilities assumed (493)
------
$2,472
======
</TABLE>
APB Opinion 16 requires, for purchase business combinations, the
presentation of pro-forma combined results of operations for the current year
and comparable prior-year period as if the transaction had occurred at the
beginning of the period. The following unaudited pro-forma results of
operations are not necessarily indicative of actual future results of
operations (in thousands, except per share data).
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1997 1996
<S> <C> <C>
Revenue $ 1,932 $ 2,166
Gross margin $ 1,179 $ 1,252
Net income (loss) before
provision for income taxes $ (966) $ 3,946
Net income (loss) $ (966) $ 3,946
======= =======
</TABLE>
Net income (loss) per common and
common equivalent share $ (.04) $ .66
======= =======
NOTE 5 - Sale of Medical Image Management Systems ("MIMS") Technology
On July 30, 1997, the Company sold its MIMS technology, including the
Image Management Server and Film Image Scan System software, to CompuRAD. As
consideration, the Company received 100,000 shares of CompuRAD common stock,
valued at approximately $575,000 on the date of the transaction, and possible
future payments by CompuRAD of up to approximately $850,000 on software sales
by CompuRAD of the MIMS technology for a five-year period commencing July 30,
1997. The Company retained the rights to use the technology in non-medical
imaging markets.
Included with the technology sold to CompuRAD was property and equipment
with a net book value of $86,000. The gain on the transaction was $489,000
and is included as other income on the consolidated statements of operations
in the quarter ended September 30, 1997.
NOTE 6 - Subsequent Event
On October 16, 1997, the Company acquired Curran Data Technologies
("CDT"), a data entry imaging services company. The Company paid
approximately $421,000, exclusive of any transaction costs, for the assets
and liabilities of CDT. The purchase price included cash and the pay off of
certain CDT liabilities. CDT had revenues of approximately $2.3 million for
the year ended December 31, 1996.
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Certain statements in the financial discussion and analysis by
management contain "forward-looking" information (as defined in Section 27A
of the Securities Act of 1933, as amended) that involve risks and
uncertainties. Actual future results and trends may differ materially
depending upon a variety of factors, including, but not limited to, the
Company's ability to successfully complete strategic mergers and
acquisitions; the ability to profitably manage such acquired companies or
successfully integrate such acquired companies into the Company without
substantial costs, delays or other problems; the ability to bring new
products to market; risks of early stages of product development including
problems, delays, expenses and difficulties, some of which may be beyond the
Company's control; risks associated with products being successfully
developed or successfully marketed; product demand and market acceptance
risks; technological difficulties; the impact of competitive products and
pricing; and the market strength of the document imaging industry.
Corporate Repositioning
Star Technologies, Inc. ("Star" or the "Company") recently completed a
transition from providing performance-enhancing computing products and
solutions for the medical imaging market to providing imaging solutions for
the document imaging market. In July 1997, the Company, through a
newly-created operating subsidiary, PowerScan, Inc. ("PowerScan"), acquired
document imaging and processing technology and the Company sold its medical
imaging technology as part of the Company's long-term growth strategy to
refocus its business from the medical imaging archival market to the broader
document imaging market. Additionally, in October 1997, the Company acquired
Curran Data Technologies ("CDT"), a provider of data entry imaging services.
(See Notes 4 and 6 to the consolidated financial statements.)
The CDT acquisition, Star's second during the past three months in the
document imaging and processing market, is part of the Company's long-term
growth plan to build market presence through strategic and synergistic
acquisitions. The Company continues to pursue its search to identify
additional acquisition opportunities in the document imaging and processing
industry. With these two acquisitions, Star is now a provider of data
capture imaging solutions, including both data capture and processing
software products and data entry imaging services.
The consolidated statements of operations for the three- and six-month
periods ended September 30, 1997 and the consolidated statement of financial
position as of September 30, 1997 presented herein reflect the July 1997
transactions. The October 1997 transaction will be included in the
consolidated financial statements beginning in the quarter ended December 31,
1997.
Results of Operations
The results of operations for the three- and six-month periods ended
September 30, 1997 are not directly comparable to the results of operations
for the comparable 1996 periods due to the repositioning of the Company
through the sale of the medical imaging technology and the acquisition of the
document imaging technology during the quarter.
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<PAGE>
Revenue for the three-month period ended September 30, 1997 increased
102% from the same period a year ago. Revenue for the six months ended
September 30, 1997 increased 18% from the comparable prior year period,
excluding the effect of the $418,000 final settlement on a claim under a
long-term subcontract under the U.S Navy's SH-60 program, payment of which
was received and recognized as revenue in the six months ended September 30,
1996. The overall increases for the three- and six-month periods are
primarily attributable to sales of the PowerScan and StageWorks products
acquired in the quarter ended September 30, 1997.
Research and development ("R&D") expense for the three and six months
ended September 30, 1997 decreased 33% and 37%, respectively, from the prior
year periods. The decreases were primarily attributable to company-wide cost
reductions, reduced staff levels, and the sale of the Medical Image
Management Systems ("MIMS") technology in July 1997, offset in part by
additional R&D expense associated with the Company's newly-formed PowerScan
subsidiary.
Selling, general and administrative ("SG&A") expense decreased 23% and
25% for the three- and six-month periods ended September 30, 1997 and 1996,
respectively, primarily due to lower administrative costs associated with the
General Electric Medical Systems ("GEMS") arbitration, and reduced staff
levels, offset in part by additional SG&A expense associated with the new
PowerScan subsidiary.
During the three and six months ended September 30, 1997 and 1996, the
Company earned $69,000 and $339,000, and $133,000 and $400,000, respectively,
of net interest income. Interest income for the three and nine months ended
September 30, 1996 included approximately $276,000 of interest received on
the GEMS arbitration settlement.
Other income for the three and six months ended September 30, 1997
includes a gain of $486,000 from the sale of the MIMS technology. (See Note
5 to the consolidated financial statements.) For the three- and six-month
periods ended September 30, 1996, other income included the GEMS arbitration
award of $9.1 million, excluding interest, offset by the settlement of a
patent infringement lawsuit of $2.9 million.
Liquidity and Capital Resources
At September 30, 1997, the Company had $2.0 million of cash
and equivalents. The Company had a net cash outflow from operating
activities of $1.4 million for the six months ended September 30, 1997. Cash
used for investment activities was $2.2 million, primarily due to the
acquisition of the PowerScan and StageWorks technologies. (See Note 4 to the
consolidated financial statements.) The Company's liquidity and capital
resources have been affected by the acquisition. To date, the Company has
financed its acquisitions with its cash and short-term investments and with
shares of its common stock.
The Company's ability to obtain cash adequate to fund its needs depends
generally on the results of its operations and the availability of financing.
The Company does not currently have a line of credit nor has it borrowed
under any bank agreement since December 1993. The Company has had sufficient
cash reserves for its operating needs since that time. The Company, however,
is in discussion with several banks regarding potential credit agreement
arrangements. The Company believes that its cash and short-term investments
and cash flows from operations, in conjunction with borrowings
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<PAGE>
under any possible future credit lines and possible issuance of shares of its
common stock, will be sufficient to meet its operating requirements, make
possible future acquisitions and fund capital expenditures in the future. 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")
currently accrues dividends at a rate of 10% per annum. To the extent
declared, such dividends would be payable quarterly in the amount of $50,000
in cash. Unpaid cumulative dividends in arrears on the Preferred Stock total
$225,000 as of September 30, 1997.
Recent Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" ("Statement 128"). Statement 128
supersedes Accounting Principles Board Opinion No. 15, "Earnings per Share"
("APB 15"), and its related interpretations, and promulgates new accounting
standards for the computation and manner of presentation of earnings (loss)
per share data. The Company is required to adopt the provisions of Statement
128 for the year ending March 31, 1998. Earlier application is not
permitted; however, upon adoption the Company will be required to restate the
previously reported earnings (loss) per share data in accordance with the
provisions of Statement 128. The Company does not believe that the adoption
of Statement 128 will have a material impact on the computation or manner of
presentation of earnings (loss) per share data.
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<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on August 21, 1997.
A total of 16,650,553 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 two directors.
At the Annual Meeting, Robert Compton and Dr. Carl Ravin were each
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
nominations of Mr. Compton and Dr. Ravin to the Board of Directors. A total
of 15,377,166 shares were voted for Mr. Compton and 1,273,387 were withheld.
A total of 14,729,375 shares were voted for Dr. Ravin and 1,921,178 were
withheld.
Alan Maxwell continues as a Director of the Company. His term expires
on the date of the 1998 Annual Meeting of Stockholders.
John Meshinsky and Herbert Schantz were appointed in July and August
1997 by the Board of Directors to fill two empty director positions. The
terms of Mr. Meshinsky and Mr. Schantz expire on the date of the 1999 Annual
Meeting of Stockholders.
Item 5. Other Information
On October 16, 1997, the Company acquired Curran Data Technologies
("CDT"), a data entry imaging services company. The Company paid
approximately $421,000, exclusive of any transaction costs, for the assets
and liabilities of CDT. The purchase price included cash and the pay off of
certain CDT liabilities. CDT had revenues of approximately $2.3 million for
the year ended December 31, 1996.
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.
On August 14, 1997, the Company filed with the Commission a Current
Report on Form 8-K, dated July 30, 1997, regarding the acquisition
and disposition of certain assets. On October 8, 1997, the Company
filed with the Commission an amended Current Report on Form 8-K/A,
dated July 30, 1997, regarding the acquisition and disposition of
certain assets.
On August 28, 1997, the Company filed with the Commission a Current
Report on Form 8-K, dated August 21, 1997, regarding the changing of
the Company's fiscal year end.
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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: November 14, 1997 /s/ Brenda A. Potosnak
Brenda A. Potosnak
Vice President of Finance and
Administration, Secretary, Treasurer
and Chief Financial 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* Certificate of Amendment of Restated Certificate of
Incorporation of the Company, dated August 23, 1996,
incorporated by reference from the exhibit filing to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended September 30, 1996 (Registration No. 0-13318) filed
with the Commission on November 14, 1996.
3.5* By-Laws of the Company, as amended and restated on February
24, 1994, and as further amended on August 22, 1996,
incorporated by reference from the exhibit filing to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended September 30, 1996 (Registration No. 0-13318) filed
with the Commission on November 14, 1996.
4.1* Restated Certificate of Incorporation, as amended (see
Exhibit 3.1).
4.2* Certificate of Amendment of Restated Certificate of
Incorporation (see Exhibit 3.2).
4.3* Certificate of Designation (see Exhibit 3.3).
4.4* Certificate of Amendment of Restated Certificate of
Incorporation (see Exhibit 3.4).
10.14* Asset Purchase Agreement dated July 30, 1997 between
PowerScan, Inc. and Intrafed, Inc., incorporated by
reference from the exhibit filing to the Company's Current
Report on Form 8-K (Registration No. 0-13318) dated July 30,
1997 filed with the Commission on August 14, 1997.
*Incorporated by reference.
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<PAGE>
10.15* Employment Agreement dated July 30, 1997 between Star
Technologies, Inc., PowerScan, Inc. and John R. Meshinsky,
incorporated by reference from the exhibit filing to the
Company's Current Report on Form 8-K (Registration No.
0-13318) dated July 30, 1997 filed with the Commission on
August 14, 1997.
10.16* Technology Purchase Agreement dated July 30, 1997 between
Star Technologies, Inc. and CompuRAD, Inc., incorporated by
reference from the exhibit filing to the Company's Current
Report on Form 8-K (Registration No. 0-13318) dated July 30,
1997 filed with the Commission on August 14, 1997.
10.17 Employment Agreement dated October 16, 1997 between Star
Technologies, Inc. and Carol L. Curran.
11 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
*Incorporated by reference.
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EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between STAR TECHNOLOGIES, INC., a
Delaware corporation (the "Company," which unless the
context otherwise requires, shall include its wholly-owned
subsidiary, CURRAN DATA TECHNOLOGIES, INC., an Indiana
corporation (the "Subsidiary") and, for purposes of
Sections 4 and 5 hereof, any other subsidiaries or
affiliates of Star Technologies, Inc.), and CAROL L. CURRAN
("Employee") is hereby entered into and effective as of
October 16, 1997.
W I T N E S S E T H :
WHEREAS, the Company desires to retain the services of
Employee, and Employee desires to be employed by the Company
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1 Employment; Position. From and after the date of
this Agreement and throughout the Term of Employment (as
herein defined), the Company hereby employs Employee to
serve initially as (i) an Executive Vice President of the
Company, and (ii) the President and a member of the Board of
Directors of the Subsidiary. During the Term of Employment,
the Company shall have the right from time to time to
designate other or additional capacities or positions, of an
executive nature, in which Employee shall serve the Company
or any of its subsidiaries or affiliates.
1.2 Nature and Extent of Duties. During the Term of
Employment, Employee shall: (i) render executive, policy and
other management services to the Company and any of its
subsidiaries or affiliates of the type customarily performed
by persons serving in similar executive officer capacities
and such duties as the Board of Directors of the Company may
from time to time reasonably direct; and (ii) devote
substantially all of her working time, attention and her
best professional efforts to promote the interests of the
Company and its subsidiaries and affiliates. During the
Term of Employment, Employee shall not engage in any
business activity other than that for and on behalf of the
Company and its subsidiaries and affiliates; provided,
however, that Employee may serve on the board of directors
of another company or companies unaffiliated with the
Company.
1.3 Board Appointment. Upon the achievement by the
Subsidiary of annual revenues of greater than four million
dollars, the Company will consider Employee's nomination to
the Board of Directors of the Company.
<PAGE>
2. TERM; TERMINATION; RIGHTS ON TERMINATION
2.1 Term of Employment. Employee's employment hereunder
shall be for the period commencing on the date hereof and
ending on the earlier of (i) October 15, 2000, and (ii) the
date of termination of employment under this Agreement (the
"Term of Employment").
2.2 Termination of Employment. Employee's employment
may be terminated without any breach of this Agreement under
the following circumstances:
(a) Death. Employee's employment shall be terminated
upon her death.
(b) Disability. The Company may terminate Employee's
employment because of disability. For this purpose,
"disability" shall mean the inability of Employee to
perform her duties under this Agreement because of physical
or mental illness or incapacity for a continuous period of
at least 120 days.
(c) Cause. The Company may terminate Employee's
employment for cause. For purposes of this Agreement, the
Company shall have "cause" to terminate Employee's
employment in the event of: (i) Employee's material and
irreparable breach of the provisions of this Agreement; (ii)
Employee's gross negligence in the performance of any of
Employee's material duties and responsibilities hereunder;
(iii) Employee's dishonesty, fraud or misconduct with
respect to the business or affairs of the Company; (iv) any
act or conduct inconsistent with the standards of loyalty,
integrity or care reasonably required of other executives of
the Company at a comparable level of management; or (v)
conviction of Employee of a felony.
2.3 Notice of Termination. Any termination of
Employee's employment by the Company (other than termination
pursuant to Section 2.2(a) hereof) shall be communicated to
Employee by a written notice of termination (the "Notice of
Termination"). Any Notice of Termination given by the
Company shall specify the particular termination provision
of this Agreement relied upon as providing a basis for the
termination under the provision so specified.
2.4 Termination Date. The Termination Date shall mean:
(i) if Employee's employment is terminated by her death, the
date of her death; (ii) if Employee's employment is
terminated as a result of her disability, the date specified
in the Notice of Termination, which shall be after the
expiration of the 120-day period specified in Section
2.2(b); (iii) if Employee's employment is terminated by the
Company for cause, the date specified in the Notice of
Termination; or (iv) if Employee's employment is terminated
for any other reason, sixty days following the date on which
the Notice of Termination is given.
2.5 Rights on Termination.
(a) Termination Because of Death, Disability or For
Cause. If Employee's employment is terminated because of
(i) her death; (ii) her disability; (iii) or for cause, the
Company shall pay Employee (or her estate, in the case of
her death) her salary and a pro rata portion of any bonus
specified in Section 3.2, if any, and Employee shall also be
entitled to receive all benefits vested
<PAGE>
and reimbursements
due, through the Termination Date, and the Company shall
have no further obligation to Employee hereunder including
any obligations to pay severance compensation. All other
rights and obligations of the Company and Employee under
this Agreement shall cease as of the Termination Date,
except for such rights and obligations intended to survive
the Termination Date, which shall include, without
limitation, the provisions of Sections 4, 5, 8.1, 8.2 and
8.8.
(b) Termination Without Cause. If the Company shall
terminate Employee's employment in breach of this Agreement,
then:
(1) the Company shall pay Employee her salary and a
pro rata portion of the bonus specified in Section 3.2
hereof, if any, through the Termination Date and all
other unpaid and pro rata amounts to which Employee is
entitled as of the Termination Date under any
compensation plan or program of the Company, including,
without limitation, all accrued vacation time; and
(2) the Company shall pay as liquidated damages to
Employee, and in lieu of any further salary or other
payments or benefits hereunder for the period after the
Termination Date, the Base Salary to be otherwise paid
to Employee pursuant to Section 3.1 hereof through
October 15, 2000. All other rights and obligations of
the Company and Employee under this Agreement shall
cease as of the Termination Date, except to the extent
necessary to the intended preservation of such rights
and obligations, which shall include, without
limitation, the provisions of Sections 4, 5, 8.1, 8.2
and 8.8.
3. COMPENSATION
3.1 Base Salary. As compensation for services hereunder
and in consideration of her agreement not to compete as set
forth in Section 4, during the Term of Employment the
Subsidiary shall pay Employee a base salary of $150,000 per
year, payable in appropriate installments to conform with
the regular payroll dates for salaried personnel of the
Subsidiary.
3.2 Incentive Bonus.
(a) For each of two one-year periods beginning November
1, 1997, Employee shall be eligible for a bonus based on the
Subsidiary operating income, before bonus, calculated in
accordance with generally accepted accounting principles,
consistently applied. Employee will be entitled to fifty
percent (50%) of the Subsidiary's operating income in excess
of $100,000 in each of the two periods in which this
provision applies. In the event that the Subsidiary is
merged, combined or reorganized, the Company may compute
operating income in any other manner that equitably reflects
what the Subsidiary operating income would otherwise have
been. Within 60 days after the end of each period in which
a bonus is applicable, such bonus will be paid by the
Company half in cash and half in restricted shares of
Company common stock. The value of such stock will be
determined using the average closing price per share of the
Company common stock as reported on the Nasdaq National
Market System (as published in The Wall Street Journal, or
if not reported thereby, another authoritative source) for
the five trading days ending on the third day preceding the
last day of each bonus period.
<PAGE>
(b) Subject to approval by the Board of Directors of
the Company, the Company and Employee agree to negotiate in
good faith the terms of an incentive bonus following the two
bonus periods described in Section 3.2(a).
3.3 Benefits and Other Compensation. Employee shall be
entitled to receive such fringe benefits as the Subsidiary
generally makes available to its employees. Such benefits
include health, disability, dental, and life insurance
plans, as well as paid holidays, plus vacation time in such
amount as may be afforded key employees under the
Subsidiary's policies in effect from time to time. In
addition, compensation to Employee includes participation by
Employee in such other Company-wide employee benefits as are
available from time to time to the Company's subsidiaries.
Employee shall also be eligible to participate in any stock
option program or employee stock purchase plan to the extent
that other executives at a comparable level of management
are eligible to participate.
4. NON-COMPETITION AGREEMENT
4.1 Covenant Not to Compete. Employee agrees that
during the Term of Employment and for one year thereafter
she will not, directly or indirectly, for herself or on
behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder,
owner, partner, joint venturer, or in a managerial
capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales
representative, in any business selling any products or
services in direct competition with the Company or the
Subsidiary, within any jurisdiction in which the Company
or the Subsidiary is duly qualified to do business, or
within any marketing area in which the Company or the
Subsidiary is doing a material amount of business or in
any area in which the Company or the Subsidiary is in
the process of initiating business operations during the
term of this covenant (the "Territory");
(ii) call upon or contact any person who is, at that
time, within the Territory, an employee of the Company
(including the subsidiaries thereof) in a managerial
capacity for the purpose or with the intent of enticing
such employee away from or out of the employ of the
Company (including the subsidiaries thereof), provided,
that Employee shall be permitted to call upon and hire
any member of her immediate family;
(iii) call upon or contact any person or entity which
is, at that time, or which has been, within one year
prior to that time, a customer of the Company (including
the subsidiaries thereof) within the Territory for the
purpose of soliciting or selling products or services in
direct competition with the Company (or its
subsidiaries) within the Territory;
(iv) call upon any prospective acquisition candidate,
on Employee's own behalf or on behalf of any competitor,
which candidate was either called upon by the Company
(including the subsidiaries thereof) or for which the
Company (or its subsidiaries) made an acquisition
analysis, for the purpose of acquiring such entity; or
<PAGE>
(v) disclose customers, whether in existence or
proposed, of the Company (or its subsidiaries) to any
person, firm, partnership, corporation or business for
any reason or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall
not be deemed to prohibit Employee from acquiring as an
investment not more than three percent (3%) of the capital
stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter. The
Company acknowledges Employee's ownership interest in
Validata Servicios de Captura.
4.2 Applicability of Covenant.
(a) It is agreed by the parties that the foregoing
covenants in this Section 4 impose a reasonable restraint on
Employee in light of the activities and business of the
Company (including the Company's subsidiaries) on the
effective date of this Agreement and the current plans of
the Company (including the Company's subsidiaries); but it
is also the intent of the Company and Employee that such
covenants be construed and enforced in accordance with the
changing activities, business and locations of the Company
(including the Company's subsidiaries) throughout the term
of this covenant, whether before or after the date of
termination of the employment of Employee, subject to
Section 4.2(b). For example, if, during the term of this
Agreement, the Company (including the Company's
subsidiaries) engages in new and different activities,
enters a new business or establishes new locations for its
current activities or business in addition to or other than
the activities or business of the Company or its
subsidiaries on the effective date of this Agreement or the
locations currently established therefor, then Employee will
be precluded from soliciting the customers or employees of
such new activities or business or from such new location
and from directly competing with such new business through
the term of this covenant.
(b) It is further agreed by the parties hereto that, in
the event that Employee shall cease to be employed
hereunder, and shall enter into a business or pursue other
activities not in competition with the Company (including
the Company's subsidiaries), or similar activities or
business in locations the operation of which, under such
circumstances, does not violate Section 4.1, and in any
event such new business, activities or location are not in
violation of this Section 4 or of Employee's obligations
under this Section 4, if any, Employee shall not be
chargeable with a violation of this Section 4 if the Company
(including the Company's subsidiaries) shall thereafter
enter the same, similar or a competitive (i) business, (ii)
course of activities or (iii) location, as applicable.
(c) In the event that a court or arbitrator determines
that the covenant in Section 4.1 is overly broad or exceeds
what is legally enforceable, then Employee agrees that
Section 4.1 shall be modified to the extent necessary to
cause it to be legally enforceable.
4.3 Enforcement of Covenant. All of the covenants in
this Section 4 shall be construed as an agreement
independent of any other provision in this Agreement, and
the existence of any claim or cause of action of Employee
against the Company, whether predicated
<PAGE>
on this Agreement or
otherwise, shall not constitute a defense to the enforcement
by the Company of such covenants. It is specifically agreed
that the period of one year stated at the beginning of this
Section 4, during which the agreements and covenants of
Employee made in this Section 4 shall be effective, shall be
computed by excluding from such computation any time during
which Employee is in violation of any provision of this
Section 4.
4.4 Remedy on Breach of Covenant. Because of the
difficulty of measuring economic losses to the Company as a
result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to
the Company for which it would have no other adequate
remedy, Employee agrees that the foregoing covenant may be
enforced by the Company in the event of breach by her by
injunctions and restraining orders.
5. INTELLECTUAL PROPERTY; CONFIDENTIALITY
5.1 Disclosure and Assignment of Intellectual Property.
(a) Employee agrees to disclose and hereby assigns to
the Company all rights to any inventions or discoveries,
whether or not patentable, that are conceived, made,
developed, built, or reduced to practice, by her solely or
jointly with others, during the Term of Employment (or
conceived by Employee before the Term of Employment but made
into something, developed, built or reduced to practice, by
her solely or jointly with others, during the Term of
Employment and that relate to the Company's (or its
subsidiaries') business, actual or demonstrably anticipated
research and development or any work performed by Employee
for the Company (collectively, the "Company Intellectual
Property"). Employee agrees that all such inventions and
discoveries are the sole property of the Company.
(b) Employee agrees to sign documents and, at the
Company's expense, to take such other actions as are
necessary to transfer complete and exclusive ownership of
Company Intellectual Property to the Company. In addition,
Employee will sign such documents as the Company from time
to time considers advisable in order to apply for patent or
copyright protection relating to Company Intellectual
Property in the Company's name. Employee further agrees to
cooperate with the Company to obtain patent or copyright
protection in the United States and foreign countries for
any Company Intellectual Property.
(c) As used in this Agreement, "inventions and
discoveries" shall have the broadest meaning and shall
include but not be limited to new products, machines,
methods, processes, software programs, hardware,
improvements, compositions of matter, and designs or
configurations.
5.2 Confidentiality. Employee agrees that during the
Term of Employment and thereafter, except in compliance with
legal process, or as required in the performance of her
duties hereunder, she will not divulge to anyone (other than
persons employed by or designated by the Company) any
knowledge or information of any type whatsoever of a
confidential nature relating to the business of the Company
or any of its subsidiaries or affiliates, including, without
limitation, all types of trade secrets, know-how,
inventions, discoveries, marketing information, business
strategies, customer lists, and other proprietary business
information. For purposes of
<PAGE>
this provision, all
information relating to the Company and to the Company's
business shall be deemed confidential unless the information
is generally known and available to the public. Employee
agrees to employ all reasonable measures to prevent the
unauthorized use by or through her of confidential or
proprietary business information. Employee agrees that in
the event she has any doubt as to whether certain
information is confidential or proprietary, she will hold
the information in the strictest confidence and otherwise
treat it as if it were proprietary or confidential. In the
event of a violation of this Section 5.2, the remedies of
the Company shall include, but shall not be limited to, the
right to seek injunctive relief in accordance with Section
8.2.
5.3 Return of Company Property. Upon the termination of
her employment for any reason and without the necessity of
recourse to legal process, Employee shall promptly surrender
to Company all originals and copies of any document, letter,
computer disc or tape, or other papers or instruments in her
possession or under her control relating to the operations,
business, or affairs of the Company or with respect to
Employee's performance of her duties hereunder. The Company
agrees, upon reasonable notice from Employee and, to the
extent reasonably possible and without the necessity of
recourse to legal process, to make available to Employee
such Company records in its possession as may be reasonably
requested by Employee in connection with Employee's defense
of any claim, proceeding or lawsuit arising out of her
employment by the Company.
6. REIMBURSEMENT OF EXPENSES
Employee shall be entitled to be reimbursed for
reasonable and customary travel and other expenses
reasonably incurred in connection with her services to the
Company and the Subsidiary during the Term of Employment and
pursuant to this Agreement, provided, that such expenses are
incurred and accounted for in accordance with the policies
and procedures established by the Company and the
Subsidiary, as applicable.
7. BREACH BY EMPLOYEE
Both parties recognize that the services to be rendered
under this Agreement by Employee are personal in character,
and that in the event of the breach by Employee of the terms
and conditions of this Agreement to be performed by her, or
in the event Employee performs services for any person, firm
or corporation engaged in a line of competing business with
the Company, the Company shall be entitled, if it so elects,
to institute and prosecute proceedings to obtain damages for
any breach of this Agreement, or to enforce the specific
performance thereof by Employee, or to enjoin Employee from
performing services for any such other person, firm or
corporation.
8. MISCELLANEOUS
8.1 Governing Law. The interpretation and construction
of this Agreement, and all matters relating hereto, shall be
governed by the laws of the State of Indiana, excluding its
conflict of law rules. All payments hereunder shall be
subject to applicable federal, State and local tax
withholding requirements.
<PAGE>
8.2 Dispute Resolution. Any dispute, controversy, or
claim arising directly or indirectly from this Agreement or
from Employee's employment under this Agreement that cannot
be resolved through good faith negotiation, shall be
submitted to non-binding mediation conducted by a mutually
selected mediator. If a dispute, controversy, or claim is
not resolved through mediation, it shall be fully and
finally settled by arbitration in the Commonwealth of
Virginia in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The arbitration
shall be conducted by a single mutually selected arbitrator
whose decision shall be final and binding. The arbitrator
shall not have authority to award punitive or other non-
compensatory damages to either party. The claims that may
be arbitrated include, but are not limited to, claims based
on contract, fraud, misrepresentation, statute, or tort. In
any arbitration under this Agreement, the parties will bear
their own attorneys' fees and costs. Either party may enter
the arbitrator's award in any court in the Commonwealth of
Virginia that has jurisdiction, provided, however, that the
Company shall be entitled to seek a restraining order or
injunction in any court of competent jurisdiction to prevent
any continuation of any violation of Sections 4.1 or 5.2 of
this Agreement. Employee hereby consents that such
restraining order or injunction may be granted without the
necessity of the Company's posting any bond, it being
acknowledged and agreed that any breach or threatened breach
of the provisions of Sections 4.1 or 5.2 will cause
irreparable injury to the Company and that money damages
will not provide an adequate remedy to the Company.
8.3 Third-Party Beneficiaries. Each party hereto
intends that this Agreement shall not benefit or create any
right or cause of action in or on behalf of any person other
than the parties hereto.
8.4 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other
jurisdiction.
8.5 Captions. The section captions used herein are for
reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement or any part
hereof.
8.6 Notices. Any notice or other communications
required or permitted hereunder shall be in writing and be
sufficiently given if delivered in person or sent by
facsimile (which provides written confirmation to the sender
of its delivery) or by registered or certified mail, postage
prepaid, or by overnight courier service, addressed as
follows:
If to the Company, to:
Star Technologies, Inc.
515 Shaw Road
Sterling, Virginia 20166
Attention: Chief Financial Officer
Fax: (703) 435-3268
<PAGE>
with a copy to:
William J. Mutryn, Esq.
Holland & Knight, LLP
2100 Pennsylvania Avenue, N.W.
Washington, D.C. 20037
Fax: (202) 955-5564
and if to Employee, to:
Ms. Carol L. Curran
12305 Thunder Bay Court
Indianapolis, Indiana 46236
Fax: (317) 826-1061
with a copy to:
Robert M. Koeller, Esq.
Maddox Koeller Hargeth & Caruso
7351 Shadeland Way
Suite 190
Indianapolis, Indiana 46256
Fax: (317) 598-2050
or such other address as shall be furnished in writing by
any party to the others, and such notice or communication
shall be deemed to have been given as of the date so
delivered, sent by facsimile or mailed. Either party may
change the address for notice by notifying the other party
of such change in accordance with this Section 8.6.
8.7 Parties in Interest. This Agreement is a personal
contract and, except as specifically set forth herein, the
rights and interests of Employee set forth herein may not be
sold, transferred, assigned, pledged or hypothecated. The
rights and obligations of the Company hereunder shall be
binding upon and run in favor of the successors and assigns
of the Company. In the event of any attempted assignment or
transfer of rights hereunder contrary to the provisions
hereof, the Company shall have no further liability for
payments hereunder.
8.8 No Conflicting Agreements. Employee hereby
represents and warrants to the Company that the execution of
this Agreement by Employee and her employment by the Company
and the performance of her duties hereunder will not violate
or be a breach of any agreement with a former employer,
client or any other person or entity. Further, Employee
agrees to indemnify the Company for any claim, including,
but not limited to, attorneys' fees and
<PAGE>
expenses of
investigation, by any such third party that such third party
may now have or may hereafter come to have against the
Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee
and such third party which was in existence as of the date
of this Agreement.
8.9 Counterparts. This Agreement may be executed in one
or more counterparts (or upon separate signature pages bound
together into one or more counterparts), all of which taken
together shall constitute one instrument.
8.10 Waiver. Waiver by either party of any breach or
failure to comply with any provision of this Agreement by
the other party shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any
other breach of or failure to comply with any other
provisions of this Agreement.
8.11 Entire Agreement. Employee has no oral
representations, understandings or agreements with the
Company or any of its officers, directors or representatives
covering the same subject matter as this Agreement. This
written Agreement is the final, complete and exclusive
statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement,
and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later
modified except by a further writing signed by a duly
authorized officer of the Company and Employee, and no term
of this Agreement may be waived except by writing signed by
the party waiving the benefit of such term.
8.12 Amendments. This Agreement may not be amended or
modified orally, but only by an amendment in writing signed
by both parties.
8.13 Prior Agreements. Employee and Company agree that
the Employment Agreement between Employee and the Subsidiary
dated as of October 16, 1995 is hereby terminated, without
reservation of right as of the date hereof and is of no
further effect. The Company shall cause the Subsidiary to
ratify such termination. Employee represents and warrants
that there are no other agreements between Employee and the
Subsidiary existing as of the date hereof.
8.14 Sale or Merger. This Agreement shall survive and
remain in full force and effect notwithstanding the sale of
a majority of the stock or substantially all of the assets
or merger of the Subsidiary or the sale of substantially all
of the assets, merger or change in control of the Company.
<PAGE>
IN WITNESS WHEREOF, the Company and Employee have
caused this Agreement to be duly executed on the date
first set forth above.
STAR TECHNOLOGIES, INC.
By:
/s/ Robert C. Compton
____________________________
Robert C. Compton
Chairman, President & CEO
EMPLOYEE
/s/ Carol. L. Curran
____________________________
Carol L. Curran
EMPLOYMENT AGREEMENT PAGE 9
EMPLOYMENT AGREEMENT SIGNATURE PAGE
EXHIBIT 11
<TABLE>
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) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Average shares outstanding during period 20,850 19,878 20,354 19,884
======= ======= ======= =======
Net income (loss) $ (124) $ 5,180 $ (826) $ 4,589
Undeclared cumulative dividends on Series B
and Series C Senior Preferred Stock (50) (199) (100) (547)
Excess carrying amount and cumulative
undeclared dividends of Series B and Series C
Senior Preferred Stock over consideration - 10,580 - 10,580
------- ------- ------- -------
Net income (loss) applicable to common shares $ (174) $15,561 $ (926) $14,622
======= ======= ======= =======
Primary earnings (loss) per common and common
equivalent share: $ (.01) $ .78 $ (.05) $ .74
======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 11
<TABLE>
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 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Average shares outstanding during period 20,850 19,878 20,354 19,884
Dilutive effect of convertible securities
computed by the "if converted" method:
Series A preferred stock 95 327 95 327
Series B & C preferred stock 1,986 1,986 1,986 1,986
------- ------- ------- -------
22,931 22,191 22,435 22,197
======= ======= ======= =======
Net income (loss) $ (124) $ 5,180 $ (826) $ 4,589
Adjustment for repurchase of Series B and
Series C Senior Preferred Stock - (174) - (522)
Excess carrying amount and cumulative undeclared
dividends of Series B and Series C Senior
Preferred Stock over consideration - 10,580 - 10,580
------- ------- ------- -------
Net income (loss) applicable to common shares $ (124) $15,586 $ (826) $14,647
======= ======= ======= =======
Fully diluted earnings (loss) per common
and common equivalent share: $ (.01) $ .70 $ (.04) $ .66
======= ======= ======= =======
</TABLE>
<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> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 92
<SECURITIES> 2530
<RECEIVABLES> 239
<ALLOWANCES> 19
<INVENTORY> 77
<CURRENT-ASSETS> 3106
<PP&E> 3506
<DEPRECIATION> 3038
<TOTAL-ASSETS> 6053
<CURRENT-LIABILITIES> 1111
<BONDS> 0
0
3
<COMMON> 213
<OTHER-SE> 4726
<TOTAL-LIABILITY-AND-EQUITY> 4942
<SALES> 608
<TOTAL-REVENUES> 608
<CGS> 261
<TOTAL-COSTS> 261
<OTHER-EXPENSES> 1797
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (826)
<INCOME-TAX> 0
<INCOME-CONTINUING> (826)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (826)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
