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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JANUARY 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
COMMISSION FILE NUMBER 0-13608
INNOSERV TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3619990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 WESTWAY, SUITE 530, ARLINGTON, TEXAS 76018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 468-3377
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 twelve 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 ___
At March 10, 1997, the Registrant had outstanding 5,035,833 shares of its
common stock, $.01 par value.
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INNOSERV TECHNOLOGIES, INC.
FORM 10-Q
JANUARY 31, 1997
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of January 31, 1997 and April 30, 1996 3
Consolidated Statements of Operations for the three months ended
January 31, 1997 and 1996 4
Consolidated Statements of Operations for the nine months ended
January 31, 1997 and 1996 5
Consolidated Statements of Cash Flows for the nine months ended
January 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
INDEX TO EXHIBITS 15
2
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INNOSERV TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
January 31,
1997 April 30,
(Unaudited) 1996
----------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 1,551 $ 941
Receivables 4,445 5,238
Inventory:
Spare parts and supplies, net 4,966 5,580
Inventory held for sale 983 1,878
Prepaid expenses 268 350
------- -------
Total current assets 12,213 13,987
Equipment, net 4,945 6,186
Goodwill, net 3,430 3,544
Other assets 55 123
------- -------
$20,643 $23,840
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 1,046 $ 862
Accounts payable 4,045 4,613
Accrued liabilities 2,804 3,090
Deferred revenues 3,329 4,399
------- -------
Total current liabilities 11,224 12,964
Long-term debt 500 910
Shareholders' equity
Preferred stock, $.01 par value: 5,000,000
shares authorized; no shares issued -- --
Common stock, $.01 par value: 10,000,000
shares authorized; 5,035,833 issued 51 51
Paid-in capital 17,303 17,303
Accumulated deficit (8,435) (7,388)
------- -------
Total shareholders' equity 8,919 9,966
------- -------
$20,643 $23,840
------- -------
------- -------
The accompanying notes are an integral part of these financial statements.
3
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INNOSERV TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
January 31,
---------------------
1997 1996
------- -------
Revenues $10,231 $11,062
Costs and expenses:
Cost of operations 8,129 9,263
Depreciation and amortization 499 493
Selling and administrative 1,524 2,222
Interest expense (income), net 43 (14)
------- -------
Total costs and expenses 10,195 11,964
------- -------
Income (loss) before income taxes 36 (902)
Benefit for income taxes -- (362)
------- -------
Net income (loss) $ 36 $ (540)
------- -------
------- -------
Per share information:
Net income (loss) $ .01 $ (.11)
------- -------
------- -------
Weighted average shares outstanding 5,036 5,037
------- -------
------- -------
The accompanying notes are an integral part of these financial statements.
4
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INNOSERV TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Nine Months Ended
January 31,
--------------------
1997 1996
------- -------
Revenues $32,703 $34,928
Costs and expenses:
Cost of operations 27,273 27,976
Depreciation and amortization 1,515 1,479
Selling and administrative 4,823 6,185
Interest expense, net 139 70
------- -------
Total costs and expenses 33,750 35,710
------- -------
Loss before income taxes (1,047) (782)
Benefit for income taxes -- (313)
------- -------
Net loss $(1,047) $ (469)
------- -------
------- -------
Per share information:
Net loss $ (.21) $ (.09)
------- -------
------- -------
Weighted average shares outstanding 5,036 5,037
------- -------
------- -------
The accompanying notes are an integral part of these financial statements.
5
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INNOSERV TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
January 31,
-------------------
1997 1996
-------- -------
Cash flows from:
Operations -
Net loss $ (1,047) $ (469)
Adjustments to reconcile net loss to
net cash flows from operations:
Depreciation and amortization 1,515 1,479
Gain on disposal of equipment -- (68)
Deferred income taxes -- (57)
Changes in assets and liabilities:
Receivables 793 1,019
Inventory 1,509 (896)
Prepaid expenses 82 (92)
Other assets 68 (342)
Accounts payable (568) 1,006
Accrued liabilities (286) (1,101)
Deferred revenues (1,070) 876
-------- -------
Net cash provided by operations 996 1,355
Investments and acquisitions -
Sale of equipment -- 180
Purchase of equipment (160) (1,085)
-------- -------
Net cash used for investments and acquisitions (160) (905)
Financing activities -
Borrowings from line of credit 242 800
Proceeds from long-term debt -- 1,500
Principal payments of long-term debt (468) (3,965)
-------- -------
Net cash used for financing activities (226) (1,665)
-------- -------
Net increase (decrease) in cash and cash equivalents 610 (1,215)
Cash and cash equivalents at beginning of period 941 1,827
-------- -------
Cash and cash equivalents at end of period $ 1,551 $ 612
-------- -------
-------- -------
The accompanying notes are an integral part of these financial statements.
6
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INNOSERV TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
(UNAUDITED)
1. GENERAL
The consolidated financial statements included herein have been prepared by
InnoServ Technologies, Inc. ("InnoServ") without audit, include all adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results of operations for the three months and nine months ended January 31,
1997 and 1996, pursuant to the rules and regulations of the Securities and
Exchange Commission, and include the accounts of InnoServ and its consolidated
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Any and all adjustments made are of a normal and recurring nature in
accordance with Rule 10-01(b)(8) of Regulation S-X. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulation, however, InnoServ believes that
the disclosures in such financial statements are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with InnoServ's annual report on Form 10-K for the fiscal year
ended April 30, 1996, filed with the Securities and Exchange Commission. The
results of operations for the nine months ended January 31, 1997, are not
necessarily indicative of the results that may be expected for the year ending
April 30, 1997.
2. INTEREST EXPENSE, NET
Interest expense is net of interest income of $5,000 and $4,000 for the
three months ended January 31, 1997 and 1996, respectively.
Interest expense is net of interest income of $28,000 and $20,000 for the
nine months ended January 31, 1997 and 1996, respectively.
3. SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest and income taxes paid in the nine months ended January 31, 1997
and 1996 were as follows:
Nine Months Ended
January 31,
----------------------
1997 1996
-------- --------
Interest $174,000 $111,000
Income taxes $ 53,000 $ 17,000
7
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INNOSERV TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
(UNAUDITED)
4. LONG-TERM DEBT
InnoServ has a loan agreement which contains a $1,000,000 term loan
expiring January 30, 1999, and a $500,000 revolving line of credit for working
capital, against which InnoServ had outstanding borrowings of $498,000 at
January 31, 1997. Obligations under the loan agreement are secured by a security
interest in InnoServ's accounts receivable, inventory and equipment. The
principal of the term loan is payable in equal quarterly installments of
$125,000. Interest on the term loan is payable quarterly and is payable monthly
under the revolving line of credit. The interest rate on both the term loan and
the revolving line of credit is 1.0 percent above the prime rate and was 9.25
percent at January 31, 1997. The loan agreement contains financial covenants
including maintenance of certain financial ratios, net worth requirements and
restrictions on future borrowings and payment of dividends. InnoServ was in
compliance with such financial covenants at January 31, 1997.
The revolving line of credit expires on March 12, 1997, at which time
InnoServ expects to restructure the loan agreement with its bank to provide for
a new $1,500,000 term loan and to eliminate the revolving line of credit. The
new term loan is expected to expire on January 30, 1999, and will require
monthly principal and interest payments. The interest rate is expected to be
1.0 percent above the prime rate.
5. RESTRUCTURING
In the fourth quarter of fiscal 1996, InnoServ adopted a plan to reorganize
its operations in order to strategically focus on its comprehensive asset
management services business ("Asset Management"). As a result of this
reorganization, InnoServ recorded restructuring charges in the fourth quarter of
fiscal 1996 of $154,000 for employee termination benefits for 25 employees. As
of January 31, 1997, $149,000 of this amount had been paid to 29 employees and
this reorganization was substantially complete. An additional $6,000 in
employee termination benefits are expected to be paid in the fourth quarter of
fiscal 1997.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRD QUARTER FISCAL 1997 COMPARED TO THIRD QUARTER FISCAL 1996
Consolidated revenues for the third quarter of fiscal 1997 were $10,231,000
as compared to $11,062,000 in the same period of fiscal 1996, a decline of
$831,000, or 8 percent. Revenues from computed tomography ("CT") maintenance
service agreements decreased approximately $850,000 primarily as a result of the
continued decline in the number and average contract amount of CT maintenance
service agreements in effect as older equipment is being upgraded or removed
from service by customers and InnoServ's decision to not renew certain CT
maintenance agreements in unprofitable locations. Revenues from equipment sales
decreased approximately $490,000 primarily as a result of the sale of
refurbished equipment in the third quarter of fiscal 1996. Revenues at Advanced
Imaging Technologies, Inc. ("AIT") were approximately $210,000 lower than the
revenues in the same period in fiscal 1996 as a result of a decline in revenues
from maintenance service agreements and lower sales of x-ray film, chemistry and
related accessories. Offsetting these declines, revenues from Asset Management
and multi-vendor services increased approximately $740,000 as InnoServ continues
to focus on the growing market for these type services.
Cost of operations decreased $1,134,000 from the same period in fiscal 1996
and as a percent of revenues declined from 84 percent to 79 percent. The fiscal
1996 cost of operations included a $701,000 charge for physical inventory
adjustments and unfavorable production variances associated with the reloading
and rework of CT tube inventory and $98,000 of restructuring expenses as a
result of the relocation of InnoServ's headquarters operations. These costs
were offset in the quarter by $359,000 for a payment received against an
insurance claim. The decrease in cost of operations in fiscal 1997 also
included approximately $410,000 as a result of the lower equipment sales and
approximately $220,000 as a result of cost reductions associated with InnoServ's
maintenance business.
Selling and administrative expenses decreased $698,000, or 31 percent, from
the prior year primarily as a result of savings from the consolidation of
InnoServ's administrative functions, lower selling expenses and restructuring
expenses of $313,000 recorded in fiscal 1996 for the relocation of InnoServ's
headquarters operations. Depreciation and amortization expenses did not change
significantly quarter to quarter.
Income before income taxes for the third quarter of fiscal 1997 was $36,000
as compared to a loss of $902,000 in the third quarter of fiscal 1996. The
results for the third quarter of fiscal 1997 represent InnoServ's first
profitable quarter since the second quarter of fiscal 1996. The improved
performance was primarily the result of cost savings from the consolidation of
InnoServ's administrative functions and actions taken over the past year in
InnoServ's maintenance service operations to provide services required by
customers on a more cost effective basis. This included selective personnel
reductions, changes in employee benefit and incentive compensation programs, and
lower utilization of outside labor, services and materials. InnoServ is
continuing to implement cost containment actions in response to the declining
revenues from CT maintenance agreements.
9
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InnoServ did not recognize a tax provision in the third quarter of fiscal
1997 as net operating losses were available from previous periods to offset the
operating income for the current quarter. At January 31, 1996, the effective
tax rate for fiscal 1996 was estimated to be 40 percent and a corresponding
benefit for income taxes was recorded for the three months ended January 31,
1996.
NINE MONTHS FISCAL 1997 COMPARED TO NINE MONTHS FISCAL 1996
Consolidated revenues for the first nine months of fiscal 1997 were
$32,703,000 as compared to $34,928,000 in the same period of fiscal 1996, a
decline of $2,225,000, or 6 percent. Revenues from CT maintenance service
agreements decreased approximately $4,740,000 primarily as a result of the
continued decline in the number and average contract amount of CT maintenance
service agreements in effect as older equipment is being upgraded or removed
from service by customers and InnoServ's decision to not renew certain CT
maintenance agreements in unprofitable locations. Revenues from equipment sales
decreased approximately $610,000 primarily as a result of lower customer demand
for refurbished equipment. Revenues at AIT were approximately $560,000 lower as
a result of lower sales of x-ray film, chemistry and related accessories.
Additionally, revenues from InnoServ's diagnostic mobile imaging operations were
approximately $440,000 lower than the revenues in the same period in fiscal 1996
as InnoServ discontinued its shared services program at the end of the first
quarter of fiscal 1996. Offsetting these declines, revenues from Asset
Management and multi-vendor services increased approximately $3,950,000 as
InnoServ continues to focus on the growing market for these type services.
Cost of operations decreased $703,000 from the same period in the prior
fiscal year primarily due to the decline in revenues; however, as a percent of
revenues, cost of operations increased from 80 percent to 83 percent. This
increase as a percent of revenues was primarily the result of costs required to
provide services for Asset Management agreements, while InnoServ was not able to
reduce its costs to service CT maintenance agreements proportionately throughout
the nine months due to certain fixed support costs and the need to retain field
service technicians in certain locations despite a declining revenue base in
those locations. Selling and administrative expenses decreased $1,362,000, or
22 percent, from the prior year primarily as a result of savings from the
consolidation of InnoServ's administrative functions, lower selling expenses and
restructuring expenses of $313,000 recorded in fiscal 1996 for the relocation of
InnoServ's headquarters operations. Depreciation and amortization expenses did
not change significantly between the two periods.
The loss before income taxes for the first nine months of fiscal 1997
was $1,047,000 as compared to a loss of $782,000 in the first nine months of
fiscal 1996. The loss in fiscal 1997 was primarily the result of unfavorable
operating margins associated with InnoServ's maintenance business during the
first half of fiscal 1997. Because InnoServ employs field service engineers
over a wide geographic area, the revenues were not sufficient in certain
locations to cover the direct and indirect costs of providing maintenance and
repair services. InnoServ is continuing to implement plans to reorganize its
service operations to more cost effectively provide the services required by
its customers and to discontinue service in selected locations upon the
expiration of the existing maintenance agreements in those locations.
InnoServ believes these actions, coupled with strategic changes it is making
in the operations of the CT and Asset Management businesses and efforts to
expand the revenue base, will improve InnoServ's operations.
10
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InnoServ did not recognize a tax benefit from the operating loss for the
first nine months of fiscal 1997. Under Statement of Financial Accounting
Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes," net operating
losses enter into the calculation of deferred tax assets and liabilities. At
January 31, 1997, InnoServ had an estimated net deferred tax asset of
$5,450,000, primarily as a result of net operating losses. In accordance with
SFAS 109, InnoServ recorded a valuation allowance for the full amount of the net
deferred tax asset. The ultimate realization of the deferred tax asset depends
on the ability of InnoServ to generate sufficient taxable income in the future.
While InnoServ believes the deferred tax asset will be substantially realized by
future operating results, due to the cumulative losses incurred in recent years
the deferred tax assets do not currently meet the criteria for recognition under
SFAS 109. At January 31, 1996, the effective tax rate for fiscal 1996 was
estimated to be 40 percent and a corresponding benefit for income taxes was
recorded for the nine months ended January 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1997, InnoServ had working capital of $989,000, of which
$1,551,000 was in cash and cash equivalents. Operations provided $996,000 of
cash for the nine months ended January 31, 1997, primarily as a result of the
non-cash effect of depreciation and amortization of $1,515,000 on the net loss
of $1,047,000 and a $1,509,000 reduction in inventory due to a decline in CT
tube inventory as a result of lower requirements for inventory because of the
declining number of CT maintenance service agreements in effect and management
controls on purchases, the sale of refurbished CT and magnetic resonance imaging
scanners, and the amortization of spare parts inventory. Additionally,
receivables declined $793,000 due to successful collection activities and lower
revenues. These funds were used to reduce accounts payable by $568,000 and
accrued liabilities by $286,000. Deferred revenues also declined $1,070,000 as
a result of the timing of cash receipts from customers, a lower base of
maintenance agreements in effect and the shipment of refurbished scanners in the
nine months for which payment had been received as of April 30, 1996.
InnoServ's allowance for doubtful accounts at January 31, 1997, was
$890,000, or 17 percent of gross accounts receivable. InnoServ's customers
include hospitals, physician practices, outpatient clinics and imaging centers.
Some of these customers are thinly capitalized, operate on small margins and
experience cash flow difficulties due to the lengthy time required to receive
reimbursements from Medicare and insurance companies. The changes occurring in
the healthcare industry, primarily the move to managed care, has weakened
healthcare providers' ability to honor their debts and have forced some of the
providers out of business. As a result of these and other factors, InnoServ has
experienced difficulty in collecting on certain of its accounts receivable.
InnoServ has a loan agreement which contains a $1,000,000 term loan
expiring January 30, 1999, and a $500,000 revolving line of credit for working
capital, against which InnoServ had outstanding borrowings of $498,000 at
January 31, 1997. Obligations under the loan agreement are secured by a security
interest in InnoServ's accounts receivable, inventory and equipment. The
principal of the term loan is payable in equal quarterly installments of
$125,000. Interest on the term loan is payable quarterly and is payable monthly
under the revolving line of credit. The interest rate on both the term loan and
the revolving line of credit is 1.0 percent above the prime rate and was 9.25
percent at January 31, 1997. The loan agreement contains financial covenants
including maintenance of certain financial ratios, net worth requirements and
restrictions on future borrowings
11
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and payment of dividends. InnoServ was in compliance with such financial
covenants at January 31, 1997.
The revolving line of credit expires on March 12, 1997, at which time
InnoServ expects to restructure the loan agreement with its bank to provide for
a new $1,500,000 term loan and to eliminate the revolving line of credit. The
new term loan is expected to expire on January 30, 1999, and will require
monthly principal and interest payments. The interest rate is expected to be
1.0 percent above the prime rate.
InnoServ does not foresee the need to make any significant capital
purchases in the next twelve months and believes sufficient funds will be
available from its operations to meet its working capital requirements.
CAUTIONARY STATEMENT
The statements in this Management's Discussion and Analysis and elsewhere
in this report that are forward looking are based on current expectations which
involve numerous risks and uncertainties. InnoServ's future results of
operations and financial condition may differ materially due to many factors
including InnoServ's ability to attract and retain Asset Management contracts,
InnoServ's ability to implement its operating plan, particularly as it relates
to the CT maintenance business, competitive and regulatory conditions in the
healthcare industry generally, the availability of financing, and other factors,
many of which are beyond the control of InnoServ.
12
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
The information required by this portion of Item 6 is set forth in the
Index to Exhibits beginning on page 15.
(b) Reports on Form 8-K:
During the three months ended January 31, 1997, no reports were filed by
the Registrant on Form 8-K.
13
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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.
DATED: March 10, 1997
INNOSERV TECHNOLOGIES, INC.
By: /s/ Thomas Hoefert
---------------------------------
Thomas Hoefert
Vice President and Chief
Financial Officer
(Duly Authorized Officer and
Principal Financial and
Accounting Officer)
14
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INDEX TO EXHIBITS
Exhibit
No. Description of Exhibit
- ------- ----------------------
10.1 Indemnity Agreement dated as of September 17, 1996 by and
between Registrant and Thomas E. Carroll as director.
10.2 Stock Option Agreement dated as of December 11, 1996 by and
between Registrant and Michael G. Puls.
10.3 Bonus Agreement dated December 20, 1996, between Registrant
and Michael G. Puls.
10.4 Bonus Agreement dated December 20, 1996, between Registrant
and Thomas Hoefert.
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
15
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Exhibit 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made and entered into as of
the 17th day of September, 1996, by and between INNOSERV Technologies, Inc.
- -Registered Trademark-, a California corporation (the "Corporation"), and
Thomas E. Carroll (the "Agent").
WHEREAS, the Agent is currently serving as a Director of the Corporation
and the Corporation wishes the Agent to continue in such capacity;
NOW, THEREFORE, in consideration of the foregoing recital and the mutual
agreements set forth herein, and in order to induce the Agent to continue to
serve as a Director of the Corporation and in consideration of his continued
service, the parties hereto hereby agree as follows:
1. The corporation will pay on behalf of the Agent, and his executors,
administrators or assigns, any amount which the Agent is or becomes legally
obligated to pay in connection with any claim or claims made against the
Agent because of any act or omission or neglect or breach of duty, including
any actual or alleged error or misstatement or misleading statement, which
the Agent commits or suffers while acting in his capacity as a Director of
the Corporation and solely because of being a Director. The payments which
the Corporation will be obligated to make hereunder shall include, INTER
ALIA, damages, judgments, settlements and costs, cost of investigation
(excluding salaries of officers or employees of the Corporation) and costs of
defense of legal actions, claims or proceedings and appeals therefrom, and
costs of attachment or similar bonds; provided however, that the Corporation
shall not be obligated to pay fines or other obligations or fees imposed by
law or otherwise make any payments hereunder which it is prohibited by
applicable law from paying as indemnity or for any other reason.
2. If a claim under this Agreement is not paid by the Corporation, or
on its behalf, within 90 days after a written claim has been received by the
Corporation, the claimant may at anytime thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and if successful in
whole or in part, the claimant also shall be entitled to be paid the expense
of prosecuting such claim.
3. In the event of payment under this Agreement, the Corporation shall
be subrogated to the extent of such payment to all of the rights of recovery
of the Agent, who shall execute all papers required and shall do everything
that may be necessary or appropriate to secure such rights, including the
execution of such documents necessary or appropriate to enable the
Corporation effectively to bring suit to enforce such rights.
4. The Corporation shall not be liable under this Agreement to make
any payment in connection with any claim made against the Agent:
(a) for which payment is actually made to the Agent under a valid
and collectible insurance policy, except in respect of any excess beyond
the amount of payment under such insurance;
(b) for which the Agent is entitled to indemnity and/or payment by
reason of having given notice of any circumstance which might give rise
to a claim under any policy of insurance, the terms of which have expired
prior to the effective date of this Agreement;
<PAGE>
(c) for which the Agent is indemnified by the Corporation otherwise
than pursuant to this Agreement;
(d) based upon or attributed to the Agent gaining in fact any
personal profit or advantage to which the Agent was not legally entitled;
(e) for an accounting of profits made from the purchase or sale by
the Agent of securities of the Corporation within the meaning of Section
16(b) of the Securities Exchange Act of 1934, as amended, or similar
provisions of any state statutory law or common law; or
(f) brought about or contributed to by the dishonesty of the Agent
seeking payment hereunder; however, notwithstanding the foregoing, the
Agent shall be protected under this Agreement to the fullest extent
permitted under law as to any claims upon which suit may be brought against
the Agent by reason of any alleged dishonesty on his part, unless a
judgment or other final adjudication thereof adverse to the Agent shall
establish that the Agent committed acts of active and deliberate dishonesty
with actual dishonest purpose and intent, which acts were material to the
cause of action so adjudicated.
5. No costs, charges or expenses for which indemnity shall be sought
hereunder shall be incurred without the Corporation's consent, which shall
not be unreasonably withheld.
6. The Agent, as a condition precedent to indemnification under this
Agreement, shall give to the Corporation notice in writing as soon as
practicable of any claim made against the Agent for which indemnity will or
could be sought under this Agreement. Notice to the Corporation shall be
directed to INNOSERV Technologies, Inc., 320 Westway, Suite 520, Arlington,
Texas 76018, Attention: President and Chief Executive Officer (or such other
address as the Corporation shall designate in writing to the Agent); notice
shall be deemed received if sent by prepaid mail properly addressed, the date
of such notice being the date postmarked. In addition, the Agent shall give
the Corporation such information and cooperation as it may reasonably require
and as shall be within the Agent's power.
7. Costs and expenses (including attorneys' fees) incurred by the
Agent in defending or investigating any action, suit, proceeding or
investigation shall be paid by the Corporation in advance of the final
disposition of such matter, if the Agent shall undertake in writing to repay
any such advances in the event that it is ultimately determined that the Agent
is not entitled to indemnification under the terms of this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, no
advance shall be made by the Corporation if a determination is reasonable and
promptly made by the Board of Directors by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs) by independent
legal counsel, that, based upon the facts known to the Board of Directors or
counsel at the time such determination is made, (a) the Agent acted in bad
faith or deliberately breached his duty to the Corporation or its
stockholders, and (b) as a result of such actions by the Agent, it is more
likely than not that it will ultimately be determined that the Agent is not
entitled to indemnification under the terms of this Agreement.
8. Nothing herein shall be deemed to diminish or otherwise restrict
the Agent's right to indemnification under any provision of the articles of
incorporation or bylaws of the Corporation or under California law.
<PAGE>
9. This Agreement shall be governed by and construed in accordance
with internal laws of the State of California.
10. This Agreement shall be binding upon all successors and assigns of
the Corporation (including any transferee of all or substantially all of its
assets and any successor by merger or operation of law) and shall inure to
the benefit of the heirs, personal representatives and estate of the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the day and year first written.
INNOSERV TECHNOLOGIES, INC.
By: /s/ MICHAEL G. PULS
-----------------------------------
Michael G. Puls
Title: President and Chief
Executive Officer
AGENT:
/s/ THOMAS CARROLL
----------------------------------
Thomas E. Carroll, Director
<PAGE>
Exhibit 10.2
INNOSERV TECHNOLOGIES, INC.-Registered Trademark-
STOCK OPTION AGREEMENT
This Agreement is made as of the 11th day of December, 1996, by and between
INNOSERV Technologies, Inc., a California corporation (the "Company"), and
Michael G. Puls, the ("Optionee").
WHEREAS, Optionee's employment agreement letter (the "Employment
Agreement") with the Company provides for a grant of options to purchase
150,000 shares of common stock of the Company pursuant to the "Company's
Stock Incentive Plan" at fair market value on the date of his employment;
WHEREAS, there are insufficient shares of common stock of the Company
available for grant under the Company's 1992 Incentive Stock Option Plan to
grant options to purchase 150,000 shares, notwithstanding the Stock Option
Agreement between Optionee and the Company dated as of 27 December, 1995
("Initial Grant") purporting to evidence the grant of options in such amount,
and therefore 150,000 shares of the previously purported grants have been
rescinded;
WHEREAS, the Optionee and the Company desire to enter into the
agreements set forth herein to evidence the grant of the same number of
options as the number of such rescinded option share grant, at the same
exercise price and the same vesting terms, on the terms and conditions set
forth herein and the board of directors of the Company (the "Board of
Directors") has authorized the grant to Optionee pursuant to Optionee's
Employment Agreement and as a matter of separate inducement in connection
with Optionee's engagement with the Company and not in lieu of any salary or
other compensation for his or her services, of an option (the "Option") to
purchase shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company on the terms and conditions set forth herein.
NOW, THEREFORE, IT IS AGREED:
Section 1. SHARES OPTIONED. Optionee may purchase all or any part
of an aggregate of 150,000 shares of Common Stock, subject to the terms and
conditions hereinafter set forth. The Company and the Optionee hereby agree
that the Stock Option Agreement between Optionee and the Company dated as of
27 December, 1995, to the extent it granted an option to purchase 150,000
shares of common stock, is hereby terminated and of no force and effect.
This Option is not intended to be an incentive stock option under Section 422
of the Internal Revenue Code of 1986 (the "Code").
Section 2. OPTION PRICE. The shares subject to this Option may be
purchased at the price of $3.625 per share (which is the fair market value of
the Common Stock on the date of the Initial Grant), on the terms and
conditions set forth herein. "Fair market value" shall be equal to the
closing price per share of Common Stock on the business day immediately
preceding the date of grant as reported in the Wall Street Journal, Southwest
Edition, or, if no closing price was so reported for such immediately
preceding business day, the closing price for the next preceding day for
which a closing price was reported, provided however, that the Board of
Directors may utilize such other listing or reporting service or valuation
method as, in its judgment, provides an accurate index of the fair market
value of the Common Stock.
<PAGE>
Section 3. WHEN OPTION MAY BE EXERCISED. This option, shall become
exercisable in installments on the anniversaries of the date of Optionee's
Initial Grant of 27 December, 1995 indicated in the following table as to the
number of shares set forth opposite said anniversaries, and each installment
shall remain exercisable as to all of the shares indicated until and
including the tenth anniversary of the date thereof, subject to the
provisions of Section 5 and 6 hereof. Shares as to which this Option becomes
exercisable pursuant to the foregoing provision may be purchased at any time
thereafter prior to the expiration or termination of this Option.
Anniversary of the Date
of the Initial Grant Number of Shares
----------------------- ----------------
First 50,000
Second 50,000
Third 50,000
Section 4. NON-TRANSFERRABILITY OF OPTION. This Option may be
exercised during the life of the Optionee only by the Optionee and may not be
assigned, transferred, pledged, hypothecated, sold or otherwise disposed of
in whole or in part, either voluntarily or involuntarily whether by operation
of law or otherwise. In the event of the Optionee's death prior to the full
exercise of this Option, this Option may be transferred by will or the laws
of descent and distribution and may be exercised by the Optionee's
transferees by will or by the laws of descent and distribution. Upon any
attempt to transfer this Option otherwise than by will or the laws of descent
and distribution, or to assign, pledge, hypothecate or otherwise dispose of
this Option, or upon the levy of any execution, attachment or similar process
upon this Option, this Option shall immediately terminate and become null and
void.
Section 5. TERMINATION OF EMPLOYMENT. If the Optionee ceases to be
employed by the Company, except in the case of termination of employment
resulting from death or disability (as defined in Section 105(d)(4) of the
Code), this Option shall expire three months after such cessation of
employment and during such period this Option shall be exercisable only as to
those shares, if any, with respect to which the Optionee could have exercised
this Option as of the last date of his or her employment, provided however,
that all rights under this Option shall expire in any event on the date
specified in Section 3 hereof.
Section 6. DEATH OR DISABILITY OF THE OPTIONEE. If the Optionee should
die or become disabled (within the meaning of Section 105(d)(4) of the Code)
while employed by the Company or within any three month period after
termination of his or her employment, Optionee, or in the case of death, the
person or persons to whom Optionee's rights under the Option shall pass by
will or the laws of descent and distribution, shall have the right, at any
time within 12 months after the date of Optionee's termination of employment,
to exercise this Option as to those shares, if any, with respect to which
Optionee could have exercised this Option as of the date of Optionee's
termination of employment; provided, however, that all rights under this
Option shall expire in any event on the date specified in Section 3 hereof.
Section 7. LEAVE OF ABSENCE. Military or sick leave shall not be
considered a termination of employment for any purpose under this Agreement
unless such a period exceeds 90 days and the Optionee's right to
re-employment is not guaranteed either by statute or by contract, in which
case the employment relationship shall be deemed to have terminated on the
91st day of such leave.
<PAGE>
Section 8. EXERCISE OF OPTION. This Option or any portion thereof may
be exercised by written notice delivered to the Company at its principal
offices 30 days prior to exercise, setting forth the number of shares with
respect to which the Option is being exercised and the total purchase price,
accompanied by full payment of the purchase price, in the form of a personal
check (or certified or cashier's check, if required by the Company) or cash;
provided, however, that the Board of Directors, in their absolute discretion,
may allow Optionee to surrender shares of stock of the Company of the class
subject to this Option in payment of such price. Any such shares shall be
valued at the fair market value of such stock on the date of such exercise.
If the Company is required to withhold on account of any present or future
federal or state tax imposed as a result of such exercise, the notice of
exercise shall be accompanied by personal check (or certified or cashier's
check, if required by the Company) made payable to the order of the Company
or cash in payment of the amount of such withholding. Upon receipt of notice
and payment as aforesaid, the Company shall promptly make arrangement for the
issuance to Optionee of the number of shares as to which this Option is
exercised.
Section 9. PARENT, SUBSIDIARY OR SUCCESSOR OF THE COMPANY. All
references herein to the Company shall be deemed to include any parent or
subsidiary of the Company (as defined in Section 425 of the Code) unless the
context shall otherwise require or indicate.
Section 10. FRACTIONAL SHARES. Notwithstanding any other provisions
herein to the contrary, the Optionee shall in no event be entitled to
exercise this Option for any fractional shares and any such fractional
interests shall be disregarded.
Section 11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. If the number
of shares of Common Stock outstanding are increased, decreased or exchanged
for or converted into cash, property or a different number or kind of
securities, or if cash, property or securities are distributed in respect of
such outstanding securities, in either case as a result of a reorganization,
merger, consolidation, recapitalization, restructuring, reclassification
dividend (other than a regular, quarterly cash dividend) or other
distribution, stock split, reverse stock split or the like, or if
substantially all of the property and assets of the Company are sold, then
unless the terms of such transaction shall provide otherwise, the Board of
Directors shall make appropriate and proportionate adjustments in the number
and type of shares or other securities or cash or other property that may be
acquired pursuant to this Option.
Section 12. SUBSTITUTION OR ACCELERATION AND TERMINATION OF OPTION UNDER
CERTAIN CIRCUMSTANCES. Upon the dissolution or liquidation of the Company,
or upon a reorganization, merger or consolidation of the Company with one or
more corporations as a result of which the Company is not the surviving
corporation or sale of substantially all of the property of the Company to
another corporation, this Option shall terminate, unless, in connection with
any such transaction, provision shall have been made in writing for the
substitution of Options. As used herein, "substitution of options" shall
mean either the issuance of a new option in exchange for this Option by the
surviving corporation or its parent or subsidiary as such terms are defined
in Section 425 of the Code in such form and on such terms and conditions that
the substituted options shall meet the requirements of Section 425 of the
Code. A substitute option may not be less favorable to the Optionee than
this Option, except to the extent to qualify the same under Section 425 of
the Code.
<PAGE>
In the event that the provision is not so made for the substitution of
options in connection with any such transaction, exercisability of this
Option shall become accelerated and the Optionee shall have the right,
immediately prior to or concurrently with such transaction, to exercise this
Option to the full extent theretofore not exercised, regardless of any
installment provisions for the exercise of such option rights which may be
provided in Section 3 hereof.
Section 13. RIGHTS IN SHARES BEFORE ISSUANCE AND DELIVERY. Neither
Optionee nor his or her transferees by will or the laws of descent and
distribution shall be, or have any rights or privileges of, a shareholder of
the Company with respect to any share issuable upon exercise of its Option,
unless and until certificates representing such shares have been issued and
delivered.
Section 14. NOTICES. Any notice to be given to the Company shall be
addressed to the Company in care of its Secretary at its principal office, or
at such other address as the Company may hereinafter designate in writing to
the Optionee, and any notice to the Optionee shall be addressed to him or her
at the address given beneath his or her signature hereto, or at such other
address as the Optionee may hereafter designate in writing to the Company.
Any such notice shall have been deemed duly given when enclosed in a properly
sealed envelope or wrap and addressed as aforesaid, registered or certified,
and deposited, postage and registration or certification fee prepaid, in a
post office or a branch post office regularly maintained due the United
States Government.
Section 15. LAWS APPLICABLE TO CONSTRUCTION. This Agreement has been
executed and delivered the day and year first written above at Arlington,
Texas and this agreement shall be construed and enforced in accordance with
the laws of the State of California.
Section 16. EFFECTIVE DATE. This Agreement shall be effective as of the
effective date and time of the Registration Statement on Form S-8 registering
the Shares issuable pursuant hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INNOSERV TECHNOLOGIES, INC.
By: /s/ DUDLEY A. RAUCH
----------------------------------
Name: Dudley A. Rauch
Title: Chairman
OPTIONEE
By: /s/ MICHAEL G. PULS
----------------------------------
Name: Michael G. Puls
Title: President & CEO
Address:
3020 Arbor Oaks Dr.
Arlington, Tx 76006
Social Security Number:
###-##-####
<PAGE>
Exhibit 10.3
INNOSERV TECHNOLOGIES, INC.
BONUS AGREEMENT
This Bonus Agreement (this "Agreement") is entered into between InnoServ
Technologies, Inc. (the "Company") and Michael G. Puls, President and Chief
Executive Officer of the Company (the "Executive").
WITNESSETH:
WHEREAS, the Executive is currently employed by the Company in the capacity
of President and Chief Executive Officer; and
WHEREAS, the board of directors of the Company (the "Board of Directors")
has determined that it is in the best interests of the Company and the
shareholders of the Company that the Company from time to time investigate
strategic alternatives in order to maximize shareholder value; and
WHEREAS, the Executive is a member of senior management of the Company and
has access to proprietary information pertaining to the business and operations
of the Company; and
WHEREAS, the Board of Directors has determined that it is in the best
interests of the Company to provide an incentive to the Executive to remain in
the employ of the Company while the Company is investigating such strategic
alternatives;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company and Executive agree as follows:
1. Subject to paragraph 2 below, if Executive is a full-time employee of
the Company in good standing on the closing of a Sale of the Company (as defined
in paragraph 3 below), then Executive will be entitled to a one-time bonus of
$150,000, less all applicable withholdings (the "Bonus"). The Bonus will be
payable in full, in cash on the closing date of such Sale of the Company.
2. Executive will not be eligible for benefits hereunder if he resigns,
retires, becomes disabled, fails to return from a leave of absence, dies, or is
terminated for cause prior to the close of the Sale of the Company.
3. For purposes of this Agreement, a Sale of the Company shall be deemed
to have occurred if the Company disposes of all of its stock or substantially
all of its assets to another party, whether by way of merger, transfer of assets
or otherwise, for cash or securities, in one or a series of transactions.
4. This Agreement is not and shall not be deemed an employment agreement,
and shall not give the Executive the right to be retained in the employment of
the Company.
5. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, legal representatives,
and assigns.
<PAGE>
6. Neither this Agreement nor any right or interest hereunder shall be
assignable by the Executive, his beneficiaries or legal representatives.
7. If any provision of this Agreement shall be determined to be invalid,
illegal or unenforceable in whole or in part, neither the validity of the
remaining part of such provision nor the validity of any other provision of this
Agreement shall in any way be affected thereby. In lieu of such invalid,
illegal or unenforceable provision, there shall be added automatically as part
of this Agreement a provision as similar in terms to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal and enforceable.
8. This Agreement shall be governed by Texas law.
9. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements, oral
and written, between the parties hereto with respect to the subject matter
hereof. This Agreement may be modified or amended only by an instrument in
writing signed by both parties hereto.
10. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together constitute one and
the same instrument.
[SIGNATURES ON THE NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the Company and Executive have executed this Agreement
as of the day and year indicated below.
INNOSERV TECHNOLOGIES, INC.
Dated: December 20, 1996 By: /s/ Dudley A. Rauch
------------------------ ------------------------------
Name: Dudley A. Rauch
----------------------------
Its: Chairman
-----------------------------
EXECUTIVE:
Dated: December 20, 1996 /s/ Michael G. Puls
------------------------ ---------------------------------
Printed Name: Michael G. Puls
--------------------
<PAGE>
Exhibit 10.4
INNOSERV TECHNOLOGIES, INC.
BONUS AGREEMENT
This Bonus Agreement (this "Agreement") is entered into between InnoServ
Technologies, Inc. (the "Company") and Thomas Hoefert, Vice President and Chief
Financial Officer of the Company (the "Executive").
WITNESSETH:
WHEREAS, the Executive is currently employed by the Company in the capacity
of Vice President and Chief Financial Officer; and
WHEREAS, the board of directors of the Company (the "Board of Directors")
has determined that it is in the best interests of the Company and the
shareholders of the Company that the Company from time to time investigate
strategic alternatives in order to maximize shareholder value; and
WHEREAS, the Executive is a member of senior management of the Company and
has access to proprietary information pertaining to the business and operations
of the Company; and
WHEREAS, the Board of Directors has determined that it is in the best
interests of the Company to provide an incentive to the Executive to remain in
the employ of the Company while the Company is investigating such strategic
alternatives;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company and Executive agree as follows:
1. Subject to paragraph 2 below, if Executive is a full-time employee of
the Company in good standing on the closing of a Sale of the Company (as defined
in paragraph 3 below), then Executive will be entitled to a one-time bonus
determined according to paragraph 4 below (the "Bonus"). The Bonus will be
payable in full, in cash on the closing date of such Sale of the Company.
2. Executive will not be eligible for benefits hereunder if he resigns,
retires, becomes disabled, fails to return from a leave of absence, dies, or is
terminated for cause prior to the close of the Sale of the Company.
3. For purposes of this Agreement, a Sale of the Company shall be deemed
to have occurred if the Company disposes of all of its stock or substantially
all of its assets to another party, whether by way of merger, transfer of assets
or otherwise, for cash or securities, in one or a series of transactions.
<PAGE>
4. a. For purposes of this Agreement, Executive's Bonus shall be based
upon the Sale Price (as hereinafter defined) of the Company. The Bonus shall be
a cash payment, less all applicable withholdings, computed as follows:
------------------------------------------------------------------------
SALE PRICE AMOUNT OF BONUS
------------------------------------------------------------------------
up to $25,000,000 $125,000
------------------------------------------------------------------------
$25,000,001 to $125,000 + ($75,000 x [(Sale Price -
$29,999,999 $25,000,000)/$5,000,000])
------------------------------------------------------------------------
$30,000,000 to $200,000 + ($50,000 x [(Sale Price -
$34,999,999 $30,000,000)/$5,000,000])
------------------------------------------------------------------------
$35,000,000 or more $250,000
------------------------------------------------------------------------
b. The Sale Price of the Company, if a stock sale, shall be the
product of (i) the average consideration paid for a share of common stock of
the Company and (ii) the sum of (A) the number of such shares acquired by the
other party to the transaction, plus (B) the number of such shares issuable upon
exercise of options, warrants or other rights or conversion or exchange of
securities all as outstanding on the date of this Agreement and, without
duplication, as thereafter issued or granted. For the purpose of clause (i) of
the foregoing sentence, all shares shall be deemed to have been acquired if more
than 50% of the Company's outstanding common stock is acquired by a "group" as
that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934.
c. For the purposes of calculating the Sale Price of the Company,
equity securities constituting a part of the consideration referred to in
clause (i) of paragraph 4.b. above that are traded on a national securities
exchange or quoted on the National Association of Securities Dealers National
Market System shall be valued at the last closing price thereof prior to the
date of the consummation or closing of any such Sale of the Company.
d. The Sale Price of the Company, if an asset sale, shall be the sum
of (i) the cash (or other consideration) paid by the purchaser for such assets
and (ii) any debt incurred by the purchaser of such assets.
5. This Agreement is not and shall not be deemed an employment agreement,
and shall not give the Executive the right to be retained in the employment of
the Company.
6. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, legal representative, and
assigns.
7. Neither this Agreement nor any right or interest hereunder shall be
assignable by the Executive, his beneficiaries or legal representatives.
<PAGE>
8. If any provision of this Agreement shall be determined to be invalid,
illegal or unenforceable in whole or in part, neither the validity of the
remaining part of such provision nor the validity of any other provision of this
Agreement shall in any way be affected thereby. In lieu of such invalid,
illegal or unenforceable provision, there shall be added automatically as part
of this Agreement a provision as similar in terms to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal and enforceable.
9. This Agreement shall be governed by Texas law.
10. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements, oral
and written, between the parties hereto with respect to the subject matter
hereof. This Agreement may be modified or amended only by an instrument in
writing signed by both parties hereto.
11. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together constitute one and
the same instrument.
[SIGNATURES ON THE NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the Company and Executive have executed this Agreement
as of the day and year indicated below.
INNOSERV TECHNOLOGIES, INC.
Dated: December 20, 1996 By: /s/ Michael G. Puls
------------------------ ------------------------------
Name: Michael G. Puls
----------------------------
Its: President and CEO
-----------------------------
EXECUTIVE:
Dated: December 20, 1996 /s/ Thomas Hoefert
------------------------ ---------------------------------
Printed Name: Thomas Hoefert
--------------------
<PAGE>
EXHIBIT 11.1 - COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
<TABLE>
Three Months Ended Nine Months Ended
January 31, January 31,
------------------ ------------------
1997 1996 1997 1996
------- ------- -------- -------
<S> <C> <C> <C> <C>
Primary:
Earnings:
Net income (loss) $ 36 $ (540) $ (1,047) $ (469)
Shares:
Weighted average shares outstanding 5,036 5,036 5,036 5,036
Net shares issuable on exercise of certain
stock options -- 1 -- 1
------- ------- -------- -------
Weighted average shares outstanding,
as adjusted 5,036 5,037 5,036 5,037
Per share amounts:
Net income (loss) $ .01 $ (.11) $ (.21) $ (.09)
------- ------- -------- -------
------- ------- -------- -------
Fully diluted (A):
Earnings:
Net income (loss) $ 36 $ (540) $ (1,047) $ (469)
Shares:
Weighted average shares outstanding 5,036 5,036 5,036 5,036
Net shares issuable on exercise of certain
stock options -- 3 45 6
------- ------- -------- -------
Weighted average shares outstanding,
as adjusted 5,036 5,039 5,081 5,042
Per share amounts:
Net income (loss) $ .01 $ (.11) $ (.21) $ (.09)
------- ------- -------- -------
------- ------- -------- -------
</TABLE>
Note A: This calculation is submitted for the three months ended January 31,
1996, and the nine months ended January 31, 1997 and 1996, in
accordance with Regulation S-K item 601(b)(11) although it is
contrary to paragraph 40 of APB Opinion No. 15 because it produces
an anti-dilutive result.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 1,551
<SECURITIES> 0
<RECEIVABLES> 5,039
<ALLOWANCES> 890
<INVENTORY> 5,949
<CURRENT-ASSETS> 12,213
<PP&E> 28,195
<DEPRECIATION> 23,250
<TOTAL-ASSETS> 20,643
<CURRENT-LIABILITIES> 11,224
<BONDS> 1,048
0
0
<COMMON> 51
<OTHER-SE> 8,868
<TOTAL-LIABILITY-AND-EQUITY> 20,643
<SALES> 1,727
<TOTAL-REVENUES> 32,703
<CGS> 1,299
<TOTAL-COSTS> 27,273
<OTHER-EXPENSES> 1,515
<LOSS-PROVISION> (126)
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> (1,047)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,047)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,047)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
