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 quarterly period ended March 31, 1997
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OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-17020
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Larson Davis Incorporated
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(Exact name of registrant as specified in its charter)
Nevada 87-0429944
- ---------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1681 West 820 North
Provo, Utah 84601
- ---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
(801) 375-0177
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(Registrant's telephone number, including area code)
N/A
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(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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 12, 1997, the Issuer had 11,439,964 shares of its common stock,
par value $0.001 per share, issued and outstanding.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Larson Davis Incorporated (the "Company") has included the consolidated
balance sheets of the Company and its subsidiaries as of March 31, 1997
(unaudited), and December 31, 1996 (the end of the Company's transition period),
and unaudited consolidated statements of operations and cash flows for the three
months ended March 31, 1997 and 1996, together with unaudited condensed notes
thereto. In the opinion of management of the Company, the financial statements
reflect all adjustments, all of which are normal recurring adjustments,
necessary to fairly present the financial condition, results of operations, and
cash flows of the Company for the interim periods presented. The financial
statements included in this report on Form 10-Q should be read in conjunction
with the audited financial statements of the Company and the notes thereto
included in the annual report of the Company on Form 10-KSB for the year ended
June 30, 1996, and the report of the Company on Form 10-K for the transition
period ended December 31, 1996.
<TABLE>
<CAPTION>
LARSON DAVIS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
March31, December 31,
1997 1996
ASSETS ------------ ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,728,172 $ 2,696,542
Trade accounts receivable, net of
allowance for doubtful accounts 2,273,012 2,598,582
Inventories 4,127,492 4,096,445
Other current assets 189,291 130,096
------------ ------------
Total current assets 11,317,967 9,521,665
Property and equipment, net of accumulated
amortization 2,180,586 1,815,455
Assets under capital lease obligations,
net of accumulated amortization 793,796 613,675
Long-term contractual arrangement, net of
accumulated cost recoveries 2,794,284 2,872,014
Intangible assets, net of accumulated
amortization 4,991,432 5,083,712
------------ ------------
$ 22,078,065 $ 19,906,521
============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements
<TABLE>
<CAPTION>
LARSON DAVIS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
March31, December 31,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY ------------ ------------
(unaudited)
<S> <C> <C>
Current liabilities:
Line of credit $ 663,715 $ 1,033,018
Accounts payable 666,481 902,926
Accrued liabilities 720,733 764,393
Current maturities of long-term debt 42,846 91,902
Current maturities of capital lease
obligations 185,183 159,515
------------ ------------
Total current liabilities 2,278,958 2,951,754
Long-term debt, less current maturities 759,573 759,709
Capital lease obligations, less current
maturities 671,683 523,185
------------ ------------
Total liabilities 3,710,214 4,234,648
------------ ------------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $.001 par value; authorized
10,000,000 shares; issued and outstanding
200,000 shares 200 200
Common stock, $.001 par value; authorized
290,000,000 shares; issued and outstanding
11,374,191 shares at March 31, 1997 and
10,717,790 shares at December 31, 1996 11,374 10,718
Additional paid-in capital 24,101,810 19,999,375
Accumulated deficit (5,773,111) (4,418,780)
Cumulative foreign currency translation
adjustment 27,578 80,360
------------ ------------
Total stockholders' equity 18,367,851 15,671,873
------------ ------------
$ 22,078,065 $ 19,906,521
============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements
<TABLE>
<CAPTION>
LARSON DAVIS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Three months ended March 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 2,204,697 $ 2,317,430
------------ ------------
Costs and operating expenses:
Cost of sales 1,208,367 1,105,591
Research and development 947,211 581,607
Selling, general, and administrative 1,362,026 907,172
------------ ------------
3,517,604 2,594,370
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Operating loss (1,312,907) (276,940)
------------ ------------
Other income (expense):
Interest income 43,999 -
Interest expense (74,732) (101,766)
Other, net 559 (12,142)
------------ ------------
(30,174) (113,908)
------------ ------------
Loss before income taxes (1,343,081) (390,848)
Income tax expense - -
------------ ------------
Net loss $ (1,343,081) $ (390,848)
============ ============
Loss per common shares:
Primary $ (0.12) $ (0.05)
Fully diluted $ (0.12) $ (0.05)
Weighted average common and common
equivalent shares:
Primary 11,114,125 7,576,427
Fully diluted 11,114,125 7,576,427
</TABLE>
The accompanying notes are an integral part of these financial
statements
<TABLE>
<CAPTION>
LARSON DAVIS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Increase (decrease) in cash and cash
equivalents:
Cash flows from operating activities
Net loss $ (1,343,081) $ (390,848)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 81,835 118,694
Amortization 159,208 184,106
Stock issued in payment of compensation 43,698 -
Gain on sale of property and equipment (559) -
Changes in assets and liabilities:
Trade accounts receivable 325,570 (376,863)
Inventories (31,047) (187,128)
Other current assets (59,195) (54,221)
Accounts payable (236,445) 291,721
Accrued liabilities (43,660) 217,620
------------ ------------
Net cash used in operating activities (1,103,676) (196,919)
------------ ------------
Cash flows from investing activities
Purchase of property and equipment (481,481) (171,286)
Proceeds from sale of assets 35,074 -
Payments for intangible assets - (519,229)
Proceeds from long-term contractual
arrangement 77,730 56,664
------------ ------------
Net cash used in investing activities (368,677) (633,851)
------------ ------------
Cash flows from financing activities
Net change in lines of credit (369,303) 89,280
Proceeds from long-term obligations 25,486 229,851
Principal payments of long-term debt (74,678) (31,246)
Net proceeds from issuance of common
stock and exercise of options and
warrants 4,059,393 330,782
Principal payments on capital lease
obligations (72,883) (37,379)
Preferred dividends (11,250) (11,250)
------------ ------------
Net cash provided by financing activities 3,556,765 570,038
------------ ------------
Effect of exchange rates on cash (52,782) 3,477
------------ ------------
Net increase (decrease) in cash and cash
equivalents 2,031,630 (257,255)
Cash and cash equivalents at beginning of
period 2,696,542 329,244
------------ ------------
Cash and cash equivalents at end of
period $ 4,728,172 $ 71,989
============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements
LARSON DAVIS INCORPORATED AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(A) Basis of Presentation
- -------------------------
The accompanying unaudited consolidated financial statements of Larson Davis
Incorporated and Subsidiaries (the Company) have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, these financial statements do not include all
of the information and footnote disclosures required by generally accepted
accounting principles for complete financial statements. These financial
statements and footnote disclosures should be read in conjunction with the
audited consolidated financial statements and the notes thereto included
in the Company's annual report on Form 10-KSB for the year ended June 30,
1996, and report on Form 10-K for the six month transition period ended
December 31, 1996. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to fairly present the Company's
consolidated financial position as of March 31, 1997, and its consolidated
results of operations and cash flows for the three months ended March 31, 1997
and 1996. The results of operations for the three months ended March 31, 1997,
may not be indicative of the results that may be expected for the year ending
December 31, 1997.
(B) Reclassifications - Not Material
- ------------------------------------
Certain nonmaterial reclassifications have been made to the consolidated
financial statements for the three months ended March 31, 1996, to conform to
the March 31, 1997, presentation.
(C) Earnings (Loss) Per Common Share
- ------------------------------------
Earnings (loss) per common share is computed by dividing net income (loss) by
the weighted average common shares outstanding during the period, including
common equivalent shares (if dilutive). Common equivalent shares include stock
options and warrants. Net income used in this calculation is decreased (net
loss is increased) by the dividends paid to preferred stockholders.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings per Share" (SFAS No. 128).
SFAS No. 128 establishes new standards for computing and presenting earnings per
share (EPS). SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods; earlier
application is not permitted. Upon adoption of SFAS No. 128, restatement of all
prior period EPS data will be required. SFAS No. 128 replaces the presentation
of primary and fully diluted EPS with a presentation of basic and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing earnings
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects potential dilution and is
calculated similarly to fully diluted EPS under current accounting standards.
Under SFAS No. 128, basic and diluted loss per share for the Company for the
three months ended March 31, 1997, and 1996, would have been the same as
primary and fully diluted loss per share presented in the accompanying
financial statements.
(D) Inventories
- ---------------
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Raw materials $1,226,418 $1,276,413
Work in process 1,339,758 1,398,229
Finished goods 1,561,316 1,421,803
---------- ----------
$4,127,492 $4,096,445
========== ==========
</TABLE>
(E) Stock Warrants
- ------------------
In conjunction with a private placement in May 1995, the Company issued warrants
to acquire additional common stock of the Company to a group of investors.
Since that time, the Company has issued additional warrants to this group as the
previously outstanding warrants were exercised. As of December 31, 1996,
warrants to purchase 2,100,167 shares of common stock at $6.25 per share were
outstanding.
In January 1997, the board of directors approved a reduction in the exercise
price, from $6.25 to $5.30 per share, of certain of these warrants related to
1,715,832 shares of common stock. In consideration of this reduction, the
holders of the warrants agreed to the early exercise of the warrants which were
otherwise permitted to be exercised until November 1, 1998. The holders agreed
to exercise a portion of the warrants on or before January 31, 1997, which
exercise occurred and resulted in the issuance of 651,103 shares and gross
proceeds to the Company of approximately $4,069,000. This initial issuance was
priced at $6.25 per share because the reduced price is contingent on the timely
exercise of the warrants related to all 1,715,832 shares.
Initially, the remaining portion of the warrants were to be exercised by April
16, 1997, but the agreement has been amended to allow the exercise of the
remaining warrants by June 6, 1997. If the remaining exercise occurs, it will
result in the issuance of an additional 1,064,729 shares of common stock and
additional gross proceeds to the Company of approximately $5,025,000. If these
remaining warrants are exercised, an aggregate of 1,715,832 shares will be
issued for aggregate gross proceeds of approximately $9,094,000, resulting in an
average exercise price of $5.30 per share.
(F) Employee Stock Purchase Plan
- --------------------------------
The board of directors of the Company adopted the 1997 Employee Stock Purchase
Plan (the "Plan") effective as of February 1, 1997. The Plan is subject to the
approval of stockholders and will be voted upon at the next shareholders'
meeting. The maximum number of shares of common stock which are available under
the Plan is 100,000 shares. The Plan will terminate on December 31, 1998, but
may be terminated earlier by the board of directors.
The Plan provides an opportunity to the employees of the Company to purchase
shares of common stock in the Company at 85% of fair market value on each
offering date. An offering date is defined in the Plan as the date that is ten
business days subsequent to the filing of the Company's quarterly reports on
Form 10-Q and annual report on Form 10-K. Employees of the Company, except
employees owning (or having a right to acquire) more that 5% of the Company's
stock, who have been employed for more than six months by the Company are
eligible to participate in the Plan. Participation in the Plan is limited to
20% of the employee's compensation, with a maximum of $25,000 during any
calendar year.
(G) Subsequent Events
- ---------------------
1. Building Lease
- ------------------
In April 1997, the Company entered into a new lease agreement covering existing
and additional office and manufacturing space. The lease covers approximately
18,300 square feet of space, has an initial term through March 31, 1999, and
contains options to extend the lease for five additional one-year periods
thereafter. The rental payment under the lease is $13,730 per month and
increases by 2% on April 1, 1998, and, if extended, by 4% on April 1, 1999, and
each year thereafter.
2. Preferred Stock
- -------------------
At March 31, 1997 and December 31, 1996, the Company had 200,000 shares of
preferred stock outstanding. This preferred stock was converted, in accordance
with the governing provisions of the designation, into 58,842 shares of common
stock effective April 30, 1997.
3. Stock Options
- -----------------
On May 13, 1997, the board of directors approved the 1997 Stock Option and Award
Plan (the "1997 Plan"). Under the 1997 Plan, the Company may grant options to
acquire or award up to 750,000 shares of common stock. The exercise prices
and vesting periods of options granted under the 1997 Plan are determined by
the board of directors.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the
consolidated financial statements and related notes contained herein and in
conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and the audited consolidated financial statements
included in the Company's report on Form 10-KSB for the year ended June 30,
1996, and on Form 10-K for the six-month transition period ended December 31,
1996.
This report and other information made publicly available by the Company
from time to time may contain certain forward looking statements and other
information relating to the Company and its business that are based on the
beliefs of management of the Company and assumptions made concerning
information then currently available to management. Such statements reflect
the views of management of the Company at the time they are made and are not
intended to be accurate descriptions of the future. The discussion of the
future business prospects of the Company is subject to a number of risks and
assumptions, including the completion of commercial products within projected
time frames, the market acceptance of products to be developed, the ability
of the Company to successfully address technical and manufacturing problems
in producing new products, the ability of the Company to enter into strategic
alliances, joint ventures, or other collaborative arrangements with
established industry partners, the success of the marketing efforts of the
Company and the entities with which it has agreements, and the ability of
the Company to obtain the necessary financing to successfully complete its
goals. Should one or more of these or other risks materialize or if the
underlying assumptions of management prove incorrect, actual results of the
Company may vary materially from those described in the forward looking
statements. The Company does not intend to update these forward looking
statements, except as may occur in the regular course of its periodic
reporting obligations.
Over the course of the last three years, the Company has acquired the
rights to a number of technologies from Brigham Young University ("BYU"), either
directly from BYU or indirectly through its acquisition of Sensar Corporation.
These technologies have placed the Company in a position to develop a number of
sophisticated analytical instruments in addition to its historical acoustical
and vibration based business. The Company believes that the patented technology
it has acquired will permit it to develop instruments that are technically
superior to those currently being offered, that will be on the cutting edge of
certain emerging markets, that will address needs in certain industries in a
more cost efficient manner, and that can be sold at prices less than alternative
solutions currently being offered.
In order to accomplish its goals, the Company initiated a research and
development plan designed to convert the underlying technologies into commercial
products. These efforts are just beginning to lead to products and have not had
a significant impact on the revenues of the Company to date. The Company does
not anticipate that there will be a significant impact until at least the third
or fourth quarter of the calendar year ending December 31, 1997. The products
currently being worked on by the Company are designed for extremely
sophisticated applications, and there can be no assurance that the Company will
be successful in its development efforts or that alternative technologies may
not be developed by some other entity that provide a more advantageous solution
to the needs of the various industries targeted by the Company.
In order to obtain the necessary funding to implement its research and
development plan, the Company has sought and obtained equity financing,
primarily from private placements to a small number of investors. This capital
has been and is currently being used for various purposes, including increased
research and development activities, the reduction of the Company's operating
line of credit, and general operations. New product development, prototype
manufacture, and first production costs adversely affected the results of
operations of the Company in the three months ended March 31, 1997. These
activities generated expenses without corresponding revenues. It is anticipated
the Company will continue to experience operating losses until new products are
brought to market and begin to generate significant sales. There can be no
assurance as to the timing of significant sales or as to the ultimate success of
the products. If the products prove unsuccessful, the Company may not be able
to recover its associated research and development costs, which could have a
significant material, adverse impact on the business and activities of the
Company.
RECENT DEVELOPMENTS
The Company has recently developed certain technologies and hired
experienced employees to enter into the supercritical fluid chromatography (SFC)
market. SFC is a chemical separations technique that one of the company's
chief scientists, Dr. Milton E. Lee, was instrumental in developing. Several
major customers, including Procter & Gamble, have found the SFC technique very
useful and have strongly encouraged the Company to introduce a new generation
commercial product.
The Company and Procter & Gamble have entered into an agreement under
which Procter & Gamble will provide the Company with its substantial experience
in SFC and its assistance in designing and testing new products developed by
the Company. The Company anticipates that it will take approximately one year
to introduce its initial product and that the market that potentially can be
developed with respect to the products being considered over the next few years
is in excess of $45 million in annual sales.
RESULTS OF OPERATIONS
Comparison of Three Months ended March 31, 1997 and 1996
Net Sales
Net sales for the three months ended March 31, 1997 and 1996, were
$2,204,697 and $2,317,430, respectively. This represents a decrease of
$112,733, or 4.9%, for 1997 as compared to 1996. The overall decrease is the
net difference between a decrease in sales of approximately $335,000 in the
acoustical and vibration product families and an increase of approximately
$222,000 in revenue from the Sensar products. Acoustical and vibration product
sales decreased from historical levels due to the delayed introduction of
certain recently announced new products. Management expects that market demand
for these new products will cause acoustical and vibration products sales to
return to and exceed historical levels, although no assurance can be made that
this will occur.
Cost of Sales
Cost of sales for the three months ended March 31, 1997, were $1,208,367,
or 54.8% of net sales, compared to $1,105,591, or 47.7% of net sales, for the
three months ended March 31, 1996. The increased level in cost of sales as a
percentage of net sales continues principally due to the high cost of materials,
initial production costs, and development costs associated with production of
the initial Sensar products. Management expects the cost of sales as a
percentage of net sales to decline in the future to a level more consistent with
historical levels prior to the Sensar acquisition. This should occur when the
Sensar products are ready for market, product demand is achieved, and standard
production processes are established; although this result cannot yet be assured
because the Company continues to have limited production experience with these
products to date.
Selling, General, and Administrative
Selling, general, and administrative expenses increased to $1,362,026, or
61.8% of net sales, for the three months ended March 31, 1997, compared to
$907,172, or 39.1% of net sales, for the three months ended March 31, 1996. The
increase was due to several factors, including audit and legal costs associated
with the change in fiscal year end to December 1996, and the related filing of a
report on Form 10-K for the six month transition period then ended; increased
consulting, travel, legal, and administrative costs associated with the pursuit
of strategic alliances; increased costs related to the establishment of the new
European sales manager position; and increased costs associated with other
corporate and marketing activities. Management believes that certain of these
costs during the three months ended March 31, 1997, were incurred in conjunction
with specific strategic initiatives, and that selling, general, and
administrative expenses as a percentage of net sales should decline in the
future to be more consistent with historical levels once such initiatives are
completed, although no assurance can be made that the Company will be successful
in accomplishing such reduction.
Research and Development
For the three months ended March 31, 1997, research and development costs
were $947,211, or 43.0% of net sales, compared to $581,607, or 25.1% of net
sales, for the three months ended March 31, 1996. The increase over the prior
period, as well as over historical levels, is due to the Company's continuing
commitment to research and the development of new products from technologies
acquired in recent years. The increased expenses principally relate to the
employment of additional scientists and engineers with pertinent experience and
education in chemistry, electrical engineering, software development, and
manufacturing production. The increased costs also include higher expenses
associated with materials and supplies used in the development process, and
consultation with outside experts. It is anticipated that research and
development costs will continue to exceed historical levels as a percentage of
net sales at least until the development of new products is completed and
significant sales levels of the new products are achieved.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had total current assets of $11,317,967,
including cash and cash equivalents of $4,728,172. The Company also had total
current liabilities of $2,278,958, resulting in working capital of $9,039,009
and a working capital ratio of 4.97 to 1. At March 31, 1997, the Company had
drawn $663,715 on its line of credit. The maximum limit on this line of credit
is $3,000,000, although the actual amount that the Company can borrow is
adjusted from time to time based on the amounts of inventories and accounts
receivable that secure the line of credit. The line of credit contains certain
covenants including, but not limited to, provisions that the Company maintain
specified levels of net worth, achieve certain results of operations, meet
established financial ratios, and restrict the amount of capital expenditures.
At times, the Company has been in violation of certain of these covenants.
The lender monitors the Company's compliance with these covenants. Under the
line of credit agreement, the lender is required to notify the Company when
it considers an event of default to have occurred. Through March 31, 1997,
and subsequent thereto, the Company has not been notified by the lender of
any event of default.
The Company's primary source of cash for the three months ended March 31,
1997, was the issuance of common stock, principally resulting from the exercise
of stock warrants. The Company has relied on the sale of common stock as a
method to fund its increases in working capital, operational losses, and
research and development efforts. During the three months ended March 31, 1997,
net proceeds from the issuance of common stock were $4,059,393. There are
currently issued and outstanding warrants with respect to 1,449,064 shares of
common stock. If all of these warrants were exercised, of which there can be no
assurance, the Company would receive additional gross proceeds of $7,426,610.
On the satisfaction of certain conditions, the Company has agreed to issue
additional warrants to acquire up to an aggregate of 1,715,832 shares of common
stock at an exercise price of $10.75 per share. There is no obligation on the
part of the holders of these rights to exercise them, and the exercise will
largely depend on the future price of the Company's common stock in the public
trading market, as to which no assurance can be given.
The Company's primary uses of cash for the three months ended March 31,
1997, were (1) cash used in operations of $1,103,676; (2) purchase of property
and equipment of $481,481; and (3) reduction in the line of credit of $369,303.
In the opinion of management, current cash balances, funds available under
the line of credit, and anticipated proceeds from the exercise of warrants will
provide the Company with sufficient capital to fund its operations and
development plans for the immediate future.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits are included as part of this report:
<TABLE>
<CAPTION>
SEC
Exhibit Reference
Number Number Title of Document
- ------ ------ -----------------
<S> <C> <C>
1 (10) Amendment to Agreement to Issue Warrants to
Congregation Ahavas Tzdokah Z'Chesed
dated April 16, 1997
2 (10) Amendment to Agreement to Issue Warrants to Ezer
Mzion Organization dated April 16, 1997
3 (10) Amendment to Agreement to Issue Warrants to
Laura Huberfeld and Naomi Bodner
dated April 16, 1997
4 (10) Amendment to Agreement to Issue Warrants to
Connie Lerner dated April 16, 1997
5 (10) Amended and Restated 1996 Director Stock Option Plan
6 (10) 1997 Stock Option and Award Plan
7 (27) Financial Data Schedule
</TABLE>
REPORTS ON FORM 8-K
During the quarter ended March 31, 1997, the Company filed a report on Form
8-K dated January 23, 1997, reporting the change in its fiscal year end from
June 30 to December 31.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Larson Davis Incorporated
Dated: May 15, 1997 By /s/ Brian G. Larson
----------------------------
Brian G. Larson, President
(Duly Authorized Officer)
Dated: May 15, 1997 By /s/ Craig E. Allen
----------------------------
Craig E. Allen
(Principal Financial and
Accounting Officer)
AMENDMENT TO AGREEMENT TO ISSUE WARRANTS
THIS AMENDMENT TO AGREEMENT TO ISSUE WARRANTS (this "Amendment") is entered
into as of April 16, 1997, by and among LARSON DAVIS INCORPORATED, a Nevada
corporation (the "Company"), and CONGREGATION AHAVAS TZDOKAH Z'CHESED
("Holder"), based on the following premises.
Premises
A. The parties entered into an Agreement to Issue Warrants dated January
9, 1997 (the "Agreement"), pursuant to which the Company agreed, subject to
certain conditions, to issue warrants to purchase shares of stock of the Company
at a price of $10.75 per share at any time after August 1, 1997, and prior to
the close of business on April 16, 1997 (the "$10.75 Warrants").
B. The parties wish to amend the terms of the Agreement as set forth in
this Amendment and to confirm all the others terms and provisions of the
Agreement.
Agreement
NOW, THEREFORE, based on the foregoing premises, which are incorporated
herein by this reference, and for and in consideration of the mutual covenants
and agreements herein set forth and the mutual benefit to the parties to be
derived therefrom, it is hereby agreed as follows:
1. Extension of Exercise Date. In the Agreement, Holder agreed to
deliver $1,084,104.40 to the Company on or before April 16, 1997, as payment of
the exercise price for their remaining $6.25 Warrants. The parties agree that
the April 16, 1997, date shall be extended to June 6, 1997, and that the
modification of the exercise date shall supersede and govern over conflicting
terms or provisions that may be contained in the Agreement.
2. Ratification of the Agreement. Except as specifically provided in
paragraph 1 of this Amendment, the parties hereby specifically ratify, confirm,
and adopt as binding and enforceable, all of the terms and conditions of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
The Company:
Larson Davis Incorporated
By /s/
Brian G. Larson, President
Holder:
CONGREGATION AHAVAS TZDOKAH
Z'CHESED
By /s/
Address: 3814-A 15th Avenue
Brooklyn, New York 11218
AMENDMENT TO AGREEMENT TO ISSUE WARRANTS
THIS AMENDMENT TO AGREEMENT TO ISSUE WARRANTS (this "Amendment") is entered
into as of April 16, 1997, by and among LARSON DAVIS INCORPORATED, a Nevada
corporation (the "Company"), and EZER MZION ORGANIZATION ("Holder"), based on
the following premises.
Premises
A. The parties entered into an Agreement to Issue Warrants dated January
9, 1997 (the "Agreement"), pursuant to which the Company agreed, subject to
certain conditions, to issue warrants to purchase shares of stock of the Company
at a price of $10.75 per share at any time after August 1, 1997, and prior to
the close of business on April 16, 1997 (the "$10.75 Warrants").
B. The parties wish to amend the terms of the Agreement as set forth in
this Amendment and to confirm all the others terms and provisions of the
Agreement.
Agreement
NOW, THEREFORE, based on the foregoing premises, which are incorporated
herein by this reference, and for and in consideration of the mutual covenants
and agreements herein set forth and the mutual benefit to the parties to be
derived therefrom, it is hereby agreed as follows:
1. Extension of Exercise Date. In the Agreement, Holder agreed to
deliver $1,084,104.40 to the Company on or before April 16, 1997, as payment of
the exercise price for their remaining $6.25 Warrants. The parties agree that
the April 16, 1997, date shall be extended to June 6, 1997, and that the
modification of the exercise date shall supersede and govern over conflicting
terms or provisions that may be contained in the Agreement.
2. Ratification of the Agreement. Except as specifically provided in
paragraph 1 of this Amendment, the parties hereby specifically ratify, confirm,
and adopt as binding and enforceable, all of the terms and conditions of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
The Company:
Larson Davis Incorporated
By /s/
Brian G. Larson, President
Holder:
EZER MZION ORGANIZATION
By /s/
Address: 16 Eshel Avraham Street
Beni- Brak, Israel
AMENDMENT TO AGREEMENT TO ISSUE WARRANTS
THIS AMENDMENT TO AGREEMENT TO ISSUE WARRANTS (this "Amendment") is entered
into as of April 16, 1997, by and among LARSON DAVIS INCORPORATED, a Nevada
corporation (the "Company"), and LAURA HUBERFELD ("Huberfeld") and NAOMI BODNER
("Bodner"), based on the following premises.
Premises
A. The parties entered into an Agreement to Issue Warrants dated January
9, 1997 (the "Agreement"), pursuant to which the Company agreed, subject to
certain conditions, to issue warrants to purchase shares of stock of the Company
at a price of $10.75 per share at any time after August 1, 1997, and prior to
the close of business on April 16, 1997 (the "$10.75 Warrants").
B. The parties wish to amend the terms of the Agreement as set forth in
this Amendment and to confirm all the others terms and provisions of the
Agreement.
Agreement
NOW, THEREFORE, based on the foregoing premises, which are incorporated
herein by this reference, and for and in consideration of the mutual covenants
and agreements herein set forth and the mutual benefit to the parties to be
derived therefrom, it is hereby agreed as follows:
1. Extension of Exercise Date. In the Agreement, Huberfeld and Bodner
each agreed to deliver $879,100.40 (an aggregate of $1,758,200.90) to the
Company on or before April 16, 1997, as payment of the exercise price for their
remaining $6.25 Warrants. The parties agree that the April 16, 1997, date shall
be extended to June 6, 1997, and that the modification of the exercise date
shall supersede and govern over conflicting terms or provisions that may be
contained in the Agreement.
2. Ratification of the Agreement. Except as specifically provided in
paragraph 1 of this Amendment, the parties hereby specifically ratify, confirm,
and adopt as binding and enforceable, all of the terms and conditions of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
The Company:
Larson Davis Incorporated
By /s/
Brian G. Larson, President
Huberfeld:
/s/
Laura Huberfeld
Address: 152 West 57th Street
New York, New York 10019
Bodner:
/s/
Naomi Bodner
Address: 152 West 57th Street
New York, New York 10019
AMENDMENT TO AGREEMENT TO ISSUE WARRANTS
THIS AMENDMENT TO AGREEMENT TO ISSUE WARRANTS (this "Amendment") is entered
into as of April 16, 1997, by and among LARSON DAVIS INCORPORATED, a Nevada
corporation (the "Company"), and CONNIE LERNER ("Lerner"), based on the
following premises.
Premises
A. The parties entered into an Agreement to Issue Warrants dated January
9, 1997 (the "Agreement"), pursuant to which the Company agreed, subject to
certain conditions, to issue warrants to purchase shares of stock of the Company
at a price of $10.75 per share at any time after August 1, 1997, and prior to
the close of business on April 16, 1997 (the "$10.75 Warrants").
B. The parties wish to amend the terms of the Agreement as set forth in
this Amendment and to confirm all the others terms and provisions of the
Agreement.
Agreement
NOW, THEREFORE, based on the foregoing premises, which are incorporated
herein by this reference, and for and in consideration of the mutual covenants
and agreements herein set forth and the mutual benefit to the parties to be
derived therefrom, it is hereby agreed as follows:
1. Extension of Exercise Date. In the Agreement, Lerner agreed to
deliver $1,098,107 to the Company on or before April 16, 1997, as payment of the
exercise price for their remaining $6.25 Warrants. The parties agree that the
April 16, 1997, date shall be extended to June 6, 1997, and that the
modification of the exercise date shall supersede and govern over conflicting
terms or provisions that may be contained in the Agreement.
2. Ratification of the Agreement. Except as specifically provided in
paragraph 1 of this Amendment, the parties hereby specifically ratify, confirm,
and adopt as binding and enforceable, all of the terms and conditions of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
The Company:
Larson Davis Incorporated
By /s/
Brian G. Larson, President
Lerner:
/s/
Connie Lerner
Address: 152 West 57th Street
New York, New York 10019
LARSON DAVIS INCORPORATED
AMENDED AND RESTATED
1996 DIRECTOR STOCK OPTION PLAN
Larson Davis Incorporated, a Nevada corporation (the "Company"), adopts
this "1996 Director Stock Option Plan" (the "Plan"), effective as of May 9,
1996, as subsequently amended and restated, under which options to acquire stock
of the Company are granted to individuals who are serving as directors of the
Company, on the terms and conditions set forth herein.
1. Purpose of the Plan. The Plan is intended to aid the Company in
maintaining and developing a management team, attracting qualified directors
capable of assisting in the future success of the Company, and rewarding those
individuals who have contributed to the success of the Company. It is designed
to aid the Company in retaining the services of current directors and in
attracting new directors when needed for future operations and growth and to
provide such individuals with an incentive to remain directors of the Company,
to use their best efforts to promote the success of the Company's business, and
to provide them with an opportunity to obtain or increase a proprietary interest
in the Company. The above aims will be effectuated through the granting of
options ("Options") to purchase shares of common stock of the Company, par value
$0.001 per share (the "Stock"), subject to the terms and conditions of this
Plan.
2. Shareholder Approval. The Plan shall become effective immediately on
adoption by the board of directors of the Company (the "Board"). In addition,
the Plan shall be submitted for approval by the Company's shareholders in the
manner set forth below:
(a) The Plan shall be submitted for approval by those shareholders of
the Company who are entitled to vote on such matters at the next duly held
shareholders' meeting or approved by the written consent of the holders of
a majority of the issued and outstanding Stock of the Company. If the Plan
is presented at a shareholders' meeting, it shall be approved by the
affirmative vote of the holders of a majority of the issued and outstanding
Stock in attendance, in person or by proxy, at such meeting.
Notwithstanding the foregoing, the Plan may be approved by the shareholders
in any other manner not inconsistent with the Company's articles of
incorporation and bylaws, the applicable provisions of state corporate
laws, and the applicable provisions of the Code and regulations adopted
thereunder.
(b) In the event the Plan is so approved, the secretary of the
Company shall, as soon as practicable following the date of final approval,
prepare and attach to this Plan certified copies of all relevant
resolutions adopted by the shareholders and the Board. All Options
previously granted under this Plan shall be deemed to have been granted as
of the date of final approval by the board of directors.
3. Administration of the Plan. Administration of the Plan shall be
determined by the Board. Subject to compliance with applicable provisions of
the governing law, the Board may delegate administration of the Plan or specific
administrative duties with respect to the Plan, on such terms and to such
committees of the Board as it deems proper. Any action taken with respect to
the Plan by the Board shall be approved by a majority vote of those members of
the Board in attendance at a meeting at which a quorum is present. Any action
taken with respect to the Plan by a committee designated by the Board shall be
approved as specified by the Board at the time of delegation. The
interpretation and construction of the terms of the Plan by the Board or a duly
authorized committee shall be final and binding on all participants in the Plan
absent a showing of demonstrable error. No member of the Board or duly
authorized committee shall be liable for any action taken or determination made
in good faith with respect to the Plan.
4. Shares of Stock Subject to the Plan. A total of 1,400,000 shares of
Stock may be subject to, or issued pursuant to, Options granted under the terms
of this Plan. In calculating the number of shares, (i) any shares subject to an
Option under the Plan, which Option for any reason expires or is forfeited,
terminated, or surrendered unexercised as to such shares, shall be added back to
the total number of shares reserved for issuance under the terms of this Plan,
and (ii) if any right to acquire Stock granted under the Plan is exercised by
the delivery of shares of Stock or the relinquishment of rights to shares of
Stock, only the net shares of Stock issued (the shares of Stock issued less the
shares of Stock surrendered) shall count against the total number of shares
reserved for issuance under the terms of this Plan.
5. Term. This Plan shall be in effect from the date hereof until close
of business May 9, 1999.
6. Grant to Board Members. Each individual who is a member of the Board
as of the effective date of this Plan shall be awarded an Option to acquire
200,000 shares of Stock at an exercise price equal to the closing bid price for
the Stock on the date of grant or the date of extension of an offer to become a
director, as designated by the Board at the time, as reported on the Nasdaq
Stock Market ("Nasdaq"), or, if the Stock is not then listed on Nasdaq, as
reported by another reliable quotation medium with respect to the principal
trading market for the Stock of the Company. Notwithstanding the foregoing, the
grant to members of the Board as of the effective date of this Plan who are also
subject to the reporting requirements of Section 16 of the Exchange Act shall be
contingent on approval of the Plan by the shareholders or subsequent Board
action. Individuals who subsequently become members of the Board during the
term of this Plan shall be awarded an Option to acquire that number of shares
determined by the Board at the date of grant at an exercise price equal to the
closing bid price for the stock on the date of grant as reported on Nasdaq.
7. Reservation of Stock on Granting of Option. At the time of granting
any Option under the terms of this Plan, there will be reserved for issuance on
the exercise of the Option the number of shares of Stock of the Company subject
to such Option. The Company may reserve either authorized but unissued shares
or issued shares that have been reacquired by the Company.
8. Term of Options and Certain Limitations on Right to Exercise.
(a) The Options shall be exercisable with respect to the shares
subject to such Options for a period of five years after the right to
acquire such shares become vested as provided below.
(b) The term of the Option, once it is granted, may be reduced only
as provided for in this Plan under the written provisions of the Option.
(c) Unless otherwise specifically provided by the written provisions
of the Option, no holder or his or her legal representative, legatee, or
distributee will be, or shall be deemed to be, a holder of any shares
subject to an Option unless and until the holder exercises his or her right
to acquire all or a portion of the Stock subject to the Option and delivers
the required consideration to the Company in accordance with the terms of
this Plan and then only to the extent of the number of shares of Stock
acquired. Except as specifically provided in this Plan or as otherwise
specifically provided by the written provisions of the Option, no
adjustment to the exercise price or the number of shares of Stock subject
to the Option shall be made for dividends or other rights for which the
record date is prior to the date the Stock subject to the Option is
acquired by the holder.
(d) Options under the Plan shall vest and become exercisable twenty-
five percent (25%) at the time of the grant of the Option and an additional
twenty-five percent (25%) on each of the first three anniversaries of the
original date of grant; provided that, the holder of the Option is a
director of the Company as of such anniversaries. If the holder is no
longer a director of the Company for any reason, all unvested Options shall
terminate and shall thereafter be null and void.
(e) If any individual who receives an Option under the terms of this
Plan is terminated or resigns from the Company within six months of such
Option being granted, the unexercised portion of the Option, whether or not
vested, shall be null and void, and such individual shall have no further
rights thereunder as of the date of such termination or resignation.
(f) In no event may an Option be exercised after the expiration of
its term.
9. Payment of Exercise Price. The exercise of any Option shall be
contingent on receipt by the Company of cash, certified bank check to its order,
or other consideration acceptable to the Company; provided that, payment may be
made in whole or in part in shares of Stock that have been held for at least six
months, valued at the then fair market value of the stock as determined by the
board of directors or a duly authorized committee.
10. Withholding. If the grant or exercise of an Option pursuant to this
Plan is subject to withholding or other trust fund payment requirements of the
Code or applicable state or local laws, the holder of such Option must, as a
condition precedent to exercising the Options, deliver to the Company cash equal
to such withholding obligation or evidence satisfactory to the Company that such
withholding obligation has otherwise been met.
11. Awards to Directors and Officers. To the extent the Company is
subject to section 16(b) of the Exchange Act, Options granted under the Plan to
directors and officers (as defined in Rule 16a-1 promulgated under the Exchange
Act or any amendment or successor rule of like tenor) intended to qualify for
the exemption from section 16(b) of the Exchange Act provided in Rule 16b-3
shall be subject to the following requirements, in addition to the other
restrictions and limitations set forth in this Plan:
(a) With respect to any award, the exercise price may not be less
than the minimum required by applicable state law.
(b) An Option or, if exercised, the Stock acquired on exercise, may
not be transferred prior to the date that is more than six months
subsequent to the date of the grant of the Option.
(c) Any cash settlement of Options or surrender or withholding of
shares of Stock to pay the exercise price of the Option, shall be made in
accordance with the requirements of Rule 16b-3 or any amendment or
successor rule of like tenor.
All of the foregoing restrictions and limitations are based on the governing
provisions of the Exchange Act and the rules and regulations promulgated
thereunder as of the date of adoption of this Plan. If at any time the
governing provisions are amended to permit an Option to be granted or exercised
pursuant to Rule 16b-3 or any amendment or successor rule of like tenor without
one or more of the foregoing restrictions or limitations, or the terms of such
restrictions or limitations are modified, the Board or a duly authorized
committee may award Options to directors and officers, and may modify
outstanding Options, in accordance with such changes, all to the extent that
such action by the Board or a duly authorized committee does not disqualify the
Options from exemption under the provisions of Rule 16b-3 or any amendment or
successor rule of similar tenor.
12. Dilution or Other Adjustment. In the event that the number of shares
of Stock of the Company from time to time issued and outstanding is increased
pursuant to a stock split or a stock dividend, the number of shares of Stock
then covered by each outstanding Option granted hereunder shall be increased
proportionately, with no increase in the total purchase price of the shares then
so covered, and the number of shares of Stock subject to the Plan shall be
increased by the same proportion. In the event that the number of shares of
Stock of the Company from time to time issued and outstanding is reduced by a
combination or consolidation of shares, the number of shares of Stock then
covered by each outstanding Option granted hereunder shall be reduced
proportionately, with no reduction in the total purchase price of the shares
then so covered, and the number of shares of Stock subject to the Plan shall be
reduced by the same proportion. In the event that the Company should transfer
assets to another corporation and distribute the stock of such other corporation
without the surrender of Stock of the Company, and if such distribution is not
taxable as a dividend and no gain or loss is recognized by reason of section 355
of the Code or any amendment or successor statute of like tenor, then the total
purchase price of the Stock then covered by each outstanding Option shall be
reduced by an amount that bears the same ratio to the total purchase price then
in effect as the market value of the stock distributed in respect of a share of
the Stock of the Company, immediately following the distribution, bears to the
aggregate of the market value at such time of a share of the Stock of the
Company plus the stock distributed in respect thereof. In the event that the
Company distributes the stock of a subsidiary to its shareholders, makes a
distribution of a major portion of its assets, or otherwise distributes
significant portion of the value of its issued and outstanding Stock to its
shareholders, the number of shares then subject to each outstanding Option and
the Plan, or the exercise price of each outstanding Option, may be adjusted in
the reasonable discretion of the Board or a duly authorized committee. All such
adjustments shall be made by the Board or duly authorized committee, whose
determination upon the same, absent demonstrable error, shall be final and
binding on all participants under the Plan. No fractional shares shall be
issued, and any fractional shares resulting from the computations pursuant to
this section shall be eliminated from the respective Option Award. No
adjustment shall be made for cash dividends, for the issuance of additional
shares of Stock for consideration approved by the Board, or for the issuance to
stockholders of rights to subscribe for additional Stock or other securities.
13. Assignment. No Option granted under this Plan shall be transferable
other than by will or the laws of descent and distribution, pursuant to a
qualified domestic relations order as defined in the Code or to family members
of the Option holder or entities created for their benefit. Except as permitted
by the foregoing, each Option granted under the Plan and the rights and
privileges thereby conferred shall not be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and shall
not be subject to execution, attachment, or similar process. On any attempt to
transfer, assign, pledge, hypothecate, or otherwise dispose of the Option, or of
any right or privilege conferred thereby, contrary to the provisions thereof, or
on the levy of any attachment or similar process on such rights and privileges,
the Option and such rights and privileges shall immediately become null and
void.
14. Listing and Registration of Shares. Each Option shall be subject to
the requirement that if at any time the Board shall determine, in its sole
discretion, that it is necessary or desirable to list, register, or qualify the
shares covered thereby on any securities exchange or under any state or federal
law, or obtain the consent or approval of any governmental agency or regulatory
body as a condition of, or in connection with, the granting of such Option or
the issuance or purchase of shares thereunder, such Option may not be exercised
in whole or in part unless and until such listing, registration, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board.
15. Options. Options granted under the Plan shall be represented by a
written agreement which shall be executed by the Company and which shall contain
such terms and conditions as may be permitted under the terms of this Plan.
16. No Right of Employment. Nothing contained in this Plan or any Option
shall be construed as conferring on a director, officer, or employee any right
to continue or remain as a director, officer, or employee of the Company or its
subsidiaries.
17. Amendment of the Plan. Subject to the limitations of Rule 16b-3
promulgated under the Exchange Act or any amendment or successor rule of like
tenor, the Board or a duly authorized committee may modify and amend the Plan in
any respect; provided, however, that to the extent such amendment or
modification would cause the Plan to no longer comply with the applicable
provisions of the Exchange Act with respect to Options granted to officers or
directors under Rule 16b-3 or any amendment or successor rule of like tenor or
with the provisions of the Code governing incentive stock options as they may be
amended from time to time, such amendment or modification shall also be approved
by the shareholders of the Company.
Subject only to the foregoing, the Plan shall be deemed to be automatically
amended as is necessary to maintain the Plan in compliance with the provisions
of Rule 16b-3 promulgated under the Exchange Act or any amendment or successor
rule of like tenor.
ATTEST:
/s/ Brian G. Larson
Brian G. Larson, Chairman
SECRETARY'S CERTIFICATE
The undersigned, the duly constituted and elected secretary of Larson Davis
Incorporated, hereby certifies that a duly constituted meeting of the
shareholders held on , 1997, pursuant to notice and at which a
---------------
quorum was present in accordance with the requirements of law and the Company's
articles of incorporation and bylaws, the foregoing 1996 Director Stock Option
Plan was approved by the affirmative vote of the holders of a majority of the
shares of common stock voted at such meeting.
DATED this day of , 1997.
----- ---------------
LARSON DAVIS INCORPORATED
By
Dan J. Johnson, Secretary
LARSON DAVIS INCORPORATED
1997 STOCK OPTION AND AWARD PLAN
Larson Davis Incorporated, a Nevada corporation (the "Company"), hereby
adopts this "Larson Davis Incorporated 1997 Stock Option and Award Plan" (the
"Plan"), effective as of the 13th day of May, 1997, under which options to
acquire stock of the Company or bonus stock may be granted from time to time to
employees, including officers and directors, of the Company or its subsidiaries.
In addition, at the discretion of the board of directors or other administrator
of this Plan, options to acquire stock of the Company or bonus stock may from
time to time be granted under this Plan to other individuals who contribute to
the success of the Company or its subsidiaries but who are not employees of the
Company, all on the terms and conditions set forth herein.
1. Purpose of the Plan. The Plan is intended to aid the Company in
maintaining and developing a management team, attracting qualified officers and
employees capable of assisting in the future success of the Company, and
rewarding those individuals who have contributed to the success of the Company.
It is designed to aid the Company in retaining the services of executives and
other employees and in attracting new personnel when needed for future
operations and growth and to provide such personnel with an incentive to remain
employees of the Company, to use their best efforts to promote the success of
the Company's business, and to provide them with an opportunity to obtain or
increase a proprietary interest in the Company. It is also designed to permit
the Company to reward those individuals who are not employees of the Company but
who are perceived by management as having contributed to the success of the
Company or who are important to the continued business and operations of the
Company. The above aims will be effectuated through the granting of options
("Options") to purchase shares of common stock of the Company, par value $0.001
per share (the "Stock"), or the granting of awards of bonus stock ("Stock
Awards"), all subject to the terms and conditions of this Plan. It is intended
that the Options issued pursuant to this Plan include, when designated as such
at the time of grant, options which qualify as Incentive Stock Options
("Incentive Options") within the meaning of section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any amendment or successor provision
of like tenor. So long as the Company has a class of securities registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), it
is intended that the Options or Stock Awards granted pursuant to this Plan
qualify for the exemption provided for in Rule 16b-3 ("Rule 16b-3") promulgated
under the Exchange Act or any amendment or successor rule of like tenor when
granted in accordance with the provisions of such rule.
2. Shareholder Approval. The Plan shall become effective immediately on
adoption by the board of directors of the Company (the "Board") and awards under
the Plan can be made at that time or at any subsequent time. The Plan shall be
submitted to the Company's shareholders in the manner set forth below:
(a) Within twelve months after the Plan has been adopted by the
Board, the Plan shall be submitted for approval by those shareholders of
the Company who are entitled to vote on such matters at a duly held
shareholders' meeting or approved by the unanimous written consent of the
holders of the issued and outstanding Stock of the Company. If the Plan is
presented at a shareholders' meeting, it shall be approved by the
affirmative vote of the holders of a majority of the issued and outstanding
Stock in attendance, in person or by proxy, at such meeting.
Notwithstanding the foregoing, the Plan may be approved by the shareholders
in any other manner not inconsistent with the Company's articles of
incorporation and bylaws, the applicable provisions of state corporate
laws, and the applicable provisions of the Code and regulations adopted
thereunder.
(b) In the event the Plan is so approved, the secretary of the
Company shall, as soon as practicable following the date of final approval,
prepare and attach to this Plan certified copies of all relevant
resolutions adopted by the shareholders and the Board.
(c) Failure to obtain shareholder approval on or before the date that
is twelve months subsequent to the adoption of this Plan by the Board shall
not affect awards previously granted under the Plan, except as may be
provided by the terms of specific awards; provided that, none of the
Options issued under this Plan will qualify as Incentive Options.
3. Administration of the Plan. Administration of the Plan shall be
determined by the Board. Subject to compliance with the applicable provisions
of governing law, the Board may delegate administration of the Plan or specific
administrative duties with respect to the Plan, on such terms and to such
committees of the Board, as it deems proper. Any Option or Stock Award approved
by the Board shall be approved by a majority vote of those members of the Board
in attendance at a meeting at which a quorum is present. Any Option or Stock
Award approved by a committee designated by the Board shall be approved as
specified by the Board at the time of delegation. The interpretation and
construction of the terms of the Plan by the Board or a duly authorized
committee shall be final and binding on all participants in the Plan absent a
showing of demonstrable error. No member of the Board or duly authorized
committee shall be liable for any action taken or determination made in good
faith with respect to the Plan.
The Board's or duly authorized committee's determinations under the Plan
(including without limitation determinations of the persons to receive Options
or Stock Awards, the form, amount, and timing of such Options or Stock Awards,
the terms and provisions of such Options or Stock Awards, and the agreements
evidencing same) need not be uniform and may be made by the Board or duly
authorized committee selectively among persons who receive, or are eligible to
receive, Options or Stock Awards under the Plan, whether or not such persons are
similarly situated.
4. Shares of Stock Subject to the Plan. A total of 750,000 shares of
Stock may be subject to, or issued pursuant to, Options or Stock Awards granted
under the terms of this Plan. Any shares subject to an Option or Stock Award
under the Plan, which Option or Stock Award for any reason expires or is
forfeited, terminated, or surrendered unexercised as to such shares, shall be
added back to the total number of shares reserved for issuance under the terms
of this Plan. If any right to acquire Stock granted under the Plan is exercised
by the delivery of shares of Stock or the relinquishment of rights to shares of
Stock, only the net shares of Stock issued (the shares of Stock issued less the
shares of Stock surrendered) shall count against the total number of shares
issuance under the terms of this Plan.
5. Reservation of Stock on Granting of Option. At the time of granting
any Option or Stock Award under the terms of this Plan, there will be reserved
for issuance, on the exercise of the Option or vesting of the Stock Award, the
number of shares of Stock of the Company subject to such Option or Stock Award.
The Company may reserve either authorized but unissued shares or issued shares
that have been reacquired by the Company.
6. Eligibility. Options or Stock Awards under the Plan may be granted to
employees, including officers and directors, of the Company or its subsidiaries,
as may be existing from time to time, and to other individuals who are not
employees of the Company as may be deemed in the best interest of the Company by
the Board or a duly authorized committee. Such Options or Stock Awards shall be
in the amounts, and shall have the rights and be subject to the restrictions, as
may be determined by the Board or a duly authorized committee at the time of
grant, all as may be within the general provisions of this Plan.
7. Term of Options and Certain Limitations on Right to Exercise.
(a) Each Option shall have the term established by the Board or duly
authorized committee at the time the Option is granted but in no event may
an Option have a term in excess of ten years.
(b) The term of the Option, once it is granted, may be reduced only
as provided for in this Plan or under the written provisions of the Option.
(c) Unless otherwise specifically provided by the written provisions
of the Option, no holder or his or her legal representative, legatee, or
distributee will be, or shall be deemed to be, a holder of any shares
subject to an Option unless and until the holder exercises his or her right
to acquire all or a portion of the Stock subject to the Option and delivers
the required consideration to the Company in accordance with the terms of
this Plan and the Option and then only to the extent of the number of
shares of Stock acquired. Except as specifically provided in this Plan or
as otherwise specifically provided by the written provisions of the Option,
no adjustment to the exercise price or the number of shares of Stock
subject to the Option shall be made for dividends or other rights granted
to stockholders for which the record date is prior to the date the Stock
subject to the Option is acquired by the holder.
(d) Options under the Plan shall vest and become exercisable at such
time or times and on such terms as the Board or a duly authorized committee
may determine at the time of the grant of the Option.
(e) Options granted under the Plan shall contain such other
provisions, including, without limitation, further restrictions on the
vesting and exercise of the Option, as the Board or a duly authorized
committee shall deem advisable.
(f) In no event may an Option be exercised after the expiration of
its term.
8. Exercise Price. The exercise price of each Option issued under the
Plan shall be determined by the Board or a duly authorized committee on the date
of grant.
9. Payment of Exercise Price. The exercise of any Option shall be
contingent on receipt by the Company of cash, certified bank check to its order,
or other consideration acceptable to the Company. Any consideration approved by
the Board or a duly authorized committee that calls for the payment of the
exercise price over a period of more than one year shall provide for interest,
which shall not be included as part of the exercise price, that is equal to or
exceeds the imputed interest provided for in section 483 of the Code or any
amendment or successor section of like tenor.
10. Withholding. If the grant or vesting of a Stock Award or the grant or
exercise of an Option pursuant to this Plan, or any other event, creates an
obligation on the part of the Company to withhold income and employment taxes
pursuant to the Code or applicable state or local laws, the payment of such
amounts to the Company, in consideration acceptable to the Company, shall be a
prerequisite to the grant or exercise of the Option or the grant or vesting of
the Stock Award. In all events, delivery of shares of Stock issuable on
exercise of the Option or on grant of the Stock Award shall be conditioned upon
and subject to the satisfaction or making provision for the satisfaction of the
withholding obligation of the Company resulting from the grant or exercise of
the Option, grant or vesting of the Stock Award, or any other event. The
Company shall be further authorized to take such other action as may be
necessary, in the opinion of the Company, to satisfy all obligations for the
payment of such taxes.
11. Incentive Options--Additional Provisions. In addition to the other
restrictions and provisions of this Plan, any Option granted hereunder that is
intended to be an Incentive Option shall meet the following further
requirements:
(a) The exercise price of an Incentive Option shall not be less than
the fair market value of the Stock on the date of grant of the Incentive
Option as determined by the Board or a duly authorized committee based on
the reported trading prices for the Stock and as permitted by the
applicable provisions of the Code.
(b) No Incentive Option may be granted under the Plan to any
individual that owns (either of record or beneficially) Stock possessing
more than 10% of the combined voting power of the Company or any parent or
subsidiary corporation unless both the exercise price is at least 110% of
the fair market value of the Stock on the date the Option is granted and
the Incentive Option by its terms is not exercisable more than five years
after the date it is granted.
(c) Incentive Options may be granted only to employees of the Company
or its subsidiaries and only in connection with that employee's employment
by the Company or the subsidiary. Notwithstanding the above, directors and
other individuals who have contributed to the success of the Company or its
subsidiaries may be granted Incentive Options under the Plan, subject to,
and to the extent permitted by, applicable provisions of the Code and
regulations promulgated thereunder, as they may be amended from time to
time.
(d) The aggregate fair market value (determined as of the date the
Incentive Option is granted) of the shares of Stock with respect to which
Incentive Options are exercisable for the first time by any individual
during any calendar year under the Plan (and all other plans of the Company
and its subsidiaries) may not exceed $100,000.
(e) No Incentive Option shall be transferable other than by will or
the laws of descent and distribution and shall be exercisable, during the
lifetime of the optionee, only by the optionee to whom the Incentive Option
is granted.
(f) No individual acquiring shares of Stock pursuant to any Incentive
Option granted under this Plan shall sell, transfer, or otherwise convey
the Stock until after the date that is both two years after the date the
Incentive Option was granted and one year after the date the Stock was
acquired pursuant to the exercise of the Incentive Option. If any
individual makes a disqualifying disposition, he or she shall notify the
Company within 30 days of such transaction.
(g) No Incentive Option may be exercised unless the holder was,
within three months of such exercise, and had been since the date the
Incentive Option was granted, an eligible employee of the Company as
specified in the applicable provisions of the Code, unless the employment
was terminated as a result of the death or disability (as defined in the
Code and the regulations promulgated thereunder as they may be amended from
time to time) of the employee or the employee dies within three months of
the termination. In the event of termination as a result of disability,
the holder shall have a one year period following termination in which to
exercise the Incentive Option. In the event of death of the holder, the
Incentive Option must be exercised within six months after the issuance of
letters testamentary or administration or the appointment of an
administrator, executor, or personal representative, but not later than one
year after the date of termination of employment. An authorized absence or
leave approved by the Board or a duly authorized committee for a period of
90 days or less shall not be considered an interruption of employment for
any purpose under the Plan.
(h) All Incentive Options shall be deemed to contain such other
limitations and restrictions as are necessary to conform the Incentive
Option to the requirements for "incentive stock options" as defined in
section 422 of the Code, or any amendment or successor statute of like
tenor.
All of the foregoing restrictions and limitations are based on the governing
provisions of the Code as of the date of adoption of this Plan. If at any time
the Code is amended to permit the qualification of an Option as an incentive
stock option without one or more of the foregoing restrictions or limitations or
the terms of such restrictions or limitations are modified, the Board or a duly
authorized committee may grant Incentive Options, and may modify outstanding
Incentive Options in accordance with such changes, all to the extent that such
action by the Board or duly authorized committee does not disqualify the Options
from treatment as incentive stock options under the provisions of the Code as
may be amended from time to time.
12. Awards to Directors and Officers. To the extent the Company has a
class of securities registered under the Exchange Act, Options or Stock Awards
granted under the Plan to directors and officers (as used in Rule 16b-3
promulgated under the Exchange Act or any amendment or successor rule of like
tenor) intended to qualify for the exemption from section 16(b) of the Exchange
Act provided in Rule 16b-3 shall, in addition to being subject to the other
restrictions and limitations set forth in this Plan, be made as follows:
(a) A transaction whereby there is a grant of an Option or Stock
Award pursuant to this Plan must satisfy one of the following:
(i) The transaction must be approved by the Board or a duly
authorized committee composed solely of two or more non-employee
directors of the Company (as defined in Rule 16b-3); or
(ii) The transaction must be approved or ratified, in compliance
with section 14 of the Exchange Act, by either: the affirmative vote
of the holders of a majority of the securities of the Company present
or represented and entitled to vote at a meeting of the shareholders
of the Company held in accordance with the applicable laws of the
state of incorporation of the Company; or, if allowed by applicable
state law, the written consent of the holders of a majority, or such
greater percentage as may be required by applicable laws of the state
of incorporation of the Company, of the securities of the Company
entitled to vote. If the transaction is ratified by the shareholders,
such ratification must occur no later than the date of the next annual
meeting of shareholders; or
(iii) The Stock acquired must be held by the officer or
director for a period of six months subsequent to the date of the
grant; provided that, if the transaction involves a derivative
security (as defined in section 16 of the Exchange Act), this
condition shall be satisfied if at least six months elapse from the
date of acquisition of the derivative security to the date of
disposition of the derivative security (other than on exercise or
conversion) or its underlying equity security.
(b) Any transaction involving the disposition to the Company of its
securities in connection with Options or Stock Awards granted pursuant to
this Plan shall:
(i) be approved by the Board or a duly authorized committee
composed solely of two or more non-employee directors; or
(ii) be approved or ratified, in compliance with section 14 of
the Exchange Act, by either: the affirmative vote of the holders of a
majority of the securities of the Company present, or represented, and
entitled to vote at a meeting duly held in accordance with the
applicable laws of the state of incorporation of the Company or, if
allowed by applicable state law, the written consent of the holders of
a majority, or such greater percentage as may be required by
applicable laws of the state of incorporation of the Company, of the
securities of the Company entitled to vote; provided that, such
ratification occurs no later than the date of the next annual meeting
of shareholders.
All of the foregoing restrictions and limitations are based on the governing
provisions of the Exchange Act and the rules and regulations promulgated
thereunder as of the date of adoption of this Plan. If at any time the
governing provisions are amended to permit an Option to be granted or exercised
or Stock Award to be granted pursuant to Rule 16b-3 or any amendment or
successor rule of like tenor without one or more of the foregoing restrictions
or limitations, or the terms of such restrictions or limitations are modified,
the Board or a duly authorized committee may award Options or Stock Awards to
directors and officers, and may modify outstanding Options or Stock Awards, in
accordance with such changes, all to the extent that such action by the Board or
a duly authorized committee does not disqualify the Options or Stock Awards from
the exemption under the provisions of Rule 16b-3 or any amendment or successor
rule of similar tenor.
13. Stock Awards. The Board or a duly authorized committee may grant
Stock Awards to individuals eligible to participate in this Plan, in the amount
and subject to the provisions determined by the Board or a duly authorized
committee. The Board or a duly authorized committee shall notify in writing
each person selected to receive a Stock Award hereunder as soon as practicable
after he or she has been so selected and shall inform such person of the number
of shares he or she is entitled to receive, the approximate date on which such
shares will be issued, and any Forfeiture Restrictions applicable to such
shares. (For purposes hereof, the term "Forfeiture Restrictions" shall mean any
prohibitions against sale or other transfer of shares of Stock granted under the
Plan and the obligation of the holder to forfeit his or her ownership or right
to such shares and to surrender such shares to the Company on the occurrence of
certain conditions.) The Board or a duly authorized committee may, at its
discretion, require the payment in cash to the Company by the award recipient of
the par value of the Stock. The shares of Stock issued pursuant to a Stock
Award shall not be sold, exchanged, transferred, pledged, hypothecated, or
otherwise disposed of during such period or periods of time during which the
Stock is subject to any Forfeiture Restrictions. Certificates representing
shares subject to Forfeiture Restrictions shall be appropriately legended as
determined by the Board or a duly authorized committee to reflect the Forfeiture
Restrictions, and the Forfeiture Restrictions shall be binding on any transferee
of the shares.
14. Assignment. At the time of grant of an Option or Stock Award, the
Board or a duly authorized Committee, in its sole discretion, may impose
restrictions on the transferability of such Option or Stock Award as it deems
appropriate. Such restrictions may prohibit the transfer, assignment, pledge,
or hypothecation in any way (whether by operation of law or otherwise) of the
Option or Stock Award, and may provide that the Option or Stock Award shall not
be subject to execution, attachment, or similar process. On any attempt to
transfer, assign, pledge, hypothecate, or otherwise dispose of the Option or
Stock Award, or of any right or privilege conferred thereby, contrary to the
provisions thereof, or on the levy of any attachment or similar process on such
rights and privileges, the Option or Stock Award and such rights and privileges
shall immediately become null and void.
15. Additional Terms and Provisions of Awards. The Board or duly
authorized committee shall have the right to impose additional limitations on
individual awards under the Plan. For example, and without limiting the
authority of the Board or a duly authorized committee, an individual award may
be conditioned on continued employment for a specified period or may be voided
based on the award holder's gross negligence in the performance of his or her
duties, substantial failure to meet written standards established by the Company
for the performance of his or her duties, criminal misconduct, or willful or
gross misconduct in the performance of his or her duties. In addition, the
Board or a duly authorized committee may establish additional rights in the
holders of individual awards at the time of grant. For example, and without
limiting the authority of the Board or a duly authorized committee, an
individual award may include the right to immediate payment of the value
inherent in the award on the occurrence of certain events such as a change in
control of the Company, all on the terms and conditions set forth in the award
at the time of grant. The Board or a duly authorized committee may, at the time
of the grant of the Option or Stock Award, establish any other terms,
restrictions, or provisions on the exercise of an Option or the holding of Stock
subject to the Stock Award as it deems appropriate. All such terms,
restrictions, and provisions must be set forth in writing at the time of grant
in order to be effective.
16. Dilution or Other Adjustment. In the event that the number of shares
of Stock of the Company from time to time issued and outstanding is increased
pursuant to a stock split or a stock dividend, the number of shares of Stock
then covered by each outstanding Option or Stock Award granted hereunder shall
be increased proportionately, with no increase in the total purchase price of
the shares then so covered, and the number of shares of Stock subject to the
Plan shall be increased by the same proportion. In the event that the number of
shares of Stock of the Company from time to time issued and outstanding is
reduced by a combination or consolidation of shares, the number of shares of
Stock then covered by each outstanding Option granted hereunder shall be reduced
proportionately, with no reduction in the total purchase price of the shares
then so covered, and the number of shares of Stock subject to the Plan shall be
reduced by the same proportion. In the event that the Company should transfer
assets to another corporation and distribute the stock of such other corporation
without the surrender of Stock of the Company, and if such distribution is not
taxable as a dividend and no gain or loss is recognized by reason of section 355
of the Code or any amendment or successor statute of like tenor, then the total
purchase price of the Stock then covered by each outstanding Option shall be
reduced by an amount that bears the same ratio to the total purchase price then
in effect as the market value of the stock distributed in respect of a share of
the Stock of the Company, immediately following the distribution, bears to the
aggregate of the market value at such time of a share of the Stock of the
Company plus the stock distributed in respect thereof. In the event that the
Company distributes the stock of a subsidiary to its shareholders, makes a
distribution of a major portion of its assets, or otherwise distributes
significant portion of the value of its issued and outstanding Stock to its
shareholders, the number of shares then subject to each outstanding Option and
the Plan, or the exercise price of each outstanding Option, may be adjusted in
the reasonable discretion of the Board or a duly authorized committee. Shares
awarded under a Stock Award shall be treated as issued and outstanding, whether
or not subject to Forfeiture Restrictions, although any Stock, assets, or other
rights distributed shall be subject to the Forfeiture Restrictions governing the
shares awarded under the Stock Award and, at the discretion of the Board or a
duly authorized committee, may be held by the Company or otherwise subject to
restrictions on transfer by the Company until the expiration of such Forfeiture
Restrictions. All such adjustments shall be made by the Board or duly
authorized committee, whose determination upon the same, absent demonstrable
error, shall be final and binding on all participants under the Plan. No
fractional shares shall be issued, and any fractional shares resulting from the
computations pursuant to this section shall be eliminated from the respective
Option or Stock Award. No adjustment shall be made for cash dividends, for the
issuance of additional shares of Stock for consideration approved by the Board,
or for the issuance to stockholders of rights to subscribe for additional Stock
or other securities.
17. Options or Stock Awards to Foreign Nationals. The Board or a duly
authorized committee may, in order to fulfill the purposes of this Plan and
without amending the Plan, grant Options or Stock Awards to foreign nationals or
individuals residing in foreign countries that contain provisions, restrictions,
and limitations different from those set forth in this Plan and the Options or
Stock Awards made to United States residents in order to recognize differences
among the countries in law, tax policy, and custom. Such grants shall be made
in an attempt to provide such individuals with essentially the same benefits as
contemplated by a grant to United States residents under the terms of this Plan.
18. Listing and Registration of Shares. Unless otherwise expressly
provided on the granting of an award under this Plan, the Company shall have no
obligation to register any securities issued pursuant to this Plan or issuable
on the exercise of Options granted hereunder. Each award shall be subject to
the requirement that if at any time the Board or a duly authorized committee
shall determine, in its sole discretion, that it is necessary or desirable to
list, register, or qualify the shares covered thereby on any securities exchange
or under any state or federal law, or obtain the consent or approval of any
governmental agency or regulatory body as a condition of, or in connection with,
the granting of such award or the issuance or purchase of shares thereunder,
such award may not be made or exercised in whole or in part unless and until
such listing, registration, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Board or a duly authorized
committee.
19. Expiration and Termination of the Plan. The Plan may be abandoned or
terminated at any time by the Board or a duly authorized committee except with
respect to any Options or Stock Awards then outstanding under the Plan. The
Plan shall otherwise terminate on the earlier of the date that is: (i) ten
years after the date the Plan is adopted by the Board; or (ii) ten years after
the date the Plan is approved by the shareholders of the Company.
20. Form of Awards. Awards granted under the Plan shall be represented by
a written agreement which shall be executed by the Company and which shall
contain such terms and conditions as may be determined by the Board or a duly
authorized committee and permitted under the terms of this Plan. Option
agreements evidencing Incentive Options shall contain such terms and conditions,
among others, as may be necessary in the opinion of the Board or a duly
authorized committee to qualify them as incentive stock options under section
422 of the Code or any amendment or successor statute of like tenor.
21. No Right of Employment. Nothing contained in this Plan or any Option
or Stock Award shall be construed as conferring on a director, officer, or
employee any right to continue or remain as a director, officer, or employee of
the Company or its subsidiaries.
22. Leaves of Absence. The Board or duly authorized committee shall be
entitled to make such rules, regulations, and determinations as the Board or
duly authorized committee deems appropriate under the Plan in respect of any
leave of absence taken by the recipient of any Option or Stock Award. Without
limiting the generality of the foregoing, the Board or duly authorized committee
shall be entitled to determine (a) whether or not any such leave of absence
shall constitute a termination of employment within the meaning of the Plan, and
(b) the impact, if any, of any such leave of absence on any Option or Stock
Award under the Plan theretofore made to any recipient who takes such leave of
absence.
23. Amendment of the Plan. The Board or a duly authorized committee may
modify and amend the Plan in any respect; provided, however, that to the extent
such amendment or modification would cause the Plan to no longer comply with the
applicable provisions of the Code with respect to Incentive Options, such
amendment or modification shall also be approved by the shareholders of the
Company. Subject to the foregoing and, if the Company is subject to the
provisions of 16(b) of the Exchange Act, the limitations of Rule 16b-3
promulgated under the Exchange Act or any amendment or successor rule of like
tenor, the Plan shall be deemed to be automatically amended as is necessary (i)
with respect to the issuance of Incentive Options, to maintain the Plan in
compliance with the provisions of section 422 of the Code, and regulations
promulgated thereunder from time to time, or any amendment or successor statute
thereto, and (ii) with respect to Options or Stock Awards granted to officers
and directors of the Company, to maintain the awards made under the Plan in
compliance with the provisions of Rule 16b-3 promulgated under the Exchange Act
or any amendment or successor rule of like tenor.
ATTEST:
/s/ Dan J. Johnson
Dan J. Johnson, Secretary
SECRETARY'S CERTIFICATE
The undersigned, the duly constituted and elected secretary of LarsonoDavis
Incorporated hereby certifies that a duly constituted meeting of the
shareholders held on , 1997, pursuant to notice and at which a
----------------
quorum was present in accordance with the requirements of law and the Company's
articles of incorporation and bylaws, the foregoing Larson Davis Incorporated
1997 Stock Option and Award Plan was approved by the affirmative vote of the
holders of a majority of the shares of Common Stock in attendance, in person or
by proxy, at such meeting.
DATED this day of , 1997.
----- ---------------
Dan J. Johnson, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AS OF MARCH 31, 1997, AND STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,728,172
<SECURITIES> 0
<RECEIVABLES> 2,313,012
<ALLOWANCES> 40,000
<INVENTORY> 4,127,492
<CURRENT-ASSETS> 11,317,967
<PP&E> 4,388,115
<DEPRECIATION> 2,207,529
<TOTAL-ASSETS> 22,078,065
<CURRENT-LIABILITIES> 2,278,958
<BONDS> 0
<COMMON> 11,374
0
200
<OTHER-SE> 18,356,277
<TOTAL-LIABILITY-AND-EQUITY> 22,078,065
<SALES> 2,204,697
<TOTAL-REVENUES> 2,204,697
<CGS> 1,208,367
<TOTAL-COSTS> 1,208,367
<OTHER-EXPENSES> 2,309,237
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,732
<INCOME-PRETAX> (1,343,081)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,343,081)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (1,343,081)
<EPS-PRIMARY> (0.12)
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