UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ x / Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 31, 1997, or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-16115
AIRSENSORS, INC.
----------------
(Exact name of registrant as specified in its charter)
Delaware 91-1039211
- ------------------------ --------------------
(State of Incorporation) IRS Employer I.D. No.
16804 Gridley Place, Cerritos, CA 90703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 860-6666
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
------ ------
Number of shares outstanding of each of the issuer's classes of common
stock, as of February 28, 1997:
5,786,264 shares of Common Stock, $.001 par value per share
<PAGE>1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRSENSORS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
January 31, 1997 and April 30, 1996
-----------
ASSETS
------
January 31, April 30,
1997 1996
----------- -----------
(unaudited)
Current assets:
Cash $ 1,776,674 $ 811,148
Accounts receivable 11,502,069 9,792,356
Less allowance for doubtful accounts 284,423 278,361
----------- -----------
Net accounts receivable 11,217,646 9,513,995
Inventories:
Raw materials and parts 7,212,609 6,096,292
Work-in-process 1,107,106 930,548
Finished goods 6,520,058 4,411,162
----------- -----------
Total inventories 14,839,773 11,438,002
Other current assets 2,634,529 2,815,181
----------- -----------
Total current assets 30,468,622 24,578,326
Equipment and leasehold improvements:
Dies, molds and patterns 4,113,178 3,297,764
Machinery and equipment 4,713,787 5,267,529
Office furnishings and equipment 3,838,967 2,895,187
Leasehold improvements 1,972,206 1,953,131
----------- -----------
14,638,138 13,413,611
Less accumulated depreciation and amortization 7,600,527 6,935,878
----------- -----------
Net equipment and leasehold improvements 7,037,611 6,477,733
Intangibles arising from acquisitions 11,253,143 7,915,314
Less accumulated amortization 2,884,145 2,689,397
----------- -----------
Net intangibles arising from acquisitions 8,368,998 5,225,917
Other assets 1,154,516 1,445,911
----------- -----------
$47,029,747 $37,727,887
=========== ===========
See accompanying notes.
<PAGE>2
AIRSENSORS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
January 31, 1997 and April 30, 1996
(Continued)
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
January 31, April 30,
1997 1996
----------- -----------
(unaudited)
Current liabilities:
Notes payable $ 79,998 $ 541,398
Accounts payable 3,400,766 3,532,070
Accrued payroll obligations 1,289,841 1,701,034
Accrued warranty obligations 341,757 469,639
Income taxes payable 781,710 706,057
Other accrued expenses 2,890,424 1,598,451
Current portion of long-term notes 1,486,949 716,932
----------- -----------
Total current liabilities 10,271,445 9,265,581
Line of credit 7,400,000 3,400,000
Term loans - Bank of America NT&SA 3,815,500 1,435,000
Term loan - DEPA Holding B.V. 2,368,349 2,820,640
Other long term liabilities 1,485,094 1,167,447
Minority Interest 582,811 383,197
Commitments and contingencies - -
Stockholders' equity:
1993 Series 1 Preferred Stock, $0.01 par value,
5,950 shares authorized, issued and
outstanding $5,950,000 liquidation value 5,650,000 5,650,000
Common stock, $.001 par value, authorized
25,000,000 shares; 5,771,014 issued and
outstanding at January 31, 1997
(5,654,568 at April 30, 1996) 5,771 5,655
Additional paid-in capital relating to
common stock 29,087,171 28,746,994
Shares held in trust (5,879) -
Accumulated deficit (13,426,503) (15,111,879)
Foreign currency translation adjustment (204,012) (34,748)
----------- -----------
Total stockholders' equity 21,106,548 19,256,022
----------- -----------
$47,029,747 $37,727,887
=========== ===========
See accompanying notes.
<PAGE>3
AIRSENSORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three and nine months ended January 31, 1997 and 1996
---------
Three Months Ended Nine Months Ended
January 31, January 31,
----------------------- -----------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Revenue:
Product sales $14,764,418 $12,115,597 $42,957,912 $34,313,511
Contract revenue 294,336 1,009,982 1,896,243 2,333,492
----------- ----------- ----------- -----------
Net revenue 15,058,754 13,125,579 44,854,155 36,647,003
Costs and expenses:
Cost of sales 9,182,704 8,302,155 26,927,385 23,018,444
Research and
development expense 1,783,788 1,726,010 6,154,229 5,521,690
Selling, general and
administrative expense 2,885,901 2,197,681 8,402,247 5,513,336
----------- ----------- ----------- -----------
Total costs and expenses 13,852,393 12,225,846 41,483,861 34,053,470
----------- ----------- ----------- -----------
Operating income 1,206,361 899,733 3,370,294 2,593,533
Financing charges 293,074 176,623 820,059 337,885
----------- ----------- ----------- -----------
Income before income taxes
and minority interest in
income of consolidated
subsidiaries 913,287 723,110 2,550,235 2,255,648
Provision for income taxes 74,024 36,412 255,024 164,412
Minority interest in income
of consolidated
subsidiaries 71,381 142,924 174,741 142,924
----------- ----------- ----------- -----------
Net income before dividends 767,882 543,774 2,120,470 1,948,312
Dividends on preferred stock 145,033 151,230 435,094 462,365
----------- ----------- ----------- -----------
Net income applicable
to common stock $ 622,849 $ 392,544 $ 1,685,376 $ 1,485,947
=========== =========== =========== ===========
Net income per share
Primary $0.11 $0.07 $0.29 $0.26
Fully diluted $0.10 $0.07 $0.28 $0.26
=========== =========== =========== ===========
Number of shares used in
per share calculation
Primary 6,857,508 6,635,763 6,778,469 6,637,939
Fully diluted 6,857,508 6,635,763 6,778,469 6,637,939
=========== =========== =========== ===========
See accompanying notes.
<PAGE>4
AIRSENSORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended January 31, 1997 and 1996
---------------
Nine Months Ended
January 31,
------------ ------------
1997 1996
------------ ------------
Net cash (used in) provided by
operating activities $ 72,594 $ 1,058,449
Cash flows from investing activities:
Payment for purchase of certain assets
acquired from Ateco (4,654,794) -
Investment in Media - (1,965,678)
Purchase of equipment and leasehold
improvements (988,373) (1,048,972)
Deferred software production costs - (612,361)
Other, net 92,936 (41,673)
------------ ------------
Net cash used in investing activities (5,550,231) (3,668,684)
Cash flows from financing activities:
Net borrowings on line of credit 4,000,000 1,900,000
Payments on notes payable (575,000) (458,249)
Proceeds from issuance of notes payable 113,600 171,054
Proceeds from issuance of bank term loans 3,989,668 2,050,000
Proceeds from issuance of common stock 340,294 74,650
Payments on term loans (751,769) (168,632)
Payments of other long-term liabilities (472,890) (216,675)
Dividends paid on preferred stock (435,094) (462,365)
------------ ------------
Net cash provided by financing activities 6,208,809 2,889,783
------------ ------------
Translation adjustments 234,354 -
Net increase in cash 965,526 279,548
Cash beginning of year 811,148 65,489
------------ ------------
Cash, end of quarter $ 1,776,674 $ 345,037
============ ============
See accompanying notes.
<PAGE>5
AIRSENSORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997 and 1996
--------------
(1) The accompanying condensed consolidated financial statements are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for the fair
presentation of the financial position and operating results for the interim
periods. The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
the results of operations, contained in the Company's Annual Report on Form
10-K for the fiscal year ended April 30, 1996, and the Company's Form 10-Q for
the periods ended July 31, 1996 and October 31, 1996. The results of
operations for the three months and nine months ended January 31, 1997 are not
necessarily indicative of the results that may be expected for the entire
fiscal year ending April 30, 1997. Certain reclassifications have been made to
the prior periods' condensed consolidated financial statements to conform to
the current interim period presentation.
(2) Acquisition
Effective July 1, 1996, the registrant acquired certain assets of Ateco
Automotive Pty. Ltd. ("Ateco") for approximately $6,500,000. Ateco, an
Australian private company, has distributed IMPCO's gaseous fuel carburetion
systems and related devices for use with internal combustion engines since
1969 through its Gas Division near Melbourne, Australia. The acquisition of
Ateco has been accounted for under the purchase method of accounting and the
acquired operations have been included in the condensed consolidated
financial statements since the date of acquisition.
The following table presents the unaudited pro forma consolidated
results of operations as if the acquisition had occurred at the beginning of
each period (Dollars in thousands, except for net income per share):
Nine Months Ended
January 31,
------------------------
1997 1996
---------- -----------
Revenue $45,252 $41,126
Net income applicable
to common stock 1,655 1,309
Net income per share $ 0.29 $ 0.23
The proforma consolidated results of operations are not necessarily
indicative of the actual results of operations that would have occurred had
the purchase actually been made at the beginning of the respective periods, or
of results which may occur in the future.
(3) Income taxes
For federal income tax purposes, at January 31, 1997, the Company had net
operating loss carryforwards of approximately $5.6 million available to offset
future taxable income. The estimated effective annual tax rate for fiscal
year 1997 was reduced by the presumed use of an annual net operating loss
carryforward of $2.4 million and research and development credits of $1.5
million.
<PAGE>6
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operation
Results of Operations
- ------------------------
Net income applicable to common stock was $623,000 and $393,000 for three
months ended January 31, 1997 and 1996, respectively. Net income applicable
to common stock for the nine months ended January 31, 1997 and 1996, was
$1,685,000 and $1,486,000 respectively.
Net revenue for the three months and nine months ended January 31, 1997,
increased by $1.9 million (15%) and $8.2 million (22%), respectively, as
compared to the same periods in the prior fiscal year.
Product sales for the three months and nine months ended January 31, 1997,
increased by 22% and 25%, respectively, as compared to the same periods in the
prior fiscal year. The following table sets forth the Company's product sales
by application (all dollars in thousands):
Three months ended Nine months ended
January 31, January 31,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
Motor vehicle $ 6,420 $ 3,780 $ 17,500 $ 11,036
Forklifts and other material
handling equipment 5,338 6,553 17,109 17,567
Small portable to
large stationary 3,006 1,783 8,349 5,711
-------- -------- -------- --------
Total product sales $ 14,764 $ 12,116 $ 42,958 $ 34,314
======== ======== ======== ========
During the three months and nine months ended January 31, 1997, net
revenue attributable to the Company's motor vehicle products increased by 70%
and 59%, respectively, as compared to the same periods in the prior fiscal
year. These increases were primarily attributable the Company's Australian
operation which was acquired in July 1996. The following table sets forth the
Company's worldwide motor vehicle product sales by application, (all dollars
in thousands):
Three months ended Nine months ended
January 31, January 31,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
Component parts $ 5,855 $ 2,392 $ 15,580 $ 8,801
Upfitting systems 565 1,388 1,920 2,235
-------- -------- -------- --------
Total $ 6,420 $ 3,780 $ 17,500 $ 11,036
======== ======== ======== ========
<PAGE>7
During the three months and nine months ended January 31, 1997, sales for
the Company's motor vehicle component parts increased by 145% and 77%,
respectively, as compared to the same periods in the prior fiscal year.
During the three and nine months ended January 31, 1997, the Company recognized
revenue of $1.3 million and $4.3 million, respectively, resulting from its
Australia operations. Management anticipates that revenue attributable to the
Company's motor vehicle component parts will be higher during fiscal year 1997
as compared to fiscal year 1996 primarily as a result of its Australian
operations and an increase in the demand for the Company's motor vehicle
component parts in Latin America.
Revenue attributable to upfitting vehicles with the Company's systems
decreased by 59% and 14% during the three and nine months ended January 31,
1997, respectively, as compared to the same periods in the prior fiscal year.
During the previous year, revenue resulted primarily from a program with the
United States Postal Service. During the current year, revenue resulted from
a program with Ford Motor Company in which IMPCO's bi-fuel propane system was
utilized on F150 and F250 pick-up trucks. The Ford Motor Company program was
completed during the second quarter of the current year. During the third
quarter of the current year, the Company began converting postal vehicles to
compressed natural gas under a new $1.5 million Postal Service contract. These
systems will continue to be delivered during the fourth quarter of the current
year. Management anticipates that revenue attributable to upfitting vehicles
with the Company's systems will be comparable to the levels recognized during
the prior year.
During the three months and nine months ended January 31, 1997, sales of
the Company's products for forklifts and other material handling equipment
decreased by approximately 19% and 3%, respectively, as compared to the same
periods in the prior fiscal year. This decrease resulted primarily from lower
domestic demand for new forklifts. During the three and nine month periods
ended January 31, 1997, the Company recognized revenue of $1.9 million and $5.4
million, respectively, from its European operations which were acquired in
October 1995. European sales during the same three and nine month periods
last year were $1.9 million. Management anticipates that the worldwide revenue
provided by forklift and other material handling equipment during the current
year will be comparable to fiscal year 1996.
During the three months and nine months ended January 31, 1997, sales for
the Company's small portable to large stationary engines increased by 69% and
46%, respectively, as compared to the same periods in the prior fiscal year.
For the nine months ended January 31, 1997, $1 million of the increase was
attributable to a product line that the Company purchased in April 1996. The
balance of the increase was attributable to higher demand for large and small
power generator units used in power replacement and recreational applications.
Management anticipates that revenue generated from the Company's small
portable to large stationary engines will be higher in fiscal year 1997 than
fiscal year 1996.
Contract revenue for the three and nine months ended January 31, 1997,
decreased by $716,000 (71%) and $437,000 (19%), respectively, as compared to
the same periods in the prior fiscal year. Revenue under the General Motors
contract was 62% higher for the nine months ended January 31, 1997 than the
same period last year. Certain other OEM development programs were completed
that are not present in fiscal year 1997. Management is in the process of
negotiating additional contracts, that if signed, would generate comparable
contract revenue in the current fiscal year as compared to the prior fiscal
year.
<PAGE>8
During the three months and nine months ended January 31, 1997, the
Company's revenues were generated in the following geographic regions:
Three months ended Nine months ended
January 31, January 31,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
United States and Canada 52% 64% 54% 66%
Pacific Rim 23% 10% 22% 13%
Europe 15% 21% 15% 15%
Latin America 10% 5% 9% 6%
Gross Profit Margin
- ---------------------
The Company's gross profit margin on product sales for the three months
ended January 31, 1997, was $5.6 million (38%) as compared to $3.8 million
(31%) during the prior fiscal year. The Company's foreign operations
contributed $632,000 of the $1.8 million increase. Favorable market driven
sales price adjustments and product mix from the domestic operations
accounted for the remaining increase.
The Company's gross profit margin on product sales for the nine months
ended January 31, 1997, was $16 million (37%) as compared to $11.3 million
(33%) during the prior fiscal year. The Company's foreign operations
contributed $3.4 million of the $4.7 million increase. Favorable market driven
sales price adjustments and product mix from the domestic operations accounted
for the remaining increase.
Research and Development
- --------------------------
Research and Development (R&D) expense for the nine months ended January
31, 1997, increased by approximately 11% as compared to the same period in the
prior fiscal year. This increase was primarily due to application and
development of the Company's products under the GM contract which was extended
in August 1995, and internally funded product development work. Management
believes the Company's future success depends on its ability to design,
develop and market new products to meet mandated emission standards and will
therefore continue to incur significant R&D costs. Management anticipates
that R&D expense during the remainder of fiscal year 1997 will continue to be
higher than last year.
Selling, General and Administrative
- -------------------------------------
Selling, general and administrative (SG&A) expense for the three months
and nine months ended January 31, 1997, increased by approximately
$688,000(31%) and $2.9 million (52%), respectively as compared to the same
periods in the prior fiscal year. The combined SG&A expenses for the
Company's European and Australian operations for three months and nine months
ended January 31, 1997, were $1.2 million and $3.3 million, respectively. SG&A
expenses for the Company's European operations for the three months and nine
months ended January 31, 1996 were $624,000. SG&A as a percentage of sales
has increased because of the Company's foreign operations. The European
facilities distribute alternate fuel products from multiple locations in
Europe and incur higher SG&A expenses as a percentage of sales than the
Company's domestic operations.
<PAGE>9
Financing charges
- -------------------
Financing charges for the three months and nine months ended January 31,
1997, increased by $116,000 (66%) and $482,000 (143%) as compared to the same
periods in the prior fiscal year. For the three and nine months ended January
31, 1997, financing charges increased $96,000 and $333,000, respectively, for
loans associated with the acquisition of the Company's foreign operations.
The remainder of the increase was due to increased utilization of the line of
credit and the capital lease facility. Management anticipates that financing
charges for fiscal year 1997 will increase as compared to fiscal year 1996 as
a result of the recent acquisitions and debt service on the Company's line of
credit.
Outlook: issues and risks
- ----------------------------
The preceding discussion includes management's outlook for revenues and
expenditures. The Company faces a number of risks and uncertainties that
should also be considered in evaluating its short and long term outlook.
These risks include, among others, the following: (1) continued world-wide
legislation enforcing environmental laws which regulate emission standards and
energy independence, (2) the Company's ability to secure future development
programs, (3) world-wide economic trends that influence geographic price
disparities between gasoline and alternative fuels, (4) fluctuations in the
foreign exchange rates causing purchases from the United States to become
undesirable, (5) the Company's ability to hire, train, and retain qualified
personnel, (6) uncontrollable changes in the timing of new product
introductions or new applications by customers which utilize the Company's
products, and (7) growth rates in foreign markets. In addition, current
economic forecasts may deviate from actual economic conditions and unfavorably
impact the Company's performance. The Company is not currently aware of any
significant new competitors, however the Company could be adversely affected
by the expansion of existing competitors, increased price competition, or
entry of new competition.
Liquidity and Capital Resources
- ---------------------------------
AirSensors, Inc. uses the cash generated from its operations and external
financing to fund capital expenditures, pay dividends on the preferred stock
and invest in and operate its existing operations and new businesses. These
sources are sufficient to meet all current obligations on a timely basis.
Management believes that such sources of funds will be sufficient to meet the
needs of its business for the foreseeable future.
Operating Activities
- ----------------------
Net cash provided by operating activities was $73,000 during the nine
months ended January 31, 1997, as compared to $1.1 million during the
same period in the prior fiscal year. The decrease in net cash provided by
operations was primarily attributable to an increase in accounts receivable of
$1.5 million and a decrease in accounts payable of $1 million as compared
to the same period in the prior fiscal year. These decreases were partially
offset by a $622,000 increase in accrued expenses and a $592,000 increase in
depreciation and amortization as compared to the same period in the prior
fiscal year. During fiscal 1997, accounts receivable increased $3.0 million.
<PAGE>10
Approximately half of this increase resulted from the operations of the new
Australian subsidiary, with the remainder primarily from increased sales to
Latin America. Depreciation and amortization increased $592,000 over the prior
year primarily due to the Company's recently acquired foreign operations.
During fiscal year 1996, inventory increased by $1.1 million primarily due
to a buildup of inventory in anticipation of future sales of compressed natural
gas systems and core products. Accounts receivable increased $1.5 million due
to the increase in sales for the month of January, 1996 as compared to sales
for the month of April, 1995, and slower payments by certain customers.
Investing activities
- ----------------------
Net cash used in investing activities for the nine months ended January
31, 1997, was $5.5 million as compared to $3.7 million for the same period
last fiscal year. Investing activities principally included the purchase of
certain assets from Ateco in Australia (July 1996) which resulted in a net
cash use of $4.7 million. During the nine months ended January 31, 1996,
investing activities included the purchase of Media (October 1995) which
resulted in a net use of cash of $2.0 million. Management projects that
capital expenditures during the remainder of the fiscal year will be
comparable to those of the last quarter of prior fiscal year.
Financing activities
- ----------------------
Net cash provided by financing activities for the nine months ended
January 31, 1997, was approximately $6.6 million as compared to $2.9 million
for the same period in the prior fiscal year. During the nine months ended
January 31, 1997, proceeds from the issuance of bank term loans included
loans with Bank of America NT&SA and its Sydney Australia branch of
$2.0 million and A$2.5 million (US $1.9 million), respectively, to finance
the purchase of Ateco. In addition, net borrowing on the line of credit
increased $2.1 million as compared to the same period in the prior fiscal
year. The Company increased it's borrowing under the operating line of
credit primarily for current operations and the Australian acquisition. During
the nine months ended January 31, 1996, proceeds from the issuance of bank
term loans included loans with Bank of America NT&SA of $2.0 million to
finance the purchase of Media.
Foreign currency risk
- -----------------------
The effect of foreign currency exchange risk has not been material to the
Company to date. The Company seeks to hedge its foreign currency risk by
minimizing its U.S. dollar investment in foreign operations using foreign
currency term loans to finance the operations of its foreign subsidiaries.
The term loans are denominated in local currencies and are included in the
local balance sheets. As of January 31, 1997, the Company had investments in
its European and Australian subsidiaries of $500,000 and $4.6 million,
respectively, subject to foreign currency risk.
<PAGE>11
Part II - OTHER INFORMATION
Items 1,2,3,5 Not applicable.
Item 4. Submission of matters to a vote of security holders
(a) The annual meeting of stockholders was held on November 7, 1996.
(b) The following were elected as directors for the terms expiring
in 1996 as follows:
Norman L. Bryan
Edwin J. Schneebeck
Don J. Simplot
The names of each of the other directors whose terms of office
continued after the meeting are as follows:
V. Robert Colton
Peter B. Bensinger
Robert M. Stemmler
Rawley F. Taplett
Douglas W. Toms
(c) The stockholders voted upon the approval of the 1996 Incentive
Stock Option Plan as follows:
Votes Votes Broker
For Against Abstention non-votes
----------- ---------- ---------- ---------
Common Stock 4,549,762 611,994 30,107 9,537
Preferred Stock 5,050 -0- -0-
(d) The stockholders voted upon the ratification of the appointment
of Ernst & Young LLP as independent auditors as follows:
Votes Votes Broker
For Against Abstention non-votes
----------- ---------- ---------- ---------
Common Stock 5,168,931 13,731 18,738 -0-
Preferred Stock 5,050 -0- -0-
<PAGE>12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11.1 - Computation of net income per share.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended
January 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AirSensors, Inc.
(Registrant)
Date: March 17, 1997 By /s/Thomas M. Costales
----------------------
Thomas M. Costales
Chief Financial Officer
and Treasurer
[Authorized Signatory]
<PAGE>13
AIRSENSORS, INC.
COMPUTATION OF NET INCOME PER SHARE
Nine months ended January 31, 1997 and 1996
---------------
Three months ended Nine months ended
January 31, January 31,
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
PRIMARY CALCULATION:
Net income $ 767,882 $ 543,774 $2,120,470 $1,948,312
Dividends on
preferred stock (145,033) (151,230) (435,094) (462,365)
----------- ----------- ----------- -----------
Net income applicable
to common stock 622,849 392,544 1,685,376 1,485,947
Add: Effect of treasury
stock on repayment
of borrowings 101,169 83,323 290,615 208,576
----------- ----------- ----------- -----------
Net income applicable to
common stock for
calculation of net
income per share $ 724,018 $ 475,867 $1,975,991 $1,694,523
Weighted average number
of common shares
outstanding 5,733,541 5,651,654 5,700,150 5,646,419
Dilutive effect of
outstanding stock
options and warrants (As
determined by application
of the modified treasury
stock method) 1,123,967 984,109 1,078,319 991,520
----------- ----------- ----------- -----------
Weighted average number
of common shares, as
adjusted for calculation
of net income per share 6,857,508 6,635,763 6,778,469 6,637,939
=========== =========== =========== ===========
Net income per share $0.11 $0.07 $.29 $0.26
=========== =========== =========== ===========
<PAGE>14
FULLY DILUTED CALCULATION:
Net income applicable to
common stock for
calculation of net income
per share before effect
of treasury stock on
repayment of borrowings $ 622,849 $ 392,544 $1,685,376 $1,485,947
Add: Effect of treasury
stock on repayment
of borrowings 65,880 83,323 193,588 208,576
----------- ----------- ----------- -----------
Net income applicable to
common stock for
calculation of net
income per share $ 688,729 $ 475,867 $1,878,964 $1,694,523
Weighted average number
of common shares
outstanding 5,733,541 5,651,654 5,700,150 5,646,419
Dilutive effect of
outstanding stock
options and warrants (As
determined by application
of the modified treasury
stock method) 1,123,967 984,109 1,078,319 991,520
----------- ----------- ----------- -----------
Weighted average number
of common shares, as
adjusted for calculation
of net income per share 6,857,508 6,635,763 6,778,469 6,637,939
=========== =========== =========== ===========
Net income per share $0.10 $0.07 $0.28 $0.26
=========== =========== =========== ===========
(1) The conversion of preferred stock was not assumed since its effect would be
antidilutive.
<PAGE>15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
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