<PAGE>
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
United States
Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the period ended December 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 Number: 0-18880
ATRIX INTERNATIONAL, INC.
-------------------------
(Exact Name of registrant as specified in its charter)
Minnesota 41-1591075
--------- ----------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
14301 Ewing Avenue South, Burnsville, MN 55306
- -------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(612) 894-6154
(Registrant's telephone number, including area code)
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 ____
------
As of December 31, 1997 the following securities of the registrant were
outstanding: 1,413,449 shares of Common Stock, $.04 per value per share.
<PAGE>
PART I.
ITEM 1. FINANCIAL STATEMENTS
This report includes the financial position of Atrix International, Inc.,
("Atrix" or the "Company") as of December 31, 1997 and June 30, 1997, the
results of operations for the three months and six months ended December 31,
1997 and 1996, and the cash flows for the six months ended December 31, 1997 and
1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET SALES. Sales for the second quarter ended December 31, 1997 totaled
$954,840 compared with $1,397,075 for the same period a year ago. Sales for the
six months ended December 31, 1997 totaled $2,003,817 compared to $2,828,243 for
the same period last year.
The following table shows the Company's revenues for the periods indicated by
product line, total manufactured products and total distributed products.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
---------------------------- ------------------------------
<S> <C> <C> <C> <C>
Product Line
Vacuums and Supplies $447,273 $ 463,877 $ 935,392 $ 860,433
ESD Equipment 40,271 53,034 72,210 123,956
Circuit Board Cases 7,491 16,741 16,363 19,092
Special Assemblies 45,819 21,951 79,602 70,502
-------- ---------- ---------- ----------
Total Manufacturing 540,854 555,603 1,103,567 1,073,983
Loose Tools 257,452 525,081 537,038 1,056,005
Tool Kits 80,321 37,755 163,900 141,732
Instrumentation 50,103 185,382 108,384 337,260
-------- ---------- ---------- ----------
Total Distribution 387,876 748,218 809,322 1,534,997
R3 Copy Control Products 16,182 93,254 73,176 209,263
MI (A-Trax System) 9,928 0 17,752 10,000
-------- ---------- ---------- ----------
Total Revenue $954,840 $1,397,075 $2,003,817 $2,828,243
</TABLE>
Manufacturing sales for the three months ended December 31, 1997 were $540,854
as compared to $555,603 for the same period in 1996, a decrease of $14,749. For
the six months ended December 31, 1997, manufacturing sales were $1,103,567 as
compared to $1,073,983 for the same period last year, an increase of $29,584.
The primary reason for the increase for the six month period was increased unit
volumes of the Omega toner vacuum line and Omega asbestos/lead abatement product
lines, increases in these areas more than offset decreases in ESD equipment and
circuit board cases.
Distribution sales for the three months ended December 31, 1997 were $ 387,876
as compared to $748,218 for the same period in 1996, a decrease of $360,342.
For the six months ended December 31, 1997, distribution sales were $809,322,
compared to $1,534,997 for the same period in the prior year. The decrease for
both periods was primarily due to a significant reduction in sales of both
loose tools and instrumentation to AT&T and Avnet, both major customers. Sales
to these two customers decreased 94%
2
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and 85% respectively, in the three and six month periods ended December 31,
1997, from the same periods in 1996. The company does not expect any
significant sales to AT & T or Avnet in future periods.
R3 Copy Control product sales for the three months ended December 31, 1997 were
$16,182 as compared to $93,254 for the same period in 1996. For the six months
ended December 31, 1997, R3 Copy Control product sales were $73,176 as compared
to $209,263 for the same period in the prior year. The primary reason for the
decrease for the six month period is decreased sales to Pitney Bowes, a major R3
Copy Control customer. Sales to Pitney Bowes decreased as Pitney Bowes reduced
inventory levels for a variety of products. R3 Copy Control sales are expected
to return to 1996 levels in future quarters.
M1 (A-Trax Production Monitoring System) sales for the three months ended
December 31, 1997 were $9,928 as compared to zero for the same period in 1996.
For the six months ended December 31, 1997, M1 sales were $17,752 as compared to
$10,000 for the same period in the prior year. The company expects M1 sales to
continue to increase as it begins to implement marketing strategies for this
product.
Looking forward, the Company believes that revenues from manufactured vacuum
products, and the R3 Copy Control system will improve. Acceptance of the Omega
series vacuum line has been very strong, with agreements being reached with
seventeen domestic and six international distributors to stock the vacuum line.
In addition, numerous other prospects are currently evaluating these products.
The Company is also beginning to market its A-Trax Production Monitoring System,
which is a new remote metering and monitoring system for the injection molding
industry. It was developed as a retrofit system permitting injection molding
plants to install the units on existing molding machines for plant monitoring,
metering, reporting and scheduling capabilities. Field testing which began in
February 1997 has now been completed. The Company believes that the A-Trax
Production Monitoring System's competitive pricing, will provide a platform for
Atrix to expand into the $40 million annual plastics monitoring market. With the
exception of the continued decrease in the AT&T/Avnet sales, the Company
believes that sales to other customers will increase for the remainder of the
fiscal year. The Company notes that except for historical financial statements,
the above and other forward looking statements are subject to certain risks.
For this purpose, any statements contained in this report that are not
statements of historical fact may be deemed to be forward looking statements.
Without limiting the foregoing, words such as "may," "will," "expect,"
"believe," "anticipate," "estimate," or continue," or comparable terminology,
are intended to identify forward looking statements. These statements by their
nature involve substantial risks and uncertainties, and actual results may
differ materially depending on a variety of factors including, market acceptance
of the Company's new products, the company's ability to increase sales to
existing customers, the Company's ability to increase sales of the R3 Copy
Control products, changes in production costs, loss of a major customer, an
economic downturn, an unplanned expense, or other events.
Gross Profit
The gross profit margin as a percentage of sales was 31.5% and 29.3% for the
three month periods ended December 31, 1997, and 1996, respectively. For the
six month period ended December 31, 1997, the gross profit margin was also 31.5%
versus 30.1% for the same period last year. The increase in gross profit margin
is due mainly to the Company's product mix, moving away from the less profitable
distribution sales and towards the more profitable vacuum sales. The company
expects that the gross margin will continue to improve throughout the remainder
of the fiscal year as sales of vacuum products, copy control products and the M1
increase.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended December
31, 1997 and 1996 decreased to $390,568 from $398,223 for the same period in
1996, or $7,655. Total selling expenses for the quarter ended December 31, 1997
were $115,654 as compared to $134,840 for the same period in 1996. Reductions in
commissions and catalogs expenses were the primary reasons for the decrease of
$19,186. These were partially offset by increases in travel, vehicle and show
expenses. The Company
3
<PAGE>
expects selling expenses to be slightly higher in future periods, due to
increases in sales commissions and travel related costs. The company has also
added one part-time and two full-time sales persons with the goal to increase
sales. Total general and administrative expenses for the quarter ended December
31, 1997 were $274,914 compared to $263,383 for the same period in 1996. The
primary reason for the increase in the general and administrative expenses of
$11,531 is an increase in research and development costs, as labor related to
the development of the A-Trax Production Monitoring System is no longer being
capitalized this fiscal year. In addition, the Company's legal and SEC expenses
increased due to the one-for-four reverse stock split announced on December 11,
1997. These were largely offset by a reduction in retirement benefits due to an
accrual made at June 30, 1997. The Company expects general and administrative
expenses to be slightly lower in future periods. Selling, general and
administrative expenses represented 40.9% and 28.5% of sales for the quarters
ending December 31, 1997 and 1996, respectively. Expenses as a percentage of
sales increased primarily due to the decline of $442,235 in sales from the
quarter ended December 31, 1997.
Selling, general and administrative expenses for the six months ended December
31, 1997 decreased to $766,257 from $804,873 in the same period of 1996, or
$38,616. Total selling expenses for the six months ended December 31, 1997 were
$219,604, compared to $278,408 for the same period in 1996. Reductions in
commissions, catalog and show expenses were the primary reasons for the decrease
of $58,804. Total general and administrative expenses for the six months ended
December 31, 1997 increased to $546,653, compared to $526,465 or $20,188 for the
same period in 1996. Expense impacts for the six month period are similar to
those explained in the second quarter analysis. Research and development, legal
and SEC expenses increased, while retirement benefits decreased. Selling,
general and administrative expenses represented 38.2% and 28.5% of sales for the
six months ending December 31, 1997 and 1996, respectively. Expenses as a
percentage of sales increased primarily due to the decline of $824,426 in sales
from the six-month period December 31, 1997. The Company expects its selling,
general and administrative expenses to be lower as a percentage of sales for the
remainder of fiscal 1998.
NET INCOME/(LOSS)
The Company generated a net loss for the quarter ended December 31, 1997 of
$80,864 versus a net income of $14,619 for the quarter ended December 31, 1996.
The net loss for the six months ended December 31, 1997 was $121,935 as compared
to a net income of $54,322 for the same period in 1996. The changes were due to
the factors discussed above.
Liquidity and Capital Resources
The Company's cash and marketable securities at December 31, 1997 was $1,510,658
compared to $1,715,571 at June 30, 1997. Working capital decreased to $1,688,074
at December 31, 1997 from $1,766,717 at June 30, 1997. The decrease in the
Company's cash and working capital positions, was due primarily to factors
related to the revenue decline including, a net loss for the first six months
and an increase in inventories which were partially offset by a decrease in
accounts receivable.
The Company maintains a line of credit with Riverside Bank. As of December 31,
1997, the borrowing base under the line of credit was the lesser of (a)
$1,000,000 or (b) the sum of (i) 75% of eligible accounts receivable and (ii)
50% of eligible inventory. The Company is also required to maintain tangible net
worth of $1,900,000. The line of credit is secured by the Company's assets. The
interest rate is at prime. The Company is required to pay accrued interest on a
monthly basis. As of December 31, 1997, the outstanding balance on the line of
credit was $840,000 and the remaining borrowing availability was $20,273.
4
<PAGE>
The Company did not have any material commitments for capital expenditures
outstanding as of December 31, 1997. The Company's plan of operations currently
does not call for raising additional capital. The Company plans to finance its
operations for the remainder of fiscal year ending June 30, 1998 with working
capital and bank borrowings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 21, 1997, the Company held its Annual Meeting of Shareholders. The
only matter acted on was the election of directors and the following directors
were elected to serve until the Company's 1998 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
DIRECTOR VOTES FOR VOTES WITHHELD
<S> <C> <C>
W. William Bednarczyk 3,088,945 778,175
Steven D. Riedel 3,056,279 810,841
Charles J. B. Mitchell, Jr. 2,978,204 888,916
Clifford Meacham 3,851,120 16,000
William E. Bennett 3,850,870 16,250
Les Eck 3,703,570 163,550
John C. Hey 3,849,870 17,250
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herein:
3.1 Bylaws, as amended through January 30, 1998
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
5
<PAGE>
ATRIX INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS December 31, 1997 June 30, 1997
------------------ --------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 963,610 $1,386,514
Marketable securities, at cost 547,048 329,057
Accounts receivable less allowance for doubtful accounts
($27,301 and $27,158, respectively) 474,038 543,091
Inventories 1,073,137 918,493
Prepaid expenses 92,932 94,315
---------- ----------
Total Current Assets 3,150,765 3,271,470
---------- ----------
Deferred Income Taxes 124,000 124,000
Property and equipment, net 334,392 375,624
Intangible assets, net 77,349 82,381
Capitalized software development costs, net 204,730 231,249
---------- ----------
TOTAL ASSETS $3,891,236 $4,084,724
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 480,672 $ 494,766
Notes payable - bank 840,000 850,000
Current maturities of long-term debt 60,737 62,622
Accrued liabilities 81,282 97,365
---------- ----------
Total current liabilities 1,462,691 1,504,753
Notes payable - long term 81,804 111,294
---------- ----------
Total Liabilities 1,544,495 1,616,047
Shareholders' Equity:
Preferred stock, $.01 par value
3,000,000 shares authorized,
no shares issued
Common stock, $.04 par value,
12,500,000 shares authorized, 1,413,449
shares issued and outstanding 56,536 56,536
Capital in excess of par value 3,276,969 3,276,969
Accumulated deficit (986,764) (864,828)
---------- ----------
Total shareholders' equity 2,346,741 2,468,677
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,891,236 $4,084,724
========== ==========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
ATRIX INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 954,840 $1,397,075 $2,003,817 $2,828,243
Cost of Sales 654,029 987,921 1,373,026 1,975,873
--------- ---------- ---------- ----------
Gross Profit 300,811 409,154 630,791 852,370
Selling, general and
administrative expenses 390,568 398,223 766,257 804,873
--------- ---------- ---------- ----------
Income/(loss) from operations (89,757) 10,931 (135,466) 47,497
Other Income 1,700 0 1,700 0
Interest Income/expense, net 7,193 2,907 14,516 6,044
--------- ---------- ---------- ----------
Income/(loss) before taxes (80,864) 13,838 (119,250) 53,541
Income tax (expense)/benefit 0 781 (2,685) 781
--------- ---------- ---------- ----------
Net Income/(loss) ($80,864) $ 14,619 ($121,935) $ 54,322
========= ========== ========== ==========
Net income/(loss) per share
Basic and diluted ($.06) $.01 ($.09) $.04
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
ATRIX INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended December 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) ($121,935) $ 54,322
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 85,100 106,781
Change in current assets and liabilities:
Accounts receivable 69,053 (19,900)
Inventories (154,644) 83,247
Prepaid expenses 1,383 (6,520)
Accounts payable (14,094) (116,156)
Accrued liabilities (16,083) (22,474)
---------- ---------
Net cash provided by operating activities (151,220) 79,300
Cash flows from investing activities:
Purchase of equipment, leasehold
improvements and other assets, net (11,716) (22,900)
(Purchases)/ sales of marketable securities, net (217,991) 191,182
Additions intangible assets (601) (48,456)
---------- ---------
Net cash provided/(used) by investing activities (230,308) 119,826
Cash flows from financing activities:
Proceeds (repayments) from notes payable - bank, net (10,000) (41,299)
Repayments of notes payable - Porous Media (30,201) (33,385)
Repayments of capital lease obligations (1,175) (1,320)
---------- ---------
Net cash (used)/ provided by financing activities (41,376) (76,004)
Net increase/(decrease) in cash (422,904) 123,122
Cash - beginning of the period 1,386,514 541,515
---------- ---------
Cash - end of the period $ 963,610 $ 664,637
========== =========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
ATRIX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. CORPORATE ORGANIZATION
Atrix International, Inc. (the Company) designs and manufactures toner vacuums,
vacuum filters and circuit board transport cases. The Company also designs the
hardware and software for R3 Remote Metering and Copy Control products. In
addition, Atrix distributes tools, meters, electrostatic discharge (ESD) and
static control products and assembles tool kits for the telecommunication,
office machine and computer industries.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements, which are unaudited except for the
balance sheet as of June 30, 1997, have been prepared in accordance with
instructions to Form 10-QSB and do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentation have been
included. These financial statements should be read in conjunction with the
financial statements and accompanying notes included in the Company's Annual
Report on Form 10-KSB, for the year ended June 30, 1997 filed with the
Securities and Exchange Commission.
REVERSE STOCK SPLIT
On December 11, 1997, the Company announced a one-for-four reverse stock split,
effective December 16, 1997, for shareholders of record as of December 15, 1997.
The reverse split reduced the number of outstanding common shares in the Company
from 5,653,644 to 1,413,449 and raised the stock price above the $1.00 bid
requirement for NASDAQ SmallCap Market listed companies. Subsequent to the
reverse split, the Company exceeded all the requirements for continued listing:
net tangible assets, public float, market value of public float, number of
market makers, round of shareholders and corporate governance requirements. The
effect of the reverse stock split has been reflected for all periods presented.
NET INCOME (LOSS) PER SHARE
In February, 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share" (SFAS No. 128), SFAS No. 128 applies to entities with
publicly held common stock and is effective for financial statements issued for
periods ending after December 15, 1997. Under SFAS No. 128 the presentation of
primary earnings per share is replaced with a presentation of basic earnings per
share. SFAS No. 128 requires dual presentation of basic and diluted earnings
per share for entities with complex capital structures. Basic earnings per
share includes no dilution and is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common shares
outstanding for the period (1,413,449 for all periods presented in this report
on Form 10-QSB). Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. The Company has adopted SFAS No. 128 in the quarter
ended December 31, 1997, and all net income (loss) per share data presented
complies with this statement. There is no difference between basic and diluted
earnings per share data as presented, as the impact from stock options is either
anti-dilative for the fiscal 1998 periods due to net losses, or there was no
additional dilution from stock options for the fiscal 1997 periods, due to stock
option exercise prices exceeding the average common stock price for the periods.
9
<PAGE>
Note 3. Inventories
Inventories are comprised of the following at:
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
-------------------- -------------
<S> <C> <C>
Raw Materials $ 446,268 $355,165
Finished goods 626,869 563,328
---------- --------
Total $1,073,137 $918,493
</TABLE>
NOTE 4. INCOME TAXES
The Company has available net operating loss and tax credit carryforwards for
income tax purposes of approximately $1,086,937 and $83,688, respectively, on
June 30, 1997. These carryforwards expire in the years ending June 30, 2003
through 2008. Utilization of the net operating loss and tax credit carryforwards
are subject to certain limitations under Section 382 of the Internal Revenue
Code. A valuation allowance exists for a portion of the net tax benefit
associated with all carryforwards and temporary differences at December 31, 1997
and June 30, 1997 as their realization is not presently assured.
INVENTORY OF DEFERRED ITEMS AND NOL CARRYFORWARD
The composition of the net deferred tax is as follows:
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
------------------ -------------
<S> <C> <C>
Loss Carryforwards $ 529,485 $ 476,078
Research & Development
Credits 83,688 83,688
Inventory 11,826 11,453
Bad Debts 5,671 5,671
Fixed Assets 69,460 77,121
Amortization (199,879) (186,033)
Other 0 0
---------- ---------
500,251 467,978
Less: Valuation Allowance (376,251 (343,978)
---------- ---------
$ 124,000 $ 124,000
========== =========
</TABLE>
10
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ATRIX INTERNATIONAL, INC.
Date: February 11 1998
/s/ Steven D. Riedel
--------------------------
Steven D. Riedel
Chief Executive Officer
(Principal Executive Officer)
/s/ Dean L. Gerber
--------------------------
Dean L. Gerber
Chief Financial Officer
(Principal Financial and Accounting Officer)
11
<PAGE>
ATRIX INTERNATIONAL, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 1997
ITEM NO. ITEM METHOD OF FILING
- -------- ---- ----------------
3.1 Bylaws, as amended through
January 30, 1998 Filed herewith
27.1 Financial data schedule Filed herewith
<PAGE>
EXHIBIT 3.1
BYLAWS
OF
ATRIX INTERNATIONAL, INC.
(FORMERLY TIEMPO EQUITIES, INC.)
AS AMENDED THROUGH JANUARY 30, 1998
ARTICLE
1.
OFFICES
The registered office of the corporation shall be that set forth in the
Articles of Incorporation dated July 31, 1987, filed with the Secretary of State
of Minnesota on August 11, 1987, or in the most recent amendment thereof, or in
a statement of the Board of Directors filed with the Secretary of State of
Minnesota changing the registered office in the manner prescribed by law. The
corporation may also have offices and places of business at such other locations
as the Board of Directors may from time to time designate, or the business of
the corporation may require.
ARTICLE
2.
SHAREHOLDER'S MEETINGS
2.1. TIME AND PLACE OF MEETINGS. Regular or special meetings of the
shareholders, if any, shall be held on the date and at the time and place
fixed by the President/Chief Executive Officer or the Board of Directors,
except that a meeting called by, or at the demand of a shareholder or
shareholder, pursuant to Minnesota Statutes, Section 302A.431, Subd. 2,
shall be held in the country where the principal executive office is
located.
2.2. REGULAR MEETINGS. An annual meeting of the shareholders shall be held at
such place as the Board of Directors shall designate, either within or
without the State of Minnesota, and on such date and at such time as may
be determined by the Board of Directors and communicated to the
shareholders according to the requirements set forth herein, for the
purpose of electing directors and for the transaction of any other
business which may properly come before it. Additional regular meetings of
the shareholders may be held on a less frequent periodic basis. No meeting
shall be considered a regular meeting unless specifically designated as
such in the notice of meeting or unless all the shareholders are present
in person or by proxy and none of them objects to such designation. Any
business appropriate for action by the shareholders may be transacted at a
regular meeting.
2.3. SPECIAL MEETINGS. Special meetings of the shareholders may be held for any
purpose or purposes, unless otherwise prescribed by statute. Such a
meeting may be called by the President/Chief Executive Officer, the Chief
Financial Officer or two or more directors and shall be called by the
President/Chief Executive Officer at the request in writing of
shareholders owning not less than ten percent (10%) or more of the voting
stock of the corporation.
2.4. NOTICE OF MEETINGS. Written notice of a meeting of the shareholders
stating the time and place thereof shall be mailed at least five (5) days
but not more than sixty (60) days prior to the
<PAGE>
meeting, except as otherwise provided by statute, to each shareholder
entitled to vote thereat to the last known address of such shareholder as
the same appears upon the books of the corporation.
Every notice of any special meeting shall state the purpose or purposes
for which the meeting has been called, and the business transacted at all
special meetings shall be confined to the purpose stated in the call, unless all
of the shareholders are present in person or by proxy and none of them objects
to consideration of a particular item of business.
2.5. RECORD DATE. The determination of shareholders entitled to vote at a
regular or special meeting shall be made on the date fixed by the Board
of Directors for closing of the books of the corporation. If no date is
fixed by the Board, the date for such determination shall be the date
five (5) days before the date of such meeting.
2.6. WAIVER OF NOTICE. Notice of the time, place and purpose of any meeting of
shareholders, whether required by statute, the Articles of Incorporation
or these Bylaws, may be waived by any shareholder. Such waiver may be
given before, at, or after the meeting, and may be given in writing,
orally or by attendance..
2.7. ACTION WITHOUT MEETING. Any action which may be taken at a meeting of the
shareholders may be taken without a meeting, if authorized in writing or
writings signed by all shareholders who would be entitled to notice of a
meeting for such purpose.
2.8. QUORUM. The presence at any meeting, in person or by proxy, of the
holders of a majority of the shares entitled to vote, shall constitute a
quorum for the transaction of business. If, however, such majority shall
not be present in person or by proxy at a meeting of the shareholders,
those present shall have the power to adjourn the meeting from time to
time, without notice other than by announcement at the meeting, until the
requisite amount of voting shares shall be represented. At any such
adjourned meeting at which the required number of voting shares shall be
represented, any business may be transacted which might have been
transacted at the meeting as originally noticed.
2.9. VOTING. At all meetings of the shareholders, each shareholder have the
right to vote shall be entitled to vote in person or by proxy, duly
appointed by an instrument in writing subscribed by such shareholder.
Each shareholder shall have one (1) vote for each share having voting
power standing in his name on the books of the corporation. Upon the
demand of any shareholder, the vote for directors or the vote upon any
question before the meeting shall be by ballot. All elections shall be
had and all questions decided by a majority vote except as otherwise
required by these Bylaws, the Articles of Incorporation, any applicable
shareholder agreement, or statute.
2.10. PROXIES. At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or by his duly appointed attorney-
in-fact. Such proxy shall be filed with the Secretary of the corporation
at or before the time of the meeting. A proxy shall be filed with the
Secretary of the corporation at or before the time of the meeting. A
proxy shall be valid for the period specified in the proxy or, if no
expiration date is provided in the proxy, for a period not to exceed
eleven months from the date of its execution. A proxy's authority shall
not be revoked by the death or incapacity of the maker unless, before the
vote is cast and the authority exercised, written notice of such death or
incapacity is given to the corporation.
2
<PAGE>
2.11. NOTIFICATIONS OF NOMINATIONS AND PROPOSED BUSINESS. Except as otherwise
required by the corporation's Articles of Incorporation (including any
certificate of designation for any class of preferred stock) or
applicable law, (a) nominations for the election of directors and (b)
business proposed to be brought before any shareholder meeting may be
made (x) by or at the direction of the Board of Directors or (y) by any
shareholder entitled to vote in the election of directors generally who
complies with the procedures set forth in this Article II, Section 2.11.
For any such shareholder to nominate one or more persons for election as
directors at a meeting of shareholders or to propose business to be
brought before a meeting of shareholders, or both, such shareholder must
have given timely notice in proper written form of his or her intent to
make such nomination or nominations or to propose such business. To be
timely, a shareholder's notice must be delivered to or mailed and
received by the Chairman of the Board or the Chief Executive Officer of
the corporation not less than forty-five (45) days nor more than ninety
(90) days prior to the scheduled date of such meeting, regardless of any
postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that if the corporation gives less than fifty-five
(55) days' notice of such meeting, notice by the shareholder to be timely
must be so delivered or received not later than the close of business on
the tenth (10th) day after the date on which the corporation first mailed
notice of such meeting; provided further that if the meeting is a special
meeting of shareholders that is being called at the demand of a
shareholder in accordance with applicable law, to be timely the
shareholder demanding such special meeting must so deliver the notice
required pursuant to this Article II, Section 2.11 at or before the
delivery by the shareholder of the shareholder's demand for such special
meeting of shareholders. To be in proper written form, a shareholder's
notice to the corporation shall set forth: (i) the name and address of
the shareholder who intends to make the nominations or propose the
business and any other shareholders known by such shareholder to be
supporting such nominations or proposals; (ii) the number of shares of
each class of capital stock of the corporation beneficially owned by the
shareholder who intends to make the nominations or propose the business
and any other shareholders known by such shareholder to be supporting
such nominations or proposals; (iii) if applicable, the name, age,
principal occupation or employment, business and residence address and
telephone number of each nominee, and number of shares of each class of
capital stock of the corporation beneficially owned by each nominee; (iv)
if applicable, a description of all arrangements or understandings
between the shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (v) if applicable, the
consent of each nominee to serve as a director of the corporation if so
elected; (vi) if applicable, a brief description of the business to be
proposed by the shareholder at the meeting, the reasons for such proposal
and a description of any material interest of the shareholder in such
proposal; and (vii) such other information regarding each nominee or each
proposal that is required to be disclosed in the solicitation of proxies
by the Board of Directors pursuant to the proxy rules of the Securities
and Exchange Commission, whether or not the corporation is then subject
to such proxy rules. If the presiding officer of the meeting of
shareholders determines that the nomination of any persons or proposal of
any business was not made in accordance with this Article II, Section
2.11, he or she shall so declare at the meeting and such nomination or
proposal shall not be acted upon at the meeting.
3
<PAGE>
ARTICLE
3.
BOARD OF DIRECTORS
3.1. ELECTION OF DIRECTORS. The business and affairs of this corporation shall
be managed by its Board of Directors. The number of directors shall be the
number last elected by a majority vote of the shareholders or by the Board
of Directors, which number shall not be less than three (3) nor more than
seven (7) directors. Directors need not be shareholders. Each of the
directors shall hold office until the regular meeting of the shareholders
next held after his election, until a successor shall have been elected
and shall qualify, or until he shall resign or shall have been removed as
hereinafter provided.
3.2. BOARD MEETINGS; PLACE AND NOTICE. Meetings of the Board of Directors may
be held from time to time at any place within or without the State of
Minnesota that the Board of Directors may designate. In the absence of
designation by the Board of Directors, Board meetings shall be held at the
principal executive office of the corporation, except as may be otherwise
unanimously agreed orally or in writing or by attendance. Any director may
call a meeting of the Board of Directors by giving two (2) days notice to
all directors of the date and time of the meeting. The note need not state
the purpose of the meeting. Notice may be given by mail, telephone,
telegram or in person. If a meeting schedule is adopted by the Board of
Directors, or if the date and time of a Board of Directors meeting has
been announced at a previous meeting, no notice is required.
3.3. WAIVER OF NOTICE. Notice of the time, place and purpose of any meeting of
the Board of Directors, whether required by statute, the Articles of
Incorporation, or these Bylaws may be waived by any director. Such waiver
may be given before, at, or after the meeting and may be given in writing,
orally or by attendance. The attendance of a director at a meeting and
participation therein shall constitute waiver of notice of such meeting
unless the director attends for the express purpose of objecting to the
translation of business because the meeting is not lawfully called or
convened, the director so states at the meeting, and the director does not
thereafter participate in the meeting.
3.4. QUORUM AND ACTION OF BOARD. At all meetings of the Board of Directors, a
majority of the directors shall be necessary and sufficient to constitute
a quorum for the transaction of business; provided, that if less than a
majority of the directors are present, a majority of those present may
adjourn the meeting from time to time without notice other than an
announcement at the meeting at which adjournment is taken.
The directors present at a duly called or held meeting at which a quorum
is present may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
The act of a majority of the directors present at any meeting at which a
quorum is present, or at any meeting at which a quorum was present and at which
the remaining directors are authorized under this Section to continue to
transact business shall be the act of the Board of Directors.
3.5. ELECTRONIC COMMUNICATIONS. A conference among directors by any means of
communication through which the directors may simultaneously hear each
other during the conference constitutes a board meeting, if the same
notice is given of the conference as required by these
4
<PAGE>
Bylaws for a meeting, and if the number of directors participating in the
conference would be sufficient to constitute a quorum at a meeting.
Participation in a meeting by such electronic means of communication
constitutes presence in person at the meeting.
3.6. VACANCIES. Any vacancy occurring on the Board of Directors by reason of
death, resignation, disqualification, or increase in the number of
directors, may be filled by a majority of the remaining directors, though
less than a quorum, at any regular or special meeting, except that
vacancies on the Board resulting from newly created directorships may
only be filled by a majority vote the directors serving at the time of
the increase. Each director so elected shall hold office until the next
regular or special shareholder meeting or until his or her successor is
elected and qualified.
3.7. RESIGNATIONS. Any director of the corporation may resign at any time by
giving written notice to the Chairman of the Board or to the
President/Chief Executive Officer or Secretary of the corporation. Unless
a later date is specified in the notice of resignation as the effective
date of resignation, resignation shall take effect on the date of receipt
of the written notice by the Chairman, President/Chief Executive Officer,
or Secretary. Unless otherwise specified in such notice, the acceptance
of the resignation shall not be necessary to make it effective.
3.8. REMOVAL. At a meeting of shareholders called expressly for that purpose,
any director or the entire Board of Directors may be removed, with or
without cause, by a vote of the holders of a majority of the shares then
entitled to vote at an election of directors.
3.9. ABSENT DIRECTORS. A director may give advance written consent or
opposition to a proposal to be acted on at a Board meeting. If the
director is not present at the meeting, consent or opposition to a
proposal does not constitute presence for purposes of determining the
existence of a quorum, but consent to opposition stated in writing and
delivered to the President/Chief Executive Officer or the officer or
director presiding at the meeting shall be counted as a vote in favor of
or against the proposal if the proposal acted on at the meeting is
substantially the same or has substantially the same effect as the
proposal to which the director has consented or objected. Such written
consent or opposition shall be entered in the minutes or other record of
action at the meeting.
3.10. ACTION WITHOUT MEETING. Any action which is required or may be taken at a
meeting of the Board of Directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by a
majority of all the directors entitled to vote with respect to the
subject matter thereof, except as to matters that require shareholder
approval, in which case such consent in writing must be signed by all of
the directors. Action taken by such written consent shall be effective on
the date when signed by the required number of directors, or such earlier
effective date as set forth therein. When written action is permitted to
be taken by less than all of the directors, all directors shall be
notified immediately of its text and effective date. Failure to provide
the notice shall not invalidate the written action. A director who does
not sign or consent to the written action shall have no liability for the
action or actions taken thereby.
3.11. PRESUMPTION OF ASSENT. For purposes of any liability as a director, a
director of the corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless:
5
<PAGE>
(a) He objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened
and does not thereafter participate in the meeting;
(b) He votes against the action at the meeting; or
(c) He is prohibited from voting at the meeting due to a conflict of
interest.
3.12. COMMITTEES. The Board of Directors may, by a majority vote, designate two
or more of their number to constitute an executive committee, which, to
the extent determined by the Board and allowed by law, shall have and
exercise the authority of the Board in the management of the business of
the corporation. Such executive committee shall act only in the interval
between meetings of the Board and shall be subject at all times to the
control and direction of the Board. The Board of Directors by a majority
vote may also appoint one or more natural persons who need not be Board
members to serve on such other committees as the Board may determine.
Such other committees shall have powers and duties as shall from time to
time be prescribed by the Board. A majority of the members of any
committee present at a meeting is a quorum for the transaction of
business. All committees shall keep accurate minutes of their meetings,
which minutes shall be made available upon request to members of that
committee and to any director.
3.13. CHAIRMAN. The Board may elect one of their number to serve as Chairman,
who shall preside, when present, at all meetings of the Board.
3.14. COMPENSATION. The directors of the corporation and all members of
committees shall serve without salary, unless ordered by the directors;
however, they shall be paid the necessary expenses incurred in the
execution of their duties. Nothing herein shall preclude the paying by
the corporation of a salary or other compensation to an officer or
employee who is also a director.
3.15. LIMITATION OF LIABILITY. Except as expressly provided in Minnesota
Statutes, Section 302A.251, Subd. 4, a member of the Board of Directors
of this corporation shall have no personal liability to this corporation
or to the shareholders for monetary damages for breach of fiduciary duty
as a member of the Board of Directors. Amendment of repeal of such
limitation in the Articles of Incorporation of this corporation shall not
adversely affect any limitation of liability of a director with respect
to any liability or alleged liability arising out of any act or omission
occurring prior to such amendment or repeal.
ARTICLE
4.
OFFICERS
4.1. ELECTION OF OFFICERS. The Board of Directors shall, from time to time,
elect a President/Chief Executive Officer and a Treasurer/Chief Financial
Officer. The Board of Directors may, but shall not be required to, elect
a Secretary and one (1) or more Vice Presidents, as they may determine,
one of whom may be designated as an Executive Vice President. In
addition, the Board of Directors may elect such other officers and agents
as it may determine necessary, including Assistant Secretaries and
Assistant Treasurers. Such officers shall exercise such powers and
perform such duties as are prescribed by the Articles of Incorporation or
the Bylaws
6
<PAGE>
or as may be otherwise determined from time by the Board of Directors. Any
number of offices or functions of those officers may be held or exercised
by the same person.
4.2. TERMS OF OFFICE. The officers of the corporation shall hold office for
such terms as shall be determined from time to time by the Board of
Directors or until their successors are chosen and qualify in their stead.
Any officer elected or appointed by the Board of Directors may be removed
by the affirmative vote of a majority of the whole Board of Directors with
or without cause.
4.3. SALARIES. The salaries of all officers and agents of the corporation
shall be determined by the Board of Directors.
4.4. PRESIDENT/CHIEF EXECUTIVE OFFICER. The President/Chief Executive Officer
shall be the chief executive officer of the corporation, and shall have
the general direction of the affairs of the corporation. He shall execute
all contracts, mortgages and other instruments of the corporation, and may
appoint and discharge agents and employees. He shall be ex officio is a
member of any executive committee which may be constituted hereunder, and
all other standing committees, and shall perform all such other duties as
are incident to his office, or are properly required to him by the Board
of Directors. As used herein or in other writings of, or documents
delivered on behalf of, the corporation, the titles "President" and "Chief
Executive Officer" shall mean one and the same person and shall be
interchangeable.
4.5. VICE PRESIDENTS. The Vice Presidents in the order designated by the Board
of Directors shall perform the duties and exercise the powers of the
President/Chief Executive Officer in his absence or incapacity. The Vice
Presidents shall perform such other duties as the Board of Directors shall
from time to time prescribe.
4.6. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall attend all
sessions of the Board of Directors and all meetings of the shareholders,
and record all votes and minutes for all proceedings in a book kept for
that purpose, and shall perform like duties for the standing committees
when required. He shall give or cause to be given notice of all meetings
of the shareholders and of the Board of Directors, and shall perform such
other duties as may be prescribed by the Board of Directors or the
President/Chief Executive Officer under whose supervision he shall be. He
shall keep in safe custody the seal, if any, of the corporation, and shall
affix the same to any instrument requiring it.
The Assistant Secretary shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary, and
shall perform such other duties as the Board of Directors shall prescribe.
4.7. TREASURER/CHIEF FINANCIAL OFFICER AND ASSISTANT TREASURERS. The
Treasurer/Chief Financial Officer shall have the custody of the corporate
funds and securities, and shall keep full and accurate account of receipt
and disbursements in books belonging to the corporation, and shall deposit
all moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated from time to time by
the Board of Directors; he shall disburse the funds of the corporation in
discharge of corporate liabilities and obligations as may be ordered by
the Board of Directors from time to time, taking the proper vouchers for
such disbursements, and shall render to the President and the Board of
Directors whenever they may require the same, an account of all of his
transactions and of the financial condition of the
7
<PAGE>
corporation; he shall give the corporation a bond, if required by the
Board of Directors, in such sum as the Board of Directors may by
resolution determine; and with one (1) or more sureties satisfactory to
the Board of Directors for the faithful performance of the duties of his
office, and for the restoration to the corporation in case of death,
resignation, retirement or removal from office of all books, vouchers,
papers, money and other property of whatsoever kind in his possession or
under his control belonging to the corporation. As used herein or in other
writings of, or documents delivered on behalf of, the corporation, the
titles "Treasurer" and "Chief Financial Officer" shall mean one and the
same person and shall be interchangeable.
The Assistant Treasurer shall, in the absence or disability of the
Treasurer/Chief Financial Officer, perform the duties and exercise the powers of
the Treasurer/Chief Financial Officer, and shall perform such other duties as
the Board of Directors shall prescribe.
4.8. VACANCIES. If the office of any officer or agent becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office
or otherwise, the Board of Directors, by a majority vote, shall choose a
successor or successors who shall hold office for the unexpired term in
respect of which such vacancy occurred.
4.9. DELEGATION OF AUTHORITY. An officer elected or appointed by the Board of
Directors may delegate some or all of the duties or powers of his office
to other persons, provided that such delegation is in writing.
4.10. CONTRACT RIGHTS. The election or appointment of a person as an officer or
agent does not, of itself, create contract rights.
ARTICLE
5.
INDEMNIFICATION
To the full extent permitted or required by Section 302A.521 of the
Minnesota Business Corporation Act, as now enacted or hereinafter amended, or by
other provisions of law, each person who was or is a party or is threatened to
be made a party to any threatened, pending, or pleaded action, suit, or
proceeding, whenever brought, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer or
agent of the corporation, or he is or was serving at the specific request of the
corporation as a director, officer, employee, fiduciary, or agent of another
corporation, partnership, joint venture, trust or other entity or enterprise,
shall be indemnified by the corporation against expenses, including attorneys'
fees, judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit, or proceeding; provided,
however, that the indemnification with respect to a person who is or was serving
as a director, officer, employee, fiduciary, or agent of another corporation,
partnership, joint venture, trust, or other enterprise shall apply only to the
extent such person is not indemnified by such other corporation, partnership,
joint venture, trust, or other entity or enterprise. Indemnification provided
by this paragraph shall continue as to a person or agent and shall inure to the
benefit of the heirs, executors, and administrators of such person and shall
apply whether or not the claim against such person arises out of matters
occurring before the adoption of this paragraph.
To the full extent permitted by the Minnesota Business Corporation Act, as
now enacted or hereinafter amended, the corporation shall have the authority to
purchase and maintain insurance for officers, directors, employees and agents
against liability arising out of their status as such.
8
<PAGE>
Further, to the full extent permitted by the Minnesota Business
Corporation Act, as now enacted or hereinafter amended, the corporation shall
have the authority to enter into such agreements as the Board of Directors deems
appropriate for the indemnification or present or future directors and officers
of the corporation in connection with their service to, or status with, the
corporation or any other corporation, entity or enterprise with which such
person is serving at the express written request of the corporation.
ARTICLE
6.
SHARES
6.1. ISSUANCE OF SHARES. The Board of Directors is authorized and empowered to
issue shares of the capital stock of the corporation to the full amount
authorized by the Articles of Incorporation and all amendments thereto in
such amounts and at such times as may be determined by the Board of
Directors and as permitted by law.
6.2. CERTIFICATES. Certificates for shares of the capital stock of the
corporation shall be in such form or forms as may be determined by the
Board of Directors or those actually used in the event the Board fails to
act. There shall be no uncertificated shares. Each shareholder shall be
entitled to a certificate representing his or her shares of stock, signed
by the President/Chief Executive Officer or a Vice President, and by the
Secretary or an Assistant Secretary, if one has been elected or appointed,
otherwise, by the Treasurer/Chief Financial Officer or an Assistant
Treasurer; provided, however, that where a certificate is countersigned by
a transfer agent or an assistant transfer agent or by a transfer clerk
acting on behalf of the corporation and registered by a registrar, the
signatures of said officers on such certificates for shares may be
facsimiles. If a person signs or has a facsimile signature placed upon a
certificate while an officer, transfer agent, or registrar of the
corporation, the certificate may be issued by the corporation even if the
person has ceased to have that capacity before the certificate is issued
with the same effect as if the person had that capacity at the date of its
issue. All certificates for shares shall be consecutively numbered or
otherwise identified, and shall state the name of the corporation, that it
is organized under the laws of the State of Minnesota, the name of the
person to whom the shares are issued, the number and class of shares, and
the designation of the series, if any, that the certificate represents.
The name of the person to whom the shares are issued with the number of
shares and date of issue shall be entered on the books of the corporation.
6.3. TRANSFER OF SHARES. The shares of stock of the corporation shall be
transferable upon its books only by persons named in the certificates or
by attorney lawfully constituted in writing, and upon surrender to the
corporation of the old stock certificates, properly endorsed, to the
person in charge of the stock and transfer books and designate, by whom
they shall be canceled. New certificates for the shares shall thereupon be
issued to the person entitled to such new certificates. A record shall be
made of each transfer, and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the
entry of the transfer.
6.4. LOST CERTIFICATES. Any shareholder claiming a certificate of shares to be
lost, stolen or destroyed shall make an affidavit or affirmation of that
fact in such form as the Board of Directors may require, and shall, if the
Board of Directors so requires:
(a) advertise such fact in such manner as the Board of Directors may
require;
9
<PAGE>
(b) give to the corporation and its transfer agent and registrar, if any,
a bond of indemnity in open penalty as to amount or in such other sum
as the Board of Directors may direct, in form satisfactory to the
Board of Directors and to the transfer agent and registrar of the
corporation, if any, and with or without such sureties as the Board of
Directors with the approval of the transfer agent and registrar, if
any, may prescribe; and
(c) satisfy such other requirements as may be imposed by the Board.
If notice by the shareholder of the loss, destruction, or wrongful taking
of a certificate is received by the corporation before the corporation has
received notice that the shares represented by such certificate have been
acquired by a bona fide purchaser, and if the foregoing requirements imposed by
the Board are satisfied, then the Board of Directors shall authorize the
issuance of a new certificate for shares of the same tenor and for the same
number of shares as the one alleged to have been lost or destroyed.
6.5. DIVIDENDS. The Board of Directors may declare dividends to the extent
permitted by Section 302A.551 of the Minnesota Business Corporation Act as
and when it deems expedient. Before declaring any dividend, there may be
reserved out of the accumulated profits such sums as the Board of
Directors from time to time, in its discretion, thinks proper for working
capital or as a reserve fund to meet contingencies or for equalizing
dividends, or for such other purposes as the Board of Directors shall
think conducive to the interests of the corporation.
Shareholders entitled to payment of such dividend shall be those
shareholders of record on the date fixed by the Board for closing of the books
of the corporation. If no date for closing of the books is fixed by the Board,
the shareholders entitled to payment of the dividend shall be the shareholders
of record on the date on which the resolution declaring such dividend is adopted
by the Board.
ARTICLE
7.
MISCELLANEOUS
7.1. BOOKS OF ACCOUNT. The corporation shall keep such books of account as are
required by Section 302A.461 of the Minnesota Business Corporations Act
and every shareholder shall have a right to examine such books, in person
or by agent or attorney, to the extent provided in such Section.
7.2. CORPORATE SEAL. If so directed by the Board of Directors, the corporation
may use a corporate seal. The failure to use such seal, however, shall not
affect the validity of any documents executed on behalf of the
corporation. The seal need only include the word "seal," but it may also
include, at the discretion of the Board of Directors, such additional
wording as is permitted by law.
7.3. CHECKS AND DOCUMENTS. All checks or demands for money and notes of the
corporation and all other instrument, documents or deeds of every kind,
nature and description required to be executed in the name and in behalf
of the corporation shall be signed by such of the officers or agents of
the corporation as the Board of Directors may from time to time by
resolution designate and determine.
7.4. FISCAL YEAR. The fiscal year of this corporation shall be as determined by
resolution of the Board of Directors.
10
<PAGE>
7.5. AMENDMENTS TO BYLAWS. These Bylaws may be amended or altered by the vote
of a majority of the Board of Directors. Such authority of the Board of
Directors is subject to the power of the shareholders to change or repeal
such Bylaws as prescribed by statute and subject to any other limitation
son such authority prescribed by statute.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 963,610
<SECURITIES> 547,048
<RECEIVABLES> 474,038<F1>
<ALLOWANCES> 0
<INVENTORY> 1,073,137
<CURRENT-ASSETS> 3,150,765
<PP&E> 334,392<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,891,236
<CURRENT-LIABILITIES> 1,462,691
<BONDS> 0
0
0
<COMMON> 56,536
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,891,236
<SALES> 2,003,817
<TOTAL-REVENUES> 2,003,817
<CGS> 1,373,026
<TOTAL-COSTS> 1,373,026
<OTHER-EXPENSES> 766,257
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,516)<F3>
<INCOME-PRETAX> (119,250)
<INCOME-TAX> 2,685
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,935)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
<FN>
<F1>NET OF ALLOWANCE FOR UNCOLLECTIBLES
<F2>NET OF ACCUMULATED DEPRECIATION
<F3>INTEREST EXPENSE IS NET WITH INTEREST INCOME
</FN>
</TABLE>
