<PAGE> 1
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 Period Ended JUNE 30, 1996
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 0-19278
OSTEOTECH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3357370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
51 JAMES WAY, EATONTOWN, NEW JERSEY 07724
(Address of principal executive offices) (Zip Code)
(908) 542-2800
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 par value - 7,787,235 shares as of July 31, 1996
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
OSTEOTECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
<C> <C>
Three Months Six Months
Ended June 30, Ended June 30,
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenues:
Service $7,578 $5,598 $15,101 $11,843
Product 641 844 1,365 1,407
Grant 156 184 318 358
8,375 6,626 16,784 13,608
Costs and expenses:
Cost of services 3,046 2,459 6,127 5,017
Cost of products 569 572 1,085 1,097
Marketing, general and administrative 3,189 2,776 6,526 5,724
Research and development 917 756 1,797 1,552
Provision for termination of
distribution agreement 980 980
7,721 7,543 15,535 14,370
{Other income (expense):
Recovery of principal on note from
a significant customer 69 69
Interest income, net 44 96 80 256
Other 5 (48) 25 (2)
49 117 105 323
Income (loss) before income taxes 703 (800) 1,354 (439)
Income tax provision (benefit), net 501 (55) 981 270
Net income (loss) $ 202 $ (745) $ 373 $(709)
Net income (loss) per share $ .02 $ (.10) $ .04 $(.09)
Shares used in computing net
income (loss) per share 8,319,023 7,818,299 8,354,163 7,813,154
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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{OSTEOTECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
<S> <C> <C> <C>
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 7,309 $ 2,788
Short-term investments 987 4,919
Accounts receivable, net 5,407 4,561
Inventories 1,090 1,081
Deferred income taxes 995 1,429
Prepaid expenses and other current assets 2,299 2,882
Total current assets 18,087 17,660
Equipment and leasehold improvements, net 9,079 8,624
Excess of cost over net assets of business acquired,
less accumulated amortization of $1,071 in 1996
and $945 in 1995 2,627 2,753
Intangible assets, net of accumulated amortization of
$258 in 1996 and $113 in 1995 483 610
Other assets 527 523
Total assets $30,803 $30,170
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,772 $ 4,078
Notes payable 314 647
Current maturities of long-term debt and
obligations under capital leases 785 800
Total current liabilities 5,871 5,525
Long-term debt and obligations under capital leases 1,204 1,598
Other liabilities 488 453
Total liabilities 7,563 7,576
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 5,676,595 shares
authorized; no shares issued or outstanding
Common stock, $.01 par value; 20,000,000 shares
authorized; issued and outstanding 7,787,235
shares in 1996 and 7,198,179 shares in 1995 78 72
Additional paid-in capital 30,099 29,782
Currency translation adjustments (99) (48)
Accumulated deficit (6,838) (7,212)
Total stockholders' equity 23,240 22,594
Total liabilities and stockholders' equity $30,803 $30,170
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
OSTEOTECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 1995
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES}
Net income (loss) $ 373 $ (709)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for termination of distribution agreement 980
Depreciation and amortization 1,168 742
Deferred income taxes 434 226
Other items, net 6 9
Changes in assets and liabilities:
Accounts receivable (875) (110)
Inventories (28) (506)
Prepaid expenses and other current assets 533 166
Accounts payable and other liabilities 716 76
Net cash provided by (used in) operating activities 2,327 874
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (1,200) (2,013)
Purchases of investments (2,974) (2,970)
Proceeds from sale of investments 6,907 1,957
Increase in other assets (213) (71)
Net cash provided by (used in) investing activities 2,520 (3,097)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 324 73
Proceeds from issuance of notes payable 94 110
Proceeds from issuance of long-term debt 215
Principal payments on notes payable (427) (226)
Principal payments on long-term debt
and obligations under capital leases (393) (223)
Net cash provided by (used in) financing activities (402) (51)
Effect of exchange rate changes on cash 76 (36)
Net increase (decrease) in cash and cash equivalents 4,521 (2,310)
Cash and cash equivalents at beginning of period 2,788 3,785
Cash and cash equivalents at end of period $ 7,309 $1,475
Supplementary cash flow data:
Cash paid during the period for interest $ 133 $ 101
Cash paid during the period for taxes 519 68
Capital lease obligations entered into during the period 138
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
OSTEOTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments (consisting only of normal recurring accruals)
considered necessary by management to present fairly the Company's
consolidated financial position as of June 30, 1996 and December 31,
1995, and the consolidated results of operations for the three-month and
six-month periods ended June 30, 1996 and 1995, and the consolidated cash
flows for the six-month periods then ended. The results of operations
for the respective interim periods are not necessarily indicative of the
results to be expected for the full year. The condensed consolidated
financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1995 which were
included as part of the Company's Report on Form 10-K.
2. FINANCING ARRANGEMENTS
Effective as of March 1996, the Company amended its loan and security
agreement with a Dutch bank which provides for borrowings up to 5,000,000
Dutch Guilders ("dfl"), or approximately $2,925,000 at the June 30, 1996
exchange rate. The amendment extends the term of the agreement through
June 1997 and reduces the annual rate of interest on borrowings from the
bank's prime rate plus a margin of 2.5% to the bank's prime rate plus a
margin of 2.0%. Additionally, the Company has voluntarily agreed to limit
its borrowings in 1996, if any, to no more than 3,000,000 dfl, or
approximately $1,755,000.
Effective as of May 1996, the Company amended its loan and security
agreement with a U.S. bank which provides for borrowings under a
revolving line of credit and an equipment line of credit. The amendment
extends the term of the agreement through May 1997 and reduces the annual
rate of interest on equipment advances from the bank's prime rate plus a
margin of .75% to the bank's prime rate plus a margin of .25%.
3. Reclassifications
Certain of the 1995 amounts have been reclassified for comparative
purposes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
RESULTS OF OPERATIONS
NET INCOME (LOSS)
Net income in the second quarter of 1996 increased to $202,000 or $.02 per
share compared to a net loss of $745,000 or $.10 per share in the second
quarter of 1995. Net income in the first six months of 1996 was $373,000 or
$.04 per share compared to net loss of $709,000 or $.09 per share in the first
six months of 1995. Results of operations in 1995 were affected by a pre-tax
charge of $980,000 resulting from the Company's decision to terminate its
distribution agreement for trauma implant products.
Following is a discussion of factors which affected results of operations for
the three-month and six-month periods ended June 30, 1996 and 1995.
REVENUES
Revenues in the second quarter of 1996 increased 26% to $8,375,000 from
$6,626,000 in the second quarter of 1995. Revenues in the first six months of
1996 increased 23% to $16,784,000 as compared to $13,608,000 in the six months
ended June 30, 1995. During the second quarter and first six months of 1996,
two of the Company's major customers accounted for 64% and 23% and 62% and 17%,
respectively, of revenues.
The increase in revenues in the second quarter and first six months of 1996
resulted principally from increased demand for the Company's allograft
processed tissue including Grafton<reg-trade-mark> Demineralized Bone Matrix
(DBM) Gel and Grafton DBM Flex which was introduced in January 1996.
COST OF SERVICES AND PRODUCTS
Cost of services as a percentage of service revenues was 40% and 41% in the
second quarter and first six months of 1996, respectively, compared to 44% and
42% in the same periods last year. The decrease in costs as a percentage of
revenues results primarily from a shift in revenue mix toward services with
higher gross margins.
Cost of products as a percentage of product revenues was 89% and 79% in the
second quarter and first six months of 1996, respectively, compared to 68% and
78% in the same periods last year. The increase in costs as a percentage of
revenues results primarily from a shift in revenue mix toward products with
lower gross margins.
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<PAGE> 7
Marketing, General and Administrative
Marketing, general and administrative expenses increased $413,000 or 15% in the
second quarter and $802,000 or 14% in the first six months of 1996, compared to
the same periods last year. The increases were primarily attributable to an
increase in facilities and expanded marketing activities associated with the
development of a national network of independent agents.
RESEARCH AND DEVELOPMENT
Research and development expenses increased $161,000 and $245,000 in the second
quarter and first six months of 1996, respectively, or 21% and 16% compared to
the same periods last year. The increases were primarily attributable to
increased spending associated with the development of additional allograft
tissue forms which have been or are expected to be introduced into the market
during 1996, expansion of the Company's viral inactivation process to a broader
range of allograft tissue and continued development of PolyActive products.
PROVISION FOR TERMINATION OF DISTRIBUTION AGREEMENT
In June 1995, the Company terminated its distribution agreement for trauma
implant products with its supplier, aap, GmbH, of Berlin, Germany, due to aap's
inability to meet certain material covenants of the agreement. As a result of
this termination the Company recorded a charge of $980,000 consisting
principally of inventory write-offs, employee termination costs and legal fees.
OTHER INCOME, NET
Other income, net decreased $68,000 and $218,000 in the second quarter and
first six months of 1996 primarily due to the repayment of a fully reserved
note receivable from a significant customer during 1995 which had a higher
interest rate than current investments. During the second quarter of 1995
$69,000 of principal payments were received on the fully reserved note. The
note had an outstanding balance of $4.1 million at June 30,1995.
PROVISION FOR INCOME TAXES
The provision for income taxes increased by $556,000 and $711,000 in the second
quarter and first six months of 1996 as a result of higher US taxable income.
The provision for income taxes in each period reflects a rate in excess of the
Federal statutory income tax rate due to state income taxes and foreign losses
for which no current tax benefits were available.
The tax benefit of $55,000 in the second quarter of 1995 is due to U.S. losses
resulting primarily from the $980,000 charge associated with the termination of
the distribution agreement for trauma implant products.
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<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had cash and cash equivalents and short-term
investments of $8,296,000 compared to $7,707,000 at December 31, 1995. Working
capital increased by $81,000 to $12,216,000.
The Company has a loan and security agreement with a US bank which provides for
borrowings of up to $3,000,000 under a revolving line of credit and $4,000,000
under an equipment line of credit. At June 30, 1996, $1,728,000 was
outstanding under the equipment line of credit and there were no borrowings
outstanding under the revolving line of credit.
The Company also has a line of credit with a Dutch bank which provides for
borrowings of up to 5,000,000 Dutch Guilders ("dfl"), or approximately
$2,925,000 at the June 30, 1996 exchange rate. An analysis of the Company's
cash position and anticipated cash flow indicated that it most likely would not
be necessary to utilize a significant portion of the line of credit during 1996
and, therefore, the Company has voluntarily agreed to limit its borrowings, if
any, to no more than 3,000,000 dfl, or approximately $1,755,000 in 1996.
Additionally, one of the Company's facility leases requires it to maintain a
declining bank guarantee which reduced the amount available for borrowings to
2,237,000 dfl, or approximately $1,310,000 at the June 30, 1996 exchange rate.
There were no borrowings under this credit line as of June 30, 1996.
The Company is involved in lawsuits principally involving allegations of spinal
fixation device products liability. See Part II - Item 1. LEGAL PROCEEDINGS.
The Company believes the claims to be without merit and all such cases have
been and will continue to be vigorously defended. Pursuant to its distribution
agreement with Ulrich, KG ("Ulrich"),the manufacturer of the spinal system
distributed by the Company which is the subject of these lawsuits, Ulrich has
agreed to indemnify the Company for liabilities incurred in connection with the
distribution of Ulrich's products. Additionally, the Company maintains
products liability insurance coverage and is also named as a co-insured on
Ulrich's products liability insurance policy. Although the Company believes
that it will ultimately prevail in these cases, litigation is subject to many
uncertainties and it is possible that some of the pending cases could be
decided against the Company. It is possible that the results of operations or
liquidity and capital resources of the Company could be materially adversely
affected by the ultimate outcome of the pending litigation or as a result of
the costs of contesting such suits if the ultimate liability exceeds the amount
that the Company recovers from Ulrich and/or such insurance policies. The
Company is unable to estimate the potential liability, if any, that may
result from the pending litigation and, accordingly, no provision for any
possible future liability has been made in the consolidated financial
statements.
The Company believes that its cash and cash equivalents, short-term investments
and available lines of credit, together with anticipated cash flow from
operations, will be sufficient to meet its near-term requirements, but may not
be adequate to fully develop and commercialize all products currently under
development by the Company. From time to time the Company may seek additional
funds through equity or debt financing. However, there can be no assurances
that such additional funds will be available to the Company, or if available,
that such funds will be available on terms favorable to the Company.
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<PAGE> 9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. ORTHOPAEDIC BONE SCREW PRODUCTS LIABILITY LITIGATION
As of August 9, 1996, the Company has been named defendant in 100 lawsuits
involving approximately 4,000 plaintiffs which name spinal implant
manufacturers, distributors (including the Company)and/or promoters as
defendants. The lawsuits against the Company are based in products liability
and involve allegations, either alone or in combination, of negligence and
conspiracy or other concerted action between the Company and other
distributors, manufacturers and promoters of similar products. The Company
believes the claims to be without merit and all such cases have been, and will
continue to be, vigorously defended. These lawsuits have been filed in various
federal and state courts throughout the country and are in preliminary stages.
Of these lawsuits, 94 are pending in federal court and have been, or are being,
consolidated with other similar actions for coordinated proceedings in the
District Court for the Eastern District of Pennsylvania in an action entitled
In re: ORTHOPAEDIC BONE SCREW PRODUCTS LIABILITY LITIGATION, MDL Dkt 1014
(E.D. Pa.) (the "MDL Litigation"). These individual lawsuits are not class
action lawsuits. However, they will remain coordinated for further pretrial
proceedings. Since the lawsuits are not class action lawsuits, additional
plaintiffs may file additional lawsuits in the future alleging similar claims.
The Company believes that it has affirmative defenses, including, without
limitation, defenses based on the learned intermediary defense (the Company's
labeling and literature contain proper warnings to healthcare professionals
regarding the use of the product), the failure of a cause of action to exist
where no malfunction of a Company-distributed spinal implant has occurred, the
fact that the product at issue was substantially modified in an unforeseeable
manner, the fact that the product distributed by the Company was not the
product at issue, the fact that the Company has not engaged in a conspiracy
with other manufacturers or distributors and the fact that these individual
lawsuits otherwise are without merit. On June 26, 1996, the United States
Supreme Court, in a case with facts somewhat similar to these, ruled that state
law claims against manufacturers and distributors of medical devices are not
necessarily preempted by federal law regulating medical devices. Thus, it is
likely that the MDL Court will modify its April 8, 1996 order, which dismissed
plaintiffs' state law claims for failure to warn, manufacturing, design and
testing defect, and implied warranty, to conform with the Supreme Court's June
26, 1996 ruling. With respect to the conspiracy and concerted action claims,
the Company has joined in an "omnibus" motion to dismiss these claims which
was filed in April 1996. The MDL Court heard oral argument on the
constitutional and jurisdictional issues raised in the motion on June 24, 1996.
Argument on the substantive issues were heard on July 25, 1996. A decision on
the motion is expected by late summer, or early fall, of 1996. Although the
Company believes that it will ultimately prevail in these cases litigation is
subject to many uncertainties and it is possible that some of the pending cases
could be decided against the Company.
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<PAGE> 10
All of the actions seek monetary damages of no less than $50,000 per plaintiff.
The aggregate monetary damages eventually sought by all of the plaintiffs and
the related costs to defend such action may be substantial. Pursuant to the
Company's distribution agreement with Ulrich, KG ("Ulrich"), the manufacturer
of the spinal system distributed by the Company, Ulrich has agreed to indemnify
the Company for liabilities incurred in connection with the distribution of
Ulrich's products. However, there can be no assurance that Ulrich will have
the financial resources necessary to comply with its indemnification obligation
to the Company. Additionally, the Company maintains its own products liability
insurance coverage and has also been named as a co-insured on Ulrich's product
liability insurance policy. The Company's insurance company has denied, and
Ulrich's insurance company has indicated that it may deny, coverage with
respect to certain of these cases. There can be no assurance that these
insurance policies will provide the Company with adequate coverage in
connection with those lawsuits for which coverage has not been denied.
2. KEHR ET AL. V. MUSCULOSKELETAL TRANSPLANT FOUNDATION AND OSTEOTECH, INC.
On March 26, 1996, the Company was served with a lawsuit that was filed in Kent
County Circuit Court in Grand Rapids, Michigan. The action is based on
products liability alleging that the Company and co-defendant Musculoskeletal
Transplant Foundation ("MTF") mislabeled and mispackaged processed human bone
tissue. On April 24, 1996, codefendant MTF, with the Company's consent,
removed this action to the United States District Court for the Western
District of Michigan.
On May 29, 1996, the Company filed its answer, denying any and all liability,
and setting forth affirmative defenses, including, without limitation, defenses
based on the surgical staff's substantial modification of the product during
surgery and the fact that plaintiffs' injuries were caused by what the Company
believes to be the failure of the surgical staff to adhere to proper surgical
procedure in connection with the use of the product. The Company believes that
this lawsuit is without merit and the case is currently being defended by the
Company's products liability insurance carrier, with the general reservation of
rights.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) An annual meeting of stockholders was held on June 6, 1996.
(b) The directors elected at the annual meeting to serve a term of one
year or until the next annual meeting of stockholders were: Richard
W. Bauer, Kenneth P. Fallon, III, Michael J. Jeffries,
Donald D. Johnston, Walter J. McNerney, and Stephen J. Sogin.
They constitute the entire board of directors of the Company.
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(c) The matters voted upon at the annual meeting and the results of the
voting are set forth below.
i) With respect to a proposal to ratify amendments to the
Company's Restated Certificate of Incorporation, to
henceforth classify the Board of Directors of the Company
into three classes and, generally, to require the affirmative
vote of eighty percent (80%) of the outstanding voting shares
of the Company to amend or repeal such requirement, the
stockholders voted 3,703,890 shares in favor, 553,597 against
and 13,475 abstained. Broker non-votes were 2,348,827. This
proposal did not receive the affirmative vote of a majority
of the outstanding shares entitled to vote at the annual
meeting as required under Delaware General Corporation Law
("DGCL") for approval.
ii) With respect to a proposal to ratify amendments to the
Company's Restated Certificate of Incorporation to allow for
action by stockholders only at duly called meetings and,
generally, to require an affirmative vote of eighty percent
(80%) of the outstanding voting shares of the Company to
amend or repeal such requirement, the stockholders voted
3,693,141 shares in favor, 562,589 against and 14,782
abstained. Broker non-votes were 1,349,277. This proposal
did not receive the affirmative vote of a majority of the
outstanding shares entitled to vote at the annual meeting as
required under DGCL for approval.
iii) With respect to the election of Directors of the Company, the
persons named below received the following number of votes:
<TABLE>
<CAPTION>
Director For Withheld
<S> <C> <C> <C> <C> <C>
Richard W. Bauer 6,491,046 128,743
Kenneth P. Fallon, III 6,491,046 128,743
Michael J. Jeffries 6,491,046 128,743
Donald D. Johnston 6,491,046 128,743
Walter J. McNerney 6,491,046 128,743
Stephen J. Sogin, Ph.D. 6,490,946 128,843
</TABLE>
iv) With respect to a proposal to amend, the Independent
Directors' Stock Option Plan, as amended, to take into
account the classification of the Board of Directors; the
stockholders voted 3,866,116 shares in favor, 546,751 against
and 19,875 abstained. Broker non-votes were 2,187,047.
Because the proposal to classify the Board of Directors
discussed in (c) (i) above was not approved by the the
stockholders, this proposal was deemed withdrawn.
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<PAGE> 12
v) With respect to a proposal to ratify amendments to the the
Independent Directors' Stock Option Plan, as amended,
increasing number of shares reserved for issuance under that
plan by 250,000 shares from 250,000 to 500,000 shares, the
stockholders voted 3,805,552 shares in favor, 575,487 against
and 12,003 abstained. Broker non-votes were 2,226,747. This
proposal received the vote required by DGCL and the
Company's by-laws for approval (i.e. affirmative vote of a
majority of the outstanding shares present at the meeting, by
proxy or in person, and entitled to vote at the annual
meeting).
vi) With respect to a proposal to ratify the selection of Coopers
& Lybrand L.L.P. as the Company's independent auditors for
the fiscal year ending December 31, 1996; the stockholders
voted 6,592,807 shares in favor, 18,950 against and 8,032
abstained. Broker non-votes were not applicable. This
proposal received the vote required by DGCL and the Company's
by-laws for approval (i.e. affirmative vote of a majority of
the outstanding shares present at the meeting, by proxy or in
person, and entitled to vote at the annual meeting).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
Exhibit Page
NUMBER DESCRIPTION NUMBER
10.1 Third Amendment to Loan and Security Agreement
between the Company and United Jersey
Bank/Central, N.A. dated May 31, 1996 E-1
10.2 Second Restated Equipment Promissory Note
between the Company and United Jersey
Bank/Central, N.A. dated May 31, 1996 E-4
10.3 Credit agreement between Osteotech b.v.
and ING Bank N.V. dated March 14, 1996 E-8
11.1 Computation of Primary Net Income (Loss)
Per Share E-13
11.2 Computation of Fully Diluted Net Income
(Loss) Per Share E-14
27.0 Financial Data Schedule E-15
(b) Reports on Form 8-K - None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OSTEOTECH, INC.
(Registrant)
Date: August 9, 1996 By: /S/ RICHARD W. BAUER
Richard W. Bauer
President, Chief
Executive Officer
Date: August 9, 1996 By: /S/ MICHAEL J. JEFFRIES
Michael J. Jeffries
Executive Vice President
Chief Operating Officer
Chief Financial Officer
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THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Third Amendment to Loan and Security Agreement is dated as of May
31, 1996 (this "Amendment") by and among:
UNITED JERSEY BANK (successor by consolidation with United Jersey
Bank/Central, N.A.) (the "Bank"), having an address at 210 Main Street
Hackensack, New Jersey 07602; and,
OSTEOTECH, INC. (the "Borrower"), a Delaware corporation having its
principal place of business at 1151 Shrewsbury Avenue, Shrewsbury, New
Jersey 07702.
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Loan and Security Agreement dated
May 27, 1993 (the "Loan Agreement"), the Bank provided a $4,000,000 credit
facility (the "Credit Facility") to the Borrower, including a $2,000,000
Revolving Loan and a $2,000,000 Equipment Loan; and,
WHEREAS, pursuant to a First Amendment to the Loan and Security
Agreement dated July 14, 1994 (the "First Amendment"), the Bank, among
other things, extended the term of the Credit Facility to May 31, 1995;
and,
WHEREAS, pursuant to a Second Amendment to the Loan and Security
Agreement dated June 30, 1995 (the "Second Amendment"), the Bank, among
other things, extended the term of the Credit Facility to May 31, 1996;
and,
WHEREAS, the term of the Credit Facility expired on May 31, 1996 and
the Borrower has requested the Bank to extend the term of the Credit
Facility, among other things, and the Bank has agreed to do so subject to
the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the recitals and the mutual
covenants contained herein and in the other agreements executed in
connection with the Credit Facility, the parties hereto agree as follows:
1. Notwithstanding anything to the contrary contained in the Loan
Agreement, the Notes or any other Fundamental Document as amended by the
First Amendment or Second Amendment (the "Amended Fundamental Documents"),
the terms of this Amendment
E-1
<PAGE>
shall control. All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them pursuant to the Amended
Fundamental Documents.
2. The Loan Agreement is hereby amended as follows:
(a) The following definition is hereby amended and restated in its
entirety to read as follows:
"Loan Termination Date" means May 31, 1997.
"Equipment Advance Limit" means the maximum amount of Equipment
Advances which the Bank may make to Borrower which amount shall
not, in the aggregate at any time outstanding, exceed $4,000,000,
provided, however, that no Equipment Advance shall be made in
excess of one hundred percent (100%) of the pre-tax cost of any
Eligible Equipment purchased by the Borrower.
(b) Section 2.06(b) is hereby amended and restated in its entirety as
follows:
(b) All amounts due to the Bank in connection with Equipment
Advances shall bear interest during each calendar month at a
fluctuating interest rate per annum equal at all times to one
quarter of one percent (0.25%) greater than the Base Rate in
effect from time to time.
3. Except as expressly otherwise provided herein, the terms of the
Amended Fundamental Documents shall remain in full force and effect and are
incorporated herein by reference. In the event of a conflict between the
terms of this Amendment and any other Amended Fundamental Document, the
terms of this Amendment shall control.
4. The Borrower acknowledges that the Bank has no obligation to make
any further amendments to the Amended Fundamental Documents or any other
agreement executed in connection therewith. The Borrower further
acknowledges that it has no defenses to any of its obligations to the Bank
and represents that no Event of Default has occurred.
5. The Borrower shall be liable for all reasonable costs and expenses
(comprising legal fees and disbursements) incurred by the Bank in
connection with this Amendment, and shall promptly pay or reimburse the
Bank for all such costs.
E - 2
<PAGE>
6. This Amendment shall be construed in accordance with, and shall be
governed by, the laws of the State of New Jersey. Except as otherwise
expressly set forth herein, nothing in this Amendment shall be construed as
a waiver or release by the Bank of any rights or remedies of the Bank. This
Amendment shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned have set their hands and seals or
caused this Third Amendment to Loan and Security Agreement to be executed
by their proper corporate officers and sealed with their seal as of May 31,
1996.
ATTEST: Osteotech, Inc., Borrower
/s/ STEVEN SOBIESKI
Steve Sobieski By: /s/ MICHAEL J. JEFFRIES
Michael J. Jeffries, Exec. V.P
COO & CFO
WITNESS: UNITED JERSEY BANK, Bank
/s/ DEBRA AGRESTI By: /s/ JOHN F. GANNING
Debra Agresti John F. Ganning
Title: Vice President
E-3
UNITED JERSEY BANK
8 Industrial Way East
2nd Floor
Eatontown, NJ 07724
SECOND RESTATED
EQUIPMENT PROMISSORY NOTE
$4,000,000 Middletown, New Jersey
Dated as of May 31, 1996
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to
the order of United Jersey Bank (successor by consolidation with United
Jersey Bank/Central, N.A.) ("Bank"), at its executive office at 210 Main
Street, Hackensack, New Jersey 07602, or at such other place as the Bank
may from time to time designate by notice to the Borrower, the principal
sum of FOUR MILLION DOLLARS ($4,000,000.00), or so much thereof as may be
advanced as Equipment Advances pursuant to the Loan and Security Agreement
between the Bank and the Borrower dated May 27, 1993, as amended (the
"Agreement"), in lawful money of the United States of America with
interest, calculated on the basis of a 360 day year, on the unpaid balance
from the date of this Promissory Note ("Note") at the rates set forth below
until paid. Any capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.
All amounts due to the Bank in connection with Equipment Advances
shall bear interest during each calendar month at a fluctuating interest
rate per annum equal at all times to one quarter of one percent (0.25%)
above the Bank's Base Rate in effect from time to time, until the Loan
Termination Date. Each change in such fluctuating rate shall take effect
simultaneously with the corresponding change in such Base Rate, without
notice to the-undersigned or any endorser, surety or guarantor. Any such
change shall not affect or alter any of the other terms and conditions of
this Note. All computations of interest shall be calculated on a daily
basis upon the unpaid balance with each day representing 1/360th of a year.
The undersigned shall make monthly payments of interest, which payments
shall be due no later than the first day of each calendar month.
The Borrower shall make monthly payments of principal of amounts due
in connection with Equipment Advances until the earlier of the date on
which all amounts due in connection with the Equipment Advances have been
paid in full or the Loan Termination Date on which date all amounts due
hereunder shall be immediately due and payable. Such payments shall be
equal to 1/48th of the total amount of principal due in connection with
Equipment Advances and shall be due on the first day of each month.
E-4
The terms, covenants and conditions of the Agreement are hereby made a
part of this Note, to the extent and with the same effect as if more fully
set forth herein and the Borrower hereby covenants and promises to abide by
and comply with each and every term, covenant and condition set forth in
this Note and in the Agreement.
Notwithstanding the foregoing, and in addition to the terms of the
Agreement, the unpaid balance of the principal amount owing hereunder,
together with interest thereon, shall immediately become due and payable,
at the election of the holder hereof, in the event of:
(a) Failure to make any payment of principal or interest when due;
(b) Failure to observe or perform any term, covenant or condition of
this Note or the Agreement with respect to the payment of money; and
(c) Any Event of Default as defined in the Agreement.
For each amount payable by the Borrower to the Bank under this Note
that is not paid by the tenth (10th) day following the date on which such
payment is due (whether at the Loan Termination Date, by acceleration or
otherwise) and to the extent permitted by applicable law, the Bank reserves
the right, without notice to the Borrower, to charge interest, from the
date on which such amount shall have first become due and payable by the
Borrower to the date on which such amount shall be paid by the Borrower
(whether before or after judgment), at an annual rate of interest that
shall at all times be five percent (5%) above the annual rate of interest
if such amount were not overdue. The unpaid interest accrued on any overdue
amount in accordance with Section 2.08 of the Agreement shall become and be
absolutely due and payable by the Borrower to the Bank on written demand by
the Bank at any time. Interest on each overdue amount will continue to
accrue monthly until the obligations of the Borrower in respect of the
payment of such overdue amounts are discharged (whether before or after
judgment).
In the event that any payment shall not be received by the Bank by the
tenth (10th) day following the date on which such payment is due, the Bank
shall, in addition to and not to the exclusion of its other rights under
this Note, be entitled to charge, and the Borrower shall pay the Bank a
late charge equal to the lesser of five percent (5%) of the overdue payment
or One Thousand Dollars ($1,000.00) for the purpose of defraying the
expense incident to handling the delinquent payment. Late charges assessed
by the Bank are immediately due and payable. Payments are deemed made on
the Business Day payment is received by the Bank. Payments received after
11:00 a.m. will be deemed received the next Business Day.
E - 5
<PAGE>
The Borrower agrees to pay all costs of enforcement or collection of
this Note and the Agreement, including reasonable attorney's fees and court
costs, in the event that the Borrower defaults in its obligations hereunder
or under the Agreement, whether suit be brought against the Borrower or
not.
This Note shall be the obligation of the maker and shall be binding
upon it and upon its successors, representatives and assigns.
If any provision contained in this Note is in conflict with, or
inconsistent with, any provision in the Agreement, the provision contained
in the Agreement shall govern and control.
This Note is referred to in the Agreement and is entitled to the
benefits thereof and may be prepaid in whole or in part as provided therein
without premium or penalty. Upon the occurrence of any one or more of the
Events of Default specified in the Agreement, all amounts then remaining
unpaid on this Note may be declared to be immediately due and payable as
provided therein.
If this Note or any installment of principal or interest hereunder is
not paid when due, the Bank may hold and apply any amounts which the Bank,
from time to time, may owe to the Borrower, including any balance or share
of any deposit or other account, and any other property, tangible or
intangible, owned by or in which the Borrower has an interest which may be
in the possession or control of the Bank. This right is in addition to the
Bank's right of set-off.
The Borrower, and any endorsers, guarantors, sureties and all other
parties liable for payment of any sum or sums due or to become due under
the terms of this Note, jointly and severally waive presentment, demand for
payment, protest and notice of dishonor of this Note, and authorize the
holder hereof, without notice, to grant extensions in the time of payment
of any reduction or increase in the rate of interest on any money owing on
this Note.
All notices and other communications hereunder shall be given in
accordance with the terms and conditions of the Agreement.
This Note has been executed and delivered in the State of New Jersey
and is to be governed in all respects by the laws of the State of New
Jersey as an agreement to be wholly performed in the State of New Jersey.
This Note shall replace and supersede the Equipment Promissory Note
dated May 27, 1993 and the First Restated Equipment Promissory Note dated
July 14, 1994 issued in connection with the Agreement as modified by an
Extension and/or Modification and/or Renewal Agreement dated October 3,
1995 to
E - 6
<PAGE>
evidence the indebtedness of the Borrower to the Bank represented thereby
which indebtedness hereafter shall be represented by this Note, but shall
not be discharged, released or reduced by this Note nor shall this Note
constitute a novation with respect to any such indebtedness.
IN WITNESS WHEREOF, the undersigned have set their hands and seals or
caused this $4,000,000 Second Restated Equipment Promissory Note to be
executed by their proper corporate officers and sealed with their seal the
day and year first above written.
WITNESS/ATTEST OSTEOTECH, INC.
/S/ STEVE SOBIESKI By: /S/ MICHAEL J. JEFFRIES
Steve Sobieski Michael J. Jeffries
Executive Vice President
COO & CFO
E-7
ING BANK NEDERLAND
KANTOOR LEIDEN SCHUTTERSVELD
Postbus lO,2300 AA Leiden
ACCEPTANCE COPY
Afdeling
Corporate Customers Dept
Telefoon
(071) 525 55 54
Referentie
G.J. van den Toorn/LD
Datum
14 March 1996
CONFIDENTIAL
Osteotech B.V. c.s. attn Mr Michael. J. Jeffries
51 James Way
EATONTOWN NJ 07724 USA
Dear Mr Jeffries,
With reference to our discussions with you concerning the rearrangement of
the current account overdraft facility granted to you, we hereby inform you
that we shall be pleased to continue the credit facility ad f 5,000,000.
Without prejudice to the provisions of the attached clause sheet and the
General Conditions, including the rules for safekeeping of securities, as
drawn up by the Nederlandse Bankiersvereniging (Netherlands Bankers'
Association), the present credit facility will be subject to the following
terms and conditions:
Borrower: the private limited companies:
- Osteotech B.V.
- HC Implants B.V.
- CAM Implants B.V.
- Osteotech/CAM Services B.V.
all of them having their registered offices in Leiden
Purpose: to finance working capital.
Credit limit: f 5,000,000 (in words: five million Dutch guilders), to be
administered under account number 67.89.11.630. The limit
will be reviewed annually by reference to the annual figures
and any other information received by us in the course of
the year. Under this facility you are offered the
possibility to draw cash loans up to an amount of f
1,000,000. Drawdown is permitted in round amounts of f
500,000 at the AIBOR rate corresponding with the tenor opted
for (maximum 6 months) plus a surcharge of 0.75% per annum.
Debit
interest
rate: 2% per annum and above the ING Basisrente (currently
standing at 3,5% per annum), as published by us in the
national daily newspapers, subject to a minimum of S% per
annum.
E-8
<PAGE>
Credit
interest rate: 0,5% per annum.
Costs of domestic
funds
transfer: f 250 per quarter.
Daily
statements: f 1.50 per statement of account.
Value dating: In the case of single amounts below f 500,000, the
applicable value date will be the settlement date plus one
day for credits and settlement date less one day for
withdrawals. For transfers of f 500,000 and higher, the
value date is the same as the settlement date.
Settlement: Interest, commission and costs will be debited to the
current account quarterly in arrears on 1 January, 1 April,
1 July and 1 October of each year. Should you so wish, we
can send you detailed transaction statements, for which a
fee will be charged.
Security: The following collateral shall be furnished as security for
the credit facilities and for all that which the borrower
may now and in the future owe us on whatever grounds:
- Corporate guarantee by Osteotech INC.
- A joint account and joint liability agreement, to be
signed by Osteotech B.V., HC.Implants B.V., CAM Implants
B.V. and Osteotech/CAM Services B.V.
The credit facilities will be disbursed as soon as the
required collateral has been furnished and any special
stipulations have been met.
Annual
figures: Each year the borrower shall provide the bank with the
balance sheet and profit and loss account, drawn up by a
(chartered) accountant within six months after the close of
the financial year in question.
Cancellation: Both the borrower and the bank are at all times entitled to
cancel the current account overdraft facility.
Special
stipulations: - The present overdraft facility shall not be used for
repayment by Osteotech B.V. c.s. of debt(s) to Osteotech
INC.
- Based on the information we have received from you we
further assume that this overdraft facility will not be used
to finance operating losses.
- Every six months we wish to receive your internal figures
as well as the half-yearly figures of Osteotech INC.
E-9
<PAGE>
- In addition to the restriction on account of the bank
guarantee for a remaining sum of f 1,265,925, issued to MB0,
f 2,000,000 of the overdraft facility will be frozen for the
time being, since - on the basis of the information we have
received from you - this is not yet needed. We will discuss
the availability of this portion of the overdraft facility
with you in further detail at the end of 1996 with reference
to your semi-annual figures for 1996 and the profitability
and liquidity forecasts for 1997.
Validity: This offer is valid until 1 April 1996.
We trust to have been of service. If you are in agreement with this offer,
please return the enclosed copy and the attached clause sheet, duly signed
where required, and having initialled the other pages to indicate your
approval, prior to the expiry date. Your signature also serves to
acknowledge receipt of a copy of the General Conditions.
The agreement between Osteotech B.V. c.s. and our institution will then
have come into effect.
Yours sincerely,
ING Bank
Leiden Branch
/s/R. VAN DEN BERG /s/G.J. VAN DEN TOORN
R. Van Den Berg G.J. van den Toorn
Head of Corporate Customers Department Account Manager
Enclosures:
- Acceptance copy
- Clause sheet
- General Conditions
APPROVAL:
Borrowers signature:
/s/MICHAEL J. JEFFRIES
Michael J. Jeffries,
Executive Vice President
Managing Director
Date:
March 15, 1996
E-10
<PAGE>
Clause sheet
This sheet of clauses forms part of our offer dated 14 March 1996
to: the private limited companies: - Osteotech B.V.
- HC Implants B.V.
- CAM Implants B.V.
- Osteotech/CAM Services B.V.
AlI of them having their registered offices in Leiden.
Clauses
1. The current account overdraft facility which is described in more
detail in the attached letter and all further current account
overdrafts or any increases therein which the bank may make available
to you shall, in so far as no other provision is made in this respect,
be governed by the following provisions.
2. The bank reserves the right at all times to alter the percentage of
the debit interest, credit interest and commissions and, if special
circumstances or special credit facilities - including any withdrawal
beyond the credit limit- necessitate this, to charge the rates which
it customarily applies. The interest and commissions shall be charged
every three months in arrears on the dates customarily used by the
bank, or in the interim upon closure of the account.
3. At the first written and reasoned request of the bank, the borrower
shall, as cover for his debts and future obligations, provide the bank
at all times with such personal and real security as the bank requires
and considers appropriate.
4. The overdraft facility may at all times be terminated by the bank
either orally or in writing or be reduced by such sums as the bank or
the borrower may specify. As a consequence of the termination of the
overdraft facility, the balance of the account(s) (or, in the case of
a lowering - of the overdraft limit, the sum owed above the new limit)
shall be immediately due and payable. The provisions of this paragraph
shall also apply if a special arrangement for repayment or reduction
of the overdraft facility is agreed.
5. If the borrower (being a natural person) dies or (being a partnership,
civil law partnership, limited partnership or legal entity) is
terminated or dissolved (or a resolution to this effect is passed),
terminates or makes a substantial change in its business activities or
enters into a merger or is taken over by a third party, petitions for
bankruptcy or has such a petition filed against it, offers a
composition or requests a suspension of payment of debts, or if any of
the above contingencies occurs with regard to one or more of the
parties comprising the borrower or to one or more of the borrower's
sureties or co-debtors jointly and severally liable, or to one or more
natural persons or legal entities which have provided real security,
or if the movable and/or immovable property and/or rights of the
borrower (or of one or more of the parties comprising the borrower)
are attached, or if the movable and/or immovable property and/or
rights of third parties furnished by these third parties as security
for the credit are attached, the balance of the account shall become
due and payable forthwith without it being necessary for the bank to
give any notice hereof.
E-11
<PAGE>
6. Unless agreed otherwise in writing, all acts with regard to an account
held jointly by two or more (natural or legal) persons shall, if
performed by one or more of them, be binding upon all of them, and all
of them shall be jointly and severally liable to the bank for the
entire amount.
7. As additional security for the repayment or return of everything which
the borrower owes the bank now or at any time in the future on any
account whatsoever, the borrower pledges - in so far as necessary in
advance - to the bank, which accepts such pledge, everything which the
bank may now, or at any time in the future, owe the borrower on any
ground whatsoever. In so far as necessary, the bank declares that in
its capacity of debtor in respect of the claims it has been informed
of the pledge. As long as the remainder after disposal still
constitutes sufficient cover for that which the borrower owes the bank
now or in the future, the bank shall grant the borrower permission,
should the latter so desire, to dispose of a pledged debt as if it
were not encumbered with a pledge.
8. If the overdraft facility is terminated and the overdraft on the
account(s) has not been cleared, the borrower shall be bound to pay
the bank, up to the date of full and final settlement, debit interest
and commission in accordance with the provisions of this agreement.
9. The borrower shall at all times allow the bank, or such persons as are
designated by it, to inspect his books and shall also provide all
information which may be required. The borrower shall also supply the
bank with a copy of his balance sheet and profit and loss account each
year within six months of the end of the financial year, unless a
different frequency or a different date of submission has been agreed.
10. In granting this overdraft facility, the bank has assumed that the
borrower will not use either all or part of it to obtain interest
profits (or to conduct interest rate arbitrage) by effecting
transactions which cannot be regarded as being part of his normal
business.
11. The borrower shall not bind himself as a surety or as a co-debtor
having joint and several liability without the prior knowledge of the
bank.
12. The borrower shall wherever possible channel his financial
transactions through the bank.
13. Any costs, such as all judicial or extrajudicial costs, incurred at
any time under the agreements made with the bank. shall be for the
account of the borrower.
N.B. In the event of a discrepancy between this translation and the Dutch
original, the latter shall prevail.
Place Date
Signature of borrower March 15, 1996
/s/ MICHAEL J. JEFFRIES
Michael J. Jeffries
OSTEOTECH, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY NET INCOME(LOSS) PER SHARE
<TABLE>
<CAPTION>
<C> <C>
Three Months Six Months
Ended June 30, Ended June 30,
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C>
1996 1995 1996 1995
</TABLE>
<TABLE>
<CAPTION>
Net income (loss) $202,000 ($745,000) $373,000 ($709,000)
<S> <C> <C> <C> <C> <C> <C> <C>
Shares used in computing net
income (loss) per share:
Weighted average Common shares
outstanding 7,760,941 7,106,452 7,662,884 7,101,400
Weighted average Common shares
issuable upon the exercise of
outstanding stock options and
warrants 1,587,724 716,669 1,693,852 716,669
Application of assumed
proceeds towards repurchase
of outstanding Common shares
using the Treasury Stock
method (1,029,642)(a) (4,822)(a) (1,002,573)(b) (4,915)(b)
Shares used in computation 8,319,023 7,818,299 8,354,163 7,813,154
Primary net income (loss) per share $.02 ($.10) $.04 ($.09)
</TABLE>
a) Computed using assumed proceeds of $7,242,503 and average market
value of $7.034 in 1996 and proceeds of $24,000 and an average market
value of $5.05 in 1995.
b) Computed using assumed proceeds of $7,322,793 and an average
market value of $7.304 in 1996 and proceeds of $24,000 and an
average market value of $4.96 in 1995.
<PAGE>
E-13
OSTEOTECH, INC. AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED NET INCOME(LOSS) PER SHARE
<TABLE>
<CAPTION>
<C> <C>
Three Months Six Months
Ended June 30, Ended June 30,
</TABLE>
<TABLE>
<CAPTION> <C> <C> <C> <C>
1996 1995 1996 1995
</TABLE>
<TABLE>
<CAPTION>
Net income (loss) $202,000 ($745,000) $373,000 ($709,000)
<S> <C> <C> <C> <C> <C> <C> <C>
Shares used in computing net
income (loss) per share:
Weighted average Common shares
outstanding 7,760,941 7,106,452 7,662,884 7,101,400
Weighted average Common shares
issuable upon the exercise of
outstanding stock options and
warrants 1,587,724 716,669 1,693,852 716,669
Application of assumed
proceeds towards repurchase
of outstanding Common shares
using the Treasury Stock
method (998,966)(a) (4,822)(a) (1,002,573)(b) (4,873)(b)
Shares used in computation 8,349,699 7,818,299 8,354,163 7,813,196
Net income (loss) per share
assuming full dilution $.02 ($.10) $.04 ($.09)
</TABLE>
a) Computed using assumed proceeds of $7,242,503 and a closing
market value of $7.25 in 1996 and proceeds of $24,000 and an
average market value of $5.05 in 1995.
b) Computed using assumed proceeds of $7,322,793 and an average
market value of $7.304 in 1996 and proceeds of $24,000 and a
closing market value of $5.00 in 1995.
E-14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Osteotech, Inc. and Subsidiaries Consolidated Balance Sheet as of June 30, 1996
and the Condensed Consolidated Statement of Operations for the six months ended
June 30, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,309,000
<SECURITIES> 987,000
<RECEIVABLES> 5,587,000
<ALLOWANCES> 180,000
<INVENTORY> 1,090,000
<CURRENT-ASSETS> 18,087,000
<PP&E> 14,778,000
<DEPRECIATION> 5,069,000
<TOTAL-ASSETS> 30,803,000
<CURRENT-LIABILITIES> 5,871,000
<BONDS> 1,204,000
0
0
<COMMON> 78,000
<OTHER-SE> 23,162,000
<TOTAL-LIABILITY-AND-EQUITY> 30,803,000
<SALES> 1,365,000
<TOTAL-REVENUES> 16,784,000
<CGS> 1,085,000
<TOTAL-COSTS> 15,535,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 129,000
<INCOME-PRETAX> 1,354,000
<INCOME-TAX> 981,000
<INCOME-CONTINUING> 373,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 373,000
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
