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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 0-21456
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1361276
--------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
372 Danbury Road
Wilton, Connecticut 06897
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(Address of principal executive offices, including zip code)
(203) 761-7900
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(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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 11, 1996
- -------------------- --------------------------------
Common Stock, $.01 par value 21,034,195 shares
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<PAGE>
Electronic Retailing Systems International, Inc.
Form 10-Q
Contents
Page Number
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet--
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statement of
Operations--Three and Nine Months Ended
September 30, 1996 and 1995 4
Condensed Consolidated Statement of
Cash Flows--Nine Months Ended September 30,
1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
<PAGE>
<PAGE>
Electronic Retailing Systems International, Inc.
Condensed Consolidated Balance Sheet
(in thousands except per share and share amounts)
<TABLE>
<CAPTIONS>
September 30,
December 31,
1996
1995
-------------
------------
(Unaudited)
<S> <C>
<C>
Assets
Current assets
Cash and cash equivalents $ 9,651
$ 3,210
Accounts receivable 1,611
1,356
Inventories 1,505
1,874
Prepayments and other current assets 206
609
-----------
- -----------
Total current assets 12,973
7,049
-----------
- -----------
Equipment 2,292
2,047
Accumulated depreciation (1,683)
(1,365)
-----------
- -----------
Net equipment 609
682
-----------
- -----------
Other non-current assets 883
585
-----------
- -----------
Total assets $ 14,465
$ 8,316
===========
===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 882
$ 1,766
-----------
- -----------
Total current liabilities 882
1,766
-----------
- -----------
Long-term debt 4,987
3,335
-----------
- -----------
Commitments -
-
-----------
- -----------
Stockholders' equity
Preferred stock, undesignated
(par value $1.00 per share;
2,000,000 and 1,860,000 shares
authorized, none outstanding)
Series A Cumulative Convertible
Preferred Stock (no shares and
140,000 shares authorized; no shares
and 123,246 shares issued and out-
standing in 1996 and 1995) -
123
Common stock (par value $0.01 per
share; 25,000,000 shares authorized;
21,034,195 and 11,748,232 shares
issued and outstanding in 1996 and 1995) 210
117
Additional paid-in capital 50,644
38,474
Accumulated deficit (42,258)
(35,499)
-----------
- -----------
Total stockholders' equity 8,596
3,215
-----------
- -----------
Total liabilities and stockholders' equity $ 14,465
$ 8,316
===========
===========
</TABLE>
See accompanying notes to condensed consolidated financial
statements
<PAGE>
<PAGE>
Electronic Retailing Systems International, Inc.
Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTIONS>
Three Months Ended
Nine Months Ended
September 30,
September 30,
1996 1995
1996 1995
---- ----
- ---- ----
<S> <C> <C>
<C> <C>
Revenues
Product Sales $ 1,376 $ 865
$ 3,675 $ 1,718
Maintenance 247 115
595 185
------- -------
- ------- -------
Total revenues 1,623 980
4,270 1,903
Cost of goods sold
Product Sales 1,429 1,087
3,955 2,382
Maintenance 273 139
718 381
------- -------
- ------- -------
Total cost of goods sold 1,702 1,226
4,673 2,763
------- -------
- ------- -------
Gross profit (loss) (79) (246)
(403) (860)
------- -------
- ------- -------
Operating expenses
Selling, general and admini-
strative (including amounts to
related parties of $9 and $46
during the three months ended
September 30, 1996 and 1995 and
$28 and $85 during the nine months
ended September 30, 1996 and 1995) 1,649 1,805
5,080 5,044
Research and development 222 390
786 2,094
Depreciation and amortization 41 27
123 81
Stock option compensation 10 26
32 80
------- -------
- ------- -------
Total operating expenses 1,922 2,248
6,021 7,299
------- -------
- ------- -------
Loss from operations (2,001) (2,494)
(6,424) (8,159)
------- -------
- ------- -------
Other income (expenses)
Interest income 129 53
179 82
Interest expense (including
amounts to related parties of
$19 and $52 during the three
and nine months ended September
30, 1995) (97) (86)
(283) (223)
Gain on short-term investments - -
- 5
------- -------
- ------- -------
Total other income (expenses) 32 (33)
(104) (136)
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- ------- -------
Net loss $(1,969) $(2,527)
$(6,528) $(8,295)
======= =======
======= =======
Earnings per share
Average common shares
outstanding 20,301 11,747
14,652 11,741
======= =======
======= =======
Loss per share (before non-cash
benefit from preferred stock
conversion) $ (0.10) $ (0.23)
$ (0.46) $ (0.72)
======= =======
======= =======
Earnings (loss) per share $ 0.16 $ (0.23)
$ (0.10) $ (0.72)
======= =======
======= =======
</TABLE>
See accompanying notes to condensed consolidated
financial statements <PAGE>
<PAGE>
Electronic Retailing Systems International, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTIONS>
Nine
Months Ended
September 30,
1996
1995
----
----
<S> <C>
<C>
Net Cash Flows Used in Operating Activities:
Net loss $
(6,528) $ (8,295)
Other adjustments to reconcile net loss
to net cash used in operating activities
201 42
- -------- --------
Cash used in operating activities
(6,327) (8,253)
- -------- --------
Cash Flows from Investing Activities:
Capital expenditures
(245) (287)
Capitalized product development costs
(513) (78)
Proceeds from sales of short-term investments
- - 1,027
- -------- --------
Cash (used in) provided by investing
activities
(758) 662
- -------- --------
Cash Flows from Financing Activities:
Net proceeds from issuance of common stock
12,111 -
Net proceeds from issuance of long term note
1,650 1,350
Payment upon conversion of preferred stock
(235) -
Net proceeds from issuance of preferred stock
- - 10,585
- -------- --------
Cash provided by financing activities
13,526 11,935
- -------- --------
Net increase in cash and cash equivalents
6,441 4,344
- -------- --------
Cash and cash equivalents at beginning of period
3,210 1,131
- -------- --------
Cash and cash equivalents at end of period $
9,651 $ 5,475
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial
statements
<PAGE>
<PAGE>
Electronic Retailing Systems International, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(Unaudited)
Note 1 -Basis of Consolidation:
Electronic Retailing Systems International, Inc. ("ERS" or the
"Company"), was incorporated in 1993 under the laws of the State of
Delaware as a holding company for the business and assets of
Electronic Retailing Systems International, Inc., incorporated in
1990 under the laws of Connecticut, and an affiliated partnership.
The condensed consolidated financial statements include the
accounts of the Company and all of its subsidiaries. All
significant intercompany balances and transactions have been
eliminated.
Note 2 -Basis of Presentation:
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements.
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements include all
adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation of the results of the interim
periods. Operating results for the three and nine month periods
ended September 30, 1996 are not necessarily indicative of the
results to be expected for the full year ending December 31, 1996.
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December
31, 1995, included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
Earnings (loss) per common share is computed using the
weighted average number of common shares and common share
equivalents assumed to be outstanding during the period. Common
share equivalents consist of the Company's common shares issuable
upon exercise of stock options and stock purchase warrants. The
computation of earnings (loss) per common share does not reflect
common share equivalents that are anti-dilutive. (See Note 5).
Cash and cash equivalents at December 31, 1995 include
deposits of approximately $440,000 held as interest bearing
collateral for irrevocable letters of credit of the same amounts
relating to future inventory purchases.
<PAGE>
<PAGE>
Electronic Retailing Systems International, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(Unaudited)
Note 3- Inventories:
Inventories are stated at the lower of cost (determined on a
first in, first out basis) or market value. Inventories at
September 30, 1996 consist of $622,000 of materials and supplies
and $883,000 of finished goods. Inventories at December 31, 1995
consisted of $674,000 of materials and supplies and $1,200,000 of
finished goods. Inventories in excess of expected requirements due
to new product introductions or product enhancements are expensed
currently.
Note 4- Adoption of New Accounting Standard:
ERS has adopted Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation" ("FAS 123"). FAS
123 indicates a preference for a fair value based method of
accounting for employee stock options, but allows for continuation
of the intrinsic value based method under Accounting Principles
Board Opinion No. 15 "Accounting for Stock Issued to Employees".
The Company has chosen to continue its use of the intrinsic value
based method of accounting, but will present required financial
statement disclosures it its Annual Report on Form 10-K for the
year ending December 31, 1996.
Note 5 - Common Stock Offering:
On July 11, 1996, the Company completed the offshore public
offering of an aggregate of 4,963,500 shares of its common stock,
$.01 par value ("Common Stock"), in accordance with Regulation S
under the Securities Act of 1933, and the contemporaneous private
placement to subscribers, including certain members of the
Company's Board of Directors and their affiliates, of an aggregate
of 911,657 shares of Common Stock. Net proceeds from these
transactions were approximately $12 million.
In connection with the completion of these transactions,
holders of the Company's Series A Cumulative Convertible Preferred
Stock, $1.00 par value, ("Preferred Stock") converted their shares,
in accordance with their terms, into an aggregate of 3,138,900
shares of Common Stock, in exchange for payments aggregating
$235,000.
Pursuant to U.S. generally accepted accounting principles, the
excess of the carrying value of Preferred Stock over the fair value
of Common Stock issued upon conversion is reflected as an
adjustment of $5,258,000 to earnings available to common
stockholders in the computation of 1996 per share amounts. Net
loss for the third quarter and nine-month periods in 1996 was $.10
and $.46 per common share, respectively, before giving effect to
adjustments arising from the non cash benefit upon conversion to
Common Stock. <PAGE>
<PAGE>
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Since its inception in April 1990, the Company has been engaged
primarily in the development, design, market testing and sale of
its electronic shelf labeling system. The Company has concentrated
on the design, development, marketing and sale of the ERS
ShelfNet(R) system (the "ERS ShelfNet System"). The Company
subcontracts to third parties the manufacture and assembly of the
components comprising the ERS ShelfNet System and, subject to the
oversight of the Company, the installation of its components. In
addition, the Company engages unaffiliated parties to augment its
internal development resources and to assist it in the continued
development of the ERS ShelfNet System. Since inception, the
Company has generated aggregate revenues of $11,821,000, and has
incurred a cumulative net loss of approximately $54,240,000,
excluding non-cash charges in the amount of $8,632,000 for stock
option compensation expense.
The market for electronic shelf labeling systems, which were first
introduced in the mid-1980's, is in the development stage and
market acceptance of and demand for these systems are subject to a
high level of uncertainty. The Company's success will depend upon
the rate at and extent to which supermarket chains choose to
install electronic shelf labeling systems throughout their stores.
The initial acceptance and rate of installation by supermarket
chains may be affected by numerous factors beyond the Company's
control, including the customer's assessment of the benefits of and
the need for electronic shelf labeling systems and the customer's
available capital resources.
The Company's revenues and operating results may vary significantly
from quarter to quarter as a result of various factors including
the timing of customer orders and system shipments and
installations.
Results of Operations
Revenues. During the three month period ended September 30, 1996,
the Company's total revenues were $1,623,000 compared to $980,000
in the corresponding quarter in 1995. Revenues for the nine months
ended September 30, 1996 were $4,270,000 compared to $1,903,000 for
the corresponding period in 1995. The increase in revenues is
primarily attributable to greater product sales in 1996, including
software license fees in the second quarter. For the first nine
months of 1996 and 1995, product sales were to five customers
within the supermarket industry.
<PAGE>
<PAGE>
Cost of goods sold. Cost of goods sold consists of the cost of
hardware components of the ERS ShelfNet System, system installation
costs, depreciation of tools and dies owned by the Company and
utilized in the manufacturing of hardware components, amortization
of capitalized software costs, warranty and maintenance costs,
freight and inventory obsolescence.
Cost of goods sold was $1,702,000 for the three months ended
September 30, 1996, compared to $1,226,000 for the three months
ended September 30, 1995. Cost of goods sold for the nine months
ended September 30, 1996 and 1995 were $4,673,000 and $2,763,000,
respectively. Cost of goods sold for the three and nine months
ended September 30, 1996 included warranty and maintenance expenses
of $273,000 and $718,000, respectively, compared to $139,000 and
$381,000 in the corresponding 1995 periods. The increase in
warranty and maintenance costs reflects the growing installation
base for the ERS ShelfNet System. The Company anticipates that
system enhancements implemented in 1995 and 1996 will further
decrease future warranty and maintenance expenses per installation
and, in the future, that the cost of goods sold will decrease as a
percentage of revenues as a result of higher manufacturing volumes
of its components and as the installation process is improved.
Selling, General and Administrative. Selling, general and
administrative costs consist of personnel costs associated with
selling and administrative staff, overhead, market research and
development, and customer service personnel. Selling, general and
administrative costs were $1,649,000 for the three months ended
September 30, 1996, a decrease of 9%, compared to $1,805,000 for
the third quarter of 1995. For the nine months ended September
30, 1996, selling, general and administrative costs were
$5,080,000, an increase of less than 1%, compared to $5,044,000 in
the corresponding period in 1995.
Research and Development. Total research and development expenses
were $222,000 for the three month period ended September 30, 1996
compared to $390,000 for the same period in 1995. For the nine
months ended September 30, 1996, total research and development
expenses were $786,000 compared to $2,094,000 for the corresponding
period in the previous year. Expenses incurred in the development
of the hardware components of the ERS ShelfNet System decreased to
$214,000 and $763,000 for the three month and nine month periods
ended September 30, 1996, respectively, from $233,000 and
$1,189,000 for the same periods in 1995, which reflected reduced
payments to third parties for development activities. For the
three and nine month periods ended September 30, 1996, the Company
capitalized $119,000 and $513,000, respectively, of product
development costs that will be amortized over the shorter of the
estimated useful life of the related software product or process or
three years. For the three and nine month periods ended September
30, 1995, the Company capitalized $78,000 of product development
costs.
<PAGE>
<PAGE>
Stock Option Compensation. The Company recorded $10,000 and
$32,000 in non-cash compensation expense for the three and nine
month periods ended September 30, 1996 compared to $26,000 and
$80,000, respectively, for the corresponding periods in 1995.
Non-cash compensation expense results from the Company's issuance
of stock options to its employees at exercise prices below the fair
market value at date of grant and is recognized as expense over the
employees' respective service periods.
Interest Income. Interest income increased to $129,000 and
$179,000 for the three and nine month periods ended September 30,
1996, respectively, compared to $53,000 and $82,000, respectively,
for the same periods in 1995, due to increased cash and cash
equivalents available for investment.
Interest Expense. Interest expense for the three and nine month
periods ended September 30, 1996 was $97,000 and $283,000,
respectively, compared to $86,000 and $223,000 for the
corresponding periods in 1995. Interest expense in 1996 represents
interest on amounts borrowed from the Connecticut Development
Authority ("CDA") and, in 1995, on amounts borrowed from the CDA
and a revolving credit facility with certain members of the Board
of Directors and their affiliates.
Income Taxes. The Company has incurred net losses since inception
which have generated net operating loss carry forwards of
approximately $42 million for federal and state income tax
purposes, which are available to offset future taxable income and
expire through the years to 2010 for federal income tax purposes.
These losses are subject to limitation on future year's utilization
should certain ownership changes occur. The offshore public
offering and related transactions described in Note 5 to the Notes
to the Condensed Consolidated Financial Statements may result in
certain limitations on future year's utilization.
In consideration of the Company's accumulated losses through
September 30, 1996 and the uncertainty of its ability to utilize
any future tax benefits resulting from these losses, the impact of
this potential tax benefit has been eliminated in the Company's
condensed consolidated financial statements.
Liquidity and Capital Resources
As of September 30, 1996, the Company had net working capital of
$12,091,000, reflecting cash and cash equivalents of $9,651,000
compared to net working capital of $5,283,000, reflecting cash and
cash equivalents of $3,210,000 at December 31, 1995. The increase
in net working capital and in cash and cash equivalents resulted
primarily from the offshore public offering and contemporaneous
private placement of Common Stock in July 1996. Net cash used in
operations was $6,327,000 for the nine months ended September 30,
1996, compared to net cash of $8,253,000 used in operating
activities in the corresponding 1995 period.
<PAGE>
<PAGE>
On July 11, 1996, the Company completed: (i) the offshore public
offering (the "Regulation S Transaction") of an aggregate of
4,963,500 shares of its Common Stock, in accordance with Regulation
S under the Securities Act of 1933, as a result of which the
Company received gross proceeds of approximately $11.2 million, and
(ii) the contemporaneous private placement (the "Private
Placement") of an aggregate of 911,657 shares of Common Stock to
subscribers, including certain members of the Company's Board of
Directors and their affiliates, as a result of which the Company
received gross proceeds of approximately $2.1 million.
In connection with completion of such transactions, holders of all
125,556 outstanding shares of the Company's Series A Cumulative,
Convertible Preferred Stock, $1.00 par value (the "Preferred
Stock"), converted their shares, in accordance with their terms,
into an aggregate of 3,138,900 shares of Common Stock, in exchange
for payments aggregating $235,000 (the "Preferred Stock Payments").
Following completion of such transactions, including the issuance
of 218,957 shares (the "Commission Shares") of Common Stock as
commissions in the Regulation S Transaction, the Company had
outstanding 21,033,062 shares of Common Stock.
The aggregate net proceeds to the Company in such transactions were
in the estimated amount of approximately $12 million (approximately
$10.2 million in the Regulation S Transaction, and approximately
$2.0 million in the Private Placement, in the aggregate net of the
Preferred Stock Payments). Net expenses do not reflect non-cash
expenses represented by the Commission Shares but reflect finder's
fees in the amount of $199,000, which were applied to the
acquisition of shares in the Regulation S Transaction. In
accordance with generally accepted accounting principles, the
Company recorded a non-cash benefit from the Preferred Stock
conversion in the computation of 1996 per share amounts in the
amount of the excess of the carrying value of the Preferred Stock
over the fair value of Common Stock issued upon conversion.
The Company borrowed the remaining $1,650,000 under its facility
with the CDA during the first quarter of 1996. The aggregate of
$5,000,000 of indebtedness is repayable five years after the August
1994 closing on such facility and is convertible to shares of
Common Stock, through August 12, 1997 at an adjusted conversion
price calculated at $3.00 plus the average market price of the
Common Stock during the eighteen months prior to conversion and
thereafter at $3.00 plus the average market price of the Common
Stock during the twelve months prior to conversion. At closing,
the CDA acquired five-year warrants to purchase 699,724 shares (as
adjusted) of Common Stock, exercisable at an adjusted price through
August 12, 1997 calculated as $2.58 plus the average market price
of the Common Stock during the eighteen months prior to exercise,
and thereafter as $2.58 plus the average market price of the Common
Stock during the twelve months prior to exercise. Under its
arrangements with the CDA, the Company will be obligated to comply
with certain covenants (some of which remain in effect for up to
ten years from closing), covering such matters as maintaining a
<PAGE>
presence in Connecticut. In the event of specified changes in
control of the Company and prepayment of its note, the Company has
rights to repurchase such warrants and shares at the fair market
value thereof (calculated pursuant to such arrangements), and
thereby extinguish such covenants.
The Company's capital expenditures were $245,000 and $287,000 for
the nine months ended September 30, 1996 and 1995, respectively.
The Company anticipates that such capital expenditures will
approximate $400,000 in 1996. For the nine months ended September
30, 1996 and 1995, the Company also capitalized $513,000 and
$78,000, respectively, of product development costs.
The Company has continued its discussions with H.E. Butt Grocery
Co. ("HEB") regarding a new arrangement that will extend beyond the
expiration of its current agreement with HEB on November 15, 1996
but has not entered into any such additional arrangement. The Stop
& Shop Supermarket Company ("Stop & Shop") has received 20 systems
under its arrangements with the Company, and the Company is engaged
in discussions with Stop & Shop with respect to the replacement of
its current arrangement with Stop & Shop insofar as relating to
additional system installations, so as to accommodate next
generation system improvements.
To date, the Company has not generated positive cash flow from
operations, and has historically funded its operations primarily
through loans from its stockholders, the sale of interests in an
affiliated partnership, its initial public offering consummated in
1993, its arrangements with the CDA, the sale of Preferred Stock to
members of the Company's Board of Directors and their affiliates,
the Regulation S Transaction and the Private Placement. The
Company believes that its current resources will be sufficient to
fund the Company's working capital requirements through 1997.
Although the Company has no current arrangements with respect to,
or sources of, any additional financing, and there can be no
assurance that any such additional financing will be available if
required, the Company continues actively to explore, evaluate and
have discussions with respect to alternatives for raising
additional capital, and the Company may consider an offering of
shares of Common Stock or convertible or other debt. The Company
has not reached any determination with respect to the size or
nature of any such offering or whether any such offering will be
undertaken, and there can be no assurance that any such offering
will be made.
<PAGE>
<PAGE>
Electronic Retailing Systems International, Inc.
Form 10-Q
Part II-Other Information
PART II. Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed or incorporated by reference as part
of this Quarterly Report on Form 10-Q are listed on the
attached Index to Exhibits.
(b) Current Reports on Form 8-K
During the quarter ended September 30, 1996, the Company
filed a Current Report on Form 8-K dated July 11, 1996
addressing, under "Item 5. Other Events." thereunder, the
closing on July 11, 1996 of the Regulation S Transaction
and the Private Placement. The Company filed an
unaudited pro forma balance sheet as and at May 31, 1996,
giving effect to such transactions, as an exhibit to such
report.
<PAGE>
<PAGE>
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.
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
11/11/96 s/Bruce F. Failing, Jr.
- ------------- --------------------------------------
Date Bruce F. Failing, Jr.
President and Chief Executive Officer
11/11/96 s/William B. Fischer
- -------------- --------------------------------------
Date William B. Fischer
Vice President, Finance
(principal financial and accounting
officer)
<PAGE>
<PAGE>
Electronic Retailing Systems International, Inc.
Form 10-Q for the Three Months Ended September 30, 1996
Index to Exhibits
Exhibit Number Document Description
- -------------- --------------------
3.2 By-Laws of the Company
11 Computation of Earnings (Loss)
Per Common Shares
27 Financial Data Schedule, which is
submitted electronically to the
Securities and Exchange Commission
for information only and is not filed
EXHIBIT 3.2
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
BY-LAWS
AS AMENDED TO SEPTEMBER 26, 1996
ARTICLE I
Offices
-------
The registered office of the Corporation shall be in the City
of Dover, County of Kent, State of Delaware.
The Corporation may also have offices at such other places,
both within and without the State of Delaware, as may from time to
time be designated by the Board of Directors.
ARTICLE II
Books
-----
The books and records of the Corporation may be kept (except
as otherwise provided by the laws of the State of Delaware) outside
of the State of Delaware and at such place or places as may from
time to time be designated by the Board of Directors.
ARTICLE III
Stockholders
------------
Section 1. Annual Meetings. The annual meeting of the
stockholders of the Corporation for the election of Directors and
the transaction of such other business as may properly come before
said meeting shall be held at the principal business office of the
Corporation or at such other place or places either within or
without the State of Delaware as may be designated by the Board of
Directors and stated in the notice of the meeting, on the second
Thursday in June in each year, if not a legal holiday, and, if a
legal holiday, then on the next weekday not a legal holiday, at
10:00 o'clock in the morning.
Written notice of the place designated for the annual meeting
of the stockholders of the Corporation shall be delivered personal-
ly or mailed to each stockholder entitled to vote thereat not less
than ten (10) and not more than sixty (60) days prior to said
meeting, but at any meeting at which all stockholders shall be
present, or of which all stockholders not present have waived
notice in writing, the giving of notice as above described may be
dispensed with. If mailed, said notice shall be directed to each
stockholder at his address as the same appears on the stock ledger
of the Corporation unless he shall have filed with the Secretary of
the Corporation a written request that notices intended for him be
mailed to some other address, in which case it shall be mailed to
the address designated in such request.
<PAGE>
<PAGE>
Section 2. Special Meetings. Special meetings of the
stockholders of the Corporation shall be held whenever called in
the manner required by the laws of the State of Delaware for
purposes as to which there are special statutory provisions, and
for other purposes whenever called by resolution of the Board of
Directors, or by the Chairman of the Board, the President, or by
the holders of a majority of the outstanding shares of capital
stock of the Corporation the holders of which are entitled to vote
on matters that are to be voted on at such meeting. Any such
special meeting of stockholders may be held at the principal
business office of the Corporation or at such other place or
places, either within or without the State of Delaware, as may be
specified in the notice thereof. Business transacted at any special
meeting of stockholders of the Corporation shall be limited to the
purposes stated in the notice thereof.
Except as otherwise expressly required by the laws of the
State of Delaware, written notice of each special meeting, stating
the day, hour and place, and in general terms the business to be
transacted thereat, shall be delivered personally or mailed to each
stockholder entitled to vote thereat not less than ten (10) days
and not more than sixty (60) days before the meeting. If mailed,
said notice shall be directed to each stockholder at his address as
the same appears on the stock ledger of the Corporation unless he
shall have filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other
address, in which case it shall be mailed to the address designated
in said request. At any special meeting at which all stockholders
shall be present, or of which all stockholders not present have
waived notice in writing, the giving of notice as above described
may be dispensed with.
Section 3. List of Stockholders. The officer of the Corpora-
tion who shall have charge of the stock ledger of the Corporation
shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to
vote at said meeting, arranged in alphabetical order and showing
the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at
the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is
present.
Section 4. Quorum. At any meeting of the stockholders of the
Corporation, except as otherwise expressly provided by the laws of
the State of Delaware, the Certificate of Incorporation or these
By-Laws, there must be present, either in person or by proxy. in
order to constitute a quorum, stockholders owning a majority of the
issued and outstanding shares of the capital stock of the Corpora-
<PAGE>
tion entitled to vote at said meeting. At any meeting of stock-
holders at which a quorum is not present, the holders of, or
proxies for, a majority of the stock which is represented at such
meeting, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting
at which a quorum shall be present or represented any business may
be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote the meeting.
Section 5. Organization. The Chairman of the Board, or in his
absence the President, shall call to order meetings of the
stockholders and shall act as chairman of such meetings. The Board
of Directors or the stockholders may appoint any stockholder or any
other Director or officer of the Corporation to act as chairman of
any meeting in the absence of the Chairman of the Board and the
President. The Secretary of the Corporation shall act as secretary
of all meetings of the stockholders, but in the absence of the
Secretary the presiding officer may appoint any other person to act
as secretary of any meeting.
Section 6. Voting. Except as otherwise provided in the
Certificate of Incorporation or these By-Laws, each stockholder of
record of the Corporation shall, at every meeting of the stockhold-
ers of the Corporation, be entitled to one (1) vote for each share
of stock standing in his name on the books of the Corporation on
any matter on which he is entitled to vote, and such votes may be
cast either in person or by proxy, appointed by an instrument in
writing, subscribed by such stockholder or by his duly authorized
attorney, and filed with the Secretary before being voted on, but
no proxy shall be voted after three (3) years from its date, unless
said proxy provides for a longer period. If the Certificate of
Incorporation provides for more or less than one (1) vote for any
share of capital stock of the Corporation, on any matter, then any
and every reference in these By-Laws to a majority or other
proportion of capital stock shall refer to such majority or other
proportion of the votes of such stock.
The vote on all elections of Directors and on any other
questions before the meeting need not be by ballot, except upon
demand of any stockholder. When a quorum is present at any meeting
of the stockholders of the Corporation, the vote of the holders of
a majority of the capital stock entitled to vote at such meeting
and present in person or represented by proxy shall decide any
question brought before such meeting, unless the question is one
upon which, under any provision of the laws of the State of
Delaware or of the Certificate of Incorporation, a different vote
is required in which case such provision shall govern and control
the decision of such question.
<PAGE>
<PAGE>
Section 7. Consent. Except as otherwise provided by the
Certificate of Incorporation, whenever the vote of the stockholders
at a meeting thereof is required or permitted to be taken in
connection with any corporate action by any provision of the laws
of the State of Delaware or of the Certificate of Incorporation,
such corporate action may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding
capital stock of the Corporation having not less than the minimum
number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented
thereto in writing.
Section 8. Judges. At every meeting of the stockholders of the
Corporation at which a vote by ballot is taken, the polls shall be
opened and closed, the proxies and ballots shall be received and
taken in charge, and all questions touching the qualifications of
voters, the validity of proxies and the acceptance or rejection of
votes shall be decided by, two (2) judges. Said judges shall be
appointed by the Board of Directors before the meeting, or, if no
such appointment shall have been made, by the presiding officer of
the meeting. If for any reason any of the judges previously
appointed shall fail to attend or refuse or be unable to serve,
judges in place of any so failing to attend, or refusing or unable
to service, shall be appointed in like manner.
ARTICLE IV
Directors
---------
Section 1. Number, Election and Term of Office. The business
and affairs of the Corporation shall be managed by the Board of
Directors. The number of Directors which shall constitute the whole
Board shall be not less than three (3) nor more than nine (9).
Within such limits, the number of Directors may be fixed from time
to time by vote of the stockholders or of the Board of Directors,
at any regular or special meeting, subject to the provisions of the
Certificate of Incorporation. Directors need not be stockholders.
Directors shall be elected at the annual meeting of the stockhold-
ers of the Corporation, except as provided in Section 2 of this
Article, to serve until the next annual meeting of stockholders and
until their respective successors are duly elected and have
qualified.
In addition to the powers by these By-Laws expressly conferred
upon them, the Board may exercise all such powers of the
Corporation as are not by the laws of the State of Delaware, the
Certificate of Incorporation or these By-Laws required to be
exercised or done by the stockholders.
<PAGE>
<PAGE>
Section 2. Vacancies and Newly Created Directorships. Except
as hereinafter provided, any vacancy in the office of a Director
occurring for any reason other than the removal of a Director
pursuant to Section 3 of this Article, and any newly created
Directorship resulting from any increase in the authorized number
of Directors, may be filled by a majority of the Directors then in
office or by a sole remaining Director. In the event that any
vacancy in the office of a Director occurs as a result of the
removal of a Director pursuant to Section 3 of this Article, or in
the event that vacancies occur contemporaneously in the offices of
all of the Directors, such vacancy or vacancies shall be filled by
the stockholders of the Corporation at a meeting of stockholders
called for the purpose. Directors chosen or elected as aforesaid
shall hold office until the next annual meeting of stockholders and
until their respective successors are duly elected and have
qualified.
Section 3. Removals. At any meeting of stockholders of the
Corporation called for the purpose, the holders of a majority of
the shares of capital stock of the Corporation entitled to vote at
such meeting may remove from office, with or without cause, any or
all of the Directors.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place, either
within or without the State of Delaware, as shall from time to time
be determined by resolution of the Board.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President
or any two Directors on notice given to each Director, and such
meetings shall be held at the principal business office of the
Corporation or at such other place or places, either within or
without the State of Delaware, as shall be specified in the notices
thereof.
Section 6. Annual Meetings. The first meeting of each newly
elected Board of Directors shall be held as soon as practicable
after each annual election of Directors and on the same day, at the
same place at which regular meetings of the Board of Directors are
held, or at such other time and place as may be provided by
resolution of the Board. Such meeting may be held at any other time
or place which shall be specified in a notice given, as hereinafter
provided, for special meetings of the Board of Directors.
Section 7. Notice. Notice of any meeting of the Board of
Directors requiring notice shall be given to each Director by
mailing the same at least forty-eight (48) hours, or by personal
delivery, telegram or telecopy at least twenty-four (24) hours,
before the time fixed for the meeting. Attendance of a Director at
a meeting shall constitute waiver of notice of such meeting, except
when such Director attends such meeting for the express purpose of
objecting, at the beginning of such meeting, to the transaction of
any business because such meeting is not lawfully called or
convened.
<PAGE>
Section 8. Quorum. At all meetings of the Board of Directors,
the presence of one-half or more of the Directors constituting the
Board (but in no event less than two Directors) shall constitute a
quorum for the transaction of business. Except as may be otherwise
specifically provided by the laws of the State of Delaware, the
Certificate of Incorporation or these By-Laws, the affirmative vote
of a majority of the Directors present at the time of such vote
shall be the act of the Board of Directors if a quorum is present.
If a quorum shall not be present at any meeting of the Board of
Directors the Directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. The Chairman of the Board
shall call to order meetings of the directors and shall act as
chairman of such meetings.
Section 9. Consent. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required
or permitted to be taken at any meeting of the Board of Directors
may be taken without a meeting, if all members of the Board consent
thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board.
Section 10. Telephonic Meetings. Unless otherwise restricted
by the Certificate of Incorporation or these By-Laws, members of
the Board of Directors may participate in a meeting of the board by
means of conference telephone or similar communications equipment
by means of which all persons participating in such meeting can
hear each other, and participation in a meeting pursuant to this
Section 10 shall constitute presence in person at such meeting.
Section 11. Compensation of Directors. Directors, as such,
shall not receive any stated salary for their services, but, by
resolution of the Board, a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special
meeting of the Board; provided that nothing herein contained shall
be construed to preclude any Director from serving the Corporation
in any other capacity and receiving compensation therefor.
Section 12. Resignations. Any Director of the Corporation may
resign at any time by giving written notice to the Board of
Directors or to the Chairman of the Board, the President or the
Secretary of the Corporation. Any such resignation shall take
effect at the time specified therein, or, if the time be not
specified, upon receipt thereof; and unless otherwise specified
therein, acceptance of such resignation shall not be necessary to
make it effective.
ARTICLE V
Officers
--------
Section 1. Number, Election and Term of Office. The officers
of the Corporation shall be a Chairman of the Board, President, one
or more Vice Presidents, a Secretary and a Treasurer, and may, at
the discretion of the Board of Directors, include any other
<PAGE>
officers and agents as the interest of the Corporation may require.
Any of the Chairman of the Board, the President, or any other
officer of the Corporation, or any combination of them, as
authorized by the directors, shall be the principal executive
officer of the Corporation. The officers of the Corporation shall
be elected annually by the Board of Directors at its meeting held
immediately after the annual meeting of the stockholders, and shall
hold their respective offices until their successors are duly
elected and have qualified. Any number of offices may be held by
the same person.
Section 2. Chairman of the Board. The Chairman of the Board
shall preside, when present, at all meetings of the Board of
Directors and all meetings of the stockholders and will perform
such other duties as may from time to time be assigned to him by
the Board of Directors or these By-laws.
Section 3. President. The President shall have such powers and
duties as from time to time may be assigned to him by the Board of
Directors or these By-laws, and shall see that all orders and
resolutions of the Board of Directors and the stockholders are
carried into effect. He shall have the general authority to execute
bonds, deeds, and contracts in the name of the Corporation and
affix the corporate seal thereto, and to sign stock certificates.
Subject to authorization and approval by the Board of Directors or
pursuant to these By-laws, he shall have the authority: to cause
the employment or appointment of such employees and agents of the
Corporation as the proper conduct of operations may require, and to
fix their compensation; and to remove or suspend any employee or
agent who shall have been employed or appointed under his authority
or under authority of an officer subordinate to him.
Section 4. Vice Presidents. The Vice Presidents shall perform
such duties as the President or the Board of Directors shall
require. Any Vice President shall, during the absence or incapacity
of the President, assume and perform his duties.
Section 5. Secretary. The Secretary may sign all certificates
of stock of the Corporation. He shall record all the proceedings of
the meetings of the Board of Directors and of the stockholders of
the Corporation in books to be kept for that purpose. He shall have
custody of the seal of the Corporation and may affix the same to
any instrument requiring such seal when authorized by the Board of
Directors, and when so affixed he may attest the same by his
signature. He shall keep the transfer books, in which all transfers
of the capital stock of the Corporation shall be registered, and
the stock books which shall contain the names and addresses of all
holders of the capital stock of the Corporation and the number of
shares held by each; and he shall keep such stock and transfer
books open daily during business hours to the inspection of every
stockholder and for transfer of stock. He shall notify the
Directors and stockholders of their respective meetings as required
by law or by these By-Laws, and shall perform such other
duties as may be required by law or by these By-Laws, or which may
be assigned to him from time to time by the Board of Directors.
<PAGE>
Section 6. Treasurer. The Treasurer shall have charge of the
funds and securities of the Corporation. He may sign all certifi-
cates of stock. He shall keep full and accurate accounts of all
receipts and disbursements of the Corporation in books belonging to
the Corporation and shall deposit all monies; and other valuable
effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors. He
shall disburse the funds of the corporation as may be ordered by
the Board, and shall render to the President or the Directors,
whenever they may require it, an account of all his transactions as
Treasurer and an account of the business and financial position of
the Corporation.
Section 7. Assistant Treasurers. The Assistant Treasurers
shall, during the absence or incapacity of the Treasurer, assume
and perform all functions and duties which the Treasurer might
lawfully do if present and not under any incapacity.
Section 8. Treasurer's Bond. The Treasurer and Assistant
Treasurers shall, if required so to do by the Board of Directors,
each give a bond (which shall be renewed every six (6) years) in
such sum and with such surety or sureties as the Board of Directors
may require.
Section 9. Transfer of Duties. The Board of Directors in its
absolute discretion may transfer the power and duties, in whole or
in part, of any officer to any other officer, or persons, notwith-
standing the provisions of these By-Laws, except as otherwise
provided by the laws of the State of Delaware.
Section 10. Vacancies. If the office of Chairman of the Board,
President, Vice President, Secretary or Treasurer, or of any other
officer or agent becomes vacant for any reason, the Board of
Directors may choose a successor to hold office for the unexpired
term.
Section 11. Removals. At any meeting of the Board of Directors
called for the purpose, any officer or agent of the Corporation may
be removed from office, with or without cause, by the affirmative
vote of a majority of the entire Board of Directors.
Section 12. Compensation of Officers. The officers shall
receive such salary or compensation as may be determined by the
Board of Directors.
Section 13. Resignations. Any officer or agent of the
Corporation may resign at any time by giving written notice to the
Board of Directors or to the Chairman of the Board, the President
or the Secretary of the Corporation. Any such resignation shall
take effect at the time specified therein or, if the time be not
specified, upon receipt thereof; and unless otherwise specified
therein, acceptance of such resignation shall not be necessary to
make it effective.
<PAGE>
<PAGE>
ARTICLE VI
Contracts, Checks and Notes
---------------------------
Section 1. Contracts. Unless the Board of Directors shall
otherwise specifically direct, all contracts of the Corporation
shall be executed in the name of the Corporation by the Chairman of
the Board or the President or a Vice President.
Section 2. Checks and Notes. All checks, drafts, bills of
exchange and promissory notes and other negotiable instruments of
the Corporation shall be signed by such officers or agents of the
Corporation as may be designated by the Board of Directors.
ARTICLE VII
Stocks
------
Section 1. Certificates of Stock. The certificates for shares
of the stock of the Corporation shall be in such form, not
inconsistent with the Certificate of Incorporation, as shall be
prepared or approved by the Board of Directors. Every holder of
stock in the Corporation shall be entitled to have a certificate
signed by, or in the name of the Corporation by, the Chairman of
the Board, the President or a Vice President, and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant
Secretary certifying the number of shares owned by him and the date
of issue; and no certificate shall be valid unless so signed. All
certificates shall be consecutively numbered and shall be entered
in the books of the Corporation as they are issued. Where a
certificate is countersigned (1) by a transfer agent other than the
Corporation or its employee, or, (2) by a registrar other than the
corporation or its employee, any other signature on the certificate
may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue. All
certificates surrendered to the Corporation shall be cancelled and,
except in the cases of lost or destroyed certificates, no new
certificates shall be issued until the former certificates for the
same number of shares of the same class of stock shall have been
surrendered and cancelled.
Section 2. Transfer of Stock. Upon surrender to the Corpora-
tion or the transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succes-
sion, assignment or authority to transfer, it shall be the duty of
the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon
its books.
<PAGE>
<PAGE>
ARTICLE VIII
Registered Stockholders
-----------------------
The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to, or interest in, such share or shares
on the part of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
ARTICLE IX
Lost Certificates
-----------------
Any person claiming a certificate of stock to be lost or
destroyed shall make an affidavit or affirmation of the fact and
advertise the same in such manner as the Board of Directors
may require, and the Board of Directors may, in its discretion,
require the owner of the lost or destroyed certificate, or his
legal representative, to give the Corporation a bond in a sum
sufficient, in the opinion of the Board of Directors, to indem-
nify the Corporation against any claim that may be made against
it on account of the alleged loss of any such certificate. A
new certificate of the same tenor and for the same number of
shares as the one alleged to be lost or destroyed may be issued
without requiring any bond when, in the judgment of the
Directors, it is proper so to do.
ARTICLE X
Fixing of Record Date
---------------------
In order that the Corporation may determine the stock-
holders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or to receive
payment of any dividend or other distribution or allotment of
any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of
directors, and which record date shall rot be more than sixty (60)
nor less than ten (10) days before the date of such meeting, nor
more than sixty (60) days prior to any other action. A determina-
tion of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
<PAGE>
<PAGE>
ARTICLE XI
Dividends
---------
Subject to the relevant provisions of the Certificate of
Incorporation, dividends upon the capital stock of the Corporation
may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation.
Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sums as the
Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property
of the Corporation, or for such other purpose as the Directors
shall think conducive to the interest of the Corporation, and the
Directors may modify or abolish any such reserve in the manner in
which it was created.
ARTICLE XII
Waiver of Notice
----------------
Whenever any notice whatever is required to be given by
statute or under the provisions of the Certificate of Incorporation
or these By-Laws, a waiver thereof in writing signed by the person
or persons entitled to said notice, whether before or after the
time stated therein, shall be equivalent thereto.
ARTICLE XIII
Seal
----
The corporate seal of the Corporation shall have inscribed
thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal of Delaware."
ARTICLE XIV
Amendments
----------
Subject to the provisions of the Certificate of Incorporation,
these By-Laws may be altered, amended or repealed or new By-Laws
may be adopted by the stockholders or by the Board of Directors at
any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment or
repeal of the By-Laws or of adoption of new By-Laws be contained in
the notice of such special meeting.
Exhibit 11
Electronic Retailing Systems International, Inc.
Computation of Earnings (Loss) Per Common Share
<TABLE>
<CAPTIONS>
Three Months
Nine Months
Ended
Ended
Sept. 30, 1996
Sept. 30, 1996
--------------
- --------------
<S> <C> <C>
Net loss ($1,969,000)
($6,528,000)
Dividends on preferred stock -
(231,000)
-----------
- -----------
Net loss available to common
shareholders (before non-cash
benefit from preferred stock
conversion) (1,969,000)
(6,759,000)
Non-cash benefit from preferred
stock conversion 5,258,000
5,258,000
----------
- ----------
Earnings (loss) available to
common shareholders $3,289,000
($1,501,000)
==========
==========
Weighted average common shares
outstanding 20,301,092
14,651,585
==========
==========
Earnings (loss) per common
share $0.16
($0.10)
==========
==========
Calculation of weighted average
shares outstanding
Shares issued and outstanding
at Dec. 31, 1995 11,748,232
11,748,232
Shares issued in Reg. S offering 4,370,038
1,472,687
Shares issued in US private placement 802,655
270,492
Shares issued to investment broker 192,777
64,965
Shares issued upon conversion of
Series A preferred stock 2,763,597
931,322
Issuance of shares pursuant to
stock option plan 52,321
40,063
Weighted average stock options
outstanding 371,472
123,824
----------
- ----------
Weighted average common shares
outstanding 20,301,092
14,651,585
==========
==========
</TABLE
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,651
<SECURITIES> 0
<RECEIVABLES> 1,719
<ALLOWANCES> (108)
<INVENTORY> 1,505
<CURRENT-ASSETS> 12,973
<PP&E> 2,292
<DEPRECIATION> (1,683)
<TOTAL-ASSETS> 14,465
<CURRENT-LIABILITIES> 882
<BONDS> 4,987
0
0
<COMMON> 210
<OTHER-SE> 8,386
<TOTAL-LIABILITY-AND-EQUITY> 14,465
<SALES> 3,675
<TOTAL-REVENUES> 4,270
<CGS> 3,955
<TOTAL-COSTS> 4,673
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 283
<INCOME-PRETAX> (6,528)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,528)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,528)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> 0
</TABLE>
