<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15 (d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-24638
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MOUNTBATTEN, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Pennsylvania 23-2633708
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
33 Rock Hill Road
Bala Cynwyd, Pennsylvania 19004
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(610) 664-2259
---------------------------
(Issuer's telephone number)
n/a
----------------------------------------------------
(Former name, former address, and former fiscal year
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Exchange Act during the past 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: State the number of shares outstanding
of each of the issuer's classes of common equity as of the latest practicable
date:
Class Outstanding at April 30, 1996
- ------------------------------ -----------------------------
Common Stock 2,528,530
Par value $.001 per share
Transitional Small Business Disclosure Format (check one ) YES NO X
----- -----
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Mountbatten, Inc. and Subsidiary
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
ASSETS 1996 1995
--------- ------------
<S> <C> <C>
Fixed maturities
At fair value (amortized cost, $6,915,952 and
$6,665,324 at March 31, 1996 and
December 31, 1995, respectively) $6,849,220 $6,685,900
Cash and cash equivalents 378,713 755,639
Premiums receivable 762,303 385,372
Reinsurance receivable 205,037 205,037
Subrogation receivable 451,690 393,999
Accrued investment income 134,258 36,673
Property and equipment, net 54,828 52,519
Deferred acquisition costs 311,985 270,687
Prepaid reinsurance premiums 13,834 39,166
Deferred tax asset 143,282 113,597
Other assets 121,107 59,318
---------- ----------
TOTAL ASSETS $9,426,257 $8,997,907
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid claims and claim adjustment expenses $670,917 $602,265
Unearned premiums 715,262 621,403
Accrued expenses and other liabilities 478,913 246,592
Federal income taxes payable 39,647 196,624
---------- ----------
TOTAL LIABILITIES 1,904,739 1,666,884
---------- ----------
Shareholders' Equity
Common stock, par value $.001 per share;
authorized 20,000,000 shares; issued and
and outstanding, 2,528,530 shares. 2,529 2,529
Additional paid in capital 6,762,934 6,762,934
Net unrealized (depreciation) appreciation, fixed
maturities (44,043) 13,580
Retained earnings 800,098 551,980
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 7,521,518 7,331,023
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $9,426,257 $8,997,907
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE>
Mountbatten, Inc. and Subsidiary
Consolidated Statements of Operations
(unaudited)
Three months ended
March 31,
1996 1995
---------- --------
Underwriting:
Gross written premiums $1,615,039 $727,049
Premiums ceded (276,582) (123,438)
---------- --------
Net written premiums 1,338,457 603,611
Change in unearned premium (93,859) (42,254)
---------- --------
Net earned premiums 1,244,598 561,357
---------- --------
Claims and claims adjustment expenses 87,121 40,262
Commission expense 496,369 220,189
Salaries and benefits 224,698 172,079
Professional fees 29,125 22,047
Other operating expenses 154,954 81,145
---------- --------
992,267 535,722
---------- --------
Underwriting income 252,331 25,635
---------- --------
Other income (expense)
Interest income 99,610 88,892
Interest expense - (3,751)
---------- --------
Income before income taxes 351,941 110,776
Provision for income taxes 103,823 37,665
---------- --------
Net income $248,118 $73,111
========== ========
Primary earnings per share: $0.10 $0.03
Weighted average shares outstanding 2,603,605 2,584,878
The accompanying notes are an integral part of these financial statements
3
<PAGE>
Mountbatten, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
---------- --------
<S> <C> <C>
Operating activities:
Net income $248,118 $73,111
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,191 2,970
Change in:
Premiums receivable (376,931) 78,710
Reinsurance receivable - -
Subrogation receivable (57,691) (33,764)
Accrued investment income (97,585) (37,078)
Unearned premiums 93,859 42,255
Unpaid claims and claim adjustment
expenses 68,652 35,263
Prepaid reinsurance premiums 25,332 110,938
Accrued expenses and other liabilities 232,323 (33,349)
Deferred acquisition costs (41,298) (18,428)
Deferred tax asset (29,685) (6,012)
Federal income taxes payable (156,977) (32,795)
Other, net (32,106) (95,295)
-------- --------
Net cash provided by (used in) operating activities (119,798) 86,526
-------- --------
Investing activities:
Purchase of equipment (6,500) (15,886)
Purchase of investments (289,535) (5,738,934)
Maturities of investments 38,907 5,759,821
-------- --------
Net cash provided by (used in) investing activities (257,128) 5,001
-------- --------
Net increase (decrease) in cash and cash equivalents (376,926) 91,527
Cash and cash equivalents at beginning of period 755,639 172,670
-------- --------
Cash and cash equivalents at end of period $378,713 $264,197
======== ========
</TABLE>
Supplemental disclosure of cash flow information:
The Company made payments of $260,800 during the three months ended March 31,
1996 for federal income taxes. Payments of $3,751 and $92,201 were made by the
Company during the three months ended March 31, 1995 for interest and federal
income taxes, respectively.
The accompanying notes are an integral part of these financial statements
4
<PAGE>
Mountbatten, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 1 - Description of Business:
Mountbatten, Inc. ("Mountbatten") commenced operations in February, 1992.
Mountbatten acts as a holding company for The Mountbatten Surety Company, Inc.
(the "Surety Company"). The Surety Company underwrites performance, payment and
other bonds, and is licensed to conduct business in the Commonwealths of
Pennsylvania, Virginia, Kentucky, the States of Delaware, Maryland, New Jersey,
New York, Ohio, and the District of Columbia. In these states, the Surety
Company underwrites primarily construction and performance bonds through
independent agents and brokers. (Mountbatten together with the Surety Company
are referred to below as the "Company").
Note 2 - Summary of Significant Accounting Policies:
Basis of presentation:
The consolidated financial statements include the accounts of Mountbatten, Inc.
("the Company") and its wholly owned subsidiary, The Mountbatten Surety Company,
Inc. ("the Surety Company"). These statements have been prepared in accordance
with generally accepted accounting principles ("GAAP"), with the instructions to
Form 10-QSB and Article 10 of Regulation S-X. The preparation of interim
financial statements necessarily relies heavily on estimates. This and certain
other factors, such as the seasonal nature of the surety bond business as well
as competitive and other market conditions, call for caution in drawing specific
conclusions from interim results. In the opinion of management, the interim
financial statements reflect all adjustments, consisting only of normal
recurring accruals, necessary for the fair presentation of the Company's results
of operations and financial position for the periods presented. Operating
results for the three month period ended March 31, 1996 are not necessarily
indicative of results that can be expected for the fiscal year ending December
31, 1996. These condensed financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Report
on Form 10-KSB dated March 19, 1996.
Statutory accounting principles:
The Surety Company follows accounting practices prescribed by the Insurance
Department of the Commonwealth of Pennsylvania, which is a comprehensive basis
of accounting other than GAAP. Accordingly, certain adjustments have been made
in order to conform the consolidated financial statements to GAAP.
Revenue recognition:
Premiums are recognized as earned over the estimated period of bond performance
or project completion, which is generally less than one year. Ceded reinsurance
premiums are recognized on a similar basis. Unearned premiums represent the
portion of net premiums applicable to the unexpired portion of the bond. The
estimates are based primarily on management's understanding of a bonded
project's stage of completion supplemented by historical completion patterns.
Cash equivalents:
Cash equivalents include highly liquid money market instruments with original
maturities of three months or less.
5
<PAGE>
Note 2 - Summary of Significant Accounting Policies: - (continued)
Investments:
The Company invests in U.S. Treasury securities with maturities ranging from six
months to five years. The Company's investments in debt securities are
classified as available-for-sale. Accordingly, any changes in carrying value are
reflected as adjustments to Shareholders' Equity.
Reinsurance receivable:
Reinsurance receivable is an estimate of amounts to be received from the Surety
Company's reinsurer.
Subrogation receivable:
The Surety Company requires bond applicants to enter into an indemnity agreement
which obligates the insured to reimburse the Surety Company for any claims paid
and costs incurred that are related to the bond. Subrogation receivable
represents amounts due to the Surety Company from bonded principals for claim
costs incurred by the Surety Company after a failure of a bonded principal to
fulfill a bonded obligation. The Company records subrogation receivable when
costs associated with a bonded loss are incurred and it is probable that the
costs will be recovered. Changes in estimates of subrogation receivable are
credited or charged to income in the period in which they are determined and are
included in claims and claim adjustment expenses.
Unpaid claims and claim adjustment expenses:
The reserve for claims and claim adjustment expenses is based on management's
individual case estimates of the ultimate future payments to be made on reported
claims and related expenses, and on estimates for incurred but not reported
("IBNR") claims. Claim reserve estimates are revised by management as new
information becomes available. Changes in these estimates are charged or
credited to income in the period in which they are determined. Claim adjustment
expenses include costs associated directly with specific claims paid or in the
process of settlement.
Note 3 - Income Taxes
The Company files a consolidated income tax return with its wholly
owned subsidiary, the Surety Company, and is a party to a tax sharing agreement
with the Surety Company. The Company had a deferred tax asset of $143,282 and
$113,597 at March 31, 1996 and December 31, 1995, respectively.
Note 4 - Shareholders' Equity
In January 1996, the Company granted incentive stock options to selected
individuals to purchase 83,750 shares of common stock, consisting of 63,750
shares at an exercise price of $5.25 per share, vesting over a five year period
and exercisable for a ten year period after the date of grant, and 20,000 shares
at an exercise price of $5.78 per share, vesting over a five year period and
exercisable for a five year period after the date of grant.
In January 1996, the Company granted non-qualified options to selected
individuals to purchase 35,000 shares of common stock at an exercise price per
share of $5.25. These options vest immediately and are exercisable for a ten
year period after the date of grant.
6
<PAGE>
Note 5 - Reinsurance
Prior to November 1, 1995, the Company's reinsurance program provided
three layers of reinsurance. Under the first layer, the Company retained 100% of
each loss up to $150,000 and the reinsurer assumed the next $350,000, subject to
a maximum annual recovery by the Company of the greater of 200% of annual ceded
premium or $850,000. The second coverage layer provided $1.5 million of coverage
on any loss in excess of the first $500,000 of loss, subject to a maximum annual
recovery by the Company of $3 million. The third layer provided $2.5 million of
coverage on any loss in excess of the first $2 million of loss, subject to a
maximum annual recovery by the Company of $2.5 million.
The reinsurance program provided that the Company would not write any
bond exceeding $3 million or bonds on the same work program in favor of the
principal exceeding $4.5 million in the aggregate. Under the treaty, the maximum
bond duration could not exceed 24 months.
Effective November 1, 1995, the Company secured a new reinsurance
treaty that increased the maximum single bond limit to $5 million, and the work
program aggregate to $7.5 million. Under the first layer of reinsurance, the
maximum annual recovery by the Company increased from the greater of 200% of
annual ceded premium or $850,000 to the greater of 250% of annual ceded premium
or $2,250,000. Under the second layer of reinsurance, the maximum annual
recovery by the Company increased from $3 million to $4.5 million. Under the
third layer of reinsurance, the maximum annual recovery by the Company increased
from $2.5 million to $5 million. In addition to the above, a fourth layer of
reinsurance with an aggregate limit of $3 million of coverage on any loss in
excess of the first $4.5 million was added. Under the new reinsurance program,
the Company will retain 5% of all losses in the second layer up to a maximum of
$75,000 per year.
Note 6 - Statutory Surplus and Dividend Restrictions
The Surety Company is subject to minimum surplus requirements under the
Commonwealth of Pennsylvania insurance laws and regulations. Under applicable
Pennsylvania laws and regulations, the Surety Company is required to maintain a
minimum of $1,125,000 of paid in capital. The maximum amount of dividends which
can be paid by the Surety Company to shareholders without prior approval of the
Insurance Commissioner is subject to restrictions relating to statutory surplus.
Note 7 - Unpaid Claims and Claim Adjustment Expenses and Reinsurance Receivable
The process by which reserves are established for insured events and
related litigation requires reliance upon estimates based on the Surety
Company's limited claims experience, supplemented with available industry data.
The Surety Company's limited claims experience creates uncertainty with respect
to the estimation of loss and loss adjustment expense reserves. As information
develops which varies from expected experience, provides additional data or, in
some cases, augments data which previously was not considered sufficient in
determining reserves, adjustments to reserves may be required. Unpaid claims and
claim adjustment expenses of $670,917 at March 31, 1996, consist of case
reserves totaling $281,623 and reserves for incurred but not reported ("IBNR")
losses of $389,294.
Included in unpaid claims and claim adjustment expenses of $602,265 at December
31, 1995 are case reserves totaling $300,010 and IBNR reserves of $302,255.
The Company has reinsurance receivable at March 31, 1996 and December 31, 1995
of $205,037, consisting of $135,398 and $69,639 at March 31, 1996, and $129,199
and $75,838 at December 31, 1995 of paid and unpaid losses, respectively.
7
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company's principal business activity is to underwrite surety bonds
through its wholly owned subsidiary, the Surety Company. On September 11, 1992,
the Surety Company was licensed by the Commonwealth of Pennsylvania Insurance
Department to write surety bonds in that state. The Surety Company received its
authority to write surety bonds on federally financed projects ("Treasury
Listing" or "T-Listing") in May 1994. The following table sets forth
information, chronologically, with respect to those states in which the Surety
Company is presently licensed to write bonds:
State Date of Admission
- ----- -----------------
Pennsylvania September 11, 1992
Delaware July 13, 1994
Maryland October 7, 1994
New Jersey March 31, 1995
Virginia August 17, 1995
District of Columbia September 1, 1995
New York October 19, 1995
Ohio November 28, 1995
Kentucky April 26, 1996
In addition, the Surety Company has applied for a license to underwrite bonds in
Indiana, and anticipates filing license applications in various other states.
Results of Operations
Three months ended March 31, 1996 compared to three months ended March
31, 1995: During the three month period ended March 31, 1996, the Surety Company
generated $1,615,039 of gross written premiums, compared to $727,049 of gross
written premiums during the three month period ended March 31, 1995,
representing an increase of $887,990 or 122%. Management attributes the increase
in gross written premiums primarily to the Surety Company's increased
penetration of the Pennsylvania, New Jersey, Delaware, Maryland and Virginia
markets. Because the Surety Company became licensed in the District of Columbia,
New York and Ohio relatively late in 1995, its expansion in these markets did
not significantly impact gross written premiums during the 1996 period.
For the three months ended March 31, 1996, gross ceded reinsurance
premiums totaled $276,582, representing approximately 17.1% of gross written
premiums. For the three months ended March 31, 1995, gross ceded reinsurance
premiums totaled $123,438, representing approximately 17% of gross written
premiums. The increase in ceded reinsurance premiums from the 1995 period to the
1996 period was primarily the result of the increase in gross written premiums
as well as an increase in reinsurance coverage limits and reinstatements.
Effective November 1, 1995, the Company secured a new reinsurance
treaty that increased the Company's maximum single bond limit and work program
aggregate limit from $3 million and $4.5 million, respectively, to $5 million
and $7.5 million, respectively. In addition, the Company's reinsurance coverage
limits and reinstatements were increased. Under its new reinsurance program,
ceded reinsurance premiums are expected to represent approximately 17.1% of
gross written premiums.
For the three months ended March 31, 1996, claims and claim adjustment
expenses incurred were $87,121 compared to $40,262 for the three months ended
March 31, 1995. The increase in claim and claims adjustment expenses in 1996
(net of subrogation receivable from the bonded principals or the owners of the
projects) relates primarily to increases in incurred but not reported ("IBNR")
reserves. The increase in IBNR reserves relates primarily to the increase in
gross written premiums.
8
<PAGE>
A limited number of claims have been filed on the Surety Company's
bonds. Accordingly, the Surety Company has established case reserves of $281,623
to provide for future claims and claim adjustment expense payments.
For the three months ended March 31, 1996, commission expenses were
$496,369, representing approximately 31% of gross written premiums, compared to
$220,189, or approximately 30% of gross written premiums, for the three months
ended March 31, 1995. The increase in commission expenses in 1996 relates
primarily to the increase in gross written premiums.
For the three month periods ended March 31, 1996 and 1995, the Company
incurred salary and benefits costs of $224,698 and $172,079, respectively. The
increase in salary and benefit costs in 1996 reflects an increase in the number
of employees, including additional underwriters and related support personnel,
as well as increased compensation for these personnel.
For the three months ended March 31, 1996, the Company incurred $29,125
for professional services and $154,954 for other operating expenses, compared to
$22,047 and $81,145, respectively, for the similar period in 1995. This increase
reflects legal, accounting, auditing, and various other expenses associated with
the Company's status as a public company and the associated regulatory reporting
obligations, in addition to compliance with licensure and tax requirements in
the various states in which the Company is licensed, the licensing of additional
agents, and the infrastructure changes required to support the Company's current
and expected future increased level of gross written premiums.
For the three month periods ended March 31, 1996 and 1995, the Company
generated $99,610 and $88,892, respectively, of income from its investments,
comprised exclusively of U.S. Government securities. The increase in interest
income in 1996 may be attributed to variances in both the level of invested
funds as well as their respective yields. On December 29, 1995 the Company sold
all of its U.S. government securities having original maturities of less than
one year, and reinvested the proceeds of $4,635,219 in a U.S. government
security maturing in November 2000 with an effective yield to maturity of 5.44%.
Net income for the three months ended March 31, 1996 was $248,118, as
compared to $73,111 for the three months ended March 31, 1995, an increase of
$175,007.
Seasonality
Because most of the Surety Company's premiums are generated on
construction related bonds, and are associated with jobs primarily in
mid-atlantic states, the Surety Company's business has been seasonal.
Accordingly, operating results have varied from quarter to quarter, with premium
levels lowest from November to March. Seasonality is expected to have less of an
effect on premium activity as the Surety Company becomes licensed in states
having more temperate climates.
Liquidity and Capital Resources
Operations of the Surety Company have been financed by contributions
from the Company, principally from the sale of common stock by the Company.
Costs incurred by the Company are shared with the Surety Company under a
services agreement which provides for the Surety Company to reimburse the
Company for costs paid by the Company which are deemed to benefit the Surety
Company. While the Surety Company has paid no dividends in the past, it may
elect to do so in the future, subject to the dividend restrictions of the
Commonwealth of Pennsylvania insurance laws and regulations. The Company expects
to maintain a high level of liquidity through, among other things, the
continued investment in U.S. government securities.
9
<PAGE>
During 1995, approximately $706,000 of the Company's cash and
investment portfolio was converted to U.S. Treasury Notes in conjunction with
the final licensure requirements of the Commonwealth of Virginia and the State
of New York. In April 1996, an additional $515,000 of the Company's cash and
investment portfolio was restricted in conjuction with the final licensure
requirements of the Commonwealth of Kentucky. Management anticipates that
additional "deposit" requirements will be required to be satisfied in those
states in which the Surety Company intends to seek a license to write surety
bonds.
The Company had approximately $7,228,000 of investments and cash
equivalents at March 31, 1996, and approximately $7,442,000 of investments and
cash equivalents at December 31, 1995. The Company's anticipated expansion plans
and its status as a public company will require additional personnel and
financial resources. While certain costs are expected to increase due to the
changes in infrastructure as discussed above, management believes that the
Company and the Surety Company have adequate liquidity to pay all claims and
meet all other obligations for the next twelve months, at a minimum.
The Surety Company requires capital to support its bond underwriting.
Management believes that the statutory surplus of the Surety Company, which was
approximately $7,266,000 at March 31, 1996, will be sufficient to support the
Surety Company's current and anticipated premiums and losses.
10
<PAGE>
PART II: OTHER INFORMATION
Item 2. Changes in Securities.
The Company's Articles of Incorporation were amended to eliminate
cumulative voting by shareholders in elections for directors. The amendment was
approved by the Company's shareholders at the Company's annual meeting of
shareholders on April 30, 1996.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of shareholders on April 30, 1996.
The matters voted upon at the meeting and the number of votes cast for, against
or withheld, as well as the number of abstentions and broker non-votes, as to
each such matter, including a separate tabulation with respect to each nominee
for director, are set forth as follows:
1. The following persons were elected as directors:
Name of Nominee No. of Votes "For" No. of Votes "Withheld"
- --------------- ------------------ -----------------------
Kenneth L. Brier 9,087,248 6,800
----------------- -----
Ted A. Drauschak 9,087,248 6,800
----------------- -----
J. Michael Adams 9,087,248 6,800
----------------- -----
Thomas P. Garry 9,087,248 6,800
----------------- -----
2. The proposal to elect of Price Waterhouse LLP as auditors for
the Company for 1996:
For 2,266,012
Against 7,500
Abstain 0
3. The proposal to adopt the Company's Equity Incentive Plan for
Key Employees:
For 1,503,318
Against 29,100
Abstain 22,800
Broker
non-votes 718,294
4. The proposal to adopt the Company's Equity Incentive Plan for
Outside Directors:
For 1,492,018
Against 38,600
Abstain 24,600
Broker
non-votes 718,294
5. The proposal to amend the Company's Articles of Incorporation
to eliminate cumulative voting by shareholders in elections
for directors:
For 1,512,418
Against 39,900
Abstain 2,900
Broker
non-votes 718,294
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 3.2 Amended and Restated Articles of Incorporation of the
Registrant, as amended
Exhibit 3.3 By-laws of Registrant (incorporated by reference to Exhibit
3.3 of Registrant's Form SB - 2 Registration Statement No. 33-78336
declared effective September 1, 1994)
Exhibit 11. Computation of Earnings per Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period for which this
report is filed
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
May 14, 1996 MOUNTBATTEN, INC.
By /s/ Kenneth L. Brier
----------------------------------
Kenneth L. Brier
President and Chief Executive Officer
(principal executive officer)
By /s/ Joel D. Cooperman
----------------------------------
Joel D. Cooperman
Vice President, Finance, Treasurer, and
Chief Financial Officer
(principal financial and accounting officer)
13
<PAGE>
Exhibit Index
Exhibit No. Description of Exhibit
- ----------- ----------------------
3.2 Amended and Restated Articles of Incorporation of the
Registrant, as amended
3.3 By-laws of Registrant (incorporated by reference to
Exhibit 3.3 of Registrant's Form SB-2 Registration Statement
No. 33-78336 declared effective September 1, 1994)
11 Computation of Eanings per Share
27 Financial Data Schedule
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
1. The name of the Corporation is "Mountbatten, Inc."
2. The address of the Corporation's current registered office is 33
Rock Hill Road, Bala Cynwyd, PA 19004 (Montgomery County).
3. The Corporation is incorporated under the Pennsylvania Business
Corporation Law of 1988, as amended for the following purposes:
To have unlimited power to engage in and do any lawful act
concerning any or all lawful business for which corporations
may be incorporated under the Business Corporation Law.
4. The term for which the Corporation is to exist is perpetual.
5. The aggregate number of shares which the Corporation shall have
authority to issue is 20,000,000 shares of Common Stock, par value $0.001 per
share, and 5,000,000 shares of Preferred Stock, par value $0.001 per share. The
Board of Directors may issue, in one or more classes or series, shares of the
Preferred Stock authorized hereby, with full, limited, multiple, fractional or
no voting rights, and with such designations, preferences, qualifications,
privileges, limitations, restrictions, options, conversion rights or other
special or relative rights as shall be fixed from time to time by the Board of
Directors. The shareholders of the Corporation shall not have the right to
cumulate their votes for election of directors of the Corporation.
Prior to the date hereof, the Corporation had designated 2,000,000
shares of Preferred Stock as Class A Convertible Preferred Stock, par value
$0.001 per share, and had issued shares of Class A Convertible Preferred Stock.
Effective immediately, (i) each share of Class A Convertible Preferred Stock,
par value $0.001 per share, currently existing shall automatically be converted
into a single share of Common Stock, par value $0.001 per share, (ii) the
designation of 2,000,000 shares of Preferred Stock as Class A Convertible
Preferred Stock shall be terminated, and (iii) the authorized shares of Class A
Convertible Preferred Stock shall be reduced to zero. (The foregoing changes are
hereinafter referred to as the "Reclassification".) From and after the date
hereof, and until exchanged for certificates representing Common Stock,
certificates formerly representing shares of Class A Convertible Preferred Stock
shall be deemed to represent the appropriate number of shares of Common Stock.
Each shareholder shall be required to surrender the certificate representing
such shareholder's Class A Convertible Preferred Stock in order to receive such
shareholder's certificate for the Common Stock into which it is converted.
<PAGE>
6. (a) The Corporation opts out of Subchapters E, G, H, I and J of the
Pennsylvania Business Corporation Law of 1988, as amended.
(b) Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting upon the written consent of
shareholders who would have been entitled to cast the minimum number of votes
that would be necessary to authorize the action at a meeting at which all
shareholders entitled to vote thereon were present and voting, so long as prompt
notice of the action is given to those shareholders entitled to vote thereon who
have not consented; provided that, at any time that the Corporation has more
than 75 shareholders, no shareholder action shall be effective unless taken at a
shareholder meeting in accordance with applicable law, these Articles and the
Corporation's By-laws. The action shall not become effective until at least ten
days' written notice of such action (or such lesser period as permitted by
applicable law) shall have been given to each shareholder entitled to vote
thereon who has not consented thereto.
Exhibit 11
MOUNTBATTEN, INC.
COMPUTATION OF NET INCOME PER SHARE (UNAUDITED)
Primary Net Income Per Share
Three months ended March 31,
1996 1995
---- ----
Net Income available to
Common Shareholders $ 248,118 $ 73,111
========== ==========
Weighted Average Shares:
Common shares 2,528,530 2,528,530
Common share equivalents
applicable to stock options 75,075 56,348
---------- ----------
Total 2,603,605 2,584,878
========== ==========
Primary Net Income per Share $ 0.10 $ 0.03
========== ==========
Fully Diluted Net Income Per Share
Net Income available to
Common Shareholders $ 248,118 $ 73,111
========== ==========
Weighted Average Shares:
Common shares 2,528,530 2,528,530
Common share equivalents
applicable to stock options 103,288 56,348
---------- ----------
Total 2,631,818 2,584,878
========== ==========
Fully Diluted Net Income per Share $ 0.09 $ 0.03
========== ==========
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 6,849,220
<DEBT-CARRYING-VALUE> 0
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<POLICY-LOSSES> 670,917
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0
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1,615,039
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