<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the fiscal quarter ended: September 30, 1997 or
--- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to ________________
Commission file number: 0-25012
CENSTOR CORP.
(Exact name of registrant as specified in its charter)
California 94-2775712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
540 N. Santa Cruz Ave., Suite #277
Los Gatos, California 95030
address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 298-8400
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 SEPTEMBER 30, 1997
Common Stock - no par value 8,523,751
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CENSTOR CORP.
INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets
June 30, 1997 and September 30, 1997 (unaudited) 3
Condensed Consolidated Statements of Operations (unaudited)
three months ended September 30, 1996 and 1997 4
Condensed Consolidated Statements of Cash Flows (unaudited)
three months ended September 30, 1996 and 1997 5
Notes to Condensed Consolidated Financial Statements (unaudited) 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 10
</TABLE>
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENSTOR CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
ASSETS 1997 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 799,928 $ 1,753,148
Receivables and prepaid expenses 44,538 38,280
------------- -------------
Total current assets 844,466 1,791,428
Deposits and other assets 10,516 8,394
------------- -------------
Total assets $ 854,982 $ 1,799,822
============= =============
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $ 66,372 $ 261,998
Deferred revenue 1,583,333 1,333,333
Other current liabilities 139,076 56,842
------------- -------------
Total current liabilities 1,788,781 1,652,173
Long-term obligations:
Deferred revenue 5,333,335 5,000,002
Restructured debt obligation 12,679,377 12,679,377
Net capital deficiency:
Preferred stock 32,509,031 32,509,031
Common stock 50,241,660 50,230,850
Warrants to purchase shares of 253,050 253,050
preferred stock
Capital surplus 2,263,708 2,263,708
Accumulated deficit (104,203,150) (102,788,369)
------------- -------------
(18,935,701) (17,531,730)
Notes receivable from shareholders (10,810) --
------------- -------------
Net capital deficiency (18,946,511) (17,531,730)
------------- -------------
Total liabilities and net capital deficiency $ 854,982 $ 1,799,822
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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CENSTOR CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1996 1997
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<S> <C> <C>
Revenues - license fees $ 838,333 $ 2,083,333
Costs and expenses:
Selling, general, and administrative 550,128 519,791
----------- -----------
Total expenses 550,128 519,791
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Operating income 288,205 1,563,542
Interest and other income, net 1,497,358 1,239
----------- -----------
Income before income tax expense 1,785,563 1,564,781
Income tax expense 600,000 150,000
----------- -----------
Net income $ 1,185,563 $ 1,414,781
=========== ===========
Net income per share $ 0.05 $ 0.06
=========== ===========
Weighted average number of shares used in
computing per share amounts (in thousands) 24,291 23,512
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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CENSTOR CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------
Operating activities: 1996 1997
----------- ------------
<S> <C> <C>
Net income $ 1,185,563 $ 1,414,781
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,878 2,122
Gain on transfer of research and development (1,596,706) --
operation
Interest on subordinated debentures 191,066 --
Changes in assets and liabilities:
Receivables and prepaid expenses (2,447,145) 6,258
Accounts payable (694,983) 195,626
Deferred revenue 7,166,667 (583,333)
Other current liabilities 121,792 (82,234)
----------- -----------
2,754,569 (461,561)
----------- -----------
Net cash provided by operating activities 3,940,132 953,220
Investing activities:
Deposits and other assets 122,220 --
Proceeds from sale of fixed assets and transfer of
assembled workforce 1,025,000 --
----------- -----------
Net cash provided by investing activities 1,147,220 --
----------- -----------
Financing activities:
Proceeds from issuance of short-term debt 350,000 --
Principal payments of short- and long-term debt (5,447,920) --
Principal payments under capital leases (23,825) --
----------- -----------
Net cash used in financing activities (5,121,745) --
----------- -----------
Net increase (decrease) in cash and cash
equivalents (34,393) 953,220
Cash and cash equivalents at beginning of period 199,998 799,928
----------- -----------
Cash and cash equivalents at end of period $ 165,605 $ 1,753,148
=========== ===========
Supplemental disclosure of noncash financing
activities:
Conversion of note payable to license $ 3,000,000 $ --
Assignment of leases in connection with
sale of assets $ 584,018 $ --
Cancellation of shareholder notes
receivable $ -- $ 10,810
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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CENSTOR CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
NOTE 1 -- BASIS OF PRESENTATION AND BUSINESS ACTIVITIES:
The accompanying unaudited condensed consolidated financial statements
have been prepared by Censtor Corp. ("Censtor" or the "Company") in accordance
with generally accepted accounting principles for interim financial information,
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for annual consolidated financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three months ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the full year
ended June 30, 1998. The financial information presented herein should be read
in conjunction with the Company's audited consolidated financial statements and
notes thereto for the year ended June 30, 1997 included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
During this fiscal quarter, the employment of four of the remaining five
employees of the Company was terminated. The one remaining employee is
responsible for the finance and administrative duties for the company while
outside sources will be utilized for the Company's intellectual property
management duties. Two of these companies are Teklicon, Inc. ("Teklicon") and I.
P. Managers, Inc. ("IPM"). IPM has relationships with intellectual property law
firms and has an exclusive contract with Teklicon, a high technology consulting
firm specializing in consulting and expert witness services to the legal
profession. Teklicon will perform marketing and technology due diligence and IPM
will provide the legal services.
NOTE 2 -- NET INCOME PER SHARE:
Net income per share is computed based upon the weighted average number
of shares outstanding of the Company's common stock and convertible preferred
stock on an if-converted basis, and dilutive common stock equivalents from the
exercise of stock options and warrants (using the treasury stock method). Common
stock equivalents from stock options and warrants are excluded from the
computation if their effect is antidilutive. The Company's common stock
equivalent shares were antidilutive for the three month periods ended September
30, 1996 and 1997, and accordingly, were not included in the weighted average
number of shares.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute income per share and to restate all prior
periods. Under the new requirements for calculating primary income per share,
the dilutive effect of convertible preferred stock will be excluded. The impact
is expected to result in an increase in primary income per share for the three
month period ended September 30, 1996 of $0.08 per share and an increase of
$0.11 per share for the three month period ended September 30, 1997. Diluted
earnings per share are not materially different from net income per share
amounts reported for the quarters ended September 30, 1996 and 1997.
NOTE 3 -- INCOME TAXES:
The Company has recorded an income tax expense of $150,000 for the
quarter ended September 30, 1997, relating to the 10% Japanese withholding tax
on the sale of a license. The Company recorded an income tax provision of
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$600,000 for the quarter ended September 30, 1996. The provision relates to the
Company's estimated alternative minimum tax liability on earnings for the three
months ended September 30, 1996.
NOTE 4 -- LICENSE ARRANGEMENTS:
On September 25, 1997, the Company entered into a licensing arrangement
with TDK Corporation, a Japanese component manufacturer, to license its
technology. The Company received a nonrefundable payment of $1.5 million on
September 26, 1997. This payment is subject to a 10% withholding tax by the
Japanese authorities.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following contains projections or other forward-looking statements
regarding future events or the future financial performance of Censtor Corp.
("Censtor" or the "Company"), including statements related to Censtor's 1998
operating plans, sale of licenses by the Company and future Censtor operating
expenses and cash flows. Actual events or results may differ materially as a
result of risks and uncertainties, including those set forth in documents the
Company files from time to time with the Securities and Exchange Commission,
including the Company's last filed Form 10-K.
In the following discussion and analysis, forward-looking statements are
made in the Overview, Liquidity and Capital Resources, and Results of Operations
sections.
OVERVIEW
The Company was formed in 1981 to develop perpendicular recording
technology and to manufacture head and disk components for disk drives. The
Company subsequently shifted the focus of its development efforts from
perpendicular to longitudinal contact recording technology. To date, the
Company's principal source of revenue has been license fees from disk drive
manufacturers. While the Company's license agreements typically provide for
on-going royalty payments by licensees based upon sales of products
incorporating the Company's technology, to date none of the Company's licensees
has commercialized products using the Company's technology and the Company has
received no recurring royalty revenue. Until the first quarter of fiscal 1997,
the Company had not been profitable in any fiscal period since inception, and,
as of September 30, 1997, had an accumulated deficit of $102.8 million. There
can be no assurance that the Company will be able to sustain its recent
profitability or achieve or sustain significant revenues or profitability in the
future.
Censtor's operating plans for fiscal 1998 focus on the perfection of the
Company's patent protection and other proprietary rights and the possible
exploitation of such rights through licenses or other strategic transactions
with disk drive manufacturers and other related companies. The Company expects
to finance these operations through sales of additional licenses such as the one
entered into between the Company and TDK Corporation ("TDK") in September 1997.
There can be no assurance that the Company will be able to sustain its
operations beyond 1998 without the sale of such additional licenses.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through private placements of its equity and debt securities and, to a lesser
extent, through licensing and research and development agreements.
During the quarter ended September 30, 1997, the Company did not engage
in any financing or investing activities. In comparison, in the quarter ended
September 30, 1996, the Company used net cash from financing activities of $5.1
million, primarily from the repayment of $5.4 million on notes payable. The
Company generated cash from investing activities of $1.1 million in the quarter
ended September 30, 1996 from the transaction with Read-Rite Corporation
("Read-Rite"). During the quarter ended September 30, 1997, the Company
generated cash in its operations of $953,000, primarily from the sale of a
license. The Company generated cash in its operations of $3.9 million in the
quarter ended September 30, 1996, primarily from the receipt of $5.5 million of
the license fee from Read-Rite, a significant portion of which was recorded as
deferred revenue offset by operating expenses and changes in operating net
assets. As of September 30, 1997, the Company had working capital of
approximately $139,000.
The Company's ability to fund its cash requirements and assert its
intellectual property rights in the future depends largely upon its success in
seeking new licensees. The Company believes the cash received from the license
agreement with TDK will enable it to fund its planned operations through fiscal
1998. The Company's commitments for
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cash payments in fiscal year 1998 are primarily for operating expenses, which,
going forward, may include significant litigation expense.
RESULTS OF OPERATIONS
Revenues
The Company's major revenue source has been fees from the sale of
license agreements with disk drive manufacturers. Revenue for the quarter ended
September 30, 1997 was $2.1 million, relating to the recognition of deferred
revenue associated with certain licenses to Read-Rite and to Western Digital
Corp. ("WD") entered into during the first quarter of fiscal 1997 and the new
license with TDK entered into this quarter. Revenues of $838,000 for the quarter
ended September 30, 1996, related to the recognition of deferred revenues
associated with the licenses sold to Read-Rite and WD.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased from $550,000 for
the quarter ended September 30, 1996 to $520,000 in the quarter ended September
30, 1997. This decrease was largely the result of lower headcount.
Interest and Other Income, Net
Interest and other income, net, for the quarter ended September 30, 1997
was $1,200 as compared to $1.5 million for the quarter ended September 30, 1996
which included a gain of $1.6 million relating to the transaction with
Read-Rite. Of this $1.6 million gain, $899,000 related to the forgiveness of
certain promissory notes and $698,000 related to the gain on sale of fixed
assets and the transfer of the Company's workforce, and the recognition of a
deferred gain of $250,000 related to the sale of fixed assets not connected with
Read-Rite.
Income Taxes
The Company has recorded an income tax expense of $150,000 for the
quarter ended September 30, 1997, relating to the 10% Japanese withholding tax
on the sale of a license in September 1997. In the quarter ended September 30,
1996, the Company recorded an income tax provision of $600,000 relating to the
Company's estimated alternative minimum tax liability on earnings for the three
months ended September 30, 1996.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1(5) Restated Articles of Incorporation of Registrant.
3.2(1) Amended and Restated Bylaws of Registrant.
10.1(1)(4) 1990 Stock Plan and Form of Option Agreement.
10.2(1) Form of Indemnification Agreement entered into between the Company and each of its
directors and officers.
10.3(1) Lease Agreement, dated November 28, 1983, between the Company and The Sobrato
Group, together with amendments thereto.
10.4(1)(2) License Agreement, dated September 23, 1991, between the Company and Maxtor
Corporation, as amended.
10.5(1)(2) License Agreement, dated February 28, 1991, between the Company and Fujitsu
Limited, as amended.
10.6(1)(2) Manufacturing License Agreement, dated August 26, 1988, between the Company and
Denki Kagaku Kogyo Kabushiki Kaisha, as amended.
10.7(1)(2) License Agreement, dated June 1, 1993, between the Company and International
Business Machines Corporation.
10.8(1) Denka Promissory Note.
10.9(3) License Agreement, dated December 19, 1994, between Hitachi, Ltd. and the Company.
10.10(5) License Agreement, dated June 19, 1995, between Contact Recording
Technology, Inc. and the Company.
10.11(2) License Agreement, dated August 7, 1995, between NEC Corporation and the Company.
10.12(6) Agreement for Purchase and Sale of Assets by and between Read-Rite
Corporation and the Company.
10.13(2) License Agreement, dated August 12, 1996, between Western Digital and the Company.
10.14(7) Assignment of Lease and Consent to Assignment, dated July 2, 1996, between The
Sobrato Group, Censtor Corp. and Read-Rite Corp.
10.15(7) Fifth Amendment to Manufacturing License Agreement, dated February 22, 1996, with
Denki Kagaku Kogyo Kabushiki Kaisha.
10.16(7) Amendment to Terms of Debentures, dated February 22, 1996, with Denki Kagaku
Kogyo Kabushiki Kaisha.
10.17(7) License Agreement, dated July 18, 1996, between Read-Rite Corporation and the
Company.
10.18(8) Agreement between I.P. Managers, Inc. and the Company dated July 31, 1997.
10.19(8) Incentive Compensation Agreement between the Company and Sabine Austin, dated July
29, 1997.
10.20 License Agreement, dated September 25, 1997 between TDK Corporation and the
Company.
27.1 Financial Data Schedule
</TABLE>
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(1) Incorporated by reference to exhibits filed with
Registrant's Registration Statement on Form 10 which
became effective December 25, 1994.
(2) Confidential Treatment requested for portions of Exhibit.
(3) Incorporated by reference to exhibits filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1994.
(4) Document indicated is a compensatory plan.
(5) Incorporated by reference to exhibits filed with
Registrant's Annual Report on Form 10-K for the year ended
June 30, 1995.
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(6) Incorporated by reference to exhibit filed with
Registrant's Proxy Statement relating to the Registrant's
1996 Annual Meeting of Shareholders.
(7) Incorporated by reference to exhibits filed with
Registrant's Annual Report on Form 10-K for the year ended
June 30, 1996.
(8) Incorporated by reference to exhibits filed with
Registrant's Annual Report on Form 10-K for the year ended
June 30, 1997.
(b) Reports on Form 8-K.
None.
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SIGNATURE
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.
CENSTOR CORP.
Registrant
BY: /s/ Sabine Austin
-------------------------------
Sabine Austin
President
Chief Executive Officer
Dated: November 7, 1997
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EXHIBIT INDEX
-------------
Exhibit
Number Description
------- -----------
<S> <C>
3.1(5) Restated Articles of Incorporation of Registrant.
3.2(1) Amended and Restated Bylaws of Registrant.
10.1(1)(4) 1990 Stock Plan and Form of Option Agreement.
10.2(1) Form of Indemnification Agreement entered into between the Company and each of its
directors and officers.
10.3(1) Lease Agreement, dated November 28, 1983, between the Company and The Sobrato
Group, together with amendments thereto.
10.4(1)(2) License Agreement, dated September 23, 1991, between the Company and Maxtor
Corporation, as amended.
10.5(1)(2) License Agreement, dated February 28, 1991, between the Company and Fujitsu
Limited, as amended.
10.6(1)(2) Manufacturing License Agreement, dated August 26, 1988, between the Company and
Denki Kagaku Kogyo Kabushiki Kaisha, as amended.
10.7(1)(2) License Agreement, dated June 1, 1993, between the Company and International
Business Machines Corporation.
10.8(1) Denka Promissory Note.
10.9(3) License Agreement, dated December 19, 1994, between Hitachi, Ltd. and the Company.
10.10(5) License Agreement, dated June 19, 1995, between Contact Recording
Technology, Inc. and the Company.
10.11(2) License Agreement, dated August 7, 1995, between NEC Corporation and the Company.
10.12(6) Agreement for Purchase and Sale of Assets by and between Read-Rite
Corporation and the Company.
10.13(2) License Agreement, dated August 12, 1996, between Western Digital and the Company.
10.14(7) Assignment of Lease and Consent to Assignment, dated July 2, 1996, between The
Sobrato Group, Censtor Corp. and Read-Rite Corp.
10.15(7) Fifth Amendment to Manufacturing License Agreement, dated February 22, 1996, with
Denki Kagaku Kogyo Kabushiki Kaisha.
10.16(7) Amendment to Terms of Debentures, dated February 22, 1996, with Denki Kagaku
Kogyo Kabushiki Kaisha.
10.17(7) License Agreement, dated July 18, 1996, between Read-Rite Corporation and the
Company.
10.18(8) Agreement between I.P. Managers, Inc. and the Company dated July 31, 1997
10.19(8) Incentive Compensation Agreement between the Company and Sabine Austin, dated July
29, 1997.
10.20 License Agreement, dated September 25, 1997 between TDK Corporation and the
Company.
27.1 Financial Data Schedule
</TABLE>
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(1) Incorporated by reference to exhibits filed with
Registrant's Registration Statement on Form 10 which
became effective December 25, 1994.
(2) Confidential Treatment requested for portions of Exhibit.
(3) Incorporated by reference to exhibits filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1994.
(4) Document indicated is a compensatory plan.
(5) Incorporated by reference to exhibits filed with
Registrant's Annual Report on Form 10-K for the year ended
June 30, 1995.
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(6) Incorporated by reference to exhibit filed with
Registrant's Proxy Statement relating to the Registrant's
1996 Annual Meeting of Shareholders.
(7) Incorporated by reference to exhibits filed with
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1996.
(8) Incorporated by reference to exhibits filed with
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1997.
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EXHIBIT 10.20
CONFIDENTIAL
LICENSE AGREEMENT
This Agreement is entered into this 25th day of September, 1997
("Effective Date"), by and between Censtor Corp., a California corporation, with
principal offices at 540 North Santa Cruz Ave., Suite 277, Los Gatos, CA 95030
("Censtor") and TDK Corporation, a Japanese corporation, with principal offices
at 1-13-1 Nihonbashi, Chuo-Ku, Tokyo 103, Japan ("TDK").
BACKGROUND
A. Censtor has developed designs and manufacturing processes for data
storage systems and has obtained and is obtaining certain patents relating
thereto.
B. Censtor has granted and is granting licenses to several companies to
manufacture and sell products using Censtor Patents.
C. TDK desires to obtain from Censtor a license to use Censtor Patents
in the manufacture of data storage devices.
D. Censtor desires to grant to TDK such a license on the terms and
conditions set forth below.
AGREEMENT
1. DEFINITIONS.
1.1 Censtor Patents. "Censtor Patents" shall mean all patents and patent
claims in all countries of the world, including utility models, issued or
issuing on patent applications entitled to an effective filing date on or before
December 31, 1997, including continuations-in-part, which are owned by Censtor
or any of its Subsidiaries, including those with respect to which employees or
consultants are or were obligated to assign to Censtor, irrespective of whether
such assignments have been executed, and shall include any and all rights
Censtor has or will have in the invention, and any U.S. or foreign patents or
patent claims that result from the invention, described in Exhibit C. Censtor
shall provide TDK with a list of such patents which are issued on or before the
Effective Date and such patent applications which are filed on or before the
Effective Date, which shall be attached to this Agreement as Exhibit A. The
absence of any such patent or patent application from said Exhibit A shall not
operate to restrict the license granted in
<PAGE> 2
this Agreement in any manner. Censtor represents that, to Censtor's present
knowledge, Exhibit A includes all patents and patent applications that have or
should have been assigned to Censtor by employees or consultants on or before
the Effective Date.
1.2 Licensed Heads. "Licensed Heads" shall mean any instrumentality or
aggregate of instrumentalities including a magnetic transducer designed to
magnetically read or erase information from, or write information onto, magnetic
recording media. Licensed Heads shall include sliders, head gimbal assembly or
assemblies (HGA), head stack assembly or assemblies (HSA), or other comparable
components or assemblies covered by any valid claim of a Censtor Patent.
Licensed Heads shall not include disc drives or other comparable data storage
devices.
1.3 Other Censtor Licensees. "Other Censtor Licensees" shall mean other
companies to which Censtor has granted rights to manufacture and sell products
using Censtor Patents. Censtor shall provide TDK with a list of such other
companies existing on the Effective Date which shall be attached to this
Agreement as Exhibit B.
1.4 Subsidiary. "Subsidiary" shall mean a corporation or other entity of
which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled now or hereafter, directly or indirectly, by
either party, but such corporation or other entity shall be deemed to be its
Subsidiary only so long as such ownership or control exists.
2. LICENSE TO TDK
2.1 Grant. Censtor hereby grants to TDK a paid-up, worldwide,
non-exclusive, non-transferable (except pursuant to section 7.4) license under
Censtor Patents to manufacture, subcontract to have manufactured (subject to the
conditions of Section 2.2), use, promote, lease, sell, import and/or otherwise
transfer Licensed Heads.
2.2 Subcontractors. TDK shall have the right to subcontract
manufacturing of all or part of Licensed Heads provided that each subcontractor
agrees in writing to sell such Licensed Heads solely to TDK.
2.3 Sublicense Rights. In addition to the subcontracting rights
described in Section 2.2, TDK shall have the right to grant sublicenses of the
rights granted in Sections 2.1 and 2.2 above only to TDK Subsidiaries; provided,
that (i) TDK shall cause each TDK Subsidiary to agree to be bound by the terms
and conditions of this Agreement, excluding the provisions of this Section 2.3
and (ii) such sublicense will terminate upon termination of this Agreement for
any reason. TDK hereby guarantees the performance by each TDK sublicensed
Subsidiary of all obligations contained herein.
2.4 Customer Non-Assertion. Censtor agrees not to assert against any
customer, direct or indirect, of TDK, or its sublicensed Subsidiaries hereunder,
any claims of infringement
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<PAGE> 3
of any of the Censtor Patents with respect to such customer's data storage
devices incorporating Licensed Heads that have been, prior to the Effective Date
of this Agreement, or will be, during the term of this Agreement, sold by TDK,
or its sublicensed Subsidiaries hereunder, provided that such future sales of
Licensed Heads are authorized under this Agreement.
2.5 Limitations. No license or other right is granted, by implication,
estoppel or otherwise to TDK, Censtor, or any other third parties except for the
licenses and rights expressly granted in this Agreement.
3. LICENSE FEE
3.1 License Fee. Within fourteen days after the date of execution of
this Agreement, but in no event later than September 30, 1997, TDK shall pay to
Censtor a license fee of One Million Five Hundred Thousand Dollars ($1,500,000)
in United States currency in consideration of the license granted herein. This
payment shall be non-refundable.
3.2 Taxes. TDK may withhold from the payment made to Censtor under this
Agreement the ten percent (10%) income tax required to be withheld by TDK under
the laws of Japan. Except for such withholding tax, the payment by TDK hereunder
shall be made free and clear of, and without reduction for, any and all taxes,
including, without limitation, sales, use, property, license, value added,
excise, franchise or similar taxes under the laws of Japan. TDK shall provide
Censtor with official receipts issued by the appropriate Japanese taxing
authority or such other evidence as is reasonably requested by Censtor to
establish that such taxes have been paid.
4. INTELLECTUAL PROPERTY OWNERSHIP
4.1 Censtor Ownership. During the term of this Agreement, Censtor
warrants that it either (i) owns all right, title and interest in or (ii) has
the right to grant the full extent of the license rights granted to TDK under
the Censtor Patents.
5. LIMITATION OF LIABILITY
NEITHER PARTY'S LIABILITY ARISING OUT OF THIS AGREEMENT SHALL EXCEED THE
AMOUNTS RECEIVED FROM TDK HEREUNDER EXCEPT WITH RESPECT TO CLAIMS OF
INFRINGEMENT BY ONE PARTY OF THE OTHER PARTY'S INTELLECTUAL PROPERTY RIGHTS AND
EXCEPT WITH RESPECT TO CLAIMS FOR WILLFUL MISREPRESENTATION. IN NO EVENT SHALL
CENSTOR BE LIABLE FOR THE COST OF PROCUREMENT OF SUBSTITUTE PRODUCTS, SERVICES,
OR TECHNOLOGY NOR SHALL EITHER PARTY BE LIABLE FOR ANY CONSEQUENTIAL,
INCIDENTAL, INDIRECT OR SPECIAL DAMAGES HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY ARISING OUT OF THIS AGREEMENT EXCEPT WITH
-3-
<PAGE> 4
RESPECT TO CLAIMS OF INFRINGEMENT BY ONE PARTY OF THE OTHER PARTY'S
INTELLECTUAL PROPERTY RIGHTS. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY.
6. TERM AND TERMINATION
6.1 Term. This Agreement shall commence as of the Effective Date and
shall continue until the expiration of the last Censtor Patent unless terminated
earlier in accordance with this Agreement.
6.2 Termination.
(a) If either party defaults in the performance of any material
obligation hereunder and if any such default is not corrected within forty-five
(45) days after the defaulting party receives written notice thereof from the
non-defaulting party, then the non-defaulting party, at its option, may, in
addition to any other remedies it may have, terminate this Agreement.
(b) Either party may terminate this Agreement effective upon
written notice to the other party in the event that the other party becomes the
subject of a voluntary or involuntary petition in bankruptcy or any proceeding
relating to insolvency, or composition for the benefit of creditors, if that
petition or proceeding is not dismissed within sixty (60) days after filing.
6.3 Effect of Termination.
(a) Except as otherwise provided in this Section, upon
termination or expiration of this Agreement, all licenses and rights granted by
the parties to each other hereunder shall terminate, and neither TDK nor its
Subsidiaries or subcontractors shall have any rights with respect to any Censtor
Patents. The provisions of Sections 5, 6, and 7 shall survive any termination or
expiration of this Agreement for any reason. In addition, all amounts for which
payment is due to Censtor prior to the date of termination shall remain due and
payable.
(b) TDK shall have the right to provide continuing maintenance
and support for previously sold Licensed Heads after any termination or
expiration of this Agreement.
7. GENERAL PROVISIONS
7.1 Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the United States and the State of California
without reference to conflict of laws principles.
7.2 Settlement of Disputes. The parties hereto shall use their best
endeavors to settle
-4-
<PAGE> 5
by mutual agreement any disputes, controversies or differences which may arise
from, under, out of or in connection with this Agreement. If such disputes,
controversies or differences cannot be settled between the parties, they shall
be finally resolved by binding arbitration in San Jose, California under the
Commercial Rules of Arbitration of the American Arbitration Association by three
arbitrators appointed in accordance with said rules. The arbitrators shall apply
California law to the merits of any dispute or claim, without reference to rules
of conflicts of law or arbitration. Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
7.3 Announcement. TDK and Censtor shall not publicly announce or
disclose to third parties the existence or any of the terms of this Agreement
without prior mutual consent except the disclosure (i) by Censtor to IP
Managers, Inc. ("IPM"), a California Corporation located at 1700 S. El Camino
Real, Suite 420, San Mateo, California 94402, (ii) by either party required by
law or existing licenses, (iii) by TDK to its Subsidiaries, (iv) of the
existence of this License Agreement by either party to subcontractors or
prospective subcontractors hereunder, or investors or prospective licensees and
(v) by TDK or its Subsidiaries to its or their customers or prospective
customers of only the existence of this License Agreement and the content of
Section 2.4 (Customer Non-Assertion).
7.4 Assignment. Neither party may assign or delegate this Agreement or
any rights or duties under this Agreement without the prior written consent of
the other except either party may assign this Agreement to a Subsidiary or to a
person or entity into which it has merged or which has otherwise succeeded to
all or substantially all of its business and assets relating to the subject
matter of this Agreement, and which has assumed in writing or by operation of
law its obligations under this Agreement.
7.5 Authority. Each party represents that all corporate action necessary
for the authorization, execution and delivery of this Agreement by such party
and the performance of its obligations hereunder has been taken.
7.6 Government Approvals. TDK represents and warrants it will take
necessary steps to obtain Japanese governmental approvals which are required for
this Agreement to take effect, if any. TDK shall be responsible for filing any
notifications to the Japanese government that may be required. Censtor will
cooperate with TDK in making such steps and filings.
7.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effective when mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand,
by messenger or by telecommunication, addressed to the addresses first set forth
above or at such other address furnished with a notice in the manner set forth
herein. Such notices shall be deemed to have been served when delivered or, if
delivery is not accomplished by reason of some fault of the addressee, when
tendered.
-5-
<PAGE> 6
7.8 Force Majeure. Neither party shall be liable to the other for
failure or delay in the performance of any obligations under this Agreement for
the time of and to the extent such failure or delay is caused by riots, civil
commotion, wars or hostilities between nations, governmental laws, orders, or
regulations, embargoes, actions by the government or any agency thereof, acts of
God, earthquakes, storms, fires, accidents, strikes, sabotages, explosions, or
other similar or different contingencies beyond the reasonable control of the
respective parties hereto.
7.9 Partial Invalidity. If any Section, provision, or clause thereof in
this Agreement shall be, found or be held to be invalid or unenforceable in any
jurisdiction in which this Agreement is being performed, the remainder of this
Agreement shall be valid and enforceable and the parties shall negotiate in good
faith, a substitute, valid and enforceable provision which most nearly effects
the parties' intent in entering into this Agreement.
7.10 Counterparts. This Agreement may be executed in two (2) or more
counterparts all of which, taken together, shall be regarded as one and the same
instrument.
7.11 Relationship of Parties. The parties hereto are licensor and
licensee. Nothing contained herein or done in pursuance of this Agreement shall
constitute either party the agent of the other party for any purpose or in any
sense whatsoever, or constitute the parties as partners or joint venturers.
7.12 Modification. No alteration, amendment, waiver, cancellation or any
other in any term or condition of this Agreement shall be valid or binding on
either party unless same shall have been mutually assented to in writing by both
parties.
7.13 Waiver. The failure of either party to enforce at any time the
provisions of this Agreement, or the failure to require at any time performance
by the other party of any of the provisions of this Agreement, shall in no way
be constituted to be a present or future waiver of such provisions, nor in any
way affect the validity of either party to enforce each and every provision
thereafter. The express waiver by either party of any provision, condition or
requirement of this Agreement shall not constitute a waiver of any future
obligation to comply with such provision, condition or requirement.
7.14 Entire Agreement. The terms and conditions herein constitute the
entire agreement between the parties and supersede all previous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof and no agreement or understanding varying or
extending the same shall be binding upon either party hereto unless in a written
document signed by the party to be bound thereby.
7.15 Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
-6-
<PAGE> 7
8. RELEASE
8.1 Censtor and TDK mutually release and forever discharge each other,
including all of its direct and indirect subsidiaries, servants, agents,
employees, and directors of Censtor and TDK, of and from any and all past claims
and causes of action of any and every character, including without limitation
claims for patent infringement for any and all of the patent and patent
applications included in section 1.1, which may have accrued up to the Effective
Date.
9. MOST FAVORED LICENSEE
9.1 Censtor agrees that, after the Effective Date, it will not grant to
any third party a license more favorable than this license to a similarly
situated licensee for a license of comparable scope. Evaluation of licenses will
take into account the royalty and payment terms, the relative volume of
potentially infringing products expected to be produced by the prospective
licensee, the field of use of the license, and any grant back of rights to
Censtor by the prospective licensee.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by duly authorized officers or representatives as of the date first above
written.
"CENSTOR": "TDK":
CENSTOR CORP. TDK CORPORATION
By: /s/ SABINE AUSTIN By: /s/ HIROSHI SATO
--------------------------- --------------------------
Name: Sabine Austin Name: Hiroshi Sato
------------------------- ------------------------
Title: President Title: President
------------------------ -----------------------
-7-
<PAGE> 8
EXHIBIT A (Censtor Patents & Applications)
PATENT # TITLE
4,423,450 Magnetic Head and Multitrack Transducer for Perpendicular
(CNR-343) Recording and Method of Fabricating
4,636,894 Recording Head Slider Assembly
(CNR-341)
4,751,598 Thin-Film Cross-Field Closed-Flux Anisotropic Electromagnetic
(CNR-001) Field Device
4,757,402 Slider Assembly for Supporting a Magnetic Head
(CNR-342)
4,860,139 Planarized Read/Write Head and Method
(CNR-304)
5,041,932 Integrated Magnetic Read/Write Head/Flexure/Conductor Structure
(CNR-309)
5,063,712 Micro-Burnishing Flex Head Structure
(CNR-310)
5,073,242 Method of Making Integrated Magnetic Read/Write Head/Flexure/
(CNR-309A) Conductor Structure
5,111,351 Integrated Magnetic Read/Write Head/Flexure/Conductor Structure
(CNR-309B)
5,163,218 Method of Making Integrated Magnetic Read/Write Head/Flexure/
(CNR-309C) Conductor Structure
5,174,012 Method of Making Integrated Magnetic Read/Write Head/Flexure/
(CNR-309D) Conductor Structure
5,396,388 Compact High-Speed Rotary Actuator and Transducer Assembly
(CNR-324) with Reduced Moment of Inertia and Mass-Balanced Structural
Overlap with Drive Motor and Organizing Method for the Same
5,625,515 Compact High-Speed Rotary Actuator and Transducer Assembly
(CNR-324A) with Reduced Moment of Inertia and Mass-Balanced Structural
Overlap with Drive Motor and Organizing Method for the Same
5,453,315 Unitary Micro-Flexure Structure and Method of Making
(CNR-313A)
<PAGE> 9
PATENT # TITLE
5,476,131 Unitary Micro-Flexure Structure and Method of Making
(CNR-313D)
5,483,025 Unitary Micro-Flexure Structure
(CNR-313CA)
5,490,027 Gimbaled Micro-Head/Flexure/Conductor Assembly and System
(CNR-322)
5,550,691 Size-Independent Rigid-Disk Magnetic Digital-Information
(CNR-321A) Storage System with Localized Read/Write Enhancements
5,557,488 Gimbaled Micro-Head/Flexure/Conductor Assembly and System
(CNR-322A)
5,632,669 Interactive Method for Lapping Transducers
(CNR-345)
<PAGE> 10
<TABLE>
<CAPTION>
APPLICATION # TITLE
- ------------- -----
<S> <C>
CNR-321B Hard Disk Drive with Lightly Contacting Head
08/702,936 (Divisional of CNR-321A)
CNR-329 Transducer/Flexure/Conductor Structure for Electromagnetic
08/338,394 Read/Write System (CIP of CNR-309 & 321)
CNR-329A Head Structure for Electromagnetic Read/Write System
08/668,977 (Divisional of CNR-329, which is CIP of CNR-309 & 321)
CNR-329B Conductive Articulator Structure for Electromagnetic Read/Write System
08/669,950 (Divisional of CNR-329, which is CIP of CNR-309 & 321)
CNR-335 Contact Interface, System and Medium in Electromagnetic Read/Write
08/408,036 Rigid-Recording-Media Environment (CIP of CNR-311)
CNR-345 Interactive Device for Lapping Transducers
08/452,041
CNR-347 Durable, Low-Vibration, Dynamic-Contact Hard Disk Drive System
08/621,521 (CIP of 5,041,932)
CNR-348 Low Friction Sliding Hard Disk Drive System
08/515,140 (Continuation in part of CNR-335)
CNR-349 Contact Planar Ring Head
08/528,890 (Continuation in part of CNR-329)
CNR-350 Hard Disk Drive Having Ring Head Sliding on Perpendicular Media
08/577,493 (Continuation in part of CNR-349)
CNR-351 Contact MagnetoResistive Hard Disk Drive Head
08/725,296
CNR-354 Virtual Contact Hard Disk Drive with Planar Transducer
08/673,281
CNR-355 Stiffened Hinge for Reducing Torsional Vibration of a Suspension
08/705,798
CNR-358 Hard Disk Drive Having Contact Write and Recessed MagnetoResistive Read
08/778,566 Head
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
APPLICATION # TITLE
- ------------- -----
<S> <C>
CNR-360 Hard Disk Drive with MagnetoResistive Head and Perpendicular Media
08/771,468 (Divisional of CNR-350)
</TABLE>
<PAGE> 12
CENSTOR FOREIGN PATENTS
<TABLE>
<CAPTION>
Patent No. Country Title
- ---------- ------- -----
<S> <C>
2026871 Canada INTEGRATED MAGNETIC READ/WRITE HEAD/FLEXURE/CONDUCTOR STRUCTURE
(CNR 30901)
0430407 EPC INTEGRATED MAGNETIC READ/WRITE HEAD/FLEXURE/CONDUCTOR STRUCTURE
(CNR 30902)
2047563 Canada INTEGRATED MAGNETIC READ/WRITE HEAD/FLEXURE/CONDUCTOR STRUCTURE
(CNR 309C1)
0450226 EPC MICRO-BURNISHING FLEX HEAD STRUCTURE
(CNR 31002)
1945281 Japan MICRO-BURNISHING FLEX HEAD STRUCTURE
(CNR 31003)
0508565 EPC WEAR-RESISTANT HEAD FOR CONTACT READING AND WRITING MAGNETIC MEDIA
(CNR 31102) MAGNETIC MEDIA
1696196 Japan RECORDING HEAD SLIDER ASSEMBLY
(CNR 34102)
0262655 EPC SLIDER ASSEMBLY FOR SUPPORTING A MAGNETIC HEAD
(CNR 34201)
0077832 EPC MULTITRACK TRANSDUCER FOR PERPENDICULAR RECORDING AND METHOD FOR FABRICATING
(CNR 34302)
1822410 Japan MAGNETIC HEAD AND MULTITRACK TRANSDUCER FOR PERPENDICULAR RECORDING AND METHOD OF FABRICATING
(CNR 34304)
</TABLE>
<PAGE> 13
CENSTOR FOREIGN PATENT APPLICATIONS
<TABLE>
<CAPTION>
App. No. Country Title
- ---------- ------- -----
<S> <C>
2-281717 Japan INTEGRATED MAGNETIC READ/WRITE HEAD/FLEXURE/CONDUCTOR STRUCTURE
(CNR 30903)
98930/92 Japan INTEGRATED MAGNETIC READ/WRITE HEAD/FLEXURE/CONDUCTOR STRUCTURE
(CNR 309C3)
2101097 Canada INTEGRATED MAGNETIC READ/WRITE HEAD/FLEXURE/CONDUCTOR STRUCTURE
(CNR 309G1)
93305811.7 EPC INTEGRATED MAGNETIC READ/WRITE HEAD/FLEXURE/CONDUCTOR STRUCTURE
(CNR 309G2)
2060669 Canada WEAR-RESISTANT HEAD FOR CONTACT READING AND WRITING MAGNETIC MEDIA
(CNR 31101)
93448/92 Japan WEAR-RESISTANT HEAD FOR CONTACT READING AND WRITING MAGNETIC MEDIA
(CNR 31103)
2081511 Canada SIZE-INDEPENDENT, RIGID-DISK, MAGNETIC, DIGITAL-INFORMATION STORAGE
(CNR 32101) SYSTEM WITH LOCALIZED READ/WRITE ENHANCEMENTS
92309210.7 EPC SIZE-INDEPENDENT, RIGID-DISK, MAGNETIC, DIGITAL-INFORMATION STORAGE
(CNR 32102) SYSTEM WITH LOCALIZED READ/WRITE ENHANCEMENTS
332133/92 Japan SIZE-INDEPENDENT, RIGID-DISK, MAGNETIC, DIGITAL-INFORMATION STORAGE
(CNR 32103) SYSTEM WITH LOCALIZED READ/WRITE ENHANCEMENTS
2081504 Canada GIMBALED MICRO-HEAD/FLEXURE/CONDUCTOR ASSEMBLY AND SYSTEM
(CNR 32201)
92309811.5 EPC GIMBALED MICRO-HEAD/FLEXURE/CONDUCTOR ASSEMBLY AND SYSTEM
(CNR 32202)
333657/92 Japan GIMBALED MICRO-HEAD/FLEXURE/CONDUCTOR ASSEMBLY AND SYSTEM
(CNR 32203)
</TABLE>
<PAGE> 14
CENSTOR FOREIGN PATENT APPLICATIONS
<TABLE>
<CAPTION>
App. No. Country Title
- ---------- ------- -----
<S> <C>
2090543 Canada COMPACT, HIGH-SPEED, ROTARY ACTUATOR, AND TRANSDUCER ASSEMBLY WITH
(CNR 32401) REDUCED MOMENT OF INERTIA AND MASS-BALANCED STRUCTURAL OVERLAP WITH
DRIVE MOTOR, AND ORGANIZING METHOD FOR THE SAME
93301532.3 EPC COMPACT, HIGH-SPEED, ROTARY ACTUATOR
(CNR 32402)
</TABLE>
<PAGE> 15
EXHIBIT B
EXISTING LICENSEES
o International Business Machines Corporation
o Kabool Electronics, Ltd.
o Denki Kagaku Kogyo Kabushiki Kaisha ("Denka")
o NEC Corporation
o Maxtor Corporation
o Read-Rite Corporation
o Western Digital Corporation
o Fujitsu Limited
o Hitachi, Ltd.
o LST
o Ministor
<PAGE> 16
EXHIBIT C
CENSTOR
530 Race Street
San Jose, CA 95126
Tel. (408) 298-8400
Fax (408) 288-9910
January 16, 1996
Mr. David D. Roberts
216 Oregon Street
Santa Cruz, CA 95060
Dear David:
Let this serve to memorialize the agreement between yourself and Robert D.
Hempstead, in which Censtor Corp. has transferred back to you ownership of
patent rights that may be granted on your invention entitled "Hidden Contact
Method" for electroplating, while Censtor will retain an irrevocable,
fully-paid, nonexclusive license to make, use, or sell the invention and the
right to sublicense this invention and any patents that result from this
invention. The invention, which was developed by you at Censtor, involves
providing electrical connections for electroplating via a number of conductive
prongs which pierce an insulative gasket positioned around a wafer, the prongs
contacting the wafer with the gasket protecting the prongs from the
electroplating solution.
It is understood that you will prosecute a U.S. patent application for the
invention on your own time and with your own funds, with no help from Censtor.
It is also understood that no other rights are being relinquished by Censtor and
that this agreement does not apply to any other inventions or situations other
than that specifically delineated above. It is further understood that the
invention is to remain a trade secret belonging to Censtor, unless and until
issued as a U.S. patent or published as a foreign patent application.
Sincerely,
Understood and agreed to:
/s/ GARRETT GARRETTSON
- ---------------------------- /s/ DAVID D. ROBERTS
Garrett A. Garrettson -----------------------------
President and CEO David D. Roberts
16 January 1996
- ---------------------------- 1/18/96
Date: -----------------------------
Date:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,753,148
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,791,428
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,799,822
<CURRENT-LIABILITIES> 1,652,173
<BONDS> 0
0
32,509,031
<COMMON> 50,230,850
<OTHER-SE> (100,271,611)
<TOTAL-LIABILITY-AND-EQUITY> 1,799,822
<SALES> 0
<TOTAL-REVENUES> 2,083,333
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,564,781
<INCOME-TAX> 150,000
<INCOME-CONTINUING> 1,414,781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,414,781
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
