<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended April 3, 1997
Commission File number 0-21727
SeaMED Corporation
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(Exact Name of Registrant as specified in its charter)
Washington 91-1002092
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(State of Incorporation) (Federal I.R.S. No.)
14500 Northeast 87th Street, Redmond, Washington 98052-3431
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number 425-867-1818
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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 ( )
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As of May 9, 1997, the Registrant had 5,205,837 shares of Common Stock
outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SeaMED CORPORATION
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Balance Sheets as of June 30, 1996 and March 31, 1997.........................3
Statements of Income for the Quarters and the Nine Months
Ended March 31, 1996 and 1997..............................................4
Statements of Cash Flows for the Nine Months Ended March 31, 1996 and 1997....5
Notes to Financial Statements.................................................6
</TABLE>
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SEAMED CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1996 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 2,912 $ 472,395
Investments .......................................... -- 7,172,921
Accounts receivable, net ............................. 5,875,933 8,141,807
Inventories .......................................... 6,697,248 10,189,051
Deferred income taxes ................................ 625,221 625,221
Prepaid expenses ..................................... 63,536 229,189
------------ ------------
Total current assets ..................................... 13,264,850 26,830,584
Fixed assets, net ........................................ 2,655,265 3,138,601
Deposits and other assets ................................ 144,220 301,555
------------ ------------
Total assets ............................................. $ 16,064,335 $ 30,270,740
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................... $ 2,688,160 $ 4,509,142
Accrued expenses and reserves ........................ 3,301,064 3,680,820
Notes payable to bank ................................ 1,817,000 --
Current portion of long-term debt .................... 461,990 141,871
------------ ------------
Total current liabilities ................................ 8,268,214 8,331,833
Long-term debt, less current portion ..................... 1,285,782 543,272
Convertible redeemable preferred stock ................... 5,279,514 --
Shareholders' equity:
Common stock ......................................... 886,828 19,186,321
Note receivable from officer ......................... (75,000) (75,000)
Retained earnings .................................... 418,997 2,284,314
------------ ------------
Total shareholders' equity ............................... 1,230,825 21,395,635
------------ ------------
Total liabilities and shareholders' equity ............... $ 16,064,335 $ 30,270,740
============ ============
</TABLE>
See accompanying notes to financial statements.
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SEAMED CORPORATION
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------------------------- -------------------------------
March 31, March 31, March 31, March 31,
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Manufacturing .............................. $ 4,478,084 $ 8,840,330 $ 11,643,157 $ 22,853,466
Engineering ................................ 2,562,224 5,454,717 5,763,107 13,528,160
------------ ------------ ------------ ------------
7,040,308 14,295,047 17,406,264 36,381,626
Costs of revenues:
Manufacturing .............................. 3,230,551 7,062,020 8,848,971 18,306,476
Engineering ................................ 2,134,546 4,784,081 5,196,465 11,914,390
------------ ------------ ------------ ------------
5,365,097 11,846,101 14,045,436 30,220,866
------------ ------------ ------------ ------------
Gross margin .................................. 1,675,211 2,448,946 3,360,828 6,160,760
Marketing, general and
administrative expenses .................... 1,030,289 1,338,509 2,080,490 3,260,599
------------ ------------ ------------ ------------
Operating income .............................. 644,922 1,110,437 1,280,338 2,900,161
Other income (expense) net:
Interest ................................... (41,682) 97,657 (146,207) (3,466)
Other ...................................... (4,360) (10,479) (6,975) (26,977)
------------ ------------ ------------ ------------
(46,042) 87,178 (153,182) (30,443)
------------ ------------ ------------ ------------
Income before income taxes .................... 598,880 1,197,615 1,127,156 2,869,718
Income tax provision .......................... 203,691 419,165 383,305 1,004,401
------------ ------------ ------------ ------------
Net income .................................... $ 395,189 $ 778,450 $ 743,851 $ 1,865,317
============ ============ ============ ============
Net income per share data:
Primary .................................... $ 0.14 $ 0.14 $ 0.24 $ 0.45
============ ============ ============ ============
Fully diluted .............................. $ 0.10 $ 0.14 $ 0.19 $ 0.39
============ ============ ============ ============
Weighted average common shares and equivalents:
Primary .................................... 2,322,441 5,562,144 2,317,565 3,963,903
============ ============ ============ ============
Fully Diluted .............................. 3,879,911 5,562,155 3,875,035 4,781,363
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
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SEAMED CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------------
1996 1997
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................ $ 743,851 $ 1,865,317
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation ........................................... 482,928 752,853
Provision for bad debts ................................ 15,416 86,627
Deferred tax benefit ................................... (30,203) --
Changes in operating assets and liabilities:
Increase in accounts receivable ...................... (1,088,287) (2,352,501)
Increase in inventories .............................. (1,101,661) (3,491,803)
Increase in accounts payable, accrued expenses, and
deferred revenue ................................... 1,788,942 2,200,738
Increase in other assets and prepaid expenses ........ (125,293) (322,988)
----------- ------------
Net cash provided by (used in) operating activities ....... 685,693 (1,261,757)
INVESTING ACTIVITIES
Purchases of equipment .................................... (622,199) (1,236,189)
Maturity of short-term investments ........................ 200,000 902,432
Purchase of investments ................................... -- (8,075,353)
----------- ------------
Net cash used in investing activities ..................... (422,199) (8,409,110)
FINANCING ACTIVITIES
Proceeds from sale of common stock (net of cost) .......... -- 14,760,897
Payment of preferred dividend ............................. -- (1,765,100)
Proceeds from stock option exercised ...................... 91,817 24,182
Net payments of credit line ............................... (555,000) (1,817,000)
Proceeds from notes payable ............................... 600,000 --
Principal payments on notes payable ....................... (264,801) (1,062,629)
----------- ------------
Net cash (used in) provided by financing activities ....... (127,984) 10,140,350
----------- ------------
Net increase in cash ...................................... 135,510 469,483
Cash and cash equivalents at beginning of period .......... 70,383 2,912
----------- ------------
Cash and cash equivalents at end of period ................ $ 205,893 $ 472,395
=========== ============
</TABLE>
See accompanying notes to financial statements.
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ITEM 1. NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Description of Business
SeaMED Corporation (the "Company") manufactures advanced durable
electronic medical instruments for medical technology companies, often as part
of systems that also include single-use components. To assist its customers in
developing and commercializing their instruments for manufacture by the Company,
the Company provides a wide range of engineering services and regulatory
expertise.
Accounting Period
The Company presents financial information for a 52/53 week fiscal year
that ends on the Thursday nearest to June 30. Each of the Company's fiscal
quarters ends, respectively, on the Thursday nearest to September 30, December
31 and March 31. For convenience of presentation, all fiscal periods in these
financial statements are shown as ending on a calendar month-end.
Unaudited Interim Financial Information
The financial information as of March 31, 1997 and for the periods
ended March 31, 1996 and 1997 is unaudited, but includes all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position at such
dates and the operations and cash flows for the periods then ended. The
financial information is presented according to the rules and regulations of the
Securities and Exchange Commission and, accordingly, does not include all of the
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles. Operating
results for the periods ended March 31, 1997 are not necessarily indicative of
results that may be expected for the entire year. This financial information
should be read in conjunction with the Company's audited financial statements
for the year ended June 30, 1996, included in its Registration Statement on Form
S-1 (No. 333-13455) filed with the Securities and Exchange Commission.
Earnings Per Share
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 earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options and preferred stock will be excluded. The
impact is expected to result in an increase in primary earnings per share for
the quarters ended March 31, 1997 and March 31, 1996 of $.01 and $.50 per share,
respectively. The impact of Statement 128
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on the calculation of fully diluted earnings per share for these quarters is not
expected to be material.
2. INITIAL PUBLIC OFFERING
On November 19, 1996, the Company completed an initial public offering
of securities, selling 1,529,720 shares of common stock at $11 per share,
resulting in net proceeds to the Company of $14,761,000. Of the net proceeds,
the Company used $1,765,000 to pay a cumulative preferred dividend on its
convertible redeemable preferred stock, $1,831,000 to pay down its line of
credit with a bank to zero and $1,296,000 to pay off in full three notes payable
to the bank. In conjunction with the offering, all of the Company's convertible
redeemable preferred stock outstanding immediately prior to the offering was
converted into 3,934,029 shares of common stock.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1996 1997
---------- -----------
<S> <C> <C>
Work-in-process $2,490,710 $ 3,148,362
Purchased and manufactured parts 4,206,538 7,040,689
---------- -----------
$6,697,248 $10,189,051
========== ===========
</TABLE>
4. INVESTMENTS
Investments are classified as held to maturity. Investments are
reported at cost net of unamortized premium or discount. All investments mature
within one year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and Notes thereto included elsewhere in
this Form 10-Q. This Form 10-Q contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed in the
Company's Registration Statement on Form S-1 (No. 333-13455) filed with the
Securities and Exchange Commission.
OVERVIEW
SeaMED is a manufacturer of advanced medical instruments for medical
technology companies. SeaMED was incorporated in 1976, and since 1988 has
focused its business primarily on manufacturing medical instruments for medical
technology companies. To assist its customers in developing and commercializing
their products for manufacture by SeaMED, the Company provides a wide range of
engineering services and regulatory expertise.
SeaMED's manufacturing contracts with its customers are usually
exclusive contracts for a fixed period of time, generally ranging from three to
five years. SeaMED negotiates each manufacturing contract independently, and
each varies as to profitability. SeaMED negotiates the price of each
manufactured instrument on a cost and margin formula. SeaMED's contracts with
its customers generally permit annual manufacturing cost audits and price
renegotiations. During the contract term, customers have broad discretion to
control the volume and timing of instrument deliveries. Consequently, SeaMED's
revenues with respect to each instrument may vary substantially from period to
period, and an instrument that generates revenues in one quarter may not
necessarily generate revenues in each quarter of a fiscal year. In addition, for
a variety of reasons such as a customer's inventory levels, sales mix and timing
of product launches, SeaMED's revenues for an instrument do not necessarily
correspond to the customer's sales.
Manufacturing revenue growth depends primarily on two factors:
increased demand for instruments manufactured by SeaMED and SeaMED's ability to
attract additional manufacturing contracts from emerging and established medical
technology companies. SeaMED has no ability to increase demand for the
instruments it manufactures because SeaMED's customers control all product
marketing and sales. SeaMED markets its manufacturing capabilities and usually
procures additional manufacturing contracts as a result of its engineering
projects, but the volume and timing of future manufacturing revenues that relate
to any specific engineering project are highly variable, and certain engineering
projects may not lead to future manufacturing revenues. The manufacturing gross
margin percentage from year to year depends primarily on the product mix, as
gross margins vary by instrument and as a result of negotiated volume discounts.
Management may negotiate volume discounts if the larger volume results in
smaller per unit overhead allocation, thereby improving operating margin. For
manufacturing revenues from
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instruments not yet approved for commercial use (known as "preproduction
revenues"), the gross margin percentage is generally lower because a smaller
number of units limits opportunities to achieve economies of scale, and the
instrument and its manufacturing process are being refined.
SeaMED provides its customers with engineering services at any stage of
an instrument's development, as part of its strategy to obtain exclusive
manufacturing rights for an instrument. SeaMED generally provides engineering
services under a project plan that identifies the engineering tasks,
deliverables and schedule. SeaMED negotiates each engineering project plan
independently, and, as a business strategy, generally prices engineering
contracts to cover direct project expenses (i.e., nonrecurring engineering
expenses) plus a share of marketing, general and administrative expenses.
SeaMED's objective in providing engineering services is to obtain, for a
specific time period (usually three to five years), exclusive manufacturing
rights to the instrument resulting from the engineering project. The customer
can typically cancel the engineering project at any time upon short notice.
Engineering revenues are derived primarily from professional services
provided by SeaMED's engineers. The balance of engineering revenues is sales of
materials to customers at cost. Engineering revenue growth depends primarily on
three factors: (i) the number and scope of existing engineering projects, (ii)
whether existing projects are in time-intensive phases, and (iii) whether new
engineering projects of sufficient scope replace engineering projects that are
completed or otherwise terminated. Engineering gross margins are low due to
SeaMED's strategy of pricing engineering services as part of an exclusive
manufacturing contract for the resulting instrument. Since demand for
engineering services is based on the number and scope of engineering projects,
if customers cancel one or more projects on short notice, SeaMED may experience
from time to time excess engineering capacity. Engineering margins may fluctuate
depending on the rates that customers pay under engineering project plans and
the utilization rates of engineers.
SeaMED from time to time selectively designs and manufactures
nonmedical commercial products that benefit from SeaMED's engineering and
manufacturing capabilities. SeaMED intends to maintain as its primary focus the
design and manufacturing of advanced medical instruments for medical technology
companies.
SeaMED has historically designed, developed and manufactured certain
proprietary instruments. SeaMED expects that fiscal year 1997 will be the last
year in which it derives revenues from such instruments. SeaMED thereafter will
derive its revenues exclusively by manufacturing instruments for its customers.
SeaMED's revenues from its proprietary instruments were $308,000 and $1,184,000,
respectively, in the quarter and nine months ended March 31, 1997. SeaMED's
revenues from its proprietary instruments were $1.2 million, $923,000 and $1.4
million in fiscal years 1994, 1995 and 1996.
Marketing, general and administrative expenses include the costs of
SeaMED's marketing, finance, and management information systems departments and
other administrative costs. In addition, marketing, general and administrative
expenses include the cost of a Company-wide bonus tied to operating performance.
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<PAGE> 10
RESULTS OF OPERATIONS
The following table sets forth statement of income data as a percentage
of revenues for the periods indicated.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
March 31, March 31,
--------------- -----------------
1996 1997 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 76.2 82.9 80.7 83.1
----- ----- ----- -----
Gross margin 23.8 17.1 19.3 16.9
Marketing, general and administrative 14.6 9.3 12.0 8.9
----- ----- ----- -----
Operating income 9.2 7.8 7.4 8.0
Other income (expenses) net (0.7) 0.6 (0.9) (0.1)
----- ----- ----- -----
Income before income taxes 8.5 8.4 6.5 7.9
Income tax provision 2.9 3.0 2.2 2.8
----- ----- ----- -----
Net income 5.6% 5.4% 4.3% 5.1%
===== ===== ===== =====
</TABLE>
Revenues
The following table sets forth revenues with the corresponding
percentage of total revenues and the percentage increase for the periods
indicated.
<TABLE>
<CAPTION>
Quarter Ended March 31, Nine Months Ended March 31,
----------------------------------------------------- ----------------------------------------------------
1996 1997 1996 1997
-------------------- ------------------- ------------------- -------------------
% of % of % of % of
Total Total % Total Total %
Revenues Revenues Revenues Revenues Increase Revenues Revenues Revenues Revenues Increase
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Manufacturing $4,478 63.6% $ 8,840 61.8% 97.4% $11,643 66.9% $22,853 62.8% 96.3%
Engineering 2,562 36.4 5,455 38.2 112.9% 5,763 33.1 13,528 37.2 134.7%
------ ----- ------- ----- ------- ----- ------- -----
Total Revenues $7,040 100.0% $14,295 100.0% 103.0% $17,406 100.0% $36,382 100.0% 109.0%
====== ===== ======= ===== ======= ===== ======= =====
</TABLE>
Manufacturing revenues increased by approximately $4.4 million from the
third quarter of fiscal year 1996 to the third quarter of fiscal year 1997 and
approximately $11.2 million from the first nine months of fiscal year 1996 to
the first nine months of fiscal year 1997, due primarily to a new nonmedical
product manufactured for Coinstar under a nonexclusive contract adding
approximately $3.2 million in revenues for the third quarter and $7.6 million
for the first nine months of fiscal year 1997, new instruments adding
approximately $1.4 million in revenues for the third quarter and $1.7 million
for the first nine months, and increased revenues from existing instruments
adding approximately $1.9 million for the third quarter and $4.9 million for the
first nine months. SeaMED began sales to Coinstar in the fourth quarter of
fiscal year 1996. Sales to Coinstar in the third quarter of fiscal year 1997
represented approximately 24.6% of total revenues and approximately 36.0% of
manufacturing revenues. Sales to Coinstar represented a higher percentage of
manufacturing revenues in the third quarter of fiscal year 1997 than in either
the second or first quarters due to fluctuations in the volume and timing of
product deliveries required by Coinstar. Management expects that sales to
Coinstar will represent a smaller percentage of manufacturing revenues in the
future. Sales to Coinstar in the first nine months of
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fiscal year 1997 represented approximately 23.6% of total revenues and 33.3% of
manufacturing revenues. Increases in manufacturing revenues were offset by
decreased volume of certain existing instruments and the phase-out of other
instruments. Significant manufacturing revenues were generated by 14 instruments
and one nonmedical product in the first nine months of fiscal year 1996 and the
first nine months of fiscal year 1997 (not all the same in each year).
Engineering revenues increased by approximately $2.9 million from the
third quarter of fiscal year 1996 to the third quarter of fiscal year 1997 and
increased by approximately $7.8 million from the first nine months of fiscal
year 1996 to the first nine months of fiscal year 1997, due primarily to new
projects adding approximately $3.0 million in revenues for the third quarter and
$7.0 million for the first nine months, and increased time and hourly rates
being billed on existing projects adding approximately $737,000 in revenues for
the third quarter and $2.6 million for the first nine months. Increases in
engineering revenues were offset by the transition of certain projects from
engineering to manufacturing and other projects being delayed or cancelled.
SeaMED intends to maintain as its primary focus the design and
manufacturing of advanced medical instruments for medical technology companies.
Management expects the percentage of the Company's revenues derived from
nonmedical products to decline in subsequent quarters unless SeaMED undertakes
to manufacture another high-volume nonmedical product or its nonmedical product
customers require increases in the volume or acceleration of the timing of their
product deliveries.
Gross Margin
The following table sets forth gross margin, both in dollar amounts and
as a percentage of the corresponding revenue figure for the periods indicated.
<TABLE>
<CAPTION>
Quarter Ended March 31, Nine Months Ended March 31,
------------------------------------------- -------------------------------------------
1996 1997 1996 1997
-------------------- -------------------- --------------------- --------------------
Gross Gross Gross Gross Gross Gross Gross Gross
Margin($) Margin(%) Margin($) Margin(%) Margin($) Margin(%) Margin($) Margin(%)
--------- --------- --------- --------- --------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Manufacturing $1,247 27.9% $1,778 20.1% $2,794 24.0% $4,547 19.9%
Engineering 428 16.7% 671 12.3% 567 9.8% 1,614 11.9%
------ ------ ------ ------
Total gross margin $1,675 23.8% $2,449 17.1% $3,361 19.3% $6,161 16.9%
====== ====== ====== ======
</TABLE>
Manufacturing gross margin decreased from 27.9% of manufacturing
revenues in the third quarter of fiscal year 1996 to 20.1% in the third quarter
of fiscal year 1997, due primarily to changes in the product mix, with
instruments and products with lower gross margins providing a larger dollar
volume of manufacturing revenue. In addition, the Company had several
instruments in preproduction in the third quarter of fiscal year 1997 compared
to no instruments in preproduction in the third quarter of fiscal year 1996. The
decrease in the manufacturing gross margin percentage from 24.0% in the first
nine months of fiscal year 1996 to 19.9% in the first nine months of fiscal year
1997 was primarily attributable to losses on a medical instrument that
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was phased out of full production in the second quarter of fiscal year 1997, to
changes in the product mix as described above and to more instruments (and
greater corresponding dollar volumes) being in preproduction in the first nine
months of fiscal year 1997 than in the first nine months of fiscal year 1996.
Due primarily to the product mix and the dollar volume of instruments in
preproduction, management expects the fiscal year 1997 manufacturing gross
margin percentage to be lower than the fiscal year 1996 manufacturing gross
margin percentage of 23.6%. Engineering gross margin decreased from 16.7% of
engineering revenues in the third quarter of fiscal year 1996 to 12.3% in the
third quarter of fiscal year 1997. This decrease was primarily attributable to
unusually high utilization of engineers in the third quarter of fiscal year 1996
and a lag time prior to incurring certain fixed engineering costs related to the
increased utilization. The increase in the engineering gross margin percentage
from 9.8% for the first nine months of fiscal year 1996 to 11.9% for the first
nine months of fiscal year 1997 was primarily attributable to (i) spreading
certain fixed engineering costs over a higher revenue base, (ii) better
utilization of engineers, and (iii) increased hourly rates for engineering
services. Management expects the fiscal year 1997 engineering gross margin
percentage to be near 11%.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses increased from $1.0
million in the third quarter of fiscal year 1996 to $1.3 million in the third
quarter of fiscal year 1997, but as a percentage of revenues decreased from
14.6% to 9.3% for the respective quarters. Marketing, general and administrative
expenses increased from $2.1 million in the first nine months of fiscal year
1996 to $3.3 million in the first nine months of fiscal year 1997 due primarily
to increases in the number of personnel in the relevant departments and in
management information systems costs. As a percentage of revenues, however,
marketing, general and administrative expenses decreased from 12.0% to 8.9% for
the respective nine month periods. The decrease in marketing, general and
administrative expenses as a percentage of revenues is due to the Company's
ability to support increased revenues without a proportionate increase in
marketing, general and administrative resources.
Operating Income
Operating income increased 72.2% from $645,000 (9.2% of revenues) in
the third quarter of fiscal year 1996 to $1.1 million (7.8% of revenues) in the
third quarter of fiscal year 1997 and increased 126.5% from $1.3 million (7.4%
of revenues) in the first nine months of fiscal year 1996 to $2.9 million (8.0%
of revenues) in the first nine months of fiscal year 1997, due primarily to
increased revenues and a decrease in marketing, general and administrative
expenses as a percentage of revenues, offset in part by the lower gross margin
percentage.
Other Income (Expenses), Net
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During the third quarter of fiscal year 1997 the Company earned
approximately $98,000 on the short-term investment of a portion of the net
proceeds from its initial public offering of securities. Management expects that
these net proceeds will be used for general corporate purposes.
LIQUIDITY AND CAPITAL RESOURCES
SeaMED has historically financed its operations through earnings, debt
and sales of securities. In the first nine months of fiscal year 1996 SeaMED's
operating activities provided cash of $686,000, due principally to the timing of
fluctuations in accounts receivable, inventories and accounts payable. In the
first nine months of fiscal year 1997, SeaMED's operating activities resulted in
net uses of cash of $1.3 million. The net use of cash in the first nine months
of fiscal year 1997 has occurred despite increased earnings, because SeaMED's
growth has required substantial infusions of working capital primarily to
support increased accounts receivable and inventories.
As part of its strategy to finance its growth, on November 19, 1996,
SeaMED completed its initial public offering of securities, selling 1,529,720
shares of common stock at $11 per share, resulting in net proceeds to the
Company of approximately $14.8 million. Of the net proceeds, the Company used
approximately $1.8 million to pay a cumulative preferred dividend on its
convertible redeemable preferred stock, approximately $1.8 million to pay down
its line of credit with Pacific Northwest Bank (the "Bank") to zero and
approximately $1.3 million to pay off in full three notes payable to the Bank.
SeaMED has invested most of the remaining net proceeds of approximately $7.6
million in instruments with maturities of less than one year.
SeaMED expects to use the remaining net proceeds to continue funding
working capital needs resulting from its growth and for general corporate
purposes, including leasehold improvements and purchases of equipment. If the
opportunity arises the Company may use a portion of the net proceeds to acquire
other manufacturing or engineering businesses or assets that complement the
Company's existing business. The Company currently is not engaged in any
discussions regarding such acquisitions and has no plans, arrangements,
understandings or agreements regarding any specific acquisition.
SeaMED has a fixed-balance cash management arrangement with the Bank.
Under this arrangement, the amount outstanding under SeaMED's cash investments
or line of credit fluctuates daily based on the Company's receipts and
disbursements. Under the line of credit, SeaMED can borrow up to 80% of eligible
accounts receivable (less than 60 days outstanding) to a maximum of $4.0
million. Borrowings under the line bear interest at the Bank's prime rate plus
.25% (8.75% at April 30, 1997) and are secured by receivables and inventories.
At April 30, 1997, no borrowings were outstanding under the line of credit.
SeaMED also has an unsecured subordinated note payable to Cordis
Corporation, with an interest rate adjustment on each July 1 to the prime rate
plus 2% (10% at April 30, 1997), with a maximum rate of 10% and a minimum rate
of 7%. The note is due in monthly payments of $17,000 through May 2001. At April
30, 1997, the balance outstanding on this note was approximately $674,000.
SeaMED believes that the remaining net proceeds, together with existing
capital resources and amounts available under its existing line of credit with
the Bank, will satisfy the
-13-
<PAGE> 14
Company's anticipated capital needs for the next 12 to 24 months (depending
primarily on SeaMED's growth rate and its results of operations). To accommodate
anticipated future growth, SeaMED will need additional sources of capital to
fund working capital needs for inventory and accounts receivable, to lease and
acquire furniture and equipment for additional plant facilities, to fund
leasehold improvements and to make other capital expenditures.
SeaMED recently accelerated its timetable for occupying additional
space in a new building so that it will occupy 60,000 new square feet of space
during May 1997. SeaMED currently has approximately 88,000 square feet of space.
Due in large part to preparing the new space for occupancy, SeaMED's capital
expenditures increased to approximately $601,000 in the third quarter of fiscal
year 1997 from a combined total of $635,000 in the first and second quarters of
fiscal year 1997. Management anticipates that the amount of capital expenditures
in the fourth quarter of fiscal year 1997 will be closer to the third quarter's
than either the first or second quarter's, because the Company expects to
complete purchasing and installing the furniture and equipment, communication
and information systems, leasehold improvements and other items needed to occupy
the 60,000 additional square feet of space. Capital expenditures were $876,000
in fiscal year 1994, $1.2 million in fiscal year 1995 and $1.5 million in fiscal
year 1996.
-14-
<PAGE> 15
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 6(A). EXHIBITS.
<TABLE>
<S> <C>
Exhibit 3.1+ Articles of Incorporation of the Registrant
Exhibit 3.2+ Bylaws of the Registrant
Exhibit 10.1 1997 SeaMED Corporation Employee Nonqualified Stock Option Plan
Exhibit 11.1 Statement regarding computation of net income per share
Exhibit 27.1 Financial Data Schedule
</TABLE>
- ----------
+ Filed previously with the Company's Registration Statement on Form S-1
(No. 333-13455) filed with the Securities and Exchange Commission.
-15-
<PAGE> 16
SIGNATURES
The unaudited interim financial statements furnished by management
reflect all adjustments which are, in the opinion of management, necessary for a
fair presentation of financial position and results of operation.
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ W. ROBERT BERG 5/19/97
------------------------------------------ --------------------
W. Robert Berg Date
Principal Executive Officer
By /s/ EDGAR F. RAMPY 5/19/97
------------------------------------------ --------------------
Edgar F. Rampy Date
Principal Financial Officer
-16-
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<S> <C> <C>
Exhibit 3.1+ Articles of Incorporation of the Registrant.............................
Exhibit 3.2+ Bylaws of the Registrant................................................
Exhibit 10.1 1997 SeaMED Corporation Employee Nonqualified Stock Option Plan.........
Exhibit 11.1 Statement regarding computation of net income per share.................
Exhibit 27.1 Financial Data Schedule.................................................
</TABLE>
- ----------
+ Filed previously with the Company's Registration Statement on Form S-1
(No. 333-13455) filed with the Securities and Exchange Commission.
(i)
<PAGE> 1
Exhibit 10.1
1997 SEAMED CORPORATION
EMPLOYEE NONQUALIFIED STOCK OPTION PLAN
ARTICLE 1. PURPOSE AND DURATION
1.1 PURPOSE. The purpose of the 1997 SeaMED Corporation Employee
Nonqualified Stock Option Plan (the "Plan") is to further the growth,
development and financial success of SeaMED Corporation (the "Company") by
aligning the personal interests of key employees, through the ownership of
shares of the Company's Common Stock to those of the Company's shareholders. The
Plan is further intended to provide flexibility to the Company in its ability to
compensate key employees and to motivate, attract and retain the services of
such key employees who have the ability to enhance the value of the Company.
1.2 DURATION. The Plan shall be deemed effective with the approval of
the Board of Directors of the Company on April 29, 1997 (the "Effective Date"),
and shall remain in effect, subject to the right of the Board of Directors to
terminate the Plan at any time pursuant to Article 9 herein and the availability
of Shares subject to the Plan, until April 29, 2007 (the "Termination Date"). No
Award may be granted under the Plan on or after the Termination Date, but Awards
made prior to the Termination Date may be exercised, vested or otherwise
effectuated beyond that date unless otherwise limited.
ARTICLE 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall
have the meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
"Affiliate" means any corporation (other than a Subsidiary),
partnership, association, joint venture or other entity in which the Company or
any Subsidiary participates directly or indirectly in the decisions regarding
the management thereof or the production or marketing of products or services.
"Award" means, individually or collectively, a grant under this Plan
of Stock Options.
"Award Agreement" means the document which evidences an Award and
which sets forth the terms, conditions and limitations relating to such Award.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Change in Control" means (a) a merger or consolidation wherein the
Company is not a surviving corporation whose common stock is publicly traded on
the Nasdaq Stock Market or a national securities exchange, which merger or
consolidation is not between or among the Company and any Affiliates or
Subsidiaries, (b) a tender offer or takeover bid for the Shares (other than a
tender offer by the Company) subject to the Exchange Act and the rules
promulgated thereunder, (c) a sale of substantially all the assets of the
Company, and (d) the dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time or any successor Code thereto.
"Committee" means the group of three or more Directors who administer
the Plan, which group: (a)(i) shall include the Directors on the Compensation
Committee of the Board who qualify as both "nonemployee directors" within the
meaning of Rule 16b-3 under the Exchange Act, or any successor rule thereto, and
"outside directors" under Section 162 of the Code, and (ii) may include any
other Directors who are "nonemployee directors," and "outside directors" as
appointed from time to time by the Board; and (b) shall be constituted so as to
permit the Plan to comply with Rule 16b-3 under the Exchange Act, or any
successor rule thereto, and Section 162 of the Code. Consistent with the
preceding sentence, the Board shall from time to time determine the size of the
Committee and at all times ensure that the Committee has an adequate number of
members.
<PAGE> 2
"Company" means SeaMED Corporation, a Washington corporation.
"Director" means a member of the Board of Directors of Company.
"Effective Date" means April 29, 1997.
"Eligible Employee" means any executive, managerial, professional,
technical or administrative employee of the Company who is expected to
contribute to its success.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor thereto.
"Fair Market Value" means the fair market value of the Company's
Shares, which shall be determined by the closing bid price of the Shares on the
Nasdaq Stock Market or, if the shares are not listed there, on any other stock
trading market, as of the relevant specified date.
"Participant" means an Eligible Employee selected by the Committee to
receive an Award under the Plan.
"Plan" means the 1997 SeaMED Corporation Employee Nonqualified Stock
Option Plan.
"Shares" means the issued or unissued shares of the common stock, par
value of $0.01 per share, of the Company.
"Stock Option" means the grant, pursuant to Article 6 herein, of a
right to purchase a specified number of Shares during a specified period at a
designated price, which shall be in the form of a Nonqualified Stock Option.
"Subsidiary" means a corporation as defined in Section 424(f) of the
Code with the Company being treated as the employer corporation for purposes of
this definition.
"Termination Date" means the earlier of the date on which all Shares
subject to the Plan have been purchased or acquired according to the Plan's
provisions, the date the Plan is terminated pursuant to Article 9, or April 29,
2007.
"Withholding Event" means an event related to an Award which results
in the Participant being subject to taxation at the federal, state, local or
foreign level.
ARTICLE 3. ADMINISTRATION
3.1 AUTHORITY. The Plan shall be administered by the Committee which
shall have full and exclusive power, except as limited by law or by the Articles
of Incorporation or Bylaws of the Company, as amended, and subject to the
provisions herein, to:
(a) select Eligible Employees to whom Awards are granted;
(b) determine the size and types of Awards;
(c) determine the terms and conditions of such Awards in a
manner consistent with the Plan;
(d) determine whether, to what extent and under what
circumstances, Awards may be settled, paid or exercised in cash, shares, or
other Awards, or other property or canceled, forfeited or suspended;
(e) construe and nterpret the Plan and any agreement or
instrument entered into under the Plan;
-2-
<PAGE> 3
(f) establish, amend or waive rules and regulations for the
Plan's administration;
(g) amend (subject to the provisions of Section 4.3 and
Article 9 herein) the terms and conditions, other than price (which amendment
may be made only by the Board of Directors of the Company pursuant to Article
9), of any outstanding Award to the extent such terms and conditions are within
its discretion;
(h) provide in the terms of the Award Agreements for
acceleration of exercise or removal of restrictions on exercise in the event of
a Change in Control of the Company; and
(i) make all other determinations which may be necessary or
advisable for the administration of the Plan.
All Awards hereunder shall be made by the Committee.
3.2 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive and binding on
all persons, including the Company, its Subsidiaries and Affiliates, its
shareholders, Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3
herein, no more than twenty-five thousand (25,000) Shares may be issued under
the Plan. No fractional Shares shall be issued under the Plan; provided,
however, that cash may be paid in lieu of any fractional Shares in settlements
of Awards under the Plan.
For purposes of determining the number of Shares available for
issuance under the Plan:
(a) The grant of an Award shall reduce the authorized pool of
Shares by the number of Shares subject to such Award while such Award is
outstanding.
(b) Any Shares tendered by a Participant in payment of the
price of a Stock Option shall be credited to the authorized pool of Shares.
4.2 LAPSED AWARDS. If any Award granted under the Plan is canceled,
terminates, expires or lapses for any reason, any Shares subject to such Award
shall again be available for the grant of an Award under the Plan.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. Subject to specific provisions
in any Award Agreement, in the event of any merger, reorganization,
consolidation, recapitalization, separation, spin-off, liquidation, stock
dividend, split-up, Share combination or other change in the corporate or
capital structure of the Company affecting the Shares, such adjustment shall be
made in the number and class of Shares which may be delivered under the Plan,
and in the number and class of and/or price of Shares subject to outstanding
Awards granted under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.
4.4 COMMITTEE DETERMINATION. In determining the number of Shares
available for issuance under the Plan as contemplated by this Article 4, the
Committee shall interpret and apply the provisions of this Article so as to
permit the Plan to comply with Rule 16b-3 under the Exchange Act, or any
successor rule thereto.
ARTICLE 5. PARTICIPATION
5.1 SELECTION OF PARTICIPANTS. Subject to the provisions of the Plan,
the Committee, from time to time, may select from all Eligible Employees those
Participants to whom Awards shall be granted and shall determine the
-3-
<PAGE> 4
nature and amount of each Award. No Eligible Employee shall have the right to
receive an Award under the Plan, or, if selected to receive an Award, the right
to continue to receive same. Further, no Participant shall have any rights, by
reason of the grant of any award under the Plan to continued employment by the
Company or any Subsidiary or Affiliate. There is no obligation for uniformity of
treatment of Participants under the Plan.
5.2 AWARD AGREEMENT. All Awards granted under the Plan shall be
evidenced by an Award Agreement that shall specify the terms, conditions,
limitations and such other provisions applicable to the Award as the Committee
shall determine.
ARTICLE 6. AWARDS
Except as otherwise provided for in Section 3.1 herein, Awards may be
granted by the Committee to Eligible Employees at any time, and from time to
time, as the Committee shall determine. The Committee shall have complete
discretion in determining the number of Awards to grant (subject to the Share
limitations set forth in Section 4.1 herein) and, consistent with the provisions
of the Plan, the terms, conditions and limitations pertaining to such Awards.
The Committee may provide that the Participant shall have the right to
utilize Shares to pay all or any part of the purchase price of the exercise of
any Stock Option or option to acquire Shares under any other incentive
compensation plan of the Company, if permitted under such plan; provided,
however, that the number of Shares, bearing restrictive legends, if any, which
are used for such exercise, shall be subject to the same restrictions following
such exercise.
Stock Options may be granted at an exercise price established by the
Compensation Committee.
A Stock Option may be exercised at such times as may be specified in
an Award Agreement, in whole or in installments, which may be cumulative and
shall expire at such time as the Committee shall determine at the time of grant;
provided, however, that no Stock Option shall be exercisable later than ten (10)
years after the date granted. Prior to the exercise of a Stock Option, the
holder thereof shall not have any rights of a shareholder with respect to any of
the Shares covered by the Stock Option.
Stock Options shall be exercised by the delivery of a written notice
of exercise to the Chief Financial Officer of the Company, or such other person
as may be specified by the Committee, that sets forth the number of Shares with
respect to which the Stock Option is to be exercised, accompanied by full
payment of the total Stock Option price and any required withholding taxes.
Payment shall be made either (a) in cash or its equivalent, (b) by tendering
previously acquired Shares having a Fair Market Value at the time of exercise
equal to the total price of the Stock Option, or (c) by a combination of (a) and
(b). The Committee also may allow exercises to be made with the delivery of
payment as permitted under Federal Reserve Board Regulation T, subject to
applicable securities law restrictions, or by any other means which the
Committee determines to be consistent with the Plan's purpose and applicable
law. The Committee may provide that the exercise of a Stock Option, by tendering
previously acquired shares, will entitle the exercising Participant to receive
another Stock Option covering the same number of shares tendered and with a
price of no less than the Fair Market Value on the date of grant of such
replacement Stock Option.
ARTICLE 7. AMENDMENT, MODIFICATION AND TERMINATION
7.1 AMENDMENT, MODIFICATION AND TERMINATION. The Committee may
terminate, amend or modify the Plan at any time and from time to time, with the
approval of the Board of Directors. The termination, amendment or modification
of the Plan may be in response to changes in, and shall be adopted in
conformance with, the Code, the Exchange Act, Nasdaq, national securities
exchange regulations or for other reasons deemed appropriate by the Committee.
7.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment or
modification of the Plan shall in any manner adversely affect any Award
previously granted under the Plan, without the written consent of the
-4-
<PAGE> 5
Participant. Any amendment which would change the exercise price of any
outstanding Awards (other than pursuant to Section 4.3) must be approved by the
Board of Directors.
ARTICLE 8. WITHHOLDING
8.1 TAX WITHHOLDING. The Company stall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
in cash or Shares having a Fair Market Value sufficient to satisfy federal,
state and local taxes (including the Participant's FICA obligation) required by
law to be withheld with respect to any Withholding Event which occurs because of
a grant, exercise or payment made under or as a result of the Plan.
8.2 SHARE WITHHOLDING. Upon a Withholding Event, the Committee may
require one or more classes of Participants to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares having a
Fair Market Value, on the date the tax is to be determined, equal to the amount
of withholding (federal, FICA, state or local) which is required by law. Absent
such a mandate, the Committee may allow a Participant to elect Share withholding
for tax purposes subject to such terms and conditions as the Committee shall
establish.
ARTICLE 11. TRANSFERABILITY
A Stock Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Participant, only by the Participant; provided that the Committee may permit
further transferability, on a general or specific basis, and may impose
conditions and limitations on any permitted transferability. Notwithstanding the
foregoing, the designation of a beneficiary by a Participant does not constitute
a transfer.
ARTICLE 10. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of
the Board of Directors, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability or expense that may be imposed upon
or reasonably incurred by such person in connection with or resulting from any
claim, action, suit or proceeding to which such person may be a party or in
which such person may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by such person
in settlement thereof, with the Company's approval, or paid by such person in
satisfaction of any judgment in any such action, suit or proceeding against such
person, provided such person shall give the Company an opportunity, at its own
expense, to handle and defend the same before such person undertakes to handle
and defend it on such person's own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
ARTICLE 11. UNFUNDED PLAN
The Plan shall be unfunded and the Company shall not be required to
segregate any assets that may at any time be represented by Awards under the
Plan. Any liability of the Company to any person with respect to any Award under
the Plan shall be based solely upon any contractual obligations that may be
effected pursuant to the Plan. No such obligation of the Company shall be deemed
to be secured by any pledge of, or other encumbrance on, any property or assets
of the Company.
ARTICLE 12. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
-5-
<PAGE> 6
ARTICLE 13. SECURITIES LAW COMPLIANCE
The Plan is intended to comply with all applicable conditions of Rule
16b-3 or any successor rule thereto under the Exchange Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Committee. Further, each Award shall be subject to the requirement that, if at
any time the Committee shall determine, in its sole discretion, that the
listing, registration or qualification of any Award under the Plan upon any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Award or the grant or
settlement thereof, such Award may not be exercised or settled in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Committee.
ARTICLE 14. REQUIREMENTS OF LAW
14.1 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
14.2 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
14.3 GOVERNING LAW. To the extent not preempted by federal law, the
Plan and all Award Agreements shall be construed in accordance with and governed
by the laws of the State of Washington.
<PAGE> 1
EXHIBIT 11.1
SEAMED CORPORATION
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
------------------- -------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C>
PRIMARY
Weighted average common shares outstanding.............. 621,890 5,176,260 588,324 2,857,410
Class B and C convertible redeemable
preferred stock classified as common stock
equivalents .......................................... 1,376,559 0 1,376,559 707,008
Net effect of dilutive stock options based on
the treasury stock method using average
market price.......................................... 229,667 360,992 250,383 348,479
Net effect of dilutive stock warrants based
on the treasury stock method using average
market price.......................................... 0 24,892 0 17,987
Net effect of stock options granted or
exercised at less than offering price during
the 12 mos prior to the Company's filing of
its initial public offering ("ipo"), calculated
using the treasury stock method at an offering
price of $11 per share................................ 94,325 0 102,299 33,019
--------- --------- --------- ---------
Total weighted average shares outstanding................. 2,322,441 5,562,144 2,317,565 3,963,903
========= ========= ========= =========
Net income................................................ 395,189 778,450 743,851 1,865,317
Less accretion of cumulative preferred stock
dividends............................................. -65,763 0 -197,289 -101,077
--------- --------- --------- ---------
Adjusted income for computation of primary
earnings per share.................................... 329,426 778,450 546,562 1,764,240
========= ========= ========= =========
Primary net income per share.............................. $0.14 $0.14 $0.24 $0.45
========= ========= ========= =========
FULLY DILUTED:
Weighted average common share outstanding............... 621,880 5,176,260 588,324 2,857,410
Weighted average of all convertible
redeemable preferred stock outstanding................ 2,934,209 0 2,934,149 1,508,933
Net effect of dilutive stock options based
on the treasury stock method using the
greater of average or ending market price............. 229,667 361,004 250,383 363,711
Net effect of dilutive stock warrants based
on the treasury stock method using the
greater of average or ending market price............. 0 24,892 0 20,844
Net effect of stock options granted or
exercised at less than offering price
during the 12 mos prior to the Company's
filing of its ipo, calculated using the
treasury stock method at an offering price
of $11 per share...................................... 94,145 0 102,179 32,465
--------- --------- --------- ---------
Total weighted average shares outstanding................. 3,879,911 5,562,155 3,875,035 4,781,363
========= ========= ========= =========
Net income................................................ 395,189 778,450 743,851 1,865,317
========= ========= ========= =========
Fully diluted net income per share........................ $0.10 $0.14 $0.19 $0.39
========= ========= ========= =========
</TABLE>
Page 1
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> DEC-31-1996 JUL-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 472,395 472,395
<SECURITIES> 7,172,921 7,172,921
<RECEIVABLES> 8,480,660 8,480,660
<ALLOWANCES> 338,853 338,853
<INVENTORY> 10,189,071 10,189,051
<CURRENT-ASSETS> 26,830,584 26,830,584
<PP&E> 6,487,301 6,487,301
<DEPRECIATION> 3,348,700 3,348,700
<TOTAL-ASSETS> 30,270,740 30,270,740
<CURRENT-LIABILITIES> 8,331,833 8,331,833
<BONDS> 543,272 543,272
0 0
0 0
<COMMON> 19,186,321 19,186,321
<OTHER-SE> 2,209,314 2,209,314
<TOTAL-LIABILITY-AND-EQUITY> 30,270,740 30,270,740
<SALES> 14,295,047 38,381,626
<TOTAL-REVENUES> 14,295,047 38,381,626
<CGS> 11,846,101 30,220,866
<TOTAL-COSTS> 11,846,101 30,220,866
<OTHER-EXPENSES> 1,338,509 3,260,599
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (97,657) 3,466
<INCOME-PRETAX> 1,197,615 2,869,718
<INCOME-TAX> 419,165 1,004,401
<INCOME-CONTINUING> 778,450 1,865,317
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 778,450 1,865,317
<EPS-PRIMARY> .14 .45
<EPS-DILUTED> .14 .39
</TABLE>
