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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 January 1, 1998
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 February 6, 1998, the Registrant had 5,298,638 shares of Common
Stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE: None
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SeaMED CORPORATION
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INDEX
Balance Sheets as of December 31, 1997 and June 30, 1997........................3
Statements of Income for the Quarters and the Six Months
Ended December 31, 1997 and 1996.....................................4
Statements of Cash Flows for the Six Months Ended December 31, 1997 and 1996....5
Notes to Financial Statements...................................................6
</TABLE>
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SEAMED CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 9,294 $ 9,092
Investments .......................................... 4,004,525 6,231,369
Accounts receivable, net ............................. 11,184,349 8,794,968
Inventories .......................................... 13,393,530 11,198,563
Deferred income taxes ................................ 1,556,791 1,193,311
Prepaid expenses ..................................... 396,023 169,553
------------ ------------
Total current assets ..................................... 30,544,512 27,596,856
Fixed assets, net ........................................ 5,151,238 4,331,814
Deposits and other assets ................................ 255,509 202,845
------------ ------------
Total assets ............................................. $ 35,951,259 $ 32,131,515
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................... $ 3,152,246 $ 2,482,551
Accrued expenses and reserves ........................ 6,619,344 5,787,715
Borrowings under bank line of credit ................. 542,943 1,068,240
Current portion of long-term debt .................... 85,309 --
------------ ------------
Total current liabilities ................................ 10,399,842 9,338,506
Long-term debt, less current portion ..................... 496,582 --
Shareholders' equity:
Common stock ......................................... 20,131,196 19,722,865
Note receivable from officer ......................... (75,000) (75,000)
Retained earnings .................................... 4,998,639 3,145,144
------------ ------------
Total shareholders' equity ............................... 25,054,835 22,793,009
------------ ------------
Total liabilities and shareholders' equity ............... $ 35,951,259 $ 32,131,515
============ ============
</TABLE>
See accompanying notes to financial statements.
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SEAMED CORPORATION
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
-------------------------------- --------------------------------
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Manufacturing ............................ $ 9,651,572 $ 7,289,418 $ 20,014,210 $ 14,013,136
Engineering .............................. 6,607,856 4,720,992 12,275,009 8,073,443
------------ ------------ ------------ ------------
16,259,428 12,010,410 32,289,219 22,086,579
Costs of revenues:
Manufacturing ............................ 7,797,185 5,805,689 16,175,257 11,244,456
Engineering .............................. 5,691,724 4,177,563 10,611,888 7,130,309
------------ ------------ ------------ ------------
13,488,909 9,983,252 26,787,145 18,374,765
------------ ------------ ------------ ------------
Gross margin ................................ 2,770,519 2,027,158 5,502,074 3,711,814
Marketing, general and
administrative expenses .................. 1,373,340 1,075,420 2,750,322 1,922,090
------------ ------------ ------------ ------------
Operating income ............................ 1,397,179 951,738 2,751,752 1,789,724
Other income (expense), net:
Interest ................................. 45,290 (18,907) 80,837 (101,122)
Other .................................... (8,154) (9,319) (24,264) (16,499)
------------ ------------ ------------ ------------
37,136 (28,226) 56,573 (117,621)
------------ ------------ ------------ ------------
Income before income taxes .................. 1,434,315 923,512 2,808,325 1,672,103
Income tax provision ........................ 487,667 323,229 954,831 585,236
------------ ------------ ------------ ------------
Net income .................................. $ 946,648 $ 600,283 $ 1,853,494 $ 1,086,867
============ ============ ============ ============
Net income per share data:
Basic .................................... $ 0.18 $ 0.21 $ 0.35 $ 0.58
============ ============ ============ ============
Diluted .................................. $ 0.17 $ 0.13 $ 0.33 $ 0.25
============ ============ ============ ============
Weighted average common
shares and equivalents:
Basic .................................... 5,283,689 2,724,566 5,276,294 1,697,986
============ ============ ============ ============
Diluted .................................. 5,625,498 4,705,530 5,626,156 4,390,967
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
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SEAMED CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income .......................................................... $ 1,853,494 $ 1,086,867
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation ..................................................... 805,414 488,029
Provision for bad debts .......................................... 72,344 54,739
Deferred tax benefit ............................................. (363,480) --
Changes in operating assets and liabilities:
Increase in accounts receivable ............................... (2,461,725) (1,027,170)
Increase in inventories ....................................... (2,194,967) (1,874,964)
Increase in accounts payable, accrued expenses, and deferred
revenue ..................................................... 1,586,634 394,780
Increase in other assets and prepaid expenses ................. (279,134) (187,962)
------------ ------------
Net cash used in operating activities ............................... (981,420) (1,065,681)
INVESTING ACTIVITIES
Purchases of equipment and leasehold improvements ................... (1,624,839) (634,664)
Maturity of short-term investments .................................. 2,226,843 --
Purchase of investments ............................................. -- (7,960,269)
------------ ------------
Net cash provided by (used in) investing activities ................. 602,004 (8,594,933)
FINANCING ACTIVITIES
Proceeds from sale of common stock (net of cost) .................... -- 14,799,036
Preferred stock dividend ............................................ -- (1,765,100)
Proceeds from stock options exercised ............................... 34,105 7,156
Proceeds from sale of common stock under employee stock purchase
plan ............................................................. 374,226 --
Net payments of credit line ......................................... (525,297) (1,817,000)
Proceeds from notes payable ......................................... 625,000 --
Principal payments on notes payable ................................. (128,416) (1,029,314)
------------ ------------
Net cash provided by financing activities ........................... 379,618 10,194,778
------------ ------------
Net increase in cash ................................................ 202 534,164
Cash and cash equivalents at beginning of period .................... 9,092 2,912
------------ ------------
Cash and cash equivalents at end of period .......................... $ 9,294 $ 537,076
============ ============
</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 December 31, 1997 and for the periods
ended December 31, 1997 and 1996 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 December 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, 1997, included in its Annual Report on Form 10-K
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 the Company has adopted effective
for periods ending December 31, 1997. Pursuant to the requirements of Statement
128, the Company has changed the method previously used to compute earnings per
share and has restated all prior periods whereby the calculation of primary and
fully diluted earnings per share have been replaced by basic and diluted
earnings per share. Under the new requirements for calculating basic earnings
per share, the dilutive effect of stock options, stock warrants and preferred
stock is excluded.
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2. INITIAL PUBLIC OFFERING
In November 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 $14,822,755, net of offering costs and
underwriters discount of $2,004,165. Of the net proceeds, the Company used
$1,765,100 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
2,934,029 shares of common stock.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
----------- -----------
<S> <C> <C>
Work-in-process $ 3,541,743 $ 3,274,857
Purchased and manufactured parts 9,851,787 7,923,706
----------- -----------
$13,393,530 $11,198,563
=========== ===========
</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.
5. LONG-TERM DEBT
The Company has a term note payable to Keybank National Association
(the "Bank"), entered into on July 31, 1997 and disbursed by the Bank on
September 4, 1997. Borrowings under this note bear interest at LIBOR plus 1.4%,
7.1% at January 31, 1998, and will adjust as the LIBOR rate changes. The note
is due in monthly payments of $18,055 through December 2000. At January 31,
the balance outstanding on this note was approximately $567,000.
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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 annual report on Form 10-K 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 instruments not yet approved for commercial use
(known as "preproduction revenues"), the gross
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<PAGE> 9
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.
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
and return on operating assets based on an operating plan approved by the Board
of Directors. Future payments will vary based on the Company's performance
relative to plan objectives.
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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 Six Months Ended
December 31, December 31,
------------------ ------------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 83.0 83.1 83.0 83.2
----- ----- ----- -----
Gross margin 17.0 16.9 17.0 16.8
Marketing, general and administrative 8.4 9.0 8.5 8.7
----- ----- ----- -----
Operating income 8.6 7.9 8.5 8.1
Other income (expense), net 0.2 (0.2) 0.2 (0.5)
----- ----- ----- -----
Income before income taxes 8.8 7.7 8.7 7.6
Income tax provision 3.0 2.7 3.0 2.6
----- ----- ----- -----
Net income 5.8% 5.0% 5.7% 4.9%
===== ===== ===== =====
</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 December 31, Six Months Ended December 31,
-------------------------------------------------- ----------------------------------------------------
1997 1996 1997 1996
--------------------- -------------------- -------------------- --------------------
% of Total % of Total % of Total % of Total
Revenues Revenues Revenues Revenues % Increase Revenues Revenues Revenues Revenues % Increase
-------- -------- -------- -------- ---------- -------- -------- -------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Manufacturing $ 9,651 59.4% $ 7,289 60.7% 32.4% $20,014 62.0% $14,013 63.5% 42.8%
Engineering 6,608 40.6 4,721 39.3 40.0% 12,275 38.0 8,073 36.5 52.1%
------- ----- ------- ----- ------- ----- ------- -----
Total Revenues $16,259 100.0% $12,010 100.0% 35.4% $32,289 100.0% $22,086 100.0% 46.2%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Manufacturing revenues increased by approximately $2.4 million in the
second quarter of fiscal year 1998 from the second quarter of fiscal year 1997
and by approximately $6.0 million in the first six months of fiscal year 1998
from the first six months of fiscal year 1997. The increase in manufacturing
revenues in the second quarter of fiscal year 1998 was due primarily to new
medical instruments and increased revenues from existing medical instruments
adding approximately $3.3 million in revenues and increased revenues from the
manufacture of the Coinstar coin-counting machine adding approximately $548,000
in nonmedical manufacturing revenues. The increase in manufacturing revenues in
the first six months of fiscal year 1998 was due primarily to new medical
instruments and increased revenues from existing medical instruments adding
approximately $7.8 million in revenues and increased revenues from the
manufacture of the Coinstar coin-counting machine adding approximately $1.1
million in nonmedical manufacturing revenues. Increases in manufacturing
revenues were offset by decreased volume of certain existing instruments and the
phase-out of others, including the phase-out of the Company's last remaining
proprietary instrument during the fourth quarter of fiscal year 1997.
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Sales to Coinstar in the second quarter of fiscal year 1998
represented approximately 28% of manufacturing revenues and approximately 20% of
total revenues (30% and 21%, respectively, in the second quarter of fiscal year
1997) and in the first six months of fiscal year 1998 represented approximately
28% of manufacturing revenues and approximately 20% of total revenues (32% and
22%, respectively, in the first six months of fiscal year 1997). Management
expects that sales to Coinstar will tend to decrease as a percentage of
manufacturing revenues in the future, but the percentage may fluctuate from
quarter to quarter.
Significant manufacturing revenues were generated by 19 medical
instruments in the first six months of fiscal year 1998 compared to 13 medical
instruments in the first six months of fiscal year 1997. The only nonmedical
commercial product that generated significant manufacturing revenues during the
first six months of fiscal years 1998 and 1997 was the Coinstar coin-counting
machine.
Engineering revenues increased by approximately $1.9 million in the
second quarter of fiscal year 1998 from the second quarter of fiscal year 1997
and approximately $4.2 million in the first six months of fiscal year 1998 from
the first six months of fiscal year 1997. The increase in engineering revenues
in the second quarter of fiscal year 1998 was due primarily to new projects and
to increased time and, to a lesser extent, hourly rates being billed on
existing projects adding approximately $3.8 million in revenues. The increase
in engineering revenues in the first six months of fiscal year 1998 was due
primarily to new projects and to increased time and hourly rates being billed
on existing projects adding approximately $6.8 million in revenues. Increases
in engineering revenues were offset by the transition of certain projects from
engineering to manufacturing and other projects being delayed or cancelled.
As of the respective ends of the second quarters of fiscal years 1998
and 1997, SeaMED had in its engineering project pipeline 21 and 16 new medical
instruments or systems, and 10 and seven projects that enhance or are intended
to extend the life cycle of existing medical instruments or systems. The 31
medical projects in the pipeline as of the end of the second quarter of fiscal
year 1998 were being performed for 25 different customers (23 medical projects
for 21 different customers as of the end of the second quarter of fiscal year
1997). Although management believes that the 31 medical projects in the
pipeline have a good chance of some day resulting in manufacturing contracts
from which SeaMED will derive substantial manufacturing revenues, the volume
and timing of future manufacturing revenues that relate to any specific
engineering project are highly variable, and certain engineering projects in
the pipeline may not lead to future manufacturing revenues.
As of the end of the second quarters of each of fiscal years 1998 and
1997, SeaMED had in its engineering project pipeline one nonmedical commercial
product.
Price adjustments under existing manufacturing contracts have not
been significant. Increases in revenues have not been significantly influenced
by inflation.
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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 December 31, Six Months Ended December 31,
-------------------------------------------------- ------------------------------------------------
1997 1996 1997 1996
-------------------------------------------------- ------------------------------------------------
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 $1,854 19.2% $1,484 20.4% $3,839 19.2% $2,769 19.8%
Engineering 916 13.9% 543 11.5% 1,663 13.5% 943 11.7%
------ ------ ------ ------
Total gross margin $2,770 17.0% $2,027 16.9% $5,502 17.0% $3,712 16.8%
====== ====== ====== ======
</TABLE>
Manufacturing gross margin decreased to 19.2% of manufacturing
revenues in the second quarter of fiscal year 1998 from 20.4% in the second
quarter of fiscal year 1997. Preproduction revenues, which generally produce
lower gross margins, increased as a percent of sales and offset gross margin
improvements achieved by spreading facilities and certain other manufacturing
overhead costs over a higher revenue base. The decrease in the manufacturing
gross margin percentage to 19.2% in the first six months of fiscal year 1998
from 19.8% in the first six months of fiscal year 1997 was primarily
attributable to the same factors. Engineering gross margin increased to 13.9% of
engineering revenues in the second quarter of fiscal year 1998 from 11.5% in the
second quarter of fiscal year 1997. This increase was attributable primarily to
spreading certain fixed engineering costs over a higher revenue base and
high utilization of engineers, and, to a lesser extent, to increased hourly
rates for engineering services. The increase in the engineering gross margin
percentage to 13.5% in the first six months of fiscal year 1998 from 11.7% in
the first six months of fiscal year 1997 was primarily attributable to the
same factors. Management expects engineering gross margin as a percentage of
revenues to fluctuate from quarter to quarter, but to average approximately
11% over time.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses increased to $1.4
million in the second quarter of fiscal year 1998 from $1.1 million in the
second quarter of fiscal year 1997, but as a percentage of revenues decreased to
8.4% from 9.0% for the respective quarters. In the first six months of fiscal
year 1998, marketing, general and administrative expenses increased to $2.8
million from $1.9 million in the first six months of fiscal year 1997, but as a
percentage of revenues decreased to 8.5% from 8.7%. The dollar increases were
due primarily to costs associated with disseminating information to shareholders
and the public, increased headcount and management information systems costs
associated with the Company's growth. Marketing, general and administrative
expenses before bonus represented 6.5% of revenues in the second quarters
of each of fiscal years 1998 and 1997, and 6.7% and 6.4% of revenues in the
first six months of fiscal years 1998 and 1997, respectively.
Operating Income
Operating income increased 46.8% to $1.4 million (8.6% of revenues)
in the second quarter of fiscal year 1998 from $952,000 (7.9% of revenues) in
the second quarter of fiscal year
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<PAGE> 13
1997 and increased 53.8% to $2.8 million (8.5% of revenues) in the first
six months of fiscal year 1998 from $1.8 million (8.1% of revenues) in the
first six months of fiscal year 1997, due primarily to an increase in sales
volume and improved gross margins in engineering.
LIQUIDITY AND CAPITAL RESOURCES
SeaMED has historically financed its operations through earnings,
debt and sales of securities. In the first six months of fiscal year 1998
SeaMED's operating activities resulted in net uses of cash of $981,000, despite
earnings of $1.9 million, because SeaMED's growth continues to require
substantial infusions of working capital, primarily to support increases in
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 a
line of credit with a bank to zero and approximately $1.3 million to pay off in
full three notes payable to the bank.
SeaMED has used a portion of 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.
The Company has a line of credit arrangement (the "working capital
facility") with Keybank National Association (the "Bank"), under which the
Company can borrow against 85% of eligible accounts receivable and 50% of
eligible inventory, up to a maximum of $10.0 million ($20.0 million after July
1998). Borrowings under the working capital facility will bear interest at
either the Bank's prime rate minus .25% or LIBOR plus 1.2%. At January 31, there
were no borrowings under the working capital facility. In addition the Bank has
committed to allow SeaMED, in SeaMED's discretion, to draw on an equipment
acquisition line of credit (the "equipment facility") with the Bank, under which
the Company can borrow up to $5.0 million. Borrowings under the equipment
facility will bear interest at LIBOR plus 1.4% and will be secured by the
equipment purchased using the equipment facility. At January 31, there were no
borrowings under the equipment facility.
SeaMED also has a term note payable to the Bank, entered into on July
31, 1997 and disbursed by the Bank on September 4, 1997. Borrowings under this
note bear interest at LIBOR plus 1.4%, 7.1% at January 31, 1998, and will adjust
as the LIBOR rate changes. The note is due
-13-
<PAGE> 14
in monthly payments of $18,055 through December 2000. At January 31, the balance
outstanding on this note was approximately $567,000.
SeaMED believes that the net proceeds remaining from its initial
public offering, together with existing capital resources and amounts available
under its new working capital and equipment facilities, will satisfy the
Company's anticipated capital needs for the next 18 to 36 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's current facilities contain approximately 148,000 square feet
of space. Due in large part to furnishing 60,000 square feet of space added in
May 1997 and reconfiguring space in its headquarters, SeaMED's capital
expenditures increased to approximately $1.6 million in the first six months of
fiscal year 1998 from $635,000 in the first six months of fiscal year 1997.
Management anticipates that total capital expenditures in fiscal year 1998 will
be about the same as the $2.8 million of capital expenditures in fiscal year
1997. In July 1997 SeaMED entered into a commitment to lease an additional
81,000 square feet of space in stages beginning in January 1999. SeaMED now
anticipates occupying the first 40,000 square feet under this commitment during
the summer of 1998 and the remaining space by summer 1999.
-14-
<PAGE> 15
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 2(D). USE OF OFFERING PROCEEDS. From November 18, 1996, the effective date
of the Securities Act registration statement for the Company's initial public
offering of common stock, through January 1, 1998, the Company has used the net
offering proceeds as follows:
<TABLE>
<CAPTION>
Use of Net Offering Proceeds Amount
- ------------------------------------------------------------------------------- ---------------------
(dollars in thousands)
<S> <C>
Construction of plant, building and facilities $ 603
Purchase and installation of machinery and equipment 3,310
Repayment of indebtedness (including a cumulative preferred stock dividend) 4,892
Working capital 2,013
Temporary investments 4,005
---------
$14,823
=========
</TABLE>
The uses of net offering proceeds set forth above are management's reasonable
estimates, and they assume the reinvestment of cash from operating activities
into the Company's net working capital. Temporary investments are United States
government obligations with a term of less than one year.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of shareholders on October 30, 1997.
The following matters were voted upon at the meeting:
Proposal 1: The following directors were elected:
<TABLE>
<CAPTION>
Votes
--------------------------
For Withheld
--------- ----------
<S> <C> <C>
Class I Directors (one-year term):
Richard E. Engebrecht 4,809,343 19,123
Edgar F. Rampy 4,809,503 18,963
Class II Directors (two-year term):
William H. Gates, Sr. 4,809,544 18,922
Richard O. Martin, Ph.D 4,809,032 19,434
Class III Directors (three-year term):
R. Scott Asen 4,809,343 19,123
W. Robert Berg 4,809,402 19,064
Stephen J. Clearman 4,809,503 18,963
</TABLE>
The board is comprised of the seven directors elected at the annual meeting.
-15-
<PAGE> 16
Proposal 2: The amendment and restatement of the Company's Articles of
Incorporation to provide for a board of directors with staggered terms of three
years was approved, with 2,843,086 votes for (53.9% of outstanding shares),
577,174 votes against, 17,692 abstentions, 1,390,514 broker nonvotes and 446,307
other unvoted shares. Proposal 2 was the only matter submitted to the
shareholders requiring approval by a majority of the Company's outstanding
shares.
Proposal 3: The amendment of the 1995 SeaMED Corporation Employee Stock
Option and Incentive Plan to increase the number of available shares by 300,000
from 200,000 to 500,000 was approved, with 2,957,595 votes for, 458,714 votes
against, 19,293 abstentions and 1,392,684 broker nonvotes.
Proposal 4: The amendment of the SeaMED Corporation 1996 Employee Stock
Purchase Plan to increase the number of available shares by 100,000 from 70,000
to 170,000 was approved, with 3,445,863 votes for, 21,432 votes against, 17,802
abstentions and 1,343,369 broker nonvotes.
Proposal 5: The appointment of Ernst & Young as the independent auditors
of the Company for fiscal year 1998 was approved, with 4,809,742 votes for,
1,006 votes against and 17,718 abstentions.
ITEM 6(A). EXHIBITS.
Exhibit 3.1+ Amended and Restated Articles of Incorporation of the
Registrant
Exhibit 3.2++ Bylaws of the Registrant
Exhibit 10.1 1995 SeaMED Corporation Stock Option and Incentive Plan,
as amended and approved by the Company's shareholders on
October 30, 1997
Exhibit 10.2 SeaMED Corporation 1996 Employee Stock Purchase Plan,
as amended and approved by the Company's shareholders on
October 30, 1997
Exhibit 11.1 Statement regarding computation of net income per share
Exhibit 27.1 Financial Data Schedule
- ---------------------------
+ Filed previously with the Company's quarterly report on Form 10-Q for
the quarter ended October 2, 1997, filed with the Securities and
Exchange Commission.
++ Filed previously with the Company's Registration Statement on Form
S-1 (No. 333-13455) filed with the Securities and Exchange
Commission.
-16-
<PAGE> 17
- --------------------------------------------------------------------------------
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 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 2/17/98
------------------------------------ ------------------------------------
W. Robert Berg Date
Principal Executive Officer
By /s/ EDGAR F. RAMPY 2/17/98
------------------------------------ ------------------------------------
Edgar F. Rampy Date
Principal Financial Officer
-17-
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
Exhibit 3.1+ Amended and Restated Articles of Incorporation of the Registrant..................
Exhibit 3.2++ Bylaws of the Registrant..........................................................
Exhibit 10.1 1995 SeaMED Corporation Stock Option and Incentive Plan, as amended
and approved by the Company's shareholders on October 30, 1997....................
Exhibit 10.2 SeaMED Corporation 1996 Employee Stock Purchase Plan, as amended
and approved by the Company's shareholders on October 30, 1997....................
Exhibit 11.1 Statement regarding computation of net income per share...........................
Exhibit 27.1 Financial Data Schedule...........................................................
</TABLE>
- ----------------------------------
+ Filed previously with the Company's quarterly report on Form 10-Q for
the quarter ended October 2, 1997, filed with the Securities and
Exchange Commission.
++ Filed previously with the Company's Registration Statement on Form
S-1 (No. 333-13455) filed with the Securities and Exchange
Commission.
<PAGE> 1
EXHIBIT 10.1
1995 SEAMED CORPORATION
EMPLOYEE STOCK OPTION AND INCENTIVE PLAN
ARTICLE 1.
PURPOSE AND DURATION
1.1 Purpose. The purpose of the 1995 SeaMED Corporation Employee Stock
Option and Incentive Plan (the "Plan") is to further the growth, development and
financial success of SeaMED Corporation (the "Company") and its Subsidiaries by
aligning the personal interests of key employees, through the ownership of
shares of the Company's Common Stock and through other incentives, 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 and its Subsidiaries. In addition, the Plan
provides for incentive awards to key employees of Affiliates in those cases
where the success of the Company or its Subsidiaries may be enhanced by the
award of incentives to such persons.
The Plan permits the granting of Stock Options, Stock Appreciation Rights
and Other Stock Based Awards.
1.2 Duration. Subject to ratification by an affirmative vote of a majority
of the Shares present and entitled to vote at any meeting of shareholders of the
Company, the Plan, if so approved, shall be deemed effective with the approval
of the Board of Directors of the Company on October 26, 1995 (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 October 26, 2005 (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, Stock Appreciation Rights or Other Stock Based Awards.
"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 the surviving corporation, 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.
1
<PAGE> 2
"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 individuals administering the
Plan, which shall be the Compensation Committee of the Board (or such members of
the Compensation Committee, including at least two (2) Directors, who qualify as
both "disinterested persons" 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) or any other committee of the Board, consisting of at least two (2)
Directors and others, all of whom are "disinterested persons," and "outside
directors" and performing similar functions as appointed from time to time by
the Board and 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.
"Company" means SeaMED Corporation, a Delaware corporation.
"Consultant" means an individual who performs services for the Company, a
Subsidiary or any Affiliate as an independent contractor.
"Director" means a member of the Board of Directors of Company.
"Director Option" means a Nonqualified Stock Option granted to a Director,
as further described at Section 6.4.
"Effective Date" means October 26, 1995.
"Eligible Employee" means any executive, managerial, professional,
technical or administrative employee of the Company, any Subsidiary or any
Affiliate 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 Act thereto.
"Fair Market Value" means the fair market value of the Company's Shares,
which shall be determined by the Board or, in the event that the Shares are
listed on any national exchange, over-the-counter, or other stock trading
market, then, as of any time, based upon the prevailing bid price of the Shares
as of such time.
"Incentive Stock Options" or "ISO" means a Stock Option granted pursuant to
Article 6 herein, which is designated as an Incentive Stock Option and is
intended to meet the requirements of Section 422 of the Code.
"Nonqualified Stock Option" or "NQSO" means a Stock Option granted pursuant
to Article 6 herein, which is not intended to be an Incentive Stock Option.
"Other Stock Based Award" means an Award, granted pursuant to Article 6
herein, other than a Stock Option or SAR, that is paid with, valued in whole or
in part by reference to, or is otherwise based on Shares.
"Participant" means an Eligible Employee or Consultant selected by the
Committee to receive an Award under the Plan, or a Director who receives
Director Options under the Plan.
"Plan" means the 1995 SeaMED Corporation Employee Stock Option and
Incentive Plan.
"Shares" means the issued or unissued shares of the common stock, no par
value, of the Company, and, as to the number of Shares reserved hereunder,
following amendment in 1997 refers to shares of common stock after taking into
account the one-for-five reverse stock split of July 1996.
"Stock Appreciation Right" or "SAR" means the grant, pursuant to Article 6
herein, of a right to receive a payment from the Company, in the form of stock,
cash or a combination of both, equal to the difference between the Fair Market
Value of one or more Shares and the exercise price of such Shares under the
terms of such Stock Appreciation Right.
"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 may be either an Incentive Stock Option or a Nonqualified Stock
Option.
2
<PAGE> 3
"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 October
26, 2005.
"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 and Consultants 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 interpret the Plan and any agreement or instrument
entered into under the Plan;
(f) establish, amend or waive rules and regulations for the Plan's
administration;
(g) amend (subject to the provisions of Section 4.4 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 4.4
herein, no more than 500,000 Shares may be issued under the Plan, of which a
maximum of fifteen percent (15%) of such Shares may be issued pursuant to Other
Stock Based Awards. These Shares may consist, in whole or in part, of authorized
and unissued Shares, or of treasury Shares. 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.
3
<PAGE> 4
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, except to the extent that such an Award is in tandem with
another Award covering the same or fewer Shares.
(b) Any Shares tendered by a Participant in payment of the price of a
Stock Option or stock option exercised under any other Company plan shall
be credited to the authorized pool of Shares.
(c) To the extent that any Shares covered by SARs are not issued upon
the exercise of such SAR, the authorized pool of Shares shall be credited
for such number of Shares.
(d) To the extent that an Award is settled in cash or any form other
than in Shares, the authorized pool of Shares shall be credited with the
appropriate number of Shares represented by such settlement of the Award,
as determined at the sole discretion of the Committee (subject to the
limitation set forth in Section 4.2 herein).
(e) If Shares are used to pay dividends and dividend equivalents in
conjunction with outstanding Awards, an equivalent number of Shares shall
be deducted from the Shares available for issuance.
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; except,
however, to the extent that such Award was granted in tandem with another Award,
any Shares issued pursuant to the exercise or settlement of such other Award
shall not be credited back. In the event that prior to the Award's cancellation,
termination, expiration, or lapse, the holder of the Award at any time received
one or more "benefits of ownership" pursuant to such Award (as defined by the
Securities and Exchange Commission, pursuant to any rule or interpretation
promulgated under Section 16 of the Exchange Act), the Shares subject to such
Award shall not be made available for regrant under the Plan.
4.3 Effect of Acquisition. Any Awards granted by the Company in
substitution for awards or rights issued by a company whose shares or assets are
acquired by the Company or a Subsidiary shall not reduce the number of Shares
available for grant under the Plan.
4.4 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; and provided further that, with respect to Incentive Stock Options,
except with Board approval and in compliance with Article 9, no adjustment shall
be authorized by the Committee to the extent such adjustment would (i) cause the
Plan to violate Section 422 of the Code, or (ii) constitute a "modification"
within the meaning of Section 424(h)(3) of the Code, or any successor provision
thereto, with the effect that such modification, if applied, would be considered
the granting of a new option under Section 424(h)(1) of the Code, or any
successor provision thereto.
4.5 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 and
Consultants, those to whom Awards shall be granted and shall
4
<PAGE> 5
determine the nature and amount of each Award. No Eligible Employee or
Consultant 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, and Consultants in the case of
Awards other than Incentive Stock Options, 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.
6.1 Stock Options. Stock Options may be granted at an exercise price
established by the Compensation Committee, which, in the case of Incentive Stock
Options, shall not be less than one hundred percent (100%) of the Fair Market
Value of a Share on the date that the Stock Option is granted. In the case of
Director Options granted pursuant to Section 6.4 herein, the exercise price
shall be 100% of the Fair Market Value of a Share on the date the Director
Option is granted.
In the case of an Incentive Stock Option granted to an Eligible Employee
who, at the time of grant, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company and its
Subsidiaries, the exercise price shall be not less than one hundred ten percent
(110%) of the Fair Market Value of a Share on the date the Incentive Stock
Option is granted, and the Incentive Stock Option by its terms shall not be
exercisable after the expiration of five (5) years from the date of grant.
Except as provided in the preceding paragraph, 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
5
<PAGE> 6
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.
6.2 Stock Appreciation Rights. SARs may be granted, at a price which shall
not be less than one hundred percent (100%) of the Fair Market Value of a Share
on the date the SAR is granted, either in tandem with a Stock Option, such that
the exercise of the SAR or related Stock Option will result in a forfeiture of
the right to exercise the related Stock Option for an equivalent number of
shares, or independently of any Stock Option.
An SAR 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 SAR shall be exercisable later than ten (10) years after the
date granted.
SARs 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 SAR is to be exercised.
6.3 Other Stock Based Awards. Other Stock Based Awards may be granted to
such Eligible Employees, or Consultants where permitted by law, as the Committee
may select, at any time and from time to time as the Committee shall determine.
The Committee shall have complete discretion in determining the number of Shares
subject to such Awards (subject to the Share limitations set forth in Section
4.1 herein), the consideration for such Awards and the terms, conditions and
limitations pertaining to same including, without limitation, restrictions based
upon the achievement of specific business objectives, tenure, and other
measurements of individual or business performance, and/or restrictions under
applicable federal or state securities laws, and conditions under which same
will lapse. Such Awards may include the issuance of Shares in payment of amounts
earned under other incentive compensation plans of the Company. The terms,
restrictions and conditions of the Award need not be the same with respect to
each Participant.
The Committee, at its sole discretion, may direct the Company to issue
Shares subject to such restrictive legends and/or stop transfer instructions as
the Committee deems appropriate.
6.4 Director Options. Nonqualified Stock Options may be granted at the
discretion of the Board from time to time to each Director of the Company who is
not an Eligible Employee or Consultant (a "Director Option"), subject to the
following terms and conditions:
(a) Each Director Option may be exercised any time after six (6)
months from the date of its grant to ten (10) years from such date, at
which time the Director Option shall lapse and be of no force and effect.
(b) The exercise price of Director Options shall be one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant.
(c) Director Options may be exercised only in whole.
ARTICLE 7.
DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that Awards earn dividends or dividend
equivalents. Such dividend equivalents may be paid currently or may be credited
to an account established by the Committee under the Plan in the name of the
Participant. In addition, dividends or dividend equivalents paid on outstanding
Awards or issued Shares may be credited to such account rather than paid
currently. Any crediting of dividends or dividend equivalents may be subject to
such restrictions and conditions as the Committee may establish, including
reinvestment in additional Shares or Share equivalents.
6
<PAGE> 7
ARTICLE 8.
DEFERRALS AND SETTLEMENTS
Payment of Awards may be in the form of cash, Shares, other Awards, or in
such combinations thereof as the Committee shall determine at the time of grant,
and with such restrictions as it may impose. Payment may be made in a lump sum
or in installments as prescribed by the Committee. The Committee may also
require or permit Participants to elect to defer the issuance of Shares or the
settlement of awards in cash under such rules and procedures as it may establish
under the Plan. It may also provide that deferred settlements include the
payment or crediting of interest on the deferral amounts or the payment or
crediting of dividend equivalents on deferred settlements denominated in Shares.
ARTICLE 9.
AMENDMENT, MODIFICATION AND TERMINATION
9.1 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 the Code, the Exchange Act, national securities
exchange regulations or for other reasons deemed appropriate by the Committee.
However, without the approval of the shareholders of the Company, no amendment
or modification may:
(a) Materially increase the total amount of Shares which may be issued
under the Plan, except as provided in Sections 4.3 and 4.4 herein; or
(b) Cause the Plan not to comply with Rule 16b-3 under the Exchange
Act, or any successor rule thereto.
9.2 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 Participant. Any amendment
which would change the exercise price of any outstanding Awards (other than
pursuant to Section 4.4) must be approved by the Board of Directors.
ARTICLE 10.
WITHHOLDING
10.1 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.
10.2 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
No Award granted under the Plan may be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code, or Title I of the Employee Retirement Income Security Act,
as
7
<PAGE> 8
amended, or the rules thereunder. Further, all Awards granted to a Participant
under the Plan shall be exercisable during the Participant's lifetime only by
the Participant. Notwithstanding the foregoing, the designation of a beneficiary
by a Participant does not constitute a transfer.
ARTICLE 12.
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 13.
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 14.
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.
ARTICLE 15.
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.
8
<PAGE> 9
ARTICLE 16.
REQUIREMENTS OF LAW
16.1 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 require.
16.2 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.
16.3 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.
9
<PAGE> 1
EXHIBIT 10.2
SEAMED CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
SeaMED Corporation (the "Company") does hereby establish its 1996 Employee
Stock Purchase Plan as follows:
1. Purpose of the Plan; Effective Date. The purpose of this Plan is to
provide eligible employees of the Company who wish to become shareholders in the
Company a convenient method of doing so. It is believed that employee
participation in the ownership of the business will be to the mutual benefit of
both the employees and the Company. It is the intention of the Company to have
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the
Plan shall, accordingly, be construed so as to extend and limit participation in
a manner consistent with the requirements of that section of the Code. This Plan
shall not be effective until the later of (i) approval by the holders of a
majority of the Company's voting securities, which approval must occur (if at
all) within 12 months of the adoption of this Plan by the Board of Directors and
(ii) the date that the Company's common stock begins to trade on the Nasdaq
Stock Market. If not so approved, the Plan and any rights granted hereunder
shall be void and of no effect.
2. Definitions.
2.1 "Base pay" means regular straight time earnings, plus review
cycle bonuses and overtime payments, payments for incentive compensation,
and other special payments except to the extent that any such item is
specifically excluded by the Board of Directors of the Company (the
"Board").
2.2 "Account" shall mean the funds accumulated with respect to an
individual employee as a result of deductions from his paycheck for the
purpose of purchasing stock under this Plan. The funds allocated to an
employee's account shall remain the property of the respective employee at
all times but may be commingled with the general funds of the Company.
2.3 "Shares" means the issued or unissued shares of the common stock,
no par value, of the Company, and, as to the number of Shares reserved
hereunder, following amendment in 1997 refers to shares of common stock
after taking into account the one-for-five reverse stock split of July
1996.
3. Employees Eligible to Participate. An employee of the Company or any of
its subsidiaries who is in the employ of the Company on one or more offering
dates is eligible to participate in the Plan, provided that they have been
employed by the Company as of the commencement date of an offering, except: (a)
employees whose customary employment is less than 20 hours per week; (b)
employees whose customary employment is for not more than five months in any
calendar year, and (c) independent contractors, individuals employed through
contract employment agencies or companies, interns, or any other temporary type
worker. With respect to any employee subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, the Company may impose such conditions on the
grant or exercise of any rights hereunder necessary to satisfy the requirements
of such statute or applicable regulations.
4. Offerings. Generally, there will be ten separate consecutive six-month
offerings pursuant to the Plan. The first offering shall commence on the date
that the Company's common stock begins to trade on the Nasdaq Stock Market and
extend through June 30, 1997. The second offering shall be for six (6) months,
commencing on July 1, 1997 and extending through December 31, 1997. The third
offering shall be for five (5) months, commencing on January 1, 1998 and
extending through May 31, 1998. Thereafter, offerings shall commence on each
subsequent June 1 and December 1, and the final offering under this Plan shall
commence on June 1, 2001 and terminate on November 30, 2001. In order to become
eligible to purchase shares, an employee must sign an Enrollment Agreement, and
any other necessary papers on or before the commencement date (except for the
three initial offerings, June 1 or December 1) of the particular offering in
which he wishes to participate. Participation in one offering under the Plan
shall neither limit, nor require, participation in any other offering.
1
<PAGE> 2
5. Price. The purchase price per share shall be the lesser of (1) 85% of
the fair market value of the stock on the offering date; or (2) 85% of the fair
market value of the stock on the last business day of the offering. Fair market
value shall mean the price at which the Company sells stock in a public offering
or, if no such sales occur within any offering period, the closing bid price as
reported on the Nasdaq Stock Market or, if the stock is traded on a stock
exchange, the closing price for the stock on the principal such exchange.
6. Offering Date. The "offering date" as used in this Plan shall be the
commencement date of the offering, if such date is a regular business day, or
the first regular business day following such commencement date. A different
date may be set by resolution of the Board.
7. Number of Shares to be Offered. Subject to adjustment as provided
herein, the number of Shares that may be issued under the Plan shall not exceed
170,000 Shares (as such number may be adjusted by any stock split approved by
the Board of Directors). The actual number of Shares to be issued under this
Plan shall be determined in the discretion of the Board of Directors. The shares
to be sold to participants under the Plan will be common stock of the Company.
If the total number of shares for which options are to be granted on any date in
accordance with Section 10 exceeds the number of Shares then available under the
Plan (after deduction of all Shares for which options have been exercised or are
then outstanding), the Company shall make a pro rata allocation of the Shares
remaining available in as nearly a uniform manner as shall be practicable and as
it shall determine to be equitable. In such event, the payroll deductions to be
made pursuant to the authorizations therefor shall be reduced accordingly and
the Company shall give written notice of such reduction to each employee
affected thereby.
8. Participation.
8.1 An eligible employee may become a participant by completing an
Enrollment Agreement provided by the Company and filing it with the Human
Resources Department prior to the commencement of the offering to which it
relates.
8.2 Payroll deductions for a participant shall commence on the
offering date, and shall end on the termination date of such offering
unless earlier terminated by the employee as provided in Paragraph 14.
9. Payroll Deductions.
9.1 At the time a participant files his authorization for a payroll
deduction, he shall elect to have deductions made from his pay on each
payday during the time he is a participant in an offering at a percentage
of his base pay as may be from time to time set by the Board; provided such
percentage shall not exceed 10%.
9.2 All payroll deductions made for a participant shall be credited
to his account under the Plan. A participant may not make any separate cash
payment into such account nor may payment for Shares be made other than by
payroll deduction.
9.3 A participant may discontinue his participation in the Plan as
provided in Section 14, but no other change can be made during an offering
and, specifically, a participant may not alter the rate of his payroll
deductions for that offering.
10. Granting of Option. On the offering date, this Plan shall be deemed to
have granted to the participant an option for as many full and/or fractional
shares as he will be able to purchase with the payroll deductions credited to
his account during his participation in that offering. Notwithstanding the
foregoing, no participant may purchase stock the fair market value of which
exceeds $25,000 during any calendar year.
11. Exercise of Option. Each employee who continues to be a participant in
an offering on the last business day of that offering shall be deemed to have
exercised his option on such date and shall be deemed to have purchased from the
Company such number of full and/or fractional shares of common stock reserved
for the purpose of the Plan as his accumulated payroll deductions on such date
will pay for at the option price.
12. Employee's Rights. No participating employee shall have any right as a
shareholder with respect to any shares until the shares have been purchased in
accordance with Section 11 above and the stock has been issued by the Company.
Neither the adoption of this Plan nor the granting of rights pursuant to it
shall be
2
<PAGE> 3
deemed to create any right in any employee to be retained or continued in the
employment of the Company or any subsidiary.
13. Evidence of Stock Ownership.
13.1 Promptly following the end of each offering, the number of
shares of common stock purchased by each participant shall be deposited
into an account established in the participant's name at a stock brokerage
or other financial services firm designated by the Company (the "ESPP
Broker").
13.2 The participant may direct, by written notice to the Company at
the time of his enrollment in the Plan, that his ESPP Broker account be
established in the names of the participant and one other person designated
by the participant, as joint tenants with right of survivorship, tenants in
common, or community property, to the extent and in the manner permitted by
applicable law.
13.3 A participant shall be free to undertake a disposition (as that
term is defined in Section 424(c) of the US Internal Revenue Code of 1986,
as amended (the "Code")) of the shares in his account at any time, whether
by sale, exchange, gift, or other transfer of legal title, but in the
absence of such a disposition of the shares, the shares must remain in the
participant's account at the ESPP Broker until the holding period set forth
in Section 423(a) of the Code has been satisfied. With respect to shares
for which the Section 423(a) holding period has been satisfied, the
participant may move those shares to another brokerage account of
participant's choosing or request that a stock certificate be issued and
delivered to him.
13.4 A participant who is not subject to payment of U.S. income taxes
may move his shares to another brokerage account of his choosing or request
that a stock certificate be issued and delivered to him at any time,
without regard to the satisfaction of the Section 423(a) holding period.
14. Withdrawal.
14.1 An employee may withdraw from an offering, in whole but not in
part, at any time prior to the last business day of such offering by
delivering a Withdrawal Notice to the Company, in which event the Company
will refund the entire balance of his deductions as soon as practicable
thereafter.
14.2 To re-enter the Plan, an employee who has previously withdrawn
must file a new Enrollment Agreement in accordance with Section 8.1. The
employee's re-entry into the Plan will not become effective before the
beginning of the next offering following his withdrawal, and if the
withdrawing employee is an officer of the Company within the meaning of
Section 16 of the Securities Exchange Act of 1934 he may not re-enter the
Plan before the beginning of the second offering following his withdrawal.
15. Carryover of Account. At the termination of each offering the Company
shall automatically re-enroll the employee in the next offering, and the balance
in the employee's account shall be used for option exercises in the new
offering, unless the employee has advised the Company otherwise. Upon
termination of the Plan, the balance of each employee's account shall be
refunded to him.
16. Interest. No interest will be paid or allowed on any money in the
accounts of participating employees.
17. Rights Not Transferable. No employee shall be permitted to sell,
assign, transfer, pledge, or otherwise dispose of or encumber either the payroll
deductions credited to his account or any rights with regard to the exercise of
an option or to receive shares under the Plan other than by will or the laws of
descent and distribution, and such right and interest shall not be liable for,
or subject to, the debts, contracts, or liabilities of the employee. If any such
action is taken by the employee, or any claim is asserted by any other party in
respect of such right and interest whether by garnishment, levy, attachment or
otherwise, such action or claim will be treated as an election to withdraw funds
in accordance with Section 14.
18. Termination of Employment. Upon termination of employment for any
reason whatsoever, including but not limited to death or retirement, the balance
in the account of a participating employee shall be paid to the employee or his
estate.
3
<PAGE> 4
19. Amendment or Discontinuance of the Plan. The Board shall have the right
to amend, modify, or terminate the Plan at any time without notice, provided
that no employee's existing rights under any offering already made under Section
4 hereof may be adversely affected thereby, and provided further that no such
amendment of the Plan shall, except as provided in Section 20, increase above
170,000 the total number of Shares to be offered unless shareholder approval is
obtained therefor.
20. Changes in Capitalization. In the event of reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, offerings of rights, or any other change in the structure of the
common shares of the Company, the Board may make such adjustment, if any, as it
may deem appropriate in the number, kind, and the price of Shares available for
purchase under the Plan, and in the number of Shares which an employee is
entitled to purchase.
21. Share Ownership. Notwithstanding anything herein to the contrary, no
employee shall be permitted to subscribe for any Shares under the Plan if such
employee, immediately after such subscription, owns shares (including all Shares
which may be purchased under outstanding subscriptions under the Plan)
possessing 5% or more of the total combined voting power or value of all classes
of shares of the Company or of its parent or subsidiary corporations.
22. Administration. The Plan shall be administered by the Board. The Board
shall be vested with full authority to make, administer, and interpret such
rules and regulations as it deems necessary to administer the Plan, and any
determination, decision, or action of the Board in connection with the
construction, interpretation, administration, or application of the Plan shall
be final, conclusive, and binding upon all participants and any and all persons
claiming under or through any participant.
The Board may delegate any or all of its authority hereunder to such
committee as it may designate.
23. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received by the Human Resources Department of the Company or when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
24. Termination of the Plan. This Plan shall terminate at the earliest of
the following:
24.1 November 30, 2001;
24.2 The date of the filing of a Statement of Intent to Dissolve by
the Company or the effective date of a merger or consolidation wherein the
Company is not to be the surviving corporation, which merger or
consolidation is not between or among corporations related to the Company.
Prior to the occurrence of either of such events, on such date as the
Company may determine, the Company may permit a participating employee to
exercise the option to purchase shares for as many full and/or fractional
shares as the balance of his account will allow at the price set forth in
accordance with Section 5. If the employee elects to purchase shares, the
remaining balance of his account will be refunded to him after such
purchase.
24.3 The date the Board acts to terminate the Plan in accordance with
Section 19 above.
24.4 The date when all shares reserved under the Plan have been
purchased.
25. Limitations on Sale of Stock Purchased Under the Plan. The Plan is
intended to provide common stock for investment and not for resale. The Company
does not, however, intend to restrict or influence any employee in the conduct
of his own affairs. An employee, therefore, may sell stock purchased under the
Plan at any time he chooses, subject to compliance with any applicable federal
or state securities laws. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET
FLUCTUATIONS IN THE PRICE OF THE STOCK.
26. Governmental Regulation and Registration of Shares. The Company's
obligation to sell and deliver shares of the Company's common stock under this
Plan is subject to the approval of, or registration of shares of common stock
with, applicable governmental authorities required in connection with the
authorization, issuance, or sale of such shares.
4
<PAGE> 1
EXHIBIT 11.1
SeaMED CORPORATION
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
----------------------- ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic:
Weighted average common shares
and equivalents.............................. 5,283,689 2,724,566 5,276,294 1,697,986
========= ========= ========= =========
Net income..................................... 946,648 600,283 1,853,494 1,086,867
Less accretion of cumulative
preferred stock dividends.................... 0 (35,314) 0 (101,077)
--------- --------- --------- ---------
Adjusted income for computation of
basic earnings per share..................... 946,648 564,969 1,853,494 985,790
========= ========= ========= =========
Basic net income per share..................... $0.18 $0.21 $0.35 $0.58
========= ========= ========= =========
Diluted:
Weighted average common shares
outstanding.................................. 5,283,689 2,724,175 5,276,294 1,697,986
Weighted average of all convertible
redeemable preferred stock outstanding....... 0 1,586,771 0 2,260,400
Net effect of dilutive stock options
based on the treasury stock method
using avg. market price...................... 313,532 373,742 321,368 365,064
Net effect of dilutive stock warrants
based on the treasury stock method
using avg. market price...................... 28,277 20,836 28,494 18,820
--------- --------- --------- ---------
Total weighted average shares
outstanding.................................. 5,625,498 4,705,524 5,626,156 4,342,270
========= ========= ========= =========
Net income..................................... 946,648 600,283 1,853,494 1,086,867
========= ========= ========= =========
Diluted net income per share................... $0.17 $0.13 $0.33 $0.25
========= ========= ========= =========
</TABLE>
Page 1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-START> OCT-01-1997 JUL-01-1997
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 9,294 9,294
<SECURITIES> 4,004,525 4,004,525
<RECEIVABLES> 11,634,583 11,634,583
<ALLOWANCES> 450,234 450,234
<INVENTORY> 13,393,530 13,393,530
<CURRENT-ASSETS> 30,544,512 30,544,512
<PP&E> 9,626,385 9,626,385
<DEPRECIATION> 4,475,147 4,475,147
<TOTAL-ASSETS> 35,951,259 35,951,259
<CURRENT-LIABILITIES> 10,399,842 10,399,842
<BONDS> 496,582 496,582
0 0
0 0
<COMMON> 20,131,196 20,131,196
<OTHER-SE> 4,923,639 4,923,639
<TOTAL-LIABILITY-AND-EQUITY> 35,951,259 35,951,259
<SALES> 16,259,428 32,289,219
<TOTAL-REVENUES> 16,259,428 32,289,219
<CGS> 13,488,909 26,787,145
<TOTAL-COSTS> 13,488,909 26,787,145
<OTHER-EXPENSES> 1,336,204 2,693,749
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,434,315 2,808,325
<INCOME-TAX> 487,667 954,831
<INCOME-CONTINUING> 946,648 1,853,494
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 946,648 1,853,494
<EPS-PRIMARY> .18 .35
<EPS-DILUTED> .17 .33
</TABLE>
