<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934.
COMMISSION FILE NUMBER: 0-26858
MIZAR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1425902
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification Number)
2410 LUNA ROAD, CARROLLTON, TX 75006
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972)277-4600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on September
3, 1996 as reported on the Nasdaq National Market, was approximately
$18,700,000.
As of September 3, 1996, Registrant had outstanding 4,965,692 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1996
Annual Meeting of Stockholders to be held November 14, 1996
are incorporated by reference in Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
Mizar designs, develops and markets multiprocessor digital signal
processing ("DSP") computing sub-systems used primarily for real-time image and
signal processing. The Company has chosen to design its products around
programmable DSP microprocessors developed by Texas Instruments Incorporated
("TI"), the acknowledged market share leader in programmable DSPs. The Company
continues to sell its prior generation of non-DSP computing sub-systems
primarily to existing commercial customers for industrial automation
applications.
DIGITAL SIGNAL PROCESSING
Digital signal processing involves the mathematical manipulation and
analysis of digitized light, sound and other naturally occurring analog wave
forms. Examples of input devices which collect and digitize these analog wave
forms include video cameras, radar arrays, digital x-ray cameras and sonar
arrays. As compared to general computing, the mathematical algorithms used to
manipulate digitized images, audio and speech use multiplication and addition
functions more intensively. DSP microprocessors perform these functions in one
clock cycle at millions of instructions per second, whereas non-DSP
microprocessors may require several clock cycles to accomplish the same
operation.
MULTIPROCESSOR DSP MARKETS AND APPLICATIONS
Multiprocessor DSP is an enabling technology applicable to a diverse
range of existing and emerging image processing applications.
Defense Electronics. The defense electronics industry has employed
multiprocessor DSPs in many defense applications. Although United States defense
spending is decreasing, the Company believes that spending for technological
improvements and enhancements has not been reduced. Many defense applications
place a premium on reduced size and weight for a given amount of computing
power, particularly if the system is to be airborne, onboard a ship or in a
battlefield vehicle. Therefore, defense applications often require maximum
processing power within specific weight and size constraints.
Machine Vision. The machine vision industry has historically used
technology other than programmable DSPs. Several firms have successfully
introduced products based on custom, single purpose ASICs, while other firms
have successfully used programmable non-DSP processors such as the Motorola 68K
family. Unlike the defense industry, space and weight constraints and harsh
environment operation are not as important in machine vision applications as is
cost effectiveness. Machine vision systems typically include one or more video
cameras and a real-time computer system which makes decisions and takes actions
without human intervention.
Medical Imaging. The Company believes that the use of DSP by this market
segment will increase as advances in medical imaging technology, such as the
increasing use of non-film based radiology, continue to occur and as the cost of
DSP technology decreases.
Other. Multiprocessor DSP technology is also used for applications such
as digital wireless communications, commercial radar for air traffic control and
machine vibration analysis.
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STRATEGY
Mizar's strategy is to use its depth of knowledge in multiprocessor DSP
design to be the leading supplier of DSP computing sub-systems to the real-time
image processing industry. Key elements of the Company's strategy include the
following:
Provide General Purpose Enabling DSP Technology. The Company has
designed its DSP products for a broad range of defense and commercial
applications. Because the Company's products are programmable, they are intended
to interface with a wide variety of other components or application software
supplied by OEM customers. The Company has focused its product line on those
applications where high performance, product quality and reliability, rather
than cost, are the customer's most important product considerations. The
Company's programmable, general purpose products permit customers to decrease
the time required to develop their products, with the benefit of "reduced time
to market."
Continue to Focus on TI DSP Microprocessors. The Company's DSP products
incorporate microprocessors manufactured by TI, which is generally acknowledged
to be the market share leader in programmable DSPs.
Enhance Financial Stability. The Company believes that commercial and
defense customers select suppliers based in part upon their financial condition,
and therefore their perceived ability to meet long-term customer requirements.
The completion of the Company's initial public offering in September 1995 has
further enhanced the Company's financial stability.
RELATIONSHIP WITH TI DSEG
The Company has entered into a series of license agreements with TI's
Defense Systems and Electronics Group ("DSEG") relating to the design of several
DSP products. These licenses are exclusive, perpetual and world wide, subject to
the Company's payment of required royalties and performance of its other
obligations under the licenses. In fiscal 1996, the royalty expense related to
these licenses was approximately $360,000. None of the licenses restricts the
Company from developing independently non-licensed designs on a non-royalty
basis or allowing the development of designs based on DSP microprocessors from
suppliers other than TI. The licenses contain several other provisions,
including the right of TI DSEG under certain conditions to use modifications of
the licensed products and derivations thereof on a royalty-free basis.
Through this relationship, the Company's engineering group has been able
to work closely with TI DSEG in advancing the design of Mizar's products. The
Company believes that TI DSEG's reputation provides marketing credibility to
customers for whom high performance and reliability of products are critical.
MULTIPROCESSOR DSP PRODUCTS
The Company offers products based on two families of TI DSP
microprocessors, the TMS320C40 ("C40") and TMS320C80 ("C80"), each of which is
designed into VME computing environments. Descriptions of the Company's product
lines follow:
Commercial C40 on VME Product Line. This product line consists of a
series of C40s on VME single board computers and associated operating software.
Products are available in single processor, dual processor, quad processor and
octal processor versions, all of which are generally software compatible. A
variety of memory configurations and daughtercards is available.
Mil-spec C40 on VME Product Line. The Company offers a variety of Mil-
spec and harsh environment DSP products using C40s in the VME computing
environment. This product line is primarily aimed at defense applications in
which a controlled environment may not always be present such as battlefield
vehicles or aircraft.
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C80 on VME Product Line. The C80 was announced by TI in 1994 as a DSP
particularly well suited for a variety of video and/or pixel oriented real-time
imaging applications. Each C80 processor includes four fixed point DSPs, one
RISC processor and two video processors. Initial orders for this product have
been for defense related applications including battlefield vehicles and
aircraft.
NON-DSP PRODUCTS
The Company continues to sell its prior generation of non-DSP computing
sub-systems, primarily to existing commercial customers who have previously
designed these products into their equipment which they continue to market for
industrial automation applications. The Company does not actively market these
products and is not currently designing any new non-DSP products. The Company
foresees a steady decline in the sales of these products.
SALES AND MARKETING
The Company uses its own direct sales force and, to a lesser extent,
independent manufacturer's representatives and distributors to market its
products. The Company's customers frequently require that a product be tailored
to their particular requirements. The Company believes that it is advantageous
to have its own employees interacting directly with customers in order to fully
understand their requirements. Mizar's sales personnel generally have
engineering backgrounds, which the Company believes enhances their ability to
create relationships with their customer counterparts, who are typically design
and systems engineers. The Company maintains regional sales offices throughout
the United States.
CUSTOMERS
The Company's customer base consists primarily of defense contractors
and OEMs which incorporate the Company's products as a part of their systems.
Typically, these customers initially purchase a small volume of products for
development testing and comparison to competitive products. If upon completion
of testing the customer elects to incorporate the Company's product into its
design, it frequently purchases the Company's standard or customized products in
higher volumes.
The Company's historic customer base for non-DSP products was OEMs
engaged in commercial product applications such as industrial automation. The
Company's DSP customer base consists primarily of defense customers, including
the major prime defense contractors. The Company's objective is to build a base
of both defense contractors and commercial OEMs.
Texas Instruments Incorporated and Pressco Technology, Inc. represented
approximately 13% and 12%, respectively, of the Company's fiscal 1996 revenues.
The revenues from Pressco Technology, Inc. were derived from non-DSP based
products.
BACKLOG
The Company's customers generally are entitled to cancel purchase
orders, or to revise the delivery schedule of orders, prior to time of shipment
without significant penalty. Further, certain customers place orders that may
require significant lead-times. Accordingly, the Company does not believe that
the level of backlog of purchase orders, as of any date, is a good indictor of
future revenues or of revenue trends. The Company does not believe there is
significant seasonality to its business.
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PRODUCT DEVELOPMENT
Mizar has made a significant investment in its engineering group. The
Company's current internal design strengths exist in areas such as DSP
computing, high speed digital circuit design, architecture for multiprocessor
computing, driver and related software design and rapid customization of
designs.
With respect to VME based DSP products, the Company has augmented its
internal research and development capability with licensed technology from TI
DSEG. Licensed DSP products have generally been leading edge designs in which TI
DSEG, as the licensor, has funded exploratory and initial designs, while the
Company has subsequently developed enhanced and customized versions of certain
of these products.
During the last three fiscal years, Mizar incurred approximately
$1,191,000, $1,577,000, and $1,652,000 of product development and engineering
expenses, exclusive of royalties paid under the TI license agreements.
MANUFACTURING AND QUALITY CONTROL
The Company relies exclusively upon subcontractors to assemble its
products. The Company believes that this enhances its flexibility in product
development, as it is not required to invest in specialized capital equipment
that may have limited use, but instead can choose subcontractors based upon
their capabilities for particular manufacturing tasks. The existence of these
outsourcing relationships allows the Company to absorb varying production levels
without incurring the costs normally attendant to such fluctuations. The Company
has relationships with several contract manufacturers but has no long-term
contracts with any of them. The Company believes there are a number of contract
manufacturers equipped to meet its needs although there is no assurance of this
in the future. Mizar's internal manufacturing operations consist primarily of
test engineering, material purchasing, incoming inspection and acceptance
testing. The Company's subcontractors perform quality control at their
facilities. Mizar undertakes subsequent additional quality control procedures.
All of the Company's products incorporate electronic components
available from a limited number of sources and in certain instances from a
single source. Most notably, all of the Company's DSP products use DSP
microprocessors manufactured by TI. The Company believes that electronic
component availability is sufficient to meet the demand for its products.
COMPETITION
The industries and markets in which the Company operates are highly
competitive, and the Company believes that competition is likely to intensify.
Many of the Company's competitors have substantially greater financial
resources, larger research, development and sales staffs as well as greater name
recognition than the Company. The Company has direct competitors which use DSP
technology similar to that of the Company. The Company also has competitors
offering technologies other than programmable DSPs for signal/image processing
applications. These technologies include ASICs, fixed program DSPs and
programmable non-DSP processors. From time to time, the Company competes with
the in-house design department of its customers. However, the Company believes
that its customers increasingly rely on outside suppliers for sub-systems such
as those designed and marketed by the Company.
New or improved products can be expected from competitors in the future.
Market participants must compete on many fronts, including development time;
engineering expertise; product quality, performance and reliability; price; name
recognition; financial stability; customer support; and access to distribution
channels.
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INTELLECTUAL PROPERTY
The Company believes that due to the rapid pace of innovation within its
industry, factors such as product quality, performance and reliability are more
important in establishing and maintaining customer relationships than are the
various protections afforded by patents. The Company generally refers to its
products by part numbers rather than by their specific names, and has therefore
not sought trade name protection for product names.
EMPLOYEES
As of June 30, 1996, the Company employed 46 full-time employees,
including 8 in product development, 12 in sales and marketing, 18 in operations,
and 8 in finance and administration. The Company's continued success will depend
in large measure on its ability to attract and retain highly skilled employees.
None of the Company's employees is represented by a labor union.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
Certain matters discussed in this Form 10-K are forward-looking
statements that involve risks and uncertainties. The following risk factors
could affect the Company's actual results and cause actual results to differ
materially from those in forward-looking statements.
Technological Change. The market for high performance computer sub-
systems and components has traditionally experienced short product life cycles
and rapid technological change, requiring high levels of expenditures for
research and development. Although the Company has been engaged in serving the
real-time image processing market for several years, it has incorporated
multiprocessor DSP architecture into its product line only since fiscal 1993.
The Company has introduced several DSP products during the past four years and,
in order to retain its competitive position, must continue to enhance its
existing products and successfully develop and introduce new products. In the
event the Company does not continue to incorporate new advances in DSP
technology into its products, the Company's business will be adversely affected.
Further, all of the Company's DSP products incorporate DSP microprocessors
manufactured by TI. To the extent that DSP microprocessors manufactured by TI's
competitors, or technologies other than DSP, should prove to be superior for the
high performance applications required by the Company's customers, the Company's
business would be significantly impaired.
Defense Industry Customer Concentration. The Company's DSP products have
been sold primarily for defense electronics applications. The federal government
has reduced overall defense spending and, in certain cases, delayed or deferred
funding for defense applications which in turn has adversely affected the
Company's revenues. The Company believes, however, that reduced defense spending
has increased the demand for efficiency and for upgraded electronics in new and
existing defense electronics systems. There can be no assurance that continued
defense cutbacks would not adversely affect the Company's customers and its
business. Additionally, there has been some consolidation of companies in the
defense industry, and further consolidation is possible in the future. There can
be no assurance that such consolidation will not adversely affect the Company.
During fiscal 1996, one of the Company's defense customers, TI, represented
approximately 13% of revenues. Loss of this account would also have a material
adverse effect on the Company.
Relationship with TI DSEG. Several of the Company's current DSP
products are marketed pursuant to licenses granted by TI's Defense Systems and
Electronics Group (DSEG). The licensing agreements with TI DSEG have been very
beneficial to the Company and were instrumental to the Company's entry into the
DSP computing sub-system business. These licenses are subject to several
restrictions and requirements, and the termination of one or more of these
licenses could adversely affect the Company's business. Additionally, TI DSEG is
under no obligation to offer licenses to the Company with respect to new
products developed by TI DSEG. In the event that TI DSEG elects to provide
future licenses to a competitor of the Company, the Company's competitive
position could be
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significantly impaired. The termination of the Company's relationship with TI
DSEG would impair the credibility of the Company's marketing efforts.
Commercial Market Uncertainties. Although the Company has historically
served commercial accounts in its non-DSP business, the Company has limited
experience in the marketing and sales of DSP products to commercial customers.
Because the Company's product line is focused towards real-time image processing
applications, the Company's products may not be cost competitive for many
emerging commercial applications in which the need for real-time performance, or
multiprocessor DSP product architecture, is not critical. Many of the commercial
applications may require product volumes which are higher than those required by
the Company's defense customers. There can be no assurance that the Company will
be able to meet these higher volume demands without increased investment in
management and administration, manufacturing, and quality control capabilities,
among other things.
Dependence upon Suppliers and Subcontractors. All of the Company's
products incorporate electronic components available from a limited number of
sources and, in certain instances, from a single source. Most notably, all of
the Company's DSP products use DSP microprocessors manufactured by TI. In the
event of shortages of any of the single source components, the Company would be
severely impacted. In addition, the Company has no internal manufacturing
capability. In the event that one or more of the several qualified
subcontractors currently used by the Company should cease operations or become
unable or unwilling to handle the Company's requirements, the Company may be
adversely affected.
Dependence on Key Personnel. The Company is highly dependent on each of
its executive officers and on a limited number of other key management, sales
and technical personnel. The Company's future success will also depend, in part,
on its ability to attract and retain highly qualified personnel, which are in
high demand in the job marketplace. There can be no assurance that the Company
will be successful in hiring or retaining qualified personnel. The loss of key
personnel, or inability to hire and retain qualified personnel, could have an
adverse effect on the Company's business, financial condition and results of
operations. The Company does not have key-person life insurance on any of its
personnel.
Competition. The Company participates in a highly competitive industry,
which is subject to rapid and innovative technological change. There can be no
assurance that future technological changes or the development of new or
competitive products by others will not render the Company's current or planned
products less competitive or obsolete. Additionally, many of the companies with
which the Company competes have significantly greater financial and other
resources than the Company.
Quarterly Fluctuations. The Company's quarterly financial results may
vary significantly depending upon factors such as the timing of significant
orders and the timing and success of new product introductions by the Company
and its competitors. Factors such as quarterly variations in financial results
could cause the market price of the Common Stock to fluctuate substantially.
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ITEM 2. PROPERTIES
The Company's general corporate offices and research and development
facilities are located in Carrollton, Texas (a suburb of Dallas) where it leases
approximately 21,000 square feet. The Company also leases offices, primarily for
regional sales operations, throughout the United States.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
The Company's Common Stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol MIZR. The following table lists the
high and low price for each quarter beginning with the date of the completion of
the Company's initial public offering of Common Stock on September 28, 1995.
Fiscal Year 1996 High Low
---------------- ---- ---
September 28 through 30 9 1/2 9
Second quarter 9 1/2 8 1/8
Third quarter 8 3/4 5
Fourth quarter 8 5
As of September 3, 1996 the approximate number of beneficial
stockholders was 1,500.
The Company has not declared or paid any dividends on its Common Stock,
and does not anticipate paying any dividends in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------
1996 1995 1994 1993 1992
--------- --------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Net sales $ 14,052 $ 14,018 $ 11,088 $ 7,454 $ 9,143
Cost of sales 6,680 6,330 5,305 3,448 4,443
-------- -------- -------- ------- -------
Gross margin 7,372 7,688 5,783 4,006 4,700
-------- -------- -------- ------- -------
Operating expenses:
Sales and marketing 2,385 2,352 2,191 2,101 2,113
Product development & engineering 1,652 1,577 1,191 973 1,016
General and administrative 968 872 899 729 928
------- -------- -------- ------- -------
Total operating expenses 5,005 4,801 4,281 3,803 4,057
------- -------- -------- ------- -------
Operating income 2,367 2,887 1,502 203 643
Interest and other (income) (400) 102 208 188 402
------- -------- ------- ------- -------
Income before provision (benefit) for
income taxes 2,767 2,785 1,294 15 241
Provision (benefit) for income taxes (507) 131 25 -- 5
------- -------- ------- ------- -------
Income before extraordinary item 3,274 2,654 1,269 15 236
Extraordinary item-gain on debt
restructuring -- -- -- 1,768 --
Net income $ 3,274 $ 2,654 $ 1,269 $ 1,783 $ 236
======= ======== ======= ======= =======
Net income per share:
Primary $0.62 $0.68 $0.43 $0.75 $0.10
======= ======== ======= ======= =======
Fully diluted $0.60 $0.56 $0.33 $0.53 $0.09
======= ======== ======= ======= =======
Weighted average shares outstanding:
Primary 5,316 3,912 2,944 2,380 2,380
======= ======== ======= ======= =======
Fully diluted 5,532 4,915 4,018 3,489 3,489
======= ======== ======= ======= =======
<CAPTION>
JUNE 30,
--------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,550 $ 3,710 $ 1,444 $ 183 $ 898
Marketable securities 10,127 76 76 75 76
Working capital 14,144 4,094 2,466 1,203 1,820
Total assets 16,095 7,122 4,855 3,109 4,085
Total debt and capital leases 15 1,945 2,080 2,457 4,261
Stockholders' equity 14,669 3,607 1,311 (33) (1,816)
- ------------------------------------------------------------------------------------------------
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Net sales increased from $11,088,000 in fiscal 1994 to
$14,018,000 in fiscal 1995, and to $14,052,000 in fiscal 1996. These increases
are the result of growth in the Company's DSP-based product line. Revenues from
DSP-based products grew from $4,334,000 in fiscal 1994 to $8,174,000 in fiscal
1995, and to $8,697,000 in fiscal 1996. The majority of DSP-based revenues were
to prime contractors for the federal government and were used in defense,
aviation and intelligence applications. The Company believes that the trend of
the federal government to emphasize the purchase of commercial-off-the-shelf
(COTS) products versus proprietary designs dedicated to a specific application
has helped stimulate the growth in the Company's DSP revenues and is expected to
continue to have a positive impact in the future. Revenues from non-DSP products
declined from $6,754,000 in fiscal 1994 to $5,844,000 in fiscal 1995, and to
$5,355,000 in fiscal 1996. The rate of decline in revenues from non-DSP products
is expected to accelerate in fiscal 1997.
Gross Margin. Gross margin as a percentage of revenues was 52.2% in
fiscal 1994, 54.8% in fiscal 1995, and 52.5% in fiscal 1996. The improvement in
1995 is attributable to labor efficiencies and reduced component costs for both
DSP-based and non-DSP products. The decline in gross margin percentage in 1996
is mostly attributable to the presence of labor and capacity inefficiencies
caused by lower production volumes in the fourth fiscal quarter of 1996 and, to
a lesser extent, the third fiscal quarter. The Company's gross margin percentage
has varied each year, and each quarter, in both a positive and negative fashion
due to factors such as the inefficiencies mentioned above, and changes in
customer and specific product mix. Such variations will continue to impact gross
margin percentages in a similar fashion during future reporting periods as DSP-
based products comprise a larger percentage of revenues, but presumably will
develop more consistency as the DSP market matures.
Sales and Marketing. Sales and marketing expenses increased from
$2,191,000 in fiscal 1994 to $2,352,000 in fiscal 1995, and to $2,385,000 in
fiscal 1996. These expenses expressed as a percentage of revenues were 19.8%,
16.8% and 17.0% in fiscal 1994, 1995 and 1996, respectively. These expenses are
expected to increase in fiscal 1997 as a result of increased spending related to
strategic and product marketing efforts.
Engineering. Engineering expenses increased from $1,191,000 in fiscal
1994 to $1,577,000 in fiscal 1995, and to $1,652,000 in fiscal 1996. These
expenses expressed as a percentage of revenues were 10.7%, 11.2% and 11.8% in
fiscal 1994, 1995 and 1996, respectively. The Company has steadily increased its
investment in new product development and will continue to do so throughout
fiscal 1997, especially in the areas of software development and expanding the
capabilities of its products to function in non-benign environments such as
extended shock, vibration, humidity or temperature ranges.
General and Administrative. General and administrative expenses were
$899,000 in fiscal 1994, $872,000 in fiscal 1995, and $968,000 in fiscal 1996.
These expenses expressed as a percentage of revenues were 8.1%, 6.2% and 6.9% in
fiscal 1994, 1995 and 1996, respectively.
Interest Income. Interest income increased from $20,000 in fiscal 1994
to $112,000 in fiscal 1995, and to $485,000 in fiscal 1996. Cash available for
investment increased throughout 1994 and 1995 as a result of cash flow from
operations and therefore positively impacted interest income in 1995. Interest
income increased significantly in 1996 primarily as a result of investing the
proceeds of the Company's initial public offering and, to a lesser extent, cash
generated from operations.
Interest Expense. Interest expense was $190,000, $209,000 and $80,000 in
fiscal 1994, 1995 and 1996, respectively, and relates primarily to previously
outstanding convertible and subordinated debentures. The convertible debentures
were converted to Common Stock in connection with the initial public offering in
fiscal 1996 and the subordinated debentures were retired using the proceeds of
the initial public offering.
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Provision (Benefit) for Income Taxes. Provision (benefit) for income
taxes was $25,000, $131,000 and $(507,000) in fiscal 1994, 1995 and 1996,
respectively. As a result of the significant net losses incurred by the Company
through fiscal 1991, the Company has accumulated a net operating loss ("NOL")
carryforward, a portion of which was used to reduce the Company's federal income
tax liability in fiscal years 1992 through 1996. Pursuant to Section 382 of the
Internal Revenue Code, a change in ownership of the Company greater than 50%, as
defined, within a three-year period has occurred, in part due to the Company's
IPO. This has resulted in an annual limitation on the Company's ability to
utilize its NOL carryforward which accrued during the tax periods prior to the
change in ownership of approximately $2,300,000. As of June 30, 1996, the
Company had an NOL carryforward of approximately $7,500,000, which begins to
expire in 2004. In accordance with the criteria contained in Statement of
Financial Accounting Standard No. 109, Accounting for Income Taxes, a valuation
allowance associated with the Company's NOL was reduced in 1996 and a deferred
tax asset of $790,000 was recognized.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operations was $1,745,000, $2,781,000 and
$2,756,000 in fiscal 1994, 1995 and 1996, respectively. Net working capital was
$2,466,000, $4,094,000 and $14,144,000 as of June 30, 1994, 1995 and 1996,
respectively. The increase in working capital in 1995 is primarily related to
positive cash generated from operations. The increase in working capital in
1996 is primarily the result of proceeds received from the Company's initial
public offering in September 1995 and, to a lesser extent, positive cash
generated from operations.
The Company's only significant indebtedness during the periods presented
consisted of the Convertible Debentures (balance of $1,048,000 as of June 30,
1995) and the Subordinated Debentures (balance of $856,000 as of June 30, 1995).
The Convertible Debentures were converted into 891,084 shares of Common Stock in
connection with the Company's IPO, and the Subordinated Debentures were retired
with a portion of the proceeds of the IPO.
Pursuant to a 1994 agreement with United Technologies Corporation
("UTC"), the Company repurchased 207,400 shares of Common Stock owned by UTC at
a price of $1.12 per share in October 1995. Concurrent with completion of the
Company's IPO, the Company completed this repurchase and exercised an option to
repurchase an additional 207,400 shares of Common Stock owned by UTC at a price
of $1.18 per share.
Mizar's investment in capital equipment was $175,000, $329,000 and
$364,000 in fiscal 1994, 1995 and 1996, respectively. Capital equipment
generally consists of production test equipment and design engineering tools and
computers for general use. The investment in capital equipment on a historical
basis has not been significant, however, more significant investments in design,
simulation and test equipment and software are expected to be made in the
future. Additionally, the Company has initiated plans to remodel and expand its
home office facilities in order to accommodate a larger workforce. The Company
believes that its current available cash and investments, together with expected
cash flow from operations, will be sufficient to fund its capital expenditures,
product development and working capital requirements during fiscal 1997.
Mizar will, from time to time, evaluate potential strategic transaction
opportunities including acquisitions and joint-ventures. In order to fund such
a transaction the Company may find it necessary to seek additional working
capital via a lending transaction or consider raising additional funds through
an equity offering.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NOT YET ADOPTED
Recently, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of. The adoption of this
standard is required for financial statements for fiscal years beginning after
December 15, 1995.
12
<PAGE>
The Company will adopt this standard for fiscal year 1997, but does not believe
the impact of the adoption will be material.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation. This standard, which establishes a fair value method of accounting
for stock-based compensation plans, also permits an election to continue
following the requirements of APB Opinion No. 25, Accounting for Stock Issued to
Employees, with disclosure of pro forma net income and net income per share
under SFAS No. 123. SFAS No. 123 is effective for years beginning after December
15, 1995. The Company has elected to continue to follow the requirements of APB
Opinion No. 25, with the pro forma disclosure requirements promulgated by SFAS
No. 123 for fiscal year 1997. The Company does not believe the impact of the
adoption will be material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
David H. Irwin 48 Chairman of the Board, President and
Chief Executive Officer
John L. Marshall 53 Senior Vice President - Sales and
Marketing
Thomas M. Jones 50 Vice President - Engineering
Charles F. Jones 48 Vice President - Operations
Charles D. Brockenbush 36 Vice President - Finance and Chief
Financial Officer
Joseph E. Andrulis 32 Vice President - Strategic Marketing
Douglas E. Johnson 52 Director(1)
John L. Rynearson 49 Director(2)
Robert G. Smith 61 Director(2)
Samuel K. Smith 64 Director(1)
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
David H. Irwin has served in various capacities at Mizar since 1991. Mr.
Irwin has in excess of 20 years of sales, marketing and general management
experience with several technology companies. As the President of Bridge
Management, Inc., a management consulting firm, he served as the interim
President and Chief Executive Officer of the Company from June to October 1991
in order to initiate the board of directors' strategic plan to reposition the
Company. He continued to serve as a director of the Company until 1993,
whereupon he resumed the additional duties of interim President and Chief
Executive Officer initially through Bridge Management, Inc. and subsequently as
a principal of Excelsior Investment Group, Ltd., a management consulting and
private merchant banking firm. Effective May 1994, Mr. Irwin ceased his
consulting practice and became a full time employee of the Company.
John L. Marshall joined Mizar in 1991 as Vice President - Sales and
became Senior Vice President - Sales and Marketing in 1992.
Charles F. Jones joined Mizar in September 1993 as Vice President-
Operations. From May 1992 to June 1993, he served as Vice President, Customer
Service, for Hyundai Electronics America. From 1987 to 1992, he was the National
Service Director for Compuadd Corporation.
Thomas M. Jones joined Mizar in January 1996 as Vice President-
Engineering. From May 1989 to December 1995, he was a Vice-President of Convex
Computer Corporation, and was responsible for a number of groups including
Development, Mass Storage Systems, and Data Analytics.
Charles D. Brockenbush joined Mizar in January 1996 as Vice President-
Finance and Chief Financial Officer. From February 1995 to January 1996, he
served as Vice-President and Chief Financial Officer of TeKnowlogy, Inc. From
1988 to 1995, he was Controller and Assistant Treasurer of Interphase
Corporation.
Joseph E. Andrulis joined Mizar in May 1996 as Vice President-Strategic
Marketing. From December 1993 to May 1996, he held various positions at Pinpoint
Communications, Inc., the most recent of which was Director of Marketing. Mr.
Andrulis was an Associate at McKinsey & Co. from September 1990 to December
1993.
Douglas E. Johnson, a director since 1990, is the Chairman and CEO of
Silicon Biology, Inc., a privately-held high-technology software and services
company. He has been associated with Silicon Biology since October 1995.
14
<PAGE>
From January to September, 1995 he was managing director of Headwaters Capital
Corporation, an investment management firm. From 1990 to 1994, he provided
management consulting and merchant banking services to privately owned
companies, including since 1993 as a principal of Excelsior Investment Group,
Ltd.
John L. Rynearson, a director since 1982, co-founded Mizar in 1982 and
held a variety of technical and managerial positions with Mizar until 1991. He
has served as the Technical Director of VITA (VME International Trade
Association) since 1993. From 1992 to 1993, he served as President of Rystar,
Inc., a VME training company. From 1991 to 1992, he held management positions
with CIM, Inc. and Concurrent Knowledge Systems, Inc., which are in the computer
industry.
Robert G. Smith, a director since 1991, has been an independent
consultant for technology companies since founding RGS Associates, Inc. in 1988.
From 1983 to 1988, he was Chief Financial Officer of Sun Microsystems Inc.
Samuel K. Smith, a director since 1994, has been an independent
consultant for technology companies since 1993. From 1984 until 1993, Mr. Smith
was a special partner of Sevin-Rosen Management Co., a venture capital firm. He
serves as Chairman of the Board of Landmark Graphics, Inc., and as a director of
Sun River Corporation.
Each of the Company's directors holds office until the next annual
meeting of stockholders and until their respective successors shall have been
elected and qualified or until their earlier death, resignation or removal. The
Company's officers are elected annually by, and serve at the discretion of, the
Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the Company's Proxy Statement for the Annual Meeting of Stockholders' to be held
on November 14, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
the Company's Proxy Statement for the Annual Meeting of Stockholders' to be held
on November 14, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the Company's Proxy Statement for the Annual Meeting of Stockholders' to be held
on November 14, 1996.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial Statements and Financial Statement Schedules
These documents are filed with this report and are listed in the Index
to Financial Statements on page F-1.
3. Exhibits
A list of exhibits required to be filed as a part of this 10-K is set
forth in the Exhibit Index.
(b) Reports on Form 8-K filed during the last quarter of 1996.
None.
16
<PAGE>
MIZAR, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants F-2
Balance Sheets as of June 30, 1996 and 1995 F-3
Statements of Income For the Years Ended June 30, 1996, 1995 and 1994 F-4
Statements of Changes in Stockholders' Equity For the Year Ended June 30, 1996, 1995 and 1994 F-5
Statements of Cash Flows For the Years Ended June 30, 1996, 1995 and 1994 F-6
Notes to Financial Statements F-7
Report of Independent Auditors on Schedule F-16
Valuation and Qualifying Accounts - Schedule II F-17
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Mizar, Inc.
We have audited the accompanying balance sheets of Mizar, Inc. (a Delaware
corporation) as of June 30, 1996 and 1995, and the related statements of income,
changes in stockholders' equity and cash flows for each of the three years in
the period ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mizar, Inc. as of June 30,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended June 30, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
July 30, 1996
F-2
<PAGE>
MIZAR, INC.
BALANCE SHEETS
JUNE 30, 1996 AND 1995
(in thousands, except number of shares)
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,550 $ 3,710
Marketable securities, at fair value 10,127 76
Interest receivable on marketable securities 159 -
Accounts receivable, net of allowance for doubtful accounts of $33 in 1996
$27 in 1995, with an allowance for product returns in 1996 of $90 1,319 1,646
Inventories, net 1,456 1,224
Prepaid and other 167 82
Deferred tax asset 790 -
-------- --------
Total current assets 15,568 6,738
-------- --------
Certificate of deposit 100 -
Plant and equipment:
Machinery and equipment 1,376 1,088
Furniture and fixtures 175 100
-------- --------
1,551 1,188
Less accumulated depreciation (1,170) (897)
-------- --------
Plant and equipment, net 381 291
-------- --------
Other assets 46 93
-------- --------
Total assets $ 16,095 $ 7,122
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 584 $ 387
Accrued compensation 191 576
Other current liabilities 636 607
Current maturities of capital lease obligations and convertible debentures 13 1,074
-------- --------
Total current liabilities 1,424 2,644
-------- --------
Convertible and subordinated debentures and capital lease obligations 2 871
-------- --------
Total liabilities 1,426 3,515
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued
and outstanding at June 30, 1996 and 1995 - -
Common stock, $.01 par value; 25,000,000 shares authorized; 5,468,063 and
3,271,436 shares issued at June 30, 1996 and 1995, respectively, and 4,968,009
and 3,203,892 shares outstanding at June 30, 1996 and 1995, respectively 55 33
Additional paid-in capital 13,656 5,570
Net unrealized loss on marketable securities (66) -
Accumulated earnings (deficit) 1,610 (1,664)
-------- --------
15,255 3,939
-------- --------
Less -- treasury stock, at cost (586) (332)
-------- --------
Total stockholders' equity 14,669 3,607
-------- --------
Total liabilities and stockholders' equity $ 16,095 $ 7,122
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MIZAR, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1996, 1995, AND 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net sales $14,052 $14,018 $11,088
Cost of sales 6,680 6,330 5,305
------- ------- -------
Gross margin 7,372 7,688 5,783
Operating expenses:
Sales and marketing 2,385 2,352 2,191
Product development and engineering 1,652 1,577 1,191
General and administrative 968 872 899
------- ------- -------
Total operating expenses 5,005 4,801 4,281
------- ------- -------
Operating income 2,367 2,887 1,502
------- ------- -------
Other income (expense):
Interest expense (80) (209) (190)
Interest income 485 112 20
Other, net (5) (5) (38)
------- ------- -------
Total other income (expense) 400 (102) (208)
------- ------- -------
Income before provision (benefit) for income taxes 2,767 2,785 1,294
------- ------- -------
Provision (benefit) for income taxes (507) 131 25
Net income $ 3,274 $ 2,654 $ 1,269
======= ======= =======
Primary net income per share $0.62 $0.68 $0.43
======= ======= =======
Fully diluted net income per share $0.60 $0.56 $0.33
======= ======= =======
Weighted average common shares outstanding:
Primary 5,316 3,912 2,944
======= ======= =======
Fully diluted 5,532 4,915 4,018
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MIZAR, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(in thousands)
<TABLE>
<CAPTION>
Option,
Net Unrealized Obligation
Common Stock Loss on Retained and
------------------- Paid-In Marketable Earnings/ Treasury
Shares Par Value Capital Securities (Deficit) Stock Total
------ --------- ------- ---------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1993 2,380 $24 $ 5,530 $ - $(5,587) $ - $ (33)
Issuance of common shares
for exercise of stock options 522 5 72 - - - 77
Employee loans for exercise
of stock options - - (61) - - - (61)
Sale of common stock for cash 326 3 45 - - - 48
Common stock issued for
services rendered in lieu
of cash 43 1 10 - - - 11
Net income - - - - 1,269 - 1,269
----- --- ------- ---- ------- ----- -------
BALANCE, June 30, 1994 3,271 33 5,596 - (4,318) - 1,311
Purchase of treasury stock,
at cost - - - - - (214) (214)
Obligation to purchase
treasury stock, at cost - - - - - (232) (232)
Payment for option to
purchase treasury stock - - - - - (31) (31)
Issuance of treasury stock for
exercise of stock warrants - - (20) - - 138 118
Issuance of treasury stock for
exercise of stock options - - (6) - - 7 1
Net income - - - - 2,654 - 2,654
----- --- ------- ---- ------- ----- -------
BALANCE, June 30, 1995 3,271 33 5,570 - (1,664) (332) 3,607
Issuance of common shares
for initial public offering 918 9 7,188 - - - 7,197
Initial public offering expenses - - (372) - - - (372)
Issuance of common shares
for conversion of debentures 891 9 1,039 - - - 1,048
Issuance of common shares
for exercise of stock options 388 4 206 - - - 210
Purchase of treasury stock,
at cost - - - - - (254) (254)
Payments on employee loans
for exercise of stock options - - 25 - - - 25
Net unrealized loss on
marketable securities - - - (66) - - (66)
Net income - - - - 3,274 - 3,274
----- --- ------- ---- ------- ----- -------
BALANCE, June 30, 1996 5,468 $55 $13,656 $(66) $ 1,610 $(586) $14,669
===== === ======= ==== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MIZAR, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996, 1995, AND 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,274 $ 2,654 $ 1,269
Adjustments to reconcile net income to net cash
provided by operating activities -
Noncash expenses for services rendered - - 11
Depreciation 274 226 238
Amortization of deferred loan costs 4 15 15
Prepaid rent (16) (16) (16)
Deferred tax asset (790) - -
-------- ------- -------
2,746 2,879 1,517
Changes in assets and liabilities -
Accounts receivable, net 327 468 (808)
Interest receivable on marketable securities (159) - -
Inventories, net (232) (523) 153
Prepaid expenses (49) (4) 20
Other assets 50 87 67
Accounts payable 197 (81) 199
Accrued liabilities (124) (45) 597
-------- ------- -------
Net cash provided by operating activities 2,756 2,781 1,745
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of machinery and equipment (364) (329) (175)
Proceeds from dispositions of machinery and equipment - 76 5
Purchases of marketable securities (10,253) - -
-------- ------- -------
Net cash used in investing activities (10,617) (253) (170)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock (net of expenses) 6,834 - -
Exercise of stock warrants and options (net of employee loans) 235 119 63
Payment for option to purchase stock - (31) -
Purchase of treasury stock (486) (214) -
Net payments on long-term debt, capital lease obligations, and
subordinated debentures (882) (136) (377)
-------- ------- -------
Net cash provided by (used in) financing activities 5,701 (262) (314)
-------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,160) 2,266 1,261
CASH AND CASH EQUIVALENTS, beginning of year 3,710 1,444 183
-------- ------- -------
CASH AND CASH EQUIVALENTS, end of year $ 1,550 $ 3,710 $ 1,444
======== ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest $ 72 $ 215 $ 236
Cash paid for income taxes 187 48 25
Assets acquired under capital leases - 32 -
Common stock issued for services rendered in lieu of cash - - 11
Common stock issued in conversion of convertible debentures 1,048 - -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MIZAR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996, 1995, AND 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Mizar, Inc. (a Delaware corporation) (the "Company") designs, develops and
markets multiprocessor DSP (Digital Signal Processing) computing sub-systems
used primarily for real-time image and signal processing. The Company's products
have been used primarily for defense applications, but are also incorporated by
OEM customers in a variety of commercial applications. The Company continues to
sell its prior generation of non-DSP computing sub-systems primarily to existing
commercial customers for industrial automation applications.
Certain previously reported amounts have been reclassified to conform with
the current year presentation.
Revenue Recognition
Revenue from product sales is recorded only when the earnings process is
completed, which is generally when the product is shipped.
For sales of products under certain government contracts, revenues are
recognized using the units of delivery method. Under this method, portions of
the total estimated contract revenues and costs are reflected in income each
period based on the units shipped in each period. Any expected loss on contracts
is recognized in the period when estimable and determinable.
Cash and Cash Equivalents
Cash and cash equivalents includes cash placed in money market funds or
investments in highly liquid securities with original maturities of three months
or less.
Marketable Securities
On July 1, 1994, the Company adopted Financial Accounting Standards Board
Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities. Statement No. 115 may not be applied retroactively to prior years'
financial statements. The Company has determined that all of its marketable
securities should be classified as available for sale and reflected in the
accompanying balance sheet at their respective market values. The Company's
results of operations will include earnings from such securities as calculated
on a yield-to-maturity basis. Unrealized gains and losses from the changes in
fair value are excluded from income and are reported as an adjustment to
stockholders' equity, net of the deferred tax effect. The Company's marketable
securities consist of government securities, commercial paper, certificates of
deposit, and corporate bonds.
The Company does not invest in or use derivative financial instruments.
Inventories
Inventories are stated at the lower of cost (including direct materials,
labor, and applied overhead) or market using the first-in, first-out method
(FIFO). The Company periodically reviews inventory items on hand to determine
that items are realizable and are included in current or future products. The
Company provides allowances, if necessary, to reduce inventory to its realizable
value.
F-7
<PAGE>
Plant and Equipment
Plant and equipment are carried at cost and depreciated using the straight-
line method over the estimated economic lives of the assets as follows:
Machinery and equipment 3 - 5 years
Furniture and fixtures 2 - 5 years
Software 1 year
When plant and equipment are sold or otherwise retired, the cost and
accumulated depreciation applicable to such assets are eliminated from the
accounts, and any resulting gain or loss is reflected in current operations.
Income Taxes
The Company uses the liability method of accounting for income taxes.
Deferred taxes are based on the estimated future tax effects of differences
between the financial statement and tax bases of assets and liabilities.
Research and Development
Research and development costs are included in and inseparable from product
development and engineering and are charged to expense as incurred.
Net Income Per Share
Primary and fully diluted net income per share were computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalents outstanding during the year. Common stock equivalents included
in primary net income per share are incentive stock options under the treasury
stock method. Fully diluted net income per share includes the shares as if the
convertible debentures were converted at the beginning of the period.
Initial Public Offering
On September 28, 1995, the Company completed an initial public offering
("IPO") of 918,000 shares of Common Stock. Proceeds from the offering, net of
expenses, aggregated $6,834,000 and were used to retire $856,000 of debt and
fulfill a commitment, as well as an option, to purchase the Company's Common
Stock owned by United Technologies, Inc. ("UTC"), and to add to working capital.
The Company sold John G. Kinnard and Company, Incorporated, as
representative of the underwriters in connection with the IPO, a five-year
warrant to purchase up to 15,000 shares of the Company's Common Stock,
exercisable at $10.20 per share. As of June 30, 1996, this warrant had not been
exercised.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements
Recently, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of. The adoption of this
standard is required for financial statements for fiscal years beginning after
December 15, 1995.
F-8
<PAGE>
The Company will adopt this standard for fiscal year 1997, but does not believe
the impact of the adoption will be material.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation. This standard, which establishes a fair value method of accounting
for stock-based compensation plans, also permits an election to continue
following the requirements of APB Opinion No. 25, Accounting for Stock Issued to
Employees, with disclosure of pro forma net income and net income per share
under SFAS No. 123. SFAS No. 123 is effective for years beginning after December
15, 1995. The Company has elected to continue to follow the requirements of APB
Opinion No. 25, with the pro forma disclosure requirements promulgated by SFAS
No. 123 for fiscal year 1997. The Company does not believe the impact of the
adoption will be material.
2. INVENTORIES:
Net inventories at June 30, 1996 and 1995, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Raw materials $ 749 $ 640
Work-in-process 688 375
Finished goods 278 361
------ ------
1,715 1,376
Less-allowance for excess and obsolete
inventory (259) (152)
------ ------
$1,456 $1,224
====== ======
</TABLE>
3. OTHER ASSETS:
Other assets consisted of the following items as of June 30, 1996 and 1995
(in thousands):
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Long-term prepaid rent - (building lease) $ 45 $ 79
Debt issuance costs - 13
Other 1 1
----- -----
$ 46 $ 93
===== =====
</TABLE>
4. OTHER CURRENT LIABILITIES:
At June 30, 1996 and 1995, other accrued liabilities consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Sales representative commissions $ 56 $ 11
Property tax 31 26
Warranties 150 120
Commitment to purchase treasury stock
(see Note 10) - 232
Accrued franchise tax 231 108
Professional services and other 168 110
----- -----
$ 636 $ 607
===== =====
</TABLE>
F-9
<PAGE>
5. ROYALTIES:
During the fiscal years 1996, 1995 and 1994, the Company paid royalties of
$360,000, $410,000, and $360,000, primarily related to license agreements with
Texas Instruments Incorporated.
The license agreements allow the Company to use certain products in its DSP
sub-system business. These licenses are subject to several restrictions and
requirements, and the termination of one or more of the licenses could adversely
affect the Company's business.
6. SIGNIFICANT CUSTOMERS, RECEIVABLES, AND CONCENTRATION OF CREDIT RISK:
The following table summarizes sales by major customer groups and accounts
receivable by major customer groups for the years ended June 30, 1996, 1995 and
1994 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
SALES BY CUSTOMER GROUP:
Commercial and other $ 7,037 $ 6,326 $ 5,745
Prime contractors to U.S.
Government 7,015 7,692 5,343
------- ------- -------
$14,052 $14,018 $11,088
======= ======= =======
</TABLE>
<TABLE>
<CAPTION> 1996 1995
------- -------
<S> <C> <C>
ACCOUNTS RECEIVABLE BY CUSTOMER GROUP:
Commercial and other $ 551 $ 789
Prime contractors to U.S.
Government 891 884
------- -------
$ 1,442 $ 1,673
======= =======
</TABLE>
The Company's primary customers are original equipment manufacturers and
those companies who provide defense and aerospace electronics applications in
the United States. During 1996, two customers accounted for 12% and 13% of net
sales, respectively. During 1995, one customer accounted for approximately 26%
of net sales. During 1994, no single customer accounted for more than 10% of the
Company's net sales.
During the fiscal years 1996, 1995, and 1994, export sales accounted for
less than 10% of the Company's net sales.
7. DEBENTURES AND CAPITAL LEASE OBLIGATIONS:
At June 30, 1996 and 1995, debentures and capital lease obligations
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Convertible subordinated debentures,
10%, interest paid quarterly, principle
due May 1, 1996, converted in
September 1995 to Common Stock $ - $ 1,048
Subordinated debentures (formerly
Exchangeable), 11% interest paid
quarterly, retired October 1995 - 856
Capital leases 15 41
------- -------
Total 15 1,945
Less-current maturities (13) (1,074)
------- -------
Long-term portion of debentures
and capital lease obligations $ 2 $ 871
======= =======
</TABLE>
F-10
<PAGE>
May 1996 Convertible Debentures
On May 1, 1989, the Company issued $1,305,000 of convertible, subordinated
debentures. These debentures were converted into 891,084 shares of Common Stock
upon the closing of the Company's initial public offering on September 28, 1995.
January 1997 Subordinated (formerly Exchangeable) Debentures
On January 1, 1990, the Company issued $906,000 of exchangeable,
subordinated debentures. Upon completion of the initial public offering of the
Company, a portion of the proceeds was used to retire the remaining $856,000 of
this debt.
Payment of Restructured Promissory Acquisition Notes
In 1993, the Company entered into definitive settlement agreements to
restructure $2,000,000 of acquisition notes payable. The Company recorded a gain
on the restructuring of approximately $1,768,000 in fiscal year 1993. These
notes were paid in full during 1994.
Maturities of the capital lease obligations (excluding the interest
component relating to the capital lease payments of $756) are as follows (in
thousands):
1997 $ 13
1998 2
1999 -
2000 -
Thereafter -
----
$ 15
====
Based on the borrowing rates which management believes are currently
available to the Company for bank loans with similar terms and average
maturities, management estimates that the carrying amount of long-term debt
approximates fair value.
8. EMPLOYEE BENEFIT PLANS:
Bonus Plan
All full-time employees of the Company participate in a bonus program in
which yearly bonus amounts are calculated on a predetermined performance
formula. There were no bonuses earned in 1996, however bonuses earned under this
program were $450,000 and $269,000 in 1994 and 1995, respectively. Bonuses, if
earned, are paid subsequent to year-end and are included in accrued compensation
in the accompanying financial statements. In 1995, $133,000 of discretionary
bonuses were earned by certain employees in addition to the Bonus Program
described above.
F-11
<PAGE>
Stock Option Plan
The Company has a stock option plan, which includes nonqualified and
incentive stock options, for directors and employees which authorizes options
for 2,252,500 shares of Common Stock to be granted at fair value as determined
by the Board of Directors. Options are exercisable on a schedule determined by
the Board of Directors and expire 10 years after the date of grant or earlier,
in accordance with the terms of the plan. The following summarizes the activity
under the plan (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -------------
<S> <C> <C> <C>
Options outstanding, beginning of year 1,225 542 729
Options granted 199 746 458
Options exercised (388) (7) (522)
Options forfeited (84) (56) (123)
------ ------ -----
Options outstanding, end of year 952 1,225 542
====== ====== =====
Options exercisable, end of year 464 491 138
====== ====== =====
Exercise prices $.15 to $9.125 $.15 to $2.55 $.15 to $.78
</TABLE>
Defined Contribution Plan
The Company maintains a defined contribution profit sharing and retirement
plan, which covers substantially all employees. Participants may elect to
contribute up to the lesser of the statutory maximum or 20% of total
compensation. The Company may, at the discretion of the Board of Directors, make
contributions at the end of each plan year. No such contributions were made in
1994, 1995 and 1996.
The Company does not offer any postemployment or postretirement benefits to
its employees. Two officers of the Company have employment contracts that
provide for up to one year of compensation for termination under certain
circumstances.
9. INCOME TAXES:
At June 30, 1996, the Company had net operating loss (NOL) carryforwards of
approximately $7,500,000 which begin to expire in 2004. Research and development
tax credit carryforwards of approximately $41,000 at June 30, 1996, were also
available to reduce future federal income taxes. Pursuant to Section 382 of the
Internal Revenue Code, a change in ownership occurred with the initial public
offering of the Company. As a result, the Company will be subject to a
$2,300,000 annual net operating loss utilization limitation.
The Company had net tax assets of $3,093,000 (composed primarily of the tax
effect of NOL's) at June 30, 1996. A valuation allowance has been recorded to
substantially offset the net tax asset to $790,000. The Company believes it is
more likely than not that it will be able to realize the benefit of this net
asset.
The components of the income tax provisions in the accompanying statements
of income consisted of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
State--
Current $ 63 $ 72 $ 12
Deferred 108 - -
Federal--
Current 41 59 13
Deferred 71 - -
Reduction in valuation allowance (790) - -
----- ----- -----
Total $(507) $ 131 $ 25
===== ===== =====
</TABLE>
F-12
<PAGE>
The difference between the federal statutory tax rate and the effective tax
rate is reconciled as follows (in thousands):
<TABLE>
<CAPTION>
1996 % 1995 % 1994 %
------- ----- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Income tax provision at statutory rate $ 968 35% $ 975 35% $ 453 35%
Utilization of NOL (920) (33) (916) (33) (440) (34)
Deduction for state taxes 63 2 47 2 8 1
Reduction in valuation allowance (790) (28) - - - -
Other 172 6 25 1 4 1
----- ---- ----- --- ----- ---
Income tax provision at effective tax
rate $(507) (18)% $ 131 5% $ 25 3%
===== ==== ===== === ===== ===
</TABLE>
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial reporting and tax bases of assets and
liabilities given the provisions of the enacted tax laws. The net deferred tax
asset is comprised of the following (in thousands):
<TABLE>
<CAPTION>
1996 Change 1995
-------- -------- --------
<S> <C> <C> <C>
DEFERRED TAX ASSETS:
Current-
Nondeductible allowances $ 211 $ 106 $ 105
UCC adjustment 4 4 -
Other 204 175 29
Noncurrent-
Depreciation 30 (43) 73
Net operating losses 2,644 (1,115) 3,759
------- ------- -------
Total deferred tax assets 3,093 (873) 3,966
DEFERRED TAX LIABILITIES:
Current-
UCC adjustment - 5 (5)
Noncurrent-
Miscellaneous - 13 (13)
------- ------- -------
Total deferred tax liabilities - 18 (18)
------- ------- -------
Net deferred tax asset, before
valuation reserve 3,093 (855) 3,948
Valuation reserve (2,303) 1,645 (3,948)
------- ------- -------
Net deferred tax assets $ 790 $ 790 $ -
======= ======= =======
</TABLE>
10. COMMITMENTS:
Leases
The Company leases its facilities and certain machinery and equipment under
operating leases with remaining terms of up to 36 months. Rent expense
applicable to operating leases was $175,000, $156,000 and $156,000 in 1996,
1995, and 1994, respectively. At June 30, 1996, the future minimum rental
payments required by operating leases were as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $130
1998 90
1999 82
2000 -
Thereafter -
----
$302
====
</TABLE>
F-13
<PAGE>
Stock Purchase
On September 27, 1994, the Company entered into an irrevocable agreement to
purchase shares of Common Stock from United Technologies Corporation (UTC). The
purchase of this stock pursuant to the commitment was completed in October,
1995. On this same date, the Company also exercised an option to purchase an
additional 207,400 shares of the Company's Common Stock for $244,000 from UTC.
The shares purchased from UTC are included in treasury stock.
11. MARKETABLE SECURITIES:
A summary of the amortized cost, unrealized gains and losses, and fair
values of available for sale marketable securities at June 30, 1996 follows (in
thousands):
<TABLE>
<CAPTION>
June 30, 1996
---------------------------------------
Amortized Gross Unrealized
Cost Holding Losses Fair Value
--------- ---------------- ----------
<S> <C> <C> <C>
Commercial paper $ 498 $ - $ 498
U.S. Government obligations 2,017 7 2,010
Corporate bonds 7,713 94 7,619
------- ---- -------
Total $10,228 $101 $10,127
======= ==== =======
</TABLE>
Net of the tax effect, the unrealized loss on securities available for sale
is $66,000, which is included in stockholders' equity. There were no sales of
securities in the fiscal years ended June 30, 1996 and 1995.
The Company established a $100,000 certificate of deposit as collateral for
a stand-by letter of credit which was required by a customer. This certificate
of deposit matures in December 1997, and therefore is classified as noncurrent
in the accompanying balance sheet.
A comparison of the amortized cost and fair value of the Company's
available for sale marketable securities at June 30, 1996, by maturity date
follows (in thousands):
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
--------- ----------
<S> <C> <C>
One year or less $ 4,153 $ 4,045
Two through three years 6,075 6,082
------- -------
Total $10,228 $10,127
======= =======
</TABLE>
F-14
<PAGE>
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
A summary of the unaudited quarterly results of operations follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
------------------
September 30, December 31, March 31, June 30,
1995 1995 1996 1996
------------- ------------ --------- --------
<S> <C> <C> <C> <C>
Net sales $4,458 $3,952 $3,255 $2,387
Gross margin 2,582 2,026 1,672 1,092
Income before provision (benefit) for
income taxes 1,266 833 632 36
Net income 1,133 1,529 579 33
Fully diluted net income per share $ .22 $ .27 $ .10 $ .01
<CAPTION>
Three Months Ended
------------------
September 30, December 31, March 31, June 30,
1994 1994 1995 1995
------------- ------------ --------- --------
Net sales $3,045 $3,403 $3,763 $3,806
Gross margin 1,778 1,870 1,965 2,075
Income before provision (benefit) for
income taxes 590 648 762 785
Net income 560 608 731 755
Fully diluted net income per share $ .13 $ .13 $ .15 $ .16
</TABLE>
During the quarter ended December 31, 1995, the Company recognized a
deferred tax asset of $790,000 associated with a net operating loss
carryforward. The net income and net income per share for the quarter ended
December 31, 1995 were positively impacted by the recognition of this asset,
which added approximately $.14 to net income per share.
F-15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Mizar, Inc.
We have audited in accordance with generally accepted auditing standards
the financial statements of Mizar, Inc. included in this Form 10-K and have
issued our report thereon dated July 30, 1996. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. Schedule II, Valuation and Qualifying Accounts and Reserves, is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Dallas, Texas
July 30, 1996
F-16
<PAGE>
SCHEDULE II
MIZAR, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
JUNE 30, 1994, 1995 AND 1996
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Balance at
Description of Period Expenses Accounts Deductions End of Period
----------- ---------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
1994
----
Allowance for doubtful accounts $ 24 $ 14 $- $ (12) $ 26
Allowance for excess and
obsolete inventory 106 395 - (355) 146
1995
----
Allowance for doubtful accounts 26 2 - (1) 27
Allowance for excess and
obsolete inventory 146 231 - (225) 152
1996
----
Allowance for doubtful accounts 27 - 6 - 33
Allowance for excess and
obsolete inventory 152 265 - (158) 259
Allowance for product returns - 90 - - 90
</TABLE>
F-17
<PAGE>
SIGNATURES
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.
Mizar, Inc.
Dated: September 20, 1996 By: /s/ Charles D. Brockenbush
---------------------------------------
Charles D. Brockenbush, Vice President,
Finance and Chief Financial Officer
(Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
By: /s/ David H. Irwin President, Chief Executive Officer Dated: September 20, 1996
--------------------------- and Director (Principal Executive
David H. Irwin Officer)
By: /s/ Charles D. Brockenbush Vice President, Finance and Chief Dated: September 20, 1996
--------------------------- Financial Officer (Principal Financial
Charles D. Brockenbush and Accounting Officer)
By: /s/ Douglas E. Johnson Director Dated: September 20, 1996
---------------------------
Douglas E. Johnson
By: /s/ John L. Rynearson Director Dated: September 20, 1996
---------------------------
John L. Rynearson
By: /s/ Robert G. Smith Director Dated: September 20, 1996
---------------------------
Robert G. Smith
By: /s/ Samuel K. Smith Director Dated: September 20, 1996
---------------------------
Samuel K. Smith
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
3.1 Certificate of Incorporation of the Company. (1)
3.2 Bylaws, as amended, of the Company. (1)
10.1 1989 Registration Rights Agreement, between the Company and certain
holders of securities of the Company. (1)
10.2 Form of Indemnification and Hold Harmless Agreement. (1)
10.3 Form of Subordinated Debenture due January 1, 1997. (1)
10.4 Form of Convertible Subordinated Debentures due May 1, 1996 and related
Purchase Agreement. (1)
10.5 Employment Agreement between the Company and David H. Irwin. (1)
10.6 Employment Agreement between the Company and John L. Marshall. (1)
10.7 Company Stock Option Plan. (1)
10.8 Company Directors' Stock Option Plan. (1)
10.9 Commercial Quad-C40 Program ("Commercial") by and between Texas
Instruments Incorporated ("TI") and the Company dated October 9, 1992.
(1)
10.10 Amendment 1 to Commercial dated March 19, 1993. (1)
10.11 Amendment 2 to Commercial dated July 1, 1993. (1)
10.12 Amendment 3 to Commercial dated January 12, 1995. (1)
10.13 MIL-SPEC Quad-C40 Program ("MIL-SPEC") by and between TI and the Company
dated January 20, 1993. (1)
10.14 Amendment 1 to MIL-SPEC dated March 19, 1993. (1)
10.15 Amendment 2 to MIL-SPEC dated July 1, 1993. (1)
10.16 ASP048 License Agreement ("ASP048 License Agreement") by and between TI
and the Company dated December 29, 1992. (1)
10.17 Amendment 1 to ASP048 License Agreement dated July 15, 1993. (1)
10.18 MIL-SPEC Octal-C40 Program ("MIL-SPEC Octal") by and between TI and the
Company dated March 28, 1994. (1)
10.19 Dual MVP Digital Computer Board License Agreement by and between TI and
the Company dated January 12, 1995. (1)
11 Computation of per share net income. (2)
23 Consent of Arthur Andersen LLP. (2)
27 Financial Data Schedule. (2)
(1) Incorporated by reference to Exhibit of same number to the Company's
Registration Statement on Form S-1, as amended and on file with the
Securities and Exchange Commission (file no. 33-95852).
(2) Filed herewith.
<PAGE>
Exhibit 11
MIZAR, INC.
COMPUTATION OF PER SHARE INCOME
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Primary Income Per Share:
Net income $3,274 $2,654 $1,269
====== ====== ======
Weighted average shares outstanding 4,543 3,203 2,835
Effect of common stock equivalents:
Options granted 806 1,146 605
Weighted average exercised options outstanding for portion of period,
net of equivalent shares purchased at average fair market value 98 - -
Effect of using option proceeds to repurchase common stock at
average fair market value (131) (437) (496)
------ ------ ------
773 709 109
------ ------ ------
Total common stock equivalents 5,316 3,912 2,944
------ ------ ------
Primary income per share $ 0.62 $ 0.68 $ 0.43
====== ====== ======
Fully Diluted Income Per Share:
Total weighted average shares from above 5,316 3,912 2,944
Effect of using year-end vs. average market price - 112 106
Effect of conversion of subordinated debentures 216 891 968
------ ------ ------
Total common stock equivalents 5,532 4,915 4,018
------ ------ ------
Net income 3,274 2,654 1,269
Adjustment to net income for interest on subordinated debentures 46 102 75
------ ------ ------
Net income, as adjusted $3,320 $2,756 $1,344
------ ------ ------
Fully diluted income per share $ 0.60 $ 0.56 $ 0.33
====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed Form S-8
Registration Statement File No. 333-430.
ARTHUR ANDERSEN LLP
Dallas, Texas
September 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MIZAR, INC. AS OF JUNE 30, 1996, AND FOR THE TWELVE
MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,550
<SECURITIES> 10,127
<RECEIVABLES> 1,442
<ALLOWANCES> 123
<INVENTORY> 1,456
<CURRENT-ASSETS> 15,568
<PP&E> 1,551
<DEPRECIATION> 1,170
<TOTAL-ASSETS> 16,095
<CURRENT-LIABILITIES> 1,424
<BONDS> 2
0
0
<COMMON> 55
<OTHER-SE> 14,614
<TOTAL-LIABILITY-AND-EQUITY> 16,095
<SALES> 14,052
<TOTAL-REVENUES> 14,052
<CGS> 6,680
<TOTAL-COSTS> 6,680
<OTHER-EXPENSES> 5,005
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 2,767
<INCOME-TAX> (507)
<INCOME-CONTINUING> 3,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,274
<EPS-PRIMARY> .62
<EPS-DILUTED> .60
</TABLE>
