UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QA
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1996.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________________ to
________________.
Commission File Number: 0 - 21810
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Amerigon Incorporated
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California 95-431855-4
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404 East Huntington Drive, Monrovia, California 91016
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(818) 932-1200
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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
requirement for the past 90 days. Yes X No
----- -----
At August 12, 1996 the registrant had 7,068,500 shares of Class A Common Stock;
no par value; 0 shares of Class B Common Stock, no par value; and 0 shares
Preferred Stock, no par value, issued and outstanding.
(1)
AMERIGON INCORPORATED
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheet 3
Condensed Statement of Operations 4
Condensed Statement of Cash Flows 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II OTHER INFORMATION 13
Signature 13
(2)
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31, June 30,
1995 1996
ASSETS ---------------------------
(unaudited)
Current Assets:
Cash and cash equivalents $4,486 $204
Accounts receivable less allowance of $100 1,052 2,993
Unbilled revenue 1,468 2,702
Inventories, primarily raw materials 243 141
Deferred contract costs 700
Prepaid expenses and other assets 961 746
---------------------------
Total current assets 8,210 7,486
Property and Equipment, net 785 792
---------------------------
Total Assets $8,995 $8,278
---------------------------
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,123 $872
Deferred revenue 94 161
Accrued liabilities 512 601
Accrued excess contract costs 1,355
Bank loan payable 3,159
---------------------------
Total current liabilities 1,729 6,148
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Long Term Portion of Lease Liability 68 60
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Shareholders' Equity:
Preferred stock, no par value; 5,000,000 shares
authorized, none issued and outstanding
Common stock:
Class A -no par value; 17,000,000 shares authorized,
4,068,500 and 4,050,000 issued and outstanding
at June 30, 1996 and December 31, 1995, respectively
(An additional 3,000,000 shares held in escrow) 17,270 17,321
Class B -no par value; 3,000,000 shares authorized,
none issued and outstanding
Contributed capital 3,115 3,115
Deficit accumulated during development stage (13,187) (18,366)
---------------------------
Total shareholders' equity 7,198 2,070
---------------------------
Total Liabilities and Shareholders' Equity $8,995 $8,278
---------------------------
---------------------------
See accompanying notes to the condensed financial statements.
(3)
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
From
April 23, 1991
Three Months Six Months (inception)
Ended June 30, Ended June 30, to June 30,
1995 1996 1995 1996 1996
------------------- ------------------ ---------------
(unaudited) (unaudited) (unaudited)
Revenues:
Development contracts and
related grants $1,509 $1,560 $2,180 $4,614 $12,556
Grants 180 - 406 - 6,696
------------------- ------------------ ---------------
Total revenues 1,689 1,560 2,586 4,614 19,252
------------------- ------------------ ---------------
Costs And Expenses:
Direct development contract and
related grant costs 1,443 4,804 2,066 7,575 13,661
Direct grant costs 152 - 324 - 5,221
Research and development 678 615 1,333 999 7,658
Selling, general and administrative,
including reimbursable expenses 644 705 1,433 1,260 11,637
------------------- ------------------ ---------------
Total Costs and Expenses 2,917 6,124 5,156 9,834 38,177
------------------- ------------------ ---------------
Operating Loss (1,228) (4,564) (2,570) (5,220) (18,925)
Interest Income 38 5 105 41 559
------------------- ------------------ ---------------
Net Loss ($1,190) ($4,559) ($2,465) ($5,179) ($18,366)
------------------- ------------------ ---------------
------------------- ------------------ ---------------
Net Loss Per Share ($0.36) ($1.12) ($0.75) ($1.28)
------------------- ------------------
Weighted Average Number
Of Shares Outstanding 3,300 4,063 3,300 4,056
------------------- ------------------
See accompanying notes to the condensed financial statements.
(4)
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS )
From
April 23, 1991
Six Months (inception) To
Ended June 30, June 30,
1995 1996 1996
--------------------- ----------------
(unaudited) (unaudited)
Operating Activities:
Net loss ($2,465) ($5,179) ($18,366)
Adjustments to reconcile net loss to
cash used in operating acitivites:
Depreciation and amortization 168 166 720
Provision for doubtful accounts 110
Stock option compensation 712
Contributed capital -founders'
services without cash compensation 300
Change in operating assets and liablilities:
Accounts receivable (151) (1,941) (3,103)
Unbilled revenue 67 (1,234) (2,702)
Inventory (494) 102 (141)
Deferred contract costs (700) (700)
Prepaid expenses and other assets (227) 215 (745)
Accounts payable 288 (251) 872
Deferred revenue 242 67 161
Accrued liabilities 65 89 601
Accrued excess contract costs 1,355 1,355
--------------------- ----------------
Net cash used in operating acitivities (2,507) (7,311) (20,926)
--------------------- ----------------
Investing Activities:
Purchase of property and equipment (262) (173) (1,444)
Short term investments 1,964 9
--------------------- ----------------
Net cash provided by (used in) investing activities 1,702 (173) (1,435)
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Financing Activities:
Proceeds from sale of common stock, net 51 17,321
Proceeds from sale of warrants 1
Borrowing under line of credit 3,400 4,500
Repayment of line of credit (241) (1,341)
Repayment of capital lease (10) (8) (18)
Notes payable to shareholders contributed
to capital 2,102
--------------------- ----------------
Net cash provided by (used in) financing activities (10) 3,202 22,565
--------------------- ----------------
Net increase (decrease) in cash (815) (4,282) 204
Cash and cash equivalents, beginning of period 2,405 4,486 -
--------------------- ----------------
Cash and cash equivalents, end of period $1,590 $204 $204
--------------------- ----------------
--------------------- ----------------
See accompanying notes to the condensed financial statements.
(5)
AMERIGON INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
Amerigon Incorporated (the "Company") is a development stage enterprise,
which was incorporated in California on April 23, 1991 primarily to develop,
manufacture and market proprietary, high technology automotive components and
systems for gasoline-powered and electric vehicles.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF CERTAIN ACCOUNTING POLICIES:
The accompanying condensed balance sheet as of June 30, 1996 and the
condensed statements of operations and cash flows for the three months and for
the six months ended June 30, 1996 and the period from April 23, 1991
(inception) to June 30, 1996 have been prepared by the Company without audit.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for fair presentation have been included. The results of
operations for the three month and the six month periods ended June 30, 1996 are
not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Form 10-K for the year ended December 31, 1995.
The condensed financial statements have been restated to reflect certain
adjustments to contract cost accounting and revenue recognition. In the three
months ended June 30, 1996, these adjustments resulted in a decrease in
revenues from development contracts and related grants of $700,000 and a
decrease in expenses related direct development contract costs and related
grants of $20,000 which caused an increase in the operating loss and net loss
of $680,000. Net loss per share increased by $.17. In the six months ended
June 30, 1996, these adjustments resulted in a decrease in revenues from
development contracts and related grants of $1,500,000 and a decrease in
expenses related to direct development contract costs and related grants of
$570,000 which caused an increase in the operating loss and net loss of
$930,000. Net loss per share increased by $.23.
DEVELOPMENT CONTRACT REVENUES. The Company has entered into a number of
fixed price contracts under which revenue is recognized using the percentage of
completion method, or in the case of short duration contracts, when the
prototype or services are delivered. Development contract revenues earned are
recorded on the balance sheet as Unbilled Revenue until billed.
GRANT REVENUES. Revenue from government agency grants and other sources
pursuant to cost-sharing arrangements is recognized when reimbursable costs have
been incurred. Grant revenues earned are recorded on the balance sheet as
Unbilled Revenue until billed.
NOTE 3 - NET LOSS PER SHARE:
The Company's net loss per share calculations are based upon the weighted
average number of shares of common stock outstanding. Excluded from this
calculation are the 3,000,000 Escrowed
(6)
Contingent Shares (Note 4). Common stock equivalents (stock options and stock
warrants) are anti-dilutive in both periods and are excluded from the net loss
per share calculation.
NOTE 4 - ESCROW AGREEMENT
Pursuant to the Underwriting Agreement, prior to the effective date of the
June 1993 initial public offering, 3,000,000 shares of the Company's Class A
Common Stock ("Escrowed Contingent Shares") were deposited into escrow by the
then existing shareholders in proportion to their then current holdings. These
shares are not transferable (but may be voted) and will be released from escrow
in the event the Company attains certain earnings levels (which have been
adjusted for the December 29, 1995 private placement of 750,000 shares) during
the period through December 31, 1998. The market price targets of the Class A
Common Stock to reach specified levels during the period through June 10, 1996
were not met.
The release of the Escrowed Contingent Shares will be deemed compensatory
and, accordingly, will result in charges to earnings equal to the fair market
value of the Escrowed Contingent Shares recorded ratably over the period
beginning on the date when management determines that any of the specified
events are probable of being attained and ending on the date on which the
Escrowed Contingent Shares are released. At the time a goal is attained,
previously unrecognized compensation expense will be adjusted by a one-time
charge based on the then fair market value of the shares released from Escrow.
Such charges could substantially reduce the Company's net income or increase the
Company's loss for financial reporting purposes in the periods such charges are
recorded. The specified events are not considered probable of attainment at
this time.
On April 30, 1999, all shares that have not been released from Escrow will
automatically be exchanged for shares of Class B Common Stock, which will then
be released from Escrow. Any dividends or other distributions made with respect
to Escrowed Contingent Shares that have not been released from Escrow as Class A
Common Stock will be forfeited and contributed to the capital of the Company on
April 30, 1999.
NOTE 5 - GOING CONCERN
The Company expects to incur losses for the foreseeable future due to the
continuing cost of its product development and marketing activities. Cash
inflows during the current year are dependent upon achieving certain billing
milestones under existing development contracts and grants, and on obtaining new
production and/or development contracts. Cash outflows are dependent upon the
level and timing of production and/or development work and the amount of
research and development and overhead expenses.
Currently, the Company's available cash and expected cash inflows are
limited and the Company continues to review all sources and uses of cash in
order to have sufficient cash available for operations. Actions being
considered include: the reduction personnel and other operating expenses and the
reduction or deferral of certain research and development activities. The
effect of some of these actions could delay the completion of development
activities relating to some or all of the Company's products In addition, the
Company is actively pursuing investments by strategic partners and/or the sale
of one or more of its technologies; a loan of up to $300,000 from Lon E. Bell,
Chairman and Chief Executive Officer of the Company; and additional debt and/or
equity financing.. At the present time, the Company expects to have sufficient
cash through October 31, 1996. Operations beyond that date will require
successful completion of a combination of the actions
(7)
mentioned above now under consideration by the Company. There can be no
assurance that these sources will provide adequate additional required financing
As a development stage company, the Company will continue to need cash until
such time as sufficient profitable production contracts are obtained.
(8)
PART 1
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER 1996 COMPARED WITH SECOND QUARTER 1995
REVENUES. Revenues for the three months ended June 30, 1996 ("Second
Quarter 1996") were $1,560,000 as compared with revenues of $1,689,000 in the
three months ended June 30, 1995 ("Second Quarter 1995"). Approximately
$1,160,000 of Second Quarter 1996 revenue relates to a major development
contract (and related grants) associated with the Company's electric vehicle
program, which is a decrease of approximately $167,000 compared to the Second
Quarter 1995. The percentage of completion method of accounting is used for
this contract and, accordingly, revenues and gross profit are recognized as work
is performed based on the relationship between actual costs incurred and total
estimated costs at completion. Revenues and gross profit are recognized
prospectively for revisions in estimated total contract costs and contract
values and estimated losses are recorded when identified. Grant revenue is
recorded when reimbursable costs are incurred.
During the Second Quarter 1996, the Company determined that prolonged work
on the development of certain aspects of the vehicle under the company's
$9,600,000 electric vehicle contract delayed the project completion date to at
least late 1996, and has resulted in significantly higher labor costs together
with higher than expected tooling and material costs. Accordingly, the Company
recorded a loss reserve for the ultimate loss expected on the contract in the
amount of $1,355,000. No assurance can be given that there will not be
additional future provisions for losses.
The level of activity in the project involved considerably more labor and
material expenses in the Second Quarter 1996 compared to the early stages of the
project in the Second Quarter 1995 when engineering design was the principal
activity. In the Second Quarter 1996, a prototype of the vehicle was being
tested; design modification changes were being made; and tooling and parts were
being ordered. Kits for 28 vehicle frames with motor controllers were shipped
in the Second Quarter 1996.
During the Second Quarter 1996, development continued on the climate
control seat system and the radar system which was funded in part by development
contracts. The magnitude of the revenues recognized for the development of the
seat systems and radar, and for the sale of interactive voice navigation systems
("IVS") in the Second Quarter 1996 was $400,000 compared to $225,000 in the
Second Quarter 1995.
Grant revenues in the Second Quarter 1996 of approximately $550,000 were
directly related to the electric vehicle development contracts activities and
are combined with the development contract revenues. There were insignificant
grant activities in the Second Quarter 1996 related to the Company's other
products. In the Second Quarter 1995, grant revenues of $180,000 were related
to one other electric vehicle project and a small project in the seat system
product.
(9)
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. Direct development
contract and related grant costs increased from $1,443,000 in the Second Quarter
1995 to $4,804,000 in the Second Quarter 1996 due to the increased activity in
the Company's electric vehicle program discussed above and due to the provision
of $1,355,000 for the loss expected on the Company's major electric vehicle
contract. No assurance can be given that there will not be additional future
provisions for losses on the contract.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased from $678,000 in Second Quarter 1995 to $615,000 in the Second Quarter
1996 due to the fact that more of the Company's research and development
activities are funded by grants and by development contracts. Research and
Development activities were primarily in the company's radar and seat systems.
Furthermore, the company was continuing development of the IVS system in the
Second Quarter 1995 which was completed in late 1995 and therefore considerably
less was expended in the Second Quarter 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased from $644,000 in Second Quarter 1995
to $705,000 in Second Quarter 1996. Direct and indirect overhead expenses
included in SG&A which are associated with development contracts are allocated
to such contracts. SG&A expenses for professional services increased by
$60,000, and marketing expenses related to the company's IVS system increased by
$35,000, offset by decreases in several other expenses.
SIX MONTHS 1996 COMPARED WITH SIX MONTHS 1995
REVENUES. Revenues for the six months ended June 30, 1996 ("1996") were
$4,614,000 as compared with revenues of $2,586,000 in the six months ended June
30, 1995 ("1995"). Approximately $3,924,000 of Second Quarter 1996 revenue
relates to a major development contract (and related grants) associated with the
Company's electric vehicle program, which is an increase of approximately
$2,177,000 over the Second Quarter 1995. The percentage of completion method of
accounting is used for this contract and, accordingly, revenues and gross profit
are recognized as work is performed based on the relationship between actual
costs incurred and total estimated costs at completion. Revenues and gross
profit are recognized prospectively for revisions in estimated total contract
costs and contract values and estimated losses are recorded when identified.
Grant revenue is recorded when reimbursable costs are incurred.
As discussed above, due to delays in the contract completion and higher
costs, the Company recorded a loss reserve for the ultimate loss expected on the
contract in the amount of $1,355,000.
The level of activity in the project involved considerably more labor and
material expenses in 1996 compared to the early stages of the project in 1995
when engineering design was the principal activity. In 1996, a prototype of the
vehicle was being tested; design modification changes were being made; and
tooling and parts were being ordered. Kits for 28 vehicle frames with motor
controllers were shipped in the Second Quarter 1996.
During 1996, development continued on the climate control seat system and
the radar system pursuant to development contracts some of which was funded
pursuant to development contracts.
(10)
The magnitude of the revenues recognized for the development of the seat systems
and radar, and for the sale of IVS in 1996 was $690,000 compared to $530,000 in
1995.
Grant revenues in 1996 of approximately $815,000 were directly related to
the electric vehicle development contracts activities and are combined with the
development contract revenues. There were insignificant grant activities in
1996 related to the Company's other products. In 1995, grant revenues of
$406,000 were related to two prior electric vehicle projects and a project in
the seat systems area.
DIRECT DEVELOPMENT CONTRACT AND RELATED GRANT COSTS. Direct development
contract and related grant costs increased from $2,066,000 in 1995 to $7,575,000
in 1996 due to the increased activity in the Company's electric vehicle program
and the provision of $1,355,000 for the loss expected on the Company's major
electric vehicle contract discussed above.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased from $1,333,000 in 1995 to $999,000 in 1996 due to the fact that more
of the Company's research and development activities are funded by grants and by
development contracts. Research and Development activities were primarily in
the company's radar and seat systems. In addition, the company was continuing
development of the IVS in 1995 which was completed in late 1995 and therefore
considerably less was expended in 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses decreased from $1,433,000 in 1995 to $1,260,000
in 1996. Direct and indirect overhead expenses included in SG&A which are
associated with development contracts are allocated to such contracts. As a
result of the increased activity as discussed under "Revenues," more of such
expenses were allocated to development contracts in 1996 than in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $1,338,000. Since its
inception, the Company's principal sources of operating capital have been the
proceeds of its initial public offering in June 1993 and the private placement
of common stock in December 1995, together with revenues from grants,
development contracts and the sale of prototypes to customers. To a lesser
extent the Company received capital contributions from the Company's principal
shareholders before becoming a public company.
In 1996 cash and cash equivalents decreased by $4,282,000. Operating
activities used $7,311,000 of which $5,179,000 was for the operating loss,
$3,175,000 was for the increase in unbilled revenues and accounts receivable,
primarily related to the development contracts and grants related to the
Company's electric vehicle program, and $700,000 was for deferred contract
costs related to work for the Company's contract with a proposed joint
venture company in India. These expenditures were offset by the non-cash
provision for the expected loss on the electric vehicle contract of
$1,355,000. Unbilled revenues at the end of the Second Quarter 1996 will be
billed later in the fiscal year. Investing activities used $173,000 related
to the purchase of property and equipment. Financing activities provided
$3,202,000 of which $3,159,000, net of repayments, was from borrowing under a
revolving bank line of credit established to finance the cash flows of the
major electric vehicle contract.
(11)
The current $4,000,000 revolving bank line of credit will have reduced
available limits as the underlying project is concluded. As of June 30, 1996,
$3,159,000 has been borrowed. The loan extends to September 30, 1996, and the
bank has verbally agreed that further extensions may be made. However, there
can be no assurance that the loan extension will be made by the bank.. In
addition, other additional financing will be required, as discussed below.
The Company expects to incur losses for the foreseeable future due to the
continuing cost of its product development and marketing activities. Cash
inflows during the current year are dependent upon achieving certain billing
milestones under existing development contracts and grants, and on obtaining new
production and/or development contracts. Cash outflows are dependent upon the
level and timing of production and/or development work and the amount of
research and development and overhead expenses.
Currently, the Company's available cash and expected cash inflows are
limited and the Company continues to review all sources and uses of cash in
order to have sufficient cash available for operations. Actions being
considered include: the reduction personnel and other operating expenses and the
reduction or deferral of certain research and development activities. The
effect of some of these actions could delay the completion of development
activities relating to some or all of the Company's products In addition, the
Company is actively pursuing investments by strategic partners and/or the sale
of one or more of its technologies; a loan of up to $300,000 from Lon E. Bell,
Chairman and Chief Executive Officer of the Company; and additional debt and/or
equity financing.. At the present time, the Company expects to have sufficient
cash through October 31, 1996. Operations beyond that date will require
successful completion of a combination of the actions mentioned above now under
consideration by the Company. There can be no assurance that these sources will
provide adequate additional required financing As a development stage company,
the Company will continue to need cash until such time as sufficient profitable
production contracts are obtained.
Except for the historical information contained herein, the matters
discussed above include forward looking statements that involve risks and
uncertainties, including with respect to the electric vehicle project, potential
further delays in the completion of the contract and receipt of payments
thereunder, unanticipated costs associated with the project which may cause the
estimated loss to increase, and unanticipated product design problems, any of
which will negatively affect the Company's cash flow position; and with respect
to the overall operations and expected future operating losses, the timing and
amount of financing required to continue operations; and other risks detailed
from time to time in the Company's others filings with the SEC, including the
Form 8-K filed July 17, 1996.
(12)
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
On July 25, 1996 John W. Clark joined the Board of Directors. Mr.
Clark is a general partner of Westar Capital, a private investment
company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits: Not applicable.
Reports on Form 8-K: July 17, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Amerigon Incorporated
---------------------
Registrant
Date: October 23, 1996 /s/ R. John Hamman, Jr.
------------------------
R. John Hamman, Jr.
Vice President Finance and
Chief Financial Officer
(13)
5
1,000
6-MOS
DEC-31-1996
JAN-01-1996
JUN-30-1996
204
0
5,795
(100)
141
7,486
1,513
(721)
8,278
6,148
0
0
0
17,321
15,221
8,278
0
4,614
0
9,834
(41)
0
0
(5,179)
0
(5,179)
0
0
0
(5,179)
(1.28)
0
