<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 0-27588
---------------------------
VITALCOM INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3662 33-0538926
- - ------------------------------- ---------------------------- ----------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
15222 DEL AMO AVENUE
TUSTIN, CALIFORNIA 92780
(714) 546-0147
- - --------------------------------------------------------------------------------
(Address and telephone number of principal executive offices)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 1996, there were 7,903,373 shares outstanding of the issuer's
common stock.
1
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VITALCOM INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
------------ ------------
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . $24,753,348 $ 2,163,645
Accounts receivable, net . . . . . . . . . . . . . . . 5,550,957 6,399,221
Inventories . . . . . . . . . . . . . . . . . . . . . . 2,466,258 1,479,921
Prepaid expenses . . . . . . . . . . . . . . . . . . . 237,053 173,097
Income tax refund receivable . . . . . . . . . . . . . 249,994 -
Deferred tax assets . . . . . . . . . . . . . . . . . . 800,600 800,600
----------- -----------
Total current assets . . . . . . . . . . . . . . . 34,058,210 11,016,484
Property
Machinery and equipment . . . . . . . . . . . . . . . . 1,147,227 864,127
Office furniture and computer equipment . . . . . . . . 1,199,117 961,138
Leasehold improvements. . . . . . . . . . . . . . . . . 65,876 73,351
----------- -----------
2,412,220 1,898,616
Less accumulated amortization and depreciation. . . . . (701,296) (541,922)
----------- -----------
Property, net . . . . . . . . . . . . . . . . . . 1,710,924 1,356,694
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 87,437 268,701
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . 690,513 711,501
----------- -----------
$36,547,084 $13,353,380
=========== ===========
</TABLE>
2
<PAGE> 3
VITALCOM INC.
BALANCE SHEETS - (CONTINUED)
<TABLE>
<CAPTION>
----------- ------------
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
<S> <C> <C>
Current liabilities
Accounts payable .............................................. $ 780,148 $ 969,350
Current portion of long-term debt ............................. - 500,000
Income taxes payable .......................................... - 312,127
Accrued payroll and related costs ............................. 1,225,583 1,341,040
Accrued warranty costs ........................................ 647,596 602,362
Customer deposits ............................................. 476,984 419,528
Accrued liabilities ........................................... 440,439 615,000
Current portion of capital lease obligations .................. 21,120 21,120
----------- -----------
Total current liabilities ................................ 3,591,870 4,780,527
Long-term debt ..................................................... - 1,041,667
Deferred tax liabilities ........................................... 49,473 49,473
Capital lease obligations, less current portion .................... 98,658 106,151
Commitments
Redeemable preferred stock (5,783,930 shares authorized
at December 31, 1995), $.001 par value:
Series C convertible preferred stock .......................... - 8,858,760
Series D convertible preferred stock .......................... - 1,489,726
Stockholders' equity (deficit):
Common stock, including paid-in capital, $.0001 par value;
8,700,000 shares authorized, 7,903,373 and 1,155,994 shares
issued and outstanding at June 30, 1996
and December 31, 1995, respectively ......................... 36,524,466 519,603
Accumulated deficit ......................................... (3,717,383) (3,492,527)
----------- -----------
Net stockholders' equity (deficit) ...................... 32,807,083 (2,972,924)
----------- -----------
$36,547,084 $13,353,380
=========== ===========
</TABLE>
3
<PAGE> 4
VITALCOM INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
----------------------------- ---------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ---------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Facility-wide networks . . . . . . . . . $3,243,007 $2,969,195 $ 6,202,980 $ 4,900,457
Departmental products . . . . . . . . . 2,761,896 2,576,511 5,771,030 5,119,741
---------- ---------- ----------- -----------
Total revenues . . . . . . . . . . . 6,004,903 5,545,706 11,974,010 10,020,198
Cost of sales . . . . . . . . . . . . . . 2,707,340 2,497,061 5,239,590 4,565,388
---------- ---------- ----------- -----------
Gross profit . . . . . . . . . . . . . . 3,297,563 3,048,645 6,734,420 5,454,810
Operating expenses:
Sales and marketing . . . . . . . . . . 2,170,482 1,469,000 4,276,707 2,649,812
Research and development . . . . . . . . 1,223,029 523,091 2,141,377 1,077,682
General and administration . . . . . . . 606,284 317,409 1,124,047 643,577
---------- ---------- ----------- -----------
Total operating expenses . . . . . . 3,999,795 2,309,500 7,542,131 4,371,071
Operating income (loss) . . . . . . . . . (702,232) 739,145 (807,711) 1,083,739
Other income (expense), net . . . . . . . 302,959 (36,256) 410,373 (67,614)
---------- ---------- ----------- -----------
Income (loss) before provision for
income taxes . . . . . . . . . . . . . . (399,273) 702,889 (397,338) 1,016,125
Provision (benefit) for income taxes . . . (173,322) 301,961 (172,481) 436,745
---------- ---------- ----------- -----------
Net income (loss). . . . . . . . . . . . . $ (225,951) $ 400,928 $ (224,857) $ 579,380
========== ========== =========== ===========
Pro forma net income and net income per
common share . . . . . . . . . . . . . . $ (0.03) $ 0.07 $ (0.03) $ 0.12
Weighted average common shares . . . . . . 8,225,982 5,865,877 7,579,145 4,709,883
</TABLE>
4
<PAGE> 5
VITALCOM INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------------
SIX MONTHS ENDED
-------------------------------------
JUNE 30, JUNE 30,
1996 1995
------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . $ (224,857) $ 579,379
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . 235,556 480,321
Deferred income taxes . . . . . . . . . . . . . . . . - (120,180)
Loss (gain) on disposal of property . . . . . . . . . 10,000 (339)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . 848,264 (71,242)
Inventories . . . . . . . . . . . . . . . . . . . . (986,337) (384,545)
Income tax receivable . . . . . . . . . . . . . . . (249,994) -
Prepaid expenses and other current assets. . . . . . (63,956) (2,003)
Accounts payable . . . . . . . . . . . . . . . . . . (189,202) 373,445
Accrued payroll and related costs . . . . . . . . . (115,457) 173,174
Accrued warranty costs . . . . . . . . . . . . . . . 45,234 (108,952)
Customer deposits . . . . . . . . . . . . . . . . . 57,456 30,590
Income taxes payable . . . . . . . . . . . . . . . . (312,127) 168,599
Accrued liabilities . . . . . . . . . . . . . . . . (174,561) (135,912)
----------- ----------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . (1,119,981) 982,335
Cash flows from investing activities:
Purchases of property . . . . . . . . . . . . . . . . (578,797) (240,934)
Proceeds from sale of property . . . . . . . . . . . . - -
(Increase) decrease in other assets . . . . . . . . . 181,264 (9,353)
----------- ----------
Net cash used in investing activities . . . . (397,533) (250,287)
Cash flows from financing activities:
Preferred stock dividends . . . . . . . . . . . . . . - (154,060)
Repayment of long-term debt. . . . . . . . . . . . . . (1,549,160) (250,000)
Proceeds from issuance of preferred and common stock . 25,656,377 2,215,506
----------- ----------
Net cash provided by financing activities . . 24,107,217 1,811,446
Net increase (decrease) in cash and cash equivalents . . 22,589,703 2,543,494
Cash and cash equivalents, beginning of period . . . . . 2,163,645 1,223,330
----------- ----------
Cash and cash equivalents, end of period . . . . . . . . $24,753,348 $3,766,824
=========== ==========
Supplemental disclosures of cash flow information
Interest paid . . . . . . . . . . . . . . . . . . . . $ 3,169 $ 110,339
Income taxes paid . . . . . . . . . . . . . . . . . . $ 386,400 $ 474,479
</TABLE>
5
<PAGE> 6
VITALCOM INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim condensed financial statements included herein have been prepared
by the Company without audit pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and
footnote disclosures, normally included in the financial statements prepared in
accordance with generally accepted accounting principles, have been condensed
or omitted pursuant to such SEC rules and regulations; nevertheless, the
management of the Company believes that the disclosures herein are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's prospectus dated February 14, 1996, for
the year ended December 31, 1995 filed with the SEC in February 1996. In the
opinion of management, the condensed financial statements included herein
reflect all adjustments consisting of normal recurring accruals necessary to
present fairly the financial position of the Company as of June 30, 1996, and
the results of its operations and its cash flows for the six-month periods
ended June 30, 1995 and 1996. The results of operations for the interim
periods are not necessarily indicative of the results of operations for the
full year.
2. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE
For the three and six month periods ended June 30, 1995 and 1996, pro forma and
net income per share is based on the weighted average number of common and
common equivalent shares outstanding. The weighted average common and common
equivalent shares for pro forma net income per share include common shares and
stock options using the treasury stock method and the assumed conversion of all
outstanding shares of preferred stock into shares of common stock. For the
three and six month periods ended June 30, 1996, the weighted average common
and common equivalent shares include common shares and stock options using the
treasury stock method. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin Topic 4D, stock options granted during the twelve months
prior to the date of the initial filing of the Company's Form S-1 Registration
Statement have been included in the calculation of common equivalent shares
using the treasury stock method as if they were outstanding as of the beginning
of the period. Common equivalent shares are not included for the three and six
month periods ended June 30, 1996 as the effect would have been antidilutive.
3. STOCK PLANS
Stock Option Plans - The following is a summary of stock option transactions
under the 1993 Stock Option Plan (the "1993 Plan") for the six months ended
June 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF PRICE PER OPTIONS
OPTIONS SHARE EXERCISABLE
--------- ---------------- -----------
<S> <C> <C> <C>
Balance, December 31, 1995 652,723 $0.60 to $5.72 98,750
Exercised (27,750) $0.60 to $1.28
Canceled (33,348) $0.60 to $5.72
Granted 54,865 $13.50 to $15.75
------- ----------------
Balance, June 30, 1996 646,490 $0.60 to $15.75 96,989
======= ================ ======
</TABLE>
During the six months ended June 30, 1996, no options were granted, exercised,
or canceled under the 1996 Director Option Plan (the "Directors' Plan"), and as
of June 30, 1996 there were no options outstanding under the Directors' Plan.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth in this Quarterly Report on Form 10-Q
contains several forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements, including
statements relating to the Company's intent to expand its sales and marketing
and research and development expenditures, inherently involve risks and
uncertainties. The Company's actual results could differ materially from the
results anticipated in such forward-looking statements. See the description of
factors that could effect results included herein under "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
General" and the "Risk Factors" section of the Company's Prospectus dated
February 14, 1996 for a discussion of the factors that could result in actual
results differing from results currently anticipated.
GENERAL
The Company provides communication networks that acquire, interpret
and distribute real-time physiologic data generated by point-of-care patient
monitors located throughout a healthcare facility. The Company sells
facility-wide networks directly to acute care hospitals and integrated health
delivery networks ("IHDN"s). In addition, the Company sells certain
components, monitoring systems, clinical analysis and display software and
wireless communications components to OEM customers for use in their
departmental monitoring products.
Revenues from sales of facility-wide networks are recognized upon
shipment. The Company's facility-wide networks had an average selling price of
approximately $450,000 during 1995 and the Company believes that average
selling prices of facility-wide networks are likely to increase as the size and
complexity of networks increase in the future. As a result, the timing of the
receipt of a single order can have a significant impact on the Company's
revenues and earnings for a particular period. In addition, the Company's
sales cycle for facility-wide networks has typically been from nine to 18
months, during which time the Company may expend substantial time and resources
without any guarantee that the transaction will be completed, and is subject to
delays attendant to large purchases over which the Company has no control. Any
significant or ongoing failure by the Company to ultimately achieve sales would
have a material adverse effect on the Company's business, financial condition
or operating results.
The Company has experienced seasonal variations in sales of its
facility-wide networks, with sales in the first quarter being lower than the
preceding fourth quarter's sales due to customer budget cycles and sales
remaining relatively flat during the third quarter. In addition, the Company's
products are generally shipped as orders are received and, accordingly, the
Company generally operates with limited backlog. As a result, sales in any
quarter are dependent on orders booked and shipped in that quarter and are not
predictable with any degree of certainty. Further, a large percentage of a
particular quarter's shipments of facility-wide networks have historically been
booked in the last weeks of the quarter. In addition, a significant portion of
the Company's expenses are relatively fixed. To the extent that revenues in a
given quarter are below the Company's expectations, the adverse effect may be
magnified by the Company's inability to decrease spending to compensate for the
revenue shortfall.
Revenues from sales of departmental products are recognized upon
shipment. The sales cycle for departmental products varies depending upon
product mix and the extent to which the Company develops customized operating
software for a particular OEM customer.
7
<PAGE> 8
The Company's revenues have been derived increasingly from direct
sales of its facility-wide networks. During 1995, the Company increased the
size of its direct sales force from nine to 18 full-time sales persons and
increased the size of its research and development staff from 26 to 34 persons.
During the first half of 1996, the Company continued to increase the size of
its direct sales force and continued to increase its research and development
expenditures to develop new products and further enhancements to its
facility-wide networks. Although the Company believes that investments in such
expenditures will improve long-term financial results, operating and net income
as a percentage of revenues decreased during the first half of 1996 as compared
to the same period of 1995, and operating and net income for the second half of
1996 are expected to continue to be lower in absolute dollars and as a
percentage of revenues than achieved in the same period of 1995. If such
increased direct sales efforts and research and development do not ultimately
result in an increase in revenues, there would be a material adverse effect on
the Company's long-term business, operating results and financial condition.
In the first quarter of 1996 the Company expanded its facility-wide
network with the introduction and shipment of OpenNet(TM), an application that
integrates multi-parameter third-party monitoring equipment. OpenNet allows
the hospital to network existing, disparate equipment to create one integrated
system. OpenNet was introduced with initial connections to bedside patient
monitoring equipment from three leading manufacturers: Datascope Corporation,
Johnson & Johnson Medical Inc. and Protocol Systems, Inc. Approximately 20% of
all new patient connections with respect to facility-wide networks sold during
the quarter ended June 30, 1996 included OpenNet connections to other
manufacturers' bedside patient monitoring equipment. At the end of the second
quarter the Company filed its 510(k) application with the Food and Drug
Administration (FDA) to add ventilator connections to the OpenNet facility-wide
network.
To date the Company has not capitalized software development expenses.
However, the development of new products or the enhancement of existing
products may require capitalization of such expenses in the future.
Total Revenues. Total revenues consist of revenue from sales of facility-wide
networks and departmental products, together with fees for installation and
servicing of products. Total revenues for the quarter ended June 30, 1996
increased eight percent to $6,004,903 from $5,545,706 for the same period in
1995. Revenues in the first six months of 1996 were $11,974,010 compared to
$10,020,198 for the same period in 1995, an increase of 19%. Facility-wide
networks sales represented 51.8% of the revenues for the first six months of
1996, compared to 48.9% for the same period a year ago. The increase in
facility-wide network sales was due to expansion of the Company's sales and
marketing efforts, greater market penetration and increasing market acceptance
of the Company's products.
Gross Margins. Cost of goods sold includes material, direct labor, overhead
and, for facility-wide networks, installation expenses. Cost of goods sold in
the quarter ended June 30, 1996 was 45.1% of revenues as compared to 45.0% in
the comparable period a year ago. Gross margin in the first six months of 1996
increased to 56.2% from 54.4% in the comparable period a year ago. The higher
gross margin in 1996 is attributable to approximately $307,000 in amortization
of developed technology in 1995 that was absent in 1996. Gross margin in the
quarter ended June 30, 1996 was 2.7% lower than the quarter ended March 31,
1996 as a result of a volume pricing discount granted to the Company's largest
OEM customer and planned increases in fixed manufacturing overhead coupled with
lower than expected sales volume.
Sales and Marketing Expenses. Sales and marketing expenses include payroll,
commissions and related costs attributable to facility-wide and departmental
sales and marketing personnel, travel and entertainment expenses, and other
promotional expenses. Sales and marketing expenses for the quarter ended June
30, 1996 increased to $2,170,482, or 36.1% of revenues, an increase of
$701,482, or 47.8% from the same period in 1995. For the first six months of
1996, sales and marketing expenses of $4,276,707 were 35.7% of revenues
compared to $2,649,812 or 26.4% of revenues in the comparable
8
<PAGE> 9
period in 1995, an increase of 61%. Marketing expense increases reflect the
doubling of the size of the Company's direct sales force in 1995 and the
Company's carrying out further planned increases in the size of the direct
sales force, advertising and other marketing expenses during the first six
months of 1996 as part of its strategy to focus on sales of facility-wide
networks.
Research and Development Expenses. Research and development expenses include
payroll and related costs attributable to research and development personnel,
prototyping expenses and other costs. Research and development expenses
increased to $1,223,029 or 20.4% of revenues in the second quarter ended June
30, 1996 up from $523,091 or 9.4% of revenues in the same period a year ago, a
133% increase. Research and development expenses for the first six months of
1996 increased to $2,141,377 or 17.9% of revenues, up from $1,077,682, or 10.8%
of revenues for the same period in 1995. Research and development increases
are related to the Company's strategy to increase development labor, prototype
supplies and consulting fee expenditures significantly in 1996 to develop new
products and features to further enhance its facility-wide networks.
General and Administrative Expenses. General and administrative expense
includes accounting, finance, MIS, human resources, general administration,
executive officers and professional fee expenses. General and administrative
expenses for the second quarter were $606,284, or 10.1% of total revenues as
compared to $317,409, or 5.7% of total revenues in the comparable period of
1995. General and administrative expenses for the first six months of 1996
were $1,124,047, or 9.4% of total revenues, as compared to $643,577, or 6.4%
of revenues, for the same period in 1995. The increase is attributable to
professional services and increased administrative headcount to accommodate the
Company's growth and being a publicly traded company.
Other Income (Expense), net. Other income (expense), net, consists primarily
of interest payments made in respect to outstanding indebtedness and interest
income from short term investments. Other income (expense) increased from
($36,256) for the first quarter in 1995 to $302,959 for the first quarter in
1996. Other income (expense) improved from ($67,614) for the first six months
of 1995 to $410,373 for the first six months of 1996 due to interest income
attributable to the proceeds of the initial public offering and payoff of the
five year term debt.
Provision (Benefit) for Income Taxes. The Company's effective tax rate was
(43.5%) for the second quarter of 1996 as compared to 41% for the same quarter
of 1995. The benefit for income taxes is primarily due to the Company's net
loss.
LIQUIDITY AND CAPITAL RESOURCES
In February 1996, the Company raised net proceeds of approximately
$25.7 million through an initial public offering of 2,300,000 shares of Common
Stock at $12.50 per share.
At December 31, 1995 the Company had a five-year term loan of $1.5
million payable in monthly installments through December, 1998 with interest
payable at the rate of prime plus 2.5% (through November 30, 1995) or prime
plus 3% (after December 1, 1995). This loan was repaid with a portion of the
proceeds of the initial public offering.
During the six months ending June 30, 1996, the Company used $1,119,981
in operating activities compared to generating $982,334 in cash from operating
activities in the same period of 1995. In the six months ended June 30, 1996,
the Company generated cash through collections of accounts receivable which was
used in targeted inventory procurement as well as reducing accounts payable,
accrued liabilities and income taxes payable.
9
<PAGE> 10
The Company's principal commitments at June 30, 1996 consisted of a
lease on its office and manufacturing facility, and a long-term lease on its
telephone system. Both obligations combined represent a expenditure of
approximately $31,500 per month.
The Company believes that existing cash resources, including cash flows
from operations, if any, will be sufficient to fund the Company's operations for
at least the next twelve months.
SUBSEQUENT EVENTS
On July 16, 1996, the Company entered into a letter of intent with
Silicon Valley Bank for a $5 million unsecured line of credit. Silicon Valley
Bank at its discretion could file a blanket lien on all assets in the event the
Company fails to comply with financial covenants if there is debt outstanding
against the line of credit.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
The Company held an Annual Meeting of Stockholders on June 13, 1996.
At the Annual Meeting, the following votes were cast for the proposals
indicated:
Proposal One: Election of Directors of the Company
<TABLE>
<CAPTION>
NAME OF NOMINEE VOTES FOR VOTES AGAINST ABSTAINING
- - --------------- --------- ------------- -----------
<S> <C> <C> <C>
Donald W. Judson 7,261,717 0 0
David L. Schlotterbeck 7,261,717 0 0
Jack W. Lasersohn 7,261,717 0 0
Elizabeth H. Weatherman 7,261,717 0 0
Timothy T. Weglicki 7,261,717 0 0
Proposal Two: Ratification of
Appointment of Deloitte & Touche
LLP as the Company's Independent
Public Accountants 7,260,467 0 1,250
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the reporting period.
10
<PAGE> 11
SIGNATURES
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 on August 8, 1996.
VITALCOM INC.
/s/ DAVID L. SCHLOTTERBECK
-------------------------------------
David L. Schlotterbeck
President and
Chief Executive Officer
/s/ SHELLEY B. THUNEN
-------------------------------------
Shelley B. Thunen
Vice President Finance and
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,475,348
<SECURITIES> 0
<RECEIVABLES> 5,550,957
<ALLOWANCES> 200,829
<INVENTORY> 2,466,258
<CURRENT-ASSETS> 34,058,210
<PP&E> 2,412,220
<DEPRECIATION> 701,296
<TOTAL-ASSETS> 36,547,084
<CURRENT-LIABILITIES> 3,591,870
<BONDS> 0
0
0
<COMMON> 36,524,466
<OTHER-SE> (3,717,383)
<TOTAL-LIABILITY-AND-EQUITY> 36,547,084
<SALES> 6,004,903
<TOTAL-REVENUES> 6,004,903
<CGS> 2,707,340
<TOTAL-COSTS> 2,707,340
<OTHER-EXPENSES> 3,999,794
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> (302,959)
<INCOME-PRETAX> (399,273)
<INCOME-TAX> (173,322)
<INCOME-CONTINUING> (225,951)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225,951)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
