<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the Transition period from to
Commission file number 0-28484
QualMark Corporation
(Exact name of small business issuer as
specified in its charter)
Colorado 84-1232688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1329 West 121st Avenue, Denver, CO 80234
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number) (303) 254-8800
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
[ X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of latest practicable date:
The number of shares of no par value common stock at September 30, 1998 is
3,485,015.
Transitional Small Business Disclosure Format (check one):
[ ] Yes [ X] No
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QUALMARK CORPORATION
BALANCE SHEET
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
SEPT. 30, 1998
(UNAUDITED) DEC. 31, 1997
-------------- -------------
<S> <C> <C>
ASSETS
Cash $ 947 $ 459
Trade accounts receivable, net of allowance for
doubtful accounts of $21 at September 30, 1998
and December 31, 1997 4,317 3,100
Inventories 1,104 608
Other current assets 55 52
------- -------
Total current assets 6,423 4,219
Property and equipment, net 1,416 1,428
Long-term notes receivable 103 --
Other assets, net of accumulated amortization
of $279 and $271, respectively 98 51
------- -------
Total assets $ 8,040 $ 5,698
------- -------
------- -------
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable $ 1,121 $ 646
Customer deposits and deferred revenue 90 59
Accrued expenses 1,662 1,893
Line of credit 775 --
Current portion of long term obligations 207 73
------- -------
Total current liabilities 3,855 2,671
Noncurrent portion of long term obligations 474 127
Shareholders' Equity:
Common stock; no par value; 15,000,000 shares
authorized; 3,485,015 and 3,387,134 shares
issued and outstanding at September 30, 1998
and December 31, 1997, respectively 6,391 6,270
Accumulated deficit (2,680) (3,370)
------- -------
Total shareholders' equity 3,711 2,900
------- -------
Total liabilities and shareholders' equity $ 8,040 $ 5,698
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
QUALMARK CORPORATION
STATEMENT OF OPERATIONS
(UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPT. 30, 1998 SEPT. 30, 1997 SEPT. 30, 1998 SEPT. 30, 1997
<S> <C> <C> <C> <C>
Net revenue $3,852 $2,892 $10,432 $7,166
Cost of revenue 2,077 1,643 5,742 4,171
Gross profit 1,775 1,249 4,690 2,995
Selling, general and administrative expenses 1,203 1,080 3,424 2,974
Research and development expenses 125 55 507 160
Income(loss) from operations 447 114 759 (139)
Other income (expense):
Interest (19) (3) (33) 24
Other -- (2) 12 (8)
Net income(loss) before income taxes 428 109 738 (123)
Provision for income taxes 30 -- 48 --
Net income (loss) $398 $109 $690 ($123)
Basic earnings(loss) per share $0.11 $0.03 $0.20 ($0.04)
Diluted earnings(loss) per share $0.11 $0.03 $0.18 ($0.04)
Weighted average shares outstanding 3,485 3,385 3,439 3,355
Weighted average number of common shares
plus common stock equvialents 3,742 3,699 3,902 3,355
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
QUALMARK CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED, AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPT. 30, 1998 SEPT. 30, 1997
<S> <C> <C>
Cash Flows From Operating Activities:
Net income(loss) $690 ($123)
Adjustments to reconcile net income(loss) to net cash
from operating activities:
Depreciation and amortization 427 310
Change in assets and liabilities:
Accounts receivable (1,217) (1,330)
Inventories (496) 176
Notes receivable (103) --
Other assets (50) (19)
Accounts payable and accrued expenses 244 (358)
Customer deposits and deferred revenue 31 8
Net cash used in operating activities (474) (1,336)
Cash Flows From Investing Activities:
Acquisition of property and equipment (415) (550)
Purchase of short term investments -- (200)
Proceeds on sale/redemption of short term investments -- 1,911
Net cash provided(used) by investing activities (415) 1,161
Cash Flow From Financing Activities:
Proceeds from borrowing 1,265 200
Proceeds from issuance of common stock 121 134
Payments on long term obligations (9) (26)
Net cash from financing activities 1,377 308
Net increase in cash 488 133
Cash at beginning of period 459 411
Cash at end of period $947 $544
NONCASH FINANCING ACTIVITIES
SUPPLEMENTAL DISCLOSURE
Interest paid $22 $6
Taxes paid 4 --
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
QUALMARK CORPORATION
NOTES TO FINANCIAL STATEMENTS
QualMark Corporation (the Company), was founded in 1991 and is a manufacturer
of physical stress systems. These systems rapidly and efficiently expose
product design and manufacturing related failures on its customer's products,
thereby providing manufacturers the necessary information to improve product
quality. The Company also operates a network of test centers that its
customers may use as an alternative, or in addition, to purchasing its
systems.
NOTE 1 - Financial Presentation
These financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1997 and notes thereto.
The interim financial data as of September 30, 1998 and for the three and
nine months ended September 30, 1998 and 1997 is unaudited; however, in the
opinion of management of the Company, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the interim periods presented. Results
for the three and nine months ended September 30, 1998 are not necessarily
indicative of results for the remainder of 1998.
NOTE 2 - Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
9/30/98
(unaudited) 12/31/97
----------- --------
<S> <C> <C>
Raw materials $503 $457
Work in process - 121
Finished goods 601 30
----------- --------
$1,104 $608
----------- --------
----------- --------
</TABLE>
NOTE 3 - Earnings(Loss) Per Share
Basic earnings per share is computed by dividing net income available to
common shareholders by the weighted average number of shares outstanding
during the period. Diluted earnings per
1
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share are computed using the weighted average number of shares determined for
the basic computations plus the number of shares of common stock that would
be issued assuming all contingently issuable shares having a dilutive effect
on earnings per share were outstanding for the period.
Due to the Company's loss from continuing operations in 1997, a calculation
of earnings per share assuming dilution is not required. Options and
warrants to purchase 850,462 shares were not included in the computation of
earnings per share for the nine-month period ending September 30, 1997
because including the options would result in an antidilutive effect on
earnings per share. However, options and warrants to purchase 850,462 were
included in the computation of earnings per share for the three-month period
ending September 30, 1997, as the options and warrants would have a dilutive
effect on earnings. Options and warrants to purchase 838,733 shares are
included in the computation of earnings per share for the three and
nine-month periods ending September 30, 1998, as the options and warrants
would have a dilutive effect on earnings.
NOTE 4 - Litigation
On March 22, 1996, the Company was served with a summons and complaint from
Screening Systems, Inc. ("SSI"), a competitor. The complaint, as amended,
alleges that the Company's vibration system infringes three patents owned by
Hughes Electronics ("Hughes") and licensed to SSI, and seeks injunctive
relief, monetary damages and costs of litigation. Because Hughes would not
voluntarily join the action as a plaintiff, SSI has named Hughes as a
defendant in the action.
The Company has been aware of the patents in question since the Company
commenced its operations and, with advice from patent counsel, designed its
vibration system, components of which are also patented, so as to not
infringe the patents. The Company's vibration system has been used
continuously in its products since 1991. On two prior occasions, Hughes put
the Company on notice that the Company's vibration system might infringe its
patents, although no litigation was commenced. On both occasions, the
Company concluded, after consultation with patent counsel, that infringement
did not exist and has seen nothing since to change that conclusion.
Discovery in the action has been completed; however, the trial date has been
vacated. In April 1997, the Magistrate Judge conducted a "Markman hearing" to
determine the scope and meaning of the relevant claims and terms of the
patents-in-suit. In
2
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October 1997, the Magistrate Judge issued its Order re Construction of Patent
Claims. Based on that Order, the Court has granted the Company summary
judgment on one of the eight patent claims at issue and has given the Company
the opportunity to file additional summary judgment motions with respect to
the other seven claims. In addition, the Court denied SSI's motion for
summary judgment on one of the three patents and granted SSI summary judgment
dismissing two of the Company's affirmative defenses. The court has not yet
set a trial date.
In response to the current litigation, the Company consulted with its current
legal and patent counsel, who agreed with prior patent counsels' opinions
that the Company's vibration system does not infringe the SSI patents.
Consequently, management intends to vigorously defend this litigation.
However, no assurances can be given that the Company will be successful in
its defense. The Company believes that the suit may have a material adverse
effect on the results of operations and financial condition of the Company in
terms of legal fees and costs for defending the claim, the possibility of an
unfavorable outcome and an award of damages, and of the loss of management
time needed to deal with the suit.
The Company believes that the legal action by the plaintiff is without merit
and will continue to vigorously defend itself in these matters.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The statements contained in this report which are not historical in nature
are forward-looking statements that are subject to risks and uncertainties
that could cause actual results to differ materially from those set forth or
implied by forward-looking statements, including but not limited to the risk
of an unfavorable outcome in the SSI litigation, variability in order flow
and operating results, the ability of the Company to find
3
<PAGE>
and retain qualified personnel to staff its manufacturing and marketing
operations and existing and anticipated test centers, and the risk that the
demand for the Company's systems will not continue to grow.
Results of Operations
The Company's annual and quarterly operating results could be subject to
fluctuations for a variety of reasons. The Company operates with a small
backlog relative to its revenue; thus most of its sales in each quarter
result from orders received in the current or prior quarter. In addition,
because prices for the Company's products are relatively substantial, a
significant portion of net sales for each quarter is attributable to a
relatively small number of units.
Revenue
Net revenue increased $960,000 (33.2%) for the three months ended September
30, 1998, as compared with the three months ended September 30, 1997, from
$2,892,000 to $3,852,000. Net revenue also increased in the nine-month
period ended September 30, 1998 as compared with the nine months ended
September 30, 1997, by $3,266,000 (45.6%), from $7,166,000 to $10,432,000.
System sales increased $815,000 (38.0%) in the three-month period ended
September 30, 1998, from $2,143,000 to $2,958,000 as compared to the three
month period ended September 30, 1997. For the nine-month period ended
September 30, 1998 system revenue increased $2,417,000 (46.1%) over the same
nine-month period in 1997, from $5,238,000 to $7,655,000. Unit shipments
increased from seventeen to nineteen systems in the comparable three-month
periods ended September 30, 1998 and 1997 and from forty one to fifty three
systems in the comparable nine-month periods ended September 30, 1997 and
1998.
Test center revenue for the three months ended September 30, 1998 increased
$145,000 (19.4%) from $749,000 to $894,000 over the three months ended
September 30, 1997. For the nine months ended September 30, 1998, test
center revenue increased $849,000 (44.0%) from $1,928,000 to $2,777,000 over
the same period in 1997. The Company operated eight test centers during the
1998 and 1997 periods. The Company also recognized revenue from a strategic
alliance test center operation in the U.K. during the three months ended
September 30, 1998. The U.K. test center agreement is with TUV Product
Service GmbH, Munich, Germany, and the relationship requires QualMark to
provide one of its OVS 2.5 systems, training and marketing assistance in
exchange for a share of all future gross revenues from the operation. The
4
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Company's direct costs for this strategic alliance are being charged to test
center cost of sales. The current agreement expires December 31, 1999 and
the Company expects to renew the agreement before its expiration.
Gross Margin
The gross margin for the three months ended September 30, 1998 was 46.1%.
This compares to a gross margin of 43.2% for the three months ended September
30, 1997. For the nine months ended September 30, 1998, the gross margin was
45.0% compared to a gross margin of 41.8% in the same nine-month period in
1997. The improvement in the gross margin for the three and nine-month
periods is mostly due to increased capacity utilization in both segments of
the Company's business.
Operating Expense
General and administrative expenses decreased from $621,000 to $569,000 for
the three months ended September 30, 1998 compared to the same three-month
period in 1997. For the nine months ended September 30, 1998, general and
administrative costs decreased from $1,780,000 to $1,606,000. The decrease in
general and administrative expense in the three and nine-month periods is due
to lower litigation expenses due in part to a reserve that was established in
1997. The Company believes that the reserve will be sufficient to meet
litigation expenses for the remainder of the case.
Sales and marketing expenses increased $175,000 from $459,000 for the three
months ended September 30, 1997 to $634,000 for the three months ended
September 30, 1998. For the nine months ended September 30, 1998, sales and
marketing expense increased $624,000 over the same period in 1997, from
$1,194,000 to $1,818,000. This increase is primarily due to increases in
department headcount and associated expenses over the same three and nine
month periods in 1997.
Research and development costs increased from $55,000 for the three months
ended September 30, 1997 to $125,000 for the three months ended September 30,
1998. For the nine-month period ended September 30, 1998, research and
development cost increased $347,000 from $160,000 for the nine months ended
September 30, 1997 to $507,000 in the current period. The increase in cost
reflects efforts to update and improve reliability of current products and
for the development of new technology. The Company expects research and
development costs to continue at or above such levels throughout 1998.
For the three months ended September 30, 1998, net interest
5
<PAGE>
expense was $19,000. For the nine months ended September 30, 1998, interest
expense was $33,000. This compares with interest expense in the prior year's
three-month period ending September 30, 1997 of $3,000 and interest income of
$24,000 for the nine months ended September 30, 1997, from cash and
short-term investment balances. During 1997, the Company's cash balance was
reduced and its short-term investments were liquidated.
Liquidity and Capital Resources
During the first nine months of 1998 the Company's operations used $474,000
of cash in operating activities, invested $415,000 for equipment and paid
$9,000 on long term obligations. The Company also borrowed $1,265,000
against a $1,975,000 credit facility with its bank. The two-part facility
consists of a revolving receivables-based credit line of $1,300,000 and a
fixed asset-based term loan of $675,000. Options and warrants were exercised
during the nine-month period for a total net increase in common stock of
$121,000. Together, these activities resulted in a cash increase of
approximately $488,000 to a quarter ending balance of $947,000.
The Company expects to meet long term liquidity requirements through cash
flows generated by operations, existing cash balances and by utilizing the
remaining balance of its credit line with its bank. The Company is
dependent, however, on its ability to maintain and grow its systems and test
center businesses in order to generate adequate operating cash flows.
Year 2000 Issue
During the quarter ended September 30, 1998, management initiated a program
to prepare the Company's financial, manufacturing, service and other critical
systems and applications for the Year 2000. The program involves the
Company's upper management as well as project leaders from each department.
The focus of the program is to identify affected software and hardware,
develop a plan to correct that software or hardware in the most effective
manner and implement and monitor that plan. The program will also include
communications with the Company's significant suppliers and customers to
determine the extent to which the Company is vulnerable to any failures by
them to address the Year 2000 issue. Although the Company's Year 2000
program is in various stages of completion in each department, the Company
anticipates it will have all modifications and replacements in place by June
30, 1999.
6
<PAGE>
OVS Systems
The Company's OVS products include an embedded controller that have been
tested and have been determined to be Year 2000 compliant. The Company
expects that there will be no Year 2000 issues in regards to its products.
The Company's proprietary OVS operating system software that controls all of
the products in the OVS product line has been upgraded this year as part of
an overall product improvement program. Part of that program ensured that
the software control system be made Year 2000 compliant. Management believes
that this has been achieved. There were no material added costs for this
compliance. Previous versions of the control system are being investigated
for compliance issues. Initial findings do not indicate compliance problems.
However, the investigation is not complete and will continue with a target
completion date of December 31, 1998.
Internal Hardware and Software
Each department is currently reviewing all of the software and hardware that
could affect its operations. With the exception of the OVS operating system
software, all software products in use were purchased from Microsoft or other
major software publishing companies. Anticipated costs for Year 2000
compliance for these software package upgrades are considered to be part of
the Company's normal ongoing business plan and are not expected to add
materially to the plan. Management has included approximately $23,000 for
software upgrades in its 1999 plan.
A vast majority of the employees of the Company utilize personal computers in
their work. One of the risks identified about the Year 2000 issue is that
these personal computers may not function or function properly due to the
internal embedded controllers not being Year 2000 compliant. The same
problem may exist in the Company's local network server, wide-area network
server equipment and the Company's internal telephone system. Management
believes that the potential for problems primarily involves older equipment.
Most of the personal computers and network server equipment have been
purchased within the last two-years and are believed to be at lower risk
than the smaller population of older computer equipment in use around the
Company. The internal telephone system was purchased from and is supported
by a leading manufacturer of that type of equipment. Software to diagnose
Year 2000 compliance for the personal computers and network servers has been
identified and procurement is underway. The cost for this software is less
than $1,000. It is unknown at this time how much of this equipment is
subject to the Year 2000 problem, however a worst-case scenario assumes the
cost of
7
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replacing non-compliant equipment to be $105,000. The most-likely scenario of
replacing affected computer and telephone equipment has not been determined
at this time. However, management has included approximately $60,000 in
computer and telephone system upgrades into its 1999 operating plan.
The Company expects to incur internal staff costs as well as consulting fees
and other expenses related to the Year 2000 project. The Company has already
purchased and installed new accounting and manufacturing control software
that is Year 2000 compliant. The cost to do this was less than $10,000. This
upgrade was done in response to the Year 2000 issue, however this and many
other upgrades are part of the Company's normal business plan.
External Factors
The Company uses outside service providers for all of its human resource
administration functions. This includes payroll and employee benefits
management. It is not known, at this time, whether the service provider is
Year 2000 compliant in regard to the services it provides the Company.
Management is in the process of verifying compliance in this area and will
complete the verification before January 1, 1999. Other service providers
that are Year 2000 compliant are available if the current provider is not
able to provide such assurances to the Company. No material costs are
expected in this area.
Another area that has been identified as bringing potential problems in Year
2000 compliance involves key suppliers of inventory materials. The Company
utilizes three key vendors as suppliers in the manufacture of its OVS
systems. Other than those three vendors, the Company's inventory suppliers
are commodity or off-the-shelf parts distributors that can be replaced with
little or no notice. It is believed that the three critical key-component
suppliers could be replaced in the event that one or all were determined to
be subject to critical shipment delays due to Year 2000 issues. Due to the
lead times associated with bringing new suppliers on-line, early
determination of vendor Year 2000 compliance is necessary. It is not known
at this time which, if any, vendors are Year 2000 compliant. Management has
set a compliance deadline of March 31, 1999 for its key vendors. If one or
more of these vendors has not satisfied this requirement, management is
developing a contingency plan to identify new vendors and prepare them to
provide the key components to the Company by the end of 1999. The cost of
this could include significant amounts of management time but is not expected
to add materially to the cost of the Company's products. Every attempt will
be made to ensure that a continuous supply of the key components is
maintained.
8
<PAGE>
Strategic Alliances
The Company expects to recognize revenue in 1999 and beyond from strategic
alliances with internationally based testing service companies. Three of
these alliances currently exist and more are expected to go into effect
before January 1, 2000. The extent to which these alliance companies are
affected by the Year 2000 issue may affect the revenue that the Company is
able to recognize from these alliances. At this time, it is unknown how
these alliance companies will be affected. The Company has no control over
how the alliance companies manage the Year 2000 issue.
Given the information available at this time, management anticipates that the
cost to address the Year 2000 issue should not have a material adverse effect
on the Company's liquidity or results of operations. However, the Company
continues to gather information regarding the total estimated costs and there
can be no assurances that these cost will not be material.
PART II OTHER INFORMATION
Item 1 Legal Proceedings
See Note 4 to Financial Statements.
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits - See Index to Exhibits
(b) Reports on Form 8-K during the quarter ended September 30, 1998
- none.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
QualMark Corporation
Date: November 10, 1998 By: /s/ W. PRESTON WILSON
----------------- --------------------------------------------
W. Preston Wilson
President, Chief Executive Officer
Date: November 10, 1998 /s/ VERNON W. SETTLE
----------------- --------------------------------------------
Vernon W. Settle
VP, Finance & Administration
Principal Accounting Officer
10
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company. (1)
3.2 Amended and Restated Bylaws of the Company. (1)
4.1 Form of Certificate for Shares of Common Stock. (1)
4.6 Form of Warrant issued to holders of 10% secured promissory notes. (1)
10.1 QualMark Corporation 1993 Incentive Stock Option Plan. (1)
10.2 QualMark Corporation 1996 Stock Option Plan. (1)
10.3 Employment Agreement dated March 1, 1993 by and between the Company
and W. Preston Wilson. (1)
10.4 Employment Agreement dated August 15, 1994 by and between the
Company and J. Wayne Farlow. (1)
10.5 Agreement dated September 30, 1995 by and between the Company and
Gregg K. Hobbs. (1)
10.8 Addendum to Agreement dated as of December 21, 1995 by and between
the Company and Gregg K. Hobbs. (1)
10.11 Loan and Security Agreement dated April 30, 1996, by and between
QualMark Corporation and Silicon Valley Bank, as amended by
Amendment to Loan and Security Agreement dated August 18, 1997. (2)
27.1 Financial Data Schedule
</TABLE>
(1) Incorporated by reference from the Company's Registration Statement No.
333-1454-D on Form SB-2.
(2) Incorporated by reference from the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1997.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 947
<SECURITIES> 0
<RECEIVABLES> 4,338
<ALLOWANCES> 21
<INVENTORY> 1,104
<CURRENT-ASSETS> 6,423
<PP&E> 2,660
<DEPRECIATION> 1,244
<TOTAL-ASSETS> 8,040
<CURRENT-LIABILITIES> 3,855
<BONDS> 0
0
0
<COMMON> 6,391
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,040
<SALES> 10,432
<TOTAL-REVENUES> 10,432
<CGS> 5,742
<TOTAL-COSTS> 3,931
<OTHER-EXPENSES> (12)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> 738
<INCOME-TAX> 48
<INCOME-CONTINUING> 690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 690
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.18
</TABLE>
