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 December 31, 1999 or
Transition report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
Commission file number 0-2387
RESEARCH, INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-0908058
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 24064, Minneapolis, Minnesota 55424
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (612) 941-3300
Former name, former address, and former fiscal year, if changed since last
report.
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 ___
As of February 01, 2000, 1,292,778 common shares were outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
RESEARCH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
-----------
1999 1998
----------- -----------
<S> <C> <C>
Net Sales $ 6,847,679 $ 5,393,706
Cost of Sales 4,315,667 3,254,460
----------- -----------
Gross profit 2,532,012 2,139,246
----------- -----------
Expenses:
Selling 1,068,676 1,232,918
Research and development 790,651 474,095
General and administrative 234,618 224,149
----------- -----------
Total expenses 2,093,945 1,931,162
----------- -----------
Income From Operations 438,067 208,084
Interest Expense (92,104) (84,595)
Other Income 56,200 -
----------- -----------
Income Before Income Taxes 402,163 123,489
Income Tax Provision 153,276 41,960
----------- -----------
Net Income $ 248,887 $ 81,529
----------- -----------
Net Income Per Common Share:
Basic $ 0.19 $ 0.06
Diluted 0.19 0.06
Weighted Average Common Shares Outstanding:
Basic 1,291,759 1,266,337
Diluted 1,333,152 1,266,337
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
RESEARCH, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
As of December 31 As of September 30
1999 1999
ASSETS ----------------- ------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,281,309 $ 350,487
Accounts receivable 4,602,451 5,244,383
Inventories 3,082,999 3,448,701
Deferred income tax benefit 672,973 789,249
Prepayments 366,920 482,812
------------ ------------
Total current assets 10,006,652 10,315,632
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 3,551,540 3,836,960
Less accumulated depreciation (2,803,024) (3,015,989)
------------ ------------
Net property and equipment 748,516 820,971
------------ ------------
DEFERRED INCOME TAX BENEFIT 733,000 733,000
------------ ------------
Total assets $ 11,488,168 $ 11,869,603
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 1,528,068 $ 681,988
Accounts payable 1,790,037 2,340,345
Deferred revenues 698,753 989,490
Deferred gain, current portion 315,089 315,089
Accrued liabilities:
Salaries and benefits 290,456 607,253
Warranty reserve 300,000 300,000
Restructuring reserve 111,713 298,065
Other 495,599 434,945
------------ ------------
Total current liabilities 5,529,715 5,967,175
------------ ------------
Long-term debt 281,659 376,660
Deferred gain 1,811,762 1,890,534
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value, 5,000,000 shares authorized,
1,292,466 and 1,290,144 shares issued and outstandi 646,233 645,072
Additional paid-in capital 655,449 646,858
Accumulated other comprehensive income 50,871 61,963
Retained earnings 2,512,479 2,281,341
------------ ------------
Total stockholders' equity 3,865,032 3,635,234
------------ ------------
Total liabilities and stockholders' equity $ 11,488,168 $ 11,869,603
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
STATEMENTS.
<PAGE>
RESEARCH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
---------- --------
<S> <C> <C>
Operating Activities:
Net income 248,887 81,529
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 84,575 145,264
Deferred income taxes 116,276 -
Changes in current operating items:
Accounts receivable, net 641,932 (822,275)
Inventories 365,702 916,051
Prepayments 115,892 4,397
Accounts payable and accrued liabilities (806,451) (366,286)
Deferred revenue (369,509) 316,114
Restructuring reserve (186,352) (365,043)
---------- --------
Net cash provided by (used in) operating activities 210,952 (90,249)
---------- --------
Investing Activities:
Property and equipment additions, net (12,120) 3,363
---------- --------
Financing Activities:
Proceeds from line of credit, net 846,080 200,000
Payments on long-term debt (95,001) -
Issuance of common stock (7,997) -
---------- --------
Net cash provided by financing activities 743,082 200,000
---------- --------
Foreign Currency Translation (11,092) (77,379)
---------- --------
Cash and cash equivalents:
Net increase in cash and cash equivalents 930,822 35,735
Beginning of year 350,487 108,647
---------- --------
End of Period 1,281,309 144,382
========== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
STATEMENTS.
<PAGE>
RESEARCH, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
The Company's significant accounting policies not elsewhere set forth in the
accompanying condensed consolidated financial statements are as follows:
Condensed Consolidated Financial Statements -
The condensed consolidated balance sheets as of December 31, and September 30,
1999, and the condensed consolidated statements of operations and cash flows for
the three months ended December 31, 1999 and 1998 have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and changes in cash flows at December
31, 1999 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's September 30,
1999 Form 10-K. The results of operations for the period ended December 31, 1999
are not necessarily indicative of the operating results for the full fiscal year
or for future interim periods.
Inventories -
Inventories are stated at the lower of first-in, first-out cost or market and
include direct labor, material and overhead costs. Inventories consist of the
following components at:
December 31, September 30,
1999 1999
----------- -----------
Manufactured subassemblies
and purchased parts $ 2,407,100 $ 2,457,783
Work in Process 675,899 990,918
----------- -----------
Total $ 3,082,999 $ 3,448,701
=========== ===========
<PAGE>
Warranty Reserve -
The surface mount technology (SMT) products are under warranty against defects
in material and workmanship for a two-year period with an extended warranty on
three components. The Company's other products are generally under warranty for
a one-year period. Estimated warranty costs are accrued in the same period as
products are shipped. An analysis of reserves for product warranties is
performed on a quarterly basis by reviewing the status of new product
introductions, trends of warranty expense by product, and internal management
information to identify known or potential defects and the estimated warranty
exposure.
Earnings per Share -
Earnings per share are computed by dividing net income (loss) by the weighted
average shares outstanding. Basic weighted average shares outstanding includes
common shares outstanding. Diluted weighted average shares outstanding includes
the basic weighted average shares outstanding and dilutive common stock
equivalents. The number of common shares outstanding at December 31, 1999 was
1,292,466, an increase of 2,322 shares for the first quarter due to the exercise
of stock options.
2. Debt Obligations:
Credit Facility -
In January 1999, the Company entered into a new three-year loan and security
agreement with a bank. The agreement provides for total borrowings of up to $8
million, subject to lending formulas based on eligible receivables, inventories,
certain long-term assets and other terms specified in the agreement. This credit
facility consists of a line of credit with interest charged at 2.25% above prime
and four term-loans with interest charged at 2.75% above prime. The agreement
contains certain restrictive covenants and any outstanding borrowings are
secured by substantially all of the Company's assets. The Company was in
compliance with all of the covenants at December 31, 1999.
<PAGE>
3. Stockholders' Equity:
Employee Stock Options -
On January 15, 1998, the shareholders of Research, Inc. ratified and approved an
amendment to the 1991 Stock Plan to increase the number of shares of common
stock available under the plan by 100,000 shares to 362,500 shares. Options for
217,406 shares under the 1991 Plan were outstanding at December 31, 1999 at
prices ranging from $3.375 to $6.625 per share.
Employee Stock Purchase Plan -
On January 15, 1998, the shareholders of Research, Inc. ratified and approved
the Research, Inc. Employee Stock Purchase Plan and set aside 100,000 shares of
common stock for issuance under the plan. As of December 31, 1999, 46,782 shares
have been issued.
4. Comprehensive Income:
Other comprehensive income (loss) was comprised of the effect of changes in
foreign currency exchange rates in translating assets, liabilities and the
results of operations of the Company's foreign subsidiary. Comprehensive income
(loss) for the following three month periods were:
Three Months Ended
December 31,
-------------------------------
1999 1998
-------------------------------
Net income $248,887 $81,529
Other comprehensive
loss (11,092) (77,379)
-------------------------------
Comprehensive
income $237,795 $ 4,150
===============================
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Operations
Sales for the first three months of fiscal year 2000 (the quarter ended December
31, 1999) compared to the same period of fiscal 1999 increased 27.0% from
$5,394,000 to $6,848,000 due to the increase in sales of new products developed
in the last three years.
Gross profit for the first quarter of fiscal year 2000 compared to the same
quarter of fiscal year 1999, decreased from 39.7% to 37.0% of sales due to
product mix, higher content of purchased product and one time costs on a thermal
solutions system.
Selling expenses for the first quarter of fiscal year 2000 compared to the same
quarter of fiscal year 1999, decreased 7.3% as a percentage of sales due to
higher sales volume and the Company's efforts to leverage expenses and realign
resources.
Research and development expenses were 11.5% of sales for the first quarter of
fiscal 2000, compared to 8.8% of sales for the same period last year. Expenses
were lower during the prior year's quarter mainly due to customers partially
funding research and development expenses in that quarter.
General and administrative expenses were 3.4% of sales for the first quarter of
fiscal 2000 compared to 4.2% of sales for the same period last year.
Interest expense was $92,000 for the first quarter of fiscal year 2000, compared
to $85,000 for the same period last year. Interest expense is higher due to
higher borrowing rates and higher minimum interest payments required by the
lending facility.
Liquidity and Sources of Capital
The Company's working capital of $4,477,000 at December 31, 1999 increased from
$4,348,000 at September 30, 1999. The Company's current ratio at December 31,
1999 was 1.8 to 1 and at September 30, 1999 was 1.7 to 1.
<PAGE>
Cash balances included $1,000,000 of short-term investments that offset minimum
interest payments required by the lending agreement.
Accounts receivable and inventory decreased from September 30, 1999, due to
lower sales volumes.
In January 1999, the Company signed a new three-year loan and security agreement
with a bank. The new agreement provides for total borrowings of up to $8 million
subject to lending formulas based on eligible receivables, inventories, certain
long-term assets and other terms specified in the agreement. This new credit
facility consists of a line of credit with interest charged at 2.25% above prime
and four available term loans with interest charged initially at 2.75% above
prime. The agreement contains certain restrictive covenants and any outstanding
borrowings are secured by substantially all of the Company's assets.
The Company's management believes its cash flow from operations and borrowing
facilities will be sufficient to meet the Company's financing requirements for
the foreseeable future. The Company believes that success in its industries
requires substantial financial flexibility due to customer expectations and
rapidly changing technologies.
Year 2000 Issues
The Company experienced no material events to report.
<PAGE>
Forward-Looking Information
The statements included herein that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. There are certain important
factors that could cause actual results to differ materially from those
anticipated by some of the statements made herein. Investors are cautioned that
all forward-looking statements involve risks and uncertainty. Some of the
factors that could affect results are the effectiveness of new product
introductions, the product mix of our sales, the amount of sales generated or
volatility in the major markets, competition, currency fluctuations,
availability of labor, general economic conditions, market cycles, dependence on
capital expenditures of contract manufacturers in SMT, product cancellations or
rescheduling, and loss of a significant customer.
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
[3.1] Bylaws, As Amended
[4.1] Amendment to Loan and Security Agreement
(U.K. closure) between Coast Business Credit,
a division of Southern Pacific Bank and the
Company dated October 30, 1999 Incorporated
by reference to Exhibit (4.8) of the
Company's 10-K for the period ended September
30, 1999
[10.1] Form of Amendment No. 1 to Employment (change
of control) Agreement for employees of the
Registrant dated November 4, 1999
Incorporated by reference to Exhibit (10.7)
of the Company's 10-K for the period ended
September 30, 1999
[27] Financial Data Schedule
(b) Reports on Form 8-K
None filed during the quarter
<PAGE>
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.
RESEARCH, INCORPORATED
----------------------
(Registrant)
Date 2/11/00 /s/ Claude C. Johnson
----------------- ----------------------
Claude C. Johnson
President,
Chief Executive Officer
Date 2/11/00 /s/ Richard L. Grose
----------------- ---------------------
Richard L. Grose
Treasurer
EXHIBIT 3.1 BYLAWS, AS AMENDED
OF
RESEARCH, INCORPORATED
ARTICLE I
Shareholders
Section 1. Unless the Board of Directors establishes a different date
and time with respect to a particular annual meeting, the annual meeting of the
shareholders of this Corporation shall be held on the third Thursday in January
of each year, at such place as may be designated therefor by the Board of
Directors. A notice setting out the time and place of the annual meeting shall
be mailed, postage prepaid, to each shareholder of record at his address as it
appears on the records of the Corporation or, if no such address appears, at his
last known address, at least ten days prior to the annual meeting, but any
shareholder may waive such notice either before, at or after such meeting by a
signed waiver in writing.
Section 2. At the annual meeting, the shareholders shall elect
Directors of the Corporation for the ensuing year and shall transact such other
business as may come before them.
Section 3. A special meeting of the shareholders may be called at any
time by the President of the Corporation, and shall be called by the Secretary
upon the request in writing by two or more members of the Board of Directors,
upon the vote of the Directors, or upon the request in writing of shareholders
holding not less than one-tenth of the outstanding shares of voting stock. Such
meeting shall be called by mailing a notice thereof as above provided. Such
notice shall state the time, place, and object of the meeting.
Section 4. At any shareholders meeting, each shareholder shall be
entitled to one vote for each share of stock standing in his name on the books
of the Corporation as of the date of the meeting. Any shareholder may vote
either in person or by proxy. The presence in person or by proxy of the holders
of a majority of the shares of stock entitled to vote at any shareholders
meeting shall constitute a quorum for the transaction of business. If no quorum
be present at any meeting, the shareholders present in person or by proxy may
adjourn the meeting to such future time as they shall agree upon without
<PAGE>
further notice other than by announcement at the meeting at which such
adjournment is taken.
ARTICLE II
Directors
Section 1. The Board of Directors shall have the general management and
control of all business and affairs of the Corporation and shall exercise all
the powers that may be exercised or performed by the Corporation under the
statutes, its Articles of Incorporation, and its Bylaws.
Section 2. The Board of Directors of this Corporation shall consist of
five Directors, and a majority of the Directors then holding office shall
constitute a quorum.
Section 3. Each Director shall be elected for a term of one year, and
shall hold office for that term and until his successor is elected and
qualified. If a vacancy in the Board occurs by reason of death, resignation, or
otherwise, the vacancy may be filled for the unexpired portion of the term in
which it occurs by a majority vote of the remaining Directors.
Section 4. The Board of Directors may meet regularly at such time and
place as it shall fix by resolution and no notice of regular meetings shall be
required. Special meetings of the Board of Directors may be called by the
President or any two Directors by giving at least three days notice to each of
the other Directors by mail, telephone, telegraph, or in person, provided that
such notice may be waived either before, at, or after a meeting by any Director
by a signed waiver in writing.
Section 5. Any action which might have been taken at a meeting of the
Board of Directors may be taken without a meeting is done in writing, signed by
all of the Directors, and any such action shall be as valid and effective in all
respects as if taken by the Board at a regular meeting.
Section 6. The Board of Directors shall fix and change as it may from
time to time determine by a majority vote, the compensation to be paid the
officers of the Corporation, and, if deemed appropriate, the members of the
Board of Directors.
Section 7. Subject to the provisions of applicable laws and its
Articles of Incorporation, the Board of Directors shall have
<PAGE>
full power to determine whether any, and if any, what part of any, funds legally
available for the payment of dividends shall be declared in dividends and paid
to the shareholders; the division of the whole or any part of such funds of this
Corporation shall rest wholly within the discretion of the Board of Directors,
and it shall not be required at any time, against such discretion, to divide or
pay any part of such funds among or to the stockholders as dividends or
otherwise.
Section 8. Except as otherwise provided in Article III of these Bylaws,
the Board of Directors may, in its discretion, by the affirmative vote of a
majority of the Directors, appoint committees which shall have and may exercise
such powers as shall be conferred or authorized by the resolutions appointing
them. A majority of any such committee, if the committee be composed of more
than two members, may determine its action and fix the time and place of its
meetings, unless the Board of Directors shall otherwise provide. The Board of
Directors shall have power at any time to fill vacancies in, to change the
membership of, or to discharge any such committee.
ARTICLE III
Executive Committee
The Board of Directors may, by unanimous affirmative action of the
entire Board, designate two or more of their number to constitute an Executive
Committee which, to the extent determined by unanimous affirmative action of the
Board, shall have and exercise the authority of the Board in the management of
the business of the Corporation. Such Executive Committee shall act only in the
interval between meetings of the Board and shall be subject at all times to the
control and direction of the Board.
ARTICLE IV
Officers
Section 1. The officers of this Corporation shall be a President, one
or more Vice Presidents (any one of which may be designated as Executive Vice
President in the discretion of the Directors), a Treasurer, a Secretary, and
such other and further officers, including any number of Assistant Secretaries
and Assistant Treasurers as may be deemed necessary from time to time by the
Board of Directors, each of whom shall be elected by the Board of Directors. One
person may hold any two offices other
<PAGE>
than those of President and Vice President. Not more than two offices shall be
held by any one person. Each officer shall serve at the pleasure of the Board of
Directors until the next annual meeting of the Directors and until his successor
is elected and qualifies. Notwithstanding the foregoing, the Board of Directors
shall have the power and authority to cause the Corporation to enter into
Employment Agreements or Contracts with any of the officers of the Corporation
for periods exceeding one year.
Section 2. The President shall preside at all meetings of the Board of
Directors and of the shareholders, shall make such reports to the Board of
Directors and the shareholders as may from time to time be required, and shall
have such other powers and shall perform such other duties incident to the
office of President or as may be from time to time assigned to him by the Board
of Directors.
Section 3. The Vice Presidents of the Corporation shall each have such
powers and duties as generally pertain to their respective offices, as well as
such powers and duties as from time to time may be conferred by the Board of
Directors. In case of the death, resignation or disability of the President, the
Vice President designated as Executive Vice President, or if none, the Vice
President who has held that office for the longest continuous period of time,
shall assume the duties and responsibilities of the President until further
action by the Board of Directors.
Section 4. The Secretary shall keep a record of the meetings and
proceedings of the Directors and shareholders, have custody of the corporate
seal and of other corporate records not specifically entrusted to some other
official by these Bylaws or by direction of the Board of Directors, and shall
give notice of such meetings as are required by these Bylaws or by the
Directors.
Section 5. The Treasurer shall keep accounts of all monies and assets
of the Corporation received or disbursed, shall deposit all funds in the name of
and to the credit of the Corporation in such banks or depositories or with such
custodians as may be authorized to receive the same by these Bylaws or the Board
of Directors, and shall render such accounts thereof as may be required by the
Board of Directors, the President, or the shareholders.
<PAGE>
ARTICLE V
Fiscal Year
The fiscal year of this Corporation shall be from the first day of
October to the 30th day of September in the succeeding year.
ARTICLE VI
Office
The principal office of this Corporation shall be at such place as the
Board of Directors shall fix from time to time. The Corporation may also have an
office or offices at such other places and in such other states or countries as
the Board of Directors may from time to time authorize and establish.
ARTICLE VII
Seal
The Corporation shall have a corporate seal which shall bear the name
of the Corporation and the name of the state of incorporation and the words
"corporate seal". It shall be in such form and bear such other inscription as
the Board of Directors may determine or approve.
ARTICLE VIII
General Provisions
Section 1. Shares of stock in this Corporation not exceeding the
authorized number thereof as specified in the Articles of Incorporation may be
issued, and certificates thereof shall be authenticated by the President or any
Vice President and the Secretary or Treasurer upon authorization by the Board of
Directors and receipt by the Corporation of such consideration for such shares
as shall be specified by the Board of Directors. In the event that a bank, trust
company or other similarly qualified corporation is designated and agrees to act
as the registrar and/or transfer agent for the Corporation, then the signatures
of the officers specified above and the seal of the Corporation may be imprinted
upon the stock certificates by facsimile and said certificates may be
authenticated by signature of an authorized agent of the said registrar and/or
transfer
<PAGE>
agent. The officers of the Corporation may delegate to such transfer agent
and/or registrar such of the duties relating to the recording and maintenance of
records relating to shares of stock and shareholders of the Corporation as may
be deemed expedient and convenient and as are assumed by said registrar and/or
transfer agent.
Section 2. The Board of Directors may establish reasonable regulations
for recording of transfers of shares of stock in this Corporation, and may
establish a date, not earlier than 50 days prior to any shareholders meeting, as
of which the shareholders entitled to vote and participate in any shareholders
meeting shall be determined.
Section 3. From time to time as it may deem appropriate and
advantageous to the best interests of this Corporation, the Board of Directors
may establish such bonus, pension, profit sharing, stock bonus, stock purchase,
stock option, or other employee incentive plans, as and for the benefit of such
of the Corporation's employees as it in its sole discretion shall determine.
Section 4. No certificate for shares of stock in this Corporation, or
any other security issued by this Corporation, shall be issued in place of any
certificate alleged to have been lost, destroyed or stolen, except on production
of such evidence of such loss, destruction, or theft and on delivery to the
Corporation, if the Board of Directors shall so require, of a bond of indemnity
in such amount (not exceeding twice the value of the shares represented by such
certificate), upon such terms and secured by such surety as the Board of
Directors may in its discretion require.
Section 5. Any person who at any time shall serve, or shall have
served, as a director, officer or employee of this Corporation, or of any other
enterprise at the request of this Corporation, and the heirs, executors and
administrators of such person, shall be indemnified by this Corporation in
accordance with, and to the fullest extent provided by, the provisions of
applicable statutes of the State of Minnesota as they may from to time be
amended.
<PAGE>
ARTICLE IX
Adoption and Amendment
Section 1. These Bylaws shall become and remain effective until amended
or superseded as hereinafter provided when they shall have been adopted by the
Board of Directors named in the Articles of Incorporation, or in the absence of
such adoption, by the shareholders.
Section 2. The Board of Directors may alter or may amend these Bylaws
and may make or adopt additional Bylaws, subject to the power of the
shareholders to change or repeal the Bylaws: provided, the Board of Directors
shall not make or alter any By-Law fixing their qualifications, classifications,
term of office, or number, except the Board of Directors may make or alter any
By-Law to increase their number.
Section 3. The shareholders may alter or amend these Bylaws and may
make or adopt additional Bylaws by a majority vote at any annual meeting of the
shareholders or at any special meeting called for that purpose.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THE 10-Q FOR THE QUARTER ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,281
<SECURITIES> 0
<RECEIVABLES> 4,702
<ALLOWANCES> 100
<INVENTORY> 3,083
<CURRENT-ASSETS> 10,007
<PP&E> 3,552
<DEPRECIATION> 2,803
<TOTAL-ASSETS> 11,488
<CURRENT-LIABILITIES> 5,530
<BONDS> 0
0
0
<COMMON> 646
<OTHER-SE> 3,219
<TOTAL-LIABILITY-AND-EQUITY> 11,488
<SALES> 6,848
<TOTAL-REVENUES> 6,848
<CGS> 4,316
<TOTAL-COSTS> 4,316
<OTHER-EXPENSES> 2,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92
<INCOME-PRETAX> 402
<INCOME-TAX> 153
<INCOME-CONTINUING> 249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 249
<EPS-BASIC> .19
<EPS-DILUTED> .19
</TABLE>
