EIP MICROWAVE INC, 10QSB, 1997-05-13

EIP MICROWAVE INC
10QSB, 1997-05-13
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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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 MARCH 31, 1997

[ ] Transition Report Under Section 13 or 15(d) of the
Exchange Act For the transition period from to

COMMISSION FILE NUMBER 0-5351

EIP MICROWAVE, INC.

(Exact name of small business issuer as specified in its charter)

DELAWARE 95-2148645
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)

3 CIVIC PLAZA, SUITE 265,
NEWPORT BEACH, CALIFORNIA 92660
(Address of principal executive offices) (Zip Code)

(714) 720-1766

(Issuer's telephone number)

(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. YES [ X ] NO [ ]

OUTSTANDING COMMON STOCK: As of May 5, 1997, Registrant had only one class of
common stock, and had 424,907 shares of this $.01 par value common stock
outstanding.

Transitional Small Business Disclosure Format (check one): YES [ ] NO [ X ]

Total Number of Pages: 28
Exhibit Index 12

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EIP MICROWAVE, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1997

<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
PART I FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 1997 (unaudited) and September 30,
1996...................................................................................... 3

Condensed Consolidated Statements of Operations and Retained Earnings (Accumulated Deficit)
for the three months and six months ended March 31, 1997 and 1996 (unaudited)............. 4

Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 1997 and
1996 (unaudited).......................................................................... 5

Notes to Unaudited Condensed Consolidated Financial Statements............................. 6

Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition...... 7-9

PART II OTHER INFORMATION

Item 2. Changes in Securities...................................................................... 10

Item 4. Submission of Matters to a Vote of Security Holders........................................ 10

Item 6. Exhibits and Reports on Form 8-K........................................................... 10

Signatures............................................................................................ 11

Index to Exhibits..................................................................................... 12
</TABLE>
<PAGE>
EIP MICROWAVE, INC.
PART I -- FINANCIAL INFORMATION
ITEM 1 -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
----------- -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 115 $ 216
Short-term investments.............................................................. 26 324
----------- ------
141 540

Accounts receivable, net............................................................ 792 686
Inventories......................................................................... 1,019 1,067
Prepaid expenses.................................................................... 48 59
----------- ------
Total current assets.......................................................... 2,000 2,352
Property and equipment, net........................................................... 611 631
----------- ------
$ 2,611 $ 2,983
----------- ------
----------- ------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 554 $ 706
Accrued liabilities................................................................. 482 546
Advanced payments from customers.................................................... -- 190
Bank borrowings..................................................................... 151 185
Notes payable to affiliates......................................................... 600 --
Current portion of obligations under capital leases................................. 34 34
----------- ------
Total current liabilities..................................................... 1,821 1,661
----------- ------
Long term obligations under capital leases............................................ 78 95
----------- ------

Commitments and contingencies

Stockholders' equity:
Common stock, $.01 par value; authorized -- 10,000,000 shares;
424,907 issued and outstanding.................................................... 5 5
Additional paid-in capital.......................................................... 848 848
Retained earnings (accumulated deficit)............................................. (141) 374
----------- ------
Total stockholders' equity.......................................................... 712 1,227
----------- ------
$ 2,611 $ 2,983
----------- ------
----------- ------
</TABLE>

3
<PAGE>
EIP MICROWAVE, INC.
PART I/ITEM 1 -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
(IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
ENDED MARCH 31, MARCH 31,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales............................................................ $ 1,289 $ 1,684 $ 2,547 $ 3,244
--------- --------- --------- ---------

Costs and expenses:
Cost of sales...................................................... 802 1,005 1,595 1,985
Research, development and engineering.............................. 278 265 494 466
Selling, general and administrative................................ 497 520 963 1,052
Interest and other, net............................................ 5 (119) 10 (137)
--------- --------- --------- ---------
Total costs and expenses......................................... 1,582 1,671 3,062 3,366
--------- --------- --------- ---------
Net income (loss).................................................... (293) 13 (515) (122)
Retained earnings at beginning of period............................. 152 732 374 867
--------- --------- --------- ---------
Retained earnings (accumulated deficit) at end of period............. $ (141) $ 745 $ (141) $ 745
--------- --------- --------- ---------
Net income (loss) per share.......................................... $ (.69) $ .03 $ (1.21) $ (.29)
Weighted average common shares outstanding........................... 425 423 425 423
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

4
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EIP MICROWAVE, INC.
PART I/ITEM 1 -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(DOLLARS IN THOUSANDS, UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Cash flows from operating activities:
Net income (loss)............................................................................ $ (515) $ (122)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization.............................................................. 133 88
Gain on sale of capital equipment.......................................................... (93) (50)
Change in assets and liabilities:
Accounts receivable, net................................................................. (106) 183
Inventories.............................................................................. 48 (92)
Prepaid expenses......................................................................... 11 43
Accounts payable......................................................................... (152) 160
Accrued liabilities...................................................................... (64) (195)
Advanced payment from customers.......................................................... (190) 0
--------- ---------
Cash provided by (used in) operating activities................................................ (928) 15
--------- ---------
Cash flows from investing activities:
Purchase of short-term investments........................................................... -- (13)
Sale of short-term investments............................................................... 298 --
Capital expenditures......................................................................... (113) (327)
Proceeds from the sale of capital equipment.................................................. 93 61
--------- ---------
Cash provided by (used in) investing activities................................................ 278 (279)
--------- ---------
Cash flows from financing activities:
Proceeds from (repayment of) bank borrowings................................................. (34) 180
Notes payable to affiliates.................................................................. 600 --
Repayment of obligations under capital leases................................................ (17) --
--------- ---------
Cash provided by financing activities.......................................................... 549 180
--------- ---------

Decrease in cash and cash equivalents.......................................................... (101) (84)
Cash and cash equivalents at beginning of period............................................... 216 126
--------- ---------
Cash and cash equivalents at end of period..................................................... $ 115 $ 42
--------- ---------
--------- ---------
</TABLE>

5
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EIP MICROWAVE, INC.

PART I/ITEM 1 -- CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(a) The condensed consolidated financial statements presented in this Form
10-QSB have been prepared from the accounting records without audit on a
basis consistent with the financial statements included in the Company's
annual report filed with the Securities and Exchange Commission for the
preceding fiscal year. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished reflects all adjustments and
disclosures which are, in the opinion of management, of a normal,
recurring nature, and necessary for a fair statement of the results for
the interim periods. This report should be read in conjunction with the
Company's 1996 Annual Report on Form 10-KSB. The results of operations
for the interim periods presented are not necessarily indicative of the
results expected for the entire year.

(b) Composition of certain balance sheet captions (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
MARCH 31, -------------
1997
-----------
(UNAUDITED)
<S> <C> <C>
Accounts receivable:
Trade........................................................... $ 842 $ 736
Less allowance for doubtful accounts............................ (50) (50)
----------- -------------
$ 792 $ 686
----------- -------------
Inventories:
Raw materials................................................... $ 592 $ 719
Work-in-process................................................. 380 320
Finished goods.................................................. 47 28
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$ 1,019 $ 1,067
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Property and equipment:
Cost............................................................ $ 5,335 $ 5,319
Accumulated depreciation........................................ (4,724) (4,688)
----------- -------------
$ 611 $ 631
----------- -------------
</TABLE>

(c) The calculation of net income (loss) per share is based upon the
weighted average number of shares outstanding during the year. During the
three month and six month periods ended March 31, 1997 and 1996, the
common equivalent shares were either antidilutive due to losses in three
of those periods or immaterial and, accordingly, were excluded from the
computation of loss or income per share for those periods.

(d) In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share". This Statement is effective for the Company's fiscal year ending
September 30, 1997. The Statement redefines earnings per share under
generally accepted accounting principles under the new standard, primary
earnings per share is replaced by basic earnings per share and fully
diluted earnings per share is replaced by diluted earnings per share. The
Company does not expect the adoption of this Statement to have a
significant impact on the previously reported loss per share.

6
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EIP MICROWAVE, INC.

PART I/ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

THE FOLLOWING DISCUSSION CONTAINS TREND INFORMATION AND OTHER FORWARD-LOOKING
STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE COMPANY'S HISTORICAL RESULTS OF
OPERATIONS AND THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO,
THOSE IDENTIFIED UNDER THE HEADING "CERTAIN FACTORS" BELOW.

RESULTS OF OPERATIONS

Net sales for the three months ended March 31, 1997, were $1,289,000, a 23%
decrease from sales of $1,684,000 in the same period last year. Net sales for
the six months ended March 31, 1997, were $2,547,000, a 21% decrease from sales
of $3,244,000 in the same period last year. The decrease in sales for both
periods was primarily attributable to lower sales of frequency counters.

Gross margin decreased to 38% in the second fiscal quarter of 1997, from 40%
in the second fiscal quarter of 1996. Gross margin was 37% for the six months
ended March 31, 1997, as compared to 39% for the same period last year. The
decrease in gross margin percentage for both periods ended March 31, 1997, was
primarily attributable to higher than normal warranty repair expenses for VXI
products.

Incoming orders for the second fiscal quarter were $1,528,000, a 23%
increase from orders of $1,238,000 for the same period a year ago. Incoming
orders for the six months ended March 31, 1997, were $2,404,000, a 6% decrease
from orders of $2,554,000 for the same period a year ago. Backlog at March 31,
1997, was $566,000, an 18% increase from a backlog of $481,000 at the end of the
second fiscal quarter last year. The increase in orders for the second fiscal
quarter and backlog resulted primarily from a large order from one government
contractor. However, orders for the six months ended March 31, 1997, were also
affected by a decrease in international orders for frequency counters.

Research, development and engineering expenses increased 5% to $278,000 in
the second fiscal quarter of 1997, compared to $265,000 for the same quarter
last year. Research, development and engineering expenses increased 6% to
$494,000 for the six months ended March 31, 1997, compared to $466,000 for the
same period last year. The increase in research, development and engineering
expenses for both periods was primarily attributable to new product development
expenditures related to a new frequency measurement product line currently under
development.

Selling, general and administrative expenses decreased 4% to $497,000 during
the second fiscal quarter of 1997, compared to $520,000 for the same quarter
last year. Selling, general and administrative expenses decreased 8% to $963,000
for the six months ended March 31, 1997, compared to $1,052,000 for the same
period last year. The decrease in selling, general and administrative expenses
for both periods is due primarily to decreased commission expense resulting from
decreased sales volume, and overall expense control, compared to the same
periods last year.

The Company recorded a net loss of $293,000 for the second fiscal quarter of
1997, as compared to net income of $13,000 during the same period last year. A
net loss of $515,000 was recorded for the six months ended March 31, 1997, as
compared to a net loss of $122,000 for the same period last year. Gains on sale
of capital equipment of $57,000 and $93,000, respectively, are included in
interest and other in the net losses for the three months and six months ended
March 31, 1997. Further, the net income for the three months ended March 31,
1996, and the net loss for the six months ended on such date reflects a credit
of $111,000 due to the waiver of fees owed by the Company to members of the
Board of Directors, and a gain on sale of capital equipment of $50,000. The
decrease in earnings for the three month and six month periods ended March 31,
1997, compared to the same periods last year, is primarily due to

7
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EIP MICROWAVE, INC.

PART I/ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)

decreased sales, a decrease in gross margin and increased research, development
and engineering expenses.

FINANCIAL CONDITION

At March 31, 1997, the Company's cash, cash equivalents and short-term
investment balance was $141,000, as compared with a cash, cash equivalents and
short-term investment balance of $540,000 at September 30, 1996. At March 31,
1997, the Company had no material commitments for capital expenditures. At March
31, 1997, working capital decreased $512,000 from September 30, 1996, and the
Company's current ratio decreased to 1.10:1 from 1.42:1 over the same time
period.

On March 5, 1997, the Company renewed its bank line of credit (the Bank
Line) through March 4, 1998. The Bank Line provides for borrowings up to 60% of
eligible accounts receivable, not to exceed $500,000. Interest is charged at the
banks prime rate plus 3% per annum, provided that the interest rate in effect
each month shall not be less than 10% per annum, and is payable monthly (11.5%
as of March 31, 1997). The Bank Line contains various restrictive covenants
requiring, among other matters, the maintenance of minimum levels of tangible
net worth and profitability and certain financial ratios, including a minimum
quick ratio and a maximum debt to net worth ratio. The Bank Line also precludes
or limits the Company's ability to take certain actions, such as paying
dividends, making loans, making acquisitions or incurring indebtedness, without
the bank's prior written consent. The Bank Line is secured by substantially all
of the Company's assets. At March 31, 1997, the Company was in material
compliance with the restrictive covenants of the Bank Line. Borrowings of
$151,000 were outstanding under the Bank Line at March 31, 1997.

In the event that the Company is unable to maintain compliance with its
financial covenants under the Bank Line, J. Bradford Bishop, the Chairman and
Chief Executive Officer of the Company, and John F. Bishop, the Vice Chairman,
Treasurer and Secretary of the Company (the "Bishops"), have agreed to finance
up to $500,000 of working capital, in addition to the Subordinated Loan
(described below), on terms acceptable to the Bishops and the Company to replace
the Bank Line.

At March 31, 1997, the Company had outstanding notes in the aggregate
principal amount of $600,000 payable to the Bishops (the "Bridge Notes").
Principal and interest under the Bridge Notes of $600,000 was repaid by the
Company on April 10, 1997, with proceeds from the Subordinated Loan (described
below). Principal in an amount equal to $9,808 remains outstanding on the Bridge
Notes. Interest is charged at 10% per annum. Principal and interest under the
Bridge Notes are payable on demand. The Bridge Notes are secured by
substantially all of the Company's assets, and the Bishops have agreed to
subordinate the Bridge Notes to the Bank Line.

The Company and the Bishops are also parties to a Subordinated Loan
Agreement dated December 16, 1996. This agreement provides for a loan from the
Bishops to the Company up to a maximum aggregate amount of $600,000 (the
"Subordinated Loan"), and such aggregate amount was advanced to the Company by
the Bishops on April 10, 1997. The Subordinated Loan must be repaid by the
Company by February 1, 2000. Interest is charged at 8% per annum, and is payable
quarterly. The Subordinated Loan is subject to various restrictive covenants,
including restrictions on dividends, mergers and the sale of substantially all
assets of the Company. The Subordinated Loan is secured by substantially all of
the Company's assets, and the Bishops have agreed to subordinate the
Subordinated Loan to the Bank Line. In connection with the Subordinated Loan,
the Company issued warrants entitling the Bishops to purchase 90,000 shares of
the Company's common stock at $3.00 per share. The warrants will expire on
December 16, 2001.

8
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EIP MICROWAVE, INC.

PART I/ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)

Future operating performance and levels of capital expenditures could reduce
the total amount of funds available under the Bank Line.

The Company believes that the cash on hand, funds generated from operations,
and funds available under the Bank Line will satisfy its cash requirements
during fiscal 1997.

CERTAIN FACTORS

IN ADDITION TO THE FACTORS DISCUSSED ELSEWHERE IN THIS QUARTERLY REPORT ON
FORM 10-QSB, THE FOLLOWING ARE IMPORTANT FACTORS WHICH COULD CAUSE ACTUAL
RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY
FORWARD-LOOKING STATEMENT MADE BY OR ON BEHALF OF THE COMPANY.

PRODUCT DEVELOPMENT AND INTRODUCTION

The Company expects to continue to invest in research and development of new
products, and plans to begin producing a new frequency measurement product line
in fiscal year 1997. Due to the uncertainty associated with any new product
development and introduction (such as delays in development and lack of market
acceptance of a new product), there can be no assurances that the development
and introduction will be successful. If the new frequency measurement product
line is not successfully introduced in fiscal year 1997, the Company's business,
financial condition and results of operations will be materially adversely
affected.

LIQUIDITY

Although the Company believes that its existing and available cash
resources, together with the availability under the Bank Line should be
sufficient to meet its needs for fiscal year 1997, there can be no assurance
that such cash resources will be sufficient to satisfy the Company's operating
requirements. The actual cash resources required will depend upon numerous
factors, including those described under "Product Development and Introduction"
above and "Other Factors" below.

OTHER FACTORS

The Company's results of operations are also affected by a wide variety of
other factors, including fluctuations in customer demand, competitive factors
(such as pricing pressures on existing products and the timing and market
acceptance of new product introductions by competitors of the Company), and both
general economic conditions and conditions specific to the microwave and RF test
and measurement industry.

Due to the foregoing and other factors, past results are not a reliable
predictor of future results. In addition, the securities of many technology and
developmental companies, such as the Company, have historically been subject to
extensive price and volume fluctuations that may adversely affect the market
price of their common stock.

9
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EIP MICROWAVE, INC.

PART II -- OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES

The Company's Bank Line contains various restrictive covenants requiring,
among other matters, the maintenance of minimum levels of tangible net worth and
profitability and certain financial ratios, including a minimum quick ratio and
a maximum debt to net worth ratio. The Bank Line also precludes or limits the
Company's ability to take certain actions, such as paying dividends, making
loans, making acquisitions or incurring indebtedness, without the bank's prior
written consent. In addition, the Subordinated Loan is subject to various
restrictive covenants, including restrictions on dividends, mergers and the sale
of substantially all assets of the Company. The Bank Line and the Subordinated
Loan are more fully described in Part 1/Item 2-Financial Condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its Annual Meeting of Stockholders on February 5, 1997. Two
items were voted on by the stockholders.

(1) Mr. John F. Bishop and Mr. J. Bradford Bishop were re-elected as Class I
members of the Board of Directors with terms expiring at the 2000 Annual
Meeting. The votes cast for or withheld for each nominee were as follows:
For - 355,671; Withheld - 11,605. Michael E. Johnson and J. Sidney Webb,
each a Class II director, and Robert D. Johnson, a Class III director,
were not up for re-election and continue in office.

(2) The stockholders approved the Company's Second Amended and Restated 1994
Stock Option Plan, as adopted by the Board of Directors. Vote to approve
as follows: For - 240,598; Against - 25,362; Abstain - 790; Broker
Non-Votes - 100,526.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<S> <C> <C>
(a) Exhibits.

10(a) Loan Modification Agreement dated as of January 15, 1997, between the Company
and Silicon Valley Bank.

10(b) Loan Modification Agreement dated as of March 5, 1997, between the Company and
Silicon Valley Bank.

10(c) Indemnification Agreement dated February 19, 1997, between the Company and
Lewis R. Foster.

10(d) Indemnification Agreement dated February 19, 1997, between the Company and Ivan
Andres.

27 Financial Data Schedule.

(b) Reports on Form 8-K.
</TABLE>

The Company did not file with the Commission any reports on Form 8-K in the
quarter ended March 31, 1997.

10
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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.

EIP MICROWAVE, INC.
(Registrant)

<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------------------ ----------------------------------------- --------------

<C> <S> <C>
/s/ J. BRADFORD BISHOP
------------------------------------------- Chairman of the Board and Chief Executive
J. Bradford Bishop Officer May 5, 1997

/s/ LEWIS R. FOSTER
------------------------------------------- President and Chief Operations Officer
Lewis R. Foster May 5, 1997

/s/ JOHN F. BISHOP
------------------------------------------- Vice Chairman, Treasurer and Secretary
John F. Bishop (Principal Financial Officer) May 5, 1997
</TABLE>

11
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EIP MICROWAVE, INC.
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- --------------

<S> <C> <C>
10(a) Loan Modification Agreement dated as of January 15, 1997, between the Company and
Silicon Valley Bank................................................................ 14

10(b) Loan Modification Agreement dated as of March 5, 1997, between the Company and
Silicon Valley Bank................................................................ 17

10(c) Indemnification Agreement dated February 19, 1997, between the Company and Lewis R.
Foster............................................................................. 19

10(d) Indemnification Agreement dated February 19, 1997, between the Company and Ivan
Andres............................................................................. 24

27 Financial Data Schedule.............................................................. 29
</TABLE>

<PAGE>
Exhibit 10(a)
Form 10-QSB (3/31/97)

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of January 15, 1997,
by and between EIP Microwave, Inc. ("Borrower") whose address is 1745
McCandless Drive, Milpitas, CA 95035, and Silicon Valley Bank ("Silicon")
whose address is 3003 Tasman Drive, Santa Clara, CA 95054.

1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which
may be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant
to, among other documents, a Loan and Security Agreement, dated March 10,
1992 (including the Schedule thereto), as may be amended from time to
time (the "Loan Agreement"). The Loan Agreement provided for, among other
things, a Credit Limit in the original principal amount of Five Hundred
Thousand and 00/100 Dollars ($500,000.00) (the "A/R Facility"). The A/R
Facility has been modified pursuant to, among other documents, a Loan
Modification Agreement dated November 15, 1996, pursuant to which, among
other things, the Credit Limit was decreased to One Hundred Eighty Five
Thousand and 00/100 Dollars ($185,000.00). Defined terms used but not
otherwise defined herein shall have the same meanings as in the Loan
Agreement.

Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred
to as the "Indebtedness."

2. DESCRIPTION OF COLLATERAL AND GUARANTIES: Repayment of the Indebtedness
is secured by the Collateral as described in the Loan Agreement.

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents." Hereinafter, the Security
Documents, together with all other documents evidencing or securing the
Indebtedness shall be referred to as the "Existing Loan Documents."

3. DESCRIPTION OF CHANGE IN TERMS.

A. MODIFICATION(S) TO LOAN AGREEMENT.

1. Notwithstanding anything to the contrary contained in the section
entitled "1.1 Loans", Silicon, in its discretion, will make loans
to the Borrower (the "Loans") in amounts determined by Silicon in
its discretion up to the amount (the "Credit Limit") shown on the
Schedule to this Agreement (the "Schedule").

2. The following modifications pertain to the Schedule to the Loan
Agreement:

a. Modification(s) to Credit Limit.

(1) The first paragraph of the section entitled
"Credit Limit (Section 1.1)" is hereby amended in
its entirety to read as follows:

An amount not to exceed the lesser of: (i)
$500,000.00 at any one time outstanding or (ii) 60%
of the Net Amount of Borrower's accounts, which
Silicon in its discretion deems eligible for
borrowing.

(2) Notwithstanding anything to the contrary
contained in the section entitled "Credit Limit
(Section 1.1)" accounts relating to Marconi
Instruments and accounts relating to and with
respect to which the account debtor is a federal,
state, or local governmental entity shall no longer
be deemed as eligible accounts.

<PAGE>
Exhibit 10(a)
Form 10-QSB (3/31/97)

b. Extension of Maturity Date.

The Maturity Date as set forth in the section entitled
"Maturity Date (Section 5.1)" is hereby deleted and
replaced, effective as of the date hereof, with
"March 5, 1997."

c. Modification of the Financial Covenants.

(1) The Tangible Net Worth and Profitability covenants
as set forth in the section entitled "Financial
Covenants (Section 4.1)" are hereby amended to read
as follows:

TANGIBLE NET WORTH. Borrower shall maintain, on a
monthly basis, beginning with the month ended
September 30, 1996, a tangible net worth of not
less than $1,000,000.00 plus 100% of funded
Subordinated Debt.

PROFITABILITY. Borrower shall be profitable (after
taxes) on a quarterly basis with an allowance for
losses of $135,000.00 for the quarter ended
December 31, 1996 and $105,000.00 for the quarter
ending March 31, 1997.

(2) Notwithstanding anything to the contrary contained
in the definition of "Subordinated Debt",
indebtedness owing by Borrower to the Creditor's
named below, which shall be subordinated to the
indebtedness of Silicon under a subordination
agreement in form specified by Silicon, shall be
included in the Tangible Net Worth for the purposes
of the Financial Covenants:

CREDITORS AMOUNT
--------- ------
John F. Bishop $300,000.00
J. Bradford Bishop $300,000.00

d. Modification to "Other Covenants".

The last sentence in paragraph 2 of the section of the
Schedule to the Loan Agreement entitled "Other Covenants
(Section 4.1)", describing the monthly backlog report
requirement, is hereby deleted.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

5. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the
amount of Five Hundred and 00/100 Dollars ($500.00) (the "Loan Fee") plus all
out-of-pocket expenses.

6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that it has no defenses against the obligations to pay
any amounts under the Indebtedness.

<PAGE>
Exhibit 10(a)
Form 10-QSB (3/31/97)

Loan Modification Agreement in no way shall obligate Silicon to make any
future modifications to the Indebtedness. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Indebtedness. It is the
intention of Silicon and Borrower to retain as liable parties all makers and
endorsers of Existing Loan Documents, unless the party is expressly released
by Silicon in writing. No maker, endorser, or guarantor will be released by
virtue of this Loan Modification Agreement. The terms of this paragraph
apply not only to this Loan Modification Agreement, but also to all
subsequent loan modification agreements.

8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee and receipt by Silicon,
of Subordination Agreements executed by the Creditor's set-forth herein.

This Loan Modification Agreement is executed as of the date first
written above.

BORROWER: SILICON:

EIP MICROWAVE, INC. SILICON VALLEY BANK

By: /s/ Lewis R. Foster By: /s/ Julie Schneider
------------------- -------------------------
Name: Lewis R. Foster Name: Julie Schneider
------------------- -------------------------
Title: President Title: AVP
------------------- -------------------------

<PAGE>

Exhibit 10(b)
Form 10-QSB (3/31/97)

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of March 5, 1997, by
and between EIP Microwave, Inc. ("Borrower") whose address is 1745 McCandless
Drive, Milpitas, CA 95035, and Silicon Valley Bank ("Silicon") whose address
is 3003 Tasman Drive, Santa Clara, CA 95054.

1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which
may be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant
to, among other documents, a Loan and Security Agreement, dated March 10,
1992 (including the Schedule thereto), as may be amended from time to time
(the "Loan Agreement"). The Loan Agreement provided for, among other things,
a Credit Limit in the original principal amount of Five Hundred Thousand and
00/100 Dollars ($500,000.00) (the "A/R Facility"). The A/R Facility has been
modified pursuant to, among other documents, a Loan Modification Agreement
dated November 15, 1996, pursuant to which, among other things, the Credit
Limit was decreased to One Hundred Eighty Five Thousand and 00/100 Dollars
($185,000.00) and a Loan Modification Agreement dated January 15, 1997,
pursuant to among other things, the Credit Limit was increased to Five
Hundred Thousand and 00/100 Dollars ($500,000.00). Defined terms used but
not otherwise defined herein shall have the same meanings as in the Loan
Agreement.

Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred
to as the "Indebtedness."

2. DESCRIPTION OF COLLATERAL AND GUARANTIES: Repayment of the Indebtedness
is secured by the Collateral as described in the Loan Agreement.

3. DESCRIPTION OF CHANGE IN TERMS.

A. MODIFICATION(S) TO LOAN AGREEMENT (AND SCHEDULES THERETO).

1. The Maturity Date as set forth in the section entitled "Maturity
Date (Section 5.1)" is hereby deleted and replaced with March 4,
1998.

2. The paragraph entitled "Financial Covenants (Section 4.1)" is
hereby deleted and replaced with the following:

QUICK ASSET RATIO: Borrower shall maintain, on a
monthly basis, beginning with the month ended
January 31, 1997 a ratio of "Quick Assets" to
current liabilities of not less than 0.50 to 1.00
through the month ending September 30, 1997,
increasing to 0.60 to 1.00 thereafter.

TANGIBLE NET WORTH: Borrower shall maintain, on a
monthly basis, beginning with the month ended
January 31, 1997, a tangible net worth of not less
than $975,000.00.

DEBT TO TANGIBLE NET WORTH: Borrower shall maintain, on
a monthly basis, beginning with the month ended
January 31, 1997, a ratio of total liabilities to
tangible net worth of not more than 1.65 to 1.00.

<PAGE>
Exhibit 10(b)
Form 10-QSB (3/31/97)

PROFITABILITY: Borrower shall be profitable (after
taxes) on a quarterly basis with an allowance for
losses not to exceed $300,000.00 for the quarter
ending March 31, 1997, $165,000.00 for the quarter
ending June 30, 1997, $110,000.00 for the quarter
ending September 30, 1997 and $30,000.00 for the
quarter ending December 31, 1997.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

5. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the amount
of Five Thousand and 00/100 Dollars ($5000.00) (the "Loan Fee") plus all
out-of-pocket expenses.

6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that it has no defenses against the obligations to pay any
amounts under the Indebtedness.

7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness,
Silicon is relying upon Borrower's representations, warranties, and
agreements, as set forth in the Existing Loan Documents. Except as expressly
modified pursuant to this Loan Modification Agreement, the terms of the
Existing Loan Documents remain unchanged and in full force and effect.
Silicon's agreement to modifications to the existing Indebtedness pursuant to
this Loan Modification Agreement in no way shall obligate Silicon to make any
future modifications to the Indebtedness. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Indebtedness. It is the
intention of Silicon and Borrower to retain as liable parties all makers and
endorsers of Existing Loan Documents, unless the party is expressly released
by Silicon in writing. No maker, endorser, or guarantor will be released
by virtue of this Loan Modification Agreement. The terms of this paragraph
apply not only to this Loan Modification Agreement, but also to all
subsequent loan modification agreements.

8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee.

This Loan Modification Agreement is executed as of the date first written
above.

BORROWER: SILICON:

EIP MICROWAVE, INC. SILICON VALLEY BANK

By: /s/ Lewis R. Foster By: /s/ Julie Schneider
- ------------------------ -----------------------------

Name: Lewis R. Foster Name: Julie Schneider
- ------------------------ -----------------------------

Title: President Title: Asst. Vice President
- ------------------------ -----------------------------

<PAGE>
Exhibit 10(c)
Form 10-QSB (3/31/97)

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT is made this 19th day of February, 1997,
by and between EIP MICROWAVE, INC. (the "COMPANY") and Lewis R. Foster
("INDEMNITEE").

R E C I T A L S:

A. The Company acknowledges Indemnitee's reluctance to serve or
continue to serve the Company as a director, officer, employee and/or agent
without assurances that adequate liability indemnification is and will
continue to be provided;

B. The Company desires to attract and/or retain the services of
Indemnitee by entering into an agreement providing for broad indemnification
of Indemnitee by the Company;

C. The Company has been advised that it may provide such
indemnification under and in accordance with Delaware law by entering into
an agreement providing for broad indemnification of Indemnitee by the Company.

D. The stockholders of the Company have authorized the indemnification
of directors, officers, employees and other agents of the Company to the
maximum extent authorized by Delaware law in accordance with Section 145(f)
of the Delaware General Corporation Law; and

E. The Company desires to enter into this Agreement with Indemnitee to
provide Indemnitee with indemnification in accordance with the terms hereof.

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

1. INDEMNIFICATION.

1.1 Subject to Section 1.3 hereof, the Company hereby agrees to
hold harmless and indemnify Indemnitee of and from all claims and all
threatened, pending or completed actions, suits or proceedings, whether
civil, criminal, administrative or investigative, involving Indemnitee by
reason of the fact that he is or was a director, officer, employee or agent
of the Company (or by reason of the fact that he is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) including
all expenses (including attorneys' fees) judgments, fines and amounts paid in
settlement, to the broadest and maximum extent permitted by Delaware law.

1.2 Without limiting the generality of Section 1.1 hereof, the
indemnification provided for by Section 1.1 shall:

(i) extend to and fully cover any Loss (as hereinafter defined),
whether such Claim is made against Indemnitee, individually or jointly with
others, by reason of any Wrongful Act (as hereinafter defined) made in
Indemnitee's capacity as a director, officer, employee and/or agent,

<PAGE>
Exhibit 10(c)
Form 10-QSB (3/31/97)

(ii) include all rights of indemnification provided to Indemnitee
under the existing provisions of the Bylaws of the Company, and

(iii) include all such additional rights of indemnification as
might possibly be provided to Indemnitee under the non-exclusivity of
Article 9, Section 3 of the Bylaws of the Company or Section 145(f) of the
Delaware General Corporation Law and which shall not be violative of
Section 145 of the Delaware General Corporation Law or contrary to the
public policy of the State of Delaware.

1.3 Nothing in this Section 1 shall be deemed to provide any
indemnity by the Company to Indemnitee on account of any matter:

(i) in respect to remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law, or

(ii) for an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Company within the meaning of Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law, or

(iii) brought about or contributed to by the dishonesty of
Indemnitee if a final judgment or other final adjudication adverse to
Indemnitee establishes that acts of active and deliberate dishonesty were
committed or attempted by Indemnitee with actual dishonest purpose and
intent and were material to the adjudication, or

(iv) which is based on or attributable to Indemnitee having gained any
personal profit or disadvantage to which he was not entitled, in the event
that a final judgment or other final adjudication adverse to Indemnitee
establishes that Indemnitee in fact gained such personal profit or other
advantage to which he was not entitled, or

(v) in respect of which any final decision by a court having
jurisdiction of the matter shall determine that indemnification is not
lawful.

1.4 The Company shall pay the expenses incurred by Indemnitee in
defending any civil or criminal action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding, provided that the Company
receives an undertaking by or on behalf of Indemnitee to repay such amounts
advanced if it is ultimately determined that he is not entitled to be
indemnified by the Company as authorized under this Agreement. The Company
shall perform its obligation under this Section 1.4 until such time as it may be
determined that Indemnitee is not entitled to indemnification by virtue of one
or more of the exclusions set forth in Section 1.3 hereof.

1.5 The reference in Section 1.1. hereof to Delaware law is to
Delaware law as the same exists from time to time but, in the case of any
amendment to or change in Delaware law, only to the extent that such amendment
or change permits the Company to provide broader or greater rights of
indemnification than is permitted to the Company prior to such amendment or
change.

<PAGE>
Exhibit 10(c)
Form 10-QSB (3/31/97)

2. DEFINITIONS.

2.1 LOSS. The term "Loss" shall mean any amount Indemnitee is
obligated or asserted to be obligated to pay in respect to his legal
liability, whether actual or asserted, for a Wrongful Act, and shall include
damages, judgments, settlements and costs, attorneys' fees, charges and
expenses incurred in the defense of Claims.

2.2 WRONGFUL ACT. The term "Wrongful Act" shall mean any breach
of duty, neglect, error, misstatement, misleading statement, omission or
other act done or wrongfully attempted by Indemnitee so alleged by any
claimant or any other matter claimed against Indemnitee by reason of
Indemnitee being a director, officer, employee or agent.

2.3 SUBSIDIARY. The term "Subsidiary" shall mean any corporation
of which at least 50% of the stock is owned by the Company or by any
Subsidiary.

2.4 CLAIM. The term "Claim" shall mean any suit, action,
proceeding, investigation or claim threatened, whether civil, criminal,
administrative or investigative, made or instituted against or with respect
to Indemnitee and/or the property of Indemnitee either by or in the right of
the Company or by or in the right of a party other than the Company.

3. SCOPE OF INDEMNIFICATION. This Agreement and the indemnification
provided herein:

3.1 Shall apply to Indemnitee in his capacity or capacities as a
director, officer, employee or agent, or the like, of (i) the Company, (ii)
any Subsidiary or former Subsidiary, or any Subsidiary which is hereafter
acquired or created by the Company, and (iii) corporations, partnerships,
associations and entities other than the Company and its Subsidiaries where
Indemnitee is directed or requested to serve by the Company;

3.2 Shall be irrevocable and perpetual, and, subject to Section
1.3 hereof, shall apply to any Claim arising or Loss incurred after the date
hereof, whether made or incurred prior to or after the termination of
Indemnitee's services to the Company in the capacities described in Section
3.1 above; and

3.3 Subject to Section 1.3 hereof, shall cover Losses arising from
any Claims made against the estate, heirs, legal representative or assigns of
Indemnitee.

3.4 The Company shall not be liable under this Agreement to make
any payment in connection with any Claim made against the Indemnitee for
which payment is actually made to the Indemnitee under a valid and
collectible insurance policy, except in respect of any excess beyond the
amount of payment under such insurance.

4. AGREEMENT TO BE LIBERALLY CONSTRUED. The purpose of this Agreement
is to induce Indemnitee either to serve the Company in one or more of the
capacities described in Section 3.1 hereof, or to induce Indemnitee to
continue to serve in one or more such capacities. The Company acknowledges
that, but for this Agreement and the expectation by Indemnitee that the
Company will perform each of its obligations hereunder, Indemnitee may not
consent to serve or to continue to

<PAGE>
Exhibit 10(c)
Form 10-QSB (3/31/97)

serve the Company in such capacities. Therefore, it is the intention of the
Company and the Indemnitee that this Agreement be liberally construed so as
to achieve its purpose of, subject to Section 1.3 hereof, protecting
Indemnitee from and against Losses arising from Wrongful Acts. The Company
agrees that it will not do or fail to do any act which would or might prevent
or hinder the performance by the Company of its obligations under this
Agreement.

5. AGREEMENT NOT EXCLUSIVE. The rights and benefits of Indemnitee,
and the obligations of the Company, under this Agreement shall be in addition
to, and shall not supersede or be in lieu of, the provisions (if any)
relating to the indemnification of Indemnitee by the Company in the
Certificate of Incorporation, Bylaws or resolutions of the Board of Directors
of the Company; the provisions of policies of insurance of the Company; the
provisions of policies of insurance or indemnification arrangements provided
by persons or entities other than the Company; or applicable law.
Notwithstanding anything to the contrary in this Agreement, the Company
agrees to defend, indemnify and hold harmless Indemnitee to the full extent
permitted from time to time by applicable law.

6. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. In the event any provision of this Agreement is
finally determined by the courts to require the Company to do or fail to do
such an act, such provision shall be limited or modified in its application
to the minimum extent necessary to avoid a violation of law, and as so
limited or modified such provision and the balance of this Agreement shall be
enforceable in accordance with their terms.

7. CHOICE OF LAW. This Agreement is made and entered into pursuant to
Delaware General Corporation Law, and this Agreement shall be governed by,
and its provisions construed in accordance with, the laws of the State of
Delaware.

8. CHOICE OF FORUM. The Company agrees that any action by or on
behalf of the Company under this Agreement or to enforce or interpret any
provision of this Agreement shall be brought only in the state courts of the
State of Delaware, and in no other court; and that if any action is
instituted in any court by Indemnitee under this Agreement or to enforce or
interpret any of its terms, the Company hereby agrees, and will at such time
agree, to the exclusive jurisdiction and exclusive venue of such court, and
to personal service upon the Company by such court, for the purpose of such
action, and will not attempt to transfer or remove such action to another
court.

9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee's estate, heirs, legal representatives and assigns.

10. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement or to enforce or interpret any of the terms
of this Agreement, Indemnitee shall be entitled to be paid all court costs
and expenses, including attorneys' fees, incurred by Indemnitee with respect
to such action, unless as a part of such action the court determines that
each of the material assertions made by Indemnitee as a basis of such action
was not made in good faith or were frivolous. In the event any action is
instituted by or in the name of the Company under this Agreement or to
enforce or interpret any of the terms of this Agreement, Indemnitee shall be
entitled

<PAGE>
Exhibit 10(c)
Form 10-QSB (3/31/97)

to be paid all court costs and expenses, including reasonable attorneys'
fees, incurred by Indemnitee in defense of such action (including with
respect to Indemnitee's counterclaims and cross claims made in such action),
unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action was made in bad faith or was
frivolous.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

EIP MICROWAVE, INC.

By: /s/ J. BRADFORD BISHOP
----------------------------
J. Bradford Bishop
Chairman of the Board and
Chief Executive Officer

AGREED TO AND ACCEPTED BY INDEMNITEE:

/s/ LEWIS R. FOSTER
- --------------------------
Lewis R. Foster

<PAGE>
Exhibit 10(d)
Form 10-QSB (3/31/97)

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT is made this 19th day of February, 1997,
by and between EIP MICROWAVE, INC. (the "COMPANY") and Ivan Andres
("INDEMNITEE").

R E C I T A L S:

B. The Company desires to attract and/or retain the services of
Indemnitee by entering into an agreement providing for broad indemnification
of Indemnitee by the Company;

E. The Company desires to enter into this Agreement with Indemnitee to
provide Indemnitee with indemnification in accordance with the terms hereof.

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

1. INDEMNIFICATION.

1.2 Without limiting the generality of Section 1.1 hereof, the
indemnification provided for by Section 1.1 shall:

<PAGE>
Exhibit 10(d)
Form 10-QSB (3/31/97)

(ii) include all rights of indemnification provided to Indemnitee
under the existing provisions of the Bylaws of the Company, and

1.3 Nothing in this Section 1 shall be deemed to provide any
indemnity by the Company to Indemnitee on account of any matter:

(i) in respect to remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law, or

(v) in respect of which any final decision by a court having
jurisdiction of the matter shall determine that indemnification is not
lawful.

<PAGE>
Exhibit 10(d)
Form 10-QSB (3/31/97)

2. DEFINITIONS.

2.3 SUBSIDIARY. The term "Subsidiary" shall mean any corporation
of which at least 50% of the stock is owned by the Company or by any
Subsidiary.

3. SCOPE OF INDEMNIFICATION. This Agreement and the indemnification
provided herein:

3.3 Subject to Section 1.3 hereof, shall cover Losses arising from
any Claims made against the estate, heirs, legal representative or assigns of
Indemnitee.

<PAGE>
Exhibit 10(d)
Form 10-QSB (3/31/97)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

EIP MICROWAVE, INC.

By: /s/ J. BRADFORD BISHOP
----------------------------
J. Bradford Bishop
Chairman of the Board and
Chief Executive Officer

AGREED TO AND ACCEPTED BY INDEMNITEE:

/s/ IVAN ANDRES
- ------------------------
Ivan Andres

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 115
<SECURITIES> 26
<RECEIVABLES> 842
<ALLOWANCES> 50
<INVENTORY> 1,019
<CURRENT-ASSETS> 2,000
<PP&E> 5,335
<DEPRECIATION> 4,724
<TOTAL-ASSETS> 2,611
<CURRENT-LIABILITIES> 1,821
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 707
<TOTAL-LIABILITY-AND-EQUITY> 2,611
<SALES> 2,547
<TOTAL-REVENUES> 2,547
<CGS> 1,595
<TOTAL-COSTS> 1,595
<OTHER-EXPENSES> 1,467
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (515)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (515)
<EPS-PRIMARY> (1.21)
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</TABLE>