<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
------------------------------------------
Commission file number 0-10691
----------------------------------------------------
CHECK TECHNOLOGY CORPORATION
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1392000
- --------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
12500 Whitewater Drive
Minnetonka, Minnesota 55343-9420
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(612) 939-9000
- -----------------------------------------------------------------------------
Registrant's telephone number, including area code
Not Applicable
- -----------------------------------------------------------------------------
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 periods
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.10 Par Value Shares 6,161,038 as of May 11, 1999.
-----------------------------------------------------------------
1
<PAGE>
INDEX
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - - March 31, 1999 and
September 30, 1998.
Condensed consolidated statements of operations - - Three
months ended March 31, 1999 and 1998 and six months ended
March 31, 1999 and 1998.
Condensed consolidated statements of cash flows - - Six months
ended March 31, 1999 and 1998.
Condensed notes to consolidated financial statements - -
March 31, 1999.
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See Market Risk in Management's Discussion and Analysis.
PART II. OTHER INFORMATION
Item 4. Submission of Matter to a Vote of Security Holders
Item 6. Exhibits and reports on Form 8-K
SIGNATURES
2
<PAGE>
Part I. FINANCIAL INFORMATION
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
------------------- ----------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,554,677 $ 2,701,888
Short-term investments 773,924 2,582,475
Accounts receivable less allowance for doubtful accounts of $50,000 4,194,918 3,446,982
Inventories
Raw materials and component parts 6,341,039 6,038,828
Work-in-process 517,596 367,160
Finished Goods 3,864,840 3,819,433
------------------- ----------------------
10,723,475 10,225,421
Deferred income taxes 1,691,156 1,309,448
Other current assets 979,706 1,085,379
------------------- ----------------------
TOTAL CURRENT ASSETS 19,917,856 21,351,593
EQUIPMENT AND FIXTURES
Machinery and equipment 2,032,671 2,049,557
Furniture and fixtures 2,013,226 1,761,984
Leasehold improvements 314,761 293,906
------------------- ----------------------
4,360,658 4,105,447
Less accumulated depreciation and amortization (3,301,131) (3,137,533)
------------------- ----------------------
1,059,527 967,914
------------------- ----------------------
TOTAL ASSETS $ 20,977,383 $ 22,319,507
------------------- ----------------------
------------------- ----------------------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30,
1999 1998
------------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,439,642 $ 2,322,696
Employee compensation and related taxes 520,978 681,465
Income taxes payable 241,607 317,884
Deferred revenue 366,274 385,556
Current portion of capital lease obligations 12,403 11,721
------------------- ------------------
TOTAL CURRENT LIABILITIES 3,580,904 3,717,322
Capital lease obligations -- less current portion 31,045 35,059
------------------- ------------------
TOTAL LIABILITIES 3,611,949 3,752,381
STOCKHOLDERS' EQUITY
Capital Stock
Common Stock--par value $.10 per share--authorized
25,000,000 shares; issued and outstanding
March 31, 1999--6,151,038 shares;
September 30, 1998--6,178,120 shares 615,104 617,812
Additional paid in capital 16,858,330 16,938,385
Accumulated other comprehensive income (1,262,856) (917,856)
Retained earnings 1,154,856 1,928,785
------------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 17,365,434 18,567,126
------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 20,977,383 $ 22,319,507
------------------- ------------------
------------------- ------------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ending March 31, Ending March 31,
1999 1998 1999 1998
------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Sales:
Printing equipment 1,343,045 $ 2,525,089 $ 2,963,638 $ 4,117,641
Maintenance, spares and supplies 3,977,155 3,804,059 7,603,105 7,364,247
------------------ ------------------ ----------------- ------------------
Net Sales 5,320,200 6,329,148 10,566,743 11,481,888
Costs and expenses:
Cost of sales 2,485,484 2,700,082 4,871,028 4,735,771
Selling, general and administrative 2,852,247 2,810,500 5,572,451 5,578,506
Research and Development 681,298 712,772 1,359,940 1,374,952
------------------ ------------------ ----------------- ------------------
6,019,029 6,223,354 11,803,419 11,689,229
------------------ ------------------ ----------------- ------------------
(Loss) income from system sales and (698,829) 105,794 (1,236,676) (207,341)
service
Interest (income) (33,634) (75,916) (85,498) (170,407)
Unrealized exchange loss (gain) 118,687 43,908 124,339 45,369
------------------ ------------------ ----------------- ------------------
(Loss) income before taxes (783,882) 137,802 (1,275,517) (82,303)
Income taxes (274,000) 50,000 (446,000) (22,000)
------------------ ------------------ ----------------- ------------------
Net (loss) income $ (509,882) $ 87,802 $ (829,517) $ (60,303)
------------------ ------------------ ----------------- ------------------
------------------ ------------------ ----------------- ------------------
(Loss) earnings per common share
Basic and diluted $ (.08) $ 0.01 $ (0.14) $ (0.01)
------------------ ------------------ ----------------- ------------------
------------------ ------------------ ----------------- ------------------
Weighted average number of shares
and share equivalents outstanding 6,134,216 6,279,534 6,134,405 6,271,047
during the period
Weighted average number of shares and
share equivalents outstanding during 6,134,216 6,299,631 6,134,405 6,271,047
the period - assuming dilution
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ending
March 31,
1999 1998
---------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (829,517) $ (60,303)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 174,570 185,040
Other 51,426 124,169
Changes in operating assets and liabilities:
Accounts receivable (894,903) (1,087,221)
Inventories (652,113) (1,143,881)
Other current assets (302,084) 23,865
Accounts payable and accrued expenses (30,893) (136,043)
Deferred revenue (19,323) (6,461)
---------------- -----------------
NET CASH (USED IN) OPERATING ACTIVITIES (2,502,837) (2,100,835)
INVESTING ACTIVITIES
Purchase of equipment and fixtures (268,244) (97,619)
Proceeds from sale of equipment - - 38,396
Purchase of short-term investments (354,682) (4,093,361)
Proceeds from sale of short-term investments 2,163,220 5,833,980
---------------- -----------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,540,294 1,681,396
FINANCING ACTIVITIES
Addition of capital leases
(Purchase) of common stock (143,043) (121,692)
Repayment of note receivable from stock sale 14,804 10,242
Repayment of capital leases (6,077) (44,410)
---------------- -----------------
NET CASH (USED IN) FINANCING ACTIVITIES (134,316) (155,860)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (50,358) (6,598)
---------------- -----------------
(DECREASE) IN CASH & CASH EQUIVALENTS (1,147,217) (581,897)
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 2,701,894 3,165,601
---------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,554,677 $ 2,583,704
---------------- -----------------
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended September 30, 1998.
Reclassifications have been made in the prior year to conform with
classifications in the current year.
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share. Statement 123 replaced the
previously reported primary and diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements.
7
<PAGE>
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE B -- Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ended March 31, Ended March 31,
1999 1998 1999 1998
----------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Numerator:
Net Income (Loss) (509,882) 87,802 (829,517) (60,303)
----------------- --------------- -------------- --------------
Numerator for basic
and diluted earnings
per share - income(loss)
applicable to common (509,882) 87,802 (829,517) (60,303)
stockholders
Denominator:
Denominator for basic earnings
per share -
Weighted-average shares 6,134,216 6,279,534 6,134,405 6,271,047
Effect of dilutive securites:
Employee stock options -- 17,292 -- --
Employee stock grants -- 15,608 -- --
----------------- --------------- -------------- --------------
Dilutive potential common shares -- a 32,900 -- a -- a
Denominator for diluted
earnings per share -
Adjusted weighted- 6,134,216 6,312,434 6,134,405 6,271,047
average shares
----------------- --------------- -------------- --------------
----------------- --------------- -------------- --------------
Earnings (loss) per common share
basic and diluted $ (.08) $ .01 $ (.14) $ (.01)
----------------- --------------- -------------- --------------
----------------- --------------- -------------- --------------
</TABLE>
a--No incremental shares related to options are included because the impact
would be antidilutive.
8
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE C -- Comprehensive Income
As of October 1, 1998, the Company adopted Statement of Financial Accounting
Standards Number 130 (Statement No. 130) "Reporting Comprehensive Income."
Statement No. 130 establishes standards for the reporting and display of
comprehensive income and its components; however, the adoption of this statement
had no impact on the Company's net income or stockholders' equity. Statement No.
130 requires foreign currency translation adjustments, which prior to adoption
were reported separately in stockholders' equity, to be included in "other
comprehensive income." Amounts in prior year financial statements have been
reclassified to conform to Statement No. 130.
The components of comprehensive income, net of related tax, for the three and
six month periods ended March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ending March 31, Ending March 31,
1999 1998 1999 1998
------------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Net (loss) income $ (509,882) $ 87,802 $ (829,517) $ (60,303)
Foreign currency translation adjustments (307,805) (60,425) (345,000) (195,136)
------------- ----------- -------------- -------------
Comprehensive income $ (817,687) $ 27,377 $(1,174,517) $ (255,439)
------------- ----------- -------------- -------------
------------- ----------- -------------- -------------
</TABLE>
9
<PAGE>
Item 2
Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
The Company's revenues consist of (i) sales of document production systems and
related equipment and (ii) maintenance contracts, spare parts, supplies and
consumable items. For the three and six month periods ended March 31, 1999,
revenues from the sale of document production equipment declined 47% and 28%
respectively, with those of the same period in fiscal 1998, primarily due to
reduced sales of the Checktronic product line in Europe and South America and
the Foliotronic in North America. Revenue from document production equipment for
the quarter included approximately $.6 million from the sale of the Company's
Imaggia product line. The Company has held for some time a dominant position in
many of the international markets in which its Checktronic equipment is sold.
Demand for the Checktronic product line has softened in these international
markets and revenues from this product line are now largely dependent on sales
to emerging markets such as Latin America, Asia and Africa. The present
recessionary environments in Asia, South America and other emerging countries
has limited the Company's current opportunities to sell high-end capital
equipment into those regions.
For the three and six month periods ended March 31, 1999, revenues from
maintenance contracts, spare parts, supplies and consumable items increased 5%
and 3% respectively, primarily due to increased volumes of consumable sales.
The gross margin percentage for the three and six month periods ended March 31,
1999, was 53% and 54% respectively, compared to 57% and 59% in the comparable
prior year. The decrease was primarily due to the increased component in the
revenue mix of the Imaggia product line as compared to the Checktronic product
line. The Company anticipates that its gross margin percentage for fiscal 1999
will be somewhat lower than fiscal 1998 as revenue from the Imaggia line
constitutes a larger portion of the Company's total revenues.
Operating expenses during the three and six month periods ended March 31, 1999,
were flat with those of the comparable quarters a year ago. Net interest income
for the three and six month periods ended March 31, 1999, was $34,000 and
$85,000 respectively, compared to $76,000 and $170,000 for the comparable prior
quarter. The decrease was due to lower cash balances available for investment
and lower interest rates.
For the three and six month periods ended March 31, 1999, the Company reported a
net loss of ($0.08) and ($0.14) per share as compared to a net earnings of $0.01
and a net loss of ($0.01) per share in the comparable periods last year. The
decrease was primarily attributable to the reduction in revenue and gross
margins.
Market Risk:
The Company presently has three foreign subsidiaries, located in England, France
and Australia, does business in 49 countries, and generates approximately 80% of
its revenues from outside North America. The Company's ability to sell its
products in these foreign markets may be affected by changes in economic,
political or market conditions in the foreign markets in which it does business.
10
<PAGE>
The Company experiences foreign currency gains and losses, which are reflected
on the Company's income statement, due to the strengthening and weakening of the
U.S. dollar against the currencies of the Company's three foreign subsidiaries
and the resulting effect on the valuation of the intercompany accounts and
certain assets of the subsidiaries, which are denominated in U.S. dollars. The
net exchange loss for the three and six month periods ended March 31, 1999, was
$119,000 and $124,000 respectively, compared to a loss of $44,000 and $45,000 in
the comparable periods last year. The Company anticipates that it will continue
to have exchange gains or losses from foreign operations in the future.
The Company's net investment in its foreign subsidiaries was $8,248,000 and
$8,681,000 at March 31, 1999, and September 30, 1998, translated into U.S.
dollars at the closing exchange rates. The potential loss in value resulting
from a hypothetical 10% change in foreign exchange rates is not material. The
impact of the stronger U.S. dollar on the translation of foreign currency
denominated sales and related gross profit thereon was not material in 1998 or
in the first six months of fiscal 1999.
Factors Affecting Results of Operations:
The Company is continuing development of the Imaggia system, including improving
its overall reliability and robustness. The Company is using the Gemini digital
print technology, which has been developed by Delphax Systems, as the print
engine for the Imaggia system. Over the course of the development, the Company
has experienced delays due in part to development delays associated with the
Gemini print engine and finalization of the engine's toner formulation, which
are outside of the Company's control. No assurance can be given that further
delays will not occur, that Imaggia will gain market acceptance or that product
development or warranty expenses will not be higher than anticipated.
Achievement of the Company's future revenue plans depends upon the successful
market acceptance of the Imaggia system. The Company's revenues and operating
results may also fluctuate from quarter to quarter because (i) the Company's
sales cycle is relatively long, (ii) the size of orders may vary significantly,
(iii) the availability of financing for customers in some countries is variable,
(iv) customers may postpone or cancel orders, and (v) economic, political and
market conditions in some markets change with minimal notice and effect the
timing and size of orders. Because the Company's operating expenses are based on
anticipated revenue levels and a high percentage of the Company's operating
costs are relatively fixed, variations in the timing of revenue recognition
could result in significant fluctuations in operating results from period to
period.
Year 2000:
The Company began evaluating the potential impact of the Year 2000 date
conversion on its operations in 1997. This evaluation included three major
elements: (i) information technology (IT) systems, (ii) non-IT, or embedded
technology systems, and (iii) relationships with its key business suppliers.
For its IT systems, the Company has assessed its hardware and applications
(software and operating systems) and has substantially finalized its plans to
address all assessed risks. The Company is in the process of completing an
upgrade to its IT systems, which among other benefits is intended to ensure that
the Company's IT systems are Year 2000 compliant. The Company presently expects
this upgrade to be complete by mid-1999.
As a result of its internal evaluation the Company believes that its embedded
technology systems are currently Year 2000 compliant. The Company has identified
its key business partners and has been
11
<PAGE>
advised by them that they have programs in place to ensure that their
operations will be Year 2000 compliant in an appropriate timeframe.
The Company believes that it has planned for the most reasonably likely worst
case scenarios. It anticipates that its IT systems will be ready for the Year
2000, although it may experience isolated incidences of non-compliance. During
1999 it will continue to follow up with critical business partners to assess
their readiness and establish appropriate contingency plans if necessary. The
Company's cost for achieving Year 2000 compliance is part of the cost of an
overall upgrade of its information technology systems. The Company estimates
that the approximate cost of this upgrade will be $300,000, of which
approximately $200,000 was incurred prior to fiscal 1999.
Euro Conversion:
On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency (Euro). The transition period for the introduction of
the Euro will be between January 1, 1999 and January 1, 2002. The Company has
prepared for the introduction of the Euro and has evaluated methods to address
the many issues involved with the introduction of the Euro, including the
conversion of information technology systems, recalculating currency risk,
strategies concerning continuity of contracts, and impacts on the processes for
preparing taxation and accounting records. The Company believes the Euro
conversion will not have a material impact on its financial statements.
Liquidity and Capital Resources:
Working capital was $16.3 million at March 31, 1999, compared to $17.6 million
at September 30, 1998. The Company's inventory levels increased from $10.2
million at September 30, 1998, to $10.7 million at March 31, 1999, primarily due
to an increase in Imaggia related inventory. Cash and short-term investments
amounted to $2.3 million at March 31, 1999, compared to $5.3 million at
September 30, 1998.
Stockholders' equity was $17.4 million at March 31, 1999, compared to $18.6
million at September 30, 1998. In September 1998, the Company announced a stock
repurchase program of up to 500,000 shares. At March 31, 1999, the Company had
repurchased 170,500 shares at a cost of $434,000.
The Company's long-term debt to equity ratio was less than 0.01 at March 31,
1999, and September 30, 1998. The Company maintains a $2.5 million unsecured
bank line of credit. At March 31, 1999, the line was unused. The credit
agreement expired March 31, 1999, and the Company presently expects to negotiate
a new bank line of credit. The Company believes that its current financial
arrangements and anticipated level of internally generated funds will be
sufficient to fund its working capital requirements in fiscal 1999.
At March 31, 1999, the Company had no material commitments for capital
expenditures.
12
<PAGE>
Cautionary Statement:
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, in the Company's Annual Report, in the
Company's Form 10-K, in other filings with the Securities and Exchange
Commission, in the Company's press releases and in oral statements made to
securities market analysts and stockholders, which 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. Such
statements are subject to certain risks and uncertainties that could cause the
Company's actual results to differ materially from historical earnings and those
presently anticipated or projected.
The factors mentioned under the subheading "Factors Affecting Results of
Operations" are among those that in some cases have affected and in the future
could affect the Company's actual results and could cause the Company's actual
financial performance to differ materially from that expressed in any
forward-looking statement.
13
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on March 18, 1999. The
shareholders elected five directors to serve for a term ending in 2000 and until
their successors are elected. The shareholders present in person or by proxy
cast the following numbers of votes in connection with the election of
directors, resulting in the election of all of the nominees:
<TABLE>
<CAPTION>
Votes For Votes Withheld
---------- --------------
<S> <C> <C>
Robert Reznick 5,080,662 204,263
Jay A. Herman 5,081,662 203,263
Thomas H. Garrett, III 5,080,662 204,263
Gary R. Holland 5,081,662 203,263
Oscar Victor 5,074,162 210,763
</TABLE>
The shareholders also approved the selection of Ernst & Young as the Company's
independent public accountants for 1999. 5,218,256 votes were cast for the
resolution; 54,593 votes were cast against the resolution; 12,076 shares
represent votes abstained; 0 shares represent broker non-vote.
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months ended
March 31, 1999.
14
<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.
CHECK TECHNOLOGY CORPORATION
----------------------------
Registrant
Date May 14, 1999 /s/ Jay A. Herman
-------------------------------- ----------------------------
Jay A. Herman
President and Chief Executive Officer
Date May 14, 1999 /s/ Vicki J. Duncomb
-------------------------------- --------------------------------
Vicki J. Duncomb
Controller
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,554,677
<SECURITIES> 773,924
<RECEIVABLES> 4,244,918
<ALLOWANCES> 50,000
<INVENTORY> 10,723,475
<CURRENT-ASSETS> 19,917,856
<PP&E> 4,360,658
<DEPRECIATION> 3,301,131
<TOTAL-ASSETS> 20,977,383
<CURRENT-LIABILITIES> 3,580,904
<BONDS> 0
0
0
<COMMON> 615,104
<OTHER-SE> 16,750,330
<TOTAL-LIABILITY-AND-EQUITY> 20,977,383
<SALES> 10,566,743
<TOTAL-REVENUES> 10,566,743
<CGS> 4,871,028
<TOTAL-COSTS> 11,803,419
<OTHER-EXPENSES> 38,841
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,275,517)
<INCOME-TAX> (446,000)
<INCOME-CONTINUING> (829,517)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (829,517)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
