<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1 TO FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended June 30, 1998
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________to ____________
Commission file number 0-9899
MEDICAL GRAPHICS CORPORATION
(Exact name of small business issuer as specified in its charter)
MINNESOTA 41-1316712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 OAK GROVE PARKWAY, SAINT PAUL, MINNESOTA 55127-8599
(Address of principal executive offices)
Registrant's telephone number, including area code: (651) 484-4874
Indicate by check mark 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
--- ---
As of August 12, 1998, the Company had outstanding 5,056,975 shares of Common
Stock, $.05 par value, and 444,445 shares of Class A Stock, $.05 par value.
Each share of Class A Stock is convertible into 1.5 shares of Common Stock.
Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDICAL GRAPHICS CORPORATION
BALANCE SHEETS
(UNAUDITED IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
1998
(AS RESTATED DECEMBER 31,
SEE NOTE 6) 1997
-------------------- ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 185 $ 387
Accounts receivable, net of allowance for doubtful
accounts of $166 and $164 4,252 3,890
Inventories:
Purchased components and work in process 3,443 3,164
Finished goods 1,991 1,636
-------------------- ------------------
5,434 4,800
Prepaid expenses 323 272
-------------------- ------------------
Total Current Assets 10,194 9,349
-------------------- ------------------
EQUIPMENT AND FIXTURES 4,093 4,072
LESS ACCUMULATED DEPRECIATION 3,411 3,110
-------------------- ------------------
682 962
SOFTWARE PRODUCTION COSTS, NET OF ACCUMULATED
AMORTIZATION OF $1,023 AND $855 613 602
OTHER ASSETS 10 13
-------------------- ------------------
$ 11,499 $ 10,926
-------------------- ------------------
-------------------- ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,816 $ 2,261
Accounts payable financed with vendors - current 924 1,145
Line of credit 2,584 2,254
Employee compensation 653 786
Deferred service contract revenue 899 896
Warranty reserve 374 414
Other liabilities and accrued expenses 595 675
-------------------- ------------------
Total Current Liabilities 8,845 8,431
COMMITMENTS AND CONTINGENCIES
LONG-TERM ACCOUNTS PAYABLE FINANCED WITH VENDORS 397 807
SHAREHOLDERS' EQUITY
Class A stock; liquidation preference of $3.375 per share 22 22
Common stock 168 148
Additional paid-in capital 15,346 13,727
Retained deficit (13,279) (12,209)
-------------------- ------------------
2,257 1,688
-------------------- ------------------
$ 11,499 $ 10,926
-------------------- ------------------
-------------------- ------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MEDICAL GRAPHICS CORPORATION
STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30.
---------------------------------- ------------------------------------------
1998 1997 1998 1997
(AS RESTATED (AS RESTATED (AS RESTATED
SEE NOTE 6) SEE NOTE 6) SEE NOTE 6)
--------------- ---------------- -------------------- ------------------
<S> <C> <C> <C> <C>
REVENUES:
Equipment sales $3,976 $3,773 $ 7,809 $ 7,396
Service and supplies revenues 1,146 1,240 2,383 2,374
--------------- ---------------- -------------------- ------------------
Total revenues 5,122 5,013 10,192 9,770
COST OF REVENUES 3,269 3,086 6,253 6,304
--------------- ---------------- -------------------- ------------------
Gross margin 1,853 1,927 3,939 3,466
OPERATING EXPENSES:
Selling and marketing 1,520 1,531 2,929 3,070
General and administrative 534 607 1,027 1,172
Research and development 449 537 856 1,059
Nonrecurring charges 53 1,358
--------------- ---------------- -------------------- ------------------
2,503 2,728 4,812 6,659
--------------- ---------------- -------------------- ------------------
LOSS FROM OPERATIONS (650) (801) (873) (3,193)
Interest expense (100) (63) (197) (148)
--------------- ---------------- -------------------- ------------------
LOSS BEFORE INCOME TAXES (750) (864) (1,070) (3,341)
Income tax benefit 0 0 0 0
--------------- ---------------- -------------------- ------------------
NET LOSS $ (750) $ (864) $(1,070) $(3,341)
--------------- ---------------- -------------------- ------------------
--------------- ---------------- -------------------- ------------------
NET LOSS PER WEIGHTED
AVERAGE SHARE
Basic $(0.13) $(0.19) $ (0.19) $ (0.80)
Diluted $(0.13) $(0.19) $ (0.19) $ (0.80)
--------------- ---------------- -------------------- ------------------
--------------- ---------------- -------------------- ------------------
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 5,708 4,496 5,595 4,175
Diluted 5,708 4,496 5,595 4,175
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MEDICAL GRAPHICS CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1998 1997
(AS RESTATED (AS RESTATED
SEE NOTE 6) SEE NOTE 6)
-------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,070) ($3,341)
Adjustments to reconcile net loss to net cash provided (used)
in operating activities
Issuance of common stock warrants $608
Depreciation 301 286
Amortization 168 166
Changes in operating assets and liabilities
Accounts receivable (362) 584
Inventory (634) 2,082
Prepaid expenses and other assets (48) (49)
Accounts payable and accrued expenses 121 (257)
Warranty reserve (40) 157
Deferred service contract revenue 3 (89)
-------------------- ------------------
Net cash (used) provided in operating activities (1,561) 147
-------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Software production costs (179) (141)
Capital expenditures (21) (86)
-------------------- ------------------
Net cash used in investing activities (200) (227)
-------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on bank line of credit 330 (1,483)
Payments on long-term accounts payable financed with vendors (410) (227)
Net proceeds from issuances of common stock 1,639 1,519
-------------------- ------------------
Net cash provided (used) by financing activities 1,559 (191)
-------------------- ------------------
NET DECREASE IN CASH (202) (271)
CASH AT BEGINNING OF PERIOD 387 545
-------------------- ------------------
CASH AT END OF PERIOD $185 $274
-------------------- ------------------
-------------------- ------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation of results have been included.
The balance sheet at December 31, 1997 was derived from the audited financial
statements as of that date. Operating results for the three and six month
periods ended June 30, 1998 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998. For further
information, refer to the financial statements and notes thereto included in
the Company's Annual Report on Form 10-KSB/A for the fiscal year ended
December 31, 1997.
2. RECLASSIFICATIONS
Certain amounts in the Company's Form 10-QSB for the three and six month
periods ended June 30, 1997 have been reclassified to conform to the 1998
presentation. These reclassifications had no effect on net loss or
shareholders' equity as previously reported.
3. NON-RECURRING EXPENSES
During the quarter ended March 31, 1997, the Company implemented certain cost
control strategies which included the termination of certain employees and
the renegotiation of the Company's bank line of credit. A total of $1,358,000
in non-recurring expenses were recorded during the six months ended June 30,
1997 related to severance, legal, consulting and accounting expenses.
4. AMENDMENT TO BANK LINE OF CREDIT
In March, 1998, the Company amended its line of credit agreement.
5. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income", which was adopted by the Company beginning January 1, 1998. SFAS No.
130 requires the disclosure of comprehensive income and its components in the
general-purpose financial statements. The adoption by the Company of SFAS No.
130 did not have a material effect on the Company's financial statements for
the three months ended June 30, 1998 or 1997. Total comprehensive loss for
the three months ended June 30, 1998 and 1997 was $(750,000) and $(864,000),
respectively. Total comprehensive loss for the six months ended June 30, 1998
and 1997 was $(1,070,000) and $(3,341,000), respectively.
Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosure
about Segments on an Enterprise and Related Information". SFAS No. 131
redefines how operating segments are determined and requires disclosures of
certain financial and descriptive information about a Company's operating
segments. This statement does not have a material impact on results reported
in the financial statements.
<PAGE>
6. RESTATEMENT
Subsequent to the issuance of the June 30, 1998 Quarterly Report on Form
10-QSB the Company determined that inventory write-downs recorded in 1996
were overstated and that certain restructuring charges recorded in 1996 and
the six months ended June 30, 1997 were missclassified and/or recorded in the
wrong period. As a result, the balance sheet at June 30, 1998 has been
restated to increase inventory and the statements of operations for the three
and six months ended June 30, 1998 and 1997 have been restated to properly
classify charges previously recorded as restructuring, to record charges
previously recorded in 1996 in the first quarter of 1997, and to eliminate the
reversal of certain inventory provisions during the first quarter of 1998.
The effects of these adjustments on the financial statements at June 30, 1998
and for the three and six months ended June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
-----------------------------------
1997
-----------------------------------
AS PREVIOUSLY AS
REPORTED RESTATED
-------------- -----------
<S> <C> <C>
General and administrative $510 $607
Non-recurring 150 53
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
-------------------------------------------------------------------------------
1998 1997
---------------------------------- ------------------------------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED
---------------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Cost of goods sold $ 6,127 $ 6,253
Selling and marketing 2,730 2,929
General and administrative $ 884 $ 1,172
Non-recurring 0 1,358
Restructuring charges 1,496 0
Net loss (745) (1,070) (3,191) (3,341)
Net income (loss) per share
(basic and diluted) (0.13) (0.19) (0.76) (0.80)
<CAPTION>
AS OF JUNE 30, 1998
----------------------------------
AS
PREVIOUSLY AS
REPORTED RESTATED
---------------- ---------------
<S> <C> <C>
Inventories $ 5,199 $ 5,434
Retained deficit (13,514) (13,279)
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
Statements included in this Quarterly Report on Form 10-QSB that are not
historical or current facts are "forward-looking statements" made pursuant to
the safe harbor provision of the Private Securities Litigation Reform Act of
1995 and are subject to certain risks and uncertainties that could cause
actual results to differ materially. Among these risks and uncertainties are
(i) the fact that the Company has incurred losses of $1,070,000 for the six
months ended June 30, 1998, and losses of $5,112,000, $8,361,000 and
$1,731,000 for the fiscal years ended December 31, 1997, 1996 and 1995,
respectively; (ii) the ability of the Company's distributors to successfully
market and sell the Company's product in markets outside the United States;
(iii) the Company's ability to successfully market its product in the United
States at a favorable margin considering significant price competition in the
industry; (iv) the extent to which physicians and health plan administrators
are motivated to use non-invasive diagnostic testing to detect early signs of
disease; (v) the Company's ability to successfully upgrade its product
software systems to a Windows-Registered Trademark- environment; and (vi) the
Company's ability to develop future products which are technologically
advanced and accepted by the marketplace. For a detailed description of these
and other factors, see Management's Discussion and Analysis of Financial
Condition or Plan of Operations, Forward-Looking Statements, Item 6, Part II,
of 1997 Form 10-KSB/A.
RESULTS OF OPERATIONS
Subsequent to the issuance of the June 30, 1998 Quarterly Report on Form
10-QSB the Company determined that inventory write-downs recorded in 1996
were overstated and that certain restructuring charges recorded in 1996 and
the six months ended June 30, 1997 were missclassified and/or recorded in the
wrong period. As a result, the balance sheet on June 30, 1998 has been
restated to increase inventory and the statements of operations for the three
and six months ended June 30, 1998 and 1997 have been restated to properly
classify charges previously recorded as restructuring, to record charges
previously recorded 1996 in the first quarter of 1997, and to eliminate the
reversal of certain inventory provisions during the first quarter of 1998.
The effects of these adjustments on the financial statements at June 30, 1998
and for the three and six months ended June 30, 1998 and 1997 are reflected in
footnote 6 to the financial statements.
The Company recorded net losses of $750,000 and $864,000 for the three months
ended June 30, 1998 and 1997, respectively. Included in the 1997 loss was
$53,000 of non-recurring expenses. For the six months ended June 30, the
Company recorded net losses of $1,070,000 and $3,341,000 for 1998 and 1997,
respectively. The six month loss for 1997 included $1,358,000 of
non-recurring expenses.
REVENUES
Revenues consist of equipment sales and service and supply revenues.
Equipment sales reflect revenues from the Company's pulmonary function
analysis systems, gas exchange testing systems and sleep diagnostic systems.
Service and supply revenues reflect contract revenues from extended
warranties, revenues from non-warranty service visits and sales of
peripherals and supplies.
Second quarter revenues increased 2.2% to $5,122,000 in 1998 compared to
$5,013,000 in 1997. Domestic revenue increased 28.7% to $3,444,000 in 1998
compared to $2,675,000 in 1997. The increase in 1998 domestic revenue was
primarily due to sales of sleep diagnostic systems, which were introduced in
September, 1997. International revenue decreased 51.6% to $532,000 in 1998
from $1,098,000 in 1997. The strong U. S. Dollar, aggressive competition in
Europe and economic difficulties being experienced by Asian Pacific countries
all contributed to a decline in international revenue. Service and supply
revenue decreased 7.6% to $1,146,000 in 1998 from $1,240,000 in 1997 due to
decreased supply revenue offset by increased non-warranty service revenues.
For the six months ended June 30, revenues increased 4.3% to $10,192,000 in
1998 from $9,770,000 in 1997. Year to date domestic revenues increased 17.9%
to $6,385,000 in 1998 from $5,414,000 in 1997 on the strength of sleep
diagnostic systems which were introduced in September, 1997. Internationally,
revenues decreased 28.2% to $1,424,000 in 1998 from $1,982,000 in 1997 due to
a strong U. S. Dollar and aggressive European competition. Service and supply
revenue is comparable to prior year with $2,383,000 for 1998 and $2,374,000
for 1997.
<PAGE>
GROSS MARGIN
Gross margin percentage decreased to 36.2% of revenue for the three months
ended June 30, 1998 from 38.4% in 1997. Increased average selling prices for
pulmonary and gas exchange systems were offset by lower margins associated
with sales of the Company's new sleep diagnostic systems.
For the six months ended June 30, gross margin percentage increased to 38.6%
in 1998 from 35.5% in 1997. This year to date increase reflects the Company's
ongoing efforts to decrease its costs of manufacturing through increased
efficiencies and improved average pricing for the Company's traditional
products, partially offset by lower margins related to the Company's new
sleep diagnostic systems.
SELLING AND MARKETING
Selling and marketing expenses for the three months ended June 30, 1998
decreased modestly by 0.7% to $1,520,000 in 1998 from $1,531,000 in 1997.
Expenses associated with expanding the Company's domestic sales force have
offset savings associated with the 1997 decision to sell its asthma business
unit and reduce focus on the sports medicine market. Year to date selling and
marketing expenses decreased 4.6% to $2,929,000 in 1998 from $3,070,000 in
1997.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased 12.0% to $534,000 in the second
quarter of 1998 from $607,000 in 1997. The decrease is attributed to lower
consulting expenses in 1998 than in 1997 when the Company began to implement
its cost reduction strategies and lower allowances for doubtful accounts
receivable. Year to date general and administrative expenses decreased 12.4%
to $1,027,000 in 1998 from $1,172,000 in 1997.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased 16.4% to $449,000 in the second
quarter of 1998 from $537,000 in 1997. The decrease reflects the Company's
1997 restructuring decision to use in-house software engineers rather than
independent software contractors as part of the Company's transition of its
product software to a Windows95-Registered Trademark- platform. Year to date,
research and development expenses decreased 19.2% to $856,000 in 1998 from
$1,059,000 in 1997.
NON-RECURRING EXPENSES
Non-recurring expenses of $53,000 and $1,358,000 for the three and six months
ended June 30, 1997, respectively, included severance, legal, accounting and
consulting expenses associated with the cost reduction strategies implemented
during the first and second quarters of 1997.
LIQUIDITY AND FINANCIAL RESOURCES
At June 30, 1998, the Company had cash of $185,000 and working capital of
$1,349,000. In addition, the Company had a balance outstanding under its bank
line of credit of $2,584,000 and additional availability of $1,049,000.
During the six months ended June 30, 1998, the Company used $1,561,000 of
cash in operating activities, primarily resulting from a net loss of
$1,070,000 and increases of $362,000 in accounts receivable and $634,000 in
inventory. The Company used $200,000 for investing activities, consisting of
software production costs of $179,000 and capital expenditures of $21,000.
The Company generated $1,559,000
<PAGE>
from financing activities, primarily from $1,500,000 in proceeds from the
private placement of its common stock and net borrowings of $330,000 under
its line of credit, offset by a decrease of $410,000 in long-term accounts
payable with vendors.
At June 30, 1997, the Company had cash of $274,000 and working capital of
$1,860,000.
During the six months ended June 30, 1997, the Company generated $147,000 of
cash from operating activities, primarily resulting from a loss of $3,341,000
and a decrease of $257,000 in accounts payable and accrued expenses which
were offset by noncash common stock warrant expense of $608,000 and
depreciation and amortization expense of $452,000, in addition to a decrease
of $2,082,000 in inventory, and $584,000 in accounts receivable. The Company
used $227,000 for investing activities, consisting of capital expenditures of
$86,000 and software production costs of $141,000. The Company expended
$191,000 for financing activities, primarily as a result of a $3,400,000
payoff of its former bank line of credit and a decrease of $227,000 in
long-term accounts payable with vendors, partially offset by net proceeds of
$1,519,000 from the private placement of its Class A Stock and net borrowings
of $1,917,000 under its existing line of credit.
At June 30, 1998 the Company had no material commitments for capital
expenditures.
The Company is currently negotiating with its bank to expand its existing
line of credit. Management believes that it will be successful in expanding
its line of credit and that cash generated from operations, together with
cash and borrowings available under its expanded line of credit facility will
be adequate to satisfy its liquidity and capital resource needs through 1998.
If negotiations with its bank are not successful, the Company would explore
raising cash from other sources.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in various claims and litigation which are
incidental to its business. Management is of the opinion that ultimate
settlement of these matters will not have a material impact on its financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on May 13, 1998. The
shareholders took the following actions:
(a) The shareholders elected two directors to hold office until the annual
meeting of shareholders held in the year 2001. 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>
Glenn D. Taylor 3,092,534 115,075
John D. Wunsch 3,092,534 115,075
</TABLE>
(b) The shareholders ratified and approved an amendment to the Company's
1987 Stock Option Plan increasing the number of shares of Common Stock
reserved for issuance under the Plan from 900,000 shares to 950,000
shares. 1,674,977 votes were cast for the resolution, 347,698 votes were
cast against the resolution and 16,280 votes abstained.
(c) The shareholders ratified and approved an amendment to the Company's
Non-Employee Director Compensation Plan increasing the number of shares
of Common Stock reserved for issuance under the Plan from 250,000 to
450,000 shares. 1,664,530 votes were cast for the resolution; 378,815
votes were cast against the resolution; and 7,815 votes abstained.
(d) The shareholders ratified and approved the election of Deloitte & Touche
LLP as the Company's auditing firm for the fiscal year ending December
31, 1998. 3,096,824 votes were cast for the resolution; 8,865 votes were
cast against the resolution; and 3,920 votes abstained.
ITEM 5. OTHER INFORMATION
The deadline for submission of shareholder proposals pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended, for inclusion in the
Company's proxy statement for its 1999 Annual Meeting of Shareholders is
December 30, 1998. Additionally, if the Company receives notice of a
shareholder proposal after February 28, 1998, such proposal will be
considered untimely pursuant to Rules 14a-4 and 14a-5(e) and the persons
named in proxies solicited by the Board of Directors of the Company for its
1999 Annual Meeting of Shareholders may exercise discretionary voting power
with respect to such proposal.
On August 3, 1998, the Company's Board of Directors elected Richard E. Jahnke
as president, chief executive officer and a member of its Board of Directors,
replacing Glenn D. Taylor who resigned.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits List
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
There were no Reports on Form 8-K filed during the quarter ended June
30, 1998.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Medical Graphics Corporation
- -------------------------------
(Registrant)
Date April 15, 1999 /s/ Richard E. Jahnke
--------------- -----------------------------------------
Richard E. Jahnke, President and Chief
Executive Officer (Principal Executive
Officer)
Date April 15, 1999 /s/ Dale H. Johnson
--------------- -----------------------------------------
Dale H. Johnson, Chief Financial Officer
(Chief Accounting Officer)
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ----- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED
JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 185 274
<SECURITIES> 0 0
<RECEIVABLES> 4,418 4,509
<ALLOWANCES> (166) (279)
<INVENTORY> 5,434 5,111
<CURRENT-ASSETS> 10,194 9,860
<PP&E> 4,093 3,943
<DEPRECIATION> (3,411) (2,817)
<TOTAL-ASSETS> 11,499 11,450
<CURRENT-LIABILITIES> 8,845 8,000
<BONDS> 0 0
0 0
0 0
<COMMON> 190 152
<OTHER-SE> 2,067 1,889
<TOTAL-LIABILITY-AND-EQUITY> 11,499 11,450
<SALES> 3,976 3,773
<TOTAL-REVENUES> 5,122 5,013
<CGS> 3,269 3,086
<TOTAL-COSTS> 5,772 5,814
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 55
<INTEREST-EXPENSE> 100 63
<INCOME-PRETAX> (750) (864)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (750) (864)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (750) (864)
<EPS-PRIMARY> (0.13) (0.19)
<EPS-DILUTED> (0.13) (0.19)
</TABLE>
