<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-14068
-------
Memry Corporation
-----------------
(Exact name of small business issuer as specified in its charter)
Delaware 06-1084424
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation of organization)
57 Commerce Drive, Brookfield, Connecticut 06804
------------------------------------------------
(Address of principal executive offices)
(203) 740-7311
--------------
(Issuer's telephone number)
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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date. As of November 11, 1998, 20,639,304
of the registrant's common stock, par value $.01 per share, were issued and
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
1
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of September 30, 1998
and June 30, 1998
Condensed Consolidated Statements of Operations for the three
months ended September 30, 1998 and 1997
Condensed Consolidated Statements of Cash Flows for the three
months ended September 30, 1998 and 1997
Notes to the Condensed Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II --- OTHER INFORMATION
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Memry Corporation & Subsidiary
Consolidated Balance Sheets
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
---------------- ----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 849,000 $ 1,189,000
1,189,000
Accounts receivable, less allowance for doubtful
accounts 2,811,000 3,534,000
Note receivable 325,000 325,000
Inventories 2,717,000 2,336,000
Prepaid expenses and other 234,000 62,000
Assets of discontinued segment 264,000 210,000
---------------- ----------------
Total current assets 7,200,000 7,656,000
---------------- ----------------
Equipment and improvements, at cost 4,790,000 4,593,000
Less accumulated depreciation (2,017,000) (1,876,000)
---------------- ----------------
2,773,000 2,717,000
---------------- ----------------
Other Assets
Patents and patent rights, less accumulated
amortization 1,700,000 1,734,000
Goodwill, less accumulated
amortization 888,000 906,000
Deferred financing costs, less accumulated
amortization 40,000 43,000
Deposits 29,000 29,000
---------------- ----------------
2,657,000 2,712,000
---------------- ----------------
Total assets $ 12,630,000 $ 13,085,000
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 1,259,000 $ 2,320,000
Notes payable 100,000 100,000
Current maturities of capital lease obligations 24,000 31,000
---------------- ----------------
Total current liabilities 1,383,000 2,361,000
---------------- ----------------
Capital lease obligations, less current maturities 19,000 19,000
Note Payable, less current maturities 379,000 580,000
---------------- ----------------
1,781,000 2,960,000
---------------- ----------------
Stockholders' Equity
Common stock, $.01 par value; 30,000,000 authorized
shares; 19,961,456 shares issued and outstanding 200,000 199,000
Additional paid-in capital 41,147,000 41,121,000
Accumulated deficit (30,498,000) (31,195,000)
---------------- ----------------
Total stockholders' equity 10,849,000 10,125,000
---------------- ----------------
Total liabilities and stockholder's equity $ 12,630,000 $ 13,085,000
================ ================
</TABLE>
3
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Memry Corporation & Subsidiary
Consolidated Statements of Operations
For the Three Months Ended September, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Revenues
Product Sales $ 4,825,000 $ 3,993,000
Research and development 28,000 -
------------- -------------
4,853,000 3,993,000
------------- -------------
Cost of revenues
Manufacturing 2,415,000 2,007,000
Research and development 39,000 -
------------- -------------
2,454,000 2,007,000
------------- -------------
Gross profit 2,399,000 1,986,000
------------- -------------
Operating expenses
General, selling and administration 1,521,000 1,320,000
Depreciation and amortization 69,000 83,000
------------- -------------
1,590,000 1,403,000
------------- -------------
Income from operations 809,000 583,000
Other income (expense)
Interest expense - (55,000)
Gain on disposition of assets - 25,000
------------- -------------
- (30,000)
------------- -------------
Income before income taxes 809,000 553,000
Provision for income taxes 112,000 45,000
------------- -------------
Net income $ 697,000 $ 508,000
============= =============
Net income per share
Basic $ 0.03 $ 0.03
============= =============
Diluted $ 0.03 $ 0.03
============= =============
Weighted average number of common shares outstanding
Basic 19,951,000 17,122,000
============= =============
Diluted 21,548,000 20,206,000
============= =============
</TABLE>
4
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Memry Corporation & Subsidiary
Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 697,000 $ 508,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 195,000 180,000
Compensation paid by the issuance of common stock 11,000 16,000
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable 763,000 (141,000)
(Increase) decrease in inventories (381,000) 159,000
(Increase) decrease in prepaid expenses and
other assets (169,000) 314,000
Decrease in accounts payable and
Accrued expenses (1,065,000) (524,000)
----------- -----------
Net cash provided by operating activities 51,000 512,000
Cash Flows From Investing Activities
Purchases of property, plant and equipment (197,000) (78,000)
----------- -----------
Net cash used in investing activities (197,000) (78,000)
Cash Flows From Financing Activities
Proceeds from sale of common stock, net 15,000 150,000
Net decrease in revolving loans payable (180,000) (353,000)
Principal payments on notes payable (21,000) (81,000)
Payments on capital lease obligations (8,000) (6,000)
----------- -----------
Net cash used in financing activities (194,000) (290,000)
----------- -----------
Net increase (decrease) in cash (340,000) 144,000
Cash and cash equivalents, beginning of period 1,189,000 25,000
----------- -----------
Cash and cash equivalents, end of period $ 849,000 $ 169,000
=========== ===========
</TABLE>
5
<PAGE>
MEMRY CORPORATION & SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. 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. Operating
results for the three month period ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending June 30, 1999
("fiscal 1999"). For further information, refer to the consolidated financial
statements and footnotes thereto included in the Annual Report on Form 10-KSB
for the year ended June 30, 1998 ("fiscal 1998") of Memry Corporation (the
"Company").
Note B. INVENTORIES
Inventories at September 30, 1998 and June 30, 1998, are summarized as follows:
September June
--------- ----
Raw Materials $ 547,000 $ 455,000
Work-in-process 1,997,000 1,783,000
Finished goods 888,000 836,000
Allowance for slow-moving
and obsolete inventory (739,000) (738,000)
----------- -----------
$ 2,693,000 $ 2,336,000
=========== ===========
Note C. EARNINGS PER SHARE
Net income per common share was computed under the treasury stock method using
the weighted average number of common shares and dilutive common stock
equivalent shares outstanding during the period. In February 1997, the FASB
issued SFAS no. 128, "Earnings per Share", which is effective for periods ending
after December 15, 1997 and requires changes in the computation, presentation
and disclosure of earnings per share. Earnings per share for all prior periods
have been restated to conform with computation provisions of SFAS no. 128. For
the periods presented, there were no items which changed net income as presented
in the consolidated statements of operations and the amounts used to compute
basic and diluted income per share. The following is a reconciliation of the
computation of basic and diluted income per share.
Three Months Three Months
Ended Ended
9/30/98 9/30/97
------- -------
Weighted average number of basic
shares outstanding 19,951,000 17,122,000
Effect of Dilutive Securites:
Warrants 1,062,000 2,761,000
Options 535,000 323,000
------------------------------
Weighted average number of diluted
shares outstanding 21,548,000 20,206,000
==============================
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results. Certain statements under this caption may constitute "forward-looking
statements". See Part II "Other Information".
(a) RESULTS OF OPERATIONS
Three Months Ended September 30, 1998 compared to three months ended
- --------------------------------------------------------------------
September 30, 1997
- ------------------
Revenues. Revenues from continuing operations increased 22% to $4,853,000 for
the first quarter of fiscal year 1999 from $3,993,000 during the same period in
fiscal 1998. The increase of $860,000 is primarily due to significantly
increased product sales for various medical applications.
Costs and Expenses. Cost of revenues increased to $2,454,000 for the three
months ended September 30, 1998 from $2,007,000 during the same three month
period in fiscal 1998. This increase of $447,000 or 22% was
attributable to the 22% increase in revenues. The Company's gross margin from
sales decreased to 49% for the three months ended September 30, 1998 from a 50%
margin in the comparable period in fiscal 1998.
Operating Expenses. Operating expenses increased $187,000 or 13%, to $1,590,000
for the three months ended September 30, 1998, as compared to $1,403,000 during
the same period of fiscal 1998. This increase is primarily attributable to the
Company's increased sales volume. Net interest expense decreased by $55,000 in
the first quarter of fiscal 1999 from $55,000 during
the comparable quarter of fiscal 1999. The decrease was due primarily to a
reduced average balance in the Company's working capital line of credit and an
increase in the Company's interest bearing cash balance compared to the same
period in fiscal 1999. The Company recorded a provision for income taxes of
$112,000 for the first quarter of fiscal 1999 versus a tax provision of $45,000
in the comparable period in fiscal 1998. This increased provision is
attributable to the Company's increase in revenues and earnings in the first
quarter of fiscal 1999 relative to the first quarter of fiscal 1998. Such
provision reflects an effective tax rate less than the statutory rate due
principally to the benefits arising from net operating loss carry-forwards
available to the Company.
Net Income. Primarily as a result of the Company's 22% increase in revenues,
essentially constant gross margins and a significantly smaller relative increase
in administrative expense, the Company was able to realize a 37% increase in net
income from $508,000 for the first quarter of fiscal 1998 versus $697,000 for
the first quarter of fiscal 1999. Diluted net income per share remained constant
at $0.03 per share for the first quarter ended September 30, 1998 versus the
first quarter ended September 30, 1997. The constant earnings per share value is
attributable to an increase in the number of weighted shares outstanding
primarily due to the exercise of outstanding warrants.
(b) SUBSEQUENT EVENTS
On October 30, 1998, the Company consummated the purchase of Advanced Materials
Technologies, N. V. of Herk-de-Stad, Begium ("AMT"). The terms of the
transaction included a cash payment of $1.04 million and 675,000 shares of Memry
Corporation common stock. In addition, Memry may be obligated to pay up to an
additional $1.05 million in cash if, twelve months from the closing date, the
value of the Memry shares is below $5.55 per share. The Company believes that
the revenue generated by AMT for consolidation on Memry Corporation
7
<PAGE>
financial statements will approximate $2 million in fiscal 1999. The impact on
fiscal 1999 net income is expected to negligible.
In October of 1998, Memry Corporation's largest customer, United States Surgical
Corporation was acquired by Tyco International, Ltd. US Surgical accounted for
approximately $7.3 million or 38% of Memry's fiscal 1998 revenues. Subsequent to
the acquisition, Memry was informed that Tyco International, Ltd. would
implement a plan to reduce United States Surgical Corporations inventory levels.
Due to these anticipated inventory adjustments, the Company expects to receive
approximately $1.5 million less in revenues from United States Surgical
Corporation in fiscal year 1999 than it did in fiscal year 1998, however, the
Company expects continued growth in total revenues.
(c) LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company's cash and cash equivalents balance was
$849,000, a reduction of $340,000 from $1,189,000 at the start of fiscal 1999.
Cash provided by operations was $51,000 for the three months ended September 30,
1998. Offsetting the cash provided by operations was cash used in investing
activities of $197,000 for the purchase of property, plant and equipment, and
$194,000 used in financing activities, primarily to repay debt.
The reduction in cash on hand is primarily due to the fact that the Company
shipped a significant portion of its first quarter products at the end of the
quarter. This accounted for recognition of revenue for the quarter but a delay
in the collection of these revenues until the first part of the second quarter
of fiscal 1999. In addition, bonuses due employees that had been accrued in
fiscal 1998 were paid-out in the first quarter of fiscal 1999. Cash used in
financing activities for the three month period ended September 30, 1998 was
$194,000 as opposed to $290,000 of cash used for financing activities for the
comparable period in fiscal 1998. The $194,000 of cash used in financing
activities during the three months ended September 30,1998 was primarily for
reduction of the Company's working capital line of credit. During the three
months ended September 30,1998, $197,000 of cash was used in investing
activities attributable primarily to the purchase of equipment and plant
improvements in the Company's west coast facilities. Working capital at
September 30, 1998 was $5,817,000, up slightly from a working capital of
$5,295,000 at June 30, 1998.
On June 30, 1998, the Company and Webster Bank entered into a Commercial
Revolving Loan, Term Loan, Line of Credit and Security Agreement and related
financing documents and agreements (the "Webster Facility"). Upon entering into
the Webster Facility, the Company paid off all amounts outstanding under its
prior credit facility with First Union National Bank. The Webster Facility
includes a revolving loan, an equipment loan line of credit and a $500,000 term
loan. The term loan is to be repaid in equal monthly installments of principal
over its five year term. The revolving loan provides for borrowings up to the
lesser of (a) $3,000,000 or (b) an amount equal to the aggregate of (1) 80% of
eligible accounts receivable and (2) the lesser of $750,000 or 35% of eligible
inventory. The revolving loan requires the payment of a commitment fee equal to
.25% per annum of the daily unused portion of the revolving loan. The equipment
loan line of credit provides for equipment financing up to the lesser of
$750,000 or 75% of the purchase price for eligible equipment each year through
June 30, 2001. The Company has the option of converting amounts borrowed under
the equipment line of credit to term loans on July 1, 1999, 2000, and 2001. At
September 30, 1998 an aggregate of approximately $480,000 thousand was
outstanding under the Webster Facility. The Webster Facility is secured by
substantially all of the Company's assets. Interest on the revolving loan and
equipment line of credit is variable based on either LIBOR or the Prime Rate as
published in the Wall Street Journal, as elected by the Company. Interest on the
term loan and converted equipment loans is either fixed, at a rate based on the
U.S. Treasury yield, or variable based on the Prime Rate, as elected by the
Company. The Company has the ability to convert between the different rates from
time to time subject to certain conditions. In addition, the credit facility
contains various restrictive covenants, including, among others, limitations on
encumbrances and additional debt, prohibition on the payment of dividends or
8
<PAGE>
redemption of stock except in connection with certain existing put rights,
restrictions on management/ownership changes and required compliance with
specified financial ratios.
The Company has in the past grown through acquisitions (including the
acquisition of Advanced Materials & Technologies, N. V. and Raychem's nickel
titanium product line). As part of its continuing growth strategy, the Company
expects to continue to evaluate and pursue opportunities to acquire other
companies, assets and product lines that either complement or expand the
Company's existing businesses. The Company intends to use available cash from
operations and authorized but unissued common stock to finance any such
acquisitions. The Company does not currently, however, contemplate any
additional material acquisitions for fiscal 1999.
The Company intends to spend between $1.5 and $2.0 million on capital
expenditures during the fiscal year ending June 30, 1999, in order to handle its
expected continuing increased sales volume of SMA materials. The Company expects
that it will be able to pay for these expenditures out of cash flow generated
from its sale of products during the current fiscal year.
In connection with a December 1994 subordinated debt financing, the Company
granted Connecticut Innovations, Incorporated ("CII"), currently the holder of
both common stock and warrants of the Company, a "put" right if: (i) at any time
before the earlier of June 28, 2006 and the date on which CII ceases to hold at
least 35% of the common stock underlying the convertible securities originally
issued to it, the Company ceases to (a) maintain its corporate headquarters and
all of its product business operations in the State of Connecticut (including
the assembly of all products to be sold to U.S. Surgical Corporation), excluding
the Company's components and sub-assembly business acquired from Raychem, (b)
base its president and chief executive officer, a majority of its senior
executives, and all of its administrative, financial, research and development,
marketing and customer service staff relating to its product business (subject
to the same inclusions and exclusions as clause (a)) in the State of
Connecticut, (c) conduct all of its operations relating to its product business
directly or through subcontractors and through licensed operations in the State
of Connecticut (subject to the same inclusions and exclusions as clause (a)),
and (d) maintain its principal bank accounts with banks located in the State of
Connecticut; or (ii) the Company fails to keep the Registration Statement on
Form S-2 that went effective on January 31, 1997 (the "Registration Statement"),
covering the offer and sale by certain of the Company's shareholders (including
CII) of up to 3,550,630 shares (including up to 3,041,963 shares beneficially
owned at such time by CII) of the Company's common stock, in effect for an
aggregate of 120 days during any rolling twelve month period during the three
years which the Company is required to maintain the effectiveness of the
Registration Statement. Upon CII's exercise of its put, the Company shall be
obligated to purchase from CII all the Company's Common Stock then owned by CII
and underlying warrants then owned by CII at a price equal to the greater of the
then current market price of the Company's common stock or $2.00 per share,
less, in either event, the aggregate amount of unpaid exercise prices of all
warrants put to the Company. Using $3.50 per share, which was the approximate
market price at September 30, 1998, as the put price per share, the aggregate
put price that would have to be paid by the Company if the put were exercised
would be approximately $6,572,000. To the extent that the current market value
of the Company's common stock exceeds $3.50 per share at any time, the put price
would be greater. If CII were to have the right to put its securities and were
to choose to exercise that right, it would have a serious adverse effect on the
Company's liquidity and the Company would most likely have to seek equity
financing to be able to meet its obligations to CII. However, the Company
believes that it has the ability to insure that its operations do not move from
Connecticut in a manner that would trigger CII's put, and the Company intends to
cause the Registration Statement to be maintained in a manner that would prevent
CII's put from being operative.
The Company believes that the combination of its working capital surplus, its
improved borrowing facility, its ability to raise equity capital in the past and
what it believes will be material net profits from operations during fiscal 1999
will be sufficient to meet the Company's capital requirements during fiscal
1999.
9
<PAGE>
YEAR 2000 ISSUE
The "Year 2000 Issue" results from computer programs being written using two
digits, instead of four, to define a given year. Programs running time-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in disruptions to various activities and
operations, miscalculations and even system failures.
The Company has recently upgraded all of its internal computer systems such that
the Company believes all of such internal systems are Year 2000 compliant. The
Company has not, however, formally tested such new systems, completed its
investigation or developed a plan regarding the Year 2000 readiness of its other
equipment or begun to inquire of its suppliers and customers as to whether the
Year 2000 Issue will create substantial risks or disruption. The Company
believes that the cost of undertaking such an investigation and developing and
effecting such a plan will be less than $50,000. The Company has not reserved
funds for such costs and, therefore, such costs, if expended, will have a direct
negative impact on the Company's future income.
The Company plans to initiate a Year 2000 investigation and develop such a Year
2000 plan by the end of the second quarter of fiscal 1999 and to complete such
investigation and effect such plan before the end of fiscal 1999. As part of the
Company's Year 2000 investigation, the Company plans to seek third-party
confirmations with respect to such third-party's computers, software and
systems. The Company also plans to review all of its equipment (other than its
recently upgraded computer systems) to determine what, if any, Year 2000
concerns exist and then to address any material concerns.
Based upon preliminary data, the Company does not believe that the Year 2000
Issue will have a material adverse impact on the Company's financial condition,
results of operation or future cash flows. If, however, the Company determines
through its investigation that its suppliers, customers and other third parties
with whom the Company maintains business relations will be unable to resolve any
arising Year 2000 problems in a timely manner, risk to the Company's financial
condition could result. In addition, in the event that the economy as a whole is
materially and adversely effected by widespread disruptions, or by failures of
key infrastructure providers (such as banks and utilities), it is likely that
the Company's financial condition and results of operations would be materially
adversely effected.
PART II - OTHER INFORMATION
The statements in this quarterly report on Form 10-QSB that are not historical
fact constitute "forward-looking statements". Said forward-looking statements
involve risks and uncertainties which may cause the actual results, performance
or achievements of the Company and its subsidiaries to be materially different
from any future results, performance or achievements, express or implied by such
forward-looking statements. These forward-looking statements are identified by
their use of forms of such terms and phrases as "expects", "intends", "goals",
"estimates", "projects", "plans", "anticipates", "should", "future", "believes"
and "scheduled".
The variables which may cause differences include, but are not limited to, the
following: general economic and business conditions; competition; success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; changes in business strategy or
development plans; the ability to retain management; availability, terms and
deployment of capital; business abilities and judgement of personnel;
availability of qualified personnel; labor and employee benefit costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with, government regulations. Although the Company believes that the
10
<PAGE>
assumptions underlying the forward looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore there can
be no assurance that the forward-looking statements included in this filing will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and expectations of the Company will be achieved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Description of Exhibit
- ---- ------------------
27 Financial Data Schedule*
- --------------------------------------------------------------------------------
* Submitted herewith electronically
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by undersigned, thereunto duly
authorized.
Memry Corporation
-----------------
Date: November 13, 1998 /s/ James G.Binch
----------------- -------------------------------
James G. Binch
President, CEO, Treasurer
and Chairman of the Board
Date: November 13, 1998 /s/ Thomas D. Carey
----------------- -------------------------------
Thomas D. Carey
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOUND ON PAGES 3-5 OF THE COMPANY'S FORM 10QSB FOR THE YEAR-TO-DATE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 849,000
<SECURITIES> 0
<RECEIVABLES> 2,811,000
<ALLOWANCES> 0
<INVENTORY> 2,717,000
<CURRENT-ASSETS> 7,200,000
<PP&E> 4,790,000
<DEPRECIATION> 2,017,000
<TOTAL-ASSETS> 12,630,000
<CURRENT-LIABILITIES> 1,383,000
<BONDS> 0
0
0
<COMMON> 41,347,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,630,000
<SALES> 4,825,000
<TOTAL-REVENUES> 4,853,000
<CGS> 2,415,000
<TOTAL-COSTS> 2,454,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 809,000
<INCOME-TAX> 112,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 697,000
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
