<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Period ended September 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
---------------
Commission File Number 0-13981
---------------
ELECTRONIC TELE-COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1357760
(State of incorporation) (IRS Employer Identification No.)
1915 MacArthur Road Waukesha, Wisconsin 53188
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(414) 542-5600
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
---------------
As of October 31, 1998, there were outstanding 2,008,949 shares of Class A
common stock and 499,998 shares of Class B common stock. The Class B common
stock, 87.9% of which is owned by affiliates, is the only voting stock. There is
no market for the Class B common stock.
<PAGE> 2
FORM 10-Q QUARTERLY REPORT
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
In this report, Electronic Tele-Communications, Inc. is also referred to as
Electronic Tele-Communications, ETC, and the Company.
---------------
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
PART I Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Operations . . . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of Cash Flows . . . . . . . . . . . . . . . . 4
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
</TABLE>
-1-
<PAGE> 3
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30 December 31
1998 1997
-------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 506,324 $ 489,573
Trade accounts receivable, net 1,482,131 1,090,776
Inventories (Note 2) 2,027,795 1,842,940
Net investment in sales-type leases 138,753 77,123
Refundable income taxes - 212,859
Deferred income tax benefits 19,500 78,000
Prepaid expenses and other current assets 124,392 143,393
-------------------------------------
Total current assets 4,298,895 3,934,664
PROPERTY, PLANT AND EQUIPMENT, NET 1,657,623 1,721,026
NET INVESTMENT IN SALES-TYPE LEASES 692,302 389,778
EXCESS COST OVER NET ASSETS ACQUIRED 1,023,452 1,052,041
-------------------------------------
Total Assets $ 7,672,272 $ 7,097,509
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facility $ 1,000,000 $ 225,000
Accounts payable 87,616 84,964
Accrued expenses 686,557 637,927
Income taxes payable 6,487 -
Deferred revenue 182,260 132,328
-------------------------------------
Total current liabilities 1,962,920 1,080,219
LONG-TERM LIABILITIES 70,551 126,760
-------------------------------------
Total liabilities 2,033,471 1,206,979
STOCKHOLDERS' EQUITY:
Preferred stock, authorized 5,000,000
shares, none issued - -
Class A common stock, authorized 10,000,000
shares, par value $.01, issued and
outstanding 2,008,949 shares 20,089 20,089
Class B common stock, authorized 10,000,000
shares, par value $.01, issued and outstanding
499,998 shares in 1998 and 500,000 shares in 1997 5,000 5,000
Additional paid-in capital 3,335,349 3,335,353
Retained earnings 2,278,363 2,530,088
-------------------------------------
Total stockholders' equity 5,638,801 5,890,530
-------------------------------------
Total Liabilities and Stockholders' Equity $ 7,672,272 $ 7,097,509
=====================================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-2-
<PAGE> 4
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 -
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------------------- ---------------------------------
1998 1997 1998 1997
---------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 3,025,266 $ 2,544,378 $ 8,881,448 $ 9,096,811
COST OF PRODUCTS SOLD 1,548,653 1,645,995 4,692,247 5,182,123
---------------------------------- ---------------------------------
GROSS PROFIT 1,476,613 898,383 4,189,201 3,914,688
OPERATING EXPENSES:
General and administrative 374,125 448,256 1,116,594 1,292,851
Marketing and selling 584,219 574,857 1,824,943 1,707,492
Research and development 422,171 488,996 1,316,927 1,374,126
---------------------------------- ---------------------------------
1,380,515 1,512,109 4,258,464 4,374,469
---------------------------------- ---------------------------------
EARNINGS (LOSS) FROM OPERATIONS 96,098 (613,726) (69,263) (459,781)
OTHER INCOME (EXPENSE):
Interest expense (24,783) (1,221) (49,679) (9,036)
Interest and dividend income 51 51 168 7,359
Miscellaneous (11,384) (10,096) (30,593) (28,083)
---------------------------------- ---------------------------------
(36,116) (11,266) (80,104) (29,760)
---------------------------------- ---------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 59,982 (624,992) (149,367) (489,541)
Income taxes (benefit) 39,300 (227,400) 22,000 (184,500)
---------------------------------- ---------------------------------
NET EARNINGS (LOSS) $ 20,682 $ (397,592) $ (171,367) $ (305,041)
================================== =================================
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE:
Class A common $ 0.01 $ (0.15) $ (0.06) $ (0.11)
Class B common $ 0.01 $ (0.17) $ (0.10) $ (0.19)
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-3-
<PAGE> 5
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 - (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
---------------------------------------
1998 1997
---------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (171,367) $ (305,041)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 278,979 291,052
Retirement of common stock (4) -
Deferred income taxes 58,500 (192,983)
Loss from sale of equipment - 2,838
Changes in operating assets and liabilities:
Accounts receivable (391,355) (529,474)
Inventories (184,855) 357,926
Net investment in sales-type leases (364,154) (342,056)
Prepaid expenses and other assets 19,001 57,962
Accounts payable and accrued expenses (4,927) 218,870
Income taxes 219,346 (77,502)
Deferred revenue 49,932 (47,637)
---------------------------------------
Total adjustments (319,537) (261,004)
---------------------------------------
Net cash provided by (used in) operating activities (490,904) (566,045)
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (186,987) (199,161)
---------------------------------------
Net cash provided by (used in) investing activities (186,987) (199,161)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving credit facility, net 775,000 400,000
Dividends paid (80,358) (260,474)
---------------------------------------
Net cash provided by (used in) financing activities 694,642 139,526
---------------------------------------
Net increase (decrease) in cash and cash equivalents 16,751 (625,680)
Cash and cash equivalents at beginning of year 489,573 1,001,976
---------------------------------------
Cash and cash equivalents at end of period $ 506,324 $ 376,296
=======================================
Supplemental disclosures of cash flow information:
Cash received from income tax refunds $ 260,453 $ -
Cash paid for income taxes 5,027 87,439
Cash paid for interest expense 45,689 9,036
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-4-
<PAGE> 6
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 - (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of the Company, such consolidated
condensed financial statements reflect all adjustments, which consist only of
normal recurring adjustments, necessary for a fair presentation. Operating
results for the three-month and nine-month periods ended September 30, 1998, are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998.
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 SEC rules and regulations dealing
with interim financial statements. It is suggested that these consolidated
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1997 Annual Report to
Shareholders.
2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1998 1997
------------ -----------
<S> <C> <C>
Raw materials and supplies $ 716,810 $ 611,561
Work-in-process and finished goods 973,152 784,518
Maintenance and demo parts 554,028 620,133
Reserve for obsolescence (216,195) (173,272)
---------- ----------
Total inventories $2,027,795 $1,842,940
========== ==========
</TABLE>
3. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes the standards
for reporting and displaying comprehensive income and its components (revenues,
expenses, gains and losses) as part of a full set of financial statements. This
statement requires that all elements of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The statement is effective for fiscal years beginning
after December 15, 1997. Since this standard applies only to the presentation of
comprehensive income, it will not have any impact on the Company's results of
operations, financial position or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for years beginning
after December 15, 1997. SFAS No. 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company does not anticipate that the
adoption of this statement will have a significant effect on the Company's
reported segments.
In addition, the FASB has issued SFAS No. 132, "Employers Disclosures About
Pensions and Other Postretirement Benefits," and SFAS No. 133, "Accounting for
Derivative Investments and Hedging Activities." The Company has not yet adopted
these standards. Management does not anticipate that adoption of these standards
will have a significant effect on the earnings or financial position of the
Company.
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<PAGE> 7
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997 - (UNAUDITED)
RESULTS OF OPERATIONS
Net sales were $3,025,266 and $2,544,378 for the three-month periods ended
September 30, 1998 and 1997, respectively. Net sales for the nine-month period
ended September 30, 1998, were $8,881,448, compared to $9,096,811 for the
corresponding period of 1997. For the three-month period ended September 30,
1998, the increase in net sales was due to increased sales of the Company's
interactive voice information systems to operating telephone companies and
competitive local exchange carriers (CLEC's). The decrease in sales for the 1998
nine-month period was due primarily to the inclusion of a $980,000 sale of
interactive voice information systems to an international customer in the 1997
first quarter. Revenues from sales of the Company's interactive voice
information systems were $4,969,536 or 56% of net sales, and $5,790,378 or 64%
of net sales, for the nine-month periods ended September 30, 1998 and 1997,
respectively. Revenues from operating leases, sales-type leases, and services
were $2,664,741 or 30% of net sales for the 1998 nine-month period, compared to
$2,587,419 or 28% of net sales for the corresponding 1997 period. Product
pricing for the Company's equipment remained relatively constant between
periods, and inflation did not have a material impact on revenues.
For the three-month periods ended September 30, 1998 and 1997, the gross profit
percentage was 49% and 35%, respectively. Gross profit as a percentage of net
sales for the nine-month periods ended September 30, 1998 and 1997, was 47% and
43%, respectively. The increase in gross profit percentage in the 1998 periods
was due to the inclusion in the 1997 first quarter of sales to an international
customer of older technology equipment which had a lower profit margin than the
normal product mix, together with providing approximately $240,000 of additional
reserves in the 1997 third quarter for the anticipated write-off of a portion of
the international receivable related to the sale.
For the three-month periods ended September 30, 1998 and 1997, total operating
expenses were $1,380,515, or 46% of net sales, and $1,512,109, or 59% of net
sales, respectively. Total operating expenses were $4,258,464 or 48% of net
sales for the nine-month period ended September 30, 1998, compared to $4,374,469
or 48% for the corresponding period of 1997. General and administrative expenses
were lower for the 1998 periods as a result of lower staffing and decreased
legal expenses. Marketing and selling expenses increased in 1998 over 1997 due
primarily to salary and benefit expenses related to previously open sales and
marketing positions which were fully staffed during the 1998 periods, together
with higher convention and advertising expenses. Research and development
expenses were slightly lower in the 1998 periods due to open engineering
positions and lower expenses related to product certifications.
Net other expenses were $80,104 for the nine-month period ended September 30,
1998, compared to $29,760 for the corresponding period of 1997. For the
three-month periods, net other expenses were $36,116 and $11,266, respectively.
The increase between periods was primarily due to interest expense incurred for
bank borrowings during the 1998 periods compared with interest income earned
from investing Company funds during the 1997 periods.
Net earnings for the three-month periods ended September 30, 1998, were $20,682
versus a net loss of $397,592 for the corresponding 1997 period. Higher earnings
in the 1998 quarter were attributable to higher sales for the quarter, and the
absence of one-time 1997 expenses including the $240,000 reserve. Net loss for
the nine-month period ended September 30, 1998 and 1997, was $171,367 and
$305,041, respectively.
-6-
<PAGE> 8
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997 - (UNAUDITED)
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $2,335,975 as of September 30, 1998, compared to $2,854,445
at December 31, 1997. The decrease in working capital was due primarily to the
net loss, payment of dividends, and expenditures made for capital equipment.
Cash used in operating activities was $490,904 for the nine-month period ended
September 30, 1998, compared to $566,045 for the corresponding 1997 period. The
cash used in operating activities in the 1998 period was due primarily to the
net loss, increases in accounts receivable and inventories, and investment in
sales-type leases, partially offset by a refund of income taxes. Cash used in
operating activities in the 1997 period was due primarily to the net loss and an
increase in accounts receivable related to the large international shipment, and
investment in sales-type leases, partially offset by a reduction of inventories.
For the nine-month periods ended September 30, 1998 and 1997, cash was used for
capital expenditures and payment of dividends, and cash was provided by bank
borrowings.
As of September 30, 1998, the Company had borrowed $1,000,000 on its available
$3,500,000 revolving credit facility. The revolving credit facility expires on
June 30, 2000.
At anticipated operating levels, management believes that future cash generated
from operations, together with the available revolving credit facility, will
provide adequate funds to meet the Company's operating needs for the foreseeable
future.
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Some of ETC's internal
computer programs have time-sensitive software that recognizes a date using "00"
as the year 1900 rather than the year 2000. This could cause system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. In addition, ETC's products contain
computer programs that may be impacted by the Year 2000 Issue. The Company also
deals with third parties that may be affected by the Year 2000 Issue and may
subsequently affect ETC.
ETC has completed its assessment of the Year 2000 Issue in regard to its
internal computer systems and will have to modify or replace minor portions of
its software so that its computer systems will function properly with respect to
dates in the year 2000 and thereafter. The project is estimated to be completed
not later than June 30, 1999, which is prior to any anticipated impact on its
operating systems. The Company believes that with these modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems.
The Company has completed evaluation of its products and has determined that the
majority of its systems are Year 2000 compliant. For those that are not, the
Company will complete modifications to the products not later that March 31,
1999. For any customers that possess ETC equipment that is currently not Year
2000 compliant, the Company will provide upgrades or migration paths to new
equipment to address the Year 2000 needs of its customers.
-7-
<PAGE> 9
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997 - (UNAUDITED)
(CONTINUED)
ETC is continuing to evaluate the Year 2000 readiness of its critical third
party suppliers. Where it is determined that any suppliers are not Year 2000
ready, ETC will continue to monitor the situation and take appropriate action.
Based on current progress, ETC does not anticipate any adverse consequences due
to supplier Year 2000 readiness.
The total year 2000 project cost is expected to be minimal and all costs will be
expensed as incurred and are included within the Company's normal operating
budget. Computer system software upgrades are included under normal maintenance
contracts
ETC believes, based on an overall analysis of the Year 2000 Issue, that it will
be able to manage its total Year 2000 transition without any adverse effect on
its business operations, products or financial prospects. However, the actual
results could differ and if such modifications and conversions are not made or
are not completed timely, the Year 2000 Issue could have a material impact on
the operations of the Company.
FORWARD LOOKING STATEMENTS
From time to time, information provided by the Company, statements made by its
employees, and information included in its filings with the Securities and
Exchange Commission which are not historical facts are "forward-looking"
statements as defined in the Private Securities Litigation Reform Act of 1995.
Any "forward-looking" statements are provided in compliance with the "Safe
Harbor" provision of the Private Securities Litigation Reform Act of 1995. The
Company's actual future outcomes and results may differ significantly from those
stated in such "forward-looking" statements. "Forward-looking" statements are
not guarantees of future performance and involve a number of risks and
uncertainties including, but not limited to, technology changes, backlog,
acquisitions, status of the economy, governmental regulations, sources of
supply, expense structure, product mix, major customers, competition,
litigation, and other risk factors detailed in the Company's filings of Form
10-K with the Securities and Exchange Commission. Investors are encouraged to
consider the risks and uncertainties included in those filings.
-8-
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
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.
ELECTRONIC TELE-COMMUNICATIONS, INC.
/s/ Dean W. Danner
----------------------------------------
Dean W. Danner
President and
Chief Executive Officer
/s/ Jeffrey M. Nigl
-----------------------------------------
Jeffrey M. Nigl
Vice President, Chief Financial
Officer, Treasurer and Principal
Accounting Officer
Date: November 10, 1998
-9-
<PAGE> 1
EXHIBIT 11
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
Earnings (loss) net of dividends paid (undistributed earnings) are allocated
equally per share to weighted average Class A shares, as adjusted for the
dilutive effect of stock options using the treasury stock method, and weighted
average Class B shares outstanding during the year. Earnings (loss) per Class A
and Class B common share were computed, as shown in the table below, by adding
dividends paid per Class A and Class B common share (distributed earnings) to
undistributed earnings.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1998 1997 1998 1997
------------------------ ------------------------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net earnings (loss) $ 20,682 $ (397,592) $ (171,367) $ (305,041)
Less dividends paid:
Class A common - 120,237 80,358 240,474
Class B common - 20,000 - 20,000
------------------------ ------------------------
Undistributed earnings (loss) $ 20,682 $ (537,829) $ (251,725) $ (565,515)
Denominator for basic and diluted earnings per share:
Weighted average shares:
Class A common 2,008,949 2,003,949 2,008,949 2,003,949
Class B common 499,998 500,000 499,998 500,000
------------------------ ------------------------
Total 2,508,947 2,503,949 2,508,947 2,503,949
Calculation of basic and diluted earnings (loss) per share:
Class A common:
Distributed earnings $ - $ 0.06 $ 0.04 $ 0.12
Undistributed earnings (loss) 0.01 (0.21) (0.10) (0.23)
------------------------ ------------------------
Basic and diluted earnings (loss) per share $ 0.01 $ (0.15) $ (0.06) $ (0.11)
======================== ========================
Class B common:
Distributed earnings $ - $ 0.04 $ - $ 0.04
Undistributed earnings (loss) 0.01 (0.21) (0.10) (0.23)
------------------------ ------------------------
Basic and diluted earnings (loss) per share $ 0.01 $ (0.17) $ (0.10) $ (0.19)
======================== ========================
</TABLE>
Options to purchase shares of Class A common stock under the Company's
Nonqualified Stock Option Plan were outstanding during the three-month and
nine-month periods ended September 30, 1998 and 1997. However, these shares were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
shares and, therefore, the effect would be antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Balance Sheet at September 30, 1998 (Unaudited) and the
Consolidated Condensed Statement of Operations for the Nine Months Ended
September 30, 1998 (Unaudited) and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 506,324
<SECURITIES> 0
<RECEIVABLES> 1,594,174
<ALLOWANCES> 112,043
<INVENTORY> 2,027,795
<CURRENT-ASSETS> 4,298,895
<PP&E> 5,858,256
<DEPRECIATION> 4,200,633
<TOTAL-ASSETS> 7,672,272
<CURRENT-LIABILITIES> 1,962,920
<BONDS> 0
0
0
<COMMON> 25,089
<OTHER-SE> 5,613,712
<TOTAL-LIABILITY-AND-EQUITY> 7,672,272
<SALES> 8,881,448
<TOTAL-REVENUES> 8,881,448
<CGS> 4,692,247
<TOTAL-COSTS> 4,692,247
<OTHER-EXPENSES> 4,279,189
<LOSS-PROVISION> 9,700
<INTEREST-EXPENSE> 49,679
<INCOME-PRETAX> (149,367)
<INCOME-TAX> 22,000
<INCOME-CONTINUING> (171,367)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (171,367)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
