================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1998
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________________ to
_____________________
Commission file number 0-16672
Power Spectra, Inc.
(Exact Name of Registrant as Specified in its Charter)
California 94-2687782
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
919 Hermosa Court
Sunnyvale, CA 94086-4103
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 737-7977
(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 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 of the latest practicable date.
Outstanding at
Class August 14, 1998
---------------- ---------------
Shares of Common 26,020,459
Stock, no par value
================================================================================
<PAGE>
Power Spectra, Inc.
Item 1: Financial Statements
<TABLE>
Balance Sheets
(In thousands)
<CAPTION>
June 30, December 31,
Assets: 1998 1997
------------ -------------
<S> <C> <C>
Cash and cash equivalents $ 190 $ 441
Accounts receivable 13 13
Receivable from affiliate 25 250
Inventories, principally purchased parts 320 232
Other current assets 79 30
------------ ----------
Total current assets 627 966
Equipment, furniture and
leasehold improvements 1,321 1,321
Less accumulated depreciation (1,117) (1,061)
------------ ----------
Net fixed assets 204 260
Patents (net of amortization) 112 78
Other assets 62 27
------------ ----------
Total assets $ 1,005 $ 1,331
============ ==========
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable $ 655 $ 311
Accrued compensation expense 203 128
Deferred contract revenue 433 433
Allowance for contract losses 100 100
Short term notes payable 138 --
Accrued professional fees 81 74
Preferred stock dividend payable 333 241
Other current liabilities 28 28
------------ ----------
Total current liabilities 1,971 1,315
Stockholders' equity:
Preferred stock 1,375 1,666
Common stock 16,813 16,253
Accumulated deficit (19,154) (17,903)
------------ ----------
Total stockholders' equity (deficit) (966) 16
------------ ----------
Total liabilities and stockholders' equity $ 1,005 $ 1,331
============ ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
2
<PAGE>
Power Spectra, Inc.
Item 1: Financial Statements
<TABLE>
Statements of Operations
(In thousands except per share data)
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 454 $ 587 $ 200 $ 230
Costs and expenses:
Cost of revenue 833 905 427 407
Sales and marketing 34 88 13 47
Research and development 352 153 112 129
General and administrative 437 494 206 264
--------- --------- ---------- ---------
Total operating costs 1,656 1,640 758 847
--------- --------- ---------- ---------
Operating loss (1,202) (1,053) (558) (617)
Other income 44 13 43 9
--------- --------- ---------- ---------
Loss before income taxes (1,158) (1,040) (515) (608)
Provision for income taxes 1 1 -- 1
--------- --------- ---------- ---------
Net loss $ (1,159) $ (1,041) $ (515) $ (609)
========= ========= ========== =========
Net loss applicable to common
shares $ (1,251) $ (1,136) $ (563) $ (657)
========= ========= ========== =========
Net loss per common share
(basic and diluted) $ (0.05) $ (0.06) $ (0.02) $ (0.03)
========= ========= ========== =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
3
<PAGE>
Power Spectra Inc.
Item 1: Financial Statements
<TABLE>
Statements of Cash Flows
(In thousands)
<CAPTION>
Six Months Ended
----------------
June 30,
--------
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,159) $ (1,041)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 60 69
Common stock issued for services 38 38
Changes in assets and liabilities:
Accounts receivable -- (40)
Receivable from affiliates 225 --
Inventories (88) (117)
Other current assets (49) 16
Accounts payable 344 (66)
Accrued compensation expense 75 16
Short term notes payable 138 --
Other current liabilities 7 24
--------- ----------
Net cash used in operating activities (409) (1,101)
Cash flows from investing activities
Increase in other assets (35) (1)
Patent additions (38) (23)
--------- ----------
Net cash used in investing activities (71) (24)
Cash flows from financing activities
Proceeds from sale of common stock 229 1,012
--------- ----------
Net cash used in financing activities 229 1,012
--------- ----------
Net increase (decrease) in cash and cash equivalents (251) (113)
Cash and cash equivalents, beginning of period 441 843
--------- ----------
Cash and cash equivalents, end of period $ 190 $ 730
========= ==========
Supplemental schedule of cash flow information: Cash paid during the period for:
Income taxes $ 1 $ 1
========= ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
4
<PAGE>
Power Spectra Inc.
Notes to Financial Statements
June 30, 1998
1. Basis for Presentation:
The accompanying unaudited 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. Operating results for the six month period ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to "Factors Affecting Future
Results," and to the financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
2. Computation of Loss Per Share:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." The
Company has adopted SFAS 128 for the periods presented. The adoption of SFAS 128
had no impact on previously reported loss per share for the six months ended
June 30, 1997. Under the provisions of SFAS 128, primary earnings per share is
replaced by basic earnings per share and the dilutive effect of stock options,
warrants, convertible stock, and contingent stock issuances are excluded from
the calculation. For companies like Power Spectra with potentially dilutive
securities such as stock options, warrants, convertible securities and
contingent stock issuances, fully diluted earnings per share is replaced by
diluted earnings per share. Loss per common share is based on the weighted
average of common shares outstanding for all periods presented, using the net
loss after deducting Series A and Series B Preferred Stock dividends in 1998 and
1997. The assumed exercise of options and warrants and assumed conversion of
convertible securities have not been included in the diluted loss per share
computation as the effect would be anti-dilutive.
The weighted average number of shares outstanding at June 30, 1998 and June
30, 1997 were 24,295,686 and 19,901,452 for the quarter ended, respectively, and
24,137,478 and 18,040978 for the six months, respectively.
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------------- -----------------------------------
1998 1997 1998 1997
------------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Net loss ($1,159,000) ($1,041,000) ($515,000) ($609,000)
Less: accrual of preferred
dividends 92,000 95,000 48,000 48,000
------------------------------------- -----------------------------------
Net loss applicable to common
shares ($1,251,000) ($1,136,000) ($563,000) ($657,000)
------------------------------------- -----------------------------------
Loss per share - basic and
diluted ($0.05) ($0.06) ($0.02) ($0.03)
------------------------------------- -----------------------------------
Weighted average shares of
common stock outstanding 24,137,474 18,040,978 24,295,686 19,901,452
------------------------------------- -----------------------------------
Common stock equivalent shares
from stock options using the
treasury stock method
-- -- -- --
------------------------------------- -----------------------------------
Number of shares used in the
per share computation 24,137,474 18,040,978 24,295,686 19,901,452
------------------------------------- -----------------------------------
</TABLE>
3. Common Stock:
As of August 13, 1998, the Company is obligated to issue an additional
384,000 shares of Common Stock to participants of the Company's private
placement of Common Stock which closed on November 11, 1997, as penalties
relating to the registration of shares purchased in that placement. To date this
stock has not been issued.
4. Subsequent Events.
On August 27, 1998, the Company announced that it had laid off all
employees due to lack of operating capital, pending the securing of additional
financing.
6
<PAGE>
Power Spectra Inc.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The forward-looking statements contained herein are subject to certain
risks and uncertainties, including those discussed herein and in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, that
could cause actual results to differ materially from those projected or
discussed. Investors are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date hereof. The Company undertakes no obligation to publicly release the
results of any revision to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Recent Development
Due to a severe financial crisis which prevented the Company from
continuing its operations, on August 27, 1998, the Company's Board of Directors
voted to lay off all of the remaining employees, pending the securing of
additional financing. No decision has been made about a filing for federal
bankruptcy protection. The Company is currently not conducting its ordinary
business, but senior management is actively pursuing various possibilities for
restructuring and financing the business on a going forward basis. There is no
assurance that the efforts of management will be successful or that the Company
will be able to continue as a going concern.
Results of Operations
Revenues for the second quarter ended June 30, 1998 were $200,000 compared
to $230,000 for the same period ended June 30, 1997, a decrease of $30,000.
Revenues for the first six months ended June 30, 1997 and June 30, 1998 were
$454,000 and $587,000 respectively. Revenues in the first half 1998 from the
Company's $1,200,000 contract (the "LandRay Contract") with LandRay
Technologies, Inc. ("LandRay"), a corporation in which the Company was one of
the founders and remains an equity owner, were $450,000, or 99% of total
revenues compared to $500,000 or 85% of revenues in the same period in 1997. The
Company has received full payment on the current LandRay Contract. As of the
date of this report, LandRay has not exercised its option to acquire the
licenses and to contract for the development work on the Imager(TM) and
Borehole-to-Borehole(TM) ground penetrating radar systems. The option may be
exercised until December 17, 1998. Failure to obtain the follow-on contract will
have a severely adverse impact on the Company. Revenues in future periods will
also be impacted by the nature and timing of any restructuring and financing the
Company is able to accomplish in its efforts to recommence operations following
its shutdown of operations on August 27, 1998. It currently has no employees on
its payroll engaged in revenue-generating activities.
7
<PAGE>
The 1998 second quarter net loss was $515,000, a decrease of $94,000
(15.5%) over the net loss of $609,000 recorded in the 1997 second quarter. In
the second quarter, the decrease in the net loss was due to lower operating
costs, particularly marketing expense and general and administrative expense.
The 1998 first six months net loss was $1,159,000, an increase of $118,000
(11.3%) over 1997 first half net loss of $1,041,000. The increase in the net
loss for the six month period was attributable primarily to a $199,000 increase
in research and development spending primarily related to the vehicle mounted
radar system. As of August 27, 1998, the Company is conducting no research and
development activities until additional funding can be secured, of which there
is no assurance.
In the aggregate, operating expenses increased by $16,000 in the first half
of 1998 compared to the same period in 1997. The cost of revenue decreased by
$72,000 due to reduced overhead expenditures, and sales and marketing expenses
decreased by $54,000 as advertising and exhibition costs were reduced compared
to 1997. General and administrative costs decreased by $57,000 compared to the
1997 first half. Since the Company has ceased operations as of August 27, 1998,
the operating expenses will be expected to decrease or be eliminated until such
time as management is able to restructure the Company and recommence operations.
Other income increased $31,000 in 1998 as the Company sold some unused
equipment which had been previously written down.
Liquidity and Capital Resources
During the 1998 first six months, cash and cash equivalents decreased by
$251,000 due to the net loss from operations, offset primarily by collection of
$400,000 from LandRay.
Inventories increased by 40%, or $88,000, from December 31, 1997 to June
30, 1998 in anticipation of orders primarily for the electro-optical range
finder.
Accounts payable increased 111% from December 31, 1997 to $655,000 at June
30, 1998 due to increased purchases related to the SEEKER(TM) and the vehicle
mounted radar system. The accrued compensation expense balance increased by
$75,000, a 59% increase over the balance at December 31, 1997, due to the timing
of payrolls, and employees taking less paid time off, which resulted in larger
accruals on the books. The Company entered into short term notes with officers,
directors and a former officer for $138,000, which was used for working capital
requirements. Preferred stock dividend payable increased by $92,000 over
December 31, 1997 as the Company did not meet California statutory criteria for
any dividend distribution.
There was no backlog at June 30, 1998, whereas at June 30 1997, backlog was
$727,000 of which 96% consisted of commitments under the $1.2 million LandRay
Contract. The $1.2 million LandRay Contract was completed in the 1998 second
quarter.
8
<PAGE>
The Company, due to lack of operating capital, laid off all employees on
August 27, 1998 pending securing additional financing. The Company's senior
management is actively pursuing all available options for restructuring and
financing the Company for the future. However, it currently has no definitive
plans. Failure to reach some accommodation in this regard will ultimately lead
to the necessity to file for bankruptcy protection. There is no assurance that
management's efforts will be successful.
Factors Affecting Future Results:
Cessation of Operations. On August 27, 1998, the Company's Board of
Directors voted to lay off the Company's remaining employees due to a lack of
operating capital and no immediate source of funding available. Unless
management is successful in its efforts to find new sources of capital and to
restructure the Company, the Company will be unable to continue in existence as
an independent company. The Company currently has not definitive plans in this
regard.
Need for Additional Capital/Ability to Continue as a Going Concern. The
Company's independent accountants, in their report regarding the Company's
financial statements for the year ended December 31, 1997, have included an
explanatory paragraph noting the Company's recurring substantial losses from
operations raise substantial doubt about the Company's ability to continue as a
going concern. The ability of the Company to continue as a going concern is
contingent upon its ability to secure additional financings, as to which the
Company currently has plans but no specific or definitive commitments. There is
no assurance that the Company will be able to secure adequate financing or to
carry out its current business plan. The Company has commenced efforts to obtain
additional equity and debt financing. If any additional funds are raised through
the issuance of equity securities, the percentage ownership of the shareholders
of the Company will be reduced, shareholders may experience significant dilution
and such equity securities may have rights, preferences or privileges senior to
those of the Company's Common Stock. There can be no assurance that additional
financing will be available, or that if available, such financing will have
terms favorable to the Company or its present shareholders. Failure to secure
adequate funding could result in the Company necessarily filing for bankruptcy
protection.
In addition, if the Company is not successful in replacing the revenue and
cash generated by the LandRay Contract, which was completed in June 1998, the
Company's ability to operate in accordance with its plans will be severely
jeopardized. The Company does not presently have access to any credit
facilities.
History of Losses; Accumulated Deficit. Since its inception, the Company
has generally operated at a loss since government contract revenues, which
represent most of the historical revenues of the Company, and other sources of
income were insufficient to cover general and administrative, research and
development and other costs incurred by the Company. The Company recorded net
losses of $2,647,399, $3,788,299, and $2,562,230 for the years ended December
31, 1997, December 31, 1996 and December 31, 1995, respectively. At December 31,
1997, the Company had an accumulated deficit of $17,902,959, which had increased
to $19,54,000 at June 30, 1998. Assuming the Company can recommence operations
(see "--Cessation of Operations"), the Company
9
<PAGE>
expects that it will continue to incur losses until its contract revenues
increase substantially from current levels or the Company begins to receive
significant product sales and license and/or royalty income. There is no
assurance that the Company will achieve profitable operations in the foreseeable
future, if at all. Although the Company has substantially reduced the size of
its operations over the last two years and has currently ceased operations,
there can be no assurance that the Company's revenues and proceeds from the
equity or debt financings (if obtained) will be sufficient to allow the Company
to successfully reorganize and recommence operations.
Dependence upon the LandRay. The Company's relationship with LandRay has
been a significant source of revenues since the first contract was awarded to
the Company in 1996. The Company's relationship with LandRay was an extremely
significant source of revenue during 1996 and 1997 and throughout the first half
of 1998. The Company recognized revenue from the LandRay Contract based upon
attainment of milestones delineated in the contract. The most recent LandRay
Contract was completed in the 1998 second quarter. If LandRay does not exercise
its option to obtain the licenses and enter into a development contract for the
Imager and Borehole to Borehole GPR systems, the Company will have no
significant revenue source.
Need to Successfully Launch and Fund New Ventures. The Company must
continue to seek and obtain other sources of revenue to reinitiate operations.
Since its inception nearly all of the Company's revenues have come from
defense-related research and development contracts related to the BASS(TM)
development and applications. The Company currently is seeking to exploit its
technology for applications in commercial and industrial markets to provide such
revenue. Participating in the founding of LandRay and entering into the license
and development contracts with LandRay were steps in this commercialization
process. The LandRay venture and any future ventures will require significant
funding in order to enable the Company and its strategic partners to carry out
their respective plans of operations. There can be no assurances that LandRay
will be able to raise adequate funding on acceptable terms or that it will agree
to exercise its option to continue development of the GPR systems, that the
Company will be able to successfully enter into any additional suitable
strategic partnership or joint venture arrangements or that such arrangements,
when entered into, will prove to be beneficial for the Company and its
shareholders. There also can be no assurance that any future agreements, if
consummated, will generate sufficient revenues to replace the existing LandRay
contract which was completed in June 1998. Failure to succeed in one or more
strategic partnerships or joint venture relationships will have a material
adverse effect on the Company's ability to resume its plan of operations and on
its results.
Product Development and Enhancements. The development of GPR systems and
other remote sensing products as well as high power switching components and
products is a complex engineering effort involving significant risk. While the
Company believes it has completed development of its core technology,
significant additional development efforts must be made in order to achieve
commercial acceptance of its products. Such efforts will require substantial
additional capital, the source and timing of which is unknown. There is no
assurance that the Company will succeed in raising the needed capital or in the
product development efforts, even if the necessary funding is raised.
10
<PAGE>
Complex Manufacturing Process; Manufacturing Capacity. Due to the cessation
of operations as of August 27, 1998, the Company currently is not engaged in any
manufacturing activity. However, assuming it is able to resume operations, its
manufacturing processes present material risks. The manufacture of GPR systems
and remote sensing products as well as semiconductor-based power switching
devices is highly complex and sensitive to a wide variety of factors, including
the level of contaminants in the manufacturing environment, impurities in the
materials used, and the performance of personnel as well as vendors and
suppliers. The Company has periodically experienced yield problems, and there
can be no assurance that these problems will no recur. Should the Company
experience protracted production delays attributable to manufacturing
complexity, its ability to deliver products would be materially affected. In the
event that the Company commences significant commercial shipments, it may be
required to obtain third party manufacturing services.
Dependence on Government Contracts; Limited Commercial Sales to Date.
Historically a material portion of the Company's business resulted from
contracts with or for government agencies. The Company expects that dependence
on such contracts for a portion of its revenues will decline in the foreseeable
future. Notwithstanding the fact that the applicability of both the Company's
BASS(TM) and PSIristor(TM) device technology to ground penetrating radar systems
has been technically demonstrated, with the exception of the development
contract from LandRay, at this early stage of its shift in strategic business
focus, the Company has not yet generated significant revenues from sales of its
commercial products. The first GPR product developed for LandRay, the
SEEKER(TM), is currently ready for production as the two deliverable units under
the SEEKER(TM) development contract were delivered in June 1998, and they are in
daily use in a working gold mine. In addition, there can be no assurance that
potential future products and applications of the Company's core technologies
which the Company is considering pursuing, but which have not yet been
developed, tested or deployed, will be successfully developed or accepted in
their target markets, that revenues generated by such products will be
sufficient to return the cost of their development, that the Company will be
successful in developing additional new products, that the Company will not
experience delays in developing such products, or that such products will
achieve commercial success. A sustained failure to successfully develop and sell
new products would have a material adverse effect on the Company's business and
its results of operations.
Limited Sales and Marketing Capability; Future Reliance on Distributors.
The Company currently as no marketing or sales force and is pursuing no
marketing activities. Assuming the Company is able to recommence operations, it
will be required to establish such marketing and sales staff in order to execute
its plans for increasing commercial sales. In addition, in order to materially
increase revenues and achieve sustained profitability (of which there is no
assurance) as the Company continues to commercialize its products, it expects
that it will be required to depend upon distributors. While any particular
distributor may have an extensive distribution network, distributors typically
represent other third-party suppliers, including competitors of the Company, to
whom they may devote greater time, effort, and attention. There can be no
assurance that the
11
<PAGE>
Company will successfully establish the requisite distribution relationships or
that those relationships will result in increased revenues.
Competition. The markets for the Company's products are competitive and
characterized by rapid technological change and changes in market demand. The
Company's competitive position is affected by all of these factors and by
industry competition for effective sales and distribution channels. The
Company's potential and existing competitors include major ultrasonic proximity
sensor vendors, a small number of which dominate the market. All of the
Company's competitors have substantially greater financial, technical, marketing
and other resources than does the Company. The Company expects that its markets
will become more competitive in the future, and there is no assurance, assuming
the Company is able to recommence operations, that it will be able to
successfully compete in its selected markets.
Volatility of Stock Price. The market price of the Common Stock is highly
volatile. Factors such as variations in the Company's operating results and
announcements of technological innovations or price reductions by the Company,
its competitors or providers of alternative products and processes may cause the
market price of the Common Stock to fluctuate substantially. In addition, the
securities markets have recently experienced substantial price and volume
fluctuations that have particularly affected technology-based companies, and
resulted in changes in the market prices of the stocks of many companies that
have not been directly related to the operating performance of those companies.
The price of the Company's Common Stock is particularly susceptible to extreme
fluctuation because of thin trading volume in the Common Stock and lack of
widely available pricing information.
12
<PAGE>
Power Spectra Inc.
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27.1 Financial Data Schedule
b. Reports on Form 8-K during the quarter ended June 30, 1998
During the period covered by this report, the Company did not
file any reports on Form 8-K.
13
<PAGE>
Power Spectra Inc.
June 30, 1998
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.
Power Spectra Inc.
Date: September 2, 1998 By: /s/ Edward J. Lamb
------------------------------ ---------------------
Edward J. Lamb
Chief Financial Officer
14
<PAGE>
Exhibit Index
Exhibit
No. Description
- -----------------------------
27.1 Financial Data Schedule
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements in the Quarterly Report on Form 10-Q of Power Spectra, Inc.
for the six months ended June 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000777527
<NAME> Power Spectra, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-31-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 190
<SECURITIES> 0
<RECEIVABLES> 13
<ALLOWANCES> 0
<INVENTORY> 320
<CURRENT-ASSETS> 627
<PP&E> 1,321
<DEPRECIATION> 1,117
<TOTAL-ASSETS> 1,005
<CURRENT-LIABILITIES> 1,971
<BONDS> 0
0
1,375
<COMMON> 16,813
<OTHER-SE> (19,154)
<TOTAL-LIABILITY-AND-EQUITY> 1,005
<SALES> 454
<TOTAL-REVENUES> 454
<CGS> 833
<TOTAL-COSTS> 1,656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,158)
<INCOME-TAX> 1
<INCOME-CONTINUING> (1,159)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,159)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
