UNITED STATES 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 July 31, 1997
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: 0-14961B
LUXTEC CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2741310
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
326 Clark Street, Worcester, Massachusetts 01606
(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including area code)
(508) 856-9454
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 _____
Indicate the number of shares outstanding for each of the issuer's classes of
Common Stock, as of the latest practicable date.
The number of shares outstanding of registrant's common stock, par value $.01
per share, at July 31, 1997, was 2,855,603.
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LUXTEC CORPORATION
TABLE OF CONTENTS
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
July 31, 1997 and October 31, 1996 3
Consolidated Condensed Statements of Operations -
Nine and three months ended July 31, 1997 and July 31, 1996 4
Consolidated Condensed Statements of Cash Flows -
Nine months ended July 31, 1997 and July 31, 1996 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
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<TABLE>
<CAPTION>
LUXTEC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
July 31, 1997 October 31, 1996
Unaudited
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ - $ 172,356
Accounts receivable, less reserves of $80,000
in 1997 and $69,000 in 1996 1,862,671 1,741,669
Inventories 2,478,514 2,173,015
Prepaid expenses 153,996 210,564
- -----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,495,181 4,297,604
- -----------------------------------------------------------------------------------------------------
PROPERTY & EQUIPMENT AT COST 2,452,095 2,365,740
ACCUMULATED DEPRECIATION (1,817,072) (1,617,861)
- -----------------------------------------------------------------------------------------------------
PROPERTY & EQUIPMENT - NET 635,023 747,879
- -----------------------------------------------------------------------------------------------------
OTHER ASSETS 259,320 249,375
- -----------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 5,389,524 $ 5,294,858
=====================================================================================================
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit 2,077,967 2,146,223
$ $
Current portion of equipment facility loan 49,000 39,612
Accounts payable 771,938 726,201
Accrued expenses 308,040 451,068
- -----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,206,945 3,363,104
$ $
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Note Payable to Stockholder - 1,000,000
$ $
Equipment Loan, net of current portion 162,853 118,843
Term Loan 500,000 -
- -----------------------------------------------------------------------------------------------------
TOTAL LONG TERM LIABILITIES $ 662,853 $ 1,118,843
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
SERIES A REDEEMABLE PREFERRED STOCK, $1.00 par value; Authorized 500,000 shares;
Issued and outstanding - 0 shares in 1996 and 10,000 shares in 1997
$ 1,103,071 -
$
- -----------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value -
Authorized - 10,000,000 shares
Issued and outstanding 2,841,539 shares in
1996 and 2,855,603 shares in 1997 28,497 28,415
Additional paid-in capital 8,350,390 8,323,216
Accumulated deficit (7,962,232) (7,538,720)
- -----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 416,655 812,911
- -----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 5,389,524 $ 5,294,858
=====================================================================================================
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
LUXTEC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Unaudited
THREE MONTHS ENDED NINE MONTHS ENDED
July 31, July 31, July 31, July 31,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET REVENUES $ 2,787,978 $ 2,432,179 $ 7,669,015 $ 6,653,494
COST OF GOODS SOLD 1,630,820 1,379,072 4,470,444 3,632,840
- ---------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 1,157,158 1,053,107 3,198,571 3,020,654
- ---------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Selling and marketing 609,436 564,846 1,855,153 1,526,704
Research & development 158,521 126,192 389,973 328,733
General & administrative 410,886 461,589 1,162,096 1,245,348
- ---------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1,178,843 1,152,627 3,407,222 3,100,785
- ---------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (21,685) (99,520) (208,650) (80,131)
OTHER EXPENSES, NET (68,115) (57,854) (154,893) (149,290)
- ---------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (89,800) (157,374) (363,542) (229,421)
PROVISION FOR INCOME TAXES 0 0 0 0
- ---------------------------------------------------------------------------------------------------------------------
NET LOSS $ (89,800) $ (157,374) $ (363,542) $ (229,421)
=====================================================================================================================
NET LOSS PER COMMON
AND COMMON EQUIVALENT SHARE $ (0.03) $ (0.06) $ (0.13) $ (0.08)
=====================================================================================================================
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 2,855,603 2,776,981 2,850,521 2,773,927
=====================================================================================================================
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
LUXTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
NINE MONTHS ENDED
July 31, July 31,
1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET LOSS $ (363,542) $ (229,421)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 217,072 160,915
Provision for uncollectible accounts receivable 10,347 3,651
Preferred stock dividend 103,071 -
Changes in current assets and liabilities:
Accounts receivable (131,349) (121,812)
Inventories (305,499) (755,578)
Prepaid expenses and other current assets 38,707 (41,850)
Accounts payable 45,737 (636,321)
Accrued expenses (206,962) (243,109)
- --------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (228,876) (1,863,525)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (86,355) (280,123)
Change in other assets (9,945) (21,310)
- --------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (96,300) (301,433)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on revolving line of credit (68,256) (16,786)
Net borrowings on term loan 500,000 0
Net borrowings on equipment loan 53,398 159,448
Net borrowings on note payable to stockholder - 1,000,000
Private Placement Proceeds - 994,665
Employee stock purchase plan 31,220 14,455
Proceeds from exercise of stock options - 2,445
- --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 516,362 2,154,227
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (172,356) (10,731)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 172,356 11,721
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ 990
====================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST $ 158,386 $ 156,506
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
CONVERSION OF NOTE PAYABLE TO STOCKHOLDER TO PREFERRED STOCK $ 1,000,000 -
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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LUXTEC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1) Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated condensed financial statements have been
prepared in conformity with generally accepted accounting principles for interim
financial information. 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 necessary
for a fair presentation have been made which comprise only normal recurring
adjustments. Operating results for the nine months ended July 31, 1997, are not
necessarily indicative of the results that may be expected for the entire year.
2) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first in, first out (FIFO) method and includes materials, labor and
manufacturing overhead. Inventories are as follows:
July 31, 1997 October 31, 1996
----------------------------------------------------------------------
Raw material $ 1,620,004 $ 1,237,123
Work in process 409,580 220,255
Finished goods 448,930 715,637
----------------------------------------------------------------------
Total $ 2,478,514 $ 2,173,015
----------------------------------------------------------------------
3) Revolving Line of Credit
The Company has a $2,250,000 revolving line of credit agreement with a
bank. Borrowings bear interest at the bank's prime rate (8.5% at July 31, 1997)
plus .5%. Unused portions of the revolving line of credit accrue a fee at an
annual rate of .50%. Borrowings are secured by substantially all assets of the
Company. The agreement contains covenants, including the maintenance of certain
financial ratios, as defined. The line of credit expires on March 31, 1999.
The Company has a $500,000 equipment facility agreement with a bank.
Borrowings are based on the purchase price of new equipment and conditions
determined by the bank. Borrowings bear interest at the bank's base rate plus
.75%. Borrowings under this facility are secured by substantially all assets of
the Company. The equipment facility agreement allows the Company to draw funds
for the purchase of fixed assets until October 23, 1997. The equipment facility
expires on October 24, 2000.
Effective April 3, 1997, the Company entered into a $500,000 term loan
agreement with a bank. Borrowings bear interest at the bank's prime rate (8.5%
at July 31, 1997) plus 1.00%. Borrowings are secured by substantially all assets
of the Company. Principal repayment is to be repaid from "Excess Cash Flow," as
defined, but no later than April 3, 2002. The agreement contains covenants,
including the maintenance of certain financial ratios, as defined. As an
inducement to grant the loan under the stated terms, the Company issued a
warrant that entitles the holder to purchase 44,000 shares of common stock at an
exercise price of $3.00 per share (approximate fair market value at the date of
grant), adjusted for certain dilutive events, as defined.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4) Note Payable and Preferred Stock
On December 18, 1995, the Company issued Senior Subordinated Notes (the
Notes) to an investor for $1,000,000 in cash. Interest accrued on the Notes at
the rate of 8% per annum and was payable annually in arrears. Principal on the
Notes was due January 1, 2001. In connection with the financing, the Company
issued a detachable stock warrant to the investor. The warrant entitles the
holder to purchase 450,000 shares of common stock at an exercise price of $3.00
per share (fair market value at the date of grant), adjusted for certain
dilutive events, as defined.
On November 14, 1996, the Company exchanged the Senior Subordinated Notes for
ten thousand (10,000) shares of the Company's nonvoting Series A preferred
stock, $1.00 par value per share (the Series A Preferred Stock). The Series A
Preferred Stock has the following rights and preferences:
Dividends
The holders of the Series A Preferred Stock shall be entitled to receive cash
dividends of $8.00 per share per annum, payable when, as and if declared by the
Board of Directors of the Company. Such dividends on the Series A Preferred
Stock shall accrue and be cumulative from the date of issuance.
Liquidation Preference
Upon any liquidation, dissolution or winding up of the Company, after payment or
provision for payment of all debts and other obligations and liabilities of the
Company, the holders of the shares of preferred stock shall be entitled, before
any distribution or payment is made upon any common stock, to be paid an amount
equal to the redemption price ($100 per share) plus an amount equal to all
accrued dividends, and the holders of the preferred stock shall not be entitled
to any further payment.
Redemption
The Company may, at the option of the Company's Board of Directors, redeem part
or all of the outstanding shares of the Series A Preferred Stock at any time or
times at a redemption price of $100 per share, plus an amount equal to all
accrued dividends.
On January 1, 2001, the Company shall redeem all outstanding shares of the
Series A Preferred Stock at a redemption price of $100 per share, plus an amount
equal to all accrued dividends.
5) Financial Accounting Standard No. 128
During the first quarter of 1997, the Financial Accounting Standards Board
adopted Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per
Share, which supersedes APB Opinion No. 15. The Company does not believe the
adoption of this accounting standard will have any impact on the Company"
financial position or results of operations.
<PAGE>
LUXTEC CORPORATION
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 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth below. The industry in which the Company competes is characterized by
rapid changes in technology and frequent new product introductions. The Company
believes that its long-term growth depends largely on its ability to continue to
enhance existing products and to introduce new products and features that meet
the continually changing requirements of its customers. While the Company has
invested heavily in new products and processes, there can be no assurance that
it can continue to introduce new products and features on a timely basis or that
certain of its products and processes will not be rendered noncompetitive or
obsolete by its competitors.
RESULTS OF OPERATIONS
Net revenues for the three months ended July 31, 1997 were $2,787,978 or 14.6%
greater than the $2,432,179 reported for the same period in fiscal 1996. For the
nine months ended July 31, 1997 net revenues increased 15.3% to $7,669,015 from
$6,653,494 reported for the same period last year. The year to date sales
increase of 15.3% was primarily the result of higher sales for Luxtec branded
products resulting from the Company's new product introduction schedule over the
past two years. The Company has also seen gains in the sale of
micro-laparascopic products from its Fiber Imaging Technologies subsidiary. This
portion of the Company's business may become a significant contributor to the
company's business lines as its very small diameter specialty endoscopes are
being well received in the marketplace. The CardioDyne new product introduction
into the stress test market is now underway with demonstrations of the motion
tolerant blood pressure monitor taking place at a pace consistent with the
Company's plans. The revenues from the CardioDyne product line have not yet
reached expectations as the capital budget cycle for purchase approval has
become a gating item. The Company continues to have very high expectations for
the product line as it is being well received by the stress test community.
Cost of sales for the three months ended July 31, 1997 were $1,630,820 or
58.5% of net revenues, compared with $1,379,072 or 56.7% for the same period in
fiscal 1996. For the nine month period ended July 31, 1997, cost of sales was
$4,470,744 or 58.3% of net revenues compared with $3,632,840 or 54.6% for the
same period in fiscal 1996. A reduction in royalties received, which do not
carry any related cost of sales, was the primary cause of the higher cost
percentage in 1997.
Gross profit was $1,157,158 or 41.5% of net revenues for the quarter ended
July 31, 1997 compared to $1,053,107 or 43.3% for the same period in fiscal
1996. For the nine month period ended July 31, 1997 gross profit was $3,198,571
or 41.7% compared with $3,020,654 or 45.4% for the same period in fiscal 1996.
The reduced margin percentage was almost entirely due to the reduction in
royalty payments from the high levels of Fiscal 1996.
Selling and marketing expenses were $609,436 for the three months ended
July 31, 1997 compared to $564,846 for the same period in fiscal 1996, an
increase of 7.9%. For the nine month period ended July 31, 1997 selling and
marketing expenses were $1,855,153 compared with $1,526,704 for the same period
in fiscal 1996, an increase of 21.5%. Marketing activities related to the
introduction of the CardioDyne motion tolerant blood pressure monitor were
intensified during the first nine months of fiscal 1997. The Company has noted a
positive reception to date by potential customers. Clinical studies and numerous
demonstrations have been and are continuing to be conducted, with substantially
positive results. The Company expects to generate revenues from sales of the
NBP2000 model by the end of fiscal 1997. The level of selling and marketing
activities associated with the CardioDyne product introduction are expected to
continue to increase throughout fiscal 1997 and into fiscal 1998.
<PAGE>
LUXTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 2. (Continued)
Research and development expenditures were $158,521 for the three months
ended July 31, 1997 compared to $126,192 for the same period in fiscal 1996, an
increase of 25.6%. For the nine month period ended July 31, 1997 research and
development expenditures were $389,973 compared with $328,733 for the same
period in fiscal 1996, an increase of 18.6%. The increases primarily resulted
from continuing work on future generations of the CardioDyne product line and
the completion of development of a new, low cost, Xenon light source, the Model
9100. The Company believes that the introduction of the fiscal 1997 new product
plan and the efforts related to the CardioDyne product lines may result in an
increased rate of spending for research and development during the remainder of
fiscal 1997.
General and administrative expenses were $410,886 for the three months
ended July 31, 1997, compared to $461,589 for the same period in fiscal 1996,
representing a decrease of 11.0%. For the nine months ended July 31, 1997
general and administrative expenses totaled $1,162,096 compared to $1,245,348
during the same period in fiscal 1996, a decrease of 6.7%. The decreases were
primarily attributable to lowered legal expenses and other costs expended during
fiscal 1996 when private capital was being raised.
Interest and other expenses of $68,115 for the three months ended July 31,
1997 compared to $57,854 for the same period in fiscal 1996, an increase of
17.7%. For the nine months ended July 31, 1997 interest and other expenses were
$154,893 compared to $149,290 for the same period in fiscal 1996, an increase of
3.8%. The third quarter and nine month increases were the result of higher
revolving credit line balances.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1997 the Company had working capital of $ 1,288,236 compared
to working capital of $934,500 at October 31, 1996. The major reason for the
increase in working capital was the completion of a term loan of $500,000 with a
bank during the second quarter of fiscal 1997.
Cash used by operating activities was primarily funded by the revolving
credit line and the additional long term loan received during the second
quarter. At July 31, 1997 the Company had used $211,853 from a $500,000
equipment facility agreement with a bank, used $2,077,967 from a $2,250,000
revolving credit line, and had borrowed $500,000 under a term loan agreement.
The Company anticipates that its current cash requirements will be
satisfied by cash flow from existing operations and the continuation of its
revolving credit arrangement with a bank, although the Company is considering an
additional private placement of equity in the near future.
<PAGE>
LUXTEC CORPORATION
PART II. OTHER INFORMATION
ITEM 1. Legal proceedings
None.
ITEM 5. Other Information
When used in this Form 10-Q and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer, the words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties, including those discussed under the caption "Risk
Factors and Cautionary Statements" below, that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed below could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
The Company will NOT undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
Risk Factors and Cautionary Statements
The Company's revenues and income are derived primarily from the
sale of medical devices. The medical device industry is highly competitive. Such
competition could negatively impact the Company's market share and therefore
reduce the Company's revenues and income.
Another result of competition could be the reduction of average unit
prices paid for the Company's products. This could have the impact of reducing
the percentage of profit margin available to the Company for its product sales.
The Company's future operating results are dependent on its ability
to develop, produce and market new and innovative products and services. There
are numerous risks inherent in this complex process, including rapid
technological change and the requirement that the Company bring to market in a
timely fashion new products and services that meet customers' needs.
Historically, the Company's operating results have varied from
fiscal period to fiscal period; accordingly, the Company's financial results in
any particular fiscal period are not necessarily indicative of results for
future periods.
The Company offers a broad variety of products and services to
customers around the world. Changes in the mix of products and services
comprising revenues could cause actual operating results to vary from those
expected.
<PAGE>
LUXTEC CORPORATION
PART II. OTHER INFORMATION
ITEM 5. (Continued)
The Company's success is partly dependent on its ability to
successfully predict and adjust production capacity to meet demand, which is
partly dependent upon the ability of external suppliers to deliver components at
reasonable prices and in a timely manner; capacity or supply constraints, as
well as purchase commitments, could adversely affect future operating results.
The Company operates in a highly competitive environment and in a
highly competitive industry, which includes significant competitive pricing
pressures and intense competition for skilled employees.
The Company offers its products and services directly and through
indirect distribution channels. Changes in the financial condition of, or the
Company's relationship with, distributors and other indirect channel partners,
could cause actual operating results to vary from those expected.
The Company does business worldwide in over 50 countries. Global
and/or regional economic factors and potential changes in laws and regulations
affecting the Company's business, including without limitation, currency
exchange rate fluctuations, changes in monetary policy and tariffs, and federal,
state and international laws regulating the environment, could impact the
Company's financial condition or future results of operations.
The market price of the Company's securities could be subject to
fluctuations in response to quarter to quarter variations in operating results,
market conditions in the medical device industry, as well as general economic
conditions and other factors external to the Company.
<PAGE>
LUXTEC CORPORATION
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K
(a) Exhibits
No Exhibits were required to be filed.
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed during the
quarter ended July 31, 1997.
<PAGE>
LUXTEC CORPORATION
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.
LUXTEC CORPORATION
(Registrant)
----------------- --------------------------
Date Samuel M. Stein
Chief Financial Officer
(Principal Accounting
Officer and Duly
Authorized Executive Officer)
<TABLE> <S> <C>
<ARTICLE> 5
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<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,949
<ALLOWANCES> 80
<INVENTORY> 2,478
<CURRENT-ASSETS> 4,495
<PP&E> 2,452
<DEPRECIATION> 1,817
<TOTAL-ASSETS> 5,389
<CURRENT-LIABILITIES> 3,206
<BONDS> 0
0
1,103
<COMMON> 28
<OTHER-SE> 388
<TOTAL-LIABILITY-AND-EQUITY> 5,389
<SALES> 7,669
<TOTAL-REVENUES> 4,470
<CGS> 3,198
<TOTAL-COSTS> 3,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158
<INCOME-PRETAX> (363)
<INCOME-TAX> 0
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<NET-INCOME> (363)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
