<PAGE>
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 APRIL 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File number: 0-15810
OSICOM TECHNOLOGIES, INC.
(Exact name of Registrant as specified in charter)
<TABLE>
<S> <C>
New Jersey 22-2367234
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
</TABLE>
2800 28th Avenue, Suite 100
Santa Monica, California
90405
(Address of principal executive offices)
(Zip Code)
(310) 581-4030
(Registrant's telephone number, including area code)
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 of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.30 par value per share, Outstanding:
8,972,339 shares at June 10, 1999.
This Form 10-Q, future filings of the registrant, and oral statements made with
the approval of an authorized executive officer of the Registrant may contain
forward looking statements. In connection therewith, please see the cautionary
statements and risk factors contained in Item 2. "Fluctuations in Revenue and
Operating Results" and "Forward Looking Statements - Cautionary Statement",
which identify important factors which could cause actual results to differ
materially from those in any such forward-looking statements.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheet at April 30, 1999 and
Consolidated Balance Sheet at January 31, 1999 3
Unaudited Consolidated Statements of Operations for the Three Months
ended April 30, 1999 and 1998 4
Unaudited Consolidated Statements of Cash Flows for the Three Months
ended April 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations/Comparison of the Three Months ended April 30,
1999 and 1998 11
Liquidity and Capital Resources 13
Impact of Recent Accounting Pronouncements 15
Other Matters 15
Fluctuations in Revenue and Operating Results 15
Forward-Looking Statements - Cautionary Statement 15
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK 16
PART II: OTHER INFORMATION 17-18
ITEM 1: LEGAL PROCEEDINGS
ITEM 2: CHANGES IN SECURITIES
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
ITEM 4: SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
ITEM 5: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE 19
</TABLE>
2
<PAGE>
OSICOM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Unaudited
April 30, 1999 January 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 2,903 $ 3,480
Accounts receivable, net 17,283 17,164
Due from affiliates 1,774 -
Inventory, net 15,378 14,465
Prepaid expenses and other current assets 2,228 2,480
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 39,566 37,589
- --------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET 6,709 6,715
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Purchased technology, net 1,674 1,766
Capitalized software, net 5,177 5,105
Other assets 1,065 803
Net assets of discontinued operations 19,147 14,818
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 27,063 22,492
- --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 73,338 $ 66,796
==========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 14,943 $ 10,678
Current maturities of long term debt 663 284
Accounts payable 10,786 9,022
Due to affiliates 386 724
Accrued liabilities 5,975 4,551
Other current liabilities 705 931
- --------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 33,458 26,190
- --------------------------------------------------------------------------------------------------------------------------
Long-term debt and capital lease obligations 2,185 1,748
- --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 35,643 27,938
- --------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; cumulative dividends; liquidation
preference $12,908 including accumulated dividends 1 1
Common stock, $.30 par value; 16,667 shares authorized; 9,052 shares
issued and 8,973 shares outstanding at April 30, 1999; 8,924 shares
issued and 8,844 shares outstanding at January 31, 1999 2,715 2,677
Additional paid-in capital 86,546 85,183
Accumulated deficit (51,052) (48,479)
Treasury stock, at cost; 79 shares and 80 shares at April 30, 1999 and
January 31, 1999, respectively (515) (524)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 37,695 38,858
- --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 73,338 $ 66,796
==========================================================================================================================
</TABLE>
3
<PAGE>
OSICOM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Three Months Ended
April 30
----------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 19,129 $ 14,788
COST OF SALES 10,251 7,556
- --------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 8,878 7,232
- --------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Selling and marketing 4,107 4,180
Engineering, research and development 2,237 2,234
General and administrative 3,033 2,817
Other operating expenses 93 93
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 9,470 9,324
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (592) (2,092)
- --------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (CHARGES)
Investment income 17 60
Interest expense (470) (349)
Other income (charges) 2 45
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (CHARGES) (451) (244)
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (1,043) (2,336)
Provision for Income Taxes - -
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,043) (2,336)
LOSS FROM DISCONTINUED OPERATIONS (1,229) (342)
(NET OF INCOME TAX OF $-0- AND $-0-)
NET INCOME (LOSS) $ (2,272) $ (2,678)
==========================================================================================================================
INCOME (LOSS) PER COMMON SHARE:
PREFERRED STOCK DIVIDENDS 339 38
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (2,611) $ (2,716)
==========================================================================================================================
BASIC
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (RESTATED, IN THOUSANDS) 8,881 6,934
NET INCOME (LOSS) PER COMMON SHARE:
Continuing Operations $ (0.15) $ (0.34)
Discontinued Operations (0.14) (0.05)
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE $ (0.29) $ (0.39)
==========================================================================================================================
DILUTED
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (RESTATED, IN THOUSANDS) 8,881 6,934
NET INCOME (LOSS) PER COMMON SHARE:
Continuing Operations $ (0.15) $ (0.34)
Discontinued Operations (0.14) (0.05)
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE $ (0.29) $ (0.39)
==========================================================================================================================
</TABLE>
4
<PAGE>
OSICOM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Three Months Ended
April 30
----------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations $ (1,043) $ (2,336)
- --------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 861 590
Accounts receivable and inventory reserves (36) (152)
Expenses paid through issuances of securities - 156
Changes in assets and liabilities net of effects of business entity acquisitions:
(Increase) decrease in accounts receivable (170) 3,268
Increase in inventories (827) (989)
(Increase) decrease in other current assets 253 (1)
Increase (decrease) in accounts payable 1,692 (800)
Increase (decrease) in net amounts due from affiliate (2,112) 211
Increase in accrued expenses 1,486 774
Decrease in other current liabilities (226) (83)
- --------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES (122) 638
NET CASH USED IN DISCONTINUED OPERATING ACTIVITIES (264) (136)
- --------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (386) 502
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (368) (579)
Capitalized software development costs (465) (546)
Other assets (262) (27)
Investing activities of discontinued operations (317) (213)
- --------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,412) (1,365)
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 1,989
Proceeds from issuance of short-term debt, net of repayments 4,265 (1,787)
Proceeds from long term debt 815 47
Repayment of long-term debt - (14)
Proceeds from stock option exercises 1,354 -
Preferred stock dividends (240) -
Other - (576)
Financing activities of discontinued operations (4,973) 349
- --------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,221 8
- --------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (577) (855)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 3,480 1,421
- --------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,903 $ 566
==========================================================================================================================
</TABLE>
5
<PAGE>
OSICOM TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
Osicom Technologies, Inc. (the "Company," "We," "Our," or "Us") through its
subsidiaries designs, manufactures and markets integrated networking and
bandwidth aggregation products for enhancing the performance of data and
telecommunications networks. Our products are deployed in telephone companies,
Internet Service Providers, governmental bodies and the corporate/campus
networks that make up the "enterprise" segment of the networking marketplace. We
have facilities in Annapolis Junction, Maryland, Waltham, Massachusetts,
Aurora, Illinois, and San Diego, California. Our discontinued operation has
facilities in China. We market and sell our products and services through a
broad array of channels including worldwide distributors, value added resellers,
original equipment manufacturers ("OEM's"), local and long distance carriers and
governmental agencies.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial data as of April 30, 1999 and January 31,
1999, for the quarters ended April 30, 1999 and 1998, have been prepared by us,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. 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 such rules and
regulations. The January 31, 1999 balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. However, we believe that the disclosures are
adequate to make the information presented not misleading. These consolidated
financial statements should be read in conjunction with the financial statements
and the notes thereto included in our Annual Report on Form 10-K for
the year ended January 31, 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates that affect
the reported amounts of assets, liabilities, revenues and expenses, the
disclosure of contingent assets and liabilities and the values of purchased
assets and assumed liabilities in acquisitions. Actual results could differ from
these estimates. In the opinion of Management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of April 30, 1999 and for the
quarter ended April 30, 1999, have been made. The results of operations for the
quarter ended April 30, 1999 are not necessarily indicative of the operating
results for the full year.
DISCONTINUED OPERATIONS
Our Far East-based Wireless Products business unit has been accounted
for as a discontinued operation pursuant to our plan to sell the division. No
gain or loss is anticipated on the disposition of this business segment.
Balances due from and to the Wireless Products division are shown as "due from
affiliate" and "due to affiliate" in the accompanying balance sheets.
EARNINGS PER SHARE
We adopted Statement of Financial Accounting Standards ("SFAS") No. 128
which requires dual presentation of basic and diluted earnings per shares
("EPS") on the face of the income statement. SFAS No. 128 also requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Basic net income
and loss per common share is computed by dividing net income or loss available
to common shareholders by the weighted average number of common shares
outstanding during each period presented. Diluted EPS is based on the weighted
average number of common shares outstanding as well as dilutive potential common
shares, which in our case consist of convertible securities
outstanding, shares issuable pursuant to contracts that may be settled in stock,
shares issuable under stock benefit plans, and shares issuable pursuant to
warrants. In computing diluted EPS, net income or loss available to common
shareholders is adjusted for the after-tax amount of interest expense recognized
in the period associated
6
<PAGE>
OSICOM TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
with convertible debt. Potential common shares are not included in the diluted
loss per share computation for the quarters ended April 30, 1999 and 1998 as
they would be anti-dilutive.
All references in the financial statements to common shares and per
share data give effect to the one for three stock split effective July 24, 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," is effective for financial statements with fiscal quarters
beginning after June 15, 1999. The statement established standards for
accounting for derivatives and hedging instruments. We do not currently have any
of these instruments. We do not expect the adoption of SFAS 133 to have a
material impact, if any, on its results of operations, financial position or
cash flows.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained After
the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," is effective for financial statements with fiscal quarters
beginning after December 31, 1998. The adoption of SFAS No. 134 had no effect on
our financial position or results of operations.
Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," is effective for
financial statements with years beginning after December 15, 1998. The SOP
provides guidance on accounting for the costs of computer software developed or
purchased for internal use. The SOP requires that we continue to capitalize
certain costs of software developed for internal use once certain criteria are
met. The adoption of SOP 98-1 had no effect on our financial position or results
of operations.
SOP 98-5, "Reporting on the Costs of Start-up Activities," is effective
for financial statements for fiscal years beginning after December 31, 1998. The
SOP provides guidance and examples of the types of expenses associated with
one-time (start-up) activities which, under this SOP, must be expensed as
incurred. The adoption of SOP 98-5 had no effect on our financial position or
results of operations.
SFAS 135, "Rescission of FASB Statement No. 75 and Technical
Corrections," is effective for financial statements issued for fiscal years
ending after February 15, 1999. The adoption of SFAS No. 135 had no effect
on our financial position or results of operations.
BALANCE SHEET DETAIL
Inventories at April 30, 1999 and January 31, 1999 consist of:
<TABLE>
<CAPTION>
April 30, 1999 January 31, 1999
<S> <C> <C>
Raw material $ 9,457 $ 9,547
Work in process 5,197 5,430
Spare parts 246 190
Finished goods 3,881 2,787
-------- -------
18,781 17,954
Less: Valuation reserve 3,403 3,489
-------- -------
$ 15,378 $ 14,465
======== ========
</TABLE>
7
<PAGE>
OSICOM TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
We are authorized to issue the following shares of stock:
16,666,667 shares of Common Stock ($.30 par value)
2,000,000 shares of Preferred Stock ($.01 par value) of which
the following series have been designated:
2,500 shares of Preferred Stock, Series A
1,000 shares of Preferred Stock, Series B
100,000 shares of Preferred Stock, Series C
3,000 shares of Preferred Stock, Series D
1,000,000 shares of Preferred Stock, Series E
We have outstanding the following shares of preferred stock:
<TABLE>
<CAPTION>
Shares Par Liquidation
Outstanding Value Preference
----------- ----- ------------
<S> <C> <C> <C>
Series A 2,500 $ 1 $ 2,500
Accrued, unpaid dividends 1,000
Series C 6,555 - 6,555
Series D 2,853 - 2,853
------- ---- --------
11,908 $ 1 $ 12,908
======= ==== ========
</TABLE>
Preferred stock dividends during the quarters ended April 30, 1999 and
1998 consist of:
<TABLE>
<CAPTION>
April 30, 1999 April 30, 1998
<S> <C> <C>
Accrued, unpaid dividends (Series A) $ 38 $ 38
Deemed dividends (Series C) 61 -
Dividends paid (Series C) 240 -
------ ------
$ 339 $ 38
====== ======
</TABLE>
OTHER CAPITAL STOCK TRANSACTIONS
In July 1998, approval was granted for a one for three stock split
effective July 24, 1998. The effect of this change was reflected in the
financial statements retroactively as if the reverse stock split occured at the
beginning of the earliest period reported.
STOCK OPTION PLANS
We have three stock options plans in effect: The 1988 Stock Option
Plan, the 1997 Incentive and Non-Qualified Stock Option Plan and the 1997
Director Stock Option Plan. The stock options have been made available to
certain employees and consultants. All options are granted at not less than fair
value at the date of grant and have terms varying from 3 to 10 years. The
purpose of these plans is to attract, retain, motivate and reward our officers,
directors, employees and consultants to maximize their contribution towards
8
<PAGE>
OSICOM TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
our success. At April 30, 1999 there were 2,297,812 shares under option at
prices varying from $3.00 to $45.00 per share.
EARNINGS PER SHARE CALCULATION
The following data show the amounts used in computing basic earnings
per share for the quarters ended April 30, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net income (loss) $ (2,272) $ (2,678)
Less: preferred dividends (339) (38)
-------- --------
Net loss available to common shareholders used in basic EPS $ (2,611) $ (2,716)
======== ========
Average number of common shares used in basic EPS 8,880,811 6,934,104
========= =========
</TABLE>
We had a net loss for the quarters ended April 30, 1999 and 1998.
Accordingly, the effect of dilutive securities including convertible debentures,
convertible preferred stock, vested and nonvested stock options and warrants to
acquire common stock are not included in the calculation of EPS because their
effect would be antidilutive. The following data shows the effect on income and
the weighted average number of shares of dilutive potential common stock.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net loss available to common shareholders used in basic EPS $ (2,611) $ (2,716)
Interest on convertible debt (net of tax) - 11
-------- --------
Net loss available to common shareholders after assumed
conversions of dilutive securities $ (2,611) $ (2,705)
======== ========
Average number of common shares used in basic EPS 8,880,811 6,934,104
Effect of dilutive securities:
Convertible preferred stock 697,965 167,382
Convertible debentures - 38,914
Stock benefit plans 1,005,437 154,866
Warrant exercises 218,639 10,249
---------- ---------
Average number of common shares and dilutive potential
common stock used in diluted EPS 10,802,852 7,305,515
========== =========
</TABLE>
The shares issuable upon exercise of options and warrants represents
the quarterly average of the shares issuable at exercise net of the shares
assumed to have been purchased, at the average market price for the period, with
the assumed exercise proceeds. Accordingly, options and warrants with exercise
prices in excess of the average market price for the period are excluded because
their effect would be antidilutive.
9
<PAGE>
OSICOM TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
SEGMENT INFORMATION
<TABLE>
<CAPTION>
Network Optical
Access NETsilicon Networking Other Total
------- ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C>
Quarter ended April 30, 1999:
Revenues from external customers $ 6,418 $ 5,815 $ 6,896 $ - $ 19,129
Intersegment revenues - - - - -
------- ------- ------- -------- --------
Total revenues 6,418 5,815 6,896 - 19,129
------- ------- ------- -------- --------
Operating profit (loss) (550) 254 787 (1,083) (592)
Depreciation & amortization expense 495 146 220 - 861
Valuation allowance additions
(reductions) (209) 65 108 - (36)
Capital assets additions, net 120 62 186 - 368
Total assets 18,210 11,028 21,948 22,152 73,338
Quarter ended April 30, 1998:
Revenues from external customers $ 7,996 $ 2,185 $ 4,607 $ - $ 14,788
Intersegment revenues - - - - -
------- ------- ------- -------- --------
Total revenues 7,996 2,185 4,607 - 14,788
------- ------- ------- -------- --------
Operating profit (loss) (1,826) (280) 956 (942) (2,092)
Depreciation & amortization expense 358 53 179 - 590
Valuation allowance additions
(reductions) (295) 10 133 - (152)
Capital assets additions, net 211 (34) 402 - 579
Total assets 17,591 8,677 15,361 26,608 68,237
</TABLE>
10
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated unaudited
financial statements and related notes thereto. Further reference should be made
to our Form 10-K for the year ended January 31, 1999.
RESULTS OF OPERATIONS/COMPARISON OF THE QUARTER ENDED APRIL 30, 1999 AND 1998
Consolidated net sales from our continuing operations were $19.1 million for the
quarter ended April 30, 1999 increasing by 29% from $14.8 million for the same
period one year ago. Sales increased by 50% and 166% for our Optical Networking
and NETsilicon business units in this period over the quarter ended April 30,
1998. Net sales for our Network Access business unit decreased by 20% from the
prior year. Our backlog from continuing operations was $18.6 million compared to
$12.9 million for the same period one year ago.
Consolidated gross margins from our continuing operations were 46.4% for the
quarter ended April 30, 1999 compared to 48.9% for the quarter ended April 30,
1998. Gross margins in our Optical Networking business unit increased during the
quarter while our Network Access and NETsilicon business units reported
decreases in gross margins.
Our consolidated selling and marketing expenses of $4.1 million remained
relatively unchanged from $4.2 million for the quarter ended April 30, 1999 as
compared to the quarter ended April 30, 1998. During the quarter ended April 30,
1999 our selling and marketing expenses represented 21.5% of net sales compared
to 28.3% for the same period ended April 30, 1998 reflecting the increase in net
sales.
Our consolidated engineering, research and development expenses from continuing
operations were $2.2 million for the quarter ended April 30, 1999 and remained
unchanged from the prior year. Research and development expenses for our Optical
Networking and NETsilicon business units increased by $165,000 offset by a
$168,000 decrease in our Network Access business unit for the quarter ended
April 30, 1999 compared to the quarter ended April 30, 1998.
Our consolidated general and administrative expenses of $3.0 million from our
continuing operations increased by $216,000 for the quarter ended April 30, 1999
compared the quarter ended April 30, 1998. This increase resulted from increases
in our Optical Networking, NETsilicon and other business units partially offset
by a $428,000 decrease in our Network Access business unit.
Other operating expenses of $93,000 from continuing operations remained
unchanged during the quarter ended April 30, 1999 compared to the same period
ended April 30, 1998. These charges represent amortization of purchased
technology costs related to acquisitions.
Net other expenses of $451,000 from continuing operations increased by $207,000
during the quarter ended April 30, 1999 from the same period ended April 30,
1998. The increase was related to interest expense associated with borrowings on
our lines of credit which increased by approximately $4.3 million over the prior
year for the same period ended April 30, 1998.
There was no provision for income taxes for the quarters ended April 30, 1999
and 1998. We have carry forwards of domestic federal net operating losses, which
may be available, in part, to reduce future taxable income in the United States.
However, due to potential adjustments to the net operating loss carry forwards
as provided by the Internal Revenue Code with respect to future ownership
changes, future availability of the tax benefits is not assured. In addition,
we provide a valuation allowance for a deferred tax asset when in management's
opinion it is more likely than not that some portion or all of the assets will
not be realized.
The loss from discontinued operations, our Wireless Products business unit,
increased to $1.2 million for the quarter ended April 30, 1999 from $342,000 for
the quarter ended April 30, 1998. The increased loss is the result of a 70%
decline in net sales partially offset by an increase to 21.5% from 14.1%
in gross margins.
OPTICAL NETWORKING
Net sales in our Optical Networking business unit were $6.9 million for the
quarter ended April 30, 1999 compared to $4.6 million for the same period ending
April 30, 1998. Sales of our GigaMux product family increased to $5.4
11
<PAGE>
million partially offset by declines in legacy products. Shipments of our
GigaMux products during this quarter accounted for twice the amount of product
that was shipped during all of fiscal 1999. Our GigaMux sales during the prior
year quarter ending April 30, 1998 were $320,000.
Our gross margins increased to 53.0% for the quarter ended April 30, 1999 from
50.5% for the same period ended April 30, 1998. Higher sales of our GigaMux
product family which yields a higher gross margin, was the primary reason for
the increase.
Our selling and marketing expenses were $1.6 million for the quarter ended April
30, 1999 compared to $483,000 for the same period a year ago. We increased our
selling and marketing efforts to support the expected growth of our GigaMux
product family. Our selling and marketing expenses associated with selling our
GigaMux products accounted for approximately 65% of the current period
expenditures.
Our engineering expenses were $485,000 during the quarter ended April 30, 1999
compared to $374,000 for the same period one year ago. We spent approximately
$255,000 in product development costs during this quarter compared to $56,000
for the period ended April 30, 1998. We continue to invest our efforts in the
research and development in our GigaMux product family as well as other new
products.
Our general and administrative expenses increased to $657,000 from $421,000 for
the period ended April 30, 1999 compared to the same period ended April 30,
1998. These expenses were incurred to ensure that we had sufficient
administrative infrastructure to support the planned growth of our GigaMux
business both domestically and internationally.
Other operating expenses of $93,000 for the period ended April 30, 1999 remained
unchanged compared to the same period ended April 30, 1998. These costs
represent the amortization of purchased technology related to acquisitions.
NETWORK ACCESS
Net sales were $6.4 million for our Network Access business unit compared to
$8.0 million for the period ended April 30, 1998. Lower sales in our Remote
Access and LAN-adapter product categories were the primary reasons for the
decline. Our net sales decline during this quarter corresponds directly to a
shift towards our new generation of optical networking products, and the planned
phase out of our legacy products.
Our gross margins decreased to 39.4% of net sales for the quarter ended April
30, 1999 compared to 48.2% for the same period ended April 30, 1998. Increases
in the cost of raw materials used in our LAN product group was the primary
reason for the decline in gross margins.
Our selling and marketing expenses decreased to $1.1 million or 17.7% of net
sales for the quarter ended April 30, 1999 compared to the prior year comparable
period. Selling and marketing expenses of $3.4 million in the prior year
approximated 42.6% of net sales. During the past fiscal year, we completed a
realignment of our sales organization which resulted in a net personnel
reduction of 24. Employee related costs were reduced by $650,000 and
advertising/promotional costs were reduced by $1.2 million.
Our engineering expenses decreased to $1.2 million for the period ended April
30, 1999 from $1.4 million for the same period a year ago. This decline is the
result of cost savings achieved by the closure of our Santa Barbara, California
and Aurora, Illinois facilities partially offset by increased amortization of
capitalized software costs.
Our general and administrative expenses decreased to $551,000 from $743,000 for
the quarter ended April 30, 1999 as compared to the quarter ended April 30,
1998. This decrease is the result of cost savings achieved in the integration of
the print server product line transferred from NETsilicon to the Network Access
business unit.
NETSILICON
Our net sales increased to $5.8 million for the three months ended April 30,
1999 from $2.2 million in the three months ended April 30, 1998, representing an
increase of 166.1%. The increase in net sales was due primarily to an increase
in our OEM customers to which we shipped product from 11 in the three months
ended April 30, 1998 to 26 the three months ended April 30, 1999. Net sales
included maintenance and service revenue of $72,000, or 1.2%
12
<PAGE>
of net sales in the three months ended April 30, 1999 compared to $79,000 or
3.6% of net sales in the three months ended April 30, 1998.
Gross profit increased to $2.7 million, or 46.3% of net sales, for the three
months ended April 30, 1999 from $1.1 million, or 52.5% of net sales, in the
three months ended April 30, 1998, representing an increase of 134.7%. Our gross
margin percentage decrease in the three months ended April 30, 1999 was due
primarily to a decline in our average sales prices.
Selling and marketing expenses increased to $1.3 million, or 22.8% of net sales,
for the three months ended April 30, 1999 from $628,000, or 28.7% of net sales,
in the three months ended April 30, 1998, representing an increase of 111.1%.
This increase was the result of expenses incurred due to increased sales volume
such as a $205,000 increase in commissions. We also incurred expenses of
$106,000 attributable to the opening of our European sales office.
Engineering, research and development expenses increased from $502,000, or 8.6%
of net sales, for the three months ended April 30, 1999 from $448,000, or 20.5%
of net sales, in the three months ended April 30, 1998, representing an increase
of 12.1%. This increase was due to the increased expenditures associated with
the development of our NET+Works family of products. Software development costs
of $315,000 and $163,000 in the three months ended April 30, 1999 and 1998,
respectively, were capitalized and are being amortized over the products' useful
lives estimated at three years. Amortization expenses related to capitalized
software development costs for the three months ended April 30, 1999 and 1998 or
$99,000 and $67,000, respectively.
General and administrative expenses increased to $613,000 or 10.5% of net sales,
for the three months ended April 30, 1999 from $352,000 or 16.1% of net sales,
and three months ended April 30, 1998, representing an increase of 74.1%. The
increase in these expenses resulted from $73,000 of expenses attributable to a
newly formed MIS group as well as other expenses resulting from increased sales.
LIQUIDITY AND CAPITAL RESOURCES
We finance our operations through a combination of debt and equity financing. At
April 30, 1999, our working capital was $6.1 million including $2.9 million in
cash and cash equivalents.
Our operating activities incurred a net cash flow deficit from continuing
operations of $122,000 and discontinued operations of $264,000 during the three
months ended April 30, 1999. During the same period last year, we incurred a
$638,000 cash inflow from continuing operations and a $136,000 net cash flow
deficit from discontinued operations. The increase in cash flows used by
operations reflects a substantial decline in liabilities due to affiliated
companies and increases in accounts receivable partially offset by increases in
accounts payable and accrued liabilities.
Investing activities from continuing operations during the three months ended
April 30, 1998 consisted primarily of purchases of property and equipment of
$368,000 and expenditures for software development costs capitalized of
$465,000. During the three month period ended April 30, 1998 our investing
activities included $579,000 in purchases of property and equipment, and
$546,000 in expenditures for capitalized software development costs.
13
<PAGE>
Our financing activities from continuing operations during the three month
period ended April 30, 1999 provided net cash flows of $6.2 million, and net
cash outflows of $5.0 million for discontinued operations. The net cash provided
by financing activities from continuing operations included $4.3 million from
net proceeds from short-term borrowings, $1.3 million from stock option
exercises, $815,000 from long-term debt offset by $240,000 of dividends paid to
our preferred shareholders.
At April 30, 1999, we had various lines of credit from continuing operations
totaling $22.5 million. Our outstanding short-term borrowings against these
credit facilities was $16.1 million at April 30, 1999, an increase of $5.4
million from January 31, 1999.
Year 2000 Compliance
The Year 2000 issue refers generally to the problems that some software may have
in determining the correct century for the year. For example, software with
date-sensitive functions that is not Year 2000 compliant may not be able to
distinguish whether `00' means 1900 or 2000, which may result in failures or the
creation of erroneous results. During fiscal 1998 we commenced taking steps to
address potential Year 2000 problems, including (i) identifying the computer
systems and products affected; (ii) contacting vendors and customers; (iii)
determining the Year 2000 compliance status of each of its systems and products;
and (iv) implementing any necessary changes. Although we do not currently expect
the Year 2000 issue will be material to our systems or products, we could
discover (or fail to discover) Year 2000 issues in the course of our evaluation
process that would have a material adverse effect on our business, results of
operations or financial condition if not properly addressed.
We have completed a review of our products and have ascertained that our
products are Year 2000 compliant. We have tested software obtained from third
parties that is incorporated into its products, and is seeking assurances from
its vendors that their licensed software is Year 2000 compliant. Furthermore, we
are surveying all vendors requesting information concerning exposure to Year
2000 problems and the results are not complete. We expect to complete this
process by September 1999. We have received representation from certain vendors,
including some of our sole source vendors, as to the Year 2000 compliance of
their systems and products. Despite our testing and our current and potential
customers, and assurances from the vendors of the software and hardware
incorporated into the products, our products may contain undetected errors or
defects associated with Year 2000 date functions. Known or unknown errors or
defects in such products could severely disrupt our operations and have a
material adverse effect on our business, financial condition, cash flows
and results of operations.
Our internal systems include both information technology ("IT") and non-IT
systems. We have completed an assessment of its material internal IT and non-IT
systems, including software and hardware technology. To the extent we cannot
test the technology, we seek assurances from such vendors that their systems are
Year 2000 compliant. We are not aware of any material operational issues or
costs associated with preparing our internal IT and non-IT systems for the Year
2000; however, we may experience material unanticipated problems and costs
caused by undetected errors or defects in the technology used in our internal IT
and non-IT systems. We intend to complete the remediation of any non-Year 2000
compliant technology by September 1999.
We are surveying our customers requesting information concerning exposure to
Year 2000 problems and the results are not complete. Our current and potential
customers may incur significant expense to achieve Year 2000 compliance. If such
customers are not Year 2000 compliant, they may incur material costs to remedy
problems or face litigation costs. As a result, such customers and potential
customers could reduce or eliminate plans that they have to purchase our
products or services. Such events could have a material effect on our business,
financial condition, cash flows and results of operations.
The efforts to address the Year 2000 issue has been funded from available cash
and has not separately accounted for these costs in its financial statements.
The costs of addressing this issue is currently estimated to be approximately
$400,000 but the final cost has not yet been determined; all costs, excluding
third party vendor software upgrades costing $200,000 have been expensed as
incurred.
We do not believe the risks of Year 2000 compliance are material, therefore we
have not yet established a contingency plan in the event that we or our
customers or vendors cannot correct the Year 2000 problem. In the event that we
or our customers or vendors cannot correct the Year 2000 problem we will
allocate the appropriate resources at that time. However, we are subject to
external forces that may affect industry and commerce generally, such as utility
or transportation company Year 2000 compliance failures and related service
interruptions.
14
<PAGE>
We believe we have sufficient working capital to meet its planned level of
operations for fiscal 2000. However, there can be no assurance that our working
capital requirements for fiscal 2000 will not exceed our ability to generate
sufficient cash internally to support its requirements and the needed capital
will have to be obtained from external sources. We cannot give any assurances
that sufficient capital, at terms acceptable to us, will be available when
needed.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued several SFAS effective in
the current and future periods including SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities," SFAS No. 134 "Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise," and SFAS No. 135 "Rescission of
FASB Statement No. 75 and Technical Corrections". The Accounting Standards
Executive Committee issued SOP 98-1 "Accounting for the Costs Computer Software
Developed or Obtained for Internal Use" and SOP 98-5 "Reporting on the Costs of
Start-up Activities" effective in the current or future periods. The adoption of
these standards has had no material effects, if any, on our financial position
or results of operations.
OTHER MATTERS
Several Securities class action lawsuits have been filed against us, our CEO,
our President and our former Chief Financial Officer. See Part II, Item 1,
"Other Information - Legal Proceedings".
FLUCTUATIONS IN REVENUE AND OPERATING RESULTS
The networking and bandwidth aggregation industry is subject to fluctuation and
the declines and increases recently experienced by us are not necessarily
indicative of the operating results for any future periods. Our operating
results may fluctuate as a result of a number of factors, including the timing
of orders from, and shipments to, customers; the timing of new product
introductions and the market acceptance of those products; increased
competition; changes in manufacturing costs; availability of parts; changes in
the mix of product sales; the rate of end user adoption and carrier and private
network deployment of WAN data, video and audio communication services; factors
associated with international operations; and changes in world economic
conditions.
FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENT
When used anywhere in this Form 10-Q, in our future filings with the Securities
and Exchange Commission, in our press releases and in oral statements made with
the approval of an authorized executive officer, the words or phrases, "will
likely result," "will continue," "are expected to," "is anticipated,"
"estimated," "project," or "outlook" or similar expressions (including
confirmations by an authorized executive officer of any such expressions made by
a third party with respect to us) are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements include our plans to introduce network
management, all optical networking equipment, Gigabit Ethernet, scaleable
remote access servers with broad practical support and aggregation
possibilities, and our plans to develop new products, expand our sales force,
expand our customer base, make acquisitions, establish strategic relationships
and expand within international markets. Such forward-looking statements also
include our expectations concerning factors affecting the markets for its
products, such as demand for increased bandwidth, the migration from private
to public networks, growth in corporate use of the Internet, expansion of
switches between LANs, remote access for corporate networks, deregulation and
increased competition, the introduction of a wide range of new communication
services and technologies and growth in the domestic and international market
for network access solutions. Further reference should be made to the "Risk
Factors" section contain in Part I, Item 1 of our Annual Report on Form 10-K
for the year ended January 31, 1999.
We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. These risks and uncertainties are described more fully
in our Annual Report on Form 10-K. We specifically decline any obligation to
publicly
15
<PAGE>
release the result of any revisions which may be made to any forward-looking
statements to reflect anticipated or unanticipated events or circumstances
occurring after the date of such statements, or to update the reasons why actual
results could differ from those projected in the forward-looking statements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, including changes in interest rates
and foreign exchange current exchange rates. We believe that the relatively
moderate rate of inflation in the United States over the past few years and the
relatively stable interest rates incurred on short term financing have not had a
significant impact on our sales, operating results or prices of raw materials.
There can be no assurance, however, that inflation or an upward trend in short
term interest rates will not have a material adverse effect on our operating
results in the future.
A substantial majority of our revenues, expenses and capital purchasing
activities are transacted in U.S. dollars and to date we have not been
significantly affected by currency fluctuations. However, we conduct business in
several different countries and fluctuations in currency exchange rates could
cause our products to become relatively more expensive in particular countries,
leading to a reduction in sales in that country.
16
<PAGE>
PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On June 3, 1999, a securities class action lawsuit entitled Frank
Foster v. Osicom Technologies, Inc., et al., Case No. 99-05789, was
filed in United States District Court for the Central District of
California against us, our CEO and our former Chief Financial Officer.
This lawsuit purports to be brought on behalf of all persons who
purchased our common stock during the period from July 1, 1998 through
April 20, 1999, inclusive.
On May 5, 1999, a securities class action lawsuit entitled Chesin &
Company Target Benefit Plan v. Osicom Technologies, Inc., et al., Case
No. 99-04822, was filed in United States District Court for the Central
District of California against us, our CEO and our former Chief
Financial Officer. This lawsuit purports to be brought on behalf of all
persons who purchased our common stock during the period from July 2,
1998 through April 21, 1999, inclusive.
On April 29, 1999, a securities class action lawsuit entitled Cecile
Michot v. Osicom Technologies, Inc., et al., Case No. 99-04698, was
filed in United States District Court for the Central District of
California against us, our CEO, our President and our former Chief
Financial Officer. This lawsuit purports to be brought on behalf of all
persons who purchased our common stock during the period from July 2,
1998 through April 20, 1999, inclusive.
On April 28, 1999, a securities class action lawsuit entitled Mark
Camera v. Osicom Technologies, Inc., et al., Case No. 99-04581, was
filed in United States District Court for the Central District of
California against us, our CEO, our President and our former Chief
Financial Officer. This lawsuit purports to be brought on behalf of all
persons who purchased our common stock during the period from July 2,
1998 through April 20, 1999, inclusive.
On April 23, 1999, a securities class action lawsuit entitled Yanay
Lehavi v. Osicom Technologies, Inc., et al., Case No. 99-04408, was
filed in the United States District Court for the Central District of
California against us and our former Chief Financial Officer. This
lawsuit purports to be brought on behalf of all persons who purchased
our common stock during the period from July 1, 1998 through April 21,
1999, inclusive.
On April 23, 1999, a securities class action lawsuit entitled Robert M.
Hill, et al., v. Osicom Technologies, Inc., et al., Case No. 99-04376,
was filed in the United States District Court for the Central District
of California against us, our CEO, our President and our former Chief
Financial Officer. This lawsuit purports to be brought on behalf of all
persons who purchased our common stock during the period from July 2,
1998 through April 20, 1999, inclusive.
On April 22, 1999, a securities class action lawsuit entitled Gadi G.
Hill v. Osicom Technologies, Inc., et al., Case No. 99-04360, was filed
in the United States District Court for the Central District of
California against us and our CEO and former Chief Financial Officer.
This lawsuit purports to be brought on behalf of all persons who
purchased our common stock during the period from July 1, 1998 through
April 20, 1999, inclusive.
On April 22, 1999, a securities class action lawsuit entitled Herman
Wunsch, et. al., v. Osicom Technologies, Inc., et al., Case No.
99-04322, was filed in the United States District Court for the Central
District of California against us, our CEO, our President and our
former Chief Financial Officer. This lawsuit purports to be brought on
behalf of all persons who purchased our common
17
<PAGE>
stock during the period from July 2, 1998 through April 20, 1999,
inclusive.
On April 22, 1999, a securities class action lawsuit entitled Todd
Augenbaum, et. al., v. Osicom Technologies, Inc., et al., Case No.
99-04321, was filed in the United States District Court for the Central
District of California against us and our CEO and former Chief
Financial Officer. This lawsuit purports to be brought on behalf of all
persons who purchased our common stock during the period from July 2,
1998 through April 21, 1999, inclusive.
All these class actions generally allege that, during the periods
alleged in the respective complaints, the defendants made false or
misleading public statements which caused the price of our common stock
to be artificially inflated. The class action asserts that the
defendants' conduct violated Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, and SEC Rule 10b-5 promulgated thereunder, as
well as state common law. The class actions do not specify an amount of
damages. We intend to defend the class actions and any other similar
lawsuits vigorously. An unfavorable outcome in such litigation could
have a material adverse affect on our financial condition and results
of operations.
From time to time we are involved in various legal proceedings
incidental to the conduct of its business. We believe that
none of these proceedings will have a material adverse impact on our
financial condition or results of operations.
ITEM 2: CHANGES IN SECURITIES
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4: SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
Not Applicable
ITEM 5: OTHER INFORMATION
Not Applicable
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
--------
20 Consolidated Financial Statements for the Quarter Ended
April 30, 1999 (included in Part I, Item 1)
27 Financial Data Schedule
B. Reports on Form 8-K
-------------------
None
18
<PAGE>
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.
OSICOM TECHNOLOGIES, INC.
(Registrant)
By: /s/ Christopher E. Sue Date: June 14, 1999
--------------------------------------
Christopher E. Sue,
Vice President Finance
Principal Accounting Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> APR-30-1999
<CASH> 2,903,000
<SECURITIES> 0
<RECEIVABLES> 18,470,000
<ALLOWANCES> 7,187,000
<INVENTORY> 15,378,000
<CURRENT-ASSETS> 39,566,000
<PP&E> 28,011,000
<DEPRECIATION> 21,302,000
<TOTAL-ASSETS> 73,338,000
<CURRENT-LIABILITIES> 33,458,000
<BONDS> 2,185,000
<COMMON> 2,715,000
0
1
<OTHER-SE> 34,979,000
<TOTAL-LIABILITY-AND-EQUITY> 73,338,000
<SALES> 19,129,000
<TOTAL-REVENUES> 19,129,000
<CGS> 10,251,000
<TOTAL-COSTS> 10,251,000
<OTHER-EXPENSES> 9,470,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 451,000
<INCOME-PRETAX> (1,043,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,043,000)
<DISCONTINUED> (1,229,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,272,000)
<EPS-BASIC> (0.29)
<EPS-DILUTED> 0
</TABLE>
