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 June 30, 1998.
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______
0-16864
------------------------
(Commission File number)
GULL LABORATORIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
UTAH 87-0404754
- ------------------------ ------------------------------------
(State of Incorporation) (IRS Employer Identification Number)
1011 East Murray Holladay Road
Salt Lake City, Utah 84117
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(801) 263-3524
- -------------------------------
(Registrant's Telephone Number)
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
--- ---
The number of shares of common stock outstanding as of August 1, 1998 was
8,016,012.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GULL LABORATORIES, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<S> <C> <C>
June 30, 1998 December 31, 1997
------------------------ ------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 569,740 $ 239,993
Receivables-net 3,335,320 1,963,410
Net investment in sales-type leases 249,464 272,125
Income tax refund receivable 307,855 119,499
Inventories 6,901,716 6,197,359
Prepaid expenses 422,133 316,878
------------------------ ------------------------
Total current assets 11,786,228 9,109,264
Property, plant and equipment - net 4,444,173 4,189,999
Net investment in sales-type leases 582,590 763,412
Deferred taxes 279,569 236,586
Other assets - net 971,897 1,001,812
------------------------ ------------------------
Total assets $ 18,064,457 $ 15,301,073
======================== ========================
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,664,831 $ 1,498,146
Accounts payable 6,409,155 2,331,126
Accrued expenses 1,791,249 1,853,521
Deferred income taxes 48,177 6,884
Current portion of long
term obligations 3,531,381 3,576,085
------------------------ -----------------------
Total current liabilities 13,444,793 9,265,762
Long-term obligations 749,195 733,082
Other long-term liabilities 375,073 362,278
------------------------ ------------------------
Total liabilities 14,569,061 10,361,122
------------------------ ------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 8,008 7,941
Additional paid-in capital 8,924,782 8,416,335
Foreign currency translation adjustment (443,847) (413,737)
Accumulated deficit (4,993,547) (3,070,588)
------------------------ ------------------------
Total stockholders' equity 3,495,396 4,939,951
------------------------ ------------------------
Total liabilities and stockholders' equity $ 18,064,457 $ 15,301,073
======================== ========================
</TABLE>
1
<PAGE>
GULL LABORATORIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C>
Three months ended
June 30, 1998 June 30, 1997
------------------------------ -----------------------------
Sales $ 4,909,146 $ 5,193,226
Cost of good sold 2,910,019 2,069,007
------------------------------ -----------------------------
Gross Profit 1,999,127 3,124,219
------------------------------ -----------------------------
Expenses:
Selling, general and administrative 3,010,550 2,512,635
Research and development 358,404 367,691
------------------------------ ------------------------------
Total expenses 3,368,954 2,880,326
------------------------------ -----------------------------
Operating income (loss) (1,369,827) 243,893
------------------------------ -----------------------------
Other expense:
Interest expense (178,899) (167,863)
Other 94,317 59,420
------------------------------ -----------------------------
Total other expense (84,582) (108,443)
------------------------------ -----------------------------
Income (loss) before provision for
income taxes (1,454,409) 135,450
Income tax provision (112,005) 17,370
------------------------------ -----------------------------
Net income (loss) $ (1,342,404) $ 118,080
============================== =============================
Net income (loss) per common share:
Basic and diluted $ (.17) $ .01
============================== =============================
</TABLE>
2
<PAGE>
GULL LABORATORIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C>
Six months ended
June 30, 1998 June 30, 1997
------------------------------ -----------------------------
Sales $ 10,049,552 $ 11,225,000
Cost of good sold 5,457,363 4,453,000
------------------------------ -----------------------------
Gross Profit 4,592,189 6,772,000
------------------------------ -----------------------------
Expenses:
Selling, general and administrative 5,661,840 5,159,000
Research and development 725,645 769,000
------------------------------ -----------------------------
Total expenses 6,387,485 5,928,000
------------------------------ -----------------------------
Operating income (loss) (1,795,296) 844,000
------------------------------ -----------------------------
Other expense:
Interest expense (378,171) (313,000)
Other 143,361 56,000
------------------------------ -----------------------------
Total other expense (234,810) (257,000)
------------------------------ -----------------------------
Income (loss) before provision for
income taxes (2,030,106) 587,000
Income tax provision (107,148) 411,000
------------------------------ -----------------------------
Net income (loss) $ (1,922,958) $ 176,000
============================== =============================
Net income (loss) per common share:
Basic and diluted $ (.24) $ .02
============================== =============================
</TABLE>
3
<PAGE>
GULL LABORATORIES, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
<TABLE>
Six Months Ended
<S> <C> <C>
June 30, 1998 June 30, 1997
----------------------- -----------------------
Cash flows from operating activities:
Income from continuing operations $ (1,922,958) $ 176,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 621,550 563,514
Stock option exercise compensation expense 238,625
Other 227,351 41,707
Changes in assets and liabilities:
Net receivables (1,413,041) (1,654,188)
Inventories (842,068) (2,261,889)
Prepaid expenses (105,983) (298,643)
Other assets/liabilities (37,961) 142,205
Income taxes (receivable) payable (121,790) 267,586
Accounts payable 4,087,232 2,153,807
Deferred income taxes (3,376) 11,000
Accrued expenses (82,434) 316,927
----------------------- -----------------------
Net cash provided by (used in) operating activities 645,147 (541,974)
----------------------- -----------------------
Cash flows from investing activities:
Receipts of sales type lease 184,012 162,454
Disposition of property, plant
and equipment 45,520 15,957
Purchase of property, plant and equipment (507,469) (1,171,051)
----------------------- -----------------------
Net cash used in investing activities (277,937) (992,640)
----------------------- -----------------------
Cash flows from financing activities:
Proceeds from long-term obligations 1,642,667
Principal payments on long-term obligations (389,688) (537,599)
Line of Credit 167,847 496,601
Proceeds from issuance of common stock 203,322 210,424
----------------------- -----------------------
Net cash provided from financing activities (18,519) 1,812,093
----------------------- -----------------------
Foreign currency translation adjustment (18,944) (359,460)
----------------------- ------------------------
Net increase/(decrease) in cash 329,747 (81,981)
Cash at beginning of period 239,993 301,033
----------------------- -----------------------
Cash at end of period $ 569,740 $ 219,052
====================== =======================
</TABLE>
4
<PAGE>
GULL LABORATORIES, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
1. Basis of presentation
The unaudited consolidated condensed financial statements of Gull
Laboratories, Inc. (the "Company") as of June 30, 1998 and for the three months
and the six months ended June 30, 1998 and 1997 were prepared by the Company
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Income statement amounts for the six months ended June 30,
1997 have been rounded to the nearest $1,000. These financial statements and
related notes should be read in conjunction with the Company's audited financial
statements for the year ended December 31, 1997 contained in its Annual Report
on Form 10-K.
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. In the opinion of management, all necessary adjustments to the
financial statements have been made to present fairly the financial position and
results of operations and cash flows. The results of operations for the periods
presented are not necessarily indicative of the results for the respective
complete years.
2. Inventories
Inventories consisted of the following:
June 30, December 31,
1998 1997
Raw materials $1,878,907 $2,514,522
Work-in-process 1,227,474 889,947
Finished goods 2,121,791 1,576,303
Equipment held for
lease or sale 1,673,544 1,216,587
---------- ----------
Total $6,901,716 $6,197,359
========== ==========
3. Earnings per share
SFAS 128, requires the presentation of basic and diluted income (loss)
per share. Basic earnings (loss) per common share is the amount of net income
(loss) for the period available to each share of common stock outstanding during
the reporting period. Diluted earnings (loss) per common share is the amount of
net income (loss) for the period available to each share of common stock
outstanding during the reporting period and to each share that would have been
outstanding during the period. A total of 147,150 potential common shares (stock
options) have not been included in the computation of loss per share for the
three months and six months ended June 30, 1998, as they would have had a
dilutive effect.
5
<PAGE>
In calculating income (loss) per common share, the net income (loss)
was the same for both the basic and diluted calculation. Below is a
reconciliation between the basic and diluted weighted average common and
common-equivalent shares for three months and six months ended June 30, 1998 and
1997.
Three Months Ended June 30,
1998 1997
---- ----
Basic (weighted average common shares
outstanding during the period) 8,000,662 7,929,825
Weighted average common stock options
outstanding during the period -- 164,591
--------- ---------
Diluted 8,000,662 8,094,416
========= =========
Six Months Ended June 30,
1998 1997
---- ----
Basic (weighted average common shares
outstanding during the period) 7,973,387 7,914,882
Weighted average common stock options
outstanding during the period -- 162,459
--------- ---------
Diluted 7,973,387 8,077,341
========= =========
4. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income", effective January 1, 1998 which
establishes standards for reporting and display of comprehensive income and its
components in financial statements. The components of the Company's
comprehensive income are as follows:
6
<PAGE>
Three Months Ended June 30,
1998 1997
---- ----
Net income/(loss) $(1,342,404) $ 118,080
Foreign currency translation
increase/(loss) (4,189) 14,000
------------ -----------
Comprehensive income/(loss) $(1,346,593) $ 132,080
============ ===========
Six Months Ended June 30,
1998 1997
---- ----
Net income/(loss) $(1,922,958) $ 176,000
Foreign currency translation loss (30,110) (131,422)
------------ ------------
Comprehensive income/(loss) $(1,953,068) $ 44,578
============ ============
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report contains both historical facts and
forward-looking statements. Any forward-looking statements involve risks and
uncertainties, including but not limited to risk of product demand, market
acceptance, government regulation, economic conditions, competitive products and
pricing, difficulties in product development, commercialization, production and
technology and other risks detailed in this filing. Although the Company
believes it has the necessary product offerings and resources, future revenue
and margin trends cannot be reliably predicted. Factors external to the Company
can result in volatility of the Company's Common Stock price. Because of the
foregoing factors, recent trends should not be considered reliable indicators of
future stock prices or financial performance.
CHANGES IN FINANCIAL CONDITIONS
The Company's liquidity continued to decrease due to operating losses
incurred in the first six months of 1998. In the first six months of 1998,
working capital decreased by $1,502,067 to a working capital deficit of
$1,658,565, as compared to a working capital deficit of $156,498 at December 31,
1997. The Company's current ratio of current assets divided by current
liabilities decreased from .98 at December 31, 1997 to .88 at June 30, 1998 and
the Company's ratio of total liabilities to equity increased from 2.1 to 1 at
December 31, 1997 to 4.2 to 1 at June 30, 1998.
During the first six months of 1998, the Company has funded its
operation by increasing its bank borrowings and through cash receipts received
through the exercise of stock options totaling approximately $200,000.
Additionally, in 1998 Fresenius AG, the Company's majority shareholder, has
advanced approximately $3,000,000 to the Company through the payment of vendors
in the Company's behalf. Without the advancement of these funds by Fresenius AG,
the Company would not have been able to meet its obligations.
7
<PAGE>
As a result of the losses and decrease in liquidity, at June 30, 1998,
the Company was not in compliance with certain earnings and leverage covenants
associated with its long-term debt with two banks and a line of credit that was
due August 15, 1998. Upon receipt of a guarantee of certain debt by Fresenius
AG, the line of credit has been extended through the earlier of November 15,
1998 or the date the Merger referred to below is closed. Because the banks have
not waived the covenants through July 1, 1999, the long-term debt with the banks
has been classified as a current liability.
The Company experienced increased accounts receivable in the Company's
European Operations as customers extended their payments. Finished Goods
inventories increased as the Company reestablished safety stocks which had been
depleted due to the manufacturing and product quality problems that the Company
had experienced in the fourth quarter of 1997 and the first quarter of 1998.
These increases were financed by proceeds from the exercise of stock options,
increases in accounts payable and accrued expenses payable to Fresenius AG and
increases in the line of credit and capital leases.
At June 30,1998, the Company had approximately $300,000 available under
lines of credit with its banks and had no commitments to purchase capital
assets. The Company will need to obtain additional financing to fund its
operations and instrumentation program. The Company does not have any funding
commitments from outside lending institutions and there is no guarantee that it
will be able to obtain funding if working capital needs cannot be financed
through internally generated funds or additional advances from Fresenius AG.
On July 27, 1998, the Company announced that, together with its
majority shareholder, Fresenius AG, it had executed a letter of intent to merge
with Meridian Diagnostics for a cash consideration of $3.00 per share
(the"Merger"). The Merger is subject to the execution of a definitive agreement,
the receipt of a fairness opinion from an independent investment banker,
recommendation of the merger to the Company's shareholders by an independent
committee of the Company's Board of Directors and approval by a majority vote of
the Company's shareholders. Fresenius AG, the Company's majority shareholder,
has agreed, subject to certain conditions, to vote its shares in favor of the
Merger.
8
<PAGE>
Results of Operations
Sales of the second quarter of 1998 of $4,909,146 were $284,080 or 5%
lower than sales in the second quarter of 1997 of $5,193,226. Approximately
$125,000 of the sales decrease was due to the strength of the dollar against
major European currencies. Sales of the Company's United States' operations
decreased approximately $82,000 or 3%. Decreased sales of the Company's reagents
in the United States and Australian markets were offset by increased sales of
Biodesign.
For the six months ended June 30, 1998 sales decreased $1,175,448 or
10% from $11,225,000 to $10,049,552. Approximately $380,000 of the decrease was
due to the strength of the dollar against major European currencies. Revenues in
the United States decreased due to decreased sales to the College of American
Pathologists, more placements of instrumentation being treated as monthly rental
agreements rather than sales, decreased sales to OEM customers and decreased
sales into export areas, mainly to the Australian market.
In Europe, the Company experienced revenue growth in France due to the
receipt of product registrations from the Agence du Medicament. Sales in
Germany, the largest market in Europe, decreased in all product lines due to a
significant increase in pricing pressure caused by changes in Germany's
reimbursement system. Additionally, the Company has shown continued loss of
market share in its infectious disease products due to back order problems in
late 1997 and early 1998.
Gross profits as a percentage of sales decreased to 41% and 46% in the
second quarter and the first six months of 1998, respectively, compared to 60%
in 1997. The decrease in the gross profit margin was caused by changes in
product mix between IFA, ELISA and instrumentation products, pricing pressures,
particularly in the German market, coupled with lower absorption of overhead due
to decreased sales of bloodgrouping and HLA products, manufacturing
inefficiencies due to raw material manufacturing and product quality problems in
the United States and increased write offs of obsolete inventories.
Selling, General and Administrative costs increased approximately
$500,000 compared to the prior year. As described below, substantially all of
this increase was caused by costs related to the termination of the Company's
President and Senior Vice President in the second quarter of 1998.
Termination Costs - The Company had employment agreements with its President and
a Senior Vice President whose employment has been terminated. Both agreements
provided for severance payments ranging from nine months to one year from the
date of termination. In the second quarter of 1998, the Company accrued
termination costs of approximately $280,000 required to be paid under the terms
of these agreements.
9
<PAGE>
Additionally, at termination, both individuals held stock options to
purchase an aggregate of 187,400 shares of the Company's common stock at a
weighted average price per share of $4.63. These options expire 90 days from the
date that their employment terminated.
Under the terms of the Company's stock option plan, stock option
holders are entitled to exercise their stock options by surrendering shares of
previously issued stock as payment for the exercise price of the stock option.
United States Generally Accepted Accounting Principles require that compensation
expense equal to the excess of the fair value of the stock received over the
exercise price of the option must be recorded if stock that has been held for
less than six months ("Immature Stock") is used to exercise stock options. While
the recognition of compensation expense does not have an impact on the liquidity
of the Company because a corresponding credit is recorded in the Company's
equity section, it can have an impact on the earnings of the Company and the
impact may be material.
In the second quarter of 1998, stock options for a total of 42,625
shares of the Company's stock were exercised using Immature Stock, resulting in
the recognition of compensation expense of approximately $238,000 and a related
income tax benefit of approximately $82,000.
Options to purchase 151,375 shares of the Company's common stock held
by the former president of the Company expired in the second quarter of 1998.
Options to purchase a total of 31,400 shares of the Company's common stock at a
weighted average price per share of $5.25 remain outstanding with the Company's
former Senior Vice President. These options expire August 19, 1998.
Clinical Trial Costs - The Company has recently introduced its new Herpes Type
Specific IgG ELISA tests in several foreign markets and is seeking clearance to
market the products in the United States from the FDA. Because there is no in
vitro diagnostic device that is able to differentiate between Type 1 and Type 2
Herpes infections that has been cleared to market in the United States by the
FDA, the Company has been required by the FDA to perform more extensive clinical
trials on individuals at risk for a sexually transmitted infection or disease.
These clinical trials are currently in process and the patient enrollment is
finished. These clinical trials are significantly more extensive than the trials
the Company has been required to perform for other new product submissions to
the FDA and the Company expects to incur clinical trial costs in excess of
$200,000, approximately $40,000 of which was incurred in the second quarter of
1998. The FDA submission will be finalized after receipt of the final clinical
trial data and the Company expects to file the submission in the fourth quarter.
At this time, the Company believes that it should be possible to launch HSV 1
IgG and HSV 2 IgG Type Specific products in the United States by the first
quarter of 1999.
10
<PAGE>
There were no other material changes in the Company's operations during
the second quarter and first six months of 1998.
PART Ill. OTHER INFORMATION
ITEM 5: OTHER INFORMATION
Dr. Silke Humberg was elected as CEO & President of the Company on
April 6, 1998. Dr. Humberg continues to be an employee of Fresenius AG while she
obtains necessary work permits and governmental authorizations. The Company, by
vote of its Board of Directors, including members of the Compensation Committee,
has agreed to reimburse Fresenius AG for the direct expenses incurred by
Fresenius AG in compensating Dr. Humberg until the work permits and
authorization are obtained. Dr. Humberg is working for the Company on a full
time basis during the time that she is being compensated by Fresenius AG.
The Company has received six U.S. patents and two European patents on
its GeneSTAR(TM) technology. GeneSTAR, as a new generation of DNA-based
technology, will require more development and preliminary evaluation before it
is ready for commercial applications. Gull is collaborating with the Centers for
Disease Control on the development of both an EHEC (enterohemorrhagic E. coli)
panel and a gastrointestinal bacterial panel of tests using its GeneSTAR
technology. The products are currently only available in a format for use in an
experimental laboratory and not in a commercially feasible format. The Company
is conducting preclinical trials on its EHEC panel in both Europe and in the
United States. The clinical trials in Europe have been suspended until certain
necessary enhancements to the product have been completed. The limited market
distribution of the EHEC product in Europe, which was initiated in May, has also
been suspended until the enhancements have been completed. The Company does not
expect to generate revenues from its GeneSTAR technology in 1998.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
The following exhibit is filed as part of this report:
10(a) Reimbursement agreement with Fresenius.
No other material matter occurred during the quarter ended June 30,
1998 that requires disclosure as part of Part II of the quarterly report on Form
10Q.
11
<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.
Gull Laboratories, Inc.
Date 8-14-98 /s/ Michael B. Malan
-------------------------------- --------------------
Michael B. Malan, CPA
Secretary/Treasurer and
V.P. of Finance (Duly authorized
officer and principal financial
officer)
12
AGREEMENT
THIS AGREEMENT is entered into by and between FRESENIUS AG
(AFresenius@) and GULL LABORATORIES, INC. ("Gull") on April ____, 1998.
WHEREAS, Fresenius is the major shareholder of Gull and the
current employer of Dr. Silke Humberg ("Humberg"). Dr. George Evanega is
resigning as President and Chief Executive Officer ("CEO") of Gull effective on
or about April 1, 1998; and
WHEREAS, Gull desires to employ Humberg as its acting
President and CEO, pending employment by Gull of a permanent President and CEO;
and
WHEREAS, the parties recognize that in order to obtain the
necessary work permit and governmental authorization for Humberg to commence
work for Gull on a timely basis, it will be necessary for Humberg to continue to
be employed and paid by Fresenius, who will make Humberg available to Gull on a
full time basis, subject to Gull=s agreement to reimburse Fresenius for the
costs of so doing.
NOW THEREFORE, the parties agree as follows:
1. Fresenius shall continue to employ Humberg throughout the
term of this Agreement, and shall make Humberg available to Gull on a full-time
basis to serve as acting president and CEO of Gull.
2. Fresenius shall pay all of Humberg's compensation and
benefits, which shall be as agreed upon by the board of directors of Gull and
Humberg.
3. At least monthly, Fresenius shall submit an invoice to
Gull for the direct expenses incurred by Fresenius in compensating Humberg
pursuant to this Agreement. Gull shall reimburse Fresenius for the expenses
represented by the invoice within thirty (30) days of receipt of the invoice.
4. Either Fresenius or Gull may terminate this Agreement upon
thirty (30) days prior written notice to the other.
5. This Agreement shall not be deemed to create any rights in
Humberg or any other person not a party to this Agreement.
IN WITNESS WHEREOF, this Agreement has executed and delivered
by the parties as of the date first above written.
GULL LABORATORIES, INC.
By:
Title:
FRESENIUS AG
By:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GULL
LABORATORIES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. THE COMPANY HAS RESTATED EARNINGS PER
SHARE FOR THE SIX MONTHS ENDED JUNE 30, 1997, FOR BASIC AND DILUTED EARNINGS PER
SHARE TO BE IN ACCORDANCE WITH STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
(SFAS) SFAS NO. 128; EARNINGS PER SHARE AND TO REFLECT THE MERGER WITH FRESENIUS
DIAGNOSTICS WHICH HAS BEEN ACCOUNTED FOR IN A MANNER SIMILAR TO A POOLING OF
INTERESTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 569,740 219,000
<SECURITIES> 0 0
<RECEIVABLES> 3,656,405 3,765,000
<ALLOWANCES> 321,085 170,000
<INVENTORY> 6,901,716 5,734,000
<CURRENT-ASSETS> 11,786,228 10,701,000
<PP&E> 10,531,151 10,189,000
<DEPRECIATION> 6,086,978 6,084,000
<TOTAL-ASSETS> 18,064,457 16,566,000
<CURRENT-LIABILITIES> 13,444,793 5,865,000
<BONDS> 749,195 3,462,000
0 0
0 0
<COMMON> 8,008 8,000
<OTHER-SE> 3,487,388 6,294,000
<TOTAL-LIABILITY-AND-EQUITY> 18,064,457 16,566,000
<SALES> 10,049,552 11,225,000
<TOTAL-REVENUES> 10,049,552 11,225,000
<CGS> 5,457,363 4,453,000
<TOTAL-COSTS> 6,387,485 5,928,000
<OTHER-EXPENSES> (143,361) (56,000)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 378,171 313,000
<INCOME-PRETAX> (2,030,106) 587,000
<INCOME-TAX> (107,148) 411,000
<INCOME-CONTINUING> (1,922,958) 176,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,922,958) 176,000
<EPS-PRIMARY> (.24) .02
<EPS-DILUTED> (.24) .02
</TABLE>
