<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 MARCH 31, 1999
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 0-21366
TRICORD SYSTEMS, INC.
---------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 41-1590621
------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2905 NORTHWEST BOULEVARD, SUITE 20, PLYMOUTH, MINNESOTA 55441
-----------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(612) 557-9005
--------------------------------------------------------
(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 last practicable date.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS MARCH 31, 1999
----- --------------
<S> <C>
Common Stock,
$0.01 par value 19,031,511
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
TRICORD SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------
(in thousands, except per share data) 1999 1998
--------------------- ----------------------
<S> <C> <C>
Revenues:
Product sales $ 243 806
Service contracts 348 509
--------------------- ----------------------
591 1,315
Cost of goods sold:
Product sales 214 685
Service contracts 96 117
--------------------- ----------------------
310 802
Gross margin 281 513
--------------------- ----------------------
Operating expenses:
Research and development 711 711
Sales and marketing 990 244
General and administrative 495 342
--------------------- ----------------------
2,196 1,297
--------------------- ----------------------
Operating loss (1,915) (784)
--------------------- ----------------------
Other income (expense):
Interest, net 66 52
Other, net 11 40
--------------------- ----------------------
77 92
--------------------- ----------------------
Loss before income taxes (1,838) (692)
Provision for income taxes - -
--------------------- ----------------------
Net loss $ (1,838) (692)
--------------------- ----------------------
--------------------- ----------------------
Net loss per share - basic and diluted $ (0.10) (0.05)
--------------------- ----------------------
--------------------- ----------------------
Weighted average common shares outstanding 18,987 13,809
--------------------- ----------------------
--------------------- ----------------------
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
TRICORD SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands, except per share data) 1999 1998
------------------- ------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,641 6,215
Accounts receivable, net 162 162
Inventories, net 513 637
Other current assets 127 96
------------------- ------------------
Total current assets 5,443 7,110
Equipment and improvements, net 350 243
------------------- ------------------
Total Assets $ 5,793 7,353
------------------- ------------------
------------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 445 398
Accrued payroll, benefits and related taxes 224 344
Deferred revenue 356 525
Other accrued expenses 190 244
------------------- ------------------
Total current liabilities 1,215 1,511
Stockholders' equity:
Common stock, $0.01 par value; 75,000 shares authorized,
19,032 and 18,961 shares issued and outstanding 190 190
Additional paid-in capital 87,652 87,483
Unearned compensation (5,159) (5,564)
Accumulated deficit (78,105) (76,267)
------------------- ------------------
Total stockholders' equity 4,578 5,842
------------------- ------------------
Total Liabilities and Stockholders' Equity $ 5,793 7,353
------------------- ------------------
------------------- ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
TRICORD SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------
(In thousands) 1999 1998
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,838) $ (692)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of unearned compensation 405 -
Depreciation and amortization 58 109
Provision for losses on inventories - 164
Recoveries on accounts receivable (19) -
Other 94 67
Changes in operating assets and liabilities:
Accounts receivable 19 255
Inventories 124 86
Other current assets (31) 50
Accounts payable 47 (74)
Accrued payroll, benefits and related taxes (45) (68)
Deferred revenue (169) (32)
Other accrued expenses (54) 7
----------------- -----------------
Net cash used in operating activities (1,409) (128)
----------------- -----------------
Cash flows from investing activities:
Capital expenditures (165) (5)
----------------- -----------------
Net cash used in investing activities (165) (5)
----------------- -----------------
Cash flows from financing activities:
Stock option transactions - 332
----------------- -----------------
Net cash provided by financing activities - 332
----------------- -----------------
Net increase (decrease) in cash and cash equivalents (1,574) 199
Cash and cash equivalents at beginning of period 6,215 3,713
----------------- -----------------
Cash and cash equivalents at end of period $ 4,641 3,912
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TRICORD SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated statements of operations,
balance sheet and statements of cash flows reflect all adjustments of a normal
recurring nature, which are, in the opinion of management, necessary for a fair
presentation of the consolidated financial position at March 31, 1999, and of
consolidated results of operations and cash flows for the interim periods ended
March 31, 1999 and 1998. The unaudited consolidated financial statements should
be read in conjunction with Tricord Systems Inc.'s (the "Company's") audited
consolidated financial statements for the year ended December 31, 1998, which
were incorporated by reference in the Company's 1998 Annual Report on Form 10-K.
The year-end balance sheet data included herein is derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. The results of operations for the interim period
ended March 31, 1999 are not necessarily indicative of the results to be
expected for the full year or any future periods.
2. BALANCE SHEET AND SUPPLEMENTAL CASH FLOW INFORMATION
Balance Sheet Information:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
(unaudited)
<S> <C> <C>
Accounts receivable, net:
Accounts receivable $ 743 841
Allowance for doubtful accounts (581) (679)
-------------- --------------
$ 162 162
-------------- --------------
-------------- --------------
Inventories, net:
Spare parts and expansion products $ 3,015 3,946
Inventory reserves (2,502) (3,309)
-------------- --------------
$ 513 637
-------------- --------------
-------------- --------------
</TABLE>
Supplemental Cash Flow Information:
During the first quarter of 1999, $75 of accrued payroll obligations and
expenses of $94 were settled through the issuance of 70,499 shares of common
stock of the Company.
4
<PAGE>
3. BUSINESS SEGMENTS
The Company reports its operations in two business segments, Server and
Software. Revenues to date are for the server line of business only. There
are no intersegment revenues. Cost allocations are necessary in the
determination of operating results by segment. For this reason, management
does not represent that these segments, if operated as independent
businesses, would result in the operating results shown.
<TABLE>
<CAPTION>
Quarter ended March 31,
----------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Operating income (loss):
Server business $ 223 386
Software business (2,138) (1,170)
--------------- --------------
$ (1,915) (784)
--------------- --------------
--------------- --------------
</TABLE>
4. NET LOSS PER SHARE
Net loss per share is computed by dividing net loss by the weighted average
number of common shares outstanding during each period. Potentially dilutive
common shares are excluded from the calculation of net loss per share as their
impact is antidilutive. Net loss per share does not include common stock options
and warrants totaling approximately 8,800,000 shares.
5. COMPREHENSIVE INCOME (LOSS)
The Company has no significant comprehensive income (loss) items other than
net loss.
5
<PAGE>
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
Throughout 1998 and the first quarter of 1999, the Company continued to focus
its development efforts exclusively on storage system management software, the
strategy it defined in 1997. The storage system management software architecture
includes an entirely new generation of distributed file system and
file-intelligent I/O ("input/output") technology known as Tricord Storage
Management Software ("TSMS"). No revenues were generated by TSMS through March
31, 1999, and the Company may not receive revenues from TSMS-based products
during the remainder of 1999.
The Company has historically engaged in the business of designing,
manufacturing, marketing and supporting high-performance enterprise servers
for use in mission critical applications, principally running on Microsoft
Windows NT-Registered Trademark- and Novell-Registered Trademark-
NetWare-Registered Trademark-. All revenues generated through March 31, 1999
relate to the server line of business (sometimes referred to as the "legacy
business").
See "Certain Important Factors" at the end of this section for a discussion of
forward looking statements.
RESULTS OF OPERATIONS
REVENUES
Revenues for the first quarter ended March 31, 1999 were $591,000 compared to
$1,315,000 for the first quarter ended March 31, 1998. Revenues decreased in
1999 from the same period in 1998 as a result of the Company's 1997 decision
to redefine its corporate strategy to focus its development efforts
exclusively on storage system management software.
The Company currently anticipates that revenues will continue to decrease during
the remainder of 1999 as the Company continues to focus its resources on
developing and marketing TSMS. The Company intends to sell its remaining
enterprise server product inventories, consisting primarily of spare parts and
expansion products, as long as there is sufficient customer demand and materials
are available. The Company will honor its service agreements and enter into new
service agreements as long as there is sufficient demand and provided such
agreements are profitable. Since the Company has not completed its development
of TSMS products, the Company may not receive revenues during the remainder of
1999 from the sale or license of TSMS-based products.
6
<PAGE>
GROSS MARGIN
Gross margin decreased to $281,000 for the first quarter of 1999 from $513,000
for the first quarter of 1998 primarily due to the decrease in revenues over the
same period. The Company currently anticipates that gross margin will continue
to decline in 1999 because of the anticipated decrease in revenues in 1999 as
discussed above.
RESEARCH AND DEVELOPMENT
Research and development expenses remained the same at $711,000 for the first
quarter of 1999 and 1998. Research and development in the first quarter of
1999 increased due to an increase of $135,000 in stock compensation expense
related to certain options granted and restricted stock issued in 1998, but
was offset by decreases in project costs and consulting. The Company
anticipates that research and development costs will rise during 1999
compared to 1998 levels as the Company continues to focus on the development
of TSMS.
SALES AND MARKETING
Sales and marketing expenses increased to $990,000 for the first quarter of
1999 from $244,000 for the first quarter of 1998, primarily due to increases
in personnel costs related to headcount additions, expenses related to
marketing research and analysis for TSMS and an increase of $136,000 in stock
compensation expense related to certain options granted and restricted stock
issued in 1998. The Company currently anticipates that sales and marketing
expenses will increase significantly in 1999 compared to 1998 levels as the
Company continues to focus on the development and marketing of TSMS and
pursues marketing and sales opportunities.
GENERAL AND ADMINISTRAtIVE
General and administrative expenses increased to $495,000 for the first
quarter of 1999 from $342,000 for the first quarter of 1998 primarily due to
an increase of $104,000 in stock compensation expense related to certain
options granted and restricted stock issued in 1998 and an increase in
personnel costs related to the December 1998 addition of the Company's Vice
President and General Counsel. The Company currently anticipates that general
and administrative expenses for 1999 will be greater than 1998 levels due to
these factors.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The aggregate net decrease in cash and cash equivalents during the first
three months of 1999 was $1,574,000, including $1,838,000 of cash used in
operating activities due to the net loss for the first three months of 1999
(adjusted by non-cash stock compensation expense related to certain options
granted and restricted stock issued in 1998) and capital expenditures of
$165,000. The Company may purchase additional capital equipment, primarily
for research and development, depending on the timing and specific
requirements of a potential OEM or other strategic investment or alliance.
The Company has no material commitments for the purchase of capital equipment.
As of March 31, 1999, the Company had $4,641,000 in cash and cash equivalents.
If the Company's operations progress as currently anticipated, of which there
can be no assurance, the Company believes that it will be able to manage its
cash resources to continue operations for at least the next twelve months.
However, should the Company incur additional costs within the next twelve months
due to the product launch of its TSMS-based products (which have yet to be fully
developed), the related channel development for distributing TSMS-based products
and other significant increases in research and development costs and marketing
and sales costs, the Company will need to adjust its plans as necessary, if it
fails to secure additional financing.
In any event, however, the Company will need to raise additional capital in
order to complete development and commence commercial marketing of its
TSMS-based products. The Company may seek such additional capital through the
sale of debt or equity securities. In addition, the Company continues to look
for additional capital through OEM or other strategic investments or alliances.
There can be no assurance, however, that additional capital will be available on
acceptable terms or at all, and the failure to obtain additional capital as
needed may have a material adverse effect on the Company.
YEAR 2000
The Company previously initiated a project to prepare its computer systems for
the Year 2000. This project encompasses information technology ("IT") systems,
non-IT systems, Company products and third party products and systems.
The Company has reviewed its main IT system and to date has determined that a
Year 2000 problem does not exist in that system. However, the Company has other
smaller supporting business systems which it has not yet completely reviewed. In
the event that the Company determines that its smaller supporting business
systems will not transition properly at the end of the millenium, the Company
will transition these systems to its main business system in order to mitigate
any business disruption.
8
<PAGE>
By the end of June 1999, the Company expects to have completed an evaluation of
its telephone, facility heating and cooling and other non-IT systems for Year
2000 readiness. The Company will take remedial action as necessary.
The Company has also reviewed its software related to its legacy business and
has completed a fix for the Year 2000 issue. The Company has made this fix
available to its customers on its web site. The Company will also commence an
effort to contact as many of its legacy business customers as possible. The
Company has not yet released any TSMS-based products, but it intends to review
and correct any Year 2000 issues, if necessary, prior to release to market of
these products.
The Company has reviewed suppliers for its legacy business and has determined
that, due to the declining revenues associated with sales of spare parts, there
is no material impact to the Company. The Company has not yet released any
TSMS-based products, but it intends to work with future suppliers to ensure that
no Year 2000 issues will exist prior to release to market of these products.
Substantially all of the Company's Year 2000 efforts have been made using
internal personnel, therefore, the costs associated with the Year 2000
assessment and corrections have not been, and currently are not anticipated to
be, material to the Company. All such costs to date have been expensed as
incurred.
Based on its efforts to date, management believes the Year 2000 issue will not
have a significant impact on operations. If additional modifications and
conversions are necessary, however, and cannot be completed on a timely basis,
the Year 2000 issue could have an adverse effect on the Company's operations. At
this time, the Company believes that it is unnecessary to adopt a contingency
plan covering the possibility that additional modifications and conversions will
be needed, but, as part of the overall project, the Company will continue to
assess the need for such a contingency plan, and will continue to analyze its
computer systems to determine if additional modifications and conversions will
be needed.
CERTAIN IMPORTANT FACTORS
This Quarterly Report on Form 10-Q contains certain forward looking statements
within the meaning of the Private Securities Reform Act of 1995. For this
purpose, any statements contained in this Quarterly Report that are not
statements of historical fact are deemed to be forward looking statements.
Without limiting the foregoing, words such as "may," "will," "should,"
"expects," "anticipates," "estimates," "believes," or "plans," or comparable
terminology, are intended to indicate forward looking statements. These
statements by their nature are based on current expectations and assumptions and
entail various risks and uncertainties that could cause actual results to differ
materially from those expressed in such forward looking statements, including
the following risks:
- - The Company will not realize sufficient revenues from its legacy
business to fund its ongoing TSMS product development and marketing
operations. The Company
9
<PAGE>
intends to manage its current cash to fund its operations throughout
1999; however, continued aggressive product development and product
introduction necessarily requires that the Company obtain additional
funds from investors. The Company continues to pursue additional
investors, however, there can be no assurance that funds will be
obtained.
- - The market window for the Company's products is limited inasmuch as
many competitors with established brand identity are beginning to enter
the market with products that will be positioned against the Company's
products. Although the Company believes that it has a significant
headstart and that its technology is superior, established product
channels and bundling arrangements may impede the Company's product
introduction and market acceptance.
- - The market for distributed file system products for the Windows NT and
UNIX environment is new and developing. The Company believes that its
future success will depend upon the continued growth and acceptance of
the Windows NT operating system and the growth in demand for attached
storage. In addition, the Company's success is dependent upon its
ability to develop, test and release products for this market on a
timely basis.
- - The market for storage products currently is characterized by rapid
technological change and evolving industry standards and is expected to
be highly competitive with respect to timing of product innovation. The
introduction of products embodying new technology and the emergence of
new industry standards can render products, either existing or under
development, obsolete and unmarketable. The Company's success is
dependent in part upon its ability to anticipate changes in technology
and industry standards and to successfully develop and introduce new
and enhanced products on a timely basis. If the Company is unable for
technological or other reasons to develop products in a timely manner
in response to changes in the industry, or if products or product
enhancements that the Company develops do not achieve market
acceptance, the Company's business will be materially and adversely
affected.
- - The Company currently intends to market its TSMS through OEM and other
channels, and the failure to establish such relationships on acceptable
terms could adversely affect the Company's ability to introduce and
market TSMS-based products successfully.
- - The Company will need to maintain compliance with the Nasdaq SmallCap
Market requirements.
- - Many of the Company's potential competitors in the market for UNIX and
Windows NT storage products are the same companies that represent
potential OEM partners. The Company's ability to introduce and market
its products could be adversely affected if one or more of these
competitors elects to develop and market its own products.
Additionally, the Company's ability to market its
10
<PAGE>
products will necessarily require the endorsement of industry
leaders if the Company's products are to gain wide-scale acceptance
by the industry.
- - The Company's sales' lead time may be longer than most storage products
due to the general market reluctance to accept new entrants and due to
the sensitivity of the data on today's storage devices.
- - The Company will need to attract new team members and consultants and
retain existing team members and consultants.
11
<PAGE>
ITEM 3:
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
FINANCIAL INSTRUMENTS
The Company invests excess funds not required for current operations in cash
equivalents, primarily money market funds or commercial paper. As of March 31,
1999, cash equivalents had an average maturity of less than three months. Market
risk was estimated as the potential decrease in interest income resulting from a
hypothetical one percent decrease in interest rates for the cash equivalents,
which would result in an annual interest income decrease of approximately
$40,000.
12
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
A special meeting of stockholders of the Company was held on March 17, 1999,
during which the following items were voted on and approved under applicable
law:
1. On the proposal to approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock,
$0.01 par value, from 27,000,000 to 75,000,000 shares, 17,431,004 shares
were cast for, 896,031 shares were cast against, 83,711 shares abstained
from voting and there were no broker non-votes.
2. On the proposal to approve amendments to the Company's 1998 Stock Incentive
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder from 1,000,000 to 5,000,000 shares and to increase the per
participant limitation from 100,000 to 500,000 shares, 10,668,351 shares
were cast for, 1,309,764 shares were cast against, 193,396 shares abstained
from voting and there were 6,239,235 broker non-votes.
3. On the proposal to approve an amendment to the Company's 1998 Non-Employee
Director Stock Plan to increase the number of shares of Common Stock
reserved for issuance thereunder from 350,000 to 550,000 shares, 11,057,886
shares were cast for, 951,649 shares were cast against, 278,186 shares
abstained from voting and there were 6,123,025 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
3.1 Amendment to Certificate of Incorporation
27.1 Financial data schedule
(b) Reports on Form 8-K
No report was filed on Form 8-K during the first quarter of 1999.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
TRICORD SYSTEMS, INC.
(REGISTRANT)
By: /s/ John J. Mitcham
-------------------
John J. Mitcham, Chairman and
Chief Executive Officer
By: /s/ J. David Cabello
--------------------
J. David Cabello, Chief Financial
Officer, Vice President and
General Counsel, Secretary
(Principal Financial Officer)
Date: May 12, 1999
14
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Number
------- ------
<S> <C> <C>
3.1 Amendment to Certificate of Incorporation 16
27.1 Financial data schedule 17
</TABLE>
15
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TRICORD SYSTEMS, INC.
Tricord Systems, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify
that:
1. The Board of Directors of the Corporation did duly adopt the
following resolution proposing and declaring advisable the following amendment
to the Certificate of Incorporation of said corporation:
RESOLVED, that Section 1 of Article IV of the Company's Certificate of
Incorporation be amended to read as follows:
The aggregate number of shares which this Corporation has the
authority to issue is 80,750,677 shares, 75,000,000 of which
shall be designated common stock, $.01 par value (hereinafter
referred to as the "Common Stock"), 2,043,966 of which shall
be designated series C convertible preferred stock, $.01 par
value (hereinafter referred to as the "Series C Preferred
Stock"), 706,711 of which shall be designated series D
convertible preferred stock, $.01 par value (hereinafter
referred to as the "Series D Preferred Stock"), and 3,000,000
undesignated stock, $.01 par value (hereinafter referred to as
the "Undesignated Stock"), which Undesignated Stock may be
issued in different classes or series, with the designation of
the class or series, the relative rights and preferences of
each class or series, to be determined by the Board of
Directors of this Corporation. Series C Preferred Stock and
Series D Preferred Stock are herein sometimes referred to
collectively as "Preferred Stock." Common Stock and Preferred
Stock are herein sometimes referred to collectively as
"Capital Stock."
2. The stockholders of said corporation approved said
amendment at a special meeting of stockholders following due notice.
3. The aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, Tricord Systems, Inc. has caused this certificate
to be signed by its Chief Executive Officer the 29th day of March, 1999.
TRICORD SYSTEMS, INC.
By: /s/ John J. Mitcham
-------------------
John J. Mitcham
Chief Executive Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 1 AND 2 OF THE COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,641
<SECURITIES> 0
<RECEIVABLES> 743
<ALLOWANCES> (581)
<INVENTORY> 513
<CURRENT-ASSETS> 5,443
<PP&E> 2,348
<DEPRECIATION> (1,998)
<TOTAL-ASSETS> 5,793
<CURRENT-LIABILITIES> 1,215
<BONDS> 0
0
0
<COMMON> 190
<OTHER-SE> 4,388
<TOTAL-LIABILITY-AND-EQUITY> 5,793
<SALES> 591
<TOTAL-REVENUES> 591
<CGS> 310
<TOTAL-COSTS> 310
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (19)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,838)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
