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, 2000
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________________ to _______________________
Commission File No. 0-5265
SCAN-OPTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0851857
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
169 Progress Drive, Manchester, CT 06040
(Address of principal executive offices) Zip Code
(860) 645-7878
(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.( X ) YES ( ) NO
The number of shares of common stock, $.02 par value, outstanding as of May
10, 2000 was 7,439,732.
<PAGE>
<TABLE>
<CAPTION>
SCAN-OPTICS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(thousands, except share data) March 31, December 31,
2000 1999
(UNAUDITED)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents 47 38
Accounts receivable less allowance of $171 at
March 31, 2000 and $308 at December 31,1999 16,729 18,713
Unbilled receivables - contracts in progress 6,156 5,023
Refundable income taxes 307 1,282
Recoverable income taxes 740
Inventories 11,222 10,033
Deferred costs, net of revenues 553 530
Prepaid expenses and other 991 976
----------------------
Total current assets 36,005 37,335
Plant and equipment:
Equipment 13,592 13,735
Leasehold improvements 5,146 5,146
Office furniture and fixtures 1,297 1,312
----------------------
20,035 20,193
Less allowances for depreciation and
amortization 17,530 17,337
----------------------
2,505 2,856
Software license, net 1,854 2,040
Goodwill, net 11,981 12,523
Other assets 471 432
----------------------
Total Assets 52,816 55,186
======================
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
(thousands, except share data) March 31, December 31,
2000 1999
(UNAUDITED)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 8,298 8,079
Notes payable to bank 18,085 17,437
Salaries and wages 1,570 1,800
Taxes other than income taxes 599 1,110
Income taxes 61
Customer deposits 1,209 1,353
Other 2,588 2,829
----------------------
Total current liabilities 32,410 32,608
Other liabilities 541 497
Stockholders' Equity
Preferred stock, par value $.02 per share,
authorized 5,000,000 shares; none
issued or outstanding
Common stock, par value $.02 per share,
authorized 15,000,000 shares;
issued, 7,439,732 shares at March 31, 2000
and 7,396,232 shares at December 31, 1999 149 148
Common stock Class A Convertible, par
value $.02 per share, authorized 3,000,000
shares; available for issuance 2,145,536
shares; none issued or outstanding
Capital in excess of par value 35,654 35,568
Retained-earnings deficit (12,690) (10,415)
Foreign currency translation adjustments (602) (574)
----------------------
22,511 24,727
Less cost of common stock in treasury,
413,500 shares 2,646 2,646
----------------------
Total stockholders' equity 19,865 22,081
----------------------
Total Liabilities and Stockholders' Equity 52,816 55,186
======================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCAN-OPTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31
(thousands, except share data) 1999 1999
- ----------------------------------------------------------------------
<S> <C> <C>
Revenues
Product sales $ 5,313 $ 6,579
Service revenues 5,749 6,571
Engineering revenues 40 73
Other operating revenues 9
----------------------
Total revenues 11,102 13,232
Costs and Expenses
Cost of product sales 3,506 4,481
Service expenses 5,680 4,538
Sales and marketing expenses 1,574 1,359
Research and development expenses 1,112 1,484
General and administrative expenses 1,142 1,081
Interest expense 394 222
----------------------
Total costs and expenses 13,408 13,165
----------------------
Operating income (loss) (2,306) 67
Other income, net 44 52
----------------------
Income (loss) before income taxes (2,262) 119
Income tax expense 13 39
----------------------
Net Income (Loss) $ (2,275) $ 80
=======================
Basic earnings (loss) per share $ (.32) $ .01
=======================
Basic weighted-average shares 7,016,672 6,965,521
Diluted earnings (loss) per share $ (.32) $ .01
=======================
Diluted weighted-average shares 7,016,672 7,068,944
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCAN-OPTICS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31
(thousands) 2000 1999
- -----------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net (loss) income $ (2,275) $ 80
Adjustments to reconcile net (loss) income
to net cash (used) provided by operating
activities:
Depreciation 218 237
Amortization 425 411
Amortization of goodwill and software license 506 290
Provision for losses on accounts receivable 10
Deferred taxes (62)
Changes in operating assets and liabilities:
Accounts receivable 1,984 1,085
Unbilled receivables - contracts in
progress (1,133)
Refundable income taxes 975
Recoverable income taxes 740
Inventories (1,614) 373
Prepaid expenses and other (15) 93
Accounts payable 219 (1,551)
Accrued salaries and wages (230) (984)
Taxes other than income taxes (511) 176
Income taxes 61 (35)
Deferred costs, net of revenues (23) 83
Customer deposits (144) 1,033
Other (42) (1,026)
---------------------
Net cash (used) provided by operating activities (859) 213
Investing Activities
Purchases of plant and equipment (82) (271)
Proceeds from the sale of plant and equipment 215
---------------------
Net cash provided (used) by investing activities 133 (271)
Financing Activities
Proceeds from issuance of common stock 87 55
Proceeds from borrowings 8,653 11,385
Principal payments on borrowings (8,005) (11,364)
--------------------
Net cash provided by financing activities 735 76
Increase in cash and cash equivalents 9 18
Cash and Cash Equivalents at Beginning of Year 38 216
--------------------
Cash and Cash Equivalents at End of Period $ 47 $ 234
=====================
See accompanying notes.
</TABLE>
<PAGE>
NOTE 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 2000, are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1999.
Certain 1999 amounts have been reclassified to conform to current year
presentation.
NOTE 2 - Inventories
The components of inventories were as follows:
March 31 December 31
(THOUSANDS) 2000 1999
- -----------------------------------------------------------
Finished goods $ 485 $ 363
Work-in-process 1,803 1,927
Service parts 4,763 4,429
Materials and component parts 4,171 3,314
--------------------
$ 11,222 $ 10,033
====================
NOTE 3 - Credit Arrangements
On May 10, 1999, the Company amended its credit agreement (the "Agreement")
with a bank to extend the maturity date to May 10, 2002 and to reduce the
line from $13 million to $10 million. The unused portion of the line is
subject to a commitment fee of 3/8% per annum. The available balance on
the line of credit was $1.2 million and $1.5 million at March 31, 2000 and
March 31, 1999, respectively. The weighted average interest rate on
borrowings during the first three months of 2000 and 1999 was 8.9% and
7.8%, respectively.
Additionally, on May 10, 1999, a five-year term loan in the amount of $10
million was established to better match the cash expenditures for
acquisitions with the cash flow that results from the acquired businesses.
The outstanding balance on the term loan at March 31, 2000 and December 31,
1999 was $9.3 million and $9.5 million, respectively, all of which is
classified as a current liability on the consolidated balance sheet due to
the covenant defaults noted below. Both the line of credit and the term
loan bear interest at prime plus 5%.
The circumstances surrounding this Agreement have changed significantly
as BankBoston, the prior lender, merged with Fleet National Bank on October 1,
1999. The Agreement contains covenants which, among other things, require
the maintenance of specified working capital, debt to equity ratios, net
income levels, tangible net worth levels and backlog levels. The Company has
been in default of these covenants since September 1999. The Company has
held discussions with Fleet National Bank and has begun to negotiate the
revision of the Agreement to meet the current operating conditions as well as
to obtain waivers for the covenant defaults. At this time, no agreement has
been reached. The Company believes that the projected operating cash flow
for 2000 will be adequate to fund operations provided that there is the
availability of a line of credit or other financing arrangement of a similar
size as currently exists. If negotiations on the revision of the
Agreement with Fleet National Bank are not complete by the end of the
second quarter, the Company will continue to negotiate with other bank and
finance companies, as well as review other business and financing options.
NOTE 4 - Income Taxes
At March 31, 2000, the Company has U.S. federal and state operating loss
carryforwards of approximately $9,700,000 and $12,300,000, respectively.
The U.S. federal and state net operating loss carryforwards expire in 2014
and 2005, respectively. At March 31, 2000, the Company has approximately
$450,000, $3,100,000 and $800,000 of net operating loss carryforwards for
Canada, the United Kingdom and Germany, respectively, which are scheduled
to expire periodically between 2000 and 2006. At March 31, 1999, the
Company had approximately $350,000, $2,600,000 and $800,000 of net
operating loss carryforwards for Canada, the United Kingdom and Germany,
respectively. For financial reporting purposes, a valuation allowance has
been recorded for the first quarter of 2000 to fully offset deferred tax
assets relating to U.S. federal, state, and foreign net operating loss
carryforwards and other temporary differences.
<PAGE>
Significant components of the Company's deferred tax liabilities and assets
were as follows:
<TABLE>
<CAPTION>
March 31 December 31
(THOUSANDS) 2000 1999
- -------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating losses $ 4,755 $ 5,671
Alternative minimum tax credit
carryforward 168 168
Depreciation 92 92
Inventory valuation 162 163
Inventory 73 101
Deferred maintenance revenue 6
Accounts receivable reserves 136 113
Goodwill 177 71
Revenue recognition - systems
undergoing acceptance testing 8 8
Vacation accrual 251 237
Other 12 13
--------------------
Total gross deferred tax assets 5,834 6,643
Deferred tax liabilities:
Revenue recognition - milestone and
retainer contracts (623) (989)
Depreciation and other (285) (263)
--------------------
Total gross deferred tax liabilities (908) (1,252)
Valuation allowance (4,926) (5,391)
--------------------
Net deferred tax asset $ - $ -
====================
</TABLE>
<PAGE>
NOTE 5 - Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
March 31 March 31
2000 1999
<S> <C> <C>
- ---------------------------------------------------------------------
Numerator:
Net income (loss) $ (2,275) $ 80
==========================
Denominator:
Denominator for basic earnings (loss)
per share (weighted-average shares) 7,016,672 6,965,521
Effect of dilutive securities:
Employee stock options 103,423
Denominator for diluted earnings (loss)
per share (adjusted weighted-average
shares and assumed conversions)
--------------------------
7,016,672 7,068,944
==========================
Basic earnings (loss) per share $ (.32) $ .01
==========================
Diluted earnings (loss) per share $ (.32) $ .01
==========================
</TABLE>
NOTE 6 - Year 2000 Compliance
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 compliant. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions
in mission critical information technology and non-information technology
systems and believes those systems successfully responded to the Year 2000
date change. The Company expensed approximately $150,000 during 1999 in
connection with remediating its systems. The Company is not aware of any
material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third
parties. The Company will continue to monitor its mission critical
computer applications and those of its suppliers and vendors throughout the
year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
NOTE 7 - Comprehensive Income
The components of comprehensive income, net of related tax, for the three-
months ended March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
March 31 March 31
(thousands) 2000 1999
- ---------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ (2,275) $ 80
Foreign currency translation adjustments (28) (40)
---------------------
Comprehensive income (loss) $ (2,303) $ 40
=====================
</TABLE>
The components of accumulated comprehensive loss, net of related tax, at
March 31, 2000 and December 31, 1999 are as follows:
<TABLE>
<CAPTION>
March 31 December 31
(thousands) 2000 1999
- ---------------------------------------------------------------------
<S> <C> <C>
Foreign currency translation adjustments $ (561) $ (533)
---------------------
Accumulated comprehensive loss $ (561) $ (533)
=====================
<PAGE>
NOTE 8 - Segment Information
The Company views its business in three distinct revenue categories:
Product and solution sales, Access services, and Contract manufacturing
services. Revenues are used by management as a guide to determine the
effectiveness of the individual segment. The Company manages its operating
expenses through a traditional functional perspective and accordingly does
not report operating expenses on a segment basis.
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31
(thousands) 2000 1999
- ------------------------------------------------------------------
<S> <C> <C>
Revenues
Solutions and products $ 7,058 $ 9,081
Access services 3,474 3,731
Contract manufacturing services 570 420
----------------------
Total revenues 11,102 13,232
Cost of solutions and products 6,220 6,191
Service expenses 2,966 2,828
----------------------
Gross profit margin 1,916 4,213
Operating expenses, net 4,178 4,094
----------------------
Income (loss) before income taxes $ (2,262) $ 119
======================
Total expenditures for additions to
long-lived assets $ 48 $ 279
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Outlook
Statements about the Company's future expectations, including future
revenues and earnings, and all other statements other than historical facts
are "forward-looking statements" made under safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and involve a number of risks
and uncertainties that could materially affect future results. Among these risk
factors are changes in general economic and business conditions in the United
States and foreign markets, which impact capital investments by customers, the
cyclical nature of funding within federal and state government agencies,
increased competition from similar products, the implementation of other
technologies which may provide alternative solutions, ability to complete
projects in a timely manner, and other risk factors and cautionary
statements listed from time to time in the Company's periodic reports
filed with the Securities and Exchange Commission, including but not
limited to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999.
The Company has three major initiatives currently underway to improve
revenue growth and profitability. They are to emphasize the "Business of
Solutions" focus in targeted markets, to decrease market risk through
expansion in the international marketplace, and to capitalize on existing
core competencies of the Company. A fourth initiative that is currently
on hold is to add long term value through the acquisition of key
strategic products or enterprises. The inability of the Company to carry
out these initiatives may have a materially adverse effect on revenue
growth and earnings. The Company incurred a loss in 1999 and in
the first quarter of 2000. These losses were mainly attributable to
professional service revenue delays on some projects and expense overruns on
others, which continue to be addressed with a comprehensive plan. In the
fourth quarter of 1999, a plan to reduce annual expenses by $5 million,
restructure the professional service organization, including the mix of
contractors to employees, and add senior management, as well as additional
project management controls and adherence to project implementation
methodology was implemented. During the first quarter of 2000, the Company
realized benefits from this plan evidenced by a loss of $2.3 million
compared to a loss of $6.4 million in the fourth quarter of 1999. The
benefits included operating expense reductions of $3.1 million from the fourth
quarter of 1999 which included a $1.3 million reduction within the professional
services organization, a reduction in the number of contractors from an average
of 53 in the fourth quarter of 1999 to an average of 29 in the first quarter of
2000, the hiring of professional services senior management, and the
implementation of improved project methodologies and controls on professional
services projects.
The first initiative is to provide cost effective solutions through the
Company's development of target market data capture applications combined
with its high speed transports and archival systems. The Company has
refined its target market approach and chosen to focus primarily on the
government and insurance markets, while continuing to address the
transportation, financial and order entry markets. The Company expects to
continue to emphasize its "Business of Solutions" focus on these targeted
markets for the foreseeable future. As other market opportunities
emerge, the Company will evaluate the potential of using its products and
services to provide solutions in these new markets. The revenue for this
initiative decreased $.3 million during the first quarter of 2000
compared to the first quarter of 1999.
The second initiative is further expansion into the international
marketplace. The Company has successfully supplied product to the
Japanese market and has experienced strong sales activity in the past
through relationships with highly qualified and productive distributors.
The Company will continue to focus on developing strong relationships in
Europe, Latin America and other Pacific Rim countries. During the first
quarter of 2000 the Company achieved revenue growth of $.9 million
compared to the first quarter of 1999. This revenue growth was due to
sales in the Japanese market for prefecture based health claims processing
systems.
The third initiative relates to leveraging the Company's core
competencies in an effort to add revenues and profits. The Company
believes that Access Services and contract manufacturing services have
potential to sell their individual expertise, experience and cost
effectiveness to other entities. Contract manufacturing revenue
increased $.2 million from the first quarter of 1999 due to the contract
signed with MailCode, Inc.
The Company has put on hold its initiative of long term growth through
accretive acquisitions of key strategic products or enterprises. When the
Company resolves the issues relating to the professional services
organization, acquisitions will again be considered based upon their
individual merit and benefit to the shareholders.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 VS. 1999
Total revenues decreased $2.1 million or 16% from the first quarter of
1999 to the first quarter of 2000.
Product sales decreased $1.3 million or 19% in the first quarter of 2000
compared with the first quarter of 1999. North American sales decreased
$2.3 million or 47% due to the internal focus of the sales organization on
improving customer satisfaction and assisting with professional services
implementations. Additionally, the expected manufacturing completion of a
large hardware system was delayed from the first quarter to the second quarter
of 2000. International sales increased $1 million or 61% mainly due to sales
in the Japanese market for prefecture based health claims processing systems.
Service revenues decreased $.8 million from the first quarter of 1999.
Access Services revenue decreased $.2 million mainly due to a decrease in
maintenance contracts on older proprietary scanner products that were not
capable of becoming Year 2000 compliant, partially offset by an increase
in the third party maintenance business. Professional service revenue
decreased $.6 million from the first quarter of 1999 due to the continued
effort to complete contracts in progress from the third and fourth
quarter of 1999 while implementing improved project methodologies on all
new contracts.
Cost of product sales decreased $1 million from the first quarter of
1999. Cost of product sales as a percentage of product sales was 66% for
the first quarter of 2000, compared to 68% in the prior year. This
reduction is mainly due to increases in contract manufacturing volume.
Service expenses increased $1.1 million in the first quarter of 2000
compared with the respective period of 1999. Access Services expenses
increased $.1 million from the first quarter of 1999 due to salary and
related expenses. The gross margin on Access Services revenue decreased
8% from 24% in the first quarter of 1999 to 16% in the first quarter of
2000. This decrease was mainly caused by the loss of maintenance
contracts on older proprietary scanners that were not capable of becoming
Year 2000 compliant. Professional service expenses increased $1 million
compared with the first quarter of 1999, mainly due to the effort to
complete various projects that were started in the third and fourth
quarters of 1999. Professional services expenses decreased $1.3 million
from the fourth quarter of 1999 which is reflective of the cost reduction
efforts initiated in October 1999.
Sales and marketing expenses increased by $.2 million from the first
quarter of 1999 mainly due to expenses related to the June 1999
acquisition of assets of the scanner and maintenance division of the
Photomatrix Imaging Corporation (PHRX).
Research and development expenses decreased $.3 million from the first
quarter of 1999 mainly due to the cost reduction efforts initiated in
October 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at March 31, 2000 remained consistent with
December 31, 1999 levels.
Total borrowings increased to $18.1 million at March 31, 2000 from $17.4
million at the end of 1999. The available balance on the line of credit
was $1.2 million and $1.5 million at March 31, 2000 and March 31, 1999,
respectively. As of March 31, 2000, the Company is in default of
certain financial covenants on its bank debt and is currently negotiating
with its bank to restructure the borrowing arrangements and agree to new
terms and conditions. Accordingly, all bank debt has been classified
as a current liability on the consolidated balance sheet. The Company believes
that the projected operating cash flow for 2000 will be adequate to fund
operations provided that there is the availability of a line of credit or
other financing arrangement of a similar size as currently exists. (See
Note 3 for further details.)
Operating activities used $1.1 million of cash in the first three months
of 2000.
Non-cash expenses recorded during the quarter were $1.1 million vs. $.9
million for the same period in 1999. These expenses relate to
depreciation of fixed assets (discussed in net plant and equipment
below), amortization of customer service spare parts inventory,
amortization of goodwill, provisions for losses on accounts receivable
and deferred taxes.
Net accounts receivable decreased $2 million from December 31, 1999 due to
collections on 1999 sales offset by first quarter 2000 sales.
Unbilled receivables - contracts in progress increased $1.1 million from
December 31, 1999 due to additional revenue recorded of $1.6 million in
the first quarter of 2000 offset by billings of $.5 million.
Total inventories increased $1.2 million from December 31, 1999. Total
manufacturing inventories increased $.9 million from the beginning of the
year mainly due to an increase in stockroom inventory of $.8 million
due to additional parts requirements related to the increase in the
build plan for the PHRX products. Customer service inventories
increased $.3 million due to additional PHRX parts.
Net plant and equipment decreased $.4 million during the first quarter of
2000 mainly due to the sale of a United Kingdom demonstration system and
$.2 million of depreciation expense recorded during the first three
months of the year.
Software license decreased by $.2 million from December 31, 1999 due to the
amortization of the source code licensing agreement signed with Bluebird
Systems during 1999.
Goodwill decreased by $.5 million from December 31, 1999 due to $.3 million
of amortization recorded for the quarter and $.2 million related to
adjustments to the purchase price allocation for the acquisition of the assets
of PHRX.
Accounts payable increased $.2 million from December 31, 1999 due to the
timing of payments.
Accrued salaries and wages decreased $.2 million from December 31, 1999
due to the timing of commission payments.
Taxes other than income taxes decreased $.5 million from December 31, 1999
due to the timing of sales and use tax payments.
Other current liabilities decreased by $.2 million from the end of 1999
due to a decrease in professional service consulting expenses.
<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.
SCAN-OPTICS, INC.
(Registrant)
Date May 15, 2000 /s/ James C. Mavel
James C. Mavel
Chairman, Chief Executive Officer,
President and Director
Date May 15, 2000 /s/ Michael J. Villano
Michael J. Villano
Chief Financial Officer,
Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
EXHIBIT 27.
SCAN-OPTICS, INC.
FINANCIAL DATA SCHEDULE
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 47,000
<SECURITIES> 0
<RECEIVABLES> 22,885,000
<ALLOWANCES> 171,000
<INVENTORY> 11,222,000
<CURRENT-ASSETS> 36,005,000
<PP&E> 20,035,000
<DEPRECIATION> 17,530,000
<TOTAL-ASSETS> 52,816,000
<CURRENT-LIABILITIES> 32,410,000
<BONDS> 0
<COMMON> 149,000
0
0
<OTHER-SE> 19,716,000
<TOTAL-LIABILITY-AND-EQUITY> 52,816,000
<SALES> 5,313,000
<TOTAL-REVENUES> 11,102,000
<CGS> 3,506,000
<TOTAL-COSTS> 13,408,000
<OTHER-EXPENSES> (44,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394,000
<INCOME-PRETAX> (2,262,000)
<INCOME-TAX> 13,000
<INCOME-CONTINUING> (2,275,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,275,000)
<EPS-BASIC> (.32)
<EPS-DILUTED> (.32)
</TABLE>
