UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
================================================================================
FORM 10-Q
================================================================================
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 0-19492
nVIEW Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-1413745
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
860 Omni Boulevard, Newport News, Virginia 23606
(Address of principal executive office)
Registrant's telephone number, including area code: (757) 873-1354
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 1, 1997: 5,005,166 shares of common stock without par
value.
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1997
Table of Contents
Page
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996 . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
for the Three Months Ended June 30, 1997
and 1996 (unaudited) and the Six Months Ended
June 30, 1997 and 1996 (unaudited). . . . . . . . . . . . . . . 4
Condensed Consolidated Statement of Shareholders'
Equity for the Six Months Ended June 30,
1997 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1997 and
1996 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . . . 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations. . . . . . . .10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . .14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
nVIEW CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets June 30, 1997 December 31, 1996
------ ------------- -----------------
(Unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $1,952,756 $1,802,596
Receivables, net 5,709,174 9,057,646
Inventories (note 3) 10,227,110 11,997,760
Prepaid expenses 399,363 331,306
----------------- ------------------
Total current assets 18,288,403 23,189,308
Property and equipment, net 731,395 801,641
Other assets, net 167,520 191,388
----------------- ------------------
$19,187,318 $24,182,337
================= ==================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $2,625,344 $5,890,860
Accrued expenses 774,302 989,605
----------------- ------------------
Total current liabilities 3,399,646 6,880,465
Shareholders' equity:
Common stock, no par value
Authorized 20,000,000 shares; 5,005,166
shares issued and outstanding at June 30,
1997 and December 31, 1996 --- ---
Additional paid-in capital 25,060,978 25,060,978
Accumulated deficit (9,273,306) (7,759,106)
----------------- ------------------
Total shareholders' equity 15,787,672 17,301,872
----------------- ------------------
Commitments and contingencies (note 2)
$19,187,318 $24,182,337
================= ==================
See accompanying notes to Condensed Consolidated Financial Statements.
3
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------- ----------------------------------------
1997 1996 1997 1996
------------------ ---------------- ------------------ -------------------
<S> <C>
Sales $5,197,395 $7,371,031 $12,360,844 $14,860,469
Cost of goods sold 4,787,587 5,459,873 10,325,787 11,636,946
------------------ ---------------- ------------------ -------------------
Gross profit 409,808 1,911,158 2,035,057 3,223,523
Marketing and promotion 785,364 873,863 1,636,555 2,087,981
Research and development 364,188 384,437 872,957 1,027,731
General and administrative 613,912 598,671 1,023,442 1,146,093
------------------ ---------------- ------------------ -------------------
Operating expenses 1,763,464 1,856,971 3,532,954 4,261,805
------------------ ---------------- ------------------ -------------------
Earnings (loss) from operations (1,353,656) 54,187 (1,497,897) (1,038,282)
Other income (expense):
Interest expense (28,396) (67,891) (56,787) (88,546)
Interest income 26,376 31,474 40,462 47,837
Miscellaneous (346) 117 22 247
------------------ ---------------- ------------------ -------------------
(2,366) (36,300) (16,303) (40,462)
------------------ ---------------- ------------------ -------------------
Net earnings (loss) ($1,356,022) $17,887 ($1,514,200) ($1,078,744)
================== ================ ================== ===================
Weighted average number
of common and common
share equivalents outstanding 5,005,166 4,922,488 5,005,166 4,913,365
================== ================ ================== ===================
Loss per share ($0.27) $0.00 ($0.30) ($0.22)
================== ================ ================== ===================
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
4
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
(Unaudited)
Six Months Ended June 30, 1997
<TABLE>
<CAPTION>
Common Stock
-----------------------------------
Additional Total
Number of Paid-in Accumulated Shareholders'
Shares Amount Capital Deficit Equity
---------------- ------------- ----------------- ---------------- -----------------
<S> <C>
Balance at
December 31, 1996 5,005,166 --- $25,060,978 ($7,759,106) $17,301,872
Net loss --- --- --- (1,514,200) (1,514,200)
---------------- ------------- ----------------- ---------------- -----------------
Balance at
June 30, 1997 5,005,166 --- $25,060,978 ($9,273,306) $15,787,672
================ ============= ================= ================ =================
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
5
<PAGE>
nVIEW Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------
1997 1996
---- ----
<S> <C>
Cash flows from operating activities:
Net loss ($1,514,200) ($1,078,744)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 289,670 383,666
Loss on disposal of fixed assets 553 ---
Loss on abandonment of patents 24,116 ---
Changes in assets and liabilities increasing (decreasing) cash:
Receivables, net 3,348,685 (657,992)
Inventories 1,770,650 2,021,084
Prepaid expenses and other items (71,669) 133,810
Income taxes receivable --- 466,797
Accounts payable (3,265,515) 1,034,971
Accrued expenses (215,304) (93,363)
----------------- ---------------
Total adjustments 1,881,186 3,288,973
----------------- ---------------
Net cash provided by operating activities 366,986 2,210,229
----------------- ---------------
Cash flows from investing activities:
Additions to property and equipment (212,657) (233,850)
Purchase of patents (4,169) (6,368)
----------------- ---------------
Net cash used in investing activities (216,826) (240,218)
Cash flows from financing activities -
Stock options exercised --- 168,700
----------------- ---------------
Net cash provided by financing activities --- 168,700
----------------- ---------------
</TABLE>
(Continued)
6
<PAGE>
nVIEW Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows, Continued
(Unaudited)
Six Months Ended
June 30
1997 1996
---- ----
Net increase in cash and cash equivalents $150,160 $2,138,711
Cash and cash equivalents at beginning of period 1,802,596 1,404,816
----------- -----------
Cash and cash equivalents at end of period $1,952,756 $3,543,527
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $171,132 $67,435
=========== ===========
Cash paid during the period for income taxes --- $40,326
=========== ===========
See accompanying notes to Condensed Consolidated Financial Statements.
7
<PAGE>
nVIEW CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. In the opinion of management, the accompanying unaudited interim
condensed consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly
the financial position of nVIEW Corporation and subsidiaries (the
Company) as of June 30, 1997 and the results of their operations and
their cash flows for the six months ended June 30, 1997 and 1996.
2. Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Management believes that the estimates are reasonable.
3. Inventories at June 30, 1997, and December 31, 1996, consist of the
following:
June 30, December 31,
1997 1996
---- ----
Raw material $1,956,781 $6,734,966
Work in process 3,013,964 211,399
Finished goods 5,256,365 5,051,395
----------- -----------
Inventories $10,227,110 $11,997,760
=========== ===========
4. As of June 30, 1997, the Company was in non-compliance of two of the
financial covenants required by the Company's loan and security
agreement with a bank. Subsequent to June 30 1997, the bank agreed to
waive the covenants to resolve the instances of non-compliance. No
amounts had been advanced under the loan as of August 11, 1997.
5. At June 30, 1997 the Company was a party to a $700 thousand letter of
credit agreement (the Agreement) in favor of a supplier. The Agreement
reduced the available credit line under the Company's loan and
security agreement with a bank. The letter of credit expired unused on
July 15, 1997.
6. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share (Statement 128). Statement 128 supersedes APB Opinion No. 15,
Earnings Per Share, and specifies the computation, presentation, and
disclosure requirements for earnings per share ("EPS") for entities
with publicly held common stock or potential common stock. Statement
128 was issued to simplify the computation of EPS and to make the
United States standard more compatible with the EPS standards of other
countries and that of the International Accounting Standards Committee
(IASC). It replaces primary EPS and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the
Basic EPS computation to the numerator and denominator of the diluted
EPS computation.
8
<PAGE>
Basic EPS, unlike primary EPS, excludes all dilution and is computed
by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted
EPS, similar to fully diluted EPS, reflects the potential dilution
that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the
entity.
Statement 128 is effective for financial statements for both interim
and annual periods ending after December 15, 1997. Earlier application
is not permitted. After adoption, all prior period EPS data presented
shall be restated to conform with Statement 128. The Company does not
expect Statement 128 to have a significant impact on earnings per
share.
9
<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 contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors
discussed herein. The following discussion and analysis should be read in
conjunction with the Management's Discussion and Analysis included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Results of Operations
The net loss for the first six months of 1997 was $1.5 million, or $.30 per
share, compared to a net loss of $1.1 million, or $.22 per share for the same
period of 1996. For the second quarter of 1997, the net loss was $1.4 million,
or $.27 per share, compared to a nominal net income for the second quarter of
1996, or $0 per share.
Sales decreased 17% to $12.4 million for the first six months of 1997 from $14.9
million for the first six months of 1996. This change consisted of a $5.1
million decrease in the sale of panel products, offset by a $2.6 million
increase in projector product sales. For the second quarter of 1997, sales
decreased 29% to $5.2 million from $7.4 million for the second quarter of 1996.
The primary components of this change were a $2.2 million decrease in the sale
of panel products and a $299 thousand decrease in projector product sales.
The decrease in panel product sales in both periods is the result of an industry
wide shift in the market from panels to projectors. This trend is expected to
continue. As a result, the Company's current product line is concentrated in
projector products. Although a portion of the panel sales in 1996 has been
replaced with projector sales in 1997, it has not been large enough to
completely offset the decline.
The $299 thousand decrease in projector product sales from the second quarter of
1996 to the second quarter of 1997 was largely due to increased competition.
This competitive selling environment has resulted in lower overall sales prices
in 1997 when compared to 1996, with many competing suppliers of projectors
reducing prices on existing products to more quickly reduce their inventories.
Additionally, the Company experienced decreased sales of its Digital Light
Processing (DLP) projector to Polaroid Corporation, which has an original
equipment manufacturer's agreement with the Company signed during the third
quarter of 1996. The Company expects the decline in DLP projector sales to
Polaroid to continue. Sales to Polaroid Corporation comprised 12% of sales
during the second quarter of 1997.
The Company's decision to exit the computer distribution channel due to
declining net profit margins also contributed to the decline in sales in 1997.
This decision resulted in a 2% decrease in sales for the first six months of
1997 compared to the first six months of 1996, and for the second quarter of
1997, a 5% decrease in sales from the same period of 1996. Although this
decision resulted in reduced sales for the first six months of 1997, it will
reduce the Company's sales and marketing expenses in future periods.
The Company continues to sell older model inventory at reduced prices, thus
decreasing overall average sales prices of both projector and panel products.
Gross profit as a percentage of sales decreased to 16% and 8%, respectively, for
the six months and the quarter ended June 30, 1997, compared to 22% and 26% for
the respective periods of 1996. The decline in gross profit margins for both the
six months and quarter ended June 30, 1997 was caused by several factors. First,
the Company decreased its current projector prices in response to increased
competition in the market. Second, the Company recorded a net increase of $352
thousand to its inventory reserve in the second quarter of 1997 to write down
older inventory to market value. Third, the Company continues to actively market
10
<PAGE>
and sell its older model inventory. These sales are higher volume, but lower
margin, thus reducing the Company's overall gross profit margin.
Operating expenses decreased 17% to $3.5 million (29% of sales) for the first
six months of 1997 from $4.3 million (29% of sales) for the comparable period of
1996. For the second quarter of 1997, operating expenses were $1.8 million (34%
of sales), down slightly from the $1.9 million (25% of sales) for the second
quarter of 1996.
Marketing and promotion expenses for the first six months and the second quarter
of 1997 decreased $451 thousand and $88 thousand, respectively, from the
comparable periods of 1996. As a percentage of sales, marketing and promotion
expenses were relatively consistent for the first six months of 1997 and 1996,
measuring 13% and 14%, respectively. For the quarters ended June 30, 1997 and
June 30, 1996, marketing and promotion expenses were 15% and 12% of sales,
respectively.
The $451 thousand decrease in marketing and promotion expenses in the first six
months of 1997 was concentrated in the first quarter and was the result of
reduced advertising and related consulting services, as well as certain
incentive based compensation. Additionally, the Company received co-operative
advertising credits from a supplier which reduced sales and marketing expenses
in 1997. These charges, as well as reduced trade show expenses, resulted in the
$88 thousand decrease in marketing and promotion expenses in the second quarter
of 1997 from the comparable period of 1996.
Research and development expenses decreased $155 thousand for the first six
months of 1997 compared to the same period of 1996. For the quarter ended June
30, 1997, research and development expense remained comparable to the same
period of 1996. Research and development expenses as a percentage of sales were
7% for both the first six months of 1997 and 1996. For the quarters ended June
30, 1997 and June 30, 1996, research and development expenses were 7% and 5% of
sales, respectively.
The $155 thousand decrease in research and development expenses in the first six
months of 1997 occurred primarily in the first quarter of the year from improved
management processes to control new product development costs. Additionally, the
Company's line of polysilicon projectors is purchased from a supplier and sold
under the nVIEW label. As a result, the company incurred minimal research and
development dollars related to these projectors.
For the first six months of 1997, general and administrative expenses decreased
$123 thousand from the first six months of 1996. For the quarter ended June 30,
1997, general and administrative expenses were consistent with the same period
in 1996. As a percentage of sales, general and administrative expenses were 8%
for the first six months of 1997 and 1996. For the quarters ended June 30, 1997
and June 30, 1996, general and administrative expenses were 12% and 8% of sales,
respectively.
The $123 thousand decrease in general and administrative expenses in the first
six months of 1997 occurred in the first quarter of the year as the result of a
$115 thousand payment received in settlement of a suit filed against another
company.
During the first six months and second quarter of 1997, other income (expense)
remained substantially consistent with the comparable period of 1996. The slight
net decrease was caused by lower fees related to the Company's borrowing
arrangement with a bank, first signed in February 1996. No amounts have been
drawn under this borrowing arrangement.
Financial Condition
Total assets decreased from $24.2 million at December 31, 1996 to $19.2 million
at June 30, 1997. The majority of the decrease occurred in accounts receivable
and inventories.
11
<PAGE>
Cash and cash equivalents increased to $2.0 million at June 30, 1997 from $1.8
million at December 31, 1996. This increase primarily resulted from the receipt
of a $115 thousand payment during the first quarter of 1997 in settlement of a
suit filed against another company.
Net receivables decreased by $3.3 million from December 31, 1996 to June 30,
1997. This was the result of decreased sales for the quarter ended June 30, 1997
($5.2 million) compared to the quarter ended December 31, 1996 ($11.2 million)
and reduced receivable balances from computer distributors and Polaroid
Corporation, the Company's single largest customer.
Inventories decreased to $10.2 million at June 30, 1997 from $12.0 million at
December 31, 1996. The decrease was due to the sales in 1997 of components
received during the fourth quarter of 1996 as well as reduced component
purchases in response to decreased sales. Additionally, the Company sold $1
million in older model inventory in the first six months of 1997.
Current liabilities decreased 51% to $3.4 million at June 30, 1997 from $6.9
million at December 31, 1996. The decrease is due to the lower inventory levels
and reduced component purchases discussed above.
On June 30, 1997, the Company had total working capital of $14.9 million. The
current ratio increased to 5.4 at June 30, 1997 from 3.4 at December 31, 1996.
The increase is primarily due to a decrease in current liabilities.
Shareholders' equity decreased to $15.8 million at June 30, 1997 from $17.3
million at December 31, 1996. The decrease is due to the net loss incurred
during the first six months of 1997.
Liquidity and Capital Resources
Cash flows from operating activities, including the receipt of a $115 thousand
payment in settlement of a suit filed against another company, was sufficient to
fund operations during the first six months of 1997. The Company believes that
existing cash, cash generated from on-going operations and the revolving bank
line of credit will be adequate to meet the anticipated operating, investing and
financing needs of the Company for the foreseeable future. The Company was in
non-compliance of two of the financial covenants measured at June 30, 1997. The
lender agreed to waive the covenants at June 30, 1997 to resolve the
non-compliance.
Risk Factors
The following discussion of risk factors describes certain aspects of the
business environment in which the Company operates. These risk factors, along
with other information in this report, should be carefully considered by users
of this report.
The markets in which the Company operates are characterized by rapidly changing
technology, resulting in short product lives. Actual or anticipated product
releases by the Company or its competitors could cause customers to delay
purchases until the new products are available and/or to discontinue purchases
of existing products altogether. The Company's competitors may introduce
products which utilize new technologies to which the Company does not have
access. Any of these factors could have a material effect on the Company's
business and results of operations. While the Company believes that it can
deliver competitive products in a timely manner in this environment, there can
be no assurance that it will succeed in doing so.
One of the Company's projector products, the D400 projector series, uses a
subassembly developed and produced only by Texas Instruments ("TI"). While the
subassembly has been available in sufficient quantities to meet demand, and the
12
<PAGE>
Company believes this availability will continue, there can be no assurance that
it will be available. As with any developing technology, unknown circumstances
outside the Company's control could affect availability of this critical,
single-source component. While TI does not compete directly with the Company
through manufacture and sale of similar projection equipment, it does sell this
subassembly to other manufacturing companies that directly compete with the
Company. Should TI cease production or delivery of this component, the result
could have a material adverse effect on the Company's sales.
While the Company's DLP based projector has been successful in the marketplace,
the demand for it has declined. There can be no assurance that DLP will continue
to be successful, as increasing numbers of competitors introduce new products
and technologies and price competition intensifies.
A significant portion of the Company's shipments typically occur in the last
month of a quarter due to customers' ordering patterns, the timing of sales
promotions, component availability or technical challenges. These factors may
cause volatility in quarterly and annual results in future periods.
Revenue from the sale of products is recognized at the time of shipment to the
customer. The Company maintains a reserve for sales returns and allowances (the
"Reserve") based upon historical rates of returns. While the Company believes
its estimated Reserve is adequate, future returns could be greater than the
Reserve and may materially affect future results of operations.
The Company is continuing its efforts to reduce inventory levels and sell older
inventory. Price reductions of certain of the Company's older products may
result in lower gross margins. This trend could continue as older inventory
continues to be liquidated and as the current products become less attractive in
the market place due to the introduction of new products by the Company or its
competitors.
To date the Company has not consistently met all of the covenants in its loan
and security agreement with a bank, and the lender has been willing to waive the
non-compliance. However, there can be no assurance that the Company will meet
the covenants in the future, nor that the lender will continue to waive any
non-compliance.
The trading price of the Company's common stock has been and is expected to
continue to be subject to immediate and wide fluctuations due to factors both
within and outside of the Company's control. These factors include, but are not
limited to, the following: fluctuations in operating results or financial
position, availability of financing, new product introductions by the Company or
its competitors, product reviews by trade publications, estimates or statements
made by analysts regarding the Company or the industry and markets in which the
Company operates and stock market price fluctuations.
The number of both competitors and competing projector products increased
significantly during the past year, resulting in intense price competition and
lower margins. The Company's strategy is to shift its efforts away from the mass
market towards serving specialized markets that require innovation, such as the
Company's recently announced relationship with Runco International in the home
theater market and InFocus Systems and Hughes ELCAN in the high end fixed
installation CRT replacement market. There is no assurance that this strategy
will be successful.
13
<PAGE>
PART II.OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
nVIEW Corporation held its 1997 Annual Meeting of Shareholders on May 22, 1997.
At the Annual Meeting, the following matters were acted upon by shareholders.
1. Election of directors. The following persons were elected as directors of the
Company to serve a one year term, with the votes For and Withheld indicated
below:
DIRECTOR FOR WITHHELD
Stephen C. Adams 4,331,128 235,910
Edgar M. Cortright 4,330,878 236,160
Angelo Guastaferro 4,330,908 236,130
Grant T. Hollett, Jr. 4,334,828 232,210
Joseph G. Morone 4,334,728 232,310
James H. Vogeley 4,328,878 238,160
2. Ratification of KPMG Peat Marwick LLP as independent auditors for 1997.
FOR AGAINST ABSTAIN BROKER NON-VOTES
4,547,798 10,640 8,600 0
14
<PAGE>
SIGNATURE
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.
Dated: August 13, 1997
nVIEW CORPORATION
By: /s/ Angelo Guastaferro
----------------------------
Angelo Guastaferro
President, Chief Executive Officer
By: /s/ Jerry W. Stubblefield
--------------------------------
Jerry W. Stubblefield
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,952,756
<SECURITIES> 0
<RECEIVABLES> 5,999,174
<ALLOWANCES> 290,000
<INVENTORY> 10,227,110
<CURRENT-ASSETS> 18,288,403
<PP&E> 3,435,686
<DEPRECIATION> 2,704,291
<TOTAL-ASSETS> 19,187,318
<CURRENT-LIABILITIES> 3,399,646
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,787,672
<TOTAL-LIABILITY-AND-EQUITY> 19,187,318
<SALES> 12,360,844
<TOTAL-REVENUES> 12,360,844
<CGS> 10,325,787
<TOTAL-COSTS> 10,325,787
<OTHER-EXPENSES> 3,532,954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,303
<INCOME-PRETAX> (1,514,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,514,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,514,200)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
