<PAGE> 1
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: December 31, 1998
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. 0-20190
BITWISE DESIGNS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 14-1673067
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
Technology Center, Rotterdam Industrial Pk, Schenectady, NY, 12306
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(518) 356-9740
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
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
7,382,663 shares of Common Stock, par value $.001 per share, were
outstanding at February 9, 1998.
Page 1 of 15
<PAGE> 2
BITWISE DESIGNS INCORPORATED
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets -
December 31, 1998 and June 30, 1998 3-4
Consolidated Statements of Operations -
Three and six months ended December 31, 1998
and December 31, 1997 5
Consolidated Statements of Cash Flows -
Six months ended December 31, 1998
and December 31, 1997 6-7
Notes to Consolidated Financial Statements 8-9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
PART II OTHER INFORMATION
Item 6 Reports on Form 8-K 13
Safe Harbor Statement 13-14
Year 2000 Update 14
Signatures 15
</TABLE>
Page 2 of 15
<PAGE> 3
PART I FINANCIAL INFORMATION
BITWISE DESIGNS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1998 1998
(unaudited)
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,877,103 $ 4,000,370
Accounts receivable, net of allowance
for doubtful accounts of $380,358 at Dec.
31, 1998 and $480,229 at June 30, 1998 5,870,392 4,609,807
Due from related parties 77,571 48,422
Inventories:
Finished goods 222,524 350,277
Purchased components & raw material 1,932,338 2,860,591
Income taxes receivable 8,126 3,291
Prepaid expenses and other current assets 263,999 266,237
----------- -----------
Total current assets 10,252,053 12,138,995
Property and equipment, net 1,274,669 776,925
----------- -----------
Other assets:
Software development costs, net 115,034 88,391
Other assets 37,341 37,508
Deferred financing costs 205,049 244,109
Excess of cost over net assets of
acquired companies, net 1,381,881 1,422,526
----------- -----------
Total assets $13,266,027 $14,708,454
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 3 of 15
<PAGE> 4
BITWISE DESIGNS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, June 30,
1998 1998
(unaudited)
------------ ------------
<S> <C> <C>
Current liabilities:
Borrowings under lines of credit $ 566,398 $ 1,673,275
Accounts payable 2,078,936 2,294,192
Accrued expenses and other liabilities 449,910 822,429
------------ ------------
Total current liabilities 3,095,244 4,789,896
------------ ------------
Long-term debt, net of discount 4,015,105 3,440,332
------------ ------------
Total liabilities 7,110,349 8,230,228
------------ ------------
Shareholders' equity:
Preferred stock -$.10 par value, 5,000,000
shares authorized:
Series A -200 shares issued and outstanding 20 20
Common stock-$.001 par value; 20,000,000
shares authorized; shares issued:
7,410,745 7,411 7,411
Additional paid-in capital 19,846,126 19,822,159
Accumulated deficit (13,621,160) (13,274,645)
------------ ------------
6,232,397 6,554,945
Less cost of common shares in treasury,
28,082 shares (76,719) (76,719)
------------ ------------
Total shareholders' equity 6,155,678 6,478,226
------------ ------------
Total liabilities and shareholders' equity $ 13,266,027 $ 14,708,454
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 4 of 15
<PAGE> 5
BITWISE DESIGNS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the 3 months ended For the 6 months ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 5,049,976 $ 9,027,801 $ 10,465,503 $ 18,396,656
Cost of goods sold 3,040,423 6,448,727 6,557,726 13,266,757
------------ ------------ ------------ ------------
Gross profit 2,009,553 2,579,074 3,907,777 5,129,899
Selling, general and
administrative expenses 1,820,396 2,832,319 3,907,150 5,744,275
Product development costs 51,820 45,325 120,098 88,428
------------ ------------ ------------ ------------
Operating income/(loss) 137,337 (298,570) (119,471) (702,804)
Other income (expense):
Interest expense (150,086) (284,139) (300,996) (415,553)
Interest and other income 9,110 63,128 69,117 116,319
------------ ------------ ------------ ------------
Income/(loss)before taxes (3,639) (519,581) (351,350) (1,002,038)
Income tax expense (5,335) 6,001 (4,835) 36,100
------------ ------------ ------------ ------------
Net income/(loss) $ 1,696 $ (525,582) $ (346,515) $ (1,038,138)
============ ============ ============ ============
Per share amounts:
Net income/(loss) per
common share $ 0.00 $ (0.07) $ (0.05) $ (0.14)
============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 5 of 15
<PAGE> 6
BITWISE DESIGNS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the 6 months ended
December 31, December 31,
1998 1997
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (346,515) $ (1,038,138)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 313,700 377,277
Provision for doubtful accounts (127,869) 129,281
Changes in operating assets and liabilities:
Accts. receivable & from related parties (1,161,865) (544,984)
Inventories 1,056,006 155,095
Prepaid expenses & other assets 26,205 (163,893)
Accounts payable and accrued expenses (587,775) (514,112)
Income taxes (4,835) 12,901
Other (707) (1)
----------- -----------
Net cash used in
operating activities (833,655) (1,586,574)
----------- -----------
Cash flows from investing activities:
Property and equipment expenditures (619,625) (68,609)
Software development costs (72,843) (45,466)
Other (1,500)
----------- -----------
Net cash used in investing
activities (692,468) (115,575)
----------- -----------
Cash flows from financing activities:
Incr/(Decr) borrowings on lines of credit, net (1,106,877) (1,025,695)
Borrowings of long-term debt, net of
deferred issuance costs 509,733 3,608,368
Principal payments - capital lease obligations (6,868)
Exercise of common stock options 3,125
----------- -----------
Net cash provided by
financing activities (597,144) 2,578,930
----------- -----------
Net increase(decrease) in cash & cash equivalents (2,123,267) 876,781
Cash and cash equivalents, beginning of year 4,000,370 2,863,847
----------- -----------
Cash and cash equivalents, end of period $ 1,877,103 $ 3,740,628
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 6 of 15
<PAGE> 7
BITWISE DESIGNS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CASH FLOW DISCLOSURES
<TABLE>
<CAPTION>
OTHER SUPPLEMENTAL INFORMATION: For the 6 months ended
December 31, December 31,
1998 1997
(unaudited) (unaudited)
-------- --------
<S> <C> <C>
Interest Paid $206,913 $197,187
Income Taxes Paid $ 0 $ 26,000
Additional Paid in Capital Resulting
from
Issuance of Detachable Warrants $650,411
for Debt
Issuance of Warrants for Services $ 23,967 $ 67,910
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 7 of 15
<PAGE> 8
BITWISE DESIGNS, INC.
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements include the accounts of Bitwise
Designs, Inc. and its wholly-owned subsidiary DJS Marketing Group, Inc. (the
Company). All significant intercompany accounts and transactions have been
eliminated in consolidation. The management of the Company believes the
accompanying unaudited consolidated financial statements contain all adjustments
necessary to fairly present the financial position as of December 31, 1998 and
June 30, 1998 and results of operations and cash flows for each of the periods
presented.
2. The results of operations for the three and six months ended December 31,
1998 and 1997 are not necessarily indicative of the results to be expected for
the full year.
3. Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the annual
consolidated financial statements and notes thereto included in the Company's
Form 10-K for the fiscal year ended June 30, 1998.
4. In June 1998, Bitwise completed the sale of one of its subsidiaries, System
Solutions Technology, Inc. (SST) for $4,000,000. The transaction was in the form
of a sale of all of the stock of SST. The Company received approximately
$3,600,000 in cash and approximately $400,000 worth of inventory and accounts
receivable.
5. The Company adopted Statement of Financial Accounting Standards Board SFAS
130, "Reporting Comprehensive Income" in fiscal year 1999. There was no
comprehensive income to report, other than net income, for the three and six
months ended December 31, 1998 and 1997.
6. During the three and six months ended December 31, 1998, no common stock
warrants were exercised.
7. The following represents the reconciliation of the basic and diluted earnings
per share amounts for the three and six months ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
Months Ended December 31,
--------------------------------------------------------------
1998 1997
---- ----
Three Six Three Six
----- --- ----- ---
<S> <C> <C> <C> <C>
Net income/(loss) $ 1,696 $ (346,515) $ (525,582) $(1,038,138)
Weighted average
shares 7,410,745 7,410,745 7,368,024 7,368,301
Basic and diluted EPS $ .00 $ (.05) $ (.07) $ (.14)
</TABLE>
The impact of options, warrants and convertible notes was antidilutive
to the calculation of basic and dilutive loss per share and were accordingly
excluded from the calculation.
Page 8 of 15
<PAGE> 9
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS No.
131 requires expanded reporting of information about operating segments in
interim and annual financial statements, including certain descriptive
information about products and services, geographic areas, and major customers.
This statement will be effective for annual financial statements beginning the
fiscal year ending 1999, and for comparative interim periods beginning the
fiscal year ending 2000. The adoption of this standard is not expected to have a
significant impact on the Company's consolidated financial statements.
In June 1998, the Financial Accounting Standards Board also issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS 133).
SFAS 133 establishes a new model for accounting for derivatives and hedging
activities. This statement is effective for fiscal years beginning June 30,
2000. The adoption of this standard is not expected to have a significant impact
on the Company's consolidated financial statements.
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
ITEM 2. FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
consolidated financial statements and notes contained elsewhere in this Form
10-Q.
RESULTS OF OPERATIONS
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE THREE AND SIX
MONTHS ENDED DECEMBER 31, 1997.
The Company realized a consolidated net profit of $1,696 ($.00 per
share) for the three months ended December 31, 1998 compared to a consolidated
net loss of $525,582 ($.07 per share) for the three months ended December 31,
1997. For the six months ended December 31, 1998 the Company realized a
consolidated net loss of $346,515 compared to a consolidated net loss of
$1,038,138 for the six months ended December 31, 1997. The Company had
consolidated net sales of $5,049,976 and $9,027,801 for the three months ended
December 31, 1998 and 1997, respectively, and $10,465,503 and $18,396,656 for
the six months ended December 31, 1998 and 1997, respectively.
The consolidated sales decrease for the quarter and the six months
ended December 31, 1998 is due to the sale of one of the Company's subsidiaries,
System Solutions Technology, Inc. (SST) in June 1998. SST had sales of
$3,120,916 and $7,484,513 for the three and six months ended December 31, 1997,
respectively. Bitwise sales of the DocStar product line were $3,005,694 and
$5,971,664 for the three and six months ended December 31, 1998, respectively,
compared to $3,230,213 and $5,450,369 for the three and six months ended
December 31, 1997, respectively. For the Company's subsidiary DJS Marketing
Group, Inc. (DJS) sales were $2,044,282 and $4,493,839 for the three and six
months ended December 31, 1998, respectively, compared to $2,676,672 and
$5,461,774 for the three and six months ended December 31, 1997, respectively.
The Company's net income improvement for the three and six months ended
December 31, 1998 is due to a combination of growth of sales by Bitwise and its
DocStar product line and a reduction of operating costs. Bitwise incurred a pre
tax loss of $121,540 and $544,771 for the three and six months ended December
31, 1998, respectively, compared to a pre tax loss of $336,824 and $1,096,955
for the same periods last year. DJS realized a reduction in sales, however DJS
reports an increase in profit due to an increase in gross profit margins as DJS
shifted its business from hardware sales to a business model that produced more
service revenue such as network and internet services in addition to hardware
sales. DJS was also able to reduce operating costs. DJS had pre tax profits of
$117,901 and $193,421 for the three and six months ended December 31, 1998,
respectively, compared to pre tax profits of $4,264 and $27,999 for the same
periods last year.
Page 10 of 15
<PAGE> 11
Bitwise recognized approximately $1,232,000 of net sales to selected
customers in December, 1998 with deferred payment terms of up to 180 days. These
customers have a right to cancel and return 50% to 100% of the purchased
products during the deferred payment period. These sales were recorded net of
expected potential sales returns of approximately $308,000 and represents a
longer than normal term supply of product to these customers. In connection with
these agreements, the Company also will incur and has accrued for certain
obligations to these customers, including the subsidy of the cost of a dedicated
DocStar sales specialist.
Consolidated gross profit for the three months and six months ended
December 31, 1998 was $2,009,553 and $3,907,777, respectively, compared to
$2,579,074 and $5,129,899 for the same periods last year. This reduction is due
to the sale of SST in June 1998. The consolidated profit margin was 39.8% and
37.3% for the three and six months ended December 31, 1998, respectively,
compared to 28.6% and 27.9% for the same periods last year. Gross profit margin
is defined as gross profit as a percentage of sales. The increase in gross
profit margin is due to the sale of SST and the continued growth of Bitwise and
it's DocStar product which has significantly higher gross profit margins than
products and services provided by both SST and DJS.
Selling, general and administrative expenses (S,G&A) consist of all
other Company expenses except product development costs and interest. S,G&A
expenses amounted to $1,820,396 and $3,907,150 for the three and six months
ended December 31, 1998, respectively, compared to $2,832,319 and $5,744,275 for
the same periods last year. S,G&A expenses decreased as a result of the sale of
SST, which reported S,G&A expenses of $642,429 and $1,434,488 for the three and
six months ended December 31, 1997. The remainder of the decrease is due to cost
cutting by Bitwise and DJS.
As a percentage of sales, S,G&A costs increased from 31.4% and 31.2%
for the three and six months ended December 31, 1997 to 36.0% and 37.3% for the
three and six months ended December 30, 1998. This increase is due to the sale
of SST. Bitwise historically has had higher S,G&A expenses than any of the
subsidiary companies because of it's organization structure which includes
sales, training and service personnel stationed around the country to serve the
national dealer network, this has resulted in high payroll and travel and living
expenses. In addition, Bitwise incurs significant advertising and marketing
costs to market DocStar nationally. The subsidiaries typically sold in a
localized area and only employ personnel in their local region and incur minimal
advertising and marketing costs.
Interest expense totaled $150,086 and $300,996 for the three and six
months ended December 31, 1998, respectively, compared to $284,139 and $415,553
for the same periods last year. The decrease is due to the sale of SST which
recorded $108,681 of interest expense during the six months ended December 31,
1997. The decrease was also due to lower borrowing levels for DJS. Interest
rates decreased during the three months ended December 31, 1998 compared to the
same period last year.
Page 11 of 15
<PAGE> 12
Product development expenses relate to software development for the
DocStar product line incurred by Bitwise. These costs increased from $45,325 and
$88,428 for the three and six months ended December 31, 1997, respectively, to
$51,820 and $120,098 for the three and six months ended December 31, 1998,
respectively. Bitwise has a policy of capitalizing qualified software
development costs and amortizing those costs over three years as product
development expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds to date have been the issuance
of equity and the incurrence of third party debt. The principal balance of
long-term debt at December 31, 1998 totaled $4,015,105, net of discounts;
$3,975,000 of this amount relates to convertible notes payable which mature on
August 11, 2002.
The Company has a working capital line of credit facility totaling
$1,500,000, of which approximately $1,200,000 was available at December 31,
1998. The line is collateralized by accounts receivable, inventory and all other
assets of Bitwise. The interest rate is prime plus 2% per annum. The line of
credit agreement includes covenants which require the Company to maintain a
minimum tangible net worth, a maximum debt-to-tangible net worth and a minimum
amount of working capital on a consolidated basis. The Company believes that it
is in full compliance of all these covenants at December 31, 1998.
DJS has a wholesale line of credit facility for $625,000 which is
supported by a guaranty furnished by one of DJS's vendors and expressly limited
to purchases from this vendor. At December 31, 1998, $483,000 was outstanding.
The line is non-interest bearing and payment terms are net 40. The line is
collateralized by all assets of DJS.
In June 1998, the Company sold SST for $4,000,000. The Company received
approximately $3,600,000 in cash and approximately $400,000 in accounts
receivable and inventory. The proceeds were used for the working capital needs
of the Company and to reduce bank borrowings at DJS. The Company has received
certain claims from the buyer of SST for indemnification under the agreements
governing its sale. The parties are currently negotiating the amount of such
claim. There can be no assurance that the result of such negotiations will be
resolved in the Company's favor.
Property, plant and equipment expenditures totaled $619,625 and
software development expenditures totaled $72,843 for the six months ended
December 31, 1998, respectively. There were no purchase commitments outstanding
or contemplated. The Company is constructing a new office/production facility
with an estimated cost of approximately $2,500,000 in Schenectady, NY. The
Company has been awarded a grant from the Empire State Development Corporation
(an agency of New York state) for $1,000,000 to be used for construction of this
facility. Funding will be received in stages as the facility is built. The
Company has a construction/permanent mortgage with a local bank for $1,400,000,
the balance outstanding at December 31, 1998 was approximately $510,000. The
Grant stipulates that the Company is obligated to
Page 12 of 15
<PAGE> 13
achieve certain annual employment levels at the Schenectady site between January
1, 2001 and January 1, 2005 or some or all of the grant will have to be repaid.
The Company anticipates that cash expected to be provided by operations
together with the proceeds from the sale of SST, and borrowings under its lines
of credit will be sufficient to satisfy normal operating obligations.
The Company experienced a net loss of $346,515 during the six months
ended December 31, 1998. To date, the Company has been largely dependent on its
ability to sell additional shares of its common stock or other securities or
other financing to fund its operating deficits. Under its current operating plan
to obtain a national acceptance of the DocStar product line, the Company's
ability to improve operating cash flow is highly dependent on the market
acceptance of DocStar and the Company's ability to reduce overhead expenses. If
the Company is unable to attain projected sales levels for its DocStar systems,
is unable to implement cost reduction strategies, or comply with debt covenant
requirements it may be necessary to raise additional capital to fund operations
and meet its obligations. There is no assurance that such funding will be
available.
PART II OTHER INFORMATION
Item 6 Reports on Form 8-K
(a) The following Reports on Form 8-K were filed by the Company during the last
quarter:
None
(b) Exhibits
None
SAFE HARBOR STATEMENT
Certain statements in this Form 10-Q, including information set forth
under Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 (the Act). The Company
desires to avail itself of certain "safe harbor" provisions of the Act and is
therefore including this special note to enable the Company to do so.
Forward-looking statements in this Form 10-Q or hereafter included in other
publicly available documents filed with the Securities and Exchange Commission,
reports to the Company's stockholders and other publicly available statements
issued or released by the Company involve known and unknown risks, uncertainties
and other factors which could cause the Company's actual results, performance
(financial or operating) or achievements to differ from the future results,
performance (financial or operating) or achievements expressed or implied by
such forward-looking statements. Such future results are based upon management's
best estimates based upon current conditions and the most recent results of
operations. These risks include, but are not limited to risks associated with
the market acceptance of the DocStar product line, competition, pricing and
technological changes and other risks as discussed in the Company's filings with
the Securities and Exchange Commission, in
Page 13 of 15
<PAGE> 14
particular its Annual Report on Form 10-K for the year ended June 30, 1998, and
Registration Statement on Form S-3 declared effective on July 30, 1996 all of
which risk factors could adversely affect the Company's business and the
accuracy of the forward-looking statements contained herein.
YEAR 2000 UPDATE
The Company has completed its company-wide Year 2000 Project (Project).
The Project addressed the issue by performing a survey on all desktop computers
and servers to ensure Year 2000 compliance. The survey concluded that all of the
Company's computer systems use hardware that is Year 2000 compliant. Most of the
Company's third party software and operating systems are Microsoft(TM) based and
believed to be Year 2000 compliant. The Project also included the evaluation of
it's third-party accounting systems. These systems have already been upgraded to
Year 2000 Versions purchased from the applicable vendors. The Company's document
imaging product, DocStar is hardware Year 2000 compliant and with the release of
Version 2.30 software in early 1999, the software will be fully Year 2000
compliant.
The Project also included the evaluation of the Company's third party
suppliers as Company operations could be affected by the interruption of
significant suppliers. This evaluation included discussions with each critical
vendor to ascertain their compliance with Year 2000 issues. The Company does not
believe any of it's critical vendors has a Year 2000 compliance problem and the
Company believes that alternate sources are available for substantially all
components the Company purchases.
The cost of the Project including software upgrades and hardware
surveys was immaterial (estimated to be less than $25,000).
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failure will have a material impact on the Company's results of operations,
liquidity or financial condition. However, the Company believes that with the
implementation its Year 2000 Project that the possibility of significant
interruptions of normal operations should be reduced.
Page 14 of 15
<PAGE> 15
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.
BITWISE DESIGNS INCORPORATED
February 12, 1999 /s/ John T. Botti
- ----------------- ---------------------------------------
DATE JOHN T. BOTTI
PRESIDENT & CHIEF EXECUTIVE OFFICER
/s/ Dennis H. Bunt
---------------------------------------
DENNIS H. BUNT
CHIEF FINANCIAL OFFICER
Page 15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,877,103
<SECURITIES> 0
<RECEIVABLES> 6,328,321
<ALLOWANCES> (380,358)
<INVENTORY> 1,924,493
<CURRENT-ASSETS> 10,252,053
<PP&E> 2,642,970
<DEPRECIATION> (1,368,301)
<TOTAL-ASSETS> 13,266,027
<CURRENT-LIABILITIES> 3,095,244
<BONDS> 0
0
20
<COMMON> 7,411
<OTHER-SE> 6,148,247
<TOTAL-LIABILITY-AND-EQUITY> 13,266,027
<SALES> 10,465,503
<TOTAL-REVENUES> 10,465,503
<CGS> 6,557,726
<TOTAL-COSTS> 10,587,974
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (300,996)
<INCOME-PRETAX> (351,350)
<INCOME-TAX> (4,835)
<INCOME-CONTINUING> (346,515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (346,515)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
