<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
Commission File Number 1-11512
______________________
SATCON TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
______________________
State of Incorporation: Delaware I.R.S. Employer ID. No. 04-2857552
161 First Street
Cambridge, MA 02142-1221
(Address of principal executive offices)
(617) 661-0540
(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 latest practicable date.
Common Stock, $0.01 Par Value, 9,018,549 shares outstanding as of
March 31, 1998.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS Page
----
Consolidated Balance Sheets ................................................1
Consolidated Statements of Operations ......................................2
Consolidated Statements of Cash Flows ......................................3
Notes to Financial Statements ..............................................4
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ...............................6
PART II: OTHER INFORMATION
Items No. 1 through 6 ......................................................10
Signatures .................................................................11
<PAGE>
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
(Unaudited)
---------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $2,529,150 $4,256,504
Marketable securities........................................ 1,415,654 1,976,400
Accounts receivable, net of allowance of $172,730 at March
31, 1998 and $159,243 at September 30, 1997.............. 3,715,153 2,965,559
Unbilled contract costs, net of allowance of $537,580 at
March 31, 1998 and $1,130,468 at September 30, 1997...... 1,381,992 1,709,826
Inventory, net of allowance of $672,790 at March 31, 1998
and $758,541 at September 30, 1997....................... 2,222,364 1,577,483
Prepaid expenses and other assets............................ 343,475 416,926
------------- -------------
Total current assets................................... 11,607,788 12,902,698
Property and equipment, net........................................ 2,610,621 4,784,355
Intangibles, net.................................................. 2,796,698 2,992,659
Investment in affiliate............................................ 5,000,000 -
Other assets....................................................... 34,660 29,726
------------- -------------
Total assets........................................... $22,049,767 $20,709,438
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................. $ 952,855 $ 850,208
Accrued payroll and payroll related expenses................. 363,506 392,235
Deferred revenue............................................. 261,989 191,128
Other accrued expenses....................................... 455,424 788,049
Accounts payable to affiliate................................ 331,526 -
Short term portion of long term debt......................... 91,919 85,784
------------- -------------
Total current liabilities.............................. 2,457,219 2,307,404
Long term liabilities:
Note Payable................................................. - 6,737
Long term debt............................................... 273,920 316,160
------------- -------------
Total long term liabilities............................ 273,920 322,897
Commitments........................................................ - -
STOCKHOLDERS' EQUITY
Preferred stock; $.01 par value, 1,000,000 shares authorized;
none issued.................................................... - -
Common stock, $.01 par value, 15,000,000 shares authorized;
9,018,549 shares at March 31, 1998 and 8,769,146 shares at
September 30, 1997, issued and outstanding..................... 90,185 87,691
Additional paid-in capital......................................... 28,377,718 26,576,600
Retained earnings/(loss)........................................... (9,135,196) (8,564,939)
Unrealized losses on marketable securities, net of tax effect...... (14,079) (20,215)
------------- -------------
Total stockholders' equity......................... 19,318,628 18,079,137
------------- -------------
Total liabilities and stockholders' equity......... $22,049,767 $20,709,438
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
----------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue........................................... $4,325,548 $2,908,114 $8,021,167 $ 5,041,672
---------- ---------- ---------- -----------
Cost of sales..................................... 2,395,452 1,349,353 4,553,814 2,053,733
Selling, general and administrative expenses...... 1,819,933 1,897,858 3,719,348 4,045,607
Research and development expenses................. 21,999 10,399 287,030 43,623
Goodwill amortization............................. 82,408 - 137,595 -
---------- ---------- ---------- -----------
Total operating expenses.......................... 4,319,792 3,257,610 8,697,787 6,142,963
Operating income/(loss)........................... 5,756 (349,496) (676,620) (1,101,291)
Interest income, net.............................. 53,199 42,559 106,363 141,189
---------- ---------- ---------- -----------
Net income/(loss)................................. $ 58,955 $ (306,937) $ (570,257) $ (960,102)
========== ========== ========== ===========
Net income/(loss) per weighted average share,
basic and diluted................................ $0.01 $(0.04) $(0.06) $(0.13)
========== ========== ========== ===========
Weighted average number of common shares,
basic........................................... 8,954,871 7,477,885 8,900,069 7,432,029
Weighted average number of common shares,
diluted......................................... 9,127,870 7,477,885 8,900,069 7,432,029
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
<TABLE>
<CAPTION>
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
March 31,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................................. ($570,257) ($960,102)
---------- ----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization......................................... 426,414 389,112
Reserve for unbilled contract costs................................... (7,175) -
Allowance for doubtful accounts....................................... 13,487 -
Changes in operating assets and liabilities:
Accounts receivable......................................... (794,518) 1,233,862
Prepaid expenses and other assets........................... 73,451 32,388
Unbilled contract costs..................................... 335,009 (1,692,629)
Inventory................................................... (661,669) (90,090)
Other assets................................................ (65,208) 219,108
Accounts payable............................................ 102,648 (384,251)
Accrued expenses and payroll................................ 3,569 63,687
Deferred revenue............................................ 165,862 -
Other accrued expenses...................................... (332,625) -
---------- ----------
Total adjustments.................................................................... (740,755) (228,813)
---------- ----------
Net cash used in operating activities................................................ (1,311,012) (1,188,915)
Cash flows from investing activities:
Sales and maturities of marketable securities............... 566,883 2,067,063
Patent & trademark expenditures............................. (93,492) (62,427)
Deferred financing fees..................................... - (189,143)
Capital expenditures........................................ (667,702) (597,916)
Acquisitions................................................ (306,261) (210,000)
Accounts payable to affiliate............................... (1,676,540) -
---------- ----------
Net cash provided/(used) by investing activities..................................... (2,177,112) 1,007,577
Cash flows from financing activities:
Repayment of borrowings................................................. (42,842) -
Proceeds from exercise of stock options................................. 581,739 86,700
Proceeds from exercise of warrants...................................... 1,221,873 -
---------- ----------
Net cash provided by financing activities............................................ 1,760,770 86,700
---------- ----------
Net decrease in cash and cash equivalents............................................ (1,727,354) (94,638)
Cash and cash equivalents at beginning of period..................................... 4,256,504 3,770,925
---------- ----------
Cash and cash equivalents at end of period........................................... $ 2,529,150 $3,676,287
=========== ==========
</TABLE>
Refer to Note B. for noncash transactions occurring during the period.
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
SATCON TECHNOLOGY CORPORATION
Notes to Financial Statements
Note A. 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 Rule 10-01 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. These consolidated financial statements, which in the
opinion of management reflect all adjustments (including normal recurring
adjustments) necessary for a fair presentation, should be read in conjunction
with the financial statements and notes thereto included in the Company's Report
on Form 10-K for the year ended September 30, 1997. Operating results for the
three and six month periods ended March 31, 1998 are not necessarily indicative
of the results that may be expected for any future interim period or for the
entire fiscal year.
Note B. Significant Events
- --------------------------
Beacon Power Corporation
During a recapitalization of Beacon Power Corporation ("Beacon") on December 24,
1997, the Company converted a significant portion of its ownership of Beacon to
preferred stock. The Company now holds less than 20% of the common stock of
Beacon. The Company's investment in Beacon is accounted for on a cost basis.
The impact on the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
(Unaudited)
-------------
<S> <C>
Accounts Receivable......................................................... $ (31,437)
Inventory................................................................... (16,788)
Prepaid expenses and other assets........................................... (59,500)
Property and Equipment, net................................................. (2,709,224)
Intangibles, net............................................................ (302,283)
Accrued payroll and payroll related expenses................................ 32,298
Deferred revenue............................................................ 95,000
Accounts payable to affiliate............................................... (2,008,066)
-------------
Investment in affiliate..................................................... $ 5,000,000
=============
</TABLE>
These amounts have been changed from those originally reported in Form 10-Q for
the quarterly period ended December 31, 1997 to more accurately reflect the
breakdown of amounts transferred.
Accounts payable to affiliate represents cash and cash equivalents transferred
to Beacon subsequent to December 24, 1997.
4
<PAGE>
Note C. SFAS No. 128
- --------------------
As of October 1, 1997, the Company adopted Statement of Financial Accounting
Standard No. 128 ("SFAS No. 128"), "Earnings per Share". SFAS No. 128 replaced
the previously reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options. All earnings per
share amounts for all periods have been presented to conform to SFAS No. 128
requirements. There was no effect on the earnings per share disclosures for
prior periods presented as a result of adoption of SFAS No. 128 due to the
antidilutive effect of the Company's outstanding options. As of March 31, 1998,
there was 584,494 stock options outstanding. The following is the reconciliation
of the numerators and denominators of the basic and diluted per share
computations for net income/(loss):
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
--------------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income/(loss)............................................ $ 58,955 $ (306,937) $ (570,257) $ (960,102)
============ ============ ============ ============
BASIC:
Common shares outstanding, beginning of period.............. 8,918,844 7,447,695 8,769,146 7,359,074
Weighted average common shares issued during the period...... 36,027 30,190 130,923 72,955
------------ ------------ ------------ ------------
Weighted average common shares outstanding, end of period.... 8,954,871 7,477,885 8,900,069 7,432,029
============ ============ ============ ============
Net income/(loss) per weighted average share, basic.......... $ 0.01 ($ 0.04) ($ 0.06) ($ 0.13)
============ ============ ============ ============
DILUTED:
Common shares outstanding, beginning of period.............. 8,918,844 7,447,695 8,769,146 7,359,074
Weighted average common shares issued during the period...... 36,027 30,190 130,923 72,955
Weighted average common stock equivalents (a)................ 532,995 - - -
Weighted average treasury stock repurchased.................. (359,996) - - -
------------ ------------ ------------ ------------
Weighted average common shares outstanding, net of treasury
stock, end of period.......................... 9,127,870 7,477,885 8,900,069 7,432,029
============ ============ ============ ============
Net income/(loss) per weighted average share, diluted........ $ 0.01 ($ 0.04) ($ 0.06) ($ 0.13)
============ ============ ============ ============
</TABLE>
(a) not included if antidilutive
On April 21, 1998, the Company's Board of Directors issued options to purchase
up to 317,000 shares of the Company's common stock. These options are
exercisable at an average price of $11.39 per share and expire in April 2008.
The shares of common stock or potential shares of common stock outstanding at
the end of the period would not have changed materially if this transaction
occurred before the end of the period.
5
<PAGE>
Note D. Derivative Financial Instruments
- ----------------------------------------
The following table summarizes derivative financial instruments included in
marketable securities held by the Company at March 31, 1998, which are sensitive
to changes in interest rates:
For the years ended September 30,
<TABLE>
<CAPTION>
Description 1998 1999 2000 2001 2002 Thereafter Total Fair Value
- ----------------- -------- ---- ---- ---- ---- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Floater $150,000 $350,000 $500,000 $474,938
Average
Interest Rate 5.8% 5.9% 5.9% 5.9% 5.9% 5.9%
CMO $ 93,338 $ 93,338 $ 92,443
Average
Interest Rate 6.9% 6.9% 6.9% 6.9% 6.9% 6.9%
Structured Notes $250,000 $250,000 $246,875
Average
Interest Rate 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
</TABLE>
The instruments held by the Company are not leveraged and are held for purposes
other than trading.
Note E. Inventory
- -----------------
Inventory consists of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
(Unaudited)
------------- -------------
<S> <C> <C>
Raw material ............................................. $ 952,406 $ 651,460
Work-in-process........................................... 963,319 637,657
Finished goods............................................ 306,639 288,366
------------- -------------
$2,222,364 $1,577,483
============= =============
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
This Form 10-Q contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects", and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ materially from
those indicated by such forward-looking statements. The factors include, without
limitation, those set forth below under the caption "Factors Affecting Future
Results".
6
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
revenues for certain items in the Company's Statement of Operations for each
period:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
1998 1997 1998 1997
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Revenues.............................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales......................................... 55.4 46.4 56.7 40.7
Selling, general and administrative................... 42.1 65.2 46.4 80.2
Research and development.............................. 0.5 0.4 3.6 0.9
Goodwill amortization................................. 1.9 0.0 1.7 0.0
Total operating expenses
(excluding cost of sales)............................. 44.5 65.6 51.7 81.1
Operating income/(loss)............................... 0.1 (12.0) (8.4) (21.8)
Interest income, net.................................. 1.2 1.5 1.3 2.8
Net income/(loss)..................................... 1.3 (10.5) (7.1) (19.0)
</TABLE>
Three Months Ended March 31, 1998 ("Q2 1998") Compared to the Three Months Ended
- --------------------------------- ----------- ----------------------------------
March 31, 1997 ("Q2 1997")
- -------------- -----------
Revenues. The Company's revenues increased approximately $1,417,000 or 48.7%,
from Q2 1997 to Q2 1998. The increase in revenues is primarily due to the
acquisition of Film Microelectronics, Inc. ("FMI") which closed on April 16,
1997. The acquisition of FMI represents incremental revenues of approximately
$1,423,000. The increase in revenues is also due to an increase in the sale of
manufactured products at K&D Magmotor Corporation ("K&D") of approximately
$193,000 offset by decreases in revenues of approximately $199,000 related to
work on various research and development contracts.
Cost of Sales. Cost of sales increased approximately $1,046,000 or 77.5%, from
Q2 1997 to Q2 1998. The increase is primarily due to the addition of cost of
sales associated with K&D and FMI of approximately $169,000 and $922,000,
respectively. These increase were partially offset by a decrease in effort on
research and development contracts.
Selling, General and Administrative. Selling, general and administrative
expenses decreased approximately $78,000 or 4.1%, from Q2 1997. The decrease in
spending is primarily due to the management of selling and administrative costs.
Six Months Ended March 31, 1998 ("Q2 1998 YTD") Compared to the Six Months Ended
- ------------------------------- --------------- --------------------------------
March 31, 1997 ("Q2 1997 YTD")
- -------------- ---------------
Revenues. The Company's revenues increased approximately $2,979,000 or 59.1%,
from Q2 1997 YTD to Q2 1998 YTD. The increase in revenues is primarily due to
the two acquisitions closed in 1997, K&D and FMI. These two acquisitions
7
<PAGE>
represent incremental revenues of approximately $3,139,000. The increase in
revenues is also due to an increase in the sale of manufactured products at K&D
of approximately $193,000 offset by decreases in revenues of approximately
$353,000 related to work on various research and development contracts.
Cost of Sales. Cost of sales increased approximately $2,500,000 or 121.7%, from
Q2 1997 YTD to Q2 1998 YTD. The increase is primarily due to the addition of
cost of sales associated with K&D and FMI of approximately $497,000 and
$1,917,000, respectively.
Selling, General and Administrative. Selling, general and administrative
expenses decreased approximately $326,000 or 8.1%, from Q2 1997 YTD. The
decrease in spending is primarily due to the management of selling and
administrative costs.
Research and Development. Research and development expenses increased
approximately $243,000 or 558.0%. This increase is primarily due to the
development of the flywheel energy storage system for Beacon. During the
recapitalization of Beacon on December 24, 1997, the Company converted a
significant portion of its ownership of Beacon to preferred stock. The Company
now holds less than 20% of Beacon's common stock; therefore, effective December
24, 1997, the Company's investment in Beacon is accounted for on a cost basis.
THE COMPANY'S LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents was approximately $2,529,000 as of March
31, 1998, a decrease of approximately $1,727,000 from September 30, 1997. Cash
used in operating activities was approximately $1,311,000 for Q2 1998 YTD,
compared to approximately $1,189,000 for Q2 1997 YTD. The cash used in operating
activities is primarily the result of a net loss and an increase in inventory
related to the introduction of a new line of standard regulators.
The Company anticipates that its existing cash resources and cash flow from
operations will be sufficient to fund its operations through September 30, 1998,
provided it meets its operating plan. The Company's ability to finance its
operations will be dependent on its ability to renegotiate its bank line of
credit for a continued availability of borrowing thereunder. There can be no
assurance that the Company will be successful in renegotiating its line of
credit. The Company's ability to generate cash from operations depends upon,
among other things, revenue growth, its credit and payment terms with vendors,
and collections of accounts receivable. If such sources of cash prove
insufficient, the Company will be required to make changes in its operations or
to seek additional debt or equity financing. There can be no assurances that
cash generated from operations will be sufficient to meet its operating
requirements, or if required, that additional debt or equity financing will be
available on terms acceptable to the Company.
FACTORS AFFECTING FUTURE RESULTS
The Company's future results remain difficult to predict and may be affected by
a number of factors which could cause actual results to differ materially from
forward-looking statements contained in this Form 10-Q and presented elsewhere
by management from time to time. These factors include business conditions
within the automotive, telecommunications, industrial machinery, and
semiconductor industries and the world economies as a whole, and competitive
pressures that may impact research and development spending. The Company's
revenue growth is dependent on technology developments and contract research
8
<PAGE>
and development for both the government and commercial sectors and no assurance
can be given that such investments will continue or that the Company can
successfully obtain such funds. In addition, the Company's future growth
opportunities are dependent on the introduction of new products that must
penetrate automotive, telecommunications, industrial, and computer market
segments. No assurance can be given that new products can be developed, or if
developed, will be successful; that competitors will not force prices to an
unacceptably low level or take market share from the Company; or that the
Company can achieve or maintain profits in these markets. Because of these and
other factors, past financial performances should not be considered an indicator
of future performance. Investors should not use historical trends to anticipate
future results and should be aware that the Company's stock price frequently
experiences significant volatility.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131 ("SFAS No. 131"), "Disclosure about
Segments of an Enterprise and Related Information." The statement is effective
for fiscal years beginning after December 15, 1997 and establishes annual and
interim reporting standards for an enterprise's operating segments and related
disclosures about its products and services, geographical areas and major
customers.
Adoption of SFAS No. 131 is not expected to have a material impact to the
Company's consolidated financial position, results of operations or cash flows
and any effect will be limited to the form and content of its disclosures.
EFFECTS OF INFLATION
The Company believes that inflation over the past three years has not had a
significant impact on the Company's sales or operating results.
EFFECTS OF YEAR 2000
Neither the cost of addressing Year 2000 compliance nor the consequence of
incomplete or untimely resolution of problems related to the Year 2000 represent
a known material event or uncertainty that would affect future financial
results, or cause reported financial information not to be necessarily
indicative of future operating results or future financial condition.
9
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings:
Not applicable.
Item 2. Changes in Securities and Use of Proceeds:
Not applicable.
Item 3. Defaults upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
At the Company's Annual Meeting of Stockholders held on March 11, 1998, the
Company's stockholders approved the following:
PROPOSAL FOR AGAINST/ ABSTAIN BROKER
WITHHELD NON-VOTERS
(1) Election of Class I
Directors for the ensuing
three years:
David B. Eisenhaure 7,539,641 222,143 0 0
James L. Kirtley, Jr.,Ph.D. 7,539,641 222,143 0 0
The other directors of the Company, whose terms of office as directors continued
after the Annual Meeting are John P. O'Sullivan, Michael C. Turmelle, Marshall
J. Armstrong and Anthony J. Villiotti.
(2) Ratification of
Coopers & Lybrand L.L.P.
as auditors for the fiscal
year ending September 30,
1998. 7,744,146 11,634 6,004 0
Item 5. Other Information:
Not applicable.
Item 6 Exhibits and Reports
on Form 8-K:
(a) Exhibits
11 Statement Regarding Computation of Earning Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter for which this
report is filed.
10
<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.
SatCon Technology Corporation
Date: May 15, 1998 By: /s/ David B. Eisenhaure
----------------------------------------
David B. Eisenhaure, President and Chief
Executive Officer
Date: May 15, 1998 By: /s/ Michael C. Turmelle
----------------------------------------
Michael C. Turmelle, Vice President,
Chief Financial Officer and Treasurer
11
<PAGE>
SATCON TECHNOLOGY CORPORATION
FORM 10-Q; FISCAL YEAR 1998; QUARTER ENDED MARCH 31, 1998
COMPUTATION OF EARNINGS PER SHARE - EXHIBIT 11
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
---------- ---------- ---------- ----------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income/(loss).................................................... $ 58,955 $ (306,937) $ (570,257) $ (960,102)
========== ========== ========== ==========
BASIC:
Common shares outstanding, beginning of period....................... 8,918,844 7,447,695 8,769,146 7,359,074
Weighted average common shares issued during the period.............. 36,027 30,190 130,923 72,955
---------- ---------- ---------- ----------
Weighted average common shares outstanding, end of period............ 8,954,871 7,477,885 8,900,069 7,432,029
========== ========== ========== ==========
Net income/(loss) per weighted average share, basic.................. $ 0.01 ($ 0.04) ($ 0.06) ($ 0.13)
========== ========== ========== ==========
DILUTED:
Common shares outstanding, beginning of period....................... 8,918,844 7,447,695 8,769,146 7,359,074
Weighted average common shares issued during the period.............. 36,027 30,190 130,923 72,955
Weighted average common stock equivalents(a)......................... 532,995 - - -
Weighted average treasury stock repurchased.......................... (359,996) - - -
---------- ---------- ---------- ----------
Weighted average common shares outstanding, net of treasury
stock, end of period....................................... 9,127,870 7,477,885 8,900,069 7,432,029
========== ========== ========== ==========
Net income/(loss) per weighted average share, diluted................ $ 0.01 ($ 0.04) ($ 0.06) ($ 0.13)
========== ========== ========== ==========
</TABLE>
(a) not included if antidilutive
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,529,150
<SECURITIES> 1,415,654
<RECEIVABLES> 3,715,153
<ALLOWANCES> 172,730
<INVENTORY> 2,222,364
<CURRENT-ASSETS> 11,607,788
<PP&E> 2,610,621<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,049,767
<CURRENT-LIABILITIES> 2,457,219
<BONDS> 0
0
0
<COMMON> 90,185
<OTHER-SE> 19,228,443
<TOTAL-LIABILITY-AND-EQUITY> 22,049,767
<SALES> 0
<TOTAL-REVENUES> 4,325,548
<CGS> 0
<TOTAL-COSTS> 2,395,452
<OTHER-EXPENSES> 1,924,340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 58,955
<INCOME-TAX> 0
<INCOME-CONTINUING> 58,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,955
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<FN>
<F1> PP&E IS SHOWN NET OF ACCUMULATED DEPRECIATION AS REPORTED WITHIN THE FORM
10-Q ON THE BALANCE SHEET
</FN>
</TABLE>
