<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
------ OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 number 0-21456
-------
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-
1361276
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
372 Danbury Road
Wilton, Connecticut 06897
(Address of principal executive offices, including
zip code)
(203) 761-7900
(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.
Class Outstanding at August 9, 1996
- ------------------- -----------------------------
Common Stock, $.01 par value 21,033,062 shares
<PAGE>
Electronic Retailing Systems International, Inc.
Form 10-Q
Contents
<TABLE>
<CAPTIONS> Page Number
PART I. Financial Information
<S> <C>
<C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet--June 30, 1996 and
December 31, 1995 3
Condensed Consolidated Statement of Operations--Three
and Six Months Ended June 30, 1996 and 1995
4
Condensed Consolidated Statement of Cash Flows--Six
Months Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
8
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
INDEX TO EXHIBITS 13
</TABLE>
<PAGE>
Electronic Retailing Systems International, Inc.
Condensed Consolidated Balance Sheet
(in thousands except per share and share amounts)
<TABLE>
<CAPTION>
June 30, December
31,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $
647 $ 3,210
Accounts receivable 1,312
1,356
Inventories 1,761
1,874
Prepayments and other current assets 262
609
Total current assets 3,982
7,049
Equipment 2,192
2,047
Accumulated depreciation (1,579)
(1,365)
Net equipment 613
682
Other non-current assets 863
585
Total assets
$ 5,458 $ 8,316
=======
=======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses
$ 1,792 $ 1,766
Total current liabilities
1,792 1,766
Long-term debt 4,987
3,335
Commitments -
- -
Stockholders' equity
Preferred stock, undesignated (par value $1.00 per share;
1,860,000 shares authorized, none outstanding)
Series A Cumulative Convertible Preferred Stock
(140,000 shares authorized; 125,556 shares and 123,246
shares issued and outstanding in 1996 and 1995)
126 123
Common stock (par value $0.01 per share; 25,000,000 shares
authorized; 11,800,048 and 11,748,232 shares
issued and outstanding in 1996 and 1995)
118 117
Additional paid-in capital
38,724 38,474
Accumulated deficit
(40,289) (35,499)
Total stockholders' equity (deficit)
(1,321) 3,215
Total liabilities and stockholders' equity $
5,458 $ 8,316
========
=======
</TABLE>
See accompanying notes to condensed consolidated
financial statements
<PAGE>
Electronic Retailing Systems International, Inc.
Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30,
June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues
Product Sales $ 1,251 $ 358 $
2,299 $ 853
Maintenance 175 39
348 70
Total revenues 1,426 397
2,647 923
Cost of goods sold
Product Sales 1,282 728
2,526 1,295
Maintenance 245 116
445 242
Total cost of goods sold 1,527 844
2,971 1,537
Gross profit (loss) (101)
(447) (324) (614)
Operating expenses
Selling, general and administrative (including
amounts to related parties of $10 and $20
during the three months ended June 30, 1996
and 1995 and $19 and $40 during the
six months ended June 30, 1996 and 1995) 1,746
1,594 3,431 3,239
Research and development 251 807
564 1,704
Depreciation and amortization 40 27
82 54
Stock option compensation 11 27
22 54
Total operating expenses 2,048 2,455
4,099 5,051
Loss from operations (2,149) (2,902)
(4,423) (5,665)
Other income (expenses)
Interest income 16 10
50 29
Interest expense (99) (89)
(186) (137)
Gain on short-term investments - -
- - 5
Total other income (expenses) (83)
(79) (136) (103)
Net loss $ (2,232) $ (2,981) $ (4,559)
$(5,768)
======= ====== ====== ======
Earnings per Share
Weighted average common shares outstanding 11,796 11,746
11,782 11,737
======= ====== ====== ======
Net loss per common share $ (0.19) $ (0.25) $
(0.41) $ (0.49)
======= ====== ====== ======
</TABLE>
See accompanying notes to condensed consolidated
financial statements
<PAGE>
Electronic Retailing Systems International,
Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C>
<C>
Net Cash Flows Used in Operating Activities:
Net loss $ (4,559) $
(5,768)
Other adjustments to reconcile net loss to net cash
used in operating activities 884
918
Cash used in operating activities (3,675)
(4,850)
Cash Flows from Investing Activities:
Capital expenditures (145)
(225)
Capitalized software costs (394)
- -
Proceeds from sales of short-term investments
- - 1,027
Cash provided by (used in) investing activities
(539) 802
Cash Flows from Financing Activities:
Net proceeds from issuance of long term note 1,650
1,050
Net proceeds from line of credit -
2,500
Other financing activities 1
- -
Cash provided by financing activities 1,651
3,550
Net decrease in cash and cash equivalents
(2,563) (498)
Cash and cash equivalents at beginning of period 3,210
1,131
Cash and cash equivalents at end of period $
647 $ 633
====== =====
</TABLE>
See accompanying notes to condensed
consolidated financial statements
<PAGE>
Electronic Retailing Systems International, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 1996
(Unaudited)
Note 1 -Basis of Consolidation:
Electronic Retailing Systems International, Inc.
("ERS" or the "Company"), was incorporated in 1993
under the laws of the State of Delaware as a
holding company for the business and assets of
Electronic Retailing Systems International, Inc.,
incorporated in 1990 under the laws of Connecticut,
and an affiliated partnership. The condensed
consolidated financial statements include the
accounts of the Company and all of its
subsidiaries. All significant intercompany
balances and transactions have been eliminated.
Note 2 -Basis of Presentation:
The accompanying unaudited condensed consolidated
financial statements have been prepared in
accordance with generally accepted accounting
principles for interim financial information and
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, the accompanying
unaudited condensed consolidated financial
statements include all adjustments, consisting of
normal recurring accruals, considered necessary for
a fair presentation of the results of the interim
periods. Operating results for the three and six
month periods ended June 30, 1996 are not
necessarily indicative of the results to be
expected for the full year ending December 31,
1996. The accompanying unaudited condensed
consolidated financial statements should be read in
conjunction with the consolidated financial
statements and notes thereto for the year ended
December 31, 1995, included in the Company's Annual
Report on Form 10-K for the year ended December 31,
1995.
Net loss per common share is computed using the
weighted average number of common shares and common
share equivalents assumed to be outstanding during
the period. Common share equivalents consist of
the Company's common shares issuable upon exercise
of stock options and stock purchase warrants. The
computation of net loss per common share does not
reflect common share equivalents that are anti-
dilutive.
<PAGE>
Electronic Retailing Systems International, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 1996
(Unaudited)
Cash and cash eqivalents at June 30, 1996 and
December 31, 1995 include deposits of approximately
$75,000 and $440,000, respectively, held as
interest bearing collateral for irrevocable letters
of credit of the same amounts relating to future
inventory purchases. Such letters of credit
expire on various dates through 1996.
Note 3- Inventories:
Inventories are stated at the lower of cost
(determined on a first in, first out basis) or
market value. Inventories at June 30, 1996 consist
of $645,000 of materials and supplies and
$1,116,000 of finished goods. Inventories at
December 31, 1995 consisted of $674,000 of
materials and supplies and $1,200,000 of finished
goods. Inventories in excess of expected
requirements due to new product introductions or
product enhancements are expensed currently.
Note 4- Adoption of New Accounting Standard:
ERS has adopted Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based
Compensation" ("FAS 123"). FAS 123 indicates a
preference for a fair value based method of
accounting for employee stock options, but allows
for continuation of the intrinsic value based
method under Accounting Principles Board Opinion
No. 15 "Accounting for Stock Issued to Employees".
The Company has chosen to continue its use of the
intrinsic value based method of accounting, but
will present required financial statement
disclosures it its Annual Report on Form 10-K for
the year ending December 31, 1996.
Note 5 - Subsequent Event:
On July 11, 1996, the Company completed the
offshore public offering of an aggregate of
4,963,500 shares of its common stock, $.01 par
value ("Common Stock"), in accordance with
Regulation S under the Securities Act of 1933, and
the contemporaneous private placement to
subscribers, including certain members of the
Company's Board of Directors and their
affiliates, of an aggregate of 911,657 shares of
Common Stock. Net proceeds from these transactions
were approximately $12.0 million.
<PAGE>
Electronic Retailing Systems International, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 1996
(Unaudited)
In connection with the completion of these
transactions, holders of the Company's Series A
Cumulative Convertible Preferred Stock, $1.00 par
value, converted their shares, in accordance with
their terms, into an aggregate of 3,138,900 shares
of Common Stock, in exchange for payments
aggregating $235,000.
<PAGE>
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since its inception in April 1990, the Company has been engaged
primarily in the development, design, market testing and sale of
its electronic shelf labeling system. The Company has
concentrated on the design, development, marketing and sale of
the ERS ShelfNet(tm) system (the "ERS ShelfNet System"). The
Company subcontracts to third parties the manufacture and
assembly of the components comprising the ERS ShelfNet System
and, subject to the oversight of the Company, the installation of
its components. In addition, the Company engages unaffiliated
parties to augment its internal development resources and to
assist it in the continued development of the ERS ShelfNet
System. Since inception, the Company has generated aggregate
revenues of $10,198,000, and has incurred a cumulative net loss
of approximately $52,281,000, excluding non-cash charges in the
amount of $8,622,000 for stock option compensation expense.
The market for electronic shelf labeling systems, which were
first introduced in the mid-1980's, is in the development stage
and market acceptance of and demand for these systems are subject
to a high level of uncertainty. The Company's success will
depend upon the rate at and extent to which supermarket chains
choose to install electronic shelf labeling systems throughout
their stores. The initial acceptance and rate of installation by
supermarket chains may be affected by numerous factors beyond the
Company's control, including the customer's assessment of the
benefits of and the need for electronic shelf labeling systems
and the customer's available capital resources.
The Company's revenues and operating results may vary
significantly from quarter to quarter as a result of various
factors including the timing of customer orders and system
shipments and installations.
Results of Operations
Revenues. During the three month period ended June 30, 1996, the
Company's total revenues were $1,426,000 compared to $397,000 in
the corresponding quarter in 1995. Revenues for the six months
ended June 30, 1996 were $2,647,000, compared to $923,000 for the
corresponding period in 1995. The increase in revenues is
primarily attributable to greater product sales in the first and
second quarter of 1996, including software license fees in the
second quarter. For the first half of 1996 and 1995, product
sales were to five customers and three customers, respectively,
within the supermarket industry.
Cost of goods sold. Cost of goods sold consists of the cost of
hardware components of the ERS ShelfNet System, system
installation costs, depreciation of tools and dies owned by the
Company and utilized in the manufacturing of hardware components,
amortization of capitalized software costs, warranty and
maintenance costs, freight and inventory obsolescence.
<PAGE>
Cost of goods sold was $1,527,000 for the three months ended June
30, 1996, compared to $844,000 for the three months ended June
30, 1995. Cost of goods sold for the six months ended June 30,
1996 and 1995 were $2,971,000 and $1,537,000, respectively. Cost
of goods sold for the three and six months ended June 30, 1996
included warranty and maintenance expenses of $245,000 and
$445,000, respectively, compared to $116,000 and $242,000 in the
corresponding 1995 periods. The increase in warranty and
maintenance costs reflects the growing installation base for the
ERS ShelfNet System. The Company anticipates that system
enhancements implemented in 1995 and 1996 will further decrease
future warranty and maintenance expenses per installation and, in
the future, that the cost of goods sold will decrease as a
percentage of revenues as a result of higher manufacturing
volumes of its components and as the installation process is
improved.
Selling, General and Administrative. Selling, general and
administrative costs consist of personnel costs associated with
selling and administrative staff, overhead, market research and
development, and customer service personnel. Selling, general
and administrative costs were $1,746,000 for the three month
ended June 30, 1996, an increase of 10%, compared to $1,594,000
for the second quarter of 1995. For the six month ended June
30, 1996, selling, general and administrative costs were
$3,431,000, an increase of 6%, compared to $3,239,000 in the
corresponding period in 1995.
Research and Development. Total research and development
expenses were $251,000 for the three month period ended June 30,
1996 compared to $807,000 for the same period in 1995. For the
six months ended June 30, 1996, total research and development
expenses were $564,000 compared to $1,704,000 for the
corresponding period in the previous year. Expenses incurred in
the development of the hardware components of the ERS ShelfNet
System decreased to $244,000 and $549,000 for the three month and
six month periods ended June 30, 1996, respectively, from
$446,000 and $956,000 for the same periods in 1995, which
reflected reduced payments to third parties for development
activities. For the three and six month periods ended June 30,
1996, the Company capitalized $171,000 and $394,000,
respectively, of product development costs that will be amortized
over the shorter of the estimated useful life of the related
software product or process or three years. There were no such
amounts capitalized in the three and six month periods ended June
30, 1995.
Stock Option Compensation. The Company recorded $11,000 and
$22,000 in non-cash compensation expense for the three and six
month periods ended June 30, 1996 compared to $27,000 and
$54,000, respectively, for the corresponding periods in 1995.
Non-cash compensation expense results from the Company's issuance
of stock options to its employees at exercise prices below the
fair market value at date of grant and is recognized as expense
over the employees' respective service periods.
Interest Income. Interest income increased to $16,000 and
$50,000 for the three and six month periods ended June 30, 1996,
respectively, compared to $10,000 and $29,000, respectively,
for the same periods in 1995, due to increased cash and cash
equivalents available for investment.
<PAGE>
Interest Expense. Interest expense for the three and six month
periods ended June 30, 1996 was $99,000 and $186,000,
respectively, compared to $89,000 and $137,000 for the
corresponding periods in 1995. Interest expense in 1996
represents interest on amounts borrowed from the Connecticut
Development Authority ("CDA") and, in 1995, on amounts borrowed
from the CDA and a revolving credit facility with certain members
of the Board of Directors and their affiliates.
Income Taxes. The Company has incurred net losses since
inception which have generated net operating loss carry forwards
of approximately $40 million for federal and state income tax
purposes, which are available to offset future taxable income and
expire through the years to 2010 for federal income tax purposes.
These losses are subject to limitation on future year's
utilization should certain ownership changes occur. The offshore
public offering and related transactions described in Note 5 to
the Notes to Condensed Consolidated Financial Statements may
result in certain limitations on future year's utilization.
In consideration of the Company's accumulated losses through June
30, 1996 and the uncertainty of its ability to utilize any future
tax benefits resulting from these losses, the impact of this
potential tax benefit has been eliminated in the Company's
condensed consolidated financial statements.
Liquidity and Capital Resources
As of June 30, 1996, the Company had net working capital of
$2,190,000, reflecting cash and cash equivalents of $647,000,
compared to net working capital of $5,283,000, reflecting cash
and cash equivalents of $3,210,000 at December 31, 1995. The
decrease in net working capital and in cash and cash equivalents
resulted from the funding of the Company's operations during the
first half of 1996. Net cash used in operations was $3,675,000
for the six months ended June 30, 1996, compared to net cash of
$4,850,000 used in operating activities in the corresponding 1995
period.
On July 11, 1996, the Company completed: (i) the offshore
public offering (the "Regulation S Transaction") of an aggregate
of 4,963,500 shares of its common stock, $.01 par value (the
"Common Stock"), in accordance with Regulation S under the
Securities Act of 1933, as a result of which the Company received
gross proceeds of approximately $11.2 million, and (ii) the
contemporaneous private placement (the "Private Placement") of an
aggregate of 911,657 shares of Common Stock to subscribers,
including certain members of the Company's Board of Directors and
their affiliates, as a result of which the Company received gross
proceeds of approximately $2.1 million.
In connection with completion of such transactions, holders of
all 125,556 outstanding shares of the Company's Series A
Cumulative, Convertible Preferred Stock, $1.00 par value (the
"Preferred Stock"), converted their shares, in accordance with
their terms, into an aggregate of 3,138,900 shares of Common
Stock, in exchange for payments aggregating $235,000 (the
"Preferred Stock Payments"). Following completion of such
transactions, including the issuance of 218,957 shares (the
"Commission Shares") of Common Stock as commissions in the
Regulation S Transaction, the Company had outstanding 21,033,062
shares of Common Stock.
<PAGE>
The aggregate net proceeds to the Company in such transactions
were in the estimated amount of approximately $12.0 million
(approximately $10.2 million in the Regulation S Transaction, and
approximately $2.0 million in the Private Placement, in the
aggregate net of the Preferred Stock Payments). Net expenses do
not reflect non-cash expenses represented by the Commission
Shares but reflect finder's fees in the amount of $199,000, which
were applied to the acquisition of shares in the Regulation S
Transaction. As of June 30, 1996, giving pro forma effect to the
Regulation S Transaction and the Private Placement (as if
completed on such date), the Company would have had net working
capital of $14,147,000, reflecting cash and cash equivalents of
$12,604,000.
The Company borrowed the remaining $1,650,000 under its facility
with the CDA during the first quarter of 1996. The aggregate of
$5,000,000 of indebtedness is repayable five years after the
August 1994 closing on such facility and is convertible to shares
of Common Stock, through August 12, 1997 at an adjusted
conversion price calculated at $3.00 plus the average market
price of the Common Stock during the eighteen months prior to
conversion and thereafter at $3.00 plus the average market price
of the Common Stock during the twelve months prior to conversion.
At closing, the CDA acquired five-year warrants to purchase
699,724 shares (as adjusted) of Common Stock, exercisable at an
adjusted price through August 12, 1997 calculated as $2.58 plus
the average market price of the Common Stock during the eighteen
months prior to exercise, and thereafter as $2.58 plus the
average market price of the Common Stock during the twelve months
prior to exercise. Under its arrangements with the CDA, the
Company will be obligated to comply with certain covenants (some
of which remain in effect for up to ten years from closing),
covering such matters as maintaining a presence in Connecticut.
In the event of specified changes in control of the Company and
prepayment of its note, the Company has rights to repurchase such
warrants and shares at the fair market value thereof (calculated
pursuant to such arrangements), and thereby extinguish such
covenants.
The Company's capital expenditures were $145,000 and $225,000 for
the six months ended June 30, 1996 and 1995, respectively. The
Company anticipates that such capital expenditures will
approximate $400,000 in 1996. In the first half of 1996, the
Company also capitalized $394,000 of product development costs.
There were no such costs capitalized in the corresponding 1995
period.
To date, the Company has not generated positive cash flow from
operations, and has historically funded its operations primarily
through loans from its stockholders, the sale of interests in an
affiliated partnership, its initial public offering consummated
in 1993, its arrangements with the CDA, and the sale of Preferred
Stock to members of the Company's Board of Directors and their
affiliates. The Company will utilize the proceeds from the
Regulation S Transaction and the Private Placement as working
capital for general corporate purposes. The Company believes
that its current resources will be sufficient to fund the
Company's working capital requirements through 1997. The Company
has no current arrangements with respect to, or sources of, any
additional financing, and there can be no assurance that any such
additional financing will be available if required.
<PAGE>
Electronic Retailing Systems International, Inc.
Form 10-Q
Part II-Other Information
PART II. Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed or incorporated by
reference as part of this Quarterly Report
on Form 10-Q are listed on the attached
Index to Exhibits.
(b) Current Reports on Form 8-K
During the quarter ended June 30, 1996, the
Company filed a Current Report on Form 8-K
dated June 24, 1996 reporting, under "Item
5. Other Events." thereunder the Company's
proposed Regulations S Transaction and
Private Placement. No financial statements
were included with such report. The
Company also filed a Current Report on Form
8-K dated July 11, 1996 addressing, under
"Item 5. Other Events." thereunder, the
closing on July 11, 1996 of the Regulation
S Transaction and the Private Placement.
The Company filed an unaudited pro forma
balance sheet as and at May 31, 1996,
giving effect to such transactions, as an
exhibit to such report.
<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.
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
8/13/96 s/ Bruce F. Failing, Jr.
-------- ---------------------------
Date Bruce F. Failing, Jr.
President and Chief Executive Officer
8/13/96 s/ William B. Fischer
-------- ---------------------
Date William B. Fischer
Vice President, Finance
(principal financial and
accounting officer)
<PAGE>
Electronic Retailing Systems International, Inc.
Form 10-Q for the Three Months Ended June 30, 1996
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Number Document Description
<S> <C>
3 (i) Certificate of Incorporation, as
amended, of the Company (incorporated by
reference to Exhibit 5(b) to the Current
Report on Form 8-K dated July 11, 1996)
10 (a)Placing Agreement dated July 5, 1996 between the Compa
ny and Henderson Crosthwaite
Institutional Brokers Limited
(incorporated by reference to Exhibit 5
(c) to the Current Report on Form 8-K
dated July 11, 1996)
10 (b)Agreement with Respect to U.S. Securities Laws dated J
uly 2, 1996 between the Company and
Henderson Crosthwaite Institutional
Brokers Limited incorporated by
reference to Exhibit 5 (d) to the
Current Report on Form 8-K dated July
11, 1996)
10 (c)Forms of Subscription Agreement accepted July 5, 1996
by the Company (incorporated by
reference to Exhibit 5 (f) to the
Current Report on Form 8-K dated July
11, 1996)
10 (d)Registration Rights Agreement dated July 11, 1996 betw
een the Company and the subscribers
parties thereto (incorporated by
reference to Exhibit 5 (g) to the
Current Report on Form 8-K dated July
11, 1996)
11 Computation of Net Loss Per Common Share
27Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission
for information only and is not filed.
</TABLE>
Exhibit 11
Electronic Retailing Systems International, Inc.
Computation of Net Loss Per Common Share
<TABLE>
<CAPTION>
Three Months
Six Months
Ended Ended
June 30, 1996 June 30, 1996
-------------- --------
- -----
<S> <C> <C>
Net loss ($2,232,000)
($4,559,000)
Dividends on Preferred Stock -
(231,000)
Net loss available to common shareholders ($2,232,000)
($4,790,000)
============
============
Weighted average common shares outstanding 11,796,330
11,782,065
============
============
Net loss per common share ($0.19)
($0.41)
============
============
Calculation of weighted average shares outstanding
- ----------------------------------------------------
Shares issued and outstanding at December 31, 1995 11,748,232
11,748,232
Subsequent issuance of shares pursuant to stock option plan 48,098
33,833
Weighted average common shares outstanding 11,796,330
11,782,065 ===========
===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 647
<SECURITIES> 0
<RECEIVABLES> 1,411
<ALLOWANCES> (99)
<INVENTORY> 1,761
<CURRENT-ASSETS> 3,982
<PP&E> 2,192
<DEPRECIATION> (1,579)
<TOTAL-ASSETS> 5,458
<CURRENT-LIABILITIES> 1,792
<BONDS> 4,987
0
126
<COMMON> 118
<OTHER-SE> (1,565)
<TOTAL-LIABILITY-AND-EQUITY> 5,458
<SALES> 2,299
<TOTAL-REVENUES> 2,647
<CGS> 2,526
<TOTAL-COSTS> 2,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 186
<INCOME-PRETAX> (4,559)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,559)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,559)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> 0
</TABLE>
