UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission File No. 000-22166
AETRIUM INCORPORATED
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1439182
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2350 HELEN STREET, NO. ST. PAUL, MINNESOTA 55109
(Address of principal executive offices) (Zip Code)
(651) 704-1800
(Registrant's telephone number)
Check whether the registrant (1) has 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 [ ]
Number of shares of Common Stock, $.001 par value, 9,568,308
outstanding as of November 6, 1998
<PAGE>
AETRIUM INCORPORATED
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1998
(unaudited) and December 31, 1997 3-4
Consolidated Statements of Operations (unaudited) for the
three months and nine months ended September 30, 1998
and 1997 5
Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 1998 and 1997 6
Notes to unaudited consolidated financial statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II. OTHER INFORMATION
Legal Proceedings. 13
Changes in Securities and Use of Proceeds. 13
Defaults Upon Senior Securities. 13
Submission of Matters to a Vote of Security Holders. 13
Other Information. 13
Exhibits and Reports on Form 8-K. 13
SIGNATURES 14
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1998 1997
--------------------------
(Unaudited) (Audited)
(in thousands, except share data)
Current Assets:
Cash and cash equivalents $ 18,416 $ 27,584
Accounts receivable, net 11,835 12,709
Inventories 14,557 16,785
Deferred taxes 2,417 784
Other current assets 1,523 615
--------------------------
Total current assets 48,748 58,477
--------------------------
Property and equipment:
Furniture and fixtures 1,939 1,351
Equipment 5,941 5,282
--------------------------
7,880 6,633
Less accumulated depreciation and
amortization (3,904) (2,990)
--------------------------
Property and equipment, net 3,976 3,643
--------------------------
Noncurrent deferred taxes 8,984 4,951
Intangible and other assets, net 10,251 3,823
--------------------------
Total assets $ 71,959 $ 70,894
==========================
See accompanying notes to the consolidated financial statements.
3
<PAGE>
AETRIUM INCORPORATED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31,
1998 1997
------------------------
(Unaudited) (Audited)
(in thousands, except share data)
Current liabilities:
Trade accounts payable $ 1,876 $ 2,611
Accrued compensation and commissions 2,088 2,250
Other accrued expenses 3,750 2,807
Income taxes payable 28 734
------------------------
Total current liabilities 7,742 8,402
------------------------
Shareholders' equity:
Common stock, $.001 par value; 30,000,000
shares authorized; 9,568,308 and 8,786,740
shares issued and outstanding, respectively 10 9
Additional paid-in capital 61,119 46,562
Retained earnings 3,088 15,921
------------------------
Total shareholders' equity 64,217 62,492
------------------------
Total liabilities and shareholders' equity $71,959 $70,894
========================
See accompanying notes to the consolidated financial statements.
4
<PAGE>
AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------- --------------------------
1998 1997 1998 1997
--------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 12,009 $ 18,683 $ 48,598 $ 45,540
Cost of goods sold 7,044 8,825 29,394 21,938
--------------------------------------------------------------
Gross profit 4,965 9,858 19,204 23,602
--------------------------------------------------------------
Operating expenses:
Selling, general, and administrative 4,905 3,848 14,490 9,938
Research and development 3,214 2,969 9,691 7,421
Non-recurring charges 0 0 14,656 7,191
--------------------------------------------------------------
Total operating expenses 8,119 6,817 38,837 24,550
--------------------------------------------------------------
Income (loss) from operations (3,154) 3,041 (19,633) (948)
Other income, net 206 238 725 853
--------------------------------------------------------------
Income (loss) before income taxes (2,948) 3,279 (18,908) (95)
Provision for income taxes 884 (935) 6,075 109
--------------------------------------------------------------
Net income (loss) $ (2,064) $ 2,344 $(12,833) $ 14
==============================================================
Net income (loss) per common share:
Basic $ (.21) $ .27 $ (1.37) $ .00
Diluted $ (.21) $ .26 $ (1.37) $ .00
Weighted average common shares outstanding :
Basic 9,640 8,743 9,382 8,629
Diluted 9,640 9,064 9,382 8,894
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
AETRIUM INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------
1998 1997
--------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(12,833) $ 14
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,741 809
Acquisition-related charges 12,029 7,191
Writedown of intangibles 2,080 0
Deferred taxes (5,666) (2,265)
Changes in assets and liabilities, net of
effects of acquired businesses:
Accounts receivable, net 3,111 (3,914)
Inventories 4,160 (3,730)
Other current assets (908) 210
Trade accounts payable (1,391) 1,759
Accrued compensation and commissions (115) 516
Other accrued expenses 294 125
Income taxes payable (551) 1,768
--------------------------
Net cash provided by operating activities 1,951 2,483
--------------------------
Cash flows from investing activities:
Purchases of businesses and technology, net of cash acquired (8,835) (4,997)
Sale of short term investments 0 1,000
Purchase of property and equipment (1,274) (575)
--------------------------
Net cash used in investing activities (10,109) (4,572)
--------------------------
Cash flows from financing activities:
Net proceeds from issuances of common stock 73 763
Repurchase of common stock (1,083) (874)
Principal payments on debt 0 (1,293)
--------------------------
Net cash used in financing activities (1,010) (1,404)
--------------------------
Net decrease in cash and cash equivalents (9,168) (3,493)
Cash and cash equivalents at beginning of period 27,584 34,756
--------------------------
Cash and cash equivalents at end of period $ 18,416 $ 31,263
==========================
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE>
AETRIUM INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL REPORTING
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments necessary to present
fairly the financial position, results of operations, and changes in
cash flows for the interim periods presented.
Certain footnote information has been condensed or omitted from these
financial statements. Therefore, these financial statements should be
read in conjunction with the consolidated financial statements and
accompanying footnotes included in Form 10-K for the year ended
December 31, 1997.
2. INVENTORIES
Inventories consist of the following:
September 30, December 31,
1998 1997
------ ------
(in thousands)
Purchased parts and completed
subassemblies $ 7,405 $ 9,307
Work in process 4,906 5,488
Finished goods, including demonstration
equipment 2,246 1,990
------- -------
Total $14,557 $16,785
======= =======
3. NET INCOME (LOSS) PER COMMON SHARE
Basic net income per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period.
Diluted net income per share is computed by dividing net income by the
weighted-average number of common shares and common stock equivalent
shares outstanding during the period. Common stock equivalents include
stock options using the treasury stock method. For the interim periods
in which the company reported net losses, common stock equivalents have
been excluded from the computations because they are antidilutive.
4. ACQUISITIONS
On April 1, 1998, the company acquired substantially all of the assets
(including in-process research and development) and assumed certain
liabilities of the Equipment Division ("Equipment Division") of WEB
Technology, Inc., a privately-held company that consisted of several
business units in addition to the Equipment Division. The Equipment
Division specializes in the design, development, manufacturing and
marketing of a variety of electromechanical equipment used by the
semiconductor industry to handle and test integrated circuits. The
purchase price totaled $23,567,500 consisting of $7,835,000 of cash,
900,000 shares of Aetrium common stock valued at $15,412,500 and
$320,000 of acquisition-related costs. The acquisition was accounted
for as a purchase. The company's consolidated financial statements
include the results of the Equipment Division's operations since April
1, 1998.
7
<PAGE>
4. ACQUISITIONS (CONTINUED)
On April 1, 1997, the company acquired substantially all of the assets
(including in-process research and development) and assumed certain
liabilities of Forward Systems Automation, Inc. ("FSA"), a privately
held manufacturer of equipment for the semiconductor and electronic
component industries. The purchase price totaled $6,749,840 consisting
of $4,000,000 of cash, 186,000 shares of Aetrium common stock valued at
$2,499,840 and $250,000 of acquisition-related costs. The acquisition
was accounted for as a purchase. The company's consolidated financial
statements include the results of FSA's operations since April 1, 1997.
For each acquisition, a portion of the purchase price, as determined by
third party appraisal, was allocated to intangible assets, including
in-process research and development that had not reached technological
feasibility and did not have alternative future uses. As required by
generally accepted accounting principles, the values of the in-process
research and development ($12,029,000 for the Equipment Division and
$7,190,809 for FSA) were charged to operations in the second quarter of
1998 and 1997 respectively. These amounts are included in the caption
"Non-recurring charges" in the accompanying Statements of Operations.
The following table presents the consolidated results of operations of
the company on an unaudited pro forma basis as if the acquisitions of
the Equipment Division and FSA had taken place at the beginning of each
period (in thousands, except per share data):
Nine months ended
------------------------------
Unaudited pro forma Sept. 30, 1998 Sept. 30, 1997
------------------- -------------- --------------
Net sales $51,592 $51,068
Net income (loss) (4,458) 4,850
Net income (loss) per share - diluted $ (.46) $ .49
-----------------------------------------------------------------------
Reported net income (loss) per share before
acquisition-related charges - diluted $ (.52) $ .57
-----------------------------------------------------------------------
The acquisition-related charges of $12,029,000 in 1998 and $7,190,809
in 1997 are not reflected in the pro forma results above. The unaudited
pro forma results of operations are for comparative purposes only and
do not necessarily reflect the results that would have occurred had the
acquisitions occurred at the beginning of the periods presented or the
results which may occur in the future.
5. COMMON STOCK
During the third quarter ended September 30, 1998, the company
repurchased 135,000 shares of its common stock for approximately
$869,000 in cash. These purchases were made pursuant to rights of first
refusal agreements entered into with certain former shareholders of WEB
Technology Inc., in connection with the April 1, 1998 acquisition of
the Equipment Division of WEB Technology, Inc.
8
<PAGE>
AETRIUM INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES. Net sales for the first nine months ended September 30,
1998, were $48.6 million, an increase of 7 percent from the same
period of 1997. The 1998 results include the net sales of FSA
(acquired in April 1997), the Advantek Handler Division (acquired
in October 1997), and the equipment business of WEB Technology
(acquired in April 1998). Net sales were $12.0 million for the
quarter ended September 30, 1998, compared with $18.7 million for
the comparable 1997 quarter, a decrease of 36 percent. The increase
for the nine month period is primarily attributable to the
inclusion of the net sales of the acquired operations. The decline
in the third quarter ended September 30, 1998, compared with the
comparable quarter of 1997, primarily reflects the impact on net
sales of a severe semiconductor industry recession. The decline in
net sales also reflects the termination of a contract for the
company's integrated circuit automation modules by a large OEM
customer that discontinued that segment of its business.
GROSS PROFIT. Gross profit was 39.5 percent of net sales for the
nine months ended September 30, 1998, including an inventory charge
of $3.7 million related to the suspension of marketing efforts on
certain older, less profitable products that was recorded in the
second quarter ended June 30, 1998. Excluding the one-time charge,
gross profit was 47.1 percent of net sales, compared with 51.8
percent for the same period of 1997. Gross profit was 41.3 percent
of net sales for the quarter ended September 30, 1998, compared to
52.8 percent for the quarter ended September 30, 1997. The decrease
in the gross margin, excluding the one-time costs, is primarily
attributable to the inclusion of results from the Advantek Handler
Division and to underabsorbed manufacturing overhead due to lower
net sales than in the same period of 1997.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses for the nine months ended September 30,
1998 were $14.5 million compared with $9.9 million for the
comparable period in 1997, a 44.9 percent increase. Selling,
general and administrative expenses for the quarter ended September
30, 1998 were $4.9 million, compared with $3.8 million in the
comparable period of 1997, and $5.3 million for the quarter ended
June 30, 1998. The increase in selling, general, and administrative
expenses for the nine month period in 1998 is attributable to
higher commissions expense on increased net sales as well as the
inclusion of the results of FSA, the Advantek Handler Division and
the equipment business of WEB Technology Inc. The decline in the
third quarter ended September 30, 1998 from the second quarter
ended June 30, 1998, reflects expense reduction actions taken in
the second quarter, including a reduction in work force.
RESEARCH AND DEVELOPMENT. Research and development expenses were
$9.7 million for the nine months ended September 30, 1998 compared
with $7.4 million for the comparable period in 1997, a 31 percent
increase. Research and development expenses were $3.2 million for
the quarter ended September 30, 1998, compared with $3.0 million in
the comparable period of 1997, and $3.5 million for the quarter
ended June 30, 1998. The increase over the nine month period in
1998 is attributable to the inclusion of the
9
<PAGE>
results of FSA, the Advantek Handler Division and the equipment
business of WEB Technology in 1998. The decline in the third
quarter ended September 30, 1998 from the second quarter ended June
30, 1998, reflects expense reduction actions taken in the second
quarter, including a reduction in work force.
NON-RECURRING CHARGES. The company incurred non-recurring charges
of $14.7 million in the quarter ended June 30, 1998. Approximately
$12.0 million was in connection with the acquisition of the
equipment business of WEB Technology, for that portion of the
purchase price allocated to research and development activities
that were in process at the time of acquisition but had not yet
reached technological feasibility. The balance of the non-recurring
charges during the quarter were for severance costs resulting from
a reduction in work force and the write-down of certain capitalized
technology. In connection with the FSA acquisition, $7.2 million
related to in-process research and development was charged against
income in the second quarter ended June 30, 1997, as the underlying
research and development projects had not yet reached technological
feasibility. See Note 4 to the unaudited consolidated financial
statements.
OTHER INCOME, NET. Other income, net, which consists primarily of
interest income from the investment of excess funds, amounted to
$725,000 for the nine months ended September 30, 1998, which was a
decline from the $853,000 for the same period in 1997. Other
income, net, amounted to $206,000 for the quarter ended September
30, 1998, compared to $238,000 for the same period of 1997.The
decline in 1998 reflects primarily the decrease in invested funds
due to the cash outlay of $7.8 million for the acquisition of the
equipment business of WEB Technology in April 1998 and $4.2 million
for the acquisition of the Advantek Handler Division in October
1997.
INCOME TAX EXPENSE (BENEFIT). Income tax expense (benefit) was
provided for at an average effective rate of approximately 29% for
the ninth months ended September 30, 1998, excluding the impact of
non-recurring acquisition-related charges, compared with
approximately 30% for the first nine months of 1997. The company's
effective tax rate compares favorably with the Federal and state
statutory rates primarily due to benefits associated with the
company's Foreign Sales Corporation and research tax credits as
well as the implementation of various tax planning strategies,
including the investment of excess funds in tax exempt instruments.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The company has a $5.0 million line of credit agreement with Harris
Trust and Savings Bank in Chicago, Illinois. Borrowings under this
agreement are secured by receivables, inventories and general
intangibles. Borrowing is limited to a percentage of eligible
receivables and inventories. There were no line of credit advances
outstanding as of September 30, 1998 or December 31, 1997.
The company had cash and cash equivalents of approximately $18.4
million at September 30, 1998. During the third quarter ended
September 30, 1998, the company repurchased 135,000 shares of its
common stock for approximately $869,000 in cash. These purchases
were made pursuant to rights of first refusal agreements entered
into with certain former shareholders of WEB Technology Inc., in
connection with the April 1, 1998 acquisition of the equipment
business of WEB Technology, Inc. The company believes its remaining
cash balances of $18.4 million, funds generated from operations,
and borrowings available under its credit facility will be
sufficient to meet capital expenditure and working capital needs
for at least 24 months. The company may acquire other companies,
product lines or technologies that are complementary to the
company's business, and the company's working capital needs may
change as a result of such acquisitions.
10
<PAGE>
BUSINESS RISKS AND UNCERTAINTIES
A number of risks and uncertainties exist which could impact the
company's future operating results. These uncertainties include,
but are not limited to, general economic conditions, competition,
changes in rates of capital spending by semiconductor
manufacturers, the company's success in developing new products and
technologies, market acceptance of new products, risks and
unanticipated costs associated with integrating acquired
businesses, and other factors, including those set forth in the
company's SEC filings, including its current report on Form 10-K
for the year ended December 31, 1997.
YEAR 2000 ISSUES
Many existing computer programs use only two digits to identify a
year in the date field, with the result that data referring to the
year 2000 and subsequent years may be misinterpreted by these
programs. If present in the computer applications of the company or
third parties (such as customers, financial institutions, and
suppliers) and not corrected, this problem may cause computer
applications to fail or to create erroneous results and could cause
a disruption in operations and have an adverse effect on the
company's business and results of operations.
The company has adopted a formal plan to evaluate its readiness for
the Year 2000 and address any deficiencies. The plan encompasses 1)
information technology (IT) systems 2) non-IT systems 3) company
products and 4) systems of third parties, including distributors
and key suppliers.
INFORMATION TECHNOLOGY: The company's principal computer
systems that it uses for financial accounting, manufacturing,
inventory control, purchasing, sales administration,
engineering, and other business functions have been determined
to be substantially Year 2000 compliant. The company intends to
monitor such principal computer systems throughout the balance
of 1998 and 1999 for any Year 2000 issues.
NON-IT SYSTEMS: By the end of the second quarter of 1999, the
company expects to have completed an evaluation of telephone
systems, manufacturing equipment, facility heating and cooling
systems, and other non-IT systems for Year 2000 readiness, and
will promptly take remedial action as necessary.
COMPANY PRODUCTS: The company has completed a series of tests,
utilizing industry standards, of the electronics systems of its
products, including those product lines no longer being
manufactured but remaining in use at customer sites, and has
determined that the products should continue to operate
according to specification after December 31, 1999.
KEY VENDORS AND SUPPLIERS: The company has initiated a survey
of its key vendors and suppliers to assess their plans for
bringing any non-compliant systems into Year 2000 compliance.
Such study is expected to be completed by the end of the first
quarter of 1999.
Substantially all of the effort to evaluate the company's Year 2000
readiness has been made using internal personnel, and therefore
incremental expenses have been less than $50,000. The company
believes it has achieved substantial compliance on Year 2000 issues
on its principal computer systems in the course of normally planned
computer
11
<PAGE>
hardware and software upgrades, and thus has not incurred any
additional significant expense to date specifically to address Year
2000 issues. The company has not incurred any material expenses in
connection with its evaluation of non-IT systems, and does not
expect material expenses in the future, although the evaluation of
non-IT systems is not yet complete. The company has not incurred
any material expenses to date in connection with the evaluation of
its products and the status of its vendors and suppliers with
respect to Year 2000 issues, and does not anticipate material
expenses in the future, although the evaluation of key vendors' and
suppliers' Year 2000 readiness is not yet complete.
Efforts on the company's Year 2000 readiness plan, as well as its
consideration of contingency plans, are ongoing and will continue
to evolve as new information becomes available. At this stage of
the process, the Company believes that it is difficult to identify
the cause of the most reasonably likely worst case Year 2000
scenario. The Company has not yet adopted any formal contingency
plans, and will determine the need for such plans as part of its
ongoing assessment of vendors and suppliers, products, and internal
business systems. Due to the complexity and pervasiveness of the
Year 2000 issue, and in particular the uncertainty regarding the
Year 2000 compliance programs of third parties, no assurances can
be given that there will not be material adverse effects on the
company's business or its results from operations.
12
<PAGE>
AETRIUM INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None which the company believes will have a material adverse impact
on its financial condition or results of operations.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submissions of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibit
Number Description Method of Filing
------- ----------- ----------------
3.1 The Company's Restated Incorporated by reference to
Articles of Incorporation, Exhibit 3.1 to the Company's
as amended. Registration Statement on
Form SB-2 filed on June 23, 1993
(File No. 33-64962C).
3.2 Articles of Amendment to Filed herewith electronically.
the Company's Articles of
Incorporation, dated
August 20, 1998.
27 Financial Data Schedule. Filed herewith electronically.
(b) Reports on Form 8-K
None.
13
<PAGE>
AETRIUM INCORPORATED
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.
AETRIUM INCORPORATED
---------------------------------------
(Registrant)
Date: November 11, 1998 By: /s/ Joseph C. Levesque
---------------------------------------
Joseph C. Levesque
Chairman of the Board, President, and
Chief Executive Officer
Date: November 11, 1998 By: /s/ Darnell L. Boehm
---------------------------------------
Darnell L. Boehm
Chief Financial Officer, Secretary, and
Director
14
EXHIBIT 3.2
AMENDMENT OF
ARTICLES OF INCORPORATION
OF
AETRIUM INCORPORATED
Pursuant to the provisions of Minnesota Statutes, Section 302A.135, the
following Amendment to the Restated Articles of Incorporation of Aetrium
Incorporated (the "Company") was duly adopted by the shareholders of the
Corporation on May 19, 1998, to become effective on the filing date.
Section 6.1 of the Company's Restated Articles of Incorporation is amended in
its entirety to read as follows:
ARTICLE 6
CAPITAL STOCK
"6.1 Authorized Shares. The aggregate number of shares which the corporation
shall have the authority to issue shall be Thirty-two Million (32,000,000),
$.001 par value per share, of which Thirty Million (30,000,000) shall be common
voting shares and Two Million (2,000,000) shall be undesignated shares. The
Board of Directors shall have the authority to issue any or all such shares and
rights to shares in accordance with the Act. The common voting shares shall be
of the same class and series with equal rights and preferences unless the Board
of Directors shall establish one or more separate classes or series. The
undesignated shares shall be issued in such classes or series and shall have
such voting rights and preferences or restrictions, including without
limitation, rights, preferences and restrictions as to redemption, distributions
and conversion, as the Board of Directors may establish."
Articles 6.2, 6.3 and 6.4 shall remain unchanged.
This amendment has been approved pursuant to Minnesota Statutes Chapter 302A. I
certify that I am authorized to execute this Amendment and I further certify
that I understand that by signing this Amendment, I am subject to the penalties
of perjury as set forth in Section 609.48 as if I signed this document under
oath.
/s/ Joseph C. Levesque
--------------------------------------
President
Dated: August 20, 1998
[STAMP]
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
AUG 31 1998
/s/ Joan Anderson Growe
Secretary of State
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,416
<SECURITIES> 0
<RECEIVABLES> 11,835
<ALLOWANCES> 0
<INVENTORY> 14,557
<CURRENT-ASSETS> 48,748
<PP&E> 7,880
<DEPRECIATION> 3,904
<TOTAL-ASSETS> 71,959
<CURRENT-LIABILITIES> 7,742
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 64,217
<TOTAL-LIABILITY-AND-EQUITY> 71,959
<SALES> 48,598
<TOTAL-REVENUES> 48,598
<CGS> 29,394
<TOTAL-COSTS> 29,394
<OTHER-EXPENSES> 24,347
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,908)
<INCOME-TAX> (6,075)
<INCOME-CONTINUING> (12,833)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,833)
<EPS-PRIMARY> (1.37)
<EPS-DILUTED> (1.37)
</TABLE>
