<PAGE>
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 5, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 000-22221
FIELDWORKS, INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-1731723
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
9961 Valley View Road
Eden Prairie, Minnesota 55344
(Address of principal executive offices)
(Zip Code)
(612) 947-0856
(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 [ ]
The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of November 10, 1997 was 8,713,428.
________________________________________________________________________________
<PAGE>
PART I. FINANCIAL INFORMATION
- -----------------------------
ITEM 1. FINANCIAL STATEMENTS
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 5, January 5,
1997 1997
---------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................. $ 5,057,654 $ 2,132,089
Accounts receivable, net of allowance
for doubtful accounts of $385,000 and
$201,400 .................................................. 4,167,640 2,008,693
Inventories ................................................ 5,385,390 4,417,322
Note receivable from related party ......................... -- 92,175
Prepaid expenses and other ................................. 181,291 418,189
----------- -----------
Total current assets ................................... 14,791,975 9,068,468
----------- -----------
PROPERTY AND EQUIPMENT:
Computers and equipment .................................... 1,442,172 1,125,379
Furniture and fixtures ..................................... 128,723 125,374
Leasehold improvements ..................................... 170,063 98,585
Less: Accumulated depreciation ............................. (855,475) (553,178)
----------- -----------
Property and equipment, net ............................ 885,483 796,160
DEPOSITS AND OTHER ASSETS, net .............................. 26,200 41,491
----------- -----------
$15,703,658 $ 9,906,119
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable .............................................. $ -- $ 4,675,838
Notes payable to related parties ........................... -- 1,350,000
Accounts payable ........................................... 1,510,846 1,111,526
Accrued compensation and benefits .......................... 609,705 264,035
Accrued warranty and other ................................. 841,289 567,201
Current maturities of capitalized
lease obligations ......................................... 58,175 57,411
----------- -----------
Total current liabilities .............................. 3,020,015 8,026,011
CAPITALIZED LEASE OBLIGATIONS,
less current maturities .................................... 28,584 66,722
----------- -----------
Total liabilities ...................................... 3,048,599 8,092,733
----------- -----------
SHAREHOLDERS' EQUITY:
Series A convertible preferred stock, $.001 par value,
300,000 shares authorized, issued and outstanding
at January 5, 1997 ........................................ -- 300
Common stock, $.001 par value, 30,000,000 and
14,700,000 shares authorized; 8,687,054 and
5,880,736 issued and outstanding .......................... 8,687 5,881
Common stock warrants ...................................... 150,640 231,985
Additional paid-in capital................................... 19,855,257 7,878,591
Accumulated deficit ........................................ (7,359,525) (6,303,371)
----------- -----------
Total shareholders' equity ............................. 12,655,059 1,813,386
----------- -----------
$15,703,658 $ 9,906,119
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
---------------------------- -----------------------------
October 5, September 30, October 5, September 30,
1997 1996 1997 1996
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
NET SALES .............................................. $6,012,019 $3,701,390 $16,642,491 $ 9,597,772
COST OF SALES .......................................... 3,808,465 2,268,690 10,613,517 5,843,978
---------- ---------- ----------- -----------
Gross profit ...................................... 2,203,554 1,432,700 6,028,974 3,753,794
---------- ---------- ----------- -----------
OPERATING EXPENSES:
Sales and marketing .................................. 1,011,464 910,154 3,128,389 2,276,291
General and administrative ........................... 771,696 501,106 2,255,013 1,472,428
Research and development ............................. 548,918 514,267 1,382,068 1,364,846
---------- ---------- ----------- -----------
Total operating expenses .......................... 2,332,078 1,925,527 6,765,470 5,113,565
---------- ---------- ----------- -----------
Operating loss .................................... (128,524) (492,827) (736,496) (1,359,771)
INTEREST INCOME (EXPENSE) AND OTHER, net ............... 75,580 (104,203) (319,658) (222,767)
---------- ---------- ----------- -----------
NET LOSS FROM CONTINUING OPERATIONS .................... (52,944) (597,030) (1,056,154) (1,582,538)
LOSS FROM DISCONTINUED OPERATION (NOTE 1) .............. -- (139,934) -- (346,889)
---------- ---------- ----------- -----------
NET LOSS ............................................... $ (52,944) $ (736,964) $(1,056,154) $(1,929,427)
========== ========== =========== ===========
EARNINGS (LOSS) PER SHARE:
Net loss per common share from continuing operations .. $(.01) $ (.09) $(.13) $ (.24)
Loss per common share from discontinued operation ..... -- (.02) -- (.05)
---------- ---------- ----------- -----------
Net loss per common share ............................. $(.01) $ (.11) $(.13) $ (.29)
========== ========== =========== ===========
Weighted average common shares outstanding ............ 8,684,614 6,617,673 8,136,366 6,596,832
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
---------------------------------------
October 5, September 30,
1997 1996
------------------ -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................ $(1,056,154) $(1,929,427)
Adjustments to reconcile net loss to net cash used for
operating activities-
Depreciation and amortization .............................. 638,444 242,271
Change in operating items:
Accounts receivable ..................................... (2,158,947) (1,061,075)
Inventories ............................................. (968,068) (2,461,145)
Prepaid expenses and other .............................. 241,127 (331,673)
Accounts payable ........................................ 399,320 503,987
Accrued expenses ........................................ 619,758 300,040
----------- -----------
Net cash used for operating activities .................. (2,284,520) (4,737,022)
----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment ............................ (385,389) (359,310)
Collection of loan to related party ........................... 92,175 --
----------- -----------
Net cash used for investing activities ..................... (293,214) (359,310)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ........................ 11,897,827 162,670
Proceeds from issuance of preferred stock ..................... -- 3,000,000
Net line of credit borrowings ................................. -- 840,000
Proceeds from notes payable to related parties ................ -- 2,890,000
Payment of notes payable to related parties ................... (6,350,000) (1,550,341)
Payment of capitalized lease obligations ...................... (44,528) (39,872)
----------- -----------
Net cash provided by financing activities .................. 5,503,299 5,302,457
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS ........................... 2,925,565 206,125
CASH AND CASH EQUIVALENTS, beginning of period .................. 2,132,089 140,442
----------- -----------
CASH AND CASH EQUIVALENTS, end of period ........................ $ 5,057,654 $ 346,567
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited consolidated financial statements of FieldWorks,
Incorporated (FieldWorks or the Company), should be read in conjunction with the
consolidated financial statements and notes thereto filed with the Securities
and Exchange Commission in the Company's Registration Statement on Form S-1,
File No. 333-18335, for the fiscal year ended January 5, 1997. In the opinion
of management, the accompanying consolidated financial statements reflect all
adjustments (consisting only of normal recurring adjustments) considered
necessary to present fairly the financial results for the interim periods
presented. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the entire fiscal year.
Merger With Paragon Technology, Incorporated and Subsequent Distribution
In August 1995, FieldWorks completed a merger with Paragon Technology,
Incorporated (Paragon), a Pennsylvania company engaged in software research and
development. The merger was accounted for as a pooling of interests. On
November 11, 1996, the Company's board of directors approved the distribution of
all of the issued and outstanding common stock of Paragon as a dividend to
Company shareholders of record as of November 15, 1996. All shares of Paragon
stock were distributed prior to January 5, 1997. Paragon's results of
operations for the three and nine month periods ended September 30, 1996 have
been presented as a discontinued operation in the accompanying statements of
operations.
2. INVENTORIES:
Inventories are stated at the lower of cost or market value, as determined by
the first-in, first-out cost method, and consisted of the following:
<TABLE>
<CAPTION>
October 5, January 5,
1997 1997
--------------- ---------------
<S> <C> <C>
Raw materials............................. $3,264,694 $2,772,219
Work in process ......................... 1,449,646 1,066,189
Finished goods .......................... 671,050 578,914
---------- ----------
Total................................... $5,385,390 $4,417,322
========== ==========
</TABLE>
3. INITIAL PUBLIC OFFERING:
In March 1997, the Company completed an initial public offering (IPO) of
2,125,000 shares of common stock with proceeds of approximately $11.8 million,
net of related offering costs. The Company used $6.4 million of the proceeds to
repay bridge financing arrangements and the remaining proceeds will be used to
fund capital expenditures and for working capital purposes. In connection with
the offering, the Company issued warrants to the underwriter to purchase 212,500
shares of common stock at an exercise price of $7.80 per share. At the
completion of the IPO, the Company's articles of incorporation were amended to
authorize 30 million shares of common stock, $.001 par value, and five million
shares of undesignated preferred stock, $.001 par value.
<PAGE>
4. SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
For the Nine Months Ended
----------------------------------
October 5, September 30,
1997 1996
--------------- -----------------
<S> <C> <C>
Supplemental cash flow disclosure:
Cash paid for interest ........................... $264,037 $202,411
======== ========
Noncash investing and financing activities:
Property and equipment acquired
under capital leases.............................. $ 7,154 $ 64,807
======== ========
Issuance of warrants............................... $ -- $ 41,800
======== ========
</TABLE>
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
This standard establishes new guidelines for computing and presenting earnings
(loss) per share (EPS). Management believes that the adoption of SFAS No. 128
will not have a material impact on the Company's calculation of EPS.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. When used in
this Form 10-Q and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer, the words or phrases
"believes," "anticipates," "expects," "intends," "will likely result,"
"estimates," "projects" or similar expressions are intended to identify such
forward-looking statements, but are not the exclusive means of identifying such
statements. These forward-looking statements involve risks and uncertainties
that may cause the Company's actual results to differ materially from the
results discussed in the forward-looking statements. In light of this, the
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
undertakes no obligation to revise any forward-looking statements in order to
reflect events or circumstances after the date of such statements. Readers are
urged carefully to review and consider the various disclosures made by the
Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission, all of which attempt to advise interested
parties of the risks and factors that may affect the Company's business.
Factors that might cause such differences include, but are not limited to, the
following: the level of market acceptance of the Company's products, the growth
of the rugged computing market, the impact of competition, the success of the
Company's on-going research and development efforts, the future availability of
financing when and if needed and the impact of general economic and business
conditions on the Company's sales. The Company's forward-looking statements are
qualified in their entirety by the cautions and risk factors set forth under the
"Cautionary Statement" filed as Exhibit 99.1 to its Form 10-Q for the period
ended April 6, 1997.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain financial data expressed as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
------------------------------ ------------------------------
October 5, September 30, OCTOBER 5, September 30,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales............................................... 100% 100% 100% 100%
Cost of sales ......................................... 63 61 64 61
---- ---- ---- ----
Gross profit ........................................ 37 39 36 39
Operating expenses:
Sales and marketing ................................. 17 25 19 24
General and administrative .......................... 13 13 13 15
Research and development ............................ 9 14 8 14
---- ---- ---- ----
Total operating expenses ......................... 39 52 40 53
Operating loss ........................................ (2) (13) (4) (14)
Interest expense and other, net ....................... 1 (3) (2) (2)
---- ---- ---- ----
Net loss from continuing operations ................... (1) (16) (6) (16)
Loss from discontinued operation ...................... -- (4) -- (4)
---- ---- ---- ----
Net loss................................................ (1)% (20)% (6)% (20)%
==== ==== ==== ====
</TABLE>
Net Sales. The Company's net sales increased 62% from $3.8 million in the
third quarter of fiscal 1996 to $6.0 million for the comparable period in 1997
and from $9.6 million in the first nine months of fiscal 1996 to $16.6 million
for the comparable period in 1997. The third quarter to third quarter increase
was the result of an increase in the number of units sold. The nine month to
nine month increase was the result of an increase in the number of units sold
partially offset by reductions in the average selling prices of the 7000 Series
products and the introduction of the 5000 Series, which carries lower pricing.
While the 5000 Series base price is lower than the 7000 Series, the average
selling price of the 5000 Series has increased in the third quarter of 1997 as
compared to the third quarter of 1996 as a result of customers purchasing more
options and accessories.
International sales remained relatively constant at 22% of net sales for the
first nine months of 1996 and 20% for the first nine months of 1997. The
Company believes that international sales as a percentage of total net sales
will continue at similar levels for the remainder of 1997, with little impact on
the Company's results of operations or liquidity.
Gross Profit. Gross profit increased 54% from $1.4 million in the third
quarter of 1996 to $2.2 million in the comparable period in 1997. As a
percentage of net sales, gross profit decreased from 39% to 37%. Gross profit
increased 61% from $3.8 million in the first nine months of 1996 to $6.0 million
in the comparable period in 1997 but decreased as a percentage of net sales from
39% to 36%. The introduction in the second half of 1996 of the 5000 Series,
which carries lower pricing and profit margins, and the introduction of a new
lower base price 7000 Series model in the fourth quarter of 1996, were the
significant causes for the reduced margins as a percent of net sales. The
Company expects the 5000 Series to represent a greater percentage of sales in
future quarters. With unit volume increases and improvements in manufacturing
efficiencies, the Company believes it can maintain gross margins in the mid to
upper 30% range for the remainder of 1997.
Sales and Marketing. Sales and marketing expenses increased from $0.9
million or 25% of net sales for the third quarter of 1996 to $1.0 million or 17%
of net sales for the comparable period in 1997. Sales and marketing expenses
increased from $2.3 million or 24% of net sales for the first nine months of
1996 to $3.1 million or 19% of net sales for the comparable period in 1997. The
increases were due primarily to increased staffing as the Company continued to
expand its inside sales force. In addition, there was an increase in sales
commissions paid
<PAGE>
to outside sales representatives as a result of increased sales volumes. Sales
and marketing expenses, as a percentage of sales, has decreased as compared to
1996 due to increased sales. The Company expects these expenses will continue to
increase, although remain at similar levels as a percentage of sales, in the
future as the Company continues to expand its vertical markets and build its
sales and marketing infrastructure.
General and Administrative. General and administrative expenses increased
from $0.5 million or 13% of net sales for the third quarter of 1996 to $0.8
million or 13% of net sales for the third quarter of 1997 and increased from
$1.5 million or 15% of net sales for the first nine months of 1996 to $2.3
million or 13% of net sales for the comparable period in 1997. The increase
was primarily due to compensation related expenses incurred as the Company
continued to add to its general and administrative infrastructure. In
addition, the Company increased its allowance for bad debt expenses. The
Company also incurred greater facility costs for additional leased space in
the first nine months of 1997 as compared to the first nine months of 1996.
During the second quarter of 1997, the Company signed a lease for a new,
larger facility which it expects to move into in the fourth quarter of 1997
and first quarter of 1998. The Company is currently seeking sub-lessors for
its current facility and anticipates some continuing lease costs from its
existing facility through the lease expiration in June 1999. An increase in
professional services in order to support the Company's information systems
was offset by a reduction of legal fees due to the resolution of a dispute
with a terminated distributor in the fourth quarter of 1996. General and
administrative expenses are expected to continue to increase in the
foreseeable future.
Research and Development. Research and development expenses are incurred in
the development and testing of new products and customized computing platforms
for special applications and are expensed as incurred. Research and development
expenses remained constant at $0.5 million during the third quarter of 1996 and
the third quarter of 1997, which represented a decrease from 14% to 9% of net
sales. Research and development expenses remained constant at $1.4 million for
the first nine months of 1996 and 1997, which represented a decrease from 14% to
8% of net sales. An increase in salaries and related expenses in these periods
was offset by a reduction in product development material costs. During the
first nine months of 1996 a significant investment in material costs was made
relating to the introduction of the 5000 Series. Research and development
expenses, as a percentage of sales, has decreased as compared to 1996 due to
increased sales. The Company expects these expenses to begin increasing in the
near term and to increase for the foreseeable future, although remain at similar
levels as a percentage of sales, as it develops new products and enhances its
existing product lines.
Interest Income (Expense) and Other, Net. Interest expense was approximately
$104,000 for the third quarter of 1996 compared to interest income of $76,000
for the comparable period in 1997. This was primarily due to the repayment of
debt in March and April of 1997 using initial public offering proceeds and the
subsequent investment of the remaining proceeds. Interest expense increased
from approximately $223,000 for the first nine months of 1996 to $320,000, net
of interest income, for the comparable period in 1997, primarily due to higher
levels of indebtedness (which were paid off in March and April of 1997, as noted
above) and the related amortization of certain financing costs. The Company
expects to continue reporting net interest income for the remainder of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has principally financed its operations and
capital expenditures through the private sale of equity and debt securities,
loans and bank lines of credit. As of January 5, 1997, the Company had
outstanding loans of $6.4 million, including $1.3 million with affiliated
parties. As of October 5, 1997, the Company had no outstanding loans. There
were no bank lines open as of January 5, 1997 or October 5, 1997. In the first
quarter of 1997, the Company completed an initial public offering of common
stock and received net proceeds of $11.8 million from the sale of 2,125,000
shares. From the proceeds, the Company repaid $6.4 million of loans during
1997, including the entire amount of loans with affiliated parties. Cash
provided by financing activities, including those listed above, totaled $5.5
million for the first nine months of 1997 and $5.3 million for the comparable
period in 1996.
<PAGE>
Cash used for operating activities totaled $2.3 million for the first nine
months of 1997 and $4.7 million for the comparable period in 1996. Inventories,
which include primarily raw materials, work in process and demonstration units,
increased from $4.4 million at January 5, 1997 to $5.4 million at October 5,
1997. The increase was primarily due to a build up of raw materials necessary to
fill the Company's backlog of orders and maintain current increased production
levels. Accounts receivable increased from $2.0 million at January 5, 1997 to
$4.2 million at October 5, 1997, due to increased sales. Accrued expenses
increased from $0.8 million at January 5, 1997 to $1.5 million at October 5,
1997. The increase was mainly due to accrued compensation as a result of the
increase in the number of employees and allowances for warranties and returns
due to the increase in sales volume.
Cash used for investing activities totaled approximately $293,000 for the
first nine months of 1997 and $359,000 for the comparable period in 1996. The
Company plans to expend larger amounts in the fourth quarter of 1997 to purchase
property and equipment related to its new leased facility.
As of October 5, 1997 the Company had cash and cash equivalents of $5.1
million.
The Company believes that cash on hand, interest expected to be earned
thereon, and anticipated operating cash flows, as well as potential financing to
be sought through borrowings or other arrangements, will be sufficient to fund
its operations at least through the next twelve months. Cash requirements for
periods during and beyond the next twelve months depend on the Company's
profitability, its ability to manage working capital requirements and its rate
of growth, among other factors.
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
On June 25, 1996, a shareholder of the Company commenced an action in
Minnesota state district court against the Company and certain directors of the
Company. The essence of the shareholder's allegations was that the Company
issued shares of Common Stock without the authorization of all shareholders in
violation of certain agreements and that certain of the Company's directors
treated the plaintiff unfairly. The shareholder requested unspecified equitable
relief. On October 8, 1996, the district court judge granted the Company's
motion for summary judgment dismissing the lawsuit, and on October 29, 1996,
judgment was entered in favor of the Company. By notice dated January 15, 1997,
the shareholder filed an appeal with the Minnesota Court of Appeals, Rejsa vs.
Beeman et al. The Minnesota Court of Appeals filed an opinion on August 26,
1997 affirming the decision of the lower court. On September 25, 1997 the
plaintiff petitioned the Minnesota Supreme Court to hear the case. The Company
filed a response on October 20, 1997 and on October 31, 1997, the Minnesota
Supreme Court denied the plaintiff's petition for further review.
ITEM 2. CHANGES IN SECURITIES
USE OF PROCEEDS
The Company's registration statement on Form S-1, file number 333-18335,
was declared effective on March 19, 1997. The Company registered an aggregate of
2,443,750 shares of common stock, $.001 par value (including 316,250 shares
covered by a registration statement filed pursuant to Rule 462(m) on March 20,
1997, file number 333-23637) with R.J. Steichen & Company as the managing
underwriter. The offering commenced on March 20, 1997, and on March 25, 1997,
the Company closed on aggregate proceeds of $13,812,500 from the sale of
2,125,000 of these shares. The remainder of the shares registered were subject
to an underwriters' over-allotment option that subsequently expired unexercised.
<PAGE>
The following expenses were incurred in connection with the issuance and
distribution of the securities:
<TABLE>
<CAPTION>
<S> <C>
Underwriters discount and commission $ 967,000
Expenses paid to underwriters 276,000
Other expenses 809,000
-----------
Total expenses $ 2,052,000
===========
Net offering proceeds $11,760,000
===========
</TABLE>
The net offering proceeds have been used as follows as of October 5, 1997:
<TABLE>
<CAPTION>
<S> <C>
Construction of plant, building and $ 71,000
facilities
Purchase of machinery and equipment 299,000
Repayment of indebtedness 6,597,000
Temporary investment in Norwest
Advantage Cash Investment Account 4,793,000
-----------
$11,760,000
===========
</TABLE>
All such amounts were direct payments to third parties.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 Second Amended and Restated Articles of Incorporation of the
Company (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement filed on Form S-1, File No.
333-18335)
Exhibit 3.2 Second Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.4 to the Company's
Registration Statement filed on Form S-1, File No. 333-18335)
Exhibit 10.1 Employment Agreement with Ronald E. Lewis dated September 18,
1997 (filed herewith)
Exhibit 11.1 Statement Re Computation of Per Share Earnings (filed
herewith)
Exhibit 27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIELDWORKS, INCORPORATED
Date: November 17, 1997 /s/ Karen L. Engebretson
---------------------------------
Karen L. Engebretson, Vice President of
Finance and CFO (as authorized officer and
principal financial officer)
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is entered into as of,
September 18, 1997, by and between FieldWorks, Incorporated, a Minnesota
corporation (the "Company"), and Ronald E. Lewis, an individual resident of the
State of Minnesota ("Executive").
WHEREAS, the Company wishes to employ Executive to render services for the
Company on the terms and conditions set forth in this Agreement, and Executive
wishes to be retained and employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the Company and Executive set forth below, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive agree as follows:
1. Employment. The Company hereby employs Executive, and Executive
accepts such employment and agrees to perform services for the Company, for the
period and upon the other terms and conditions set forth in this Agreement.
2. Term. Unless terminated at an earlier date in accordance with Section
9 of this Agreement, the term of Executive's employment hereunder shall be for a
period of one year, commencing on the date on which Executive begins employment
with the Company (the "Effective Date"). Thereafter, the term of this Agreement
shall be automatically extended for successive one (1) year periods unless
either party objects to such extension by written notice to the other party at
least thirty (30) days prior to the end of the initial term or any extension
term.
3. Position and Duties.
3.01 Service with Company. During the term of this Agreement,
Executive agrees to perform such reasonable employment duties consistent with
the position of President as the Board of Directors of the Company shall assign
to him from time to time.
3.02 Performance of Duties. Executive agrees to serve the Company
faithfully and to the best of his ability and to devote his full time, attention
and efforts to the business and affairs of the Company during the term of this
Agreement. Executive represents to the Company that he is under no contractual
commitments inconsistent with his obligations set forth in this Agreement, and
that during the term of this Agreement, he will not render or perform services
for any other corporation, firm, entity or person which are inconsistent with
the provisions of this Agreement. The Company hereby acknowledges that
Executive may continue to serve as the Chief Executive Officer of PanAm
Systems, Inc. and that neither such service nor Executive's service as a
director of other companies shall be deemed inconsistent with the
-1-
<PAGE>
provisions of this Agreement; provided, however, that no such service
interferes with Executive's performance of his duties under this Agreement and
provided, further, that Executive shall not serve as a director of any entity
that is a direct competitor of the Company.
4. Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement during the first year of the term of
this Agreement, the Company shall pay to Executive a base salary of $140,000 ,
which salary shall be paid on a bi-weekly basis in accordance with the Company's
normal payroll procedures and policies. The salary payable to Executive during
each subsequent year during the term of this Agreement shall be established by
the Company's Board of Directors following an annual performance review;
provided, however, that such base salary shall not be decreased.
4.02 Incentive Compensation. In addition to the base salary described
in Section 4.01, Executive shall be eligible to participate in any incentive
compensation plans which may be established by the Board of Directors of the
Company from time to time.
4.03 Participation in Benefit Plans. Executive shall also be entitled
to participate in all employee benefit plans or programs (including vacation
time) of the Company to the extent that his position, title, tenure, salary,
age, health and other qualifications make him eligible to participate. The
Company does not guarantee the adoption or continuance of any particular
employee benefit plan or program during the term of this Agreement, and
Executive's participation in any such plan or program shall be subject to the
provisions, rules and regulations applicable thereto.
4.04 Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the presentment of
appropriate vouchers in accordance with the Company's normal policies for
expense verification.
4.05 Issuance of Stock Option. Concurrently with the execution of
this Agreement, the Company shall issue to Executive two options to purchase
shares of the Company's common stock pursuant to the Company's 1994 Stock Option
Plan (the "Plan") having substantially the following terms:
(a) an option (the "First Option") to purchase an aggregate of
150,000 shares of Common Stock, which shall be effective on the
Effective Date, shall have an exercise price per share equal to
the closing price per share of the Common Stock on the Effective
Date, shall have a term of ten years, shall be an incentive stock
option to the
-2-
<PAGE>
extent permitted by law and shall vest as to 50,000 shares on
each of the first, second and third anniversaries of the
Effective Date, and subject to accelerated vesting in the event
of a change in control of the Company; and
(b) an option (the "Second Option") under the Plan to purchase an
aggregate of 100,000 shares of Common Stock, which shall be
effective on the Effective Date, shall have an exercise price per
share equal to the closing price per share of the Common Stock on
the Effective Date, shall have a term of ten years, shall be an
incentive stock option to the extent permitted by law and shall
vest as to all 100,000 shares on the date 9 years and 6 months
after the Effective Date, and subject to accelerated vesting in
the event of a change in control of the Company; provided,
however, that the vesting of the shares subject to the Second
Option shall accelerate in cumulative 25,000 share installments
on the last day of the quarter in which the company first
achieves each of the following:
i. Revenues of $7.5 million for the quarter together with no
net loss for such quarter;
ii. Revenues of $12.5 million for the quarter together with
a net profit of 5% for such quarter;
iii. Revenues of $15 million for the quarter together with a net
profit of 6% for such quarter; and
iv. Revenues of $20 million for the quarter together with a net
profit of 7% for such quarter.
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any time
thereafter, Executive shall not divulge, furnish or make accessible to anyone or
use in any way (other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of the Company
which Executive has acquired or become acquainted with or will acquire or become
acquainted with prior to the termination of the period of his employment by the
Company (including employment by the Company or any affiliated companies prior
to the date of this Agreement), whether developed by Executive or by others,
concerning any trade secrets, confidential or secret designs, processes,
formulae, plans, devices or material (whether or not patented or patentable)
directly or indirectly useful in any aspect of the business of the Company, any
customer or supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other confidential
information or secret aspects of the business of the Company. Executive
acknowledges that the above-described knowledge or information constitutes a
unique and valuable asset of the Company and represents a substantial investment
of time and expense by the Company and its predecessors, and that any disclosure
or other use of
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<PAGE>
such knowledge or information other than for the sole benefit of the Company
would be wrongful and would cause irreparable harm to the Company. Both during
and after the term of this Agreement, Executive will refrain from any acts or
omissions that would reduce the value of such knowledge or information to the
Company. The foregoing obligations of confidentiality, however, shall not apply
to any knowledge or information which is now published or which subsequently
becomes generally publicly known in the form in which it was obtained from the
Company, other than as a direct or indirect result of the breach of this
Agreement by Executive.
6. Ventures. If, during the term of this Agreement, Executive is engaged
in or associated with the planning or implementing of any project, program or
venture involving the Company and a third party or parties, all rights in such
project, program or venture shall belong to the Company. Except as formally
approved by the Company's Board of Directors, Executive shall not be entitled to
any interest in such project, program or venture or to any commission, finder's
fee or other compensation in connection therewith other than the salary to be
paid to Executive as provided in this Agreement.
7. Noncompetition Covenant.
7.01 Agreement Not to Compete. Executive agrees that, during the
period of his employment by the Company and for a period of two (2) years after
the termination of such employment (whether such termination is with or without
cause, or whether such termination is occasioned by Executive or the Company),
he shall not, directly or indirectly, engage in competition with the Company in
any manner or capacity (e.g., as an advisor, principal, agent, partner, officer,
director, stockholder, employee, member of any association, or otherwise) in any
phase of the business which the Company is conducting during the term of this
Agreement
7.02 Geographic Extent of Covenant. The obligations of Executive
under Section 7.01 shall apply to any geographic area in which the Company:
(a) has engaged in business during the term of this Agreement through
production, promotional, sales or marketing activity, or
otherwise, or
(b) has otherwise established its goodwill, business reputation, or
any customer or supplier relations.
7.03 Limitation on Covenant. Ownership by Executive, as a passive
investment, of less than two percent (2%) of the outstanding shares of capital
stock of any corporation listed on a national securities exchange or publicly
traded in the over-the-counter market shall not constitute a breach of this
Article 7.
7.04 Indirect Competition. Executive further agrees that, during the
term of this Agreement, he will not, directly or indirectly, assist or encourage
any other
-4-
<PAGE>
person in carrying out, directly or indirectly, any activity that would be
prohibited by the above provisions of this Article 7 if such activity were
carried out by Executive, either directly or indirectly; and in particular
Executive agrees that he will not, directly or indirectly, induce any employee
of the Company to carry out, directly or indirectly, any such activity.
8. Patent and Related Matters.
8.01 Disclosure and Assignment. Executive will promptly disclose in
writing to the Company complete information concerning each and every invention,
discovery, improvement, device, design, apparatus, practice, process, method or
product, whether patentable or not, made, developed, perfected, devised,
conceived or first reduced to practice by Executive, either solely or in
collaboration with others, during the term of this Agreement, or within six
months thereafter, whether or not during regular working hours, relating either
directly or indirectly to the business, products, practices or techniques of the
Company (hereinafter referred to as "Developments"). Executive, to the extent
that he has the legal right to do so, hereby acknowledges that any and all of
said Developments are the property of the Company and hereby assigns and agrees
to assign to the Company any and all of Executive's right, title and interest in
and to any and all of such Developments.
8.02 Future Developments. As to any future Developments made by
Executive which relate to the business, products or practices of the Company and
which are first conceived or reduced to practice during the term of this
Agreement, or within six months thereafter, but which are claimed for any reason
to belong to an entity or person other than the Company, Executive will promptly
disclose the same in writing to the Company and shall not disclose the same to
others if the Company, within twenty (20) days thereafter, shall claim ownership
of such Developments under the terms of this Agreement. If the Company makes
such claim, Executive agrees that, insofar as the rights (if any) of Executive
are involved, it will be settled by arbitration in accordance with the rules
then obtaining of the American Arbitration Association. The locale of the
arbitration shall be Minneapolis, Minnesota (or other locale convenient to the
Company's principal executive offices). If the Company makes no such claim,
Executive hereby acknowledges that the Company has made no promise to receive
and hold in confidence any such information disclosed by Executive.
8.03 Limitation on Sections 8.01 and 8.02. The provisions of Sections
8.01 and 8.02 shall not apply to any Development meeting the following
conditions:
(a) such Development was developed entirely on Executive's own time;
and
(b) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information; and
-5-
<PAGE>
(c) such Development does not relate (i) directly to the business of
the Company, or (ii) to the Company's actual or demonstratably
anticipated research or development; and
(d) such Development does not result from any work performed by
Executive for the Company.
8.04 Assistance of Executive. Upon request and without further
compensation, but at no expense to Executive, and whether during the term of
this Agreement or thereafter, Executive will do all lawful acts, including, but
not limited to, the execution of papers and lawful oaths and the giving of
testimony, that in the opinion of the Company, its successors and assigns, may
be necessary or desirable in obtaining, sustaining, reissuing, extending and
enforcing United States and foreign patents, including, but not limited to,
design patents, on any and all of such Developments, and for perfecting,
affirming and recording the Company's complete ownership and title thereto, and
to cooperate otherwise in all proceedings and matters relating thereto.
8.05 Records. Executive will keep complete, accurate and authentic
accounts, notes, data and records of all Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon its request, Executive will promptly
surrender same to it or, if not previously surrendered upon its request or
otherwise, Executive will surrender the same, and all copies thereof, to the
Company upon the conclusion of his employment.
8.06 Obligations, Restrictions and Limitations. Executive understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived or developed by employees, consultants or other agents rendering
services to it. Executive agrees that he shall be bound by all such
obligations, restrictions and limitations applicable to any such invention
conceived or developed by him during the term of this Agreement and shall take
any and all further action which may be required to discharge such obligations
and to comply with such restrictions and limitations.
9. Termination.
9.01 Grounds for Termination. This Agreement shall terminate prior to
the expiration of the initial term set forth in Section 2 or any extension
thereof in the event that at any time during such initial term or any extension
thereof:
(a) Executive dies, or
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<PAGE>
(b) Executive becomes disabled (as defined below), so that he cannot
perform the essential functions of his position with or without
reasonable accommodation, or
(c) The Board of Directors of the Company elects to terminate this
Agreement for "cause" and notifies Executive in writing of such
election, or
(d) The Board of Directors of the Company elects to terminate this
Agreement (including an election not to renew this Agreement
under Section 2) without "cause" and notifies Executive in
writing of such election, or
(e) Executive elects to terminate this Agreement and notifies the
Company in writing of such election.
If this Agreement is terminated pursuant to subsection (a), (b) or (c) of
this Section 9.01, such termination shall be effective immediately. If this
Agreement is terminated pursuant to subsection (d) or (e) of this Section 9.01,
such termination shall be effective thirty (30) days after delivery of the
notice of termination.
9.02 "Cause" Defined.
(a) Executive has breached the provision of Article 5, 7 or 8 of this
Agreement in any material respect, or
(b) Executive has, in the performance of his duties as an officer or
employee of the Company, engaged in willful and material
misconduct, including willful and material failure to perform
Executive's duties and has failed to "cure" such default within
thirty (30) days after receipt of written notice of default from
the Company, or
(c) Executive has committed fraud, misappropriation or embezzlement
in connection with the Company's business, or
(d) Executive has been convicted or has pleaded nolo contendere to
criminal felony charges.
(e) Executive's use of narcotics, liquor or illicit drugs has a
detrimental effect on the performance of his employment
responsibilities, as determined by the Company's Board of
Directors after consultation with an appropriate physician.
In the event that the Company terminates Executive's employment for
"cause" pursuant to subsection 9.01(c) and Executive objects in writing to the
Board's
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<PAGE>
determination that there was proper "cause" for such termination within twenty
(20) days after Executive is notified of such termination, the matter shall be
resolved by arbitration in accordance with the provisions of Section 10.01. If
Executive fails to object to any such determination of "cause" in writing within
such twenty (20) day period, he shall be deemed to have waived his right to
object to that determination. If such arbitration determines that there was not
proper "cause" for termination, such termination shall be deemed to be a
termination pursuant to subsection 9.01(d) and Executive's sole remedy shall be
to receive the wage continuation benefits contemplated by Section 9.06.
9.03 Effect of Termination Notwithstanding any termination of this
Agreement, Executive, in consideration of his employment hereunder to the date
of such termination, shall remain bound by the provisions of this Agreement
which specifically relate to periods, activities or obligations upon or
subsequent to the termination of Executive's employment.
9.04 "Disability" Defined. As used in this Agreement, the term
"disabled" means any mental or physical condition which renders Executive unable
to perform the essential functions of his position, with or without reasonable
accommodation, for an aggregate of ninety (90) days during any consecutive one
hundred and twenty (120) day period
9.05 Surrender of Records and Property. Upon termination of his
employment with the Company, Executive shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company or which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or in part contain any trade secrets or confidential
information of the Company, which in any of these cases are in his possession or
under his control.
9.06 Wage Continuation. If Executive's employment by the Company is
terminated by the Company pursuant to subsection 9.01(b) or 9.01(d), the Company
shall continue to pay to Executive his base salary (less any payments received
by Executive from any disability income insurance policy provided to him by the
Company) and shall continue to provide health insurance benefits for Executive
through the earlier of (a) the date that Executive has obtained other full-time
employment (provided that, if Executive obtains other employment where
Executive's base salary is less than his base salary as in effect under this
Agreement prior to termination, then the Company shall continue to pay Executive
the difference), or (b)six months from the date of termination of employment.
Executive shall also be entitled to receive a pro rata portion (based on the
number of days of employment during that fiscal year) of any bonus payment that
would have been payable to him for the current fiscal year pursuant to Section
4.02 if Executive had been in the employ of the Company for the full fiscal
year. No bonus will be payable to Executive with respect to any fiscal
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<PAGE>
year after the fiscal year in which Executive's employment terminated. If this
Agreement is terminated pursuant to subsection 9.01(a), 9.01(c) or 9.01(e),
Executive's right to base salary and benefits shall immediately terminate,
except as may otherwise be required by applicable law.
10. Settlement of Disputes.
10.01 Arbitration. Except as provided in Section 10.02, any claims
or disputes of any nature between the Company and Executive arising from or
related to the performance, breach, termination, expiration, application, or
meaning of this Agreement or any matter relating to Executive's employment and
the termination of that employment by the Company shall be resolved exclusively
by arbitration in Minneapolis, Minnesota, in accordance with the applicable
rules then obtaining of the American Arbitration Association. Each party shall
bear half of the fees of the arbitrator(s) and all of its own other costs
incurred in connection with such arbitration.
The decision of the arbitrator(s) shall be final and binding upon
both parties. Judgment of the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. In the event of submission
of any dispute to arbitration, each party shall, not later than thirty (30)
days prior to the date set for hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely at
the hearing and a list of all persons each party intends to call at the
hearing.
10.02 Resolution of Certain Claims - Injunctive Relief. Section
10.01 shall have no application to claims by the Company asserting a violation
of Article 5, 7 or 8 or Section 9.05 or seeking to enforce, by injunction or
otherwise, the terms of Article 5, 7 or 8 or Section 9.05. Such claims may be
maintained by the Company in a lawsuit subject to the terms of Section 10.03.
Executive agrees that, in addition to, but not to the exclusion of any other
available remedy, the Company shall have the right to enforce the provisions of
Articles 5, 7 and 8 and Section 9.05 by applying for and obtaining temporary and
permanent restraining orders or injunctions from a court of competent
jurisdiction without the necessity of filing a bond therefor, and the Company
shall be entitled to recover from the Employee its reasonable attorneys' fees
and costs in enforcing the provisions of Articles 5, 7 and 8 and Section 9.05;
provided, that if the Company is ultimately denied the right to enforce such
terms, Employee shall be entitled to recover from the Company his reasonable
attorney's fees and costs in defending such action.
10.03 Venue. Any action at law, suit in equity, or judicial
proceeding arising directly, indirectly, or otherwise in connection with, out
of, related to or from this Agreement or any provision hereof, shall be
litigated only in the courts of the state of Minnesota, County of Hennepin.
Executive waives any right the Executive may have to transfer or change the
venue of any litigation brought against Executive by the Company.
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<PAGE>
10.04 Severability. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect. In furtherance and not in limitation
of the foregoing, should the duration or geographical extent of, or business
activities covered by, any provision of this Agreement be in excess of that
which is valid and enforceable under applicable law, then such provision shall
be construed to cover only that duration, extent or activities which may validly
and enforceably be covered. Executive acknowledges the uncertainty of the law
in this respect and expressly stipulates that this Agreement be given the
construction which renders its provisions valid and enforceable to the maximum
extent (not exceeding its express terms) possible under applicable law.
11. Miscellaneous.
11.01 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the state of Minnesota.
11.02 Prior Agreements. This Agreement contains the entire agreement
of the parties relating to the employment of Executive by the Company and the
ancillary matters discussed herein and supersedes all prior agreements and
understandings with respect to such matters, and the parties hereto have made no
agreements, representations or warranties relating to such employment or
ancillary matters which are not set forth herein.
11.03 Withholding Taxes. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
11.04 Amendments. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by both the
Executive and the Company.
11.05 No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
11.06 Assignment. This Agreement shall not be assignable, in whole
or in part, by either party without the written consent of the other party,
except that the Company may, without the consent of Executive, assign its rights
and obligations under this Agreement to any corporation, firm or other business
entity with or into which the Company may merge or consolidate, or to which the
Company may sell or transfer all or substantially all of its assets, or of which
50% or more of the equity
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<PAGE>
investment and of the voting control is owned, directly or indirectly, by, or
is under common ownership with, the Company. After any such assignment by the
Company, the Company shall be discharged from all further liability hereunder
and such assignee shall thereafter be deemed to be the Company for the
purposes of all provisions of this Agreement including this Section 11.
11.07 Counterparts. This Agreement may be simultaneously executed in
any number of counterparts, and such counterparts executed and delivered, each
as an original, shall constitute but one and the same instrument.
11.08 Captions and Headings. The captions and paragraph headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
IN WITNESS WHEREOF, Executive and the Company have executed this Agreement
as of the date set forth in the first paragraph.
FieldWorks, Incorporated
By /s/ David C. Malmberg
-------------------------------
David Malmberg, Chairman of
the Board of Directors
By /s/ Gary J. Beeman
--------------------------------
Gary Beeman, Chief Executive
Officer
/s/ Ronald E. Lewis
--------------------------------
Ronald Lewis
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<PAGE>
Exhibit 11.1
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
--------------------------------- ---------------------------------
October 5, September 30, October 5, September 30,
1997 1996 1997 1996
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
PRIMARY AND FULLY DILUTED
Net loss................................................... $ (52,944) $ (736,964) $(1,056,154) $(1,929,427)
========== ========== =========== ===========
Weighted average common shares outstanding................. 8,684,614 5,880,736 7,926,646 5,859,895
Effect of conversion of preferred shares (1)............... -- 576,923 156,382 576,923
Effect of cheap shares issued (2).......................... -- 160,014 53,338 160,014
---------- ---------- ----------- -----------
8,684,614 6,617,673 8,136,366 6,596,832
========== ========== =========== ===========
NET LOSS PER COMMON SHARE ................................. $ (.01) $(.11) $(.13) $(.29)
========== ========== =========== ===========
</TABLE>
(1) Gives effect to preferred shares which converted to common shares
concurrent with the company's initial public offering.
(2) Warrants issued and options granted from March 1, 1996 to February 28, 1997
are included in the calculation for certain periods presented, using the
treasury stock method, in accordance with Staff Accounting Bulletin Topic
4(D).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-04-1998
<PERIOD-START> JAN-06-1997
<PERIOD-END> OCT-05-1997
<CASH> 5,057,654
<SECURITIES> 0
<RECEIVABLES> 4,167,640
<ALLOWANCES> 0
<INVENTORY> 5,385,390
<CURRENT-ASSETS> 14,791,975
<PP&E> 1,740,958
<DEPRECIATION> 855,475
<TOTAL-ASSETS> 15,703,658
<CURRENT-LIABILITIES> 3,020,015
<BONDS> 0
0
0
<COMMON> 8,687
<OTHER-SE> 12,646,372
<TOTAL-LIABILITY-AND-EQUITY> 15,703,658
<SALES> 16,642,491
<TOTAL-REVENUES> 16,642,491
<CGS> 10,613,517
<TOTAL-COSTS> 10,613,517
<OTHER-EXPENSES> 1,382,068
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 319,658
<INCOME-PRETAX> (1,056,154)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,056,154)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,056,154)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
</TABLE>
