FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the Three Month period ended March 31, 1999
[ ] 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 ____
PHOTONICS CORPORATION
D/B/A DTC Data Technology
(Exact name of Small Business Issuer as specified in its charter)
California 77-0102343
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
606 Charcot Avenue (408)546-5600
San Jose, California 95131
(Address of Principal Executive Offices) (Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
The number of shares outstanding of the issuer's Common Stock, $.001 par
value, as of March 31, 1999 was 4,396,272 shares.
PHOTONICS CORPORATION
dba
DTC DATA TECHNOLOGY
For the quarter ended March 31, 1999
INDEX
Page Number
INTRODUCTION PHOTONICS CORPORATION
Introduction 2
The Market 2
The Competition 2
The Strategy 3
Products 3
Intellectual Property 3
Employees 3
Sales, Distribution and Customer Service 3
Research & Development 4
Manufacturing 4
Current Developments 4
PART I FINANCIAL INFORMATION 5
ITEM I Interim Financial Statements
Consolidated Balance Sheet as of
March 31, 1999 and December 31, 1998 6
Consolidated Statements of Operation
for the Three months and Six months
ending June 30, 1998 7
Consolidated Statement of Cash Flows 8
Notes to Consolidated Financial Statements 9
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 12
ITEM 2 Changes in Securities 13
ITEM 3 Defaults Upon Senior Securities 13
ITEM 4 Submission of Matters of a Vote of Security Holders 13
ITEM 5 Other Information 13
ITEM 6 Exhibits and Reports on Form 8-K 13
SIGNATURE 13
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<PAGE>
INTRODUCTION
This report contains forward-looking statements and the Company's actual
results could differ materially from those anticipated in these forward-
looking statements as a result of numerous factors, including those set
forth below and elsewhere in this report. The industry in which the Company
competes is characterized by extreme rapid changes in technology and
frequent new product introductions. The company believes that its long-term
growth will depend largely on its ability to continue to enhance existing
products and to introduce new products and features that meet the
continually changing requirements of customers. While the Company has
invested in new products and processes and feels confident that it can keep
abreast of current technology trends, there can be no assurance that it can
continue to introduce new products and features on a timely basis or that
certain of its products and processes will not be rendered noncompetitive or
obsolete by its competitors.
General
Photonics dba Data Technology resulted from the merger of Photonics
Corporation and DTC Data Technology Corporation in 1996. Shortly after the
merger, the Company decided to focus on the IDE, Small System Interface
(SCSI), Input Output (I/O) and Basic Input and Output Systems (BIOS) upgrade
business of DTC and ceased activities in the infrared Wireless LAN business
of Photonics.
As DTC has the name recognition, and established sales channels, it is the
intent of the Company to eventually rename the Company DTC Data Technology
Corporation. Meanwhile, the legal entity is known as Photonics Corporation
dba DTC Data Technology. For brevity sake, the company is herein after
referred to as DTC or the Company.
The Market
One time, DTC had dominated the Integrated Drive Electronics (IDE) and
Enhanced IDE ("EIDE") add-on card market. Today, most new PCs have the IDE
function built-in on the mother board. Sales have changed from mainly OEM
to VARs and system integrators through distribution and retailers for the
upgrade after market. The IDE I/O market has declined and stabilized at a
much lower level of approximately $50 million dollars per year.
The Company is in the BIOS upgrade add on card market. The BIOS upgrade
allows older machines to access large disks and to be Y2K compliant. The
rapid increase in the size of Hard Disks opened up the BIOS upgrade market.
About 10% of new PCs and more than 90% two or more years old PCs are not Y2K
compliant due to non-compliant BIOS. The approaching of year 2000, creates
a large Y2K BIOS upgrade market. The Company has introduced a family BIOS
upgrade products to address the Y2K issue in the this quarter.
The Company is also in the Small Computer System Interface (SCSI) controller
market. SCSI is the controller of choice for high-end personal computers,
engineering work stations, Internet and enterprise file servers. The market
is about $1 billion is dominated by Adaptec with over 70% of the market. As
compatibility is a key issue for SCSI add on cards, other SCSI vendors
-2-
<PAGE>
(including DTC) have not been able to obtain a meaningful market share even
at significantly lower price and margin. The Company intents to enter the
SCSI market with a family of Adaptec compatible PCI-SCSI products. However,
due to financial limitations, this project has been put on hold since Q4
1998.
The Competition
Due to decline of the market, many vendors have dropped out of IDE and I/O
market. Promise and SIIG are the major competitors in this market. DTC has
broad sales channels, strong name recognition along with access to low cost-
manufacturing when compared with either of these competitors. In the BIOS
upgrade market, main competitors are Unicore and AMI. The Company has lower
cost of manufacturing and broader sales channels.
In the SCSI market, Adaptec is the main competitor. While there are a number
of smaller SCSI controller card manufacturers, they have all failed to
achieve a meaningful market share, offering vendor unique products.
The Strategy
The company's strategy is to continue to broad its EIDE, I/O and BIOS
upgrade products and at the same time develop a family of Adaptec compatible
PCI-SCSI controller cards with a superior value to the market's current
offerings. The Company believes strongly that there is a significant market
segment for this cost-effective compatible SCSI products.
The Company is committed to continuous product improvement and innovation,
which the Company believes is necessary for greater market penetration and
profitability.
Products
The Company has introduced a family of PCI parallel port add on cards, and a
family of Y2K upgrade BIOS, and EIDE products in the first quarter of 1999.
The Company plans to continue to introduce new products in these areas in
the coming quarters.
Intellectual Property
The Company has registered the trademark/logo "DTC" in the United States and
several foreign countries and has protected the use of this name by others
in the market place.
The Company has studied the intellectual property issues (and performed
patent searches) related to the SCSI, IDE, and I/O products which it intends
to market, and is unaware of any patents or intellectual property owned by
any other party which would impede the development or sale of its current or
proposed line of Adaptec compatible SCSI products. However, there can be no
absolute assurances that such legal challenges will not happen.
Software is an important ingredient for success in the controller market.
DTC has a large library of copyrighted IDE, SCSI and BIOS software drivers
and utilities for various operating systems including DOS, OS/2, UNIX,
Novell, Windows 3.1, and Windows 95.
-3-
<PAGE>
Employees
During February, the Company has drastically reduced its work force to 9
employees. As of March 31, 1999 DTC employed 9 individuals on a full time
basis, 8 of which were located in the United States and 1 in Hong Kong. Of
such employees 2 were engaged in manufacturing and related operations, 2 in
development and engineering, 3 in sales and marketing, and 2 in general
management and administration.
None of DTC's employees are represented by a labor union and the Company
considers its employee relations to be good.
Sales, Distribution and Customer Service
The Company currently sells its products through domestic and international
independent distributors, computer retailers and OEMs. In the United States
and Canada, the Company sells to most of the top national distributors in
the computer industry who in turn distribute the Company's products to
retailers, OEM and VAR. During the quarter, the Company lost Tech Data, and
Southern Electronics Corp. as its distributors. The Company's current sales
strategy is to continue to increase its sales to EOM, VAR, and resellers.
During the quarter, the Company also started actively to sell products
through Company's web site on Internet.
The Company's customer service and technical support organization is located
in San Jose, California and provides customers with software updates, and
warranty service. The technical support personnel assist end users and
distributors via telephone, fax-back facsimile services, a 24-hour bulletin
board service and an Internet Web site (WWW.datatechnology.com) for user yy
self-diagnosis and download of software updates.
As is common practice in the personal computer industry, the Company
frequently grants distributors limited rights to return unsold inventories
of the Company's products in exchange for new purchases, as well as price
protection and marketing development funds. While the Company reserves
funds each month to cover these programs, there can be no absolute
assurances that the Company's current allowances will be sufficient to not
have a material adverse effect on future operating results.
Research and Development
The Company believes that continued investment in research and development
is critical to successful new product introductions, which address market
needs, on a timely and cost effective basis.
Manufacturing
Over the years the Company has developed business relationships with various
contract board manufacturers in the Far East, which currently supply DTC
with highly cost competitive finished product. It is the Company's
intention to continue utilizing these sources of production. There can,
however, be no absolute assurance that these manufacturing sources will
remain available to the Company.
-4-
<PAGE>
At the present time approximately 90% of the Company's product requirements
are provided by Broadsino Computer Development, Ltd. (Broadsino) of Hong
Kong. Broadsino is one of the major beneficial owners of the Company with
approximately total of 12% of the ownership.
Current Developments
Due to continued loss, the Company has drastically cut its work force during
this quarter to 9 persons only, and has asked many of its vendors for delay
of payments. The Company has hired a financial consultant to the Board, and
retained an investment banker Hagerty Steward for additional financing in
the form of a bridge loan. The Company is also seeking an alternative to
Coast Business Credit for the accounts receivable financing as Coast has
indicated their intention of terminating their activity with the Company by
April 30. There is no assurance the Company can obtain additional financing
or finding an alternative financial institution for replacing Coast Business
Credit.
In July 1998 the Company signed a letter of intent and the Board of
Directors had approved the stock purchase of Broadsino, a privately help
company in Hong Kong. Under the terms of the agreement, the Company will
issue one share of the Company's Series A Convertible Preferred (Preferred)
for each U.S. dollar of net asset of Broadsino, approximately 6 million U.S.
dollars, for all the shares of Broadsino. Broadsino is a shareholder of the
Company and the major supplier of the Company; the main owner of Broadsino
is a Company director.
A SEC approved accounting firm is currently auditing Broadsino's financials
and is near completion. However, the major bank of Broadsino objected the
merger, and the merger is delayed. At the time of writing, both companies
are still seeking ways to merge.
PART 1 FINANCIAL INFORMATION
The condensed consolidated interim financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures made are adequate to make the
information presented not misleading. It is suggested that the condensed
consolidated interim financial statements be read in conjunction with the
consolidated financial statement and the notes thereto included in the
Company Annual Report on Form 10-K for the year ended December 31, 1998.
The accompanying consolidated interim financial statements have been
prepared, in all material respects, in conformity with the standards of
accounting measurements set forth in Accounting Principles Board Opinion No.
28 and reflect, in the opinion of management, all adjustments, which are of
a normal recurring nature, necessary to summarize fairly the financial
position and results of operations for such periods. The results of
operations for such interim periods are not necessarily indicative of the
results to be expected for the full year.
-5-
<PAGE>
PHOTONICS CORPORATION
Consolidated Balance Sheet
(amounts in thousands)
<TABLE>
<CAPTION>
yy Mar 31, Dec. 31,
1999 1998
(unaudited) (audited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents 6 $ 42
Accounts Receivable, 427 313
Other Receivables 0 52
Inventories, net 327 352
Prepaid expenses and other current assets 47 59
Total current assets 807 816
Furniture and equipment, net 18 21
Other Assets 15 15
Total Assets 840 852
Liabilities and shareholders equity (deficiency)
Current Liabilities:
Note Payable - AR Credit Line 125 147
Due to Related Parties 2,075 2,049
Accounts payable 1,669 1,450
Accrued liabilities 328 372
Total current liabilities 4,197 4,018
Deferred Taxes 0 0
Total Liabilities 4,197 4,018
Minority interest in subsidiaries 125 125
Shareholders' equity (deficiency):
Common stock 44,096 44,085
Treasury stock 0 0
Capital subscription 2,339 2,339
Accumulated deficit (50,070) (49,869)
Cumulative translation adjustment 154 154
Total shareholders' equity (deficiency) (3,481) (3,291)
Total liabilities and shareholders' equity $ 840 $ 852
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
-6-
<PAGE>
PHOTONICS CORPORATION
Consolidated Statements of Operations
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Mar 31, 1999 1998
(unaudited) (unaudited)
- ----------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Net Product Sales $ 446 $ 1,733
Cost of Revenues 361 909
Gross Profit 85 824
Operating Expenses:
Research and development 54 100
Selling, general and administration 151 679
Total operating expense 205 779
Income (loss) from operations (121) 45
Other income (expense):
Interest income 0 0
Interest expense (80) (21)
Other Income 0 53
Other expense (0) (1)
Total other income (expense) (80) 31
Provision for taxes 0 0
Net income (loss) $ (201) $ 76
Net income (loss) per share (0.04) 0.02
===== =====
Average Common shares used for calculation 4,485,595 4,451,934
====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
-7-
<PAGE>
PHOTONICS CORPORATION
Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
(unaudited) (unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (201) $ 76
Adjustments to reconcile net cash
Used in operating activities:
Depreciation 3 4
Changes in operating assets and liabilities:
Accounts Receivable (62) (339)
Inventories 23 (169)
Deposits and prepaid expenses 12 353
Accounts payable 219 61
Due to Related Parties 26 43
Accrued Liabilities (44) (42)
Net Cash Provided by (used for) Operations (24) (13)
==== ====
Cash flows from Investing Activities:
Sale (Purchase) of Property and Equipment 0 (60)
Net Cash used in Investing Activities 0 (60)
==== ====
Cash flows from Financing Activities:
Proceeds from Capital Stock Subscription 0 10
Net Borrowings (Repayments) under Bank Line (22) 0
Borrowing (repayments of other debt), net 0 0
Other Equity Transactions, net 0 0
Net Cash provided by (used for) Financing (22) $10
==== ====
Net increase (decr.)Cash and Cash equivalents (46) (63)
Cash and Cash Equivalents Beginning of Period 76 130
Cash and Cash Equivalents at end of Period 6 67
</TABLE>
-8-
<PAGE>
PHOTONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mar 31, 1999
(unaudited)
1. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its majority-owned subsidiaries after elimination of
intercompany accounts and transactions. The minority interest represents
the minority stockholders' proportionate share of the subsidiaries, Qume
Taiwan and Data Technology Hong Kong Ltd., which is 0.6% and 1%, respectively.
Foreign Currency Translation
Certain entities located outside the United States use the local currency
as their functional currency. Assets and liabilities are translated at
exchange rates in effect at the balance sheet date, while revenues and
costs are translated at monthly average exchange rates.
Translation gains and losses are accumulated as a separate component of
stockholder equity.
Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
2. Earnings (loss) per share
Conforming to SFAS No. 128, the Company has changed its method of computing
earnings per share and restated all prior periods. Under the new
requirements for calculating earnings per share, the dilutive effect of
stock options has been excluded.
3. Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market value (net realizable value), and include material, labor and
attributable overhead.
Inventories consist of the following: xx
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
(unaudited) (audited)
- -------------------------------------------------------------------------------
<S> <C> <C>
Raw Materials and Purchased Parts $ 88 $ 130
Work-in-process 62 111
Finished Goods 206 727
TOTAL $ 350 $ 968
======= ======
</TABLE>
-9-
<PAGE>
4. Property, Plant, and Equipment
Property and equipment are stated at cost and, other than leasehold
improvements, are depreciated on a straight-line basis over their useful
lives. Leasehold improvements are amortized on a straight-line basis over
the lesser of their useful life or remaining term of the related lease.
Property and equipment consisted of the following (in thousands): xx
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
(unaudited) (audited)
- --------------------------------------------------------------------------------
<S> <C> <C>
Machinery and Equipment $ 2,317 $ 2,317
Furniture and Fixtures 277 277
Leasehold Improvements 94 94
SUB TOTAL $ 2,688 $ 2,688
Less Accumulated depreciation
and amortization $ 2,671 $ 2,667
TOTAL $ 17 $ 21
</TABLE>
ITEM 2 MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONIDTION AND
RESULTS OF OPERATIONS
The statements made concerning expected company performance and product
commercialization are forward-looking statements and as such are made
pursuant to the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. The Company's 1995 10-K and 1996 10-KSB contain
detailed risk factors that may contribute to the actual results in future
periods which could materially differ from forward-looking statements made
by the Company.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Financial
Statements and the related notes thereto included in this report. The
following discussion contains forward-looking statements and the Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of numerous factors, including those
set forth in the following discussion and elsewhere in this report.
Net revenues for the current quarter total $446 thousand, a decrease of 74%
from the $1,733 thousand reported during the first quarter of 1997. The
decrease in revenues can be attributed to loss of customers, lack of product
inventory for sales, and a general decline in sales throughout the PC
industry.
The gross margin in the first quarter of fiscal 1999 was approximately 23%
compared to 48% in the first quarter of fiscal 1998. This decrease is due
to an inventory adjustment and also cost of the manufacturing overhead
spreading over a smaller sales volume.
-10-
<PAGE>
Product development expenses were approximately $54 thousand or 12% of net
revenues during the current quarter compared to approximately $100 thousand
or 6% of net revenues during the first quarter of 1998. The Company remains
firmly committed to new product development and does so with efficiency and
awareness of the Company's on going cost control program, and lower revenue
base.
Selling, general and administrative expenses were approximately $151
thousand or 34% of revenues during the first quarter of 1999 compared to
$679 thousand reported in the first quarter of 1998.
Interest expenses also increased from $21 thousand dollars of first quarter
of 1998 to $80 thousand dollars of 1999. Per agreement with Coast Business
Credit, interest is approximately $10 thousand per month as it is based on a
minimum of a $1.0 million line of credit. Additionally, for the current
quarter there were additional accrued interest charges accrued to James T.
Koo, David S. Lee, and K. C. Yeung for personal loans extended to the
Company.
Overall, this quarter's loss can be mostly attributed to the large decrease
in revenues, inventory provisions, and higher interest expenses.
Year 2000
Many computer systems experience problems handling dates in and beyond the
year 2000. Therefore, some computer hardware and software will need to be
modified prior to the year 2000 in order to remain functional. To the
Company's best knowledge, the Company has conducted tests, and therefore
does not anticipate any internal Year 2000 issues from its own information
system, databases or programs. Additionally, it is our belief that the
Company's hardware and software are also Year 2000 compliant. There can be
no assurance, however, that there will not be a delay in, or increased costs
associated with, the implementation of any changes, and the Company's
inability to implement such changes could have an adverse effect on future
results of operations or financial condition.
It is unknown how customers' spending patterns may be impacted by year 2000
programs. As customers focus on preparing their business for the year 2000
in the near term, capital budgets may be spent on efforts of remedy,
potentially delaying the purchase and implementation of new systems, thereby
creating less demand for the Company's products and services. This could
adversely affect the Company's future revenues, thought the impact is not
known at this time.
The Company is also assessing and addressing the possible effects on the
Company's operations of the year 2000 readiness of key distributors,
suppliers, customers, vendors and financial services organizations. The
Company's reliance on suppliers and distributors means that their failure to
address year 2000 issues could have a material impact on the Company's
operations and financial results. However, the potential impact and related
costs are not known at this time.
Liquidity and Capital Resources
Liquidity and capital resources of the Company continue to worsen during the
-11-
<PAGE>
first quarter of 1999. The Company defaulted on its minimum Tangible Net
Worth requirement under the line of credit during the third quarter of 1998.
Coast has formally waived this breach through Mar. 31, 1999. There can be
no assurance the Company will be successful in obtaining an alternative
source of financing to replace Coast.
The Company's total accounts payable, including those to related party, has
decreased slightly from $3,499,000 as of the year ended Dec. 31, 1998 to
3,381,000 as of Dec. 31, 1998. Accounts payable to Action Well (a
subsidiary of Broadsino) is included in Due to related parties in both
years. The majority of these accounts payable are over 90 days old and a
substantial number of them are over 180 days. The Company has been and
continues to be threatened with litigation by some of its trade creditors.
Based on the Company's existing cost structure, and the Company's current
and anticipated revenue streams, the Company cannot estimate that it will
break even on cash flow in the current or net fiscal year. The Company does
not expect to achieve profitability until the Adaptec compatible PCI SCSI
controller cards and PCI I/O products are in production and have obtained a
substantial market share. The Company cannot make any assurance that this
level of sales will be achieved or that the products will be marketable.
The Company has a negative working capital of $3.5 million and its current
liabilities exceeded it current assets by $3.4 million. The Company needs
to raise financing in the near term or be faced with selling itself or
bankruptcy. The Company's best prospect for raising cash in the next six
months is the prior-described bridge loan and merger with Broadsino. No
assurance can be given either the bridge loan or the merger will occur.
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
During the quarter, Dynasales, a former sales representative of the Company
filed legal proceedings against the Company for the past due commission
earned. The case has been settled with the Company paying the past
commission due.
Two ex-employees of the Company have filed complaints with State of
California, department of Labor for not receiving the full wage due when
terminated. Since then the Company has paid the wages due in full and will
pay the penalty of salaries up to 28 days to each of the two employees.
An ex-employee of the Company has filed complaints with State of California
for sexual bias and sexual harassment. The Company (considers the case
without merit and) has responded the complaints and will defend itself
vigorously.
From time-to-time DTC could be involved in routine litigation as part of its
normal course of business. Management believes the Company carries adequate
product liability insurance and these matters can be resolved without
material adverse effect on DTC's overall financial position, results of
operations and cash flows.
ITEM 2 Changes in Securities
None
-12-
<PAGE>
ITEM 3 Defaults Upon Senior Securities
None
ITEM 4 Submission of Matters to a Vote of Security Holders
John Miao has resigned as Director of the Company. A replacement will be
put forth for election for coming shareholders meeting.
ITEM 5 Other Information
Not applicable
ITEM 6 Exhibits and Reports on Form 8k
Exhibit 27.1 Financial Data Schedule
SIGNATURE
Pursuant to the requirements of Section 3 or 15(d) 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
PHOTONICS CORPORATION dba
DTC DATA TECHNOLOGY
DATE: May 25, 1999
BY: /s/ Wen-Wai Huang
Chief Financial Officer
- -13-
<PAGE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 OF
PHOTONICS CORPORATION, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 427
<ALLOWANCES> 0
<INVENTORY> 327
<CURRENT-ASSETS> 807
<PP&E> 36
<DEPRECIATION> 3
<TOTAL-ASSETS> 840
<CURRENT-LIABILITIES> 4,197
<BONDS> 0
0
2,328
<COMMON> 44,096
<OTHER-SE> (49,781)
<TOTAL-LIABILITY-AND-EQUITY> 840
<SALES> 446
<TOTAL-REVENUES> 446
<CGS> 361
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (80)
<INCOME-PRETAX> (201)
<INCOME-TAX> 0
<INCOME-CONTINUING> (201)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (201)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
<PAGE>
</TABLE>
