<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
-----------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31,1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from __________ to __________
Commission File Number: 0-23606
EDUCATIONAL INSIGHTS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2392545
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16941 KEEGAN AVENUE
CARSON, CA 90746
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 884-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to b 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
----- -----
As of May 6, 1998 there were 7,040,000 shares of common stock outstanding.
Total number of sequential pages: 19 Exhibit Index is on page 10
Page 1 of 19 sequentially numbered pages
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PART I. ITEM 1. FINANCIAL STATEMENTS
EDUCATIONAL INSIGHTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(Unaudited, except for December 31, 1997 balance sheet information)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 295 $ 235
Accounts receivable, less allowance for doubtful
accounts of $375 in 1998 and $412 in 1997 6,338 10,478
Inventory 13,374 12,086
Income taxes receivable 495
Other receivables 191 193
Prepaid expenses and other current assets 991 593
Deferred income taxes 750 750
-------- -----------
Total current assets 22,434 24,335
-------- -----------
PROPERTY AND EQUIPMENT, Net 5,331 5,218
-------- -----------
OTHER ASSETS 659 577
-------- -----------
TOTAL $28,424 $ 30,130
-------- -----------
-------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 121 $ 121
Line of credit 500
Accounts payable 2,741 3,045
Accrued expenses 1,318 1,391
Income taxes payable 14 34
Deferred Income 99 101
-------- -----------
Total current liabilities 4,293 5,192
-------- -----------
LONG-TERM DEBT 1,034 1,064
-------- -----------
DEFERRED INCOME TAXES 355 355
-------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, no par value; 10,000,000 shares authorized;
no shares issued
Common stock, no par value; 30,000,000 shares authorized;
7,040,000 shares issued in 1998 and 1997 18,644 18,644
Accumulated other comprehensive income - foreign currency
translation adjustments 136 130
Retained earnings 3,962 4,745
-------- -----------
Total shareholders' equity 22,742 23,519
-------- -----------
TOTAL $28,424 $ 30,130
-------- -----------
-------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2 of 19 sequentially numbered pages
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EDUCATIONAL INSIGHTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
------ ------
<S> <C> <C>
SALES $5,922 $6,347
COST OF SALES 2,942 3,056
------ ------
GROSS PROFIT 2,980 3,291
------ ------
OPERATING EXPENSES:
Sales and marketing 1,438 1,523
Warehousing and distribution 851 908
Research and development 1,112 1,136
General and administrative 904 942
------ ------
Total operating expenses 4,305 4,509
------ ------
OPERATING LOSS (1,325) (1,218)
------ ------
OTHER INCOME (EXPENSE):
Interest expense (36) (36)
Interest income 6 16
Other income, net 80 32
------ ------
Total other income (expense) 50 12
------ ------
LOSS BEFORE BENEFIT
FOR INCOME TAXES (1,275) (1,206)
BENEFIT FOR INCOME TAXES (492) (460)
------ ------
NET LOSS (783) (746)
------ ------
OTHER COMPREHENSIVE INCOME -
Foreign currency translation adjustments
(Net of tax of $4 in 1998 and $(8) in 1997) 6 (13)
------ ------
COMPREHENSIVE INCOME $ (777) $ (759)
------ ------
------ ------
Net Income (Loss) Per Share - Basic and Diluted $(0.11) $(0.11)
------ ------
------ ------
Weighted Average Number of
Common and Common Equivalent
Shares Outstanding - Basic and Diluted 7,040 7,040
------ ------
------ ------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 19 sequentially numbered pages
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EDUCATIONAL INSIGHTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (783) $ (746)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for doubtful accounts and sales returns (37) 30
Depreciation 214 255
Changes in operating assets and liabilities:
Accounts receivable 4,185 3,743
Inventory (1,272) (665)
Income taxes receivable (495) (429)
Other receivables 3 (71)
Prepaid expenses and other current assets (398) (287)
Other assets (79) (31)
Accounts payable (328) 815
Accrued expenses (74) (350)
Deferred Income (2) (73)
Income Taxes Payable (20) (437)
------ ------
Net cash provided by operating activities 914 1,754
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (327) (332)
------ ------
Net cash used in investing activities (327) (332)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in line of credit (500) (1,000)
Repayments of long-term debt (30) (27)
------ ------
Net cash used in financing activities (530) (1,027)
------ ------
Effect of exchange rate changes on cash 3 (9)
------ ------
NET DECREASE IN CASH 60 386
CASH, BEGINNING OF PERIOD 235 1,018
------ ------
CASH, END OF PERIOD $ 295 $1,404
------ ------
------ ------
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $46 $54
Income taxes paid $16 $409
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 19 sequentially numbered pages
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EDUCATIONAL INSIGHTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The consolidated financial statements of Educational Insights, Inc. (the
"Company") include all of the accounts of the Company and its wholly owned
subsidiary. All significant inter-company balances and transactions have
been eliminated in consolidation.
The interim consolidated financial statements are not audited, but include
all adjustments (including normal recurring adjustments) which are, in the
opinion of management, necessary for a fair representation of the financial
position, results of operations and cash flows for the period.
The consolidated financial statements as presented herein should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto as filed with the Securities and Exchange Commission and
included in the Company's Form 10-K for the year ended December 31, 1997.
The Company's fiscal year ends December 31. The results of operations for
the period ended March 31, 1998, are not indicative of the results that might
be expected for the full fiscal year.
2. INVENTORY
Inventory consists principally of finished goods held for sale and are stated
at the lower of cost or market. Cost is determined using the first-in,
first-out method.
3. NEW ACCOUNTING STANDARDS
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive
Income, which is effective for period beginning after December 15, 1997.
SFAS No. 130 establishes standards for reporting and displaying comprehensive
income by their nature in the financial statements. In addition, the
accumulated balance of other comprehensive income must be displayed
separately from retained earnings and additional paid-in capital in the
equity section of the statement of financial position. Reclassification of
financial statements for earlier periods, provided for comparative purposes,
is required.
Page 5 of 19 sequentially numbered pages
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PART I. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited consolidated financial statements and accompanying notes, included
in Part I -Item 1 of this Quarterly Report, and the audited consolidated
financial statements and accompanying notes and Management's Discussion and
Analysis of Financial Condition and Results of operations for the year ended
December 31, 1997 included in the Company's Annual Report on Form 10-K.
Consolidated sales were $5,922,000 for the first quarter ended March 31,
1998, a decrease of 6.7% or $425,000 compared to the same period in 1997.
Net loss was $783,000 or $0.11 per share compared with a net loss of $746,000
or $0.11 per share for the same period in 1997. The Company's business is
highly seasonal. Typically, sales and operating income are highest during
the third and fourth quarters and lowest during the first and second
quarters, This seasonal pattern is primarily due to the increased demand for
the Company's products during the "Back-to-school" and year-end holiday
selling seasons. The Company typically experiences losses during the first
quarter. The loss in the first quarter of 1998 was in line with the
Company's internal projections.
SALES
Sales decreased by 6.7% or $425,000 to $5,922,000 in the quarter ended
March 31, 1998 from $6,347,000 in the quarter ended March 31, 1997. The
decrease occurred primarily in the Company's specialty toy business where
there were decreases in purchases by seven of the Company's larger customers.
The Company believes these decreases were the result of delays in the
placing of orders by these larger customers and the fact that the Company
made no major product introductions that significantly impacted the first
quarter of 1998 while in 1997 its GeoSafari Talking Globe, which was
introduced in late 1996, was continuing to produce carryover sales in the
first quarter of 1997. Overall, sales in the Company's other businesses
remained essentially unchanged with sales in the Company's school supply,
mass market and private label business increasing slightly while sales in the
International and direct businesses declined slightly.
GROSS PROFIT
Gross profit margin as a percentage of sales decreased to 50.3% for the
quarter ended March 31, 1998 from 51.9% for the same period in 1997. This
decrease resulted primarily from a continuing increase in the in the
proportion of ExploraToy sales which are at margins lower than those
experienced in the Company's core markets and the result of a one-time
adjustment that resulted in relatively higher costs of goods sold in 1998
compared to 1997 in the Company's ExploraToy division. The Company does not
anticipate a significant change in gross profit margin from that experienced
in the first quarter of 1998.
SALES AND MARKETING EXPENSE
Sales and marketing expense decreased $85,000 to $1,438,000 from
$1,523,000 for the same period in 1997. When expressed as a percentage of
sales, sales and marketing expense increased slightly to 24.3% from 24.0% as
a result of the decrease in sales volume. Because of the seasonal nature of
the Company's business, sales and marketing expense when expressed as a
percentage of sales are normally higher during the first two quarters of the
year than they are in the last two quarters of the year. The Company expects
sales and marketing expense when expressed as a percentage of sales to
decrease in the latter half of the year.
WAREHOUSING AND DISTRIBUTION EXPENSE
Warehousing and distribution expense decreased $57,000 to $851,000 from
$908,000 for the same period in 1997. Warehousing and distribution expense
remained essentially unchanged as a percentage of sales at 14.4%. The
Company believes that warehousing and distribution expense expressed as a
percentage of sales will decrease in conjunction with the seasonal increase
in sales during the last half of 1998.
RESEARCH AND DEVELOPMENT EXPENSE
In absolute dollars, research and development expense remained
essentially unchanged at $1,112,000 for the quarter ended March 31, 1998
compared to $1,136,000 for the same period in 1997. When expressed as a
percentage of sales, research and development expense increased to 18.8% from
17.9% as a result of the decrease in sales volume.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense remained essentially unchanged at
$904,000 for the quarter ended March 31, 1998 compared to $942,000 for the
same period in 1997. When expressed as a percentage of sales, general and
administrative expense increased to 15.3% from 14.8% as a result of the
decrease in sales volume.
INTEREST EXPENSE
Interest expense remained unchanged at $36,000 for the first quarter of
1998.
Page 6 of 19 sequentially numbered pages
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, this Report
contains forward-looking statements which involve a number of risks and
uncertainties, including but not limited to continued successful development
and acceptance of new products, dependence on education funding by Federal,
State and local governments, dependence on key development and marketing
personnel, general economic conditions and the risk factors listed from
time-to-time in the Company's filings with the Securities and Exchange
Commission.
LIQUIDITY & CAPITAL RESOURCES
In recent years, the Company's working capital needs have been met
through funds generated from operations and from the Company's revolving line
of credit. The Company's principal need for working capital has been to meet
peak inventory and accounts receivable requirements associated with its
seasonal sales patterns. The Company increases inventory levels during the
spring and summer months in anticipation of increasing shipments in the
summer and fall. Accounts receivable have historically increased during the
summer and fall because of the Company's use of "dating" programs wherein
sales are made to the Company's customers for which payment is deferred for
one to three months based on the size of the sales orders. Due to these
sales patterns, the largest customer orders are shipped during the summer and
fall, hence increasing accounts receivable balances during the third and
fourth quarters.
During the quarter ended March 31,1998, the Company's source of funds
was net cash provided by operating activities, primarily from the collection
of outstanding accounts receivable.
The principal uses of cash during the period ended March 31, 1998 were
the funding of operating losses (net of depreciation) of $569,000, an
increase in inventory of $1,272,000, an increase in prepaid expenses of
$398,000 and an increase in taxes receivable of $495,000 and repayment of
outstanding borrowings under the Company's revolving line of credit of
$500,000. Capital spending of $327,000 during the quarter was primarily for
tooling relating to new products and for the purchase of a show exhibit booth.
The Company currently has a revolving line of credit with a bank which
is collateralized by substantially all of the Company's assets. Under the
revolving line of credit agreement, which expires June 8, 1998, the Company
may borrow up to $8 million. The agreement requires the maintenance of
certain financial ratios, minimum annual net income amounts and tangible net
worth amounts, and provides for various restrictions including limitations on
capital expenditures and additional indebtedness. At March 31, 1998, the
Company had no outstanding borrowings against this line of credit.
The Company believes that borrowings available under the revolving line
of credit, if and when renewed, and anticipated funds from operations will
satisfy the Company's projected working capital and capital expenditure
requirements for at least the next 12 months.
Page 7 of 19 sequentially numbered pages
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Directors Stock Option Plan No. 1, and form of Stock Option Agreement
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the period in
question.
Page 8 of 19 sequentially numbered pages
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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.
EDUCATIONAL INSIGHTS, INC.
(Registrant)
Date: May 6, 1998 By: /s/ Jay Cutler
----------------------------------
Jay Cutler
President and Chief Executive Officer
Date: May 6, 1998 By: /s/ G. Reid Calcott
----------------------------------
G. Reid Calcott
Vice Chairman and Chief Financial Officer
(Principal Financial Officer)
Page 9 of 19 sequentially numbered pages
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- ------- ----------- -------------
<S> <C> <C>
10.19 Directors Stock Option Plan No. 1 and form of Stock Option Agreement 11
</TABLE>
Page 10 of 19 sequentially numbered pages
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EDUCATIONAL INSIGHTS, INC.
DIRECTORS STOCK OPTION PLAN NO.1
1. PURPOSE. The purpose of this Educational Insights, Inc. Directors
Stock Option Plan No.1 is to further the growth and development of
Educational Insights, Inc. by providing an incentive to non-employee
directors of the Company to participate in the long-term growth of the
Company by receiving the opportunity to acquire shares of the Company's
common stock. The Plan provides a means to increase such persons' interests
in the Company's welfare and to encourage them to continue their services to
the Company or its subsidiaries.
2. DEFINITIONS. The following definitions are applicable to the Plan:
2.1 BOARD. The Board of Directors of the Company.
2.2 COMPANY. Educational Insights, Inc., a California corporation.
2.3 CODE. The Internal Revenue Code of 1986, as amended from time
to time.
2.4 COMMON STOCK. The shares of the common stock, without par
value, of the Company.
2.5 DIRECTORS STOCK OPTION. Any non-qualified stock option that is
intended to be, and is designated as, a "Directors Non-Qualified Stock
Option" and granted pursuant to and in accordance with this Plan.
2.6 FAIR MARKET VALUE. For purposes of the Plan, the Fair Market
Value of any share of Common Stock at any date shall be (a) if the Common
Stock is listed on an established stock exchange or exchanges, the last
reported sale price per share on such date on the principal exchange on which
it is traded, or if no sale was made on such day on such principal exchange,
at the closing reported bid price on such day on such exchange, or (b) if the
Common Stock is not then listed on an exchange, the average of the closing
bid and asked prices per share for the Common Stock in the over-the-counter
market as quoted on NASDAQ on the day prior to such date, or (c) if the
Common Stock is not then listed on an exchange or quoted on NASDAQ, an amount
determined in good faith by the Plan Administrator.
2.7 INCENTIVE STOCK OPTION. Any stock option intended to be and
designated as an "incentive stock option" within the meaning of Section 422
of the Code.
2.8 OPTIONEE. The recipient of a Directors Stock Option.
2.9 PLAN. This Educational Insights, Inc. Directors Stock Option
Plan No. 1, as amended from time to time.
2.10 PLAN ADMINISTRATOR. The Board or the Directors Awards Committee
designated pursuant to Section 4 to administer, construe and interpret the terms
of the Plan.
3. OPTIONS UNDER THE PLAN. Only one type of stock option may be
granted under the Plan: Directors Stock Options (referred to herein as
"Option").
4. ADMINISTRATION.
4.1 ADMINISTRATION BY BOARD. Subject to Section 4.2, the Plan
Administrator shall be the Board. Subject to the provisions of the Plan, the
Plan Administrator shall have authority to construe and interpret the Plan,
to promulgate, amend and rescind rules and regulations relating to its
administration, from time to time to select from among the eligible directors
(as determined pursuant to Section 5) of the Company and its subsidiaries
those to whom Options will be granted, to determine the timing and manner of
the grant of the Options, to determine the exercise price, the number of
shares covered by and all of the terms of the Options and to make all of the
determinations necessary or advisable for administration of the Plan. The
interpretation and construction by the Plan Administrator of any provision of
the Plan, or of any agreement issued and executed under the Plan, shall be
final and binding upon all parties. No member of the Board shall be liable
for any action or determination undertaken or made in good faith with respect
to the Plan or any agreement executed pursuant to the Plan.
4.2 ADMINISTRATION BY COMMITTEE. The Board may, in its sole
discretion, delegate any or all of its duties as Plan Administrator to a
committee (the "Directors Awards Committee") of not fewer than two (2)
members of the Board to be appointed by and serve at the pleasure of the
Board. From time to time, the Board may increase or decrease (to not less
than two members) the size of the Directors Awards Committee, and add
additional members to, or remove members from, the Directors Awards
Committee. The Directors Awards Committee shall act pursuant to a majority
vote, or the written consent of a majority of its members, and minutes shall
be kept of all of its meetings and copies thereof shall be provided to the
Board. Subject to the provisions of the Plan and the directions of the Board,
the Directors Awards Committee may establish and follow such rules and
regulations for the conduct of its
Page 11 of 19 sequentially numbered pages
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business as it may deem advisable. No member of the Directors Award Committee
shall be liable for any action or determination undertaken or made in good
faith with respect to the Plan or any agreement executed pursuant to the Plan.
5. ELIGIBILITY. Any duly elected or appointed and acting director of
the Company or any of its subsidiaries who is not an employee of the Company
or any of its subsidiaries shall be eligible to receive an Option under the
Plan.
6. SHARES SUBJECT TO THE PLAN.
6.1 AVAILABLE SHARES. The shares available for grant of Options
under the Plan shall be shares of the Company's authorized but unissued, or
reacquired, Common Stock. The aggregate number of shares which may be issued
pursuant to exercise of Options granted under the Plan shall not exceed
Twenty Five Thousand (25,000) shares of Common Stock (subject to adjustment
as provided in Section 6.2). The Company shall at all times reserve and keep
such shares available for this Plan. In the event that the grant of any
Option under the Plan for any reason expires, is terminated or surrendered
without being exercised in full or is exercised or surrendered without the
distribution of shares, the shares of Common Stock allocable to the
unexercised portion of the Option shall again be available for grant and
distribution under the Plan as if no Option had been granted with respect to
such shares.
6.2 CAPITAL STRUCTURE ADJUSTMENTS. Except as otherwise provided
herein, appropriate and proportionate capital structure adjustments shall be
made in the number and class of shares subject to the Plan, to the Option
rights granted under the Plan, and the exercise price of such Option rights,
in the event of a stock dividend (but only on Common Stock), stock split,
reverse stock split, recapitalization, reorganization, merger, consolidation,
separation, or like change in the corporate or capital structure of the
Company. To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Plan
Administrator, the determination of which in that respect shall be final,
binding and conclusive.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan
shall be evidenced by agreements (which need not be identical) in such form
and containing such provisions which are consistent with the Plan as the Plan
Administrator shall from time to time approve. That form of agreement
attached as Exhibit "A" and made a part of this Plan by this reference is
approved. All such agreements may incorporate all or any of the terms hereof
by reference and shall comply with and be subject to the following terms and
conditions:
7.1 NUMBER OF SHARES SUBJECT TO OPTION. Each Option shall be
for Two Thousand Five Hundred (2,500) shares of common stock. Each Option
agreement shall specify the number of shares subject to the Option.
7.2 TIMING OF OPTION GRANTS. Options may be granted under this
Plan if, and only if, the Company has been profitable for its full fiscal
year next preceding the proposed date of an Option grant. No Option shall be
granted under this Plan to any one person who has received an Option under
this Plan at any time within the twelve calendar month period ending on the
date of proposed option grant.
7.3 OPTION PRICE. The purchase price for the shares subject to
any Option shall be 100% of the Fair Market Value of the shares of Common
Stock on the date the Option is granted.
7.4 NOTICE AND PAYMENT. Any exercisable portion of an Option may
be exercised only by delivery of a written notice to the Company, prior to
the time when the portion of such Option becomes unexercisable under Section
7.5, stating the number of shares being purchased and complying with all
applicable rules established by the Plan Administrator. Such notice shall be
accompanied by full payment in cash or by check for an amount equal to the
total Option price for the number of shares being purchased, plus the amount
of tax required to be withheld (if any) by the Company or any parent,or
subsidiary corporation as a result of the exercise of an Option. At the
discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, the Optionee may pay all or a portion of the
purchase price for the number of shares being purchased by tendering shares
of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company, with a Fair Market Value on the date of delivery equal to the
aggregate purchase price of the shares with respect to which such Option is
thereby exercised. Notwithstanding the foregoing, the Company may (but is not
obligated to) extend and maintain, or arrange for the extension and
maintenance of, credit to any Optionee to finance the Optionee's purchase of
shares pursuant to exercise of any Option, on such terms as may be approved
by the Plan Administrator, subject to applicable regulations of the Federal
Reserve Board and any other laws or regulations in effect at the time such
credit is extended.
7.5 TERM OF STOCK OPTION. No Option shall be exercisable after
the expiration of the earliest of (a) five (5) years after the date the
Option is granted or (b) three (3) months after the date the Optionee ceases
to be a director of the Company or its subsidiaries for any reason.
7.6 EXERCISE OF OPTION. No Option shall be exercisable during
the lifetime of an Optionee by any person other than the Optionee. Subject
to the foregoing, the Plan Administrator shall have the power to set the
Page 12 of 19 sequentially numbered pages
<PAGE>
time or times within which each Option shall be exercisable and to accelerate
the time or times of exercise; provided, however, that if any Option is
exercised prior to six months from the date of grant, the shares of Common
Stock received upon such exercise may not be sold prior to six months from
the date of grant. Unless otherwise designated by the Plan Administrator,
each Option under the Plan shall be exercisable as to the total number of
shares covered thereby at any time after the date the Option is granted and
until expiration of the Term of the Option (Section 7.5). To the extent that
an Optionee has the right to exercise an Option and purchase shares pursuant
thereto, the Option may be exercised from time to time by written notice to
the Company, stating the number of shares being purchased and accompanied by
payment full of the purchase price for such shares.
7.7 NO TRANSFER OF OPTION. No Option shall be transferable by an
Optionee otherwise than by will or the laws of descent and distribution.
7.8 NO FRACTIONAL SHARES. In no event shall the Company be
required to issue fractional shares upon the exercise of an Option.
7.9 EXERCISABILITY IN THE EVENT OF DEATH. In the event of the
death of the Optionee, any Option or unexercised portion thereof granted to
the Optionee, to the extent exercisable by him or her on the date of death,
may be exercised by the Optionee's personal representatives, heirs, or
legatees subject to the provisions of Section 7.5 hereof.
7.10 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of the Plan, the Plan
Administrator may accept the surrender of outstanding Options (to the extent
not theretofore exercised) and authorize the granting of new Options in
substitution therefor (to the extent not theretofore exercised). Outstanding
Options may not be modified, extended or amended in any way.
7.11 OTHER PROVISIONS. Each Option may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined
by the Plan Administrator.
8. TERMINATION OR AMENDMENT OF THE PLAN. The Board may at any time
terminate or amend the Plan; provided that (a) without approval of the
shareholders of the Company, there shall be, except by operation of the
provisions of Section 6.2, no increase in the total number of shares covered
by the Plan, and (b) no change in the class of persons eligible to receive
Options granted under the Plan or other material modification of the
requirements as to eligibility for participation in the Plan, no material
increase in the benefits accruing to participants under the Plan, no change
in the exercise price of Options granted under the Plan, no change (except
under Section 6.2) in the number of shares covered by the Plan and no change
in the timing of Option grants (Section 7.2) shall be made more often then
once every six (6) months; and, provided further that, without the consent of
the Option recipient, no amendment may adversely affect any then outstanding
Options or any unexercised portion thereof.
9. WITHHOLDING. Whenever the Company proposes or is required to issue
or transfer shares under the Plan, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
any federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares of Common Stock.
If a participant surrenders shares acquired pursuant to the exercise of an
Incentive Stock Option in payment of the exercise price of an Option and such
surrender constitutes a disqualifying disposition for purposes of obtaining
Incentive Stock Option treatment under the Code, the Company shall have the
right to require the Optionee to remit to the Company an amount sufficient to
satisfy any federal, state and local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares.
10. UNFUNDED STATUS OF PLAN. The Plan is intended to constitute an
"unfunded" plan for incentive and compensation. With respect to any payments
not yet made to a participant by the Company, nothing set forth herein shall
give any such participant any rights that are greater than those of a general
unsecured creditor of the Company. In its sole discretion, the Plan
Administrator may authorize the creation of trusts or other arrangements to
meet the obligations created under the Plan to deliver shares or cash with
respect to the exercise of Options hereunder, provided, however, that the
existence of such trusts or other arrangements is consistent with the
unfunded status of the Plan.
11. CHANGE OF CONTROL. The following acceleration and valuation
provisions shall apply in the event of a "Change of Control" or "Potential
Change of Control", as defined in this Section 11:
11.1 OPTIONS CASHED OUT. In the event of a "Change of Control," as
defined in Section 11.2, unless otherwise determined by the Plan
Administrator in writing at or after grant, but prior to the occurrence of
such Change of Control, or, if and to the extent so determined by the Plan
Administrator in writing at or after grant (subject to any right of approval
expressly reserved by the Plan Administrator at the time of such
determination) in the event of a "Potential Change of Control," as defined in
Section 11.3, the value of all outstanding Options, shall, to the extent
determined by the Plan Administrator at or after grant, be cashed out on the
basis of the "Change of Control Price" (as defined in Section 11.4) as of the
date the Change of Control occurs or Potential Change of Control is
determined to have occurred, or such other date as the Plan Administrator may
determine prior to the Change of Control or Potential
Page 13 of 19 sequentially numbered pages
<PAGE>
Change of Control.
11.2 DEFINITION OF CHANGE OF CONTROL. For purposes of Section
11.1, a "Change of Control" means the happening of any of the following:
(a) when any "person", as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (other than the
Company or a subsidiary or any Company employee benefit plan (including its
trustee)), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended), directly or
indirectly of securities of the Company representing 20 percent or more of
the combined voting power of the Company's then outstanding securities;
(b) the occurrence of any transaction or event relating to
the Company required to be described pursuant to the requirements of Item
5(f) of Schedule 14A of Regulation 14A of the Commission under the Securities
Exchange Act of 1934, as amended;
(c) when, during any period of two consecutive years during
the existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board cease, for any reason other than death, to
constitute at least a majority thereof, unless each director who was not a
director at the beginning of such period was elected by, or on the
recommendation of, at least two-thirds of the directors at the beginning of
such period; or
(d) the occurrence of a transaction requiring shareholder
approval for the acquisition of the Company by an entity other than the
Company or a subsidiary through purchase of assets, or by merger, or
otherwise.
11.3 DEFINITION OF POTENTIAL CHANGE OF CONTROL. For purposes of
Section 11.1 a "Potential Change of Control" means the happening of any of
the following:
(a) the entering into an agreement by the Company, the
consummation of which would result in a Change of Control of the Company as
defined in Section 11.2; or
(b) the acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
subsidiary or any Company employee benefit plan (including its trustee)) of
securities of the Company representing 5 percent or more of the combined
voting power of the Company's outstanding securities and the adoption by the
Board of a resolution to the effect that a Potential Change of Control of the
Company has occurred for purposes of this Plan.
11.4 DEFINITION OF CHANGE OF CONTROL PRICE. For purposes of this
Section 11, "Change of Control Price" means the highest price per share paid
in any transaction reported on any established stock exchange or reported
over-the-counter market, or paid or offered in any transaction related to a
potential or actual Change of Control of the Company at any time during the
preceding sixty (60) day period as determined by the Plan Administrator.
11.5 EXCEPTIONS. Anything to the contrary notwithstanding, any
transaction involving the spin-off of the company and any public offering of
shares of the Company that results in raising capital for the Company shall
be excluded from the events and transactions specified in Sections 11.2 and
11.3.
12. GENERAL PROVISIONS.
12.1 RESTRICTIONS ON ISSUANCE OF SHARES. The issuance of Options
and shares of Common Stock shall be subject to compliance with all of the
applicable requirements of law with respect to the issuance and sale of
securities, including, without limitation, any required qualification under
the California Corporate Securities Law of 1968, as amended. If a participant
acquires shares of Common Stock pursuant to the exercise of an Option the
Plan Administrator, in its sole discretion, may require as a condition of
issuance of shares covered by his or her Option, to represent that the shares
to be acquired pursuant to exercise of the Option will be acquired for
investment and without a view to distribution thereof; and in such case, the
Company may place a legend on the certificate evidencing the shares
reflecting the fact that they were acquired for investment and cannot be sold
or transferred unless registered under the Securities Act of 1933, as
amended, or unless counsel for the Company is satisfied that the
circumstances of the proposed transfer do not require such registration. The
Company may place a legend on the certificates evidencing the shares
reflecting the fact that they are subject to restrictions on transfer under
the terms of this Section 12.1. In addition, any participant may be required
to execute a buy-sell or right of first refusal agreement in favor of the
Company or its designee with respect to all or any of the shares so acquired.
In such event, the terms of such agreement shall apply to such shares.
12.2 RIGHTS AS A SHAREHOLDER OR EMPLOYEE. A participant or
transferee of an Option shall have no right as a shareholder of the Company
with respect to any shares covered by any grant under this Plan until the
date of the issuance of a share certificate for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether cash,
securities, or other property) or distributions or other rights for which the
Page 14 of 19 sequentially numbered pages
<PAGE>
record date is prior to the date such share certificate is issued, except as
provided in Section 6.2. Nothing in the Plan or in any Option agreement shall
confer upon any participant any right to enter or continue in the employ of
the Company or any of its subsidiaries or interfere in any way with any right
of the Company or any subsidiary to terminate the participant's relationship
with the company or subsidiary at any time.
12.3 GOVERNING LAW. This plan shall be governed by, and construed
in accordance with, the laws of the state of California.
13. EFFECTIVE DATE OF PLAN. The plan shall be adopted and become
effective on the date of execution specified below.
14. TERM OF PLAN. Unless sooner terminated by the Board in its sole
discretion, the Plan will expire and no Options may be granted hereunder on
or and after the earlier of the tenth anniversary of the effective date
determined in Section 13.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly authorized officer and to be effective on this February 14, 1997.
EDUCATIONAL INSIGHTS, INC.
BY:
JAY A. CUTLER, PRESIDENT
Page 15 of 19 sequentially numbered pages
<PAGE>
Name:
Option No.: NSO-
No. Shares:
Grant Date:
Exercise Price: $
Expiration Date:
EDUCATIONAL INSIGHTS, INC.
DIRECTORS NON-QUALIFIED
STOCK OPTION AGREEMENT
This Agreement ("Agreement") is made by and between Educational Insights,
Inc. , a corporation ("Company"), and _________________ ("Optionee") as of
the ____ day of _____________, 199__, with respect to the following facts:
A. The Company has adopted the Educational Insights, Inc. "Directors
Option Plan No. 1 ("Plan") pursuant to which the Company is authorized to
grant stock options to directors of the Company or its subsidiaries; Except
as otherwise specified, capitalized terms used herein shall have the same
meanings as set forth for like terms in the Plan, all of which are made a
part hereof by this reference;
B. Optionee has received and reviewed a copy of the Plan; and
C. Optionee is an employee of the Company or a subsidiary but not an
employee of either:
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound, the parties agree as follows:
1. GRANT OF STOCK OPTION. Subject to the terms and conditions set forth
herein and to end in the Plan, the Company hereby grants to Optionee a
non-qualified stock option (" Option") to purchase from the Company, at the
price of ___________ ($____________) per share, Two Thousand Five Hundred
(2,500) Shares of the Company's authorized and unissued or reacquired shares
of Common Stock (the "Shares").
2. NON-QUALIFIED STOCK OPTION. The Option granted to Optionee pursuant
to this Agreement is intended to be a "non-qualified stock option" and is not
subject to the qualification requirements and limitations applicable to
incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended ("Code").
3. ADMINISTRATION. The Plan provides that the Plan Administrator shall
be the Board or a committee ("Committee") consisting of not less than two (2)
individuals appointed by the Board. Subject to the provisions of the Plan,
the Plan Administrator shall have authority to construe and interpret the
Plan and this Agreement, to promulgate, amend and rescind rules and
regulations relating to the administration of the Plan and this Agreement,
and to make all of the determinations necessary or advisable for
administration of the Plan and this Agreement. The interpretation and
construction by the Plan Administrator of any provision of this Agreement,
shall be final and binding upon all parties. No member of the Plan
Administrator shall be liable for any action or determination undertaken or
made in good faith with respect to the Plan or this Agreement.
4. TERM OF STOCK OPTION. Unless earlier exercised pursuant to Section 5
below, the Option shall terminate on, and shall not be exercisable after, the
expiration of the earliest of (a) five (5) years after the date first above
written or, if earlier, the Expiration Date set forth above or (b) three (3)
months after the date Optionee ceases to be a director of the Company or its
subsidiaries for any reason.
5. EXERCISE.
5.1 EXERCISABILITY. Subject to the terms and conditions of this
Agreement, the Option shall be immediately exercisable with respect to the
total number of the Shares specified in Section 1 above. The Option may be
exercised by Optionee with respect to any of the Shares at any time on or
after the date on which the Option becomes exercisable with respect to such
Shares during the Term (Section 4) of the Option; provided that the Option
may not be exercised at any one time with respect to less than ten (10) of
the Shares unless the number of the Shares with respect to which the Option
is exercised is the total number of the Shares with respect to which the
Option is exercisable at that time.
5.2 NOTICE OF EXERCISE. Optionee shall exercise the Option by
delivering to the Company, either in person or by certified or registered
mail, written notice, in substantially the form attached hereto as Exhibit A,
of election to exercise and payment in full of the purchase price as provided
in Section 5.3 below. The written notice shall set forth the whole number of
the Shares with respect to which the Option is being exercised.
Page 16 of 19 sequentially numbered pages
<PAGE>
5.3 PAYMENT OF PURCHASE PRICE. The purchase price for any of the
Shares with respect to which Optionee exercises this Option shall be paid in
full at the time Optionee delivers to the Company the written notice of
election to exercise. The purchase price shall be paid in cash or by check
for an amount equal to the total Option exercise price set forth above for
the total number of the shares being purchased, plus the amount of tax
required to be withheld (if any) by the Company or any parent or subsidiary
corporation as a result of the exercise of this Option. At the discretion of
the Plan Administrator, upon such terms as the Plan Administrator shall
approve, the Optionee may pay all or a portion of the purchase price for the
number of shares being purchased, by tendering to the Company shares of the
Company's Common Stock owned by the Optionee, duly endorsed for transfer to
the Company, with a Fair Market Value (determined under the terms of the
Plan) on the date of delivery equal to the aggregate purchase price of the
shares with respect to which such Option or portion is thereby exercised.
Notwithstanding the foregoing, the Company may (but is not deligated to)
extend and maintain, or arrange for the extension and maintenance of, credit
to the Optionee to finance the Optionee's purchase of shares pursuant to
exercise of any Option, on such terms as may be approved by the Plan
Administrator, subject to applicable regulations of the Federal Reserve Board
and any other laws or regulations in effect at the time such credit is
extended. The Optionee shall make any arrangements required by the Company to
ensure that there is available for payment the amount of tax required to be
withheld by the Company or any parent or subsidiary corporation as a result
of either the grant or exercise of a Stock Option or any sale or other
disposition of shares acquired by exercise of a Stock Option.
6. ISSUANCE OF AND RESTRICTION ON SHARES. (a) Promptly after the
Company's receipt of the written notice of election provided for in Section
5.2 above and Optionee's payment in full of the purchase price, the Company
shall deliver, or cause to be delivered to Optionee, certificates for the
whole number of the Shares with respect to which the Option is being
exercised by Optionee. Shares shall be registered in the name of Optionee.
If any law or regulation of the Securities and Exchange Commission or of any
other federal or state governmental body having jurisdiction shall require
the Company or Optionee to take any action prior to issuance to Optionee of
any of the Shares specified in the written notice of election to exercise, or
if any listing agreement between the Company and any national securities
exchange requires such shares to be listed prior to issuance, the date for
the delivery of such shares shall be adjourned until the completion of such
action and/or such listing.
If the Optionee acquires any of the Shares pursuant to the exercise of this
Option, the Plan Administrator, in its sole discretion, may require the
Optionee to execute a buy-sell or right of first refusal agreement with
respect to all or any portion of such Shares so acquired. In such event, the
terms of such agreement shall apply to such Shares.
7. FRACTIONAL SHARES. In no event shall the Company be required to issue
fractional shares upon the exercise of any portion of the Option.
8. RIGHTS AS A SHAREHOLDER. Optionee shall have no rights as a
shareholder of the Company with respect to any of the Shares until the date
of the issuance of a share certificate for such Shares. No adjustment shall
be made for any dividends (ordinary or extraordinary, whether cash,
securities, or other property) or distributions or other rights for which the
record date is prior to the date such share certificate is issued, except as
provided in Section 9 below.
9. CAPITAL STRUCTURE ADJUSTMENTS. Except as otherwise provided herein,
appropriate and proportionate adjustments shall be made in the number and
class of of the Shares and the purchase price of such Shares in the event of
a stock dividend (but only on Common Stock), stock split, reverse stock
split, recapitalization, reorganization, merger, consolidation, separation,
or like change in the capital structure of the Company. To the extent that
the foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Plan Administrator the determination of
which shall be final, binding and conclusive.,
10. NO TRANSFER OF OPTION. Optionee may not transfer all or any part of
this Option except by will or the laws of descent and distribution, and the
Option shall not be exercisable during the lifetime of Optionee by any person
other than Optionee.
11. INVESTMENT REPRESENTATION. Optionee hereby represents and warrants
to the Company that he is acquiring the Option and the Shares thereto for his
own account and not with a view to or for sale in connection with any
distribution thereof. Optionee hereby further represents and warrants to, and
agrees with, the Company that, if he exercises the Option in whole or in part
at a time when there is not in effect under the Securities Act of 1933, as
amended, a registration statement covering the Shares issuable upon exercise
of the Option and available for delivery a prospectus meeting the
requirements of Section 10(a)(3) of said Act, that Optionee may be required,
as a condition of issuance of the Shares, to represent to the Company that
those of the Shares issued pursuant to the exercise of the Option are being
acquired for investment and without a view to distribution thereof; and that
in such case the Company may place a legend on the certificate(s) evidencing
the Shares issued upon exercise of the Option reflecting the fact that the
Shares were acquired for investment and cannot be sold or transferred unless
registered under said Act or unless counsel for the Company is satisfied that
the circumstances of the proposed transfer do not require such registration.
In addition, the Company may place a legend on the certificates evidencing
the Shares reflecting the fact that they are subject to restrictions on
transfer under the terms of Section 6 hereof.
Page 17 of 19 sequentially numbered pages
<PAGE>
12. CHANGE OF CONTROL. The following provisions shall apply on the
occurrence of Change of Control or Potential Change of Control:
12.1 OPTION CASHED OUT. In the event of a Change of Control, unless
otherwise determined by the Plan Administrator in writing at or after grant,
but prior to the occurrence of such Change of Control, or, if and to the
extent so determined by the Plan Administrator in writing at or after grant
(subject to any right of approval expressly reserved by the Plan
Administrator at the time of such determination) in the event of a Potential
Change of Control, the value of any unexercised portion of the Option shall,
to the extent determined by the Plan Administrator at or after grant, be
cashed out on the basis of the Change of Control Price as of the date the
Change of Control occurs or Potential Change of Control is determined to have
occurred, or such other date as the Plan Administrator may determine prior to
the Change of Control or Potential Change of Control.
12.2 EXCEPTIONS. Anything to the contrary notwithstanding, any
transaction involving the spin-off of the Company and any public offering of
shares of the Company that results in raising capital for the Company shall
be excluded from the events and transactions specified in this Section 12.
13. GENERAL PROVISIONS.
13.1 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties with respect to the subject matter hereof,
and supersedes any and all prior written or oral agreements between the
parties with respect to the subject matter hereof. There are no
representations, agreements, arrangements, or understandings, either written
or oral, between or among the parties with respect to the subject matter
hereof which are not set forth in this Agreement.
13.2 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
13.3 NOTICES. Any notice given pursuant to this Agreement may be
served personally on the party to be notified or may be mailed, with postage
thereon fully prepaid, by certified or registered mail, with return receipt
requested, addressed as set forth by the party's signature of this Agreement
or at such other address as such party may designate in writing from time to
time. Any notice given as provided in the preceding sentence shall be deemed
delivered when given, if personally served, or ten (10) business days after
mailing, if mailed.
13.4 FURTHER ACTS. Each party to this Agreement agrees to perform
such further acts and to execute and deliver such other and additional
documents as may be reasonably necessary to carry out the provisions of this
Agreement.
13.5 SEVERABILITY. If any term, provision, covenant, or condition
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, or unenforceable for any reason, such invalidity, illegality, or
unenforceability shall not affect any of the other terms, provisions,
covenants, or conditions of this Agreement, each of which shall be binding
and enforceable.
13.6 MODIFICATION AND AMENDMENT. This Agreement may not be
modified, extended, renewed or substituted without an amendment or other
agreement in writing signed by the parties to this Agreement.
- ----
- ----
IN WITNESS WHEREOF, the parties have entered into this Non-qualified Stock
Option Agreement as of the date first above written.
EDUCATIONAL INSIGHTS, INC.
BY:
JAY A. CUTLER, PRESIDENT
"OPTIONEE"
SIGNATURE OF OPTIONEE
NAME OF OPTIONEE
Page 18 of 19 sequentially numbered pages
<PAGE>
(TYPED OR PRINTED)
STREET ADDRESS
CITY STATE ZIP CODE
CONSENT OF SPOUSE
I, spouse of
the Optionee who executed the foregoing Agreement, hereby agrees that my
spouse's interest in the shares of Educational Insights, Inc. Common Stock
subject to said Agreement shall be irrevocably bound by the Agreement's
terms. I further agree that my community property interest in such Shares, if
any, shall similarly be bound by said Agreement ("Shares") and that such
consent is binding upon my executors, administrators, heirs and assigns. I
agree to execute and deliver such documents as may be necessary to carry out
the intent of said Agreement and this consent.
Signature:
Dated:
EXHIBIT A
LETTER OF INTENT TO EXERCISE STOCK OPTION
TO:
Gentlemen:
The undersigned holds non-qualified stock options to purchase _______
shares of the Common Stock (the "Shares") of Educational Insights, Inc. (the
"Company") at a price of $_______ per share pursuant to the Company's
Directors Stock Option Plan No. 1 (the "Plan"), and a Directors Non-qualified
Stock Option Agreement dated ______________,199 designated DNSO _____(the
"Agreement"), pursuant to which the undersigned currently may exercise an
Option as to the Shares.
I hereby notify the Company of my desire to exercise my Option as to
_________ of the Shares and am enclosing my check in the amount of
$__________ in payment therefor. The Shares being exercised shall be charged
against the first Option exercisable by me under the Agreement and then to
the next exercisable Shares in the order and sequence stated in the
Agreement. Please issue these securities in my name.
I hereby acknowledge that because of my position with the Company, I am
fully familiar with its business, operations and financial condition and in
addition I have requested and the Company has furnished to me for review
copies of its current financial statements, business plans, pending and
threatened litigation, and such other information that I have requested. I
acknowledge that I have thereby received all the information I deem material
to my decision to purchase the shares requested to be sold to me in this
letter.
I hereby represent and warrant to the Company that I understand that
neither the Option nor any of the Shares have been registered under the
Securities Act of 1933 or any other federal or state statute or regulation of
similar purport and that these shares are being purchased for my personal
investment and for my sole benefit and not with the view of selling,
distributing, dividing or otherwise holding such Shares for the benefit of
any other person, corporation or entity. I further understand and consent to
the restrictions on transfer of the Shares as set forth in the Plan, the
Agreement and the Shareholder Agreement.
I hereby agree to indemnify the Company against and hold it free and
harmless from any loss, damages, expense or liability resulting to the
Company if any sale or distribution of the Shares is contrary to the
foregoing representations.
I agree that the Company may place on all certificates representing the
shares purchased hereby, the legends set forth in the Plan, the Agreement and
the Shareholder Agreement and may place a stop-transfer order against these
Shares.
Optionee
-----------------
Address:
Social Security Number:
Page 19 of 19 sequentially numbered pages
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q 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-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 295
<SECURITIES> 0
<RECEIVABLES> 6,713
<ALLOWANCES> 375
<INVENTORY> 13,374
<CURRENT-ASSETS> 22,434
<PP&E> 5,331
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,424
<CURRENT-LIABILITIES> 4,293
<BONDS> 1,034
0
0
<COMMON> 18,644
<OTHER-SE> 4,098
<TOTAL-LIABILITY-AND-EQUITY> 28,424
<SALES> 5,922
<TOTAL-REVENUES> 5,922
<CGS> 2,942
<TOTAL-COSTS> 2,942
<OTHER-EXPENSES> 4,305
<LOSS-PROVISION> (37)
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> (1,275)
<INCOME-TAX> (492)
<INCOME-CONTINUING> (783)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (783)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
